For the convenience of the House, we will deal with motions 4 and 5 together for the purposes of debate. We will, of course, put the questions separately at the conclusion of the allocated time.
With this we shall take the following motion:
That the Local Government Finance Report (England) 2009-10 (House of Commons Paper No. 150), which was laid before this House on 21 January, be approved.
We are debating the 2009-10 settlement for local government, the second year of the first ever three-year funding deal for councils. Through the Government’s policy on three-year settlements, I have made certain commitments to local government. First, every council in every region will get an increase in its core grant in each of the three years. Secondly, total Government funding for councils in England rose by 4 per cent. this year, will rise by 4.2 per cent. next year and is set to increase by 4.4 per cent. in 2010-11. Thirdly, councils will have more freedom to take local spending decisions. By 2010-11, £5.7 billion a year will have been mainstreamed into funding with no Government funding strings attached. Fourthly, councils will have more certainty about other funding, so in addition to the core grant, I am also confirming today the allocation to councils of 70 other grants from eight different Departments. Most importantly, I have given the commitment not to change my proposals on formula grant distribution, except in entirely exceptional circumstances.
Local councils therefore know what they will get, and they can plan and manage ahead. The stability that that commitment brings is doubly important in dealing with the economic downturn, which I will come to in a few minutes.
The Minister mentioned exceptional circumstances. Is he aware that in the royal borough of Kingston, as in many other London boroughs, there was a massive and unexpected increase in demand for primary school reception year places in September 2008, which is expected to be repeated in September 2009 and beyond? The capital allocations, and the revenue to support those places, are simply not available. Will he talk to colleagues in the Department for Children, Schools and Families and argue that this is an exceptional case, and that Kingston and other London boroughs need the support of the Government?
In a moment, I shall explain the conclusions that I have come to on whether there are exceptional circumstances in relation to the three-year settlement. I shall also deal with how I expect councils to show—and how they are showing—that they can deal with the downturn. I am aware of such representations, not least from London councils, representatives of which I met face to face. Their first point, when I asked them about the apparent impact of the economic downturn on their councils, was that an increasing number of students were coming out of private school education and looking for places in the state school system. That was their top priority.
The Minister suggested that he was going to answer in terms of the decisions that he has made. We already know that the decisions that he has made will not help the situation. My colleagues and I from all parties around the capital are asking the Government to consider the case of primary school places in London. The change happened before the Government did all the work in preparation for the announcement. Changes within the settlement and the comprehensive spending review need to be made in year. Otherwise, there will be severe problems for many children and families across the capital.
One of the principal strengths of a three-year settlement, as well as the additional flexibilities that allow local authorities to identify the priorities or pressures in their area, is that the authorities are given the capacity to manage through that period. For that reason, I have not regarded the representations that I have received on the demand for school places as exceptional circumstances warranting an unpicking of the three-year settlement and undoing the stability and certainty that is at its heart.
One of the other unfortunate by-products of the current economic downturn is the fact that local authorities such as mine, Chelmsford borough council, are being adversely affected as the fall in interest rates has changed the income that they receive from savings. What advice does the Minister have for local authorities affected in that way? Clearly, the three-year settlement would not have taken that consideration into account.
That is one of the points that have been put to me, not least by the Local Government Association, as the hon. Gentleman might expect. The impacts and pressures of the economic downturn do not all go one way. Some costs are down considerably, reserves are up and with inflation set to be lower next year, the quantum of Government grant to local government is likely to go further. There are pressures on local councils, just as there are on central Government, but they do not all go one way. Councils have the capacity to manage their way through this period, not least because they now have a three-year settlement with extra flexibility as part of the funding. They know what they are getting and are able to plan ahead and make some of the difficult decisions that they face.
In my statement to the House on 26 November, I launched the period of statutory consultation on the local government settlement for next year. That ended on 7 January, and we received 109 written representations from local authorities, local authority groupings and hon. Members. That is the smallest number of representations on the local government finance settlement that anyone can remember. It underlines the seriousness with which local government takes our commitment to a stable three-year settlement and, I think, the seriousness with which local government takes its responsibility to manage within that settlement.
