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Local Government Finance

Volume 468: debated on Thursday 6 December 2007

With permission, Madam Deputy Speaker, I wish to make a statement about local government finance in England. For the first time ever, this is a three-year settlement. I am today able to confirm for each authority for each of the next three years not only allocations of formula grant but allocations of the new working neighbourhoods fund and 60 other specific grants, from eight Government Departments.

In total, Government revenue funding for local authority services will be, in the years 2008-09, 2009-10 and 2010-11, £70.4 billion, £73.5 billion and £76.7 billion. These are increases of 4 per cent., 4.4 per cent. and 4.3 per cent. respectively. This continues the sustained real-terms increases for local government under this Government. By the end of this comprehensive spending review period, local government will have received a real-terms grant increase of 45 per cent. since 1997.

Formula grant, which includes revenue support grant, redistributed business rates and the police grant, will total in each year £27.5 billion, £28.2 billion and £29 billion, representing increases of 3.6 per cent., 2.8 per cent. and 2.6 per cent. respectively. Every authority will receive a formula grant increase in every year. In addition, we expect of local government the same 3 per cent. efficiency savings each year as the rest of the public sector. Delivering that would mean that councils would have an extra £4.9 billion over the spending review period, which they could use to improve services or to cut council tax pressures.

We have worked closely with local government and its associations over the past two years to assess cost pressures and the scope for efficiencies. This settlement takes account in particular of the pressures on adult social care and on waste. Local government told us that it wanted certainty, flexibility, equity and stability in funding, all of which are delivered by this settlement. On certainty, we are providing a three-year settlement, not just for the core grant but for 61 other central Government grants and for regeneration funds. On flexibility, we have pooled 38 of the 61 specific grants into the new area-based grant, worth £4.7 billion by 2010, three quarters of which was previously ring-fenced but will be no longer. We are also transferring £900 million a year from other specific grants into formula grant. Local government also wanted less bureaucracy from central Government, so we have radically streamlined the new performance framework for local government, with a single set of under 200 national indicators, down from about 1,200.

On equity, we consulted local government over the summer on making the method of grant distribution fairer. My conclusions are set out in the further consultation paper that we are publishing today, but let me highlight these points. Following a major review, we were able to introduce a new and improved formula in each of the areas of social care in 2006. For the past two years, we have been damping two of those formulae. I now propose to end the additional damping and fully to implement the social services formulae. The overall system of grant floors, which we will retain, will ensure that that unwinds quite gradually over this and the next spending review periods.

I also propose to make the system fairer to authorities with a relatively low council tax base. Those authorities will have much greater difficulty than others in coping with spending pressures. I therefore propose to increase by 2 per cent. the proportion of the blocks for relative needs and relative resource within the available total.

We have made significant progress with regeneration in many of the most disadvantaged areas of the country. The new £1.5 billion working neighbourhoods fund replaces the neighbourhood renewal fund and builds in the Department for Work and Pensions deprived areas fund to create a single fund at local level. As we set out in the sub-national review, we are concentrating that funding on tackling worklessness in the most deprived areas. Sixty-six local authorities will receive funding from the working neighbourhoods fund for three years, and the 21 authorities that currently receive neighbourhood renewal funding but do not qualify for the new fund will get two years of transitional funding.

On stability, we consulted on aspects of the area cost adjustment. I propose some changes, to reflect more recent evidence, in the weights given to labour and business rates costs. However, I have decided not to implement any changes in the geography of the area cost adjustment. The consultation proposals covered only a few areas, and the financial turbulence involved did not seem justified by the relatively minor refinements that would result. I therefore intend to take advantage of the next three years to conduct a full review of the area cost adjustment, which will begin after the House has debated and approved this settlement.

I also propose no change to the expenditure base of the formula for fire and rescue. I have concluded that the last few years have been an untypical period for the service, making spending patterns an uncertain base for a formula. Again, I propose to conduct a thorough review of the formula. That will begin in the new year. Grant floors damping is the main way in which we ensure stability of funding for councils over time. Though some argued for the opposite, we will continue with the system of floors, which ensure that every authority receives a formula grant increase in every year of the comprehensive spending review period. In setting floor levels, I have struck a balance between providing an increase for all authorities and allowing formula changes to come through. For each of the three years the floors will be: for fire and rescue authorities and shire district councils, 1 per cent., 0.5 per cent. and 0.5 per cent.; for authorities with responsibilities for education and social services, 2 per cent., 1.75 per cent. and 1.5 per cent.; and for police authorities, 2.5 per cent. in each year.

