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Local Government Finance

Volume 456: debated on Wednesday 31 January 2007

I beg to move,

That the Local Government Finance Report (England) 2007-08, House of Commons Paper No. 231, a copy of which was laid before this House on 18th January, be approved.

With this we may discuss the following:

That the Limitation of Council Tax and Precepts (Alternative Notional Amounts) Report (England) 2007-08, House of Commons Paper No. 232, a copy of which was laid before this House on 18th January, be approved.

On 28 November, I announced plans to the House for grant allocation to local authorities in England and, following consultation, I am confirming those plans today.

Before I briefly set out the figures, I should like to remind the House that the Government are now planning local government finances over several years, and that 2007-08 is the second year of a two-year settlement. Later this year, we will announce the first ever three-year settlement for local government.

Our policy on each year’s settlement in a multi-year settlement is to make changes only if exceptional circumstances are revealed by consultation. I shall deal more with consultation shortly. However, in summary, I did not find any exceptional circumstances.

Most local authorities welcome the Government’s move from a two-year to a three-year settlement. However, that makes the basis on which the settlement is struck more important. Some authorities, such as the Wirral—part of which I represent—are protected by the floor that the Government have introduced but are disadvantaged by the failure to phase out the cap on the new formula for social services expenditure. Is the Minister in a position to say that, for the three-year settlement, the damping arrangement will be put to one side and that local authorities, such as the Wirral, will get their full entitlement for social services?

I thank my right hon. Friend for raising that point, which he has made forcefully on behalf of his authority and others previously. I understand his point. Two floors operate in distributing the money: the overall floor, which protects councils from sudden decreases in grant, and the floor in two of the three social services funding blocks. The latter exists because of the changes in the formula for 2006-07 and 2007-08. The statement today, as I know my right hon. Friend appreciates, relates to the next financial year. Consultation over the three-year settlement will begin later this year. Obviously, both the policy towards the overall floor and the policy towards damping within the social services block will be given consideration.

I suggest that the House take heed of the important point that my right hon. Friend makes: although there are many benefits from multi-year settlements, such as councils’ ability to know their future finances, there are councils who argue that injustices within the system would be locked in for three years, not one. The debate is therefore an important one.

From what the Minister has just told the House, am I right to assume that the Government have not yet made up their mind as to whether that dumping arrangement—[Laughter.] Sorry, I meant damping—we feel that we have been dumped on; a Freudian slip if ever there was one. Will that damping arrangement be lifted for the new settlement? If the Government are still making up their mind, will we be informed of that before the Minister announces the three-year settlement, or will we learn of the Government’s mind only when he makes that announcement?

My right hon. Friend is rightly pushing the point—dumping is what the Conservative Government used to do; we do damping. [Interruption.] The hon. Member for Beverley and Holderness (Mr. Stuart) says from a sedentary position that I am getting a bit political; I apologise. I know that that is not allowed in this place.

I can refer my right hon. Friend to the statement made in December 2005 and repeated in 2006. We see damping as a permanent part of the system. It would not be right to allow local authorities to have sudden negative changes to their finances. Having said that, we must balance that with the issue of fairness. Having identified a formula for distribution of grant, part of which is based on relative need, the Government must state their view as to what a local authority requires. We intend to consult on the formula distribution, including the damping and the floors, and to make provisional announcements towards the end of the calendar year, subject to consultation over that period. We will confirm decisions at about the same time next year, as we are doing today.

To repeat the point made by my right hon. Friend, the consultation is extremely important for councils and, therefore, for hon. Members, as the settlement will be for three years. As I have said, unless there are exceptional circumstances our policy is to keep the decisions on grant allocation as they are.

Before I give way to the hon. Member for Northampton, South (Mr. Binley), let me explain to the House why that policy is important.

We are asking local authorities to deliver services, to provide stability in council tax and to pass on the stability that we provide. We are also asking them to make efficiency savings as part of their financial decision making. Obviously, local authorities have a greater capacity to do that over a longer period of financial planning than simply 12 months.

The Minister is always generous, and I recognise that. He will know that there are exceptional circumstances in Northamptonshire, not least because the figures used for growth from 2001 to 2008 were mistakenly accepted, as has been acknowledged. Equally, does he recognise that our revenue support grant has been well below the rate of inflation over the past two years, and that we have made savings of £45 million and £41 million respectively, including 1,030 full-time equivalent cuts in staff? We face similar problems in 2008-09, but we have been cut to the bone. Will the Minister look specifically at the mistake in population projections made by the Office for National Statistics, and view us as an exception? We desperately need his help.

I thank the hon. Gentleman for his kind words. I shall try to deal with his point about population figures in a moment. First, let me say that the decision on distribution is on how to allocate a certain pot of money between councils, and what benefits one council will be to the detriment of others. During the consultation, a number of councils argued that they are unique; logically, of course, it is not possible for more than one to be unique.

The hon. Gentleman made a serious point about growth. It is important to recognise that authorities face extra costs as a result of growth in terms of both revenue and capital, and that capital in particular can be lumpy in placing demands on authorities. In the two-year settlement, we changed the method of calculation of population to take account of future projections rather than simply relying on historical trends. A number of authorities had asked us to do that.

I will give way first to my hon. Friend the Member for Newcastle upon Tyne, Central (Jim Cousins) and then to my hon. Friend the Member for Amber Valley (Judy Mallaber), to whom I am sorry I did not give way a moment ago.

Between 2000 and 2004, Newcastle was the most rapidly growing of all the neighbourhood renewal fund-supported authorities. The population projections that the Minister is using as a basis for grant distribution reflect previous years of decline rather than the years of growth around 2003-04. As a result, in comparison with the real population of the city, they are out by some 13,000. Those extra 13,000 are a young, transient population who place particular demands on the resources of the city council. Can the Minister not see a way of putting the error right?

That point has been made by my hon. Friend’s local authority, and by council groups across the political spectrum. The population figures will never be fully up to date—there must be a cut-off point, and there will of course always be future allocations—but I reassure my hon. Friend that allocations within a multi-year settlement reflect the population trend. As I have said, we made changes to ensure that that happened.

I should also say—to the House in general, rather than to my hon. Friend in particular—that notwithstanding the large number of representations I have received from local authorities arguing that their populations have risen, I have yet to hear from a council saying that its population has fallen. It is of course possible that no council has a population that is falling.

I do not think that I have, but I thank my hon. Friend for giving way. May I ask whether his formula and his population calculations take account of any allowances for refugees or asylum seekers in some of our major cities?

That is an important point, but perhaps it is best if I apologise to my hon. Friend the Member for Amber Valley and give way to her, as I said I would. I shall deal with the population calculation methodology later, if I may.

I thank my hon. Friend. May I return him to the earlier discussion of floors and ceilings? As he will know, ever since I entered the House we have argued vehemently about Derbyshire’s being one of the relatively underfunded authorities. I welcome this year’s 5.8 per cent. increase for the county council—it is one of the authorities that always gets the top performance rating—and the 5.2 per cent. for Amber Valley. We have closed the gap considerably, but will my hon. Friend reassure us that we will continue to close it in decisions on floors and ceilings in future settlements?

I thank my hon. Friend for making that point and for her acknowledgement of the grant increase. It might be timely to remind Members that all local authorities have now received above-inflation grant settlements for 10 years—a point that the Local Government Association has made.

Will Members allow me to answer the question that has been asked before I take an intervention on a different point?

The ceilings have been abolished, which has been welcomed by the authorities that benefit. The calculations that go towards deciding the grant allocation include the resource equalisation calculation as well as others, such as the relative needs formula and per capita calculations. Many councils argue that that creates an unfair advantage, which is why changes were made for the settlement. However, I emphasise to my hon. Friend that the settlement that I am confirming today was announced more than a year ago, and that I am simply delivering what local authorities asked of the Government in the consultation —

Let me emphasise the point that I am making. Local government welcomed multi-year settlements. There is strong support for such settlements across the political parties.

I thank the Minister for giving way. I want to correct his statement that every council has received above-inflation increases. Is he aware that the 2007-08 grant to Richmond upon Thames council has been cut by 79p per head? That is partly because of a population issue, but it is also because of the change in the way that the base figure is calculated and the way that capital expenditure is put into that. That authority receives the least money; it has the lowest grant in all of London, and the gap between it and the next authority is £60.30 per head. Although its grant is far less than that of every other authority in London, it has had a cut for the coming year.

Perhaps I am just getting middle-aged, but the ingenuity of the arguments that Members employ to claim a special case for their authorities never ceases to amaze me. I acknowledge that the hon. Lady is standing up for her area of Richmond—which I think has recently been in the news because of its policy on four-wheel drive vehicles.

Let me correct the hon. Lady’s point. She is referring to the allocation of grant following the changes in the baseline. When any Government allocate grant on a formula basis, they have to do so on the basis of a like-for-like comparison. A number of local authorities, especially in London, made the point in consultation that the allocation appears to be lower in cash grant in some cases, such as when an authority is, so to speak, on the floor at 2.7 per cent.—and I am fairly sure that the hon. Lady’s authority is a floor authority. That appears to be the case because of the like-for-like comparisons year on year. The authorities that have argued that the actual grant is not as much as it appears to be on paper make a point that would be fair if in alternative years, when the like-for-like comparison gives them more than the allocation appears on paper, that sum were returned. I have yet to hear that offer being made.

I am sure that the Minister agrees that the formula-funded mechanism that we inherited from the previous Government was unfair to many local authorities—particularly metropolitan authorities. As my right hon. Friend the Member for Birkenhead (Mr. Field) has already explained, the children’s social services damping mechanism is having an adverse effect on many metropolitan authorities. Let me give the example of the two authorities that I serve. Barnsley is losing out to the tune of £9.9 million, and Doncaster to the tune of £9.5 million. Can the Minister clarify the stance that his Department will take next year, when we review the damping mechanism? Can he give an assurance that his Department will give active consideration next year to reviewing the damping mechanism, with a view to making it fairer to all authorities, specifically metropolitan ones?

I think that I can give a commitment to making the mechanism as fair as possible; however, I am not sure that making it fairer for a specific group of local authorities is consistent. The serious answer to my hon. Friend’s question is yes—it is incumbent on the Government to do that, in recognition of the points that have been made across the spectrum.

I will take an intervention first from the hon. Member for Kingston and Surbiton (Mr. Davey) and then from my hon. Friend the Member for North-West Leicestershire (David Taylor). I will then need to move on to my statement, in order to allow the hon. Member for Brentwood and Ongar (Mr. Pickles) and others to make their points.

I am grateful to the Minister for giving way. He said a few moments ago that the Government have given a real-terms increase to every council in the country, but in replying to my hon. Friend the Member for Richmond Park (Susan Kramer), he gave the game away. He made it clear that—on looking at the cash increase, by whatever method of analysis—some London boroughs have had less than that. In my case, Kingston had an increase of just 1.9 per cent. The retail prices index—the inflation index—is running at 4.4 per cent. What inflation index is the Minister using for the real-terms increase that he says he is giving to every council in the country? Such an increase is certainly not coming to the royal borough of Kingston.

I did not say what the hon. Gentleman says that I said; I said that councils said that they were not getting that increase. I am simply making the obvious point that, if we make a like-for-like comparison over the period in question, what I have said is correct. I will give the hon. Gentleman the figures for his local authority if he wants me to. In the case of Richmond, the average increase in formula grant over the 10-year period—over which it is possible to iron out the like-for-like ups and downs—is 3.7 per cent. Although the councils of the hon. Gentleman and the hon. Member for Richmond Park say that there is a reduction this year, that simply reflects the change that has been made over the period. Perhaps I should now stick to my word and take an intervention from my hon. Friend the Member for North-West Leicestershire.

I am grateful to my hon. Friend for giving way. Sadly, Leicestershire had the lowest grant increase of all 150 upper-tier unitary authorities—£0.6 million, or 0.8 per cent. Why was that so? Well, the Minister talks about like-for-like adjustments, but in our case the transfer of supported capital expenditure was based on 2005-06, when there was a significant spike of almost £13 million in capital expenditure because we were replacing a number of schools, one of which is in my constituency. Can Leicestershire be treated in the same way as Norfolk and Lancashire, both of which had their spikes removed? Norfolk’s figure was reduced to £56 million from £71 million, and Lancashire’s was reduced to £32 million from £36 million. Such an approach does make a difference. We are grateful for what has happened, but our increase remains very low, compared with other unitary and upper-tier authorities.

I of course recognise the point that my hon. Friend makes about the treatment of capital and the building schools for the future programme in those cases. I will deal with that issue in a moment, because it has caused concern and some confusion among the local authorities affected.

I want to emphasise that the policy on multi-year settlements is to make changes only in exceptional circumstances, and if those circumstances are revealed by consultation. The stability and predictability that that approach brings are very important for public finances—more important, in my opinion, than tiny differences in marginal grant increases, and more important even, I venture to suggest, than arguing over the minutiae of some of the grant formula. More widely, stability is vital to enable authorities to plan jointly with local service delivery partners, agree objectives for their area, and deliver them. So I am very happy indeed to be able to say something that is so expected and predictable.

Is the Minister conscious that because the NHS is under pressure—for instance, Kingston primary care trust has a significant deficit—a significant amount of cost shunting is going on in many local authorities between partners? That shunting is moving costs on to local authorities which are attempting to keep up even minimum levels of service. The partnership strategy that the Minister mentions is operating in reverse at present.