I am sorry that I missed the Minister’s first words, but I rushed here as soon as I saw that he had started to speak. I think that there might not have been many representations because, with a fixed three-year settlement, local councils might have thought that they would not see much change. Does he accept the case put by inner- London boroughs in the representations that he has received for a better allocation of money for social services and the care of vulnerable younger people? The figure that I have been given—he can correct me if I am wrong—is that last year £370 million was transferred out of London to the rest of the country. While some local authorities now have 99 per cent. of their funding met, boroughs like mine get only two thirds of what they need to look after vulnerable young people.
No, I do not agree. This change in the funding formula is based on some detailed work that we published and consulted on several years ago, which formed the basis of the decisions that I took at the beginning of this three-year settlement. Although the same arguments have been made to me by others, I have seen no evidence that the formula is not the best available, or to suggest that the shift in funding—which some people say is long overdue—is not appropriate for this year and next year.
The hon. Member for North Southwark and Bermondsey (Simon Hughes) had two bites at the cherry during the debate on the police authority settlement. I shall give him his second bite in this debate, and then give way to the hon. Member for Wimbledon (Stephen Hammond).
The Minister for Security, Counter-Terrorism, Crime and Policing was very helpful in response to my second bite at the cherry. He said that he accepted that he would revise the funding formula to take account of new and up-to-date assessments of migration and population figures before the next three-year funding period, at the latest. Will this Minister do the same? He knows the arguments: we think that Ministers do not count the population of boroughs such as mine correctly, as we have many more people than the official figures show.
My hon. Friend the Minister for Security, Counter-Terrorism, Crime and Policing is always helpful. The hon. Gentleman has just asked a separate and different question, but I can give him the same answer. It is yes, and not least because the national statistician has been leading a taskforce over the past year, with local government intimately and essentially involved. On 24 February, the Office for National Statistics will announce a package of improvements to the population and migration statistics that will give us a better base for calculations for any future financial settlement beyond this three-year period.
I am extremely grateful to the Minister for giving way. He will have noticed that one of the other representations made to him was a joint representation from the chief executive and the leader of Merton council. A continuing problem for many outer-London boroughs and constituencies is that, although we pay our hard-working teachers inner-London rates, we get the outer-London settlement in the local government formula. Has the Minister had a chance to consider the representation from the chief executive and the leader of Merton council? If so, what is his response? Will he consider meeting them, and me, to talk about the problem further?
I have not yet considered that representation, or any of the others that we have encouraged from local authorities. The hon. Gentleman’s point is linked to our review of the area cost adjustment, which is essentially the mechanism that he and his council’s chief executive and leader are concerned about. The way in which it operates is not entirely satisfactory, and we looked at options before striking the present three-year funding deal with councils. We consulted on various changes to the mechanism but none was appropriate at the time, although we are looking hard for the sort of changes that may be appropriate in the future. The work that the hon. Gentleman’s council, and others, are doing with departmental officials is extremely valuable, and I and other colleagues in government will take a hard look at it as we prepare the ground for any future finance settlement beyond the current three-year period.
I am grateful to the Minister for giving way, and I apologise for not being present for the opening of his statement. The concerns expressed by my hon. Friend the Member for Wimbledon (Stephen Hammond) also affect the borough of Enfield. It too is an outer-London borough that welcomes the review of the area cost adjustment, but we need to see the reality of that review before we get to the end of the three-year cycle. Ideally, Enfield council would like to make reductions in council tax, but the fact that the dampening effect takes £5 million out of its hands means that that money cannot be passed on to the taxpayer.
I am not sure that the hon. Gentleman’s description of damping is quite correct. He might like to recall that it was we who introduced the damping floor into the local government settlement in about 2000. Before that, authorities such as his would face big reductions year on year. They faced volatility that was difficult for them to manage, and that certainly made it difficult for them to plan ahead. If his authority benefits from the floor, I have to say to him that without that floor, his authority would be entitled to a good deal less support for council spending and council services.
I have taken into account all the representations that we received, including what was said at the meetings that the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Tooting (Mr. Khan), and I had with local government groupings. My conclusions from the consultation are that there are no exceptional circumstances of a kind that would justify changing the plans that I announced for the core grant and its distribution in the coming year.