To deliver this three-year settlement, we need to use the best and latest data available on a consistent basis across all authorities and we need to deploy it at the time we calculate the three-years figures. For population, those are the population projections produced by the Office for National Statistics in September, which take advantage of improvements in the way in which migrants are counted. The majority of the councils in our consultation wanted us to use those figures.

In recent years, however, the UK has seen significant demographic changes, not least in the pattern of people’s mobility. Those changes clearly create new measurement challenges. We are determined to build on recent improvements, while recognising that there is no single, simple or swift solution to those challenges. I can confirm today that the national statistician will now bring together central and local government to work on ways to improve population survey data and to make greater use of administrative data.

Ten successive years of above-inflation grant increases from this Government—continued throughout this spending review period—plus tough capping action have helped bring down council tax increases. Keeping council tax under control remains a high priority for the Government. We expect the average council tax increase in England to be substantially below 5 per cent. next year. Let me be clear: we will not hesitate to use our capping powers as necessary to protect council tax payers from excessive increases.

This is a tight settlement, but it is fair and affordable. It delivers the certainty, the flexibility, the equity and the stability that local government wanted. We know councils are capable of innovating, managing change and improving efficiency without having a disproportionate impact on their council tax payers. The challenge and onus now is on councils to demonstrate the leadership to deliver just that. I commend the statement to the House.

I begin by welcoming the Minister’s courtesy in sending me a copy of his statement. The technicalities of such a statement do not come alive in an instant, so it is appreciated when we have a little time to prepare. There was a bit of a glitch in getting the statement to us, but we will not make too much of that.

The Minister, who is a fair man, will know that his statement today will have been heard with more than disappointment in town halls up and down the land—not to mention the massive silence behind him—and not just by councillors themselves, but by the communities they represent and those who will be affected by what he has said and what he has not said today. Will he confirm that he has just announced another round of inflation-busting council tax increases for the long-suffering taxpayer? Over the last decade, we have predicted rises in council tax, which successive Ministers have dismissed at the Dispatch Box. Each year, the accuracy of our predictions has comfortably outscored the Government’s.

Does the Minister agree with the leader of the cross-party Local Government Association who said this morning that he was estimating inflation-jumping 4 to 4.5 per cent. increases? Will he confirm that the three-year settlement means an extra £208 on the bill of a band D home—a whopping increase of 122 per cent. under Labour? That will push council tax at band D through the £1,500 barrier by the next general election. I do not think that the Minister, who at the conclusion of his statement seemed rather proud of 10 years of Labour, has that much to be proud about. Is he aware of a survey released by a leading building society today showing that under this Government council tax has become the most unpopular tax in Britain—a pretty competitive league to top?

Conservative Members welcome the move to three-year funding, which this statement represents. Making this change must be helpful in planning budgets, but it also makes crystal clear the precipice that the Government are pushing local authorities over. The good news about councils having some certainty in their budgets is balanced by the bad news that they now know what it is they have to be certain about: a front-loaded increase of 1.5 per cent. this year, with rises of only 0.7 per cent. and 0.6 per cent. for the following two years at best, or just 1 per cent., 0.1 per cent. and a cut of 0.1 per cent. if private finance initiative commitments are removed. This statement is a cunningly worded invitation for reduced services from councils and higher bills for taxpayers. Does the Minister acknowledge that, tough as the first year is, the real screw and ratchet is applied in years two and three?

For young and old, and especially for those in receipt of elderly care and those paying council tax, today’s statement marks a further chapter in the long, slow but certain betrayal of people’s hopes and expectations from this Government. They will listen not just with disappointment, but with real anger as the small print unfolds in classic Labour fashion over the next few days and weeks.

The headline 1 per cent. increase in real terms over the next three years will be only the first meaningless figure to fall. Will the Minister confirm that that figure bears no relation to the cost pressures being suffered in, for example, adult social services, where expected real-terms expenditure growth appears to be double the funding increase provided? The “gradual unwinding” of controls on social services spending that the Minister speaks of in his statement does not address the urgency of the problem and will leave floor authorities in London and the south-east much worse off. Is the Minister aware that one head of social services has told the Local Government Association that these pressures require a 4.6 per cent. real-terms increase, and, tellingly, that the service provided by that council is now

“on the edge of human rights and dignity levels”?