I had spotted the point that the hon. Lady makes and I was aware of that. The PCTs are one of the major partners, if not the major partner, of local authorities in the delivery of local area agreements. Therefore the alignment of financial periods and spending decisions, both revenue and capital, is very important. It follows that it is essential that the partners work in partnership. I acknowledge the point that in some instances the financial decision making of the local authority and the primary care trust can be out of kilter, but the local area agreement process that we have introduced allows the council and the PCT to work together, and the previous regime did not. The second and more important point, which the hon. Lady must surely acknowledge, is that it is incumbent on the PCT, as it is on the local authority, to balance their books. There is little point having financial stability and predictability if one is simply building up a deficit in one’s accounts. Against the background of increased resources, it is surely right—it is surprising that the hon. Lady disagrees—that PCTs and councils should balance their books.

The point I was making about 2008-09 is that local government reorganisation will cost councils in those years. On top of that we have the growth agenda and on top of that we have the mistake—recognised by the Government—that there will have been no growth in Northampton between 2001 and 2008. All those factors come together at a time when we are trying to put into effect single status, because it was neglected before. That is a massive amount of additional expenditure and I want the Minister to recognise the accumulation of problems that we face.

I give the hon. Gentleman the assurance that local government reorganisation will not take place at the expense of the council tax payer. Unless there is a proven case that reorganisation will save money rather than cost money, it will not go ahead. I hope that he is reassured by that. I note that he said that the reorganisation was what his local authority wanted. I repeat for the record that it is not my proposal.

On total grants, I confirm that the Government will provide for £65.8 billion in 2007-08, an increase of £3.1 billion or 4.9 per cent. over 2006-07. Within that total, formula grant, which we are debating today, will total £25.6 billion in 2007-08, an increase of 3.7 per cent. All of the increases that I have quoted are on a like-for-like basis—this is the important point that the House has just been debating—as they are adjusted for changes in function and financing. That is an important point, because several of the representations that I received—I suspect that the same applies to hon. Members—were on that point.

I shall expand a little further. A simple cash difference in the amount of grant that an authority receives from one year to the next is no doubt a useful figure, but it is not the whole story. That is because from one year to the next we may ask local government to take on a new task, or drop an old one, or to transfer the financing for an existing function to a different body or a different financing route.

To take the most dramatic example of recent years, the introduction of dedicated schools grant from 2006-07 meant a large reduction in cash terms in the formula grant received by education authorities compared with the previous year. However, that would not have been a sensible comparison, because previously they were also receiving DSG, so we adjusted the comparison for formula grant purposes to reflect that.

This year, the main adjustment is for something rather less obvious. When we introduced multi-year settlements, we needed also to make changes in the way support for capital expenditure is provided. Any allocations that needed revenue support through the formula grant needed to be made in advance, so that we could calculate two years’ worth of formula grant. However, some capital programmes are not so predictable: for example, when expenditure is inherently lumpy with large projects, or funding is based on a bidding process. So those programmes were switched to being supported by the Government with a direct capital grant.

The effect of that, financially, was to move the burden of borrowing from councils to the Treasury. Resources that were previously included in the local government settlement to help support borrowing were therefore transferred to the Treasury.

To reflect that financing change, we recalculate the prior year—2006-07 in the case of the settlement that we are debating today—as though the transfer for 2007-08 had already happened. A number of councils objected to the resultant reduction in their base position and, therefore, to the fact that their cash increase from year to year was less than the adjusted, like-for-like increase.

I believe however that councils could hardly object to the underlying principle of adjusting since, if funding were transferred into the settlement, it would give authorities on the floor a larger increase. As I told my right hon. Friend the Member for Birkenhead and my hon. Friend the Member for Barnsley, Central (Mr. Illsley), I am certainly prepared to look again at the way in which the grant floor operates from 2008-09 onwards, but I will not change the basis for 2007-08.

The Minister has been very kind about giving way, but I seek clarification on a technical point. The Chancellor’s spending review will have an effect on the move to three-year settlements. I presume that some priorities will be changed, with knock-on effects on the various spending blocks, and that the Minister will introduce dampening mechanisms involving ceilings and floors to cushion those changes. Will he be able to oblige local government by giving a description of those mechanisms a little earlier than normal?

The hon. Gentleman raises an important and fair point. As I said earlier, moving to multi-year settlements means that we must make a special effort to look at all the relevant circumstances, and the consultation timetable is being considered at the moment. My policy is to ensure that the spending period of a local authority is aligned with the Treasury’s and also, as far as possible, with the financial periods of its local government partners in the local area. Moreover, that alignment will be reflected in special grant allocation so as to provide a stable framework for public finance. It is too early to give the hon. Gentleman a straight yes in answer to his question, although I acknowledge that it is a valid one to ask.

Councils are understandably keen to get hold of information on the capital grants that will have taken the place of supported borrowing in 2007-08. Some allocations for 2007-08 have been announced but others, mainly bid-based programmes, are not able to work to that deadline. I undertake to keep the latest information on our website, as happens with other revenue grants.

My hon. Friend the Minister acknowledges the impact that atypical capital expenditure, especially in connection with school replacement, can have on the calculated grant increase, but I hope that he will explain a little more about his rationale, either now or in writing. For example, Walthamstow, Knowsley, Solihull, Newcastle city and Sunderland all have smaller amounts of gross atypical capital expenditure adjusted for the calculated grant increase. In contrast, Leicestershire’s amount was larger, but no adjustment was made. Will he revisit that case and write to me?

I looked specifically at the point my hon. Friend raises. There are different routes and frameworks for capital financing and I think that he has tabled questions on that subject, but I will give him further details. The differences between local authorities make the different routes for capital financing difficult to explain in lay language. My hon. Friend indicates that it would be helpful if I wrote to him about the details, and I undertake to do so.

During the consultation period, the Department received 169 written responses from 136 individual authorities, Members, and groups of authorities, and I met delegations from groups representative of the different types of authority. The most frequently raised issue was the way in which grant changes are damped from year to year—a point that has also been raised today. A number of authorities opposed in particular the way in which the new formulae for social services for children and younger adults are being phased in at the same time as the overall grant settlement is subject to the floor, which is another point that has been raised in the debate. However, given that the new formulae produce considerable swings between authorities, I took the decision last year to phase in the new formula for at least two years, and I have not been persuaded that I should reopen that decision for the second year of the two-year settlement. However, we will look at the issue again for the next three-year settlement, from 2008-11.

A number of responses raised concerns about the population figures that we use in the settlement. As in other areas, we use the best data consistently available across all local authorities, and for population that means the estimates and projections produced by the Office for National Statistics. As Members know, the ONS is engaged in a programme of work to improve progressively the methodology used in calculating statistics for population and, in particular, for migration. Ahead of the next three-year settlement, the ONS anticipates incorporating in population estimates and projections improvements in data on the geographical location of international migrants. Beyond that time, work will continue, but it is clear that there are no quick fixes and change will be gradual.

A number of authorities and groups asked us to increase the amount of grant available by £1 billion, on the grounds that the yield from business rates had increased since last year. That sounds an agreeable prospect, but unfortunately it ignores how public finances are managed and planned. The Government provide for an aggregate of funding to be distributed to local government for the three years of the spending plans. That aggregate includes business, or non-domestic, rates and revenue support grant. If the business rates yield decreases, the Government bear the risk and increase the RSG accordingly, but it is not a one-way street; if the business rates yield increases, the Government cannot conjure up another billion pounds from thin air.

I considered all the points that bear on the amount and distribution of grant in 2007-08 in the light of the policy on three-year settlements and found no circumstances sufficiently exceptional to cause a change in the plans first announced last January, so I confirm my proposals on grant distribution, including the grant floor levels. Those floors—the minimum percentage grant increase, on a like-for-like basis—are 2.7 per cent. for all authorities, except police authorities, where the floor is 3.6 per cent., which the House debated earlier. For the future, before we decide on proposals for grant allocation from 2008-09, there will be further opportunities for authorities and groups of authorities to make proposals if they want to do so, and there will be a further round of consultation.

Another fair and predictable grant settlement means that there should not be any excuse for large council tax rises. I certainly do not think that the scare stories that are dreamed up sometimes by Opposition Members qualify as factors that councils should take into account in setting their budgets. I am pleased that the Local Government Association predicts that there will be council tax increases below inflation this year. I can confirm to the House that the Government remain prepared to use their capping powers to protect council tax payers from excessive council tax increases in 2007-08. That message applies to all authorities, including fire and police authorities.

I have a quirky question. The cap is normally assumed to be a percentage. If the percentage rise for a council with an expensive council tax—I am not going to mention any, but we have a few—was 2.5 per cent., that would be a considerable increase on the doorstep. But if the percentage rise in the Minister’s favourite council, Wandsworth, was 5 per cent., in money terms that increase could be distinctly lower than in the more expensive council with half the percentage increase. So why is it always said that there is a percentage level set? That appears to be the impression that the Minister and his predecessors have given in the past.

The hon. Gentleman is eloquently trying to tempt me down a route that I do not wish to go down, although he does remind of Rodney Bickerstaffe, who put the same point rather more bluntly in trade union negotiations. He said that x per cent. of nothing is nothing—in more industrial language than I have just used, as the House may imagine. It might help the hon. Gentleman if I laid out the policy towards capping and then answered the specific point that he made in relation to his authority.

I think that the hon. Gentleman carries a spiritual ownership of it through the generations. Certainly, the hon. Members that represent two of the three constituencies in Wandsworth would blame him for what they see as the problems—perhaps the third would not, but let us not go into that.

No decisions have been taken on capping principles for 2007-08, but no authority should make the assumption that it is somehow immune from the capping policy. As in previous years, we will take action to deal with excessive increases if that proves necessary. The principles of previous years should not be used as a guide for the future. In order to cap, the Secretary of State must decide whether an authority’s budget is excessive according to a set of principles. One of the principles must involve a comparison of the authority’s budget requirement over one or more years. To be capped, an authority must therefore have set an excessive budget requirement increase and have exceeded any other principles the Government decide to use, for example: a principle relating to council tax increases. That would be the case in all authorities.

I said that I would answer the hon. Gentleman’s specific point. As I have just said, we have not decided on the principles for the future. The point that has been made has also been made by a number of authorities. Of course, one has to protect against the inflationary pressure that council tax increases can bring about. The principles that have been used for this year and in previous years have related to budget requirements and council tax increases. That is an important point that addresses the point that he and Rodney Bickerstaffe make.

I am pleased to note that the proposed merger of the fire and rescue services in Somerset and Devon will go ahead next year. I can confirm my proposals for the alternative notional amounts for Devon and Somerset fire and rescue authority and Somerset county council. They will enable like-for-like comparisons to be made between 2006-07 and 2007-08 budget requirements for capping purposes and will also prove helpful to those authorities in setting their budgets.

Local government finance is not normally described in these terms, but I believe that this year’s settlement is revolutionary. [Laughter.]

I will. This is the first time the Government have made allocations to councils of formula grant for more than one year at a time. It is a step on the way to passing on a full three years of grant following the next comprehensive spending review. Almost as dramatically, the settlement continues the sustained investment in services that has taken place under this Government. We have delivered 10 years of above-inflation grant increases to local councils. The distribution of the grant carefully balances greater fairness with stability, and I commend the settlement to the House.

The settlement is revolutionary, in the sense of listening to the late Enver Hoxha announcing the tractor production figures for the great Albanian republic.

The Minister gave several technical justifications for the settlement, which I am sure that we all enjoyed, but outside the Chamber, the Government seem remarkably content about the projected increase in council tax. Their contentment is almost verging on smugness. The Minister was quoted in The Times last week as saying:

“It is encouraging to note that … local authorities are driving down council tax rises”.

No doubt he had in mind the magnificent London borough of Hammersmith and Fulham, which, after decades of Labour mismanagement and waste, has been able, under a new Conservative administration, to cut its council tax by 3 per cent. However, not all authorities have the mixed blessing of inheriting a badly run council. Elsewhere, we are seeing increases.

The hon. Gentleman mentions Hammersmith and Fulham. Does he realise that because the authority gets a grant per head of £624, it is one of the better-off London boroughs? If Kingston received the grant per head of Hammersmith and Fulham, we would be able to cut our council tax by 80 per cent.

The borough was Labour-controlled, but is now Conservative-controlled. It is the change from Labour to Conservative about which I am remarking. No doubt the hon. Gentleman will have plenty of time to make various points about the budgetary blocks.

I do not wish to detain the hon. Gentleman because I hope to have the opportunity to tell the truth about Hammersmith and Fulham council later—

That is true.

I assume that the hon. Gentleman agrees with the cut in the council tax. Does he also agree with the extraordinary cuts—schools have been closed and home helps have been sacked—across every single service in the borough, ranging from street cleansing to theatres?

I will come on to this in greater detail, but the council essentially has to pick up the tab for the changes in the NHS. The hon. Gentleman has said that it is important for authorities to balance their budgets and I think that he introduced the concept of robbing Peter to pay Paul.

Council tax will hit the £1,300 mark from April. That is the equivalent to people paying £110 a month out of their pensions or take-home pay. We are well on the way to a band D bill of more than £1,500 in a couple of years. As the Daily Express said when the settlement was announced—I think that it speaks for the nation on this occasion—since Labour came to power, there has been

“a wicked, cynical and pernicious drain on the resources of all of us and especially those who are least able to cope with the rise.”