I have confirmed that the formula grant is set to increase by £780 million, or 2.8 per cent., in 2009-10, and by £747 million, or 2.6 per cent., in 2010-11. The distribution of that formula or core grant to authorities will be as I proposed to the House in November. On top of that, specific and area-based grants take the total increases to £2.97 billion, or 4.2 per cent., next year, and £3.18 billion, or 4.4 per cent., the year after that. It is a tight but fair settlement. It is in line with what I announced in 2007, and every local authority will get an increase in core grant in each year in this three-year period. I am also confirming allocations for 70 other funding streams today, including 43 separate grants from six different Departments, which will be paid in a single sum each month under the new area-based grant system—and central Government have attached no strings, in terms of how local councils decide to spend that money.
I cannot let the Minister get away with the statement that every council will get an increase. The truth is that local authorities that are on the floor, such as mine, are getting a real-terms cut in their grant. Is he prepared at least to admit that fact on the record?
No, because the hon. Gentleman is wrong. There are two points. First, every council will get an increase in each year of the three-year settlement—fact. Secondly, without that floor, his authority would get a good deal less this year, and possibly next year. That is how the floor, which the Government introduced to try to help local government through periods of funding formula change, assists his council and a number of others.
Included in the figures for the area-based grant is the working neighbourhoods fund.
I thank the Minister for giving way. To go back to the amount of the increase, does he not accept that the inflation rate that councils face is not the inflation rate shown by the retail prices index or other statistics, but is instead in excess of 5 per cent.? For example, for many of them, the energy costs of previous years are yet to come through in the bills that they are paying.
Actually, some of the significant costs for local authorities—fuel and, in time, energy costs—are going the other way. The pressures and economic trends vary in their effect on local authorities, but it is for local authorities to manage that. It is central Government’s job first to give local government a sufficient settlement to enable it to provide the services that people need, and secondly to give it, as far as we can, the stability and predictability to allow it to do its job of deciding how to manage its budgets, including in this economic downturn.
The working neighbourhoods fund is our £1.5 billion programme to support local councils in getting people back into work in areas that face the most concentrated worklessness and deprivation in England. Hon. Members may know that we had concluded that there were errors in one of the three criteria that we used for eligibility—the third criterion. Having consulted all authorities on our proposals to revise the third criterion, and having taken into account all the representations that we received, I am today publishing the working neighbourhoods fund allocations for 2009-10 and the indicative allocations for the following year. As a result of these changes—I am sorry the hon. Member for Enfield, Southgate (Mr. Burrowes) has left the Chamber—Enfield is now fully eligible for the working neighbourhoods fund, as is Lewisham. They will receive their full allocations in 2009-10.
On the other hand, Brent, Camden, Westminster and West Somerset are no longer eligible for full funding, but I have nevertheless decided that because they have been adversely affected by the revisions to the third criterion, they will receive the special transitional payments that I proposed and set out in the consultation.
It would be churlish of me not to give the Minister some credit, although I suspect that the remonstrations of the hon. Member for Regent's Park and Kensington, North (Ms Buck) carried more weight than mine in the various meetings that took place. When the Minister speaks of the working neighbourhoods fund moneys and mentions a considerable number of London boroughs, is he not concerned that London boroughs are so disproportionately represented, with 24 out of 33 getting the floor of the more general funding? As the effects of the recession are likely to reach London and the south-east more quickly than other parts of the country, there are likely to be substantial problems, such as those that other London Members have raised in the course of the Minister’s speech.
The hon. Gentleman is right to pay tribute, as I do, to the work of my hon. Friend the Member for Regent's Park and Kensington, North (Ms Buck), who made a forceful case. She is very concerned about the most deprived areas of her borough and sees the funding as an important element of supporting those people, as long as the council makes the right decisions in investing in the sort of programmes that will help. However, the hon. Gentleman should not underplay the strength of his own representations. They certainly played a part in the decisions that I reached.
On the hon. Gentleman’s more general point, which takes us back to an exchange during an earlier passage in my speech, the floor is there to assist authorities that would otherwise receive less core grant than they do. I hope he will appreciate that. Moreover, formula grant is part of the total funding that a council will have available each year. As part of their budget planning, councils make their own decisions on council tax levels. In order to judge to some extent whether the core grants that we are providing are a sufficient part for London boroughs such as his, it is important also to look at the council tax levels that his borough and others set.