Other services such as waste and highways are running similarly ahead of the measure of inflation used. Will the Minister introduce a measure of inflation relevant to the services provided by local authorities and use that measure instead? Will he confirm that the Government are cutting the amount of funding given to the local authorities business growth incentive scheme—a cut of £850 million over the next three years? Is that not just a back-door way of forcing councils to raise the money through new supplementary business rates, increasing the burden of taxation on firms? Have the Government any awareness of what is happening to shops and businesses out there on the high street and how these rises will damage them?

We acknowledge some limited progress towards allowing more apparent local control over budgets through the release from ring-fencing and other controls of some £5 billion by 2010-11, but does the Minister agree that once again there is sleight of hand as the money is being shifted into an opaque pot called “area-based grant”, with a say not only for a council, but for other public bodies and Government’s own regional offices? Can he confirm that on table 2 of specifics and general grants 2010-11, the area-based grant actually drops by 2.4 per cent.? Given that this grant has been trumpeted as an important new initiative, why is there to be a significant reduction?

The Lyons review, about which we have heard much in previous statements, but nothing at all today, said that

“an independent and authoritative voice is needed to provide better information on funding to inform the public and parliament about the impact of new burdens on local government and the evidence of future pressures”.

Michael Lyons said that because he felt an unanswered question was undermining public confidence in local government. Who is really responsible for the rises in council tax: is it the council or is it the Government? Each blames the other, so with the public losing out in the tit-for-tat discussion, Lyons proposed that we should tackle this with a simple, transparent mechanism. Why is there nothing in the statement about that and why is no initiative being taken?

We have come to learn that there are frequently reasons why the Government choose not to reveal information to the public—usually because people will not like what they are not being told. Is it not the case that the Government have chosen to dismiss this recommendation out of hand, because they know the answer to the question about who is responsible for nearly doubling council tax during their time in office? It is a case of “Best when we are putting up taxes; best when we are blaming others; best when we are Labour”—[Interruption.] I will get better back-up next year.

What representations has the Minister received about the new national concessionary fares scheme—merely the latest example of a national idea underfunded by this Government? Does he realise that the scheme makes financial sense for councils only if no passengers apply for it?

Why is the Minister only now bringing together local and national Government to discuss population movement and migration? This phenomenon has been leading to unacceptable strain on key public services such as schools and social services. Why has nothing been done, apart from the setting up of a meeting?

The Secretary of State—

It is inflation-busting grant rises that I have announced today, not inflation-busting council tax rises. I am proud of the 10 years of a Labour Government. I am proud of the commitment that we have given to local government. I am proud of the fact that, to date, local government has received a 39 per cent. real-terms increase in funding from central Government, and I am proud of the fact that that is in stark contrast to the 7 per cent. real-terms cut that local government had to endure for the four years of the previous Government, before 1997.

This is a tight settlement. It is a tight settlement for local government, and it is a tight settlement for central Government. But there are areas of central Government, including work and pensions, revenue and customs and enterprise, which have experienced year-on-year cuts, not the year-on-year rises that I have been able to announce for local government today.

The hon. Gentleman asked me a number of specific questions. Let me try to answer them. He asked whether I had heard from the heads of social services departments, and quoted one in particular. Let me quote the response of their representative body to the comprehensive spending review. The Association of Directors of Social Services said:

“Today’s CSR announcement is clear evidence that the Department of Health has truly recognised the importance of social care…today’s figures and settlement show that the vital contribution our social care services make to the overall wellbeing of so many hundreds and thousands of older people is beginning to win the recognition it deserves”.

The hon. Gentleman asked about the local authority business growth incentive. I introduced it from the Treasury, and we could not have been clearer from the start that it was a three-year scheme that we would review and seek to build into the mainstream funding system—which we will do over the spending review period, and for which purpose £150 million is allocated over that period.

The area-based grant is a larger fund than the current area fund. As a result of my proposals, more funding streams will go through it. Each will be a single payment made each month to local authorities, and all will be un-ring-fenced.