As the Minister recently admitted:

“It is not the council tax per se but the increases in council tax which cause concern.”

There has been an increase on top of an increase, on top on an increase, on top of an increase. We have heard the same weary tale for 10 years: increases piled on top of one another. We have seen increases of £59, £51, £48, £55, £74, £126, £65, £47 and £54. There is now an increase this year of £44. There has thus been an increase of £623 for an average home, although that amount is bigger for one of Labour’s millionaire donors. Householders may well wonder if they would achieve better value by clubbing together and using their £623 contribution to buy a life peerage. It is a stark measure of council tax rises under the Government that an increase of 3.5 per cent. above inflation—the Chancellor’s favourite measure—can produce a monetary amount that a decade ago would have required double-digit percentages to achieve. A £44 increase hits someone’s pocket hard, whether it is caused by a 3.5 per cent. increase in council tax or an 11 per cent. increase. It is a big increase if someone is struggling to make ends meet.

Labour inherited a system of council tax finance that worked. It is incredible that as recently as 1998 the Government should declare:

“The council tax is working well as a local tax. It has been widely accepted and is generally very well understood”.

Within nine short years, the Government have wrecked that tax, as they have wrecked so much else in local government. They continue to proceed with the planning and a computer database for council tax revaluation in England. Nice neighbourhoods, scenic views and home improvements have all been targeted, as homes with such features will be subject to a hike in taxes. The hounds of the Minister’s paparazzi-like council tax inspectors have dug even deeper into people’s lives. In Wales, the 2005 council tax revaluation resulted in four times as many houses moving up a band as down.

Northern Ireland has been used as a testing ground for the new price index scheme by the Labour Government, and from April, every home will be charged 0.633 per cent. of the house price every year. In Scotland, a report by the Liberal Democrat and Labour Executive backs a house price index of 1 per cent. a year. Such a tax is being considered by the Lyons inquiry—we look forward to the publication of that report in March—but if it were introduced in my constituency, a hard-working family living in an average house would have to pay about £2,000 a year. The majority of year-in, year-out council tax increases are the direct result of national pay increases and unfunded burdens imposed by central Government on local authorities. Those arguments are well rehearsed, but I wish to offer the House two new ones.

The latest addition to the list of Government schemes is the free bus pass for over-60s. Everything would be fine if only a few pensioners took up the offer, as funding for the scheme ignored past demand, and assumed a modest increase. Predictably, that assumption was wrong, and demand increased while central Government funding did not. Lord Bruce-Lockhart—the Minister’s favourite Conservative spokesman—said in The Times:

“The free bus pass was a good idea but it hasn’t been funded so it has become another pressure on the council tax bill, which the elderly cannot afford to pay.”

Is my hon. Friend aware that East Herts district council has discovered that the cost of that apparently generous scheme is £732,000 this year? Is it not ironic that the very people whom it is meant to help will have to foot the bill?

Yes. We often deal with billions of pounds in the Chamber, so that sounds like a relatively small sum of money. For the good folk of the district council, however, it is an enormous part of their budget. Recently, I had the opportunity to meet some of Hertfordshire’s splendid councillors, and what is true in that county is true across the country. It is a prime example of a proposal that only works if people do not take it up. If people use their pass to travel by bus, the whole thing starts to collapse.

In Croydon, the cost has increased by 8.3 per cent. to £862,000. Does my hon. Friend not agree that the figures quickly accumulate into millions of pounds and more, and the burden will fall on hard-pressed council tax payers?

Yes. The Government had their day, and got all the good press, but the hard fact is that it is not they who will foot the bill, but the hard-pressed council tax payers. Let me give my hon. Friend another example, with regard to licensing. In previous debates, I have raised the worry that licensing authorities would not be fully compensated for the extra costs imposed on them by the Government. Assurances were given in the Chamber that that would not be the case, but we now have the benefit of the Elton report on licence fees, which said:

“When looking at the income received by authorities over the 3 year transitional period, this translates to an excess cost of around £43 million, which we recommend should be funded by central Government.”

So the worries that we expressed proved to be well-founded. I would be grateful if the Minister told us whether the Government will make good on the guarantees given at the Dispatch box.

My point relates back to the concessionary bus travel scheme, and the elements of it that the hon. Gentleman said had been imposed on local governments by the Government. Is he saying that the Conservative position is not to fund those schemes—in other words, to scrap them altogether––or is it to put more money into them, so that the council tax payer does not pay for them? If it is the latter, is he giving a commitment that a future Conservative Government would fund local government more heavily than this Government do?

The hon. Gentleman is trying to pin me into a corner, but if he wants to succeed in doing that, he will have to be a lot more subtle about it. If he is advocating putting schemes together and not paying for them, well, that is the system that exists now. We are clear that, if we were in government—and we soon will be a Government, sitting across the Chamber on the Government Benches—when we decided to impose a scheme on local government, we would be mindful that there should be no transfer of costs on to the council tax. We would ensure that, if we passed on a burden, it would be funded, and transparently so.

If the Minister is about to announce that the £43 million mentioned by Elton will go back into local authority coffers, I will gladly give way to him.

Will the hon. Gentleman confirm the policy announced by his party leader at the Local Government Association conference last summer, which is that under a Conservative Government, there would be no ring-fencing of grants to local government? If that is the policy, how can the hon. Gentleman possibly give the commitment that he has just made?

The way in which local authorities deal with money, once it is handed over, will be a matter for them, but they currently have the worst of both worlds. They have been passed burdens, but no money. We propose to pass the money on to them, if we agree a burden, and we propose that they decide whether they could do things cheaper or better. The problem with the Minister is that he wants to control everything but, frankly, can manage nothing.

My hon. Friend may have just made my point. Labour Members are so used to a system in which everything is decided from the centre that they cannot release themselves mentally even to imagine what it might be like to allow local accountability, and for the House not to have Ministers making promises that they then do not provide the funding for, leading to greater stealth taxes, which have undermined the Chancellor’s reputation perhaps more than anything else.

My hon. Friend makes his point with his customary elegance, and I do not seek to enhance his comment in any way, because he made it extremely well. On the request to guarantee the £43 million, we notice that the Minister has not rushed to the Dispatch Box to announce that he will sign the cheque.

The importance of other settlements pales when compared with the importance to local government of next year’s summer spending review, which we touched on earlier. The Local Government Association produced a constructive document outlining the funding crisis facing local government, and it includes the No. 1 problem facing local government, namely the care of the elderly. I have a prejudice on the subject because of my experience as chairman of a social services department. Like many hon. Members present, I have seen at first hand the effects of a local shortage of dementia beds.

The number of people aged 85 and over has been increasing rapidly in recent years by almost 6 per cent. a year, with a growth in dependency and in the complexity of cases. A quarter of over-85s develop dementia, and a third of those need constant care and supervision. Some hon. Members on the Labour Benches seem to find that amusing. If a relative of theirs ever suffers from dementia and they see the deterioration, they may find it in their hearts to be a little more compassionate.

Further demand is generated as the NHS withdraws from service agreements, as the hon. Member for Richmond Park (Susan Kramer) noted. Nearly half of all councils have experienced a reduction in primary care trust funding for joint projects. To manage rising demands and costs, local authorities have increasingly raised the eligibility criteria. That is the most dramatic change that I have seen since I first became involved with the problem over 30 years ago. We have moved to a world where only those elderly people who are unable to perform most or all personal care or domestic routines receive support. Not surprisingly, the growing number of older people with increasingly complex needs is placing local authorities under pressure.

Local authorities have more than doubled their spending on care for older people in the past 10 years, yet Government funding for social care has not kept pace. The Local Government Association estimates that Government funding has increased by just 14 per cent. in real terms since 1997-98. Of course, if the same group of people qualify for nursing care, there has been a 90 per cent. increase in funding for the NHS. The figure demonstrates that social care is the Cinderella service of the Department of Health, as the Under-Secretary of State for Health so rightly said last year.

The hon. Gentleman makes a powerful case for social care. If, therefore, a council had cut £1.5 million by tightening the criteria, sacked all 166 of its home helps, had no assessment staff and had put up the cost of meals on wheels by 25 per cent. in order to cut council tax by 3 per cent.—50p a week—would he condemn it? That is what Hammersmith and Fulham council is doing.

The hon. Gentleman makes his local point, but it does not diminish my argument that care of the elderly is in deep crisis because changes have occurred in funding and in the elderly population. When I became involved in social services many years ago, the kind of people in elderly persons homes were very different in character. We have moved further away from that. I believe the conventional elderly persons residential home will gradually disappear, to be replaced principally by dementia beds and more severe dementia beds.

The hon. Gentleman makes a political point, but we should be trying to achieve some degree of consensus because the problem is the most challenging that the Government and the Opposition face. With good will, I believe we could move towards consensus.

I am grateful to the hon. Gentleman, and I apologise for not being present at the beginning of the debate, as I was chairing a Committee. Does he share my view that the long-term care of dementia patients should not be part of the responsibility of local government? What is the Conservative view on that?

I am not sure the hon. Gentleman is right. There are clearly some differences, particularly in respect of intermediate beds, where people spend some time in order to be assessed. The cost, which would normally be paid by social services, is paid by the state. I accept that there are problems with regard to the definition, which we need to consider seriously. However, we could make significant changes if we were more aggressive on joint commissioning, revisited the regulations on the joint registration of homes as between nursing care and social care, dealt with the training of people working in homes, and tried to find different ways of ensuring that when a care package is put together both sides can stick to it. There are lots of practical things that we could do to make a difference.

The hon. Member for Richmond Park talked about her local council, Kingston. I should like to give three examples of what the pull-out of funds from local authorities has meant in practice. Devon county council reports facing a £15 million budget shortfall in 2006. By 2026, there will have been a 73 per cent. increase in those aged over 85, with the cost of caring for somebody of 85-plus being twice the average cost of caring for someone aged 75 to 85. That is placing significant pressure on its budget. The London borough of Harrow has been forced to make a £9 million cut to avoid a financial crisis as a result of increased demand for social care and cost-shifting by the local primary care trust. Wiltshire county council has been forced to introduce a £7 million recovery plan to overcome a deficit in its adult and community services department following reductions in NHS funding.

Care for the elderly is challenging not only financially but emotionally. At times, it can be heart-breaking. Its effects permeate society far beyond the immediate family. The crisis in elderly social care has long been predicted, and its arrival is not in dispute. Any civilised spending review must put it at its very heart the care of the elderly.

Order. I remind all right hon. and hon. Members that Mr. Speaker has imposed a time limit of 10 minutes on all Back-Bench contributions.

In keeping my remarks very brief, I make the same complaint as I made last year. In a three-and-a-half hour debate, the Front Benchers have taken up just over an hour. The wind-ups will probably take another 20 minutes, so almost half the debate has gone in Front-Bench contributions. I keep banging on about that every year, because it demeans our debates. We could do with a much longer period to debate local government finance, which is an important subject.

My first point concerns the second year of damping in relation to social services. The Minister has already said that he is not willing to change his mind on that, but I make no apology for raising it with him again. The SIGOMA group has had several meetings throughout the year with him—I am grateful to him for attending them—and with his colleagues to try to make the point that this represents a substantial amount of money. Year after year, it seems that we cannot get these formulas right. The damping mechanisms or the ceilings and floors mean that some authorities gain and some lose out, while those that really need the money are deprived of it for three or four years until the mechanisms correct the anomalies. I have been in the House for almost 20 years, and every year we have seen some form of adjustment mechanism for the grant.

The figure of £238 million was mentioned in relation to the SIGOMA group. For an authority such as mine, that would equate to about £10 million—a substantial amount of money that would perhaps enable us to adjust our council tax, if not in the same way as Hammersmith. My hon. Friend the Member for Ealing, Acton and Shepherd’s Bush (Mr. Slaughter) will no doubt return to the cuts in services in Hammersmith that he mentioned earlier. People in Barnsley are looking at what is happening in Hammersmith, where they see the reduction in council tax and begin to wonder whether we are again in a situation whereby the money is flowing south.

As has been pointed out, the revenue grant savings made because of the business grant this year—the £1 billion figure—could have been funded equally easily by removing the damping to the tune of £238 million and giving the money to the local authorities that need it.

We are not talking about profligate authorities here. Barnsley is a well run authority, as most metropolitan authorities and, indeed, most authorities in the country are. It is always looking to improve its performance. For example, on Monday this week, Barnsley council hosted a seminar for local authorities from all over the country. At that seminar—this is wizard for a former coal-mining authority—it passed a declaration that in future any council-owned premises in the authority will be heated by wood burning. We have been wood burning now for some time and we have won awards for it. Apparently, we have already met—in fact, we have surpassed—our 2060 targets for environmental cleanliness. The money that Barnsley has saved, thanks to some innovative ideas, has been quite substantial over the past 10 or 12 years. That is why I say that these are forward-thinking authorities, doing their best to save money and provide good services.

The knock-on effect has already been mentioned by the hon. Member for Brentwood and Ongar (Mr. Pickles) when he spoke about care issues. We have joint partnerships with our primary care trusts in Barnsley. Until the recent reconfiguration we had the biggest PCT in the country, though I am not sure that that is still the case. The Minister mentioned that local authorities and PCTs should be striving to balance their books. My PCT would have balanced its books for this financial year end, but it had to pay a £7 million levy to fund authorities in deficit—namely, Sheffield, which had substantial deficits. Thus £7 million has gone out of the PCT and the partnership funding. If the local authority is at the same time being squeezed on funding that should be made available, especially for social services, we face something of a double whammy in that the money is being squeezed at both ends of the partnership. I repeat the point that Barnsley PCT is still not funded at its target. I think that we are now at 97.5 per cent. and we are being funded less and less in relation to the target every year. Those are the two main points.