I am grateful for the Minister’s comments about West Somerset, and I am extremely grateful that the Government have given money back to West Somerset. The council was told about that so close to the time that it had to set the budget that it caused enormous problems in the West Somerset area. Will the Minister consider revisiting the matter? The council will have to go right to the top of the capping level just to try to stand still. I would be grateful for the Minister’s comments.
First, we are debating the final settlement for next year, so I do not want to give the hon. Gentleman any indication or encouragement that somehow, as a result of his intervention, I intend to reopen or reconsider the matter. Secondly, the circumstances that West Somerset and the other three authorities were left in led me to the decision to propose the special transitional payment. I hope that will help the council manage its way through this period. I am grateful that the hon. Gentleman is nodding assent to that.
I shall move on and confirm that I am also announcing today the council-by-council allocations of the £100 million from our local authority business growth incentive funding. Those are the final payments of our three-year LABGI scheme, and I am using the same methodology to make the distribution as I did for the payments that we made in June last year. The funds will help local authorities respond to the economic downturn’s impact on jobs and businesses in their areas. I propose to consult for a couple of weeks on the calculations and application of the methodology, before releasing payments to councils rapidly afterwards.
I am grateful to the Minister for mentioning that scheme, as £100 million has been held back pending the conclusion of various legal cases. Councils such as my own—Kettering borough council—have benefited from the scheme in the past. Will the Minister confirm whether the grant money will go to district and borough councils, and not to county authorities, or whether it will go to both? Will the funds be used only for the purposes of economic development?
The funds will be distributed to authorities, whether county or district, in the same way as in June last year. My answer to his second question is no. One of the values of the scheme for local councils has been that central Government have not attached conditions or funding strings to the money. As I said, the money is available now to deal with the impact of the economic downturn on jobs and businesses in local areas. However, it will be for local councils to decide how best to spend any money that they receive as a result of this announcement and the allocations that I am making today; I hope that they will be able to do that in a matter of weeks.
I am grateful to the Minister, who is being extremely generous, particularly to me. I welcome the announcement but would like to suggest another way in which he can help small businesses across the country immediately. The Government should consider how to make the small business rate relief automatic. Many businesses are not aware of the relief and pay business rate bills far higher than they should.
Small business rate relief is a valuable scheme that we introduced relatively recently; it probably benefits about 400,000 small firms across the country. It is for the local authorities, as the billing authorities, to promote the scheme. Back in September, I wrote to them reminding them of that and urging them to do so. Making the relief automatic is not straightforward, not least because there is a difficulty in ensuring that the person liable to pay business rates on one property does not have a string of similar properties, thereby breaching the eligibility criteria for claiming the relief.
However, I recognise that people are making the hon. Gentleman’s argument at present, and there are things that we have done and can do to make the scheme better. Last year, we simplified the administration arrangements for it and we are now changing the eligibility that allows people to claim the relief back to the beginning of the financial year; that will come into play in April this coming year.
The issue of small business rate relief and whether it should be made automatic has already been raised. Can the Minister do anything else to provide support? Other things that would greatly help small businesses could be done. Can he do anything further to help raise awareness?
I am open to suggestions. I have written not only to all local authorities, but to business organisations. I have encouraged them to ensure that they do all that they can through their networks, local groups and membership to promote the scheme and its availability, and I hope that that will also help with take-up in future.
I noticed that I whetted the appetite of some hon. Members by mentioning concessionary bus travel. [Interruption.] If the hon. Member for East Worthing and Shoreham (Tim Loughton) wants to intervene, of course he can; or perhaps we can look forward to a speech from him. Funding for free bus travel for 11 million pensioners and disabled people continues to be delivered through two routes: the core grant and the special grant that local authorities requested for last year and the coming year. There is no evidence that the total amount of additional funding that central Government are putting in to support this new entitlement, which we are keen for people to have, is not enough, although some authorities have argued for a change in its distribution. I understand their argument, but I have to say that any change would upset the three-year funding certainty of the settlement. I also have to say that there is no guarantee that any alternative allocation would match needs better than the current one.