I was disappointed to hear the hon. Gentleman’s grudging comments on concessionary travel. I would have expected him to welcome the fact that 11 million pensioners and disabled people will benefit from free travel. I was also disappointed that he did not recognise that we are providing the funding—over £200 million in each of the coming years—and doing what local government wanted by paying it as a specific grant rather than through the formula.

The settlement builds on our strong track record of commitment to and funding for local government over the past 10 years, which is extended further through this spending review period, but it is not just about cash. Local government asked for certainty, and we have delivered it. Local government asked for greater stability, and we have delivered it. Local government asked for greater flexibility, and we are delivering that too.

Finally, let me return to the point with which the hon. Gentleman began: his council tax rise predictions. There is a certain regular choreography about the annual settlements. We have heard before from the Opposition their predictions of settlements and their impact on council tax. In 2004 the hon. Gentleman’s boss, the hon. Member for Brentwood and Ongar (Mr. Pickles), predicted a 6.7 per cent. increase; the increase was 4.2 per cent. The following year he predicted a 7.1 per cent. increase; the increase was 4.5 per cent. I could not find any predictions for 2006, and I thought that the hon. Gentleman might have learnt his lesson—but the hon. Member for North-East Bedfordshire (Alistair Burt) obviously has not.

Increased funding and capping action have delivered three of the four lowest council tax rises in the past three years since council tax was introduced in 1993. That combination—real increases in funding for local government, and a determination to take tough capping action as necessary—will continue over the next three years.

Order. A great many hon. Members are hoping to catch my eye. There is business to follow this, so I am minded to ask for a single brief question and a short answer from each of them. More hon. Members may then be successful.

Do the Government accept that their failure to implement the social services formula fully has resulted in Wirral metropolitan borough council losing £8 million a year? Can the Minister guarantee that despite the other changes that he has announced, Wirral will gain that £8 million in each of the next three years?

My right hon. Friend follows these matters in detail, and I am disappointed that he has not recognised and welcomed my announcement that we will fully implement the formula and remove the double damping. He may be interested to know that the formula grant increases for his local authority will be 5.1 per cent., 3.7 per cent. and 3.4 per cent. over the next three years, and that next year alone Wirral will receive £24.5 million extra in central Government grant.

I start by thanking the Minister for providing a copy of his statement in advance—but I am afraid that that is where the thank yous finish. There were no surprises in the statement, just bad news. Social care, teachers’ salaries and equal pay remain underfunded, while capping and the dreaded council tax remain in place. There was an opportunity to reform the council tax completely and replace it with a tax based on people’s ability to pay, but that opportunity was squandered, and the most unfair tax of all continues to exist. Council tax, which in the past 11 years has increased by 86 per cent. in the Minister’s constituency and by nearly 60 per cent. in that of the Secretary of State, will continue to hit the most vulnerable hardest, and to rise at a rate above the rate of inflation.

I welcome the fact that there has been a start at reversing the trend towards greater ring-fencing, which has accelerated under the Labour Government. I also welcome the cut in performance indicators, and the stability provided by the three-year settlement. That, however, does not outweigh the bad things in the statement.

Let me ask the Minister three specific questions. The Government have at long last recognised that migration is an issue. Can the Minister say when he expects the national statistician to produce proposals that will enable migration figures to be taken into account more rapidly in the allocation of grant? Will he confirm what I think he said—that he will ensure that any funding formula changes take account of the fact that the metropolitan fire and rescue services deal with the most vulnerable and deprived inner-city areas, with all the associated costs? Finally, what real average increase in council tax does he expect in the next financial year?

I regret the fact that the Minister is still observing the pretence that local government Ministers come to the House dressed in Santa costumes to deliver bountiful settlements that will pay for the turkey and the trimmings. They do not, and he did not today. This settlement might just about pay for a battery chicken, but it will not even cover the cost of the gas needed to cook it.

Where does one begin, Madam Deputy Speaker? The vulnerable in our system are, of course, protected by council tax benefit, whereas the same is not true of the hon. Gentleman’s party’s proposals for a local income tax. The Liberal Democrats will not tell us how they will calculate the local income tax and they will not tell us who it will hit, but the risk is that there will be big increases for the working population, who will not be protected as they are at present. Sir Michael Lyons recognised those flaws, which is why he did not recommend the implementation of a local income tax. I am quite sure that when we see the detail of the Liberal Democrats’ proposals they will not add up, because the Liberal Democrats’ sums never do.