I have already alluded to the case of Hammersmith. I will say no more, as I hope that my hon. Friend the Member for Ealing, Acton and Shepherd's Bush will make his points, but it is worth mentioning the continual argument between authorities in the north and authorities in London. Quite a number of London authorities have the same needs and assessments as authorities in the north. The requirements are similar, so there is no easy argument about money going into London, depriving the north. We should stop making statements about money that London needs going to northern authorities—or vice versa. That is not the case; it is obvious that there are needs on both sides. I have not always taken that much notice of the issue, but if London authorities can afford to stage the 2012 Olympics, they cannot be doing too badly.

I can give a commitment now: we are definitely not going to pay for that, which is well off the agenda. As I said, London authorities had the money to pay for the Olympic games bid, so they cannot be doing too badly.

One issue that affects my area is the building schools for the future programme. We are looking at a huge programme of school rebuilding in my constituency. Every secondary school will be demolished and a number of them will be rebuilt. Every school place at secondary level will be—

All fuelled by wood! It is a substantial programme and a huge commitment for the local authority. Given recent pressure on available funding, I would like the Minister to confirm that the programme will still go ahead.

I share the hon. Gentleman’s frustration that Sheffield, which is already given more money than its needs assessment dictates, overspends, resulting in £8 million being top sliced from the budget for the East Riding of Yorkshire. He contrasted the north with London. Does he also accept a comparison between urban and rural areas? I am delighted that schools will be rebuilt in his constituency, but my area, which bears major costs in sparsely populated parts of the countryside, is not getting the investment in education that it needs. Does he support a better balance between the countryside and urban areas?

I take the hon. Gentleman’s comments on board. He and I lobbied the Yorkshire and the Humber strategic health authority on such issues. I hope that he will have the opportunity later to make those points in detail.

I hope that the Minister can reassure us about the building schools for the future initiative.

The equal pay single status issue has been raised with the Minister on several occasions. Again, it will create huge costs for local authorities the length and breadth of the country. I hope that he will deal with that when he sums up.

I hope that the Minister will also make a commitment to retaining the neighbourhood renewal fund because it has an impact on the other services block. It is important for a metropolitan borough such as mine, where the majority of the funding is spent on education and social services but, in survey after survey, the majority of the people ask why they cannot have clean streets and better services, recycling and so on.

I should like to lobby the Minister on the local authority business growth initiative. My local authority will not qualify for funding from that until perhaps year three. If he removes the damping measures in year two of the initiative, will he do the same in year three, thus ensuring that the funding is still available for local authorities such as mine, which qualify at a later date simply because our rateable income from business properties has not been substantial in the first two years?

Just as my hon. Friend the Member for Cheadle (Mark Hunter), who opened the earlier debate for the Liberal Democrats, thanked the police for their hard work and commitment, I shall do the same for those who work in local government—not only because my wife works there. They are more likely to receive brickbats than plaudits, and we should acknowledge that they provide vital services, which make a genuine difference to our quality of life and local environment. Local government has responded year after year to requests for efficiency savings. Indeed, it does that much more effectively than central Government.

Unique circumstances prevail this year. The Government’s White Paper, “Strong and Prosperous Communities” was published, the Local Government and Public Involvement in Health Bill and the Greater London Authority Bill are being considered, and we expect the report of Sir Michael Lyons. Indeed, we have a Government who, on the face of it, are willing to give local authorities greater responsibility in place-shaping an area.

There was therefore an opportunity for this year’s local government finance debate to jettison the bombastic references to billions of pounds of Government expenditure, above-inflation increases, the most generous settlement ever and so on in favour of a discussion that confirmed that the Government had loosened the purse strings and been willing to trust local authorities with their own finances. I regret that that opportunity has not been grasped.

The Government have adopted the same old tired approach—I was about to say, of spraying the chamber with facts and figures, but that would be uncharitable to the Minister. He has deployed them carefully, with the deviousness of a chess grandmaster, rather than splattering them around the Chamber, disregarding all requests for changes to the formula and using headline figures that mask the reality of what is happening on the ground.

I should like to set out some issues that have not been tackled in the debate. The comprehensive spending review affords the Government an opportunity to make good. Let us consider wage settlements in local authorities. Perhaps the Minister can confirm in his response to the debate that the increase in local authority wages is expected to be 2.5 to 2.7 per cent. What does that mean for local authorities receiving less than that in real terms? Hon. Members, including my hon. Friends, have mentioned local authorities who will be in that situation.

What of the extra autonomy to be granted to local authorities promised by the White Paper, “Strong and Prosperous Communities”? Can the Minister confirm whether ring-fencing has been reduced? Of course, he cannot; instead, he will have to confirm that ring-fencing of council budgets is at record levels, and that local government is still being treated as a delivery arm of central Government rather than a tier of government in its own right. For all their talk of autonomy and greater devolution, the Government are again threatening councils with capping. Where does that leave councils that have a historically low level of taxation? What logic is there in requiring councils to re-bill if they have set a budget over the cap, when the re-billing costs are more than the saving in council tax? The Minister said that he had not yet established the exact principles in relation to capping. I hope that he will at least establish the principle that a requirement to re-bill in such circumstances would not be terribly sensible.

How does the Government’s claim of a 4.9 per cent. increase for English authorities bear up to scrutiny? The Minister’s statement shows that once specific ring-fenced grants are taken into account, the increase in total formula grant is 3.7 per cent. Some councils will receive the minimum increase—my council and many others will receive 2.7 per cent.—but the adjusted grant for my local authority and others pushes the increase below that level. For instance, Sutton will receive 1.7 per cent. at a time when, as other Members have mentioned, the retail prices index is running at 4.4 per cent. and inflation in local government might be higher still. [Interruption.] The Minister expresses desperation about my remarks from a sedentary position, but I hope that he will explain why he does not agree with that point, which is made by many local authorities.

I do not want to be too biased in my presentation of the facts, so I will welcome the significant above-inflation increase in education spending. The Minister will know, however, that because education spending is ring-fenced, councils have no flexibility, and if savings are required, those end up being made principally in adult social services. As several Members have mentioned, according to representations made by the special interest group of municipal authorities outside London within the Local Government Association—that explains why it is abbreviated to SIGOMA—the Government’s failure to apply changes to the social services formula means that most metropolitan and large urban authorities will be deprived of about £250 million, putting them under great pressure. In opening the debate, the Minister talked about Members arguing over the minutiae of the formula. I hope that he was not referring to that £250 million, as it is a substantial sum.

As chairman of the SIGOMA group, I am delighted to hear the hon. Gentleman supporting our claim for that £250 million. Does he realise that granting us that would ensure that his authority received less money? Is he happy with that?

I am sure that the hon. Gentleman would not expect me to welcome the fact that his proposals would slash funding for my local authority. What is needed is a fair, transparent, open system, which allows local authorities to set the level of tax that they think is appropriate, and to pay the consequences at the ballot box, if necessary, at the next election.

Social services are therefore left reeling from a double whammy. One could argue that it is a triple whammy, as they are also hit by fees in nursing, residential care and home care all increasing by more than 4 per cent. No doubt the Minister will say that local authorities should beat down prices in those homes. But how realistic is that? I suspect that every Member present in the Chamber will have been lobbied recently by care homes in their constituencies stating that they cannot make ends meet with the rates that are currently paid to them; in fact, private individuals are having to make up the difference in many cases. I do not think that it is realistic to ask local authorities to play hardball with care homes, many of which are on the verge of closing—if they have not already done so—because of the amount that they must pay to stay open.

In its briefing, the Local Government Association identified many other problems that the report does not address. I do not have time to refer to them all in detail, but waste collection and disposal costs are rising at a rate of 9 per cent. per annum. The Minister would have some justification in saying that local authorities should have planned for that, given their awareness of an inbuilt increase in landfill tax. That is true, but authorities have also been hit by a substantial increase in transport costs, which are a key part of the costs of waste collection and disposal.

There is the issue of children with severe and complex needs. Thanks to medical advances many are now surviving and leading longer and fuller lives, but the cost of an individual care package often runs into six figures. A limited number of such children can have a significant impact on a local authority budget. Other Members have mentioned concessionary fares, so I shall merely say that local authorities’ grant clearly does not cover the full cost and that the Government must deal with that.

Some authorities have experienced a sharp rise in the number of short-term migrants, those resident in a local authority area for less than 12 months. In some areas, there are hundreds or even thousands of such migrants. Admittedly many are young people who may not make substantial calls on council services, but no account has been taken of those who will.

Perhaps the most important issue is cost-shunting. There is evidence from all over the country of attempts to shift financial pressures from primary care trusts and acute trusts to local authorities. That is being done either directly or indirectly: for instance, PCTs may cut funds for voluntary associations which then expect local authorities to make up the difference. Open Door is a service that provides counselling for teenagers who are not yet ill enough to need access to acute mental health services, and may not need it if they receive counselling. A PCT has cut funding for that service without, apparently, trying to fill the gap with an alternative service. I am hopeful that it will do a U-turn, but we must wait and see.

There are many other examples, but I shall give just a few. There is no great significance in the authorities that I selected from the pile: they were in alphabetical order, and I took the top ones.

I am told that Durham county council is finding it

“difficult… to secure additional funding for shared cost packages especially in relation to Learning Disabilities clients.”

Even if there is no cost-shunting, the council can see that pressures in the primary care trusts and acute trusts will stop it from expanding services. Dudley metropolitan borough council tells me that

“planned improvements/developments have been deferred; there are particular risks around continuing care.”

Haringey council says

“The PCT withdrew £0.4 million… for some services that were previously jointly funded.”

The costs were staff-related, but who had to pick them up? The local authority. Allerdale borough council says

“There is only a limited relationship between the Council and the PCT”,

and that the council is finding it difficult to involve the PCT in regeneration programmes.

All that shows that cost-shunting and the shortfalls that PCTs are having to address are already having significant effects on their funding for voluntary associations, on services and on partnership arrangements with local authorities. It is clear that that will get worse in the short term; it will not get better. I hope that when the Minister responds he will say how that has been taken into account in the settlement.

There is no room for complacency. A 14 per cent. increase in real terms since 1997 is not a cause for celebration, although I acknowledge that it is better than the poke in the eye that local government received from the official Opposition when they were the Government and were responsible for funding local councils. Local authorities face many of the same battles now as they did 10 years ago. The words with which my hon. Friend the Member for Brent, East (Sarah Teather) concluded the debate on local government finance a little more than a year ago are as pertinent now as they were then:

“We need a new system of local government finance that is based on fair local taxes, localised business rates, local income tax and a simple grant mechanism, without ring-fencing, passporting or capping.”—[Official Report, 6 February 2006; Vol. 442, c. 687.]

That is what we should have been debating today. Instead the Minister has deployed—in a reasonable way, I accept—a barrage of statistics that has served only to obscure the important issues involved in this debate. The Minister promised clarity and transparency; instead he has provided smoke and mirrors, and the debate has been the poorer for that.

I have heard what has been said about the settlement. Some problems might, indeed, be prevented. I do not wish to make light of those problems, but I had 15 years of setting budgets for a local authority, which is a difficult process, and I would rather have had this settlement than any of those I had between 1990 and 1997. It has the advantages of giving an above-inflation increase in funding from central Government and of being the second year of a two-year settlement, which gives stability—and we are moving towards a three-year settlement. It also has the advantage that all responsible local authorities are now building Gershon, or Gershon-style, efficiencies into what they do and achieving real savings without cutting front-line services. Generally speaking, local government finance is in a much better state after 10 years of a Labour Government than it was previously.

Does the hon. Gentleman agree that during the 1990s under the previous Conservative Government council tax rises were at or near the level of inflation, whereas council taxes have doubled under Labour?

I shall talk about my local issues, but I agree that council tax rises should be kept to moderate levels, and they generally were—I had below-inflation increases and my authority moved down the scale. A balance must be struck between services and council tax increases, because council tax is a regressive tax.

The Local Government Association has acknowledged that this is not a bad settlement; by reading the language, one can learn how good or bad it thinks it is. I say that by way of introduction because it makes what is happening locally in west London all the more remarkable.

I should say for the avoidance of doubt that there are two local authorities in the area I represent, both of which are Conservative-controlled. I want briefly to mention the London borough of Ealing. Its council is having a council tax increase of 1.9 per cent., which I think is slightly too high, and it is also having some cuts in front-line services including in adult social services, which I think are unnecessary and inappropriate, but it is largely following the previous Labour council’s financial plans—I do not know whether that is because they were very good plans or because the Conservatives did not expect to get elected last May and have not quite got their act together yet. However, I must be honest and say that although there might be some problems, there are not many.

However, I now turn to the situation in Hammersmith and Fulham—and, oh dear, what do we see? What we see is a pledge to give a rebate of 50p a week on average—the sum will, of course, be less for people who are poor or who live in a small property, and more for those in a higher band property. I have no objection to people being given 50p a week, but in the brief time that I have I shall explain what that rebate will mean.

I will do so in due course—it always helps my argument when I give way to the hon. Gentleman.