The Minister mentioned people being upset. My constituents are exceedingly upset, for the second year running. He will remember that, over Christmas and the new year, he kindly received a delegation of councillors and chief executives from my constituency. At that stage, Worthing council faced a deficit of more than £600,000 and eight of my other local councils faced deficits of almost £250,000—big hits that will mean big increases in council tax or cuts in services. We have just heard that, this year, Worthing is going to suffer a deficit in excess of £500,000 on top of that, despite assurances from one of his colleagues that they would reconsider the formula by which these figures were decided. Although I do not dispute that the overall figure for the scheme nationally may be sufficient, in the case of my two local councils and others in my part of the country it is woefully insufficient and is having a serious impact on their finances.
I well remember the meeting with Worthing council. I remember, too, that the figures that were set before me were essentially predictions and modelling about which nobody could be entirely certain, not least because of two main factors: first, how people respond to the fact that they can now travel for free anywhere they like on local buses; and secondly, the significant variations in how tough and effective councils have been in negotiating their contracts with local bus operators. If the hon. Gentleman wishes to send me updated figures that are based on actual spend and cost, I will be interested to look at them. However, it is now clear that moving administration of the free bus travel scheme to county level instead of leaving it in the hands of district councils such as his own will help to iron out some of these funding wrinkles. I can confirm to the House that the Government plan to consult on such a move within the next few weeks.
I want to probe the Minister’s suggestion that studies were being done to work out the public’s response to the availability of more free travel. Presumably after millions of pounds-worth of consultants, he found that more people might take advantage of free travel. Is there any more to be got out of the studies other than that basic fact and beyond trying to work out exactly where people are travelling?
We do not need studies, because we can look at what has happened during the course of this year. The hon. Gentleman refers to studies; I was referring to modelling that local government had commissioned to try to argue the case with central Government. Of course, one of the main results of the free entitlement is that more people travel on buses. That is why this year central Government are putting an extra £212 million into the concessionary travel pot to ensure that we can cover the extra costs for the extra entitlement that people now have to travel free on buses not only within their local council area but anywhere that they choose.
There was strong support in the consultation for three-year settlements; I keep coming back to that. That applies particularly in such economic times, because it gives local government the stability and certainty that it needs to plan and manage its budgets effectively. That, combined with an extra £8.9 billion over three years, and moving £5.7 billion into general grants that are not ring-fenced, allows councils to spend money on what matters most to local people.
A number of councillors commented on the pressures that they faced due to declining income or increasing demand on services. To help deal with the extra work load for housing and council tax benefit services, we have now confirmed that an extra £45 million will be distributed to councils on a monthly basis during 2009-10, using the existing administration subsidy distribution formula.
I also recognise the concerns of local authorities that have made investments in Icelandic banks. They have money that is clearly at risk, but it is not lost, and I want to help to minimise the problems for those authorities. Having completed the consultation on draft regulations that I promised the House in November, I will shortly lay them before the House so that they can come into effect in this financial year. The regulations will mean that the possible losses from Icelandic banks will not affect council budgets or council tax levels during the next year. Representations have been made to me by some authorities about the position of passenger transport executives, which would not be covered by the change in regulations I have proposed. Those are subject to a separate and more flexible financial regime, and unlike local authorities, they are already able to spread revenue costs between years without any Government action being needed.
Like everyone else, however, councils are now making hard budgetary decisions, and while the year ahead will be tough for many people, they need their council to provide services that they can rely on, and they need it to keep council tax down. In December, the Audit Commission published its report “Crunch time?”, which confirmed that councils are generally prepared for the impact that this downturn will have on local services, and that their efforts to find efficiency savings will ensure value for money and minimise the impact on their budgets and communities.
As I said, however, the economic pressures are not all one way. With the expected fall in inflation next year, Government grants will go further. Some council costs are already down, reserves are up and borrowing is cheaper. Keeping council tax down and maintaining improvements in services means being continually more efficient, and low tax does not have to mean service cuts. About a fortnight ago, I visited Newham, Greenwich and Hackney, and saw that it is possible to make that equation add up. In each of those three boroughs, I saw service improvements and further investment at the same time as council tax was frozen. Councils must strive to make every penny of public money go as far as it can. When everyone is tightening their belt, people expect councils to do the same.