Let me turn to the three questions the hon. Gentleman asked. On migration, I will send him a copy of a relevant report, as he might not have seen it. The national statistician set up and led a taskforce looking into how we can improve the analysis of migration figures, which reported in 2006. She will now lead action, involving local and central Government, on ways to implement those improvements, through, for instance, improving survey data and the greater use of administrative data. On the fire and rescue service, the hon. Gentleman is concerned about inner-urban areas and I hoped he would recognise that my decision not to rebase the formula will be of assistance in that regard, but he did not. On council tax levels, the hon. Gentleman will understand that, quite properly, they are set by local councils: it is for local councils to determine those levels. We expect them to be substantially below 5 per cent., and we will take tough capping action in the new year if that is necessary.

I congratulate my hon. Friend on scrapping the double damping, which was iniquitous, immoral and had no intellectual basis; that is of great benefit to many people in our constituencies. Will he confirm that as Conservative-controlled councils such as Havering and Redbridge in London will benefit from that, this is nothing to do with a north-south divide, but is actually about making sure that the money follows the need, so that councils such as mine will be able to tackle the inequalities that still exist in our country?

I welcome my hon. Friend’s comments. He is a former local government finance chief, he chairs the group of SIGOMA—Special Interest Group of Municipal Authorities within the Local Government Association—MPs, and I know how closely he follows these matters. He is absolutely right to say that there is not a north-south divide. It is clear from the figures for this settlement and the total grant that there are bigger variations within regions than there are between regions. He might be interested to know that the increases in formula grant for Wigan are set to be 5.7 per cent., 3.7 per cent. and 3.1 per cent. If Wigan, like other local councils, achieves the efficiency savings that we expect, next year alone it will have an extra £7 million with which either to improve services or to keep council tax pressures under control; I have already stressed that point.

Does the Minister accept that the quotation from the Association of Directors of Social Services that he read out simply does not represent the position in counties such as Hampshire, which are spending much more than their formula grant on adult services? Does he also recognise that because of factors such as demography and the growing cost of care packages, intervention by social services authorities will increasingly be restricted to emergencies and life-threatening situations?

We have worked closely with local government over two years to analyse the pressures, and we have identified with them in particular the pressures on adult social care. They are recognised in the level of rises for local government. The right hon. Gentleman will note that authorities with social services and social care responsibilities have relatively higher rises than other types of authority. If he looks at the figures and the small print, he will also note that there is a significant increase in Department of Health funding specifically for adult social care. That will rise on average by up to 10 per cent. across the three-year period. That means that over the spending review period there will be an extra £300 million for adult social care and for addressing some of the problems that authorities such as the right hon. Gentleman’s local one face in dealing with the pressures that undoubtedly exist.

Has my hon. Friend looked at the impact on our decent homes policy of the withdrawal of the rental constraint allowance in the housing subsidy draft determination? This morning, Bolton has calculated that its arm’s length management organisation will lose approximately £7 million in the coming years. It was on target to meet its decent homes standard by 2010, but I am afraid that if these calculations are accurate, this announcement will put the decent homes standard in jeopardy.

The Government are giving a very high priority to housing—both to building new houses and to improving those that we currently have. I have not looked in detail at the specific formula for Bolton, but now I shall, in view of my hon. Friend’s intervention. I hope he will recognise and welcome the fact that Bolton’s formula grant stands to rise by 5.3 per cent. next year compared with this year’s figures.

The Minister spoke of the traditional choreography of these occasions. Last year, the then Minister said that he expected council tax to rise by substantially less than 5 per cent. That meant in practice anything up to 5 per cent. Does the word “substantially” this year mean anything different from what it meant last year? Also, does the Minister realise that there is a problem with the universal bus pass, because the formula by which the fund is being distributed means that some local authorities, such as Harrogate, stand to be very substantially underfunded for that programme, and in order to meet their bus pass obligations they will have to look for resources from other work that might be more important? Will he discuss with the Secretary of State for Transport how that can be avoided for the local authorities on which it might bear particularly heavily?