The local budget in Hammersmith and Fulham is, I fear, the work of amateurs, and I obviously take some exception to that, having crafted it so carefully over many years. The council has raided the ample balances left by the previous Labour council, which would account for 2 per cent. of its 3 per cent. rise in any event. It has received a 3.4 per cent.—£3.6 million—increase from central Government, which is equivalent to 6 per cent. on the council tax. It also had the benefit of a very good medium-term financial strategy, delivering above-Gershon savings every year. It has introduced two items of growth. First, it changed its corporate identity, so that everything in the borough is now painted blue—be it notepaper, buildings, signage or notice boards. A huge amount of public money is being spent on branding everything blue.

I think it was red before, but that was for purely historical reasons—under Labour and Conservative councils.

Secondly, the council produced fantastic propaganda sheets, which it put out, at the council tax payer’s expense, once a month. It produced three editions of a newspaper, saying what a wonderful job it was doing on every single issue. What one will not read in that paper—fortunately, we have an independent press, as well—is what I read every week in, for example, the Fulham and Hammersmith Chronicle and the Hammersmith and Shepherd’s Bush Gazette. The former ran the following headline: “Libraries living on borrowed time. Jobs set to go as council reveals proposals to slash £450,000 from service”. The latter ran the following headline: “Campaigners against council’s plan to close Tamworth Centre”, which is a mental health centre in Fulham. Another headline in the Fulham and Hammersmith Chronicle ran as follows: “PM backs campaign. Blair speaks out in favour of school’s fight against controversial closure”.

I would love to, but I really do not have the time.

I must admire the council for one thing: it really gets down to the details. According to last week’s Fulham and Hammersmith Chronicle,

“Hammersmith and Fulham Council hires out a variety of items for community occasions but bosses say … increases … will start in April … To dress up as Father Christmas in Hammersmith and Fulham will soon cost you £15—nearly twice as much as the original price of £7.95.

Raffle drums will cost twice as much, up to £10.

If you want a game of five-a-side football, the inflatable goal hire price will rise from £13.80 to £20”.

This is comic stuff, but it has a serious side.

I thank the hon. Gentleman for giving way. He did not notify me that he would be talking about Hammersmith and Fulham council, but to be honest, I rather expected it. If he so objects to the council tax cut, can he explain why the Labour group put out a press release, which was then withdrawn, saying that it would have cut the council tax by even more if it was still in office? Most local people found that incredible, after 10 years of Labour council tax hikes.

The hon. Gentleman must not trespass too much on my time. The point, which I made clearly at the outset, is that it is perfectly possible to have a budget that cuts the council tax without these horrific cuts in services.

I turn to the serious point that I want to make in the limited time that I have left. Hammersmith and Fulham is pledged to cutting £34 million from a budget of £180 million. Anyone who knows anything about local government finance knows that that must mean very deep, almost unimaginable cuts in services. I referred earlier to the cuts in social services. We are talking about every home help being sacked; no assessment staff; cutting £1.5 million by tightening the criteria applying to the old and the vulnerable; £150,000 being cut from occupational therapy; and £500,000 being saved by closing mental health day care facilities. There are also the cuts in the general services that we all thought the Conservatives were going to support. Some £1 million will be cut from the refuse services and street cleaning budget. Under Labour, Hammersmith and Fulham was the fourth cleanest borough in London. What will it be after four years of £1 million-worth of cuts from the Conservatives?

The Irish centre, in Hammersmith Broadway, which has a national and not just a London-wide, reputation, has had its budget cut. The Lyric theatre, which also has a national reputation, is having its budget cut. The borough’s play and youth services will not exist, given that £320,000 is being cut from those services. Some £400,000 is also being cut from the library service. These are extraordinary, almost unimaginable cuts.

One might think that education was free from these cuts, given the hypothecation of the budget—but no. Three schools are to close, not on educational grounds but simply so that the sites can be sold off in order that debt charges can be repaid and further cuts made in the council’s budget.

The affordable housing programme has been completely turned on its head. The minimum of rented housing will be built in the borough. Services for the homeless have been cut to the bone. Even the budget that is set aside for storing the possessions of homeless families, so that they can reclaim them when they are rehoused, has been cut. The number of staff who service the homeless at council offices has also been cut. The message is clear: if people are old, poor or vulnerable, the council will no longer provide services for them. In return, it will give people 50p a week.

The hon. Gentleman’s story is unfortunately all too frequently the case when Conservatives come into power. Can he explain whether they said anything about such cuts in the run-up to the election, other than that they would save £30 million-odd from the budget?

They did not even say that. They said that they would cut the council tax, and they have done so, by 50p a week—[Interruption.] I hear the cheers, but they were somewhat more muted than they have been when the issue has been raised previously, because what is going on in Hammersmith and Fulham is not comparable with what is happening even in other Conservative authorities. It has been described as “Porterite” and as matching the antics of Wandsworth and Westminster councils in the 1980s, when a studious attempt was made to remove council accommodation from the borough, but things have gone even further and we are seeing almost a type of social cleansing. The council is saying that it does not want community schools in the borough: one is being closed and the other threatened by having an academy opened next door. It is saying that it does not want affordable housing in the borough or social service provision—although we heard from the hon. Member for Brentwood and Ongar (Mr. Pickles) that that is a priority for his party. All those cuts will have an impact on the weakest, poorest and most vulnerable people. That is being done deliberately and cynically.

Nor does the council want the people who serve the community. Hundreds of people—mostly local and on low incomes—are being made redundant in privatisations and service cuts. The message is clear from the Conservative administration in Hammersmith and Fulham: “If you are old, poor, in need or homeless, we do not want you in the borough. We want to model ourselves on the central London boroughs which have adopted these policies for many years.” It is a cynical and deplorable move, and I believe that when people have another opportunity at the ballot box to consider whether they want 50p a week or decent services—as provided for many years by a Labour council—and the opportunity to live in a mixed community that welcomes everyone, they will not vote Conservative in Hammersmith and Fulham again.

It is a pleasure to follow my successor but one as Member of Parliament for Ealing and Acton. I recognise the expertise of the hon. Member for Ealing, Acton and Shepherd’s Bush (Mr. Slaughter) in local government finance and I understand his anger. When he was first elected, the London boroughs of Ealing and of Hammersmith and Fulham were both controlled by the Labour party. After six months of my party being led by my right hon. Friend the Member for Witney (Mr. Cameron), the hon. Gentleman finds that both those local authorities have had a change of control to the Conservatives. As I understand it, the Conservatives locally stood on a manifesto of reducing the council tax. They won, and they are honouring the commitment that they made.

I listened in respectful silence to the Minister as he introduced the debate and described a revenue support grant settlement that seemed more and more remote from the one that I was looking at in Hampshire. I realised that he had lost contact with reality when, in his peroration, he described the settlement as revolutionary and then sat down. It is possible to seek to defend the settlement in the terms that he did, if one looks at it as a snapshot. If, on the other hand, one views it as a movie, as my hon. Friend the Member for Brentwood and Ongar (Mr. Pickles) did, and in perspective, it is much more difficult to defend it.

From the point of view of Hampshire, we are in the 2.7 per cent. club, which has several members. As the hon. Member for Carshalton and Wallington (Tom Brake) said, 2.7 per cent. does not begin to cover inflation, let alone the rising costs of, for example, adult social care, about which I shall say more in a moment. That low increase in the formula grant is even more difficult, as it follows a settlement for the current year that amounts to 0.2 per cent. once the one-off grants have been stripped out.

In addition, Hampshire county council’s grant for supporting people has been frozen at just below the level for the current year, so it finds itself between a rock and a hard place: if it puts up the council tax by more than 5 per cent., it gets capped; if it continues to make efficiency savings—as it will—there will still be a gap of £10 million, which the council will have to fill by making some very unpalatable decisions. It is unsustainable for the Government to continue to provide grants such as this one while still expecting rises of below 5 per cent. in council tax, with no effect on services.

The Minister accused Opposition Members of waving shrouds, but I refer him to the report from the Commission for Social Care Inspection that was published in December. It deals with the very difficult decisions that social services departments already have to make. The report was very balanced: it paid tribute to the Government for some of the things that they have done, but it also identified real cause for concern in a number of areas. It found that a third of care homes did not meet the required standards for the management of medication or operate safe working practices, and that a substantial number of home care services are failing standards on the recruitment and supervision of staff. It mentions the juggling that local authorities are having to undertake, and the fact that they are having to tighten eligibility criteria. It also notes that there are question marks about the advice and support available to clients and carers excluded from funded care.

The CSCI report highlights five groups of people who give rise for concern: those not using council services but in need of information and support; the carers, relatives and friends who carry the cost of ever tightening eligibility criteria; those who lack choice in respect of services or the people who deliver home care; those whose service standards are unacceptably low, and those with special complex needs that are not being met. All the evidence is that the problems are going to get worse.

Ministers respond by saying that there has been a 39 per cent. real increase in funding for local authorities nationally since 1997-98, but expenditure by local authorities has had to rise by 50 per cent. in that period, in direct response to Government spending plans and to service pressures. As a result, the increase is not as generous as we are told.

The Local Government Association says that funding from the Government for services other than schools and specific grant priorities has increased by only 14 per cent. in real terms. That contrasts with the 90 per cent. increase given to the NHS. I welcome increased investment in the public services, but one has to compare the very generous treatment given to a service for which the Government have direct responsibility, with the rather miserly funding of services for which local authorities have responsibility. That is especially important in respect of where the two services overlap, which is in social services.

My second point has to do with damping, the mechanism introduced by the Government to prevent sharp adjustments in grant distribution as we move from where we are to where the Government think we ought to be. Is it a floor, or is it quicksand? In Hampshire, £38 million—or 30 per cent.—of our formula grant is at risk as a result of the damping mechanism. The Minister talks about the certainty that multi-year agreements will bring, but that is undermined by the medium-term uncertainty about how the damping mechanism is to unwind.

I was not greatly reassured by the exchange at the start of the debate between the Minister and the right hon. Member for Birkenhead (Mr. Field). It would be helpful if the Minister, when he winds up, will confirm that the grant floor will be a permanent part of the formula grant allocation, and that the £38 million will not be removed.

A moment ago, I mentioned residential care. There was a very good debate in Westminster Hall on 17 January on public funding for residential care, about which hon. Members of all parties expressed their concern. It emerged that the pressure on funding means that social services now intervene only when a client reaches a substantial or critical level of need. The Joseph Rowntree Foundation estimates that care homes are underfunded by £1 billion. In the CSCI report, Denise Platt mentioned that primary care trusts and local authorities are increasingly withdrawing from pooled budget arrangements, owing to pressure on funding. Prevention and early intervention are being squeezed out. We need a step change in funding for those services if the quality of care that we all want to see is delivered.

The Minister might care to read what his colleague, the Under-Secretary of State for Health, the hon. Member for Bury, South (Mr. Lewis), said about his aspirations when he wound up the Westminster Hall debate. The hon. Gentleman said:

“The first point is that older people in this country are entitled to be treated with dignity and respect. They are a generation that worked hard to build this country, and a fundamental sign of a civilised society is the way in which it treats older people.”—[Official Report, Westminster Hall, 17 January 2007; Vol. 455, c. 331WH.]

Can the Minister tell us whether his colleague’s ambition will be realised if we continue down the path of underfunding for social services that I have described? The number of people with learning disabilities is increasing by 2 per cent. a year in Hampshire, and as care packages become more sophisticated their cost is ever higher. The funding formula does not recognise that need.

My final point is about the sustainability of the system by which we pay for local government. The council tax is like an old bridge with a weight restriction. It was designed to carry the pressure of council tax bills of three figures, but not of four, so it is creaking. There is something unsustainable about the regime we are being asked to approve this evening. On each occasion, the Government defer a difficult decision, but the time for drift is coming to an end; it is time that the Government took a grip on local government finance and found a sustainable way of funding it which recognises the responsibilities that fall on local government. I hope that in a year’s time we shall have a different debate—one with a greater degree of realism.

I apologise to you, Mr. Deputy Speaker, and to the Minister for not being in the Chamber at the start of the debate. I was elsewhere in the House at a Committee meeting.

The settlement is broadly good in historical terms. The Local Government Association briefing of 31 January notes that most authorities will receive a higher grant increase than in 2006-07 and that there has been a real-terms grant increase of 14 per cent. between 1997 and 2007-08, although I realise that the Government dispute that figure and say that it is actually nearer 29 per cent., when education is excluded.

We need to compare the settlement with the years of Conservative Government, when there were cash cuts year on year and the grant was fiddled to ensure that it went to Conservative-controlled local authorities. When the hon. Member for Brentwood and Ongar (Mr. Pickles), the Conservative spokesman, responded to my intervention, it was interesting that he gave no indication whatever that if the Conservatives were in power they would give more money to local government.

Local government can take no comfort at all from Opposition Front-Bench Members. They complain about the problems, but they offer not a penny piece extra. When the hon. Member for Brentwood and Ongar winds up the debate, I challenge him to give an undertaking to put more money into local government to get rid of the some of the problems he outlined.

The legacy of Conservative Government remains. Local authorities with measurable needs are not yet receiving the grant agreed under the central Government formula, because the Labour Government have done what the Conservative Government did not do. The right hon. Member for North-West Hampshire (Sir George Young) complained about floors and ceilings, but I do not remember him supporting councils such as Wigan when we were experiencing yearly cash cuts of £10 million, £8 million and £12 million. I do not recall Conservative proposals for a floor on the amount of reduction. The Government have implemented such a floor and I very much support it, because without it local authority finances and services would be destabilised. The floor is an important part of local government.