The right hon. Gentleman is right, in that the council tax rise was 4.2 per cent. last year, 4.5 per cent. the year before, and 4.1 per cent. the year before that. The level of council tax rises will be determined by the decisions that local councils throughout the country take. As for the pressures that he feels exist in his area, let me say again that this is not just a question of the cash that central Government give; it is also a question of the decisions taken, and leadership given, by local councils in managing those pressures over the next three years. If the right hon. Gentleman’s own local county council of North Yorkshire were to achieve the 3 per cent. efficiency savings that we expect, that would give it almost £9 million extra to spend on improving services—or it could, indeed, choose to cut council tax by £39.

I welcome many aspects of the overall settlement. Although it is tighter than the settlements in most recent years, it is clearly better than anything local government used to get during the 18 years when the Conservatives were in power. May I ask a specific question about my own city of Sheffield? I understand that its grant increase will be only about half that of neighbouring authorities in South Yorkshire. Sheffield has areas that are just as deprived as those in neighbouring authorities, including places such as Darnall in my constituency. The problem is that we also have areas such as Sheffield, Hallam, whose affluence raises the overall average for Sheffield, so people in the deprived parts of the city do not get the resources needed to meet their specific problems.

One of the things that I have learned during my first few months in this job is that every council regards itself as uniquely disadvantaged by central Government funding decisions, and every council has a special case unique to its circumstances. I ask my hon. Friend not to compare the position of Sheffield with that of Rotherham, Doncaster or Barnsley, which in many ways look enviously at Sheffield’s success in the past 10 years—I know that, because one of those is an area that I represent. I ask him instead to look at the extent of the Sheffield increase—at the fact that there is an increase in all grants to Sheffield next year of more than £30 million—and in particular I hope he will work with the Government to make sure that Sheffield city council and others make best use of the new working neighbourhoods fund, which will help to tackle some of the problems that he is concerned about in Darnall.

Because of Government decisions, Suffolk county council has worked hard and spent a good deal of money on the pathfinder scheme, and Ipswich borough council has spent a good deal of money preparing for unitary authorities. The Government have now changed their mind on that. What resources are they going to pay to those authorities to protect the ordinary council tax payer, who will have to foot the bill for incompetence in the Minister’s Department?

I simply do not recognise that description of the announcement I made yesterday about local government restructuring; it is so wide of the mark that it does not do the right hon. Gentleman, with his long experience in local government, sufficient credit. The resources that any such councils put into their work with the boundary committee over the next year or so are a matter for those local councils. The right hon. Gentleman is concerned about Suffolk county council, and it is true that his county has done good work in improving the efficiency of its services. It is looking at a formula grant increase over the spending review period of 7.3 per cent., 4.8 per cent. and 4.4 per cent. In total, the grants from central Government mean that Suffolk county council will receive more than £40 million more next year than it will have received this year.

I welcome my hon. Friend’s announcement of a three-year settlement. On leadership, will he congratulate Durham county council on its successful unitary bid, which will mean that council tax in six of the seven former district authorities in Durham will fall in 2009? The bid continues to be opposed by Durham city council, which is led by the Liberal Democrats.

My hon. Friend has been a consistently strong advocate of local government reorganisation in his county, and I pay tribute to his work. I also pay tribute to Durham county council leader Albert Nugent, whom I have met on several occasions. This process is creating new authorities, and it gives the possibility of new leadership, new involvement and empowerment of local people, and a significant improvement in the quality of services in his area in the future.

I genuinely seek clarification. The Minister announced, with a bit of a flourish, that he proposed to “end the additional damping and fully to implement the social services formulae”. He also said that “this unwinds quite gradually over this and the next spending review periods.” That, of course, equals six years, so the damping will be withdrawn not immediately but in a gradual fashion. The damping mechanism affects Cornish authorities. Cornwall county council has a formula grant of £149 million, but how much will be withdrawn from that council as a result of the damping mechanism? Last year, £10 million was withdrawn.

What I announced is what we will do—remove the double damping on the formula in two of the three areas of social services. Floors damping is a general feature of the system—incidentally, it was this Government who introduced it, in 2000, to protect councils year-on-year against the sort of volatility and unpredictability that they used to suffer. That will be removed, but it will unwind over the course of this spending review and the next one. If the hon. Gentleman is concerned about Cornwall, he should note that it will receive an 8.5 per cent. formula grant increase next year. I hope that he puts to its county council that were it to make the efficiency savings that we expect, nearly a further £9.5 million would be available to it, so if it chose to reduce council tax bills, rather than improve services, it could do so by £50.

My hon. Friend will be aware that because of double damping Birmingham has experienced a shortfall of about £30 million in its grant allocation compared with its assessed need for social services spending. Does his announcement of the withdrawal of double damping mean that that gap will be eliminated, or at least substantially reduced? If so, that is good news, but if not, does he accept that there will continue to be considerable pressure on social care budgets?

I have explained, and we have recognised in the settlement, the pressures on social care budgets. I have also explained how in the settlement to local authorities, and through specific grants from the Department of Health, we are trying to support councils in dealing with those. Double damping will unwind, which means that over time any gap will be reduced and then closed.

Is the Minister aware that 10 years ago Sevenoaks district council received roughly exactly the same per head as Sedgefield borough council in the north, whereas this year Sedgefield borough council is getting more than twice as much as Sevenoaks district council? [Hon. Members: “Quite right!”] Why should council tax payers in the south continue to subsidise the friends in the north?

The hon. Gentleman is very astute and very well informed about financial matters, so he knows that the formula is applied consistently across the whole of England. When he compares Sedgefield and Sevenoaks, he will surely recognise that Sevenoaks district council’s ability to raise funds from its council tax base is entirely different from that of Sedgefield. He will also recognise that the needs element and the resource element, in which I have announced increases today, are necessary, particularly to ensure proper fairness in the system.

May I ask the Minister about his decisions on floors? I suspect that I shall welcome his decision on floors for district councils, because I would expect it to benefit South Derbyshire district council, but setting a floor of 2.5 per cent. on police authorities indicates extraordinarily slow progress in implementing the formula that would correct the underfunding of Derbyshire police authority in the future.

My hon. Friend is right, to the extent that this is always a decision about the balance between wanting to see the changes that should flow from formula calculations come through into the system and the reward of grants, and ensuring year-on-year stability and a degree of predictability for local government. The decision on the floors for the police grant follows exactly the same approach as we took in the current two-year spending settlement. The floor will be 2.5 per cent. in each of the next three years.

The Minister will accept that any settlement is good for the local people of a community only if their council is well run and well led. He knows of the concerns in Herefordshire about its council’s leadership, particularly in relation to information and communications technology projects. He personally endorsed to me the appointment of Mr. Crookall to carry out an independent review. Has he seen the Crookall report? If not, will he get a copy of it? Will he publish it in full, unlike Herefordshire council, which reportedly has published only part of it?

I will ensure that I try to get sight of the Crookall report, as the hon. Gentleman urges me to do. He is right to say that the quality of the management and the ability of councils to lead their organisation, and thus to do their best by local council tax payers, is important; it is a central feature for us. I see no reason why many more councils cannot match the best of the efficiencies that have been gained—Northumberland county council has managed 11.5 per cent. over the current period, Sheffield city council has managed 12 per cent., Hackney borough council has achieved 14.5 per cent., and five district councils have achieved more than 20 per cent. Those councils are setting the standards for others over the next three years.

The seven metropolitan district fire authorities have genuine concerns about the settlement. The Minister has referred to them, so will he give any assurances that the moves that he has made meet the concerns of the fire authorities? If they think that that is not the case, will he agree to meet them as soon as possible?

Specifically, the decisions that I have announced this afternoon for fire and rescue authorities do meet one of the principal points that those authorities were making to me—that basing the formula on the most recent period was uncertain because it was untypical—so I trust that they will welcome my decision. In general terms, my colleagues in the Department for Communities and Local Government and I are ready to meet any local authority leader or any Member of this House who wishes to make representations between today’s announcement and the close of the consultation period, which will be on 8 January.

May I ask the Minister to clarify the decision process on the new working neighbourhoods fund? The previous fund, the deprived areas fund, was set nationally to individual wards and was then largely administered by Jobcentre Plus district managers. That meant that the situation in wards such as Roehampton in my constituency was similar to the one mentioned by the hon. Member for Sheffield, Attercliffe (Mr. Betts), who is no longer in his place. It was difficult to target the fund at areas containing diverse populations where deep areas of deprivation are located cheek by jowl with the most affluent areas in cities, so Roehampton did not qualify for it.