If we are to ensure that the Government achieve what they want, which is to tackle deprivation and need, I strongly argue that local authorities have a major part to play. The only way they can do that is if we make sure that they get the amount of money that the formula says that they are entitled to. When the Minister comes to the comprehensive spending review settlement for the next three years and the grant, I urge him to reduce the floor and increase the ceiling so that we can more rapidly move towards local authorities getting the amount of money that they are entitled to.

My hon. Friend the Member for Barnsley, Central (Mr. Illsley) is not in his place, but he properly raised the issue of the amount of money that has been damped out. The hon. Member for Carshalton and Wallington (Tom Brake) mentioned the amount of money that has been damped out from social services because of the double damping figure. That is extremely important, particularly in SIGOMA areas. The figure is something like £250 million. I was disappointed that the Minister did not feel able to take cognisance of that and make some changes to the grant to recognise the fact that that is the case.

It is a double whammy for us. Not only are we getting the double damping, but in general, our primary care trusts are underfunded by comparison with the amount of money that the health formula says that we should get. I think that the figure is £8 million to £10 million when it comes to the grant that we have lost in relation to the local authority and £11 million in relation to our primary care trust. That means £20 million has been taken away from Wigan—largely within social services. That extends right across a range of local authorities that I represent in the SIGOMA group. That means that there will be a postcode lottery for social services provision. Some social services departments will be able to provide services for free. Others will charge and others will not provide the services at all. The Minister has to address that issue when he thinks about the grant for the next three years.

The debate has highlighted one of the difficulties that having a three-year settlement will produce. If we have a three-year settlement and there is something wrong in the figures, local authorities have to deal with that, because it will not be sorted out over the next three years. In a spirit of helpfulness, I put it to the Minister that we should look seriously at perhaps top-slicing part of the grant to local authorities so that there is a pool of money available to central Government. That would mean that, if there were problems—because of non-recognition of the indication—it would be available to him to correct the anomaly. If there were no anomalies and local government was reasonably satisfied with the way in which the formula had been sorted out and with the amount of money that it was getting, that pool of money could be put back into local authorities over the following year. The proposal does not involve taking money off local authorities; it involves putting money into a pool that can be used to sort out problems, if there are any, and given back to local authorities if there are not.

I urge the Minister not to take the advice from the hon. Member for Wigan (Mr. Turner). The Minister and his colleagues have had too many special grants that they have been able to manipulate across the country at will. If they go down the route that the hon. Gentleman has suggested, they will be going back on a promise that they made to the House to reduce a practice that creates great unfairness.

My point is that the practice would not create unfairness. It would try to tackle unfairness that may get built into the system. We are talking about a hugely complex system. Figures are taken from all over. There are queries about the number of people who live in an area or the number of people who require one service or another service. It is difficult to try to project that kind of thing over a three-year period. I am just saying to the Minister that our experience over two years has shown that there is a £250 million impact on SIGOMA authorities. That is greatly reducing their ability to provide social services. I am suggesting that, if that is the case the first time around, the Minister should look at the possibility of putting a pool of money aside from the grant, so that if that occurs again, it can be tackled and if it does not, the money can be put back and given to local authorities properly. That is a perfectly reasonable solution to a difficult situation.

I know that many other hon. Members wish to speak. I hope that the Minister will consider my point and think about the impact that double damping has had. In effect, there has been a double whammy because of the PCTs, so it is hugely important that the situation is resolved. I hope that he will not only consider the future following the next round of the comprehensive spending review, but that he will have constructive dialogue with the people in charge of the PCT allocations in the Department of Health to ensure that there is a system of integration in the amount that is given, so that a local authority and PCT serving a community do not find that the amount that they should receive is reduced because of the formula that has been agreed by local and central Government.

I congratulate the Minister on his speech. One of his predecessors, whom I will not name, had a tendency to present his case in the form of a triumphant speech. However, the Minister has been a little more constructive, so I hope that he will get a more constructive response.

I am sorry that the hon. Member for Ealing, Acton and Shepherd's Bush (Mr. Slaughter) is not in the Chamber. I was going to remind him that he would find that the allegations that he made against Hammersmith and Fulham council were made against Wandsworth council. However, the populace has backed that council and it and the Government have backed the services. The hon. Gentleman should realise that judging the quality of a service by the amount of other people’s money that is spent on it is not a good approach.

I want to touch on two issues, hopefully constructively, although it is worth setting the scene first. The result of the motion will be that most of the south-east county councils and two thirds of the London boroughs will be on what the Minister calls the floor. They will see “the floor” in the same sort of terms as the Deputy Prime Minister would: as a boxing phrase, not a dancing phrase. The assumed inflation figure of 2.7 per cent. is not the reality for many of those councils for the reasons that we have heard.

The stark reality for Surrey county council, which is on the floor—the boxing term—is that only 15 per cent. of its £640 million budget will be met by grant. Given the inflation costs that it expects to face, rather than the 2.7 per cent. figure, it reckons that it will need a tax rise of 8.6 per cent. Fortunately for council tax payers, if not necessarily service recipients, the council will reduce its budget by about £11 million and, I hope, get the increase below the assumed cap of 5 per cent.

As we have heard, social services, especially residential homes and care contracts, are the real problem. Throughout the area, we have the problem of cost-shunting and high-volume output to the community from acute hospitals and primary care trusts. Most London and south-east PCTs are in deficit. Every single Surrey PCT was in deficit, and after they were combined into one PCT, all the deficits were generously combined into one very large one. We have been warned that there will be cuts. One of the difficulties is the difference between the way in which the Ministers’ Department and the Department of Health examine the needs indices, especially those for the elderly. Some 13 London councils’ PCTs are in financial deficit, so they are facing the same problem, and many councils are facing an enormous struggle. Brent council complains that cost-shunting from its PCT will cost it about £9 million, which represents a considerable budget shift.

Although I have hammered on at Ministers about this over the years, the Government have only just started to learn that they should take away the leverage of central controls, targets and bureaucratic demands on local government. That is essential. One of my little councils, Mole Valley district council, has a tiny budget of about £10 million. However, its last comparative performance assessment cost £250,000, which, due to gearing, added £1 million to the council tax. While the Government are starting to move, tricks can be carried out involving smoke and mirrors—there could even be a three-card trick. Ministers talk about reducing the number of indicators from between 600 and 1,200 down to 200.

May I focus on the local area agreement, about which there has been a great deal of talk. The original proposal was for a local scheme with little central control, but I hope that the Minister will look at it, because it has become a monstrosity. There are 180 pages of guidance, and statutory duties and ministerial powers of intervention are to be introduced. There are 60 targets, extensive six-monthly reports on the targets to Government officers and a huge raft of bureaucratic procedures for local partners. The Minister looks a little puzzled, so I will not continue with that list, but the problem does not concern his Department alone. The Department for Education and Skills has more than 150 targets for children; the Department of Health another 100 or so for adults; the Department for Transport has its own set of targets, as does the Department for Environment, Food and Rural Affairs. Having just been hit with a demand for tax because it is the end of the tax year, I am sure that excessive numbers of civil servants are dealing with what is produced with excessive numbers of bureaucrats in local government, especially as local area agreements do not provide any real results on the streets.

I urge the Minister to consider the points that have been made by Members on both sides of the House about the care of the elderly and the mismatch between the NHS and local government. He may smile at my next request. He and I have both mentioned his favourite local authority. I urge him to take a deep breath and come with me, without officials or anything else, to listen to the people at the front line of what, I believe, is one of the most efficient local authorities to learn what could be done to take the bureaucratic load off local government and still give central Government what they want. It would be good business, and because of gearing it would have a dramatic effect on council tax. Will the Minister accept the challenge?

It is a great pleasure to follow my hon. Friend the Member for Mole Valley (Sir Paul Beresford), who touched on one or two points that I wish to make. I shall therefore try to abbreviate my contribution accordingly.

May I begin by praising the work of many local authorities? Whether at parish, town, district or county level, councils often provide crucial services. They educate the young, provide care for the elderly, keep the streets clean and often help to keep our communities safe. I suspect that everyone in the Chamber has criticisms of certain decisions or oversights, but local councils employ thousands of unsung heroes who, day after day, make a real difference to our constituents’ lives. Local councils, however, often have to make difficult and unpopular decisions. On waste management, for example, it is local authorities that make the difficult decisions on the ground. Local government therefore deserves a financial settlement that fully reflects changing needs and rising expectations.

As we have heard, Ministers claim that local government has received a generously funded settlement since 1997, and they cite a real-terms increase approaching 40 per cent. Once we strip out all the ring-fenced grants, not least for education, the increase is, as we heard earlier, just 14 per cent. in real terms. In other words, there has been a measly 1.5 per cent. per annum in the past nine years or so. In Hertfordshire, our general grant has increased in cash terms by 52 per cent. over the past 10 years. Some 46 per cent. of that increase has been required simply to cover inflation and Whitehall-led changes in formula and functions. As a result, our councils have received only a 6 per cent. increase over 10 years to cover other cost pressures, including, as we have heard, the rising burden of care for the elderly.

At the same time, the Government have piled new statutory responsibilities on to councils, tying them up with targets and red tape. Like my hon. Friend, I looked at some of those targets. Since 1997, Ministers have, between them, generated 1,500 performance targets, 734 objectives, 273 measures, 183 aims, 66 value-for-money targets, and 11 standards of maintenance, so they have been rather busy, as we can see. The problem is that the cost resulting from all that frenetic activity has proved to be hideous, both financially and in terms of lost time.

The background to today’s financial statement is one of rising prices. The consumer prices index stands at 3 per cent., and the retail prices index at 4.4 per cent., but energy costs, for example, are rising by well in excess of 10 per cent. Despite rising prices and costs, my authorities, Hertfordshire county council and East Herts district council, have been offered just 2.7 per cent. The settlement completely fails to take into account the real costs of their services. Take the county council; inflation alone will mean £19 million in extra costs. A deliberate pattern has been woven into the settlement. The Government either take decisions that result in new duties for councils, or make settlements that increase their costs.

The county council has experienced a rise in landfill tax, which will cost it another £1.8 million. We heard about NHS cost-shunting earlier, and the NHS is being squeezed in Hertfordshire, too, with many care costs being pushed back on to the county council. Our county hall reckons that that is another £2 million in the coming year. The Government made a proud boast about concessionary fares for the elderly, but the scheme comes without full funding, a fact that we debated earlier. The result is that East Herts district council will have to find more than £730,000 next year for a deal over which it has absolutely no say. Every year, both councils continue to pay for the Chancellor’s decision to raid pensions by scrapping advance corporation tax relief. The result for the county authority is another £1.5 million of expense.

Sadly, the current financial settlement is a classic example of the way in which the Government treat our councils. They give them more jobs, but keep back the money. They announce generous settlements, but get council tax payers to pick up the tab. However, it is not just the Government’s actions that cause problems. They have failed to acknowledge and respond to the changing social demands in our communities. On social care, for example, there is a rapid and continuous increase in the size of the elderly population. That group’s needs and expectations are, of course, considerable. In Hertfordshire, the increased number of adults who need essential support is projected to add another £10 million of cost, next year and every year.

Care costs are projected to increase by as much as 6 per cent. per placement, due in part to new Government standards. I do not doubt that, as the Minister will claim, good intentions lie behind those standards, but I am deeply concerned that those intentions are not accompanied with the money that is needed to make them work. The irony is that good, efficient authorities do not seem to be rewarded. According to the Government, Hertfordshire county council is an efficient authority. It has exceeded its Gershon efficiency target and has made cashable savings of £70 million in 10 years, and it intends to keep to the prudent path. However, because Hertfordshire is a floor authority, its ability to borrow in the way that it thinks best is severely limited.

In Hertford, the Richard Hale school has led an excellent campaign to build a desperately needed sports hall. The scheme has cross-community support and would benefit both the town and the school. Indeed, the county council would like to support it, if it could, but it tells me that because of Government rules on borrowing for floor authorities, it simply cannot help the school next year. Its hands are tied. Where is the logic in that? Why tie the hands of good, efficient councils in that way?

The financial settlement is part of a broader pattern. My councils have had their duties increased, and their costs have risen. Their wage bills have been increased for them, and their tax bills have been raised. At the same time, the Government have switched funds away or tied up projects in endless red tape. The result is that council tax bills have soared. Since 1997, the average council tax bill for my constituents has risen by 84 per cent., so that is an 84 per cent. increase for what is essentially the same service. This huge increase is especially unfair on those on fixed incomes, such as the elderly. They cannot hope that a pay rise will bail them out. Instead, they feel they have to cut back on other things to pay a tax that they increasingly resent. It might be their heating, or a birthday present for a grandchild. That is the price of the Government’s policy.

Ministers should realise that my constituents know exactly where the blame lies. Although all councils must strive to be more efficient, the Government also have a duty to provide a fair settlement which does not switch our funds away without good reason, matches funds with new responsibilities, and does not stop good councils backing projects that are valued in the community. That is what my councils and our taxpayers are seeking, and it is what they deserve. I regret to say that that is not what the Government are delivering.

The hon. Member for Mole Valley (Sir Paul Beresford) said that his local authority was on the floor. That is an appropriate description. My local authority, Solihull, is on the ropes and on the floor, having to cope with £7 million worth of cuts this year, as it did last year, with more to come.