Will the new working neighbourhoods fund be allocated at the local authority level and then distributed by the local authority, or will it still be done at ward level and, therefore, potentially still miss the key areas, such as those in my constituency, that did not manage to benefit from the previous fund?

The working neighbourhoods fund will be distributed through the new area-based grant. It will be one of those grants that is totally un-ring-fenced. The hon. Lady may wish to know that her authority, Hammersmith and Fulham—[Hon. Members: “Wandsworth.”] In that case, the point that I was going to make about Hammersmith and Fulham is not relevant.

Following the question from the hon. Member for Sevenoaks (Mr. Fallon), does my right hon. Friend agree that this Government inherited in 1997 a perverse formula funding system, which favoured certain categories of local authority over others? Can he reassure the House that this announcement will at long last level the playing field for all categories of local authority, particularly those in SIGOMA, of which Barnsley and Doncaster are but two?

My hon. Friend is right. He is a former Barnsley council leader and he knows just how unfair and rigged the funding system was under the previous Government. Achieving more fairness in the formula system was part of the consultation we conducted over the summer. Some of the changes that I have announced this afternoon will help to make the system even fairer. I hope that my hon. Friend and the current council leader, Steve Houghton, will welcome the fact that in Barnsley the increase in formula grant—the core grant from central Government—will be, over the next three years, 6 per cent., 3.7 per cent. and 3.1 per cent.

Will the specific grant for the extension of the excellent concessionary travel scheme fully compensate councils such as Essex for their costs—yes or no?

The extra money that we are putting in through a special grant, as local government wanted, in each of the three years will compensate local authorities for the extra costs in making a local free travel scheme a national one from April this year.

I add my welcome for the year-on-year increases which are, as has been pointed out, in stark contrast to the situation until a decade ago. I also welcome the abolition of double damping. Can my hon. Friend clarify further the phasing out of double damping, which—if I understand him correctly—will take place over six years, and will he say a little more about the mechanisms that will be in place over the next three years to assist places such as Birmingham, which have been facing pressures of some £28 million? Will he also address the point about the working neighbourhoods fund being applied to areas below the level of wards, because funding at ward level is not always appropriate for targeting the pockets of deprivation found in many areas?

The new working neighbourhoods fund is based on criteria that start from the neighbourhood level, as my hon. Friend wishes, not the ward level. He asks also about the double damping. Damping on the formula is removed with immediate effect. It is the full changes that flow from the implementation of the formula that will feed through over the next few years, and it is the general system of floors that will ensure that that happens, but over a manageable period. Finally, he asks how we will help Birmingham in particular, and I hope that he will welcome the fact that next year the total grant increases from central Government to Birmingham council will be more than £100 million.

In his alter-ego as flood recovery Minister, the Minister will know that one of the big financial pressures on Gloucestershire county council is the huge damage caused by the summer’s flooding to our highways network. The bill is estimated at £25 million. We have had £10 million from the Government, for which the county is grateful, but does he have any news on the remaining £15 million?

The hon. Gentleman is right: we have given an interim payment of £10 million to Gloucestershire in recognition of the damage caused to the highway infrastructure and in response to the request that it made to us. We are working with the county at present on the final costs of the damage, but the principle is well established that although central Government will step in to support and help local government—as we are doing in a big way—it is right to expect local councils to cover a certain amount of the costs.

The Minister said that this was a fair settlement, but how can he apply the word “fair” to the treatment of Derbyshire police authority, which has been underfunded for many years? Two years ago, the Government acknowledged that, but have refused to implement the formula that would remedy it. The statement today means that the authority will be £3 million short each year for the next three years, on top of the £4.5 million efficiency savings that it has to make. It already has 230 police officers fewer than the family of authorities with which it is compared. Now it seems that the authority will have to make cuts that will make that situation even worse. How is that fair?

Fair for Derbyshire is an increase of more than £50 million in the total grant coming from central Government in the next year.

Does the Minister not accept that his announcement today also leaves Greater Manchester police—the second largest force in the country—considerably short of funding and having to make yet more cuts in the number of front-line officers? Does he think that that is acceptable?

Having announced the settlement, I have made it clear that decisions on spending—on how to manage the pressures in the next three years and how greater efficiencies can be gained through council activities—are properly a matter for local authorities, not for central Government. Greater Manchester police will have to face those pressures and those challenges, just like every other police authority and local authority.