I am grateful to be called to speak in this short debate, because the constituents of Solihull feel a deep sense of anger at the settlement that we have received this year. Some Labour Members—there are not many in their place—may think that somewhere as posh sounding as Solihull does not need a big settlement, and that people there earn more, live in big houses and somehow deserve to be left short of income. Solihull is often referred to as the posh bit of Birmingham—a place where Brummies aspire to move out to—but the borough of Solihull contains four out of the 10 per cent. most deprived areas in England. Even in the more affluent parts of the borough, the need for services is great.

Solihull has 16 per cent. more elderly than the national average, or indeed the average for next-door Birmingham. One third of those aged 85 or over need intensive care. Every year Solihull gets the lowest education grant of all the metropolitan authorities, and every year the council overspends its budget for the most vulnerable— for care for the elderly and for children.

The Conservative-run council has tried hard to balance its books, making hugely unpopular decisions like cutting music services for children and even shutting the public toilets, which caused a public outcry. Visitors, the elderly, parents with children and people with medical conditions cannot go to a public loo to spend a penny. Toilet talk may have its humorous side, but the toilets were closed to save just £220,000, and that is no laughing matter.

To get some investment into the borough, the council has complied by introducing an unwanted and unneeded red route, costing over £4 million. That is £4 million of Government money, so it is said, but in reality it is £4 million of our money, our taxes, misused in useless Government projects when the money could and should have been better spent on children and the elderly.

Solihull is the lowest funded metropolitan borough council in England, and perhaps it should be. Other areas have greater social deprivation overall than we do. But does the Minister agree that in an attempt to redress social deprivation, we have got things slightly out of proportion? Solihull is destined to receive a grant allocation this year of £243.79 per head of population. Next door in Birmingham, the allocation is £582. That is 2.4 times as much.

With a rise in grant of just £1 million, Solihull is bracing itself for major cuts to services, major redundancies, and major losses to everyone of facilities and services. For every £1 per head rise in Solihull, Birmingham gets £17. I do not get it, and I am afraid that my constituents do not either. Can the Minister explain how anyone can work out that a borough with four of the most deprived wards in England, a disproportionate share of elderly people needing care, children to educate, social services to provide, roads to maintain, bins to empty, and so on, can do that on 40 per cent. of the grant of the borough next door and only 53 per cent. of the national average?

The choices for Solihull are stark. Our officers are to be commended that Solihull has achieved an overall three star rating on efficiency and performance, but what is the point in performing so well when you get kicked in the teeth by being starved of funds? With £7 million pounds of cuts to find, the days of belt tightening are over. Even by raising council tax by the maximum possible without being capped, there is no surplus fat to cut, so we are talking amputation time. Perhaps the Minister will explain to my constituents and to those who run the council just how we are to maintain our basic services; and, since we clearly cannot, who should lose out—the elderly, the children with special needs, the environment, or what? Could we have a review of proportionality in setting the formula? We are only asking for fairness and reasonableness. We paid the taxes in the first place; we would just like a little bit more of them back .

I should like to discuss the situation in the East Riding of Yorkshire, where the local government finance settlement is a tale of light and dark—of community champions fighting community betrayal. It is a tale of outstanding success and outstanding performance by the Conservative-led East Riding of Yorkshire council set against the abysmal waste and systematic abandonment of vital rural services by a corrupt and failing Labour Government. The results of this Labour ineptitude, not to mention gerrymandering, are broken care, lost opportunity in our education system, and suffering by the old, the weak, the ill and the poor. Truly, this is a tale of the good, the bad and the ugly.

I will start with the good—it is a delight for me to do so—by congratulating East Riding of Yorkshire council, which is led by the Conservatives and has been transformed under Conservative leadership. In 1996, when East Riding of Yorkshire council was formed, it had the fourth highest council tax in England. In 2006, it had fallen to 245th out of 356. It had a four star rating for benefits in the 2005 English council league, which made a real difference to those with least—as, I am proud to say, Conservative councils so often do around the country. In education, the council is in the top 20 per cent. of performers. It is 17th nationally for GCSE results, with 61 per cent. of pupils achieving five A to C grades compared with 54 per cent. nationally. There has been a tale of continuous improvement in that respect.

The council has a record of extremely good financial management. Last year, it was regarded as one of the three financially best run councils in the country. I am delighted to share with the House the fact that this year it has been made top council in the country in terms of financial management. It has delivered the highest possible score in all areas of assessment: financial reporting, financial standing, financial management, internal control, and—the issue with which I am most proud to be associated—value for money. That is what Conservative leadership has delivered in the East Riding of Yorkshire. In Conservative hands, East Riding of Yorkshire council delivers the best value for money in the entire country. I know that when the electorate are given the opportunity in May, they will seek to re-elect those successful councillors and, I sincerely hope, add to them. That is a tale of outstanding performance by the Conservative-led council.

Now we come on to the bad. Here we have a sustained assault on our rural schools through Labour underfunding. We have a sustained assault by Labour on rural NHS beds, with a proposal to close every single one in my constituency. If the primary care trust’s preferred option goes through, the nearest NHS beds for intermediate care of the elderly will be based in Goole and Bridlington—an hour and a half’s drive away from where people live in villages around Withernsea, Hornsea and Beverley. That is just one way, so we are talking about a return trip of three to four hours—if, of course, people have a car in the drive, but Withernsea is one of the poorest areas in the East Riding of Yorkshire and one of the poorest in the country. It is going to lose every NHS bed and I pay tribute to the GP surgery, which has been fighting against the cut imposed by the PCT appointed by the Secretary of State.

If the Minister asks what relevance this matter has to the local government finance settlement, he should know full well that it is because of the impact on social services. It is because the East Riding of Yorkshire, an outstandingly well run authority, has none the less struggled to deliver care. Last year, there was just a 2 per cent. increase in the money available for either domiciliary care or care homes. That put care home owners under complete pressure. When challenged, the East Riding of Yorkshire council told me that it accepted that what it was being asked to do was unreasonable and that it could not be expected to do it.

Does my hon. Friend agree that it is not only services that are often pushed on to local authorities—for example, when hospitals do not have beds and elderly people go to social services earlier than they would have done—but that the level of inflation in the budgets is also important? In my part of London, the budget inflation for social services is upwards of 6, 7, 8 or 9 per cent. Does my hon. Friend face similar problems in his area?

My hon. Friend is quite right to point out that inflation is running at higher than the standard rate in many areas, which has often been stoked by the Government’s behaviour.

Labour has been running a sustained attack on rural schools and rural NHS beds, as I said. We are also losing rural dentists. Under the new contract, two out of three dental surgeries in Hornsea closed. There is also a sustained attack by Labour on post offices, with an announcement that thousands more are at risk. Labour has launched a sustained attack on the funding of social care and there has been a sustained failure to support transport. Not only does Yorkshire receive an unfair share of the transport cake, but my constituents were shocked to learn that of the money given across Yorkshire last year, 85 per cent. of it was deemed by the Government to have the greatest need, funnily enough, in Labour-held constituencies. I repeat the figure of 85 per cent.—although Labour holds only half the constituencies in Yorkshire. If we consider the land area covered as well, my constituents will draw the right lesson from that. I pay tribute to the Yorkshire Post for its sustained campaign on the Government’s failure to provide proper transport infrastructure—[Interruption.]

I am sure that the Minister will have plenty of time later to respond to the debate.

That is the tale of the bad. We have done the good and the bad, so now we come on to the ugly. The ugly is the actual impact of the failure to look after rural areas, of the withdrawal of funds and the undermining of services. Who does it impact upon most? As ably set out by my hon. Friends already, the impact is greatest on those with least. It is they who will be forced to travel the furthest. It is they who will be isolated when beds are removed from the NHS and they who will suffer from the lack of delivery of social care. The poorest and weakest in our society will be the most affected.

I mentioned earlier the 2 per cent. payment for domiciliary care going to the preferred providers in the East Riding of Yorkshire. Typically—and certainly in the urban areas—the people who provide the service are cycling from house to house, often on the minimum wage and on split shifts, to support the elderly and the incontinent. They have only a short time in which to do so, but once again it is they who are paying the price for what the Government have done.

The position of schools is also stark. When the gap between the richest and the poorest education authorities has widened, is not it time to implement measures to make the allocation of funding fairer and more equitable? In my constituency, well run, popular schools, such as Beverley grammar school and Beverley high school, are facing, at the end of the year, what the head teacher of Beverley high school described as the worst situation that she has known in 18 years. That school is outstanding—the Minister would be proud to boast of its contribution to results, not least for those in the poorest areas of Beverley. Yet there is a possibility of redundancies in the future.

Sparsely populated areas, such as the East Riding of Yorkshire, have higher costs. They have higher transport costs—more than £11 million this year. A recent report from TeacherNet shows that primary schools with between 80 and 100 pupils cost 16 per cent. more per pupil. If the school has fewer than 50 pupils, the cost per pupil increases substantially, yet the funding for the East Riding of Yorkshire is inadequate. Indeed, it is the fourth lowest funded education authority in the country.

Is my hon. Friend, like me, concerned about the iniquities of the Barnett formula, which is propagated by the Government and was established by their predecessors in 1978, whereby a substantial number of pupils in Scotland receive a huge amount funding—much more than his constituents and mine?

I simply comment that, when considering the unfair funding for the East Riding of Yorkshire, my constituents share a belief with my hon. Friend the Member for Peterborough (Mr. Jackson) that the Scottish settlement is unfair when compared with that in England. Scottish Members’ ability to vote on English-only matters—

Order. The hon. Gentleman should have taken the hint. He is now trespassing into territory, which, as I have said, is off bounds.

I apologise and I shall move on, noting only that Scottish Members of Parliament will vote on the local government finance settlement in England. I would have thought that that was relevant.

We hoped that the 2002 changed formula on local education funding would make the system fairer and more transparent. It has become more transparent but that only serves to make it clearer that, time and again, the authorities at the bottom of the funding league table lose out. Instead of being closed, the gap between the highest and the lowest funded local authorities is widening. [Interruption.] If the Minister would like to intervene to explain why we are getting a fairer settlement over time, I should be delighted to hear from him.

The local authority does not receive the money that it is supposed to receive. The floor system is a balancing act, as the Minister knows. The lack of funding to the East Riding of Yorkshire is not being remedied and the gap between richest and poorest is widening, not narrowing. That is why the hon. Member for Stafford (Mr. Kidney) chairs the f40 group and joins me and others with the lowest funded education authorities in the country to demand that the Government create a fairer funding settlement and change the current inequitable position.

Many hon. Members have mentioned the impact of the settlement on care, as I have done.

I congratulate the Conservative-led East Riding of Yorkshire council and urge the Minister to reverse the unfair funding. He claims that there is no assault on rural services—

I invite the Minister to visit my constituency. He will find that there are assaults on local services. We have a good Conservative-led local council and a bad Government who fail to listen.

I am sorry that I was not present in the Chamber for the start of the debate. I was lobbying the Mayor of London for money for my constituency. [Interruption.] I had a positive meeting.

Clearly, the council tax system, which stands behind the local government settlement, is now untenable. Many of those who will pay increased charges—particularly in London, where the tax is due to increase by 5.7 per cent.—will struggle, especially those senior citizens who wish to stay in the family home.

I was pleased to hear the Minister talk about the work of the ONS on the issue of migration flows and the calculations that will be made. That applies particularly in my constituency, as it is the base for the immigration and nationality directorate. From my casework, I have the perception that the population to be served by local government might be as much as 40 per cent. larger than that measured by the old census figures.

Previously, when I have raised the issue of the good treatment or otherwise of Croydon in the settlement, the Minister’s response has been robust, if not aggressive, in referring to local enterprise growth initiative funding. Nevertheless, that money is for rejuvenation, and should not be applied through the local government settlement. In the past, Croydon was slow in lobbying the Government about the area cost adjustment, and the way in which it affected different boroughs in London. Croydon ended up being in the other outer-London group when a west London group was set up. As the hon. Member for Carshalton and Wallington (Tom Brake) is in the Chamber, I pay tribute to the London borough of Sutton, which was rather more adept at lobbying on the issue than Croydon. The cost to Croydon has been £15 million a year in grant over the three-year period. I very much hope that the settlement working group work programme will consider closely the issue of area cost adjustment geography, which has a real impact on the allocation of moneys to a place such as Croydon.

For many London boroughs, certain issues are particularly challenging. In my earlier intervention on concessionary fares, I mentioned that the demands on Croydon are increasing by £862,000 a year, which is an 8.3 per cent. increase. I should have said that that is before the impact of any changes to the national scheme in future years. Because of migration issues, Croydon faces particular problems in relation to asylum and its costs. We face a shortfall of £4 million in that area, as well as a shortfall of £3.8 million in the area of learning disability. We also face challenges in dealing with the issue of single status, as do other local authorities. Following approaches from boroughs, the Minister’s Department has agreed that there should be a capitalisation of many of those costs. Within the limited amount of overall capitalisation allowed across the country, however, it is likely that there will be little real impact on the extra provision and flexibility allowed.

I am aware that we are tight on time, so I shall speak for just one more minute. I should like to return to the issue of asylum seekers and its effect on the budget of the London borough of Croydon. While strenuous efforts are made by Croydon and other London councils to alleviate the burden placed on them by the cost of asylum, several areas still need to be addressed. There is a lack of overall financial provision for post-16 to 18 age groups. Even where there is such provision, payments are not made within a reasonable period. That has been addressed by the Home Office for 2006-07, but outstanding issues in prior years remain, going back to 2002-03. I am sure that almost all Members would regard that as an unsatisfactory approach. The funding methodology used by the Department for Education and Skills is even more bizarre. Shortfalls go back to 2004-05, which must make planning very difficult for councils, quite apart from the impact on cash-flow management.

There is also a failure to address the support needs of asylum seekers with special needs—both while they are awaiting determination of their asylum applications and following a negative decision—as well as the support needs of others who are subject to immigration control and have no other recourse to public funds.

I have exceeded my minute. I hope that the Minister will be able to reassure me that he is listening to Croydon’s case, which I think has been put in a rational and constructive fashion. The borough faces real challenges: for instance, it receives £40 million less per resident than Ealing.

The hon. Gentleman knows what he is talking about. Like the hon. Member for Beverley and Holderness (Mr. Stuart), he is expressing compassionate Conservatism—of which I do not hear much in my area—and asking for more to be spent on services. But will he at least concede that local government funding is rising? Whether the figure is 39 per cent. or 14 per cent., there are, as the LGA says, real increases. How different the present position is from that when the hon. Gentleman’s party was in power.

My hon. Friends and I have tried to be constructive rather than going over past experiences. We should be positive about what the settlement will mean in some boroughs.

As there is not really enough time for others to speak, I will make a few more points. We ought to be concerned about changes considered during the period of a multi-year settlement that will have an impact on boroughs’ finances without any reassessment of the financial effect of that settlement. For example, a 5 per cent. cut in the housing benefit cap for private sector leasing exclusively in London in 2007-08 would have a very negative impact. It has been estimated that it would cost Croydon £73,000 per year, and the effect on several other London boroughs would probably be even more severe. In a year when the Minister is trying to convey the message that stability is what he seeks, that strikes me as a contradictory approach. There is also consternation about the cost of proposals to change the payment profiles of formula grant and national non-domestic rate. That change will probably cost my borough a further £70,000 a year, and it too strikes me as unnecessary in the context of a three-year settlement.

I am pleased that the Minister is willing to review the geography of the area cost adjustment. I am sure that officials from his Department are undertaking the preliminary work in respect of a small number of ACA areas in which there are data anomalies. I hope that he will reassure me that Croydon will be included in the review. In my opinion it is closely related to south-west London authorities such as Sutton, and should not be isolated in the outer-London group. I apologise to some of my south-west London colleagues who may feel that they have been squeezed out of the debate, but I think that that is due to earlier speeches rather than to mine.

What my hon. Friend is saying is very relevant to my borough of Wandsworth. Does he agree that some boroughs’ hard work to provide value for money for council tax payers should be reflected in the Government’s formula for allocation of funds, and does he believe that it is reflected adequately at present?

I agree with my hon. Friend. It is reasonable to expect that good performance should be rewarded, and also that cognisance should be given to the Government’s approach by rewarding delivering on Government policies. I know from experience that there might be disagreements between the two boroughs that my hon. Friend and I represent in the approach taken on housing, but it is amazingly counter-intuitive that, when boroughs such as Croydon deliver on Government targets for providing extra housing, they should subsequently be punished for having done so in further allocations for the new year.

I appreciate that that falls outside the local government financial settlement, but it has a real knock-on effect in the housing revenue account in boroughs such as Croydon. Not only is that a particular difficulty, but of the £57 million that is taken into the London borough of Croydon, £14 million is transferred to other authorities. The Government are trying to encourage the provision of additional council housing directly—not through housing associations—even though that might be an old-fashioned Socialist Workers party type of policy. I agree with my hon. Friend that the approach in any funding process should be to reward success and good performance and also to reward delivering on Government policies.

Our approach to local government finance must now be set in a new context. We look forward to the Lyons review. The council tax cannot continue. Although we should commemorate the good work done by Lord Heseltine, the time has come to move to a new system of local government finance.

I am conscious that the Minister must be given adequate time to respond to the debate, so let me cut to the quick of my comments. I want to address the needs of south-west London. I shall talk specifically about one of my two councils—Richmond upon Thames. I know that my hon. Friend the Member for Kingston and Surbiton (Mr. Davey) was going to address Kingston issues, and I shall mention them only in passing and look for another opportunity to raise them with the Minister.

As the Minister knows, Richmond upon Thames is the lowest-funded borough in London. The numbers that I have heard mentioned in this debate for other councils would leave Richmond in clover. The relevant sum for Richmond is £127 per head in 2006-07, which is £57 lower than that for the next lowest borough in London, and it will be £60 lower for 2007-08 because, as I said in an intervention, Richmond’s budget will be cut in the 2007-08 round. In saying “cut” I am using exactly the standard that the Minister asked for: comparing on a like-with-like basis year on year.

The Minister said, “You must look back over a 10-year period”, but 10 years ago the base for Richmond was wrong. What was a small number then has become magnified year on year to a number today which I believe even he and his senior officials would recognise is totally out of kilter. Although Richmond is different from other boroughs in that it is well-to-do, it is not that different from neighbouring boroughs. That number is now completely disproportionate in comparison with those for other boroughs.

For Richmond, only 19 per cent. of local council expenditure comes from grant. It has a very high council tax to deal with that situation, but it is also the lowest spending authority in London—it has the lowest expenditure per head. That demonstrates that it is a borough with no fat to cut, and with the additional burdens that have been described as a result of NHS cost-shunting, adult care costs and special needs for young children, the pressures are becoming intolerable.

Both Richmond and Kingston, the two boroughs that I know best, have a reputation for doing very well for children with special needs. Obviously, the education budget is picked up within the schools budget, but the care that such children need comes along with that, and the responsibility falls on the local authorities. We have good anecdotal evidence—we do not yet have hard survey evidence—that, because their reputation is so good, people are moving to the borough to take advantage of such care, thereby throwing more and more cost on to the local authorities. In Kingston, the same thing is certainly happening with social care. Frankly, the boroughs’ needs are therefore acute.

In the last minute that I shall take, I want to make a special plea for the south-west London boroughs as a whole. I ask the Minister to meet them collectively to look at their problems. The amount of revenue support grant that they receive collectively is far lower than that received by others. Only 35 per cent. of their collective expenditure is funded by grant, and they collect over £100 million more in business rates than is returned to them. Kingston, for example, pays far more in business rates—some £67 million a year—than is recovered in various grants collectively, which is about £32 million. The resource allocation has become completely out of kilter.

When I raised this issue in an intervention, the Minister smiled and with a slight snicker mentioned that Richmond upon Thames has developed a car parking charging regime to hit gas guzzlers, thereby implying, as many do, that it is a leafy, wealthy suburb. The elderly in our boroughs need care just as much as the elderly in any other. Children with special needs in our boroughs need care just as much as those in any other. The attitude that such places are leafy suburbs and should therefore only provide—that their needs do not have to be taken into consideration—is generally unacceptable. It has begun to irritate people beyond the point of tolerance to hear those sentiments constantly expressed. I thank the Minister for listening.

I apologise at the outset to Members in all parts of the House if I cannot answer the specific questions that some have raised on their constituents’ behalf. I of course understand why Members have made their special pleas, as well as their more general points, and I shall try to answer as many of those questions as I can.

I want to begin by painting the bigger picture. Underlying this debate has been the assumption that the Government’s grant settlement should fully fund the inflationary pressures on local government. Indeed, the hon. Member for Hertford and Stortford (Mr. Prisk) said that the settlement should fully reflect changing needs and demands. Of course, that is a desirable wish list, but the difficulty that the Government would have under any circumstances, were that approach to be accepted, is that it would simply fuel the very inflationary demands that councils face. One cannot possibly base a local government finance system that has distributed more than £60 billion on that premise.

I turn to the 14 per cent. figure given by the Local Government Association, which has been quoted in order to point out the difference between schools and non-schools funding. If one takes into account the full grant allocation, the figure is 29 per cent. in real terms. Of course, one can always make use of statistics, and the LGA acknowledges that this is an above-inflation figure. However, the social care issues that have been raised are of course extremely important.

The hon. Member for Brentwood and Ongar (Mr. Pickles) said that the council tax would go up as a result of home improvements, of having a nice view and of living in a nice area. Let me try again to scotch this rumour. Council tax, like the rates before it, is a value-based tax, so it is already inherent within it that, where there is a relative advantage in property value, a higher tax band rate is paid, other things being equal. There are no plans to change that, despite the excellent cost-saving computer that the Valuation Office Agency has. In Northern Ireland, another scaremongering story is put about. The changes there were instigated by the Northern Ireland Executive, not the Government, and are bringing Northern Ireland from a rental-based system of property tax to a capital-based one. It is indeed Northern Ireland that is following England, rather than the other way around.

The hon. Gentleman mentioned Scotland and an executive report from the Labour-Liberal Democrat Executive. In fact, it was an independent report that was, on the whole, dismissed by the Executive within minutes of being published, at least as far as the point systems were concerned. He tried—as have others—to paint the picture that the concessionary fares system is unfunded, but he cannot have his cake and eat it, as much as he tries. He cannot say that we should move towards less ring-fencing—a policy that we support—and then argue that specific grants should match pound for pound. It is not the Government who set the bus fare, but the bus company. Local authorities asked for a formula-based distribution of funding and we provided £350 million. None of the councils that were positive winners as a result—which included the councils of those hon. Members who mentioned this issue—said at the time that they did not like that distribution. The fact is that the Government have now provided another £250 million for a nationwide scheme.

On licence fees, the Licensing Act 2003 is a devolutionary measure. Again, the Opposition cannot have their cake and eat it. When the Leader of the Opposition attends the Local Government Association conference and promises an end to all ring-fencing, Opposition Members cannot criticise us when we do the same.

Given that the Minister and his predecessor gave some clear undertakings to the Chamber that local authorities would be fully compensated—those were the exact words—

Yes, I am just talking about licensing—I was restricting my comments because of the time. That has not been the case and the independent Elton inquiry suggested that local authorities should receive £43 million. What will the Minister do?

The hon. Gentleman makes a point. The Elton report landed on my desk this morning and the Government take its consideration of the new burden seriously—

From the hon. Gentleman’s political perspective, he should support the idea of value for money. If he seriously proposed that any Government should fully fund the demands on local authorities, he would set in train an inflationary economic policy that would render the local government grant settlement inoperable. The net new costs of the measures—the Opposition always talk about the gross costs—have to be taken into account.

Some hon. Members asked specific questions about the settlement. The hon. Member for Hertford and Stortford raised several points, including one about advance corporation tax and the changes to pensions. I would point out that at the time the Government provided £150 million of funding for local government because of that change.

My hon. Friend the Member for Wigan (Mr. Turner) generally welcomed the settlement, although he had some very strong criticisms of it, especially of the double damping on the floor. The hon. Member for Beverley and Holderness (Mr. Stuart), who represents the East Riding council area, made the serious accusation that the settlement was “gerrymandering”. He actually used that word. That is a serious accusation. However, the councils in his area that will receive the money through the funding system on concessionary fares are not Labour. I wish that they were, but they are not. My hon. Friend the Member for Wigan has criticised this Government strongly and consistently for our policy on social services damping, as has my hon. Friend the Member for Barnsley, Central (Mr. Illsley). At the same time, the accusation is made that the settlement is an example of gerrymandering.

No. The hon. Gentleman had his say, and refused to give way to me earlier on this point. I acknowledge the point about the damping floor. I have not been able to make changes in this settlement, but I shall look at the matter again.

The right hon. Member for North-West Hampshire (Sir George Young) asked me for confirmation about the permanence of floors, of which there are two types. One is the overall floor, from which I think that his county benefits—although he said that he wished that it was not a floor authority. The second type of floor includes those within social services, which will be taken into consideration.

The hon. Member for Mole Valley (Sir Paul Beresford) made some powerful points about cost- shunting and the inflationary pressures faced by local authorities. He talked about the targets for the local area agreement, and said that there was a fear that the agreement could become too bureaucratic. I agree, and invite him to support our Local Government and Public Involvement in Health Bill. He voted against it on Second Reading, but it achieves exactly what he asked me to achieve by means of the funding system.

My hon. Friend the Member for Barnsley, Central, like his colleagues from SIGOMA, spoke about double damping and the billion-pound business rate funding. He asked about equal pay for equal value, and I refer him to the Government’s recent statements on that subject.

The hon. Member for Carshalton and Wallington (Tom Brake) described me as a chess grandmaster—not a description that would be recognised in my household. He criticised the Government about the wage settlement, but I remind him that local council wages are agreed by councils, and not by the Government, so his criticism was unfair. He said that he wanted a local tax, thereby confirming a Liberal Democrat policy that I consider to be unworkable.

My hon. Friend the Member for Ealing, Acton and Shepherd’s Bush (Mr. Slaughter) made some strong criticisms, and there was an exchange about Hammersmith. I believe that that has changed the whole debate—

It being three hours after the commencement of proceedings on the motion, Mr. Speaker put the Question, pursuant to Order [24 January].

Question agreed to.


That the Local Government Finance Report (England) 2007-08, House of Commons Paper No. 231, a copy of which was laid before this House on 18th January, be approved.



That the Limitation of Council Tax and Precepts (Alternative Notional Amounts) Report (England) 2007-08, House of Commons Paper No. 232, a copy of which was laid before this House on 18th January, be approved.—[Mr. Michael Foster.]