My hon. Friend knows well enough that decisions about allowances for council members and decisions on employees’ salaries are rightly matters for local government itself. I know that he will not agree with this, but I shall say it to him anyway. There are particular problems and financial pressures in Northumberland, some of which derive from the inheritance the new unitary council is taking on from the district authorities. In Northumberland, as in the other eight areas where new unitary councils will come into place in April, the scope to manage difficult economic pressures is much greater than it is for those councils that are continuing without such restructuring and reorganisation.
The Minister did not say that when people came along with their gold-plated services and an £18 million saving so that they could get a single-status authority in Northumberland. Everything seemed to be rosy, and that was only last year. What has changed?
I am keeping a close eye, not least because my hon. Friend is ensuring that I do, on preparations for the new unitary authority in Northumberland and particularly on its finances. From everything that I have seen and been told, the new council is set to make a saving not quite of £18 million but of the £17 million-odd that it anticipated as part of the restructuring. It will also have to make almost £10 million of additional savings as a result of the legacies that have been passed to it by the combination of districts in its areas. Those are tough decisions for it to take, but I am confident that it will be up and running with its services in place by 1 April, and that it will make the necessary financial decisions in circumstances that I accept are difficult both in Northumberland and generally. All local councils face those decisions.
Anxious as I know the Minister always is to learn from experience, particularly in relation to unitary authorities, and given his concern about the reliability of modelling and calculations, will he undertake to review the modelling that his Department used to calculate both the transitional costs and savings in relation to the new unitary authorities? He will recall that it was called into question by a number of academic sources, so will he undertake to review it in the light of the actual figures?
I am surprised at the hon. Gentleman. The Department did no modelling of the financial changes. It looked very hard, using external financial expertise, at the modelling and financial figures submitted by those proposing unitary government. We debated in the House the financial elements of each change to which Parliament gave the go-ahead.
I am conscious of the time, and a number of Members wish to speak, so I shall continue.
In line with the rest of the public sector, we expect councils to achieve at least 3 per cent. efficiencies every year. That means smarter procurement, better management of their assets, reorganising how the organisation works, sharing more services and collaborating more with public, private and third-sector organisations. In doing that, they cannot count cutting public services as efficiency savings. The rules in our guidance make it clear that any steps to make efficiencies must maintain or improve the quality of local services.
The Minister mentions smart procurement. How does he believe that will be achieved, particularly when central Government Departments have more than 100,000 different supplier contracts, often with duplications across or within Departments? How can he say that he will promote smarter procurement when central Government have so palpably failed to achieve that goal?
Because local government is capable of achieving things that central Government do not find easy to achieve in some cases, and because leading councils are already doing each of the things that I have said that all councils need to consider much more seriously.
On smart procurement, a lot of small businesses have complained to me that they find it difficult to take part on a level playing field when initial interest is expressed, because not enough detail is provided. Does the Minister agree that smart procurement can also mean making it easier for consortiums of smaller local businesses to take part in that process?
Indeed. I accept and agree with the hon. Lady’s points.
The efficiency challenge for councils means that they need to find more than £1.5 billion in new savings every year. To put that into perspective, it is worth £90 off the average band D council tax bill. For this year, councils are forecasting around £1.1 billion of new savings, which is similar to those that they have achieved each year in recent years, but it is clearly not good enough now, and councils must do more.
I believe that council tax payers should be able to see and challenge the value for money that their local authorities provide. Therefore, from this year, I will require councils to put on council tax bills standard information about the efficiency gains that they are making, and to give further detail in the accompanying leaflets.
Can the Minister help me with two points? Will he publish the assessment of the costs that local authorities will incur? In an endeavour to lead by example, will he liaise with the Chancellor of the Exchequer to ensure that each income tax and other tax demand contains a list of all the efficiencies that all Departments achieved?
There are all sorts of ways in which the efficiencies that Departments achieve are available for public scrutiny, as well as debate in the House. It will not surprise the hon. Gentleman to learn that the cost of such changes to council tax bills are relatively marginal and that I took them into account when reaching the decision.
Let me say something about council tax and capping, which, I know, will be unpopular and unwelcome in local government. We acted to protect council tax payers from excessive increases this year, and I will not hesitate to take tough action again, including requiring rebilling, if it is necessary to protect council tax payers next year. A combination of inflation-busting increases, which we have provided every year since 1997, in the Government grant to local government, and the threat of council tax capping produced this year the second lowest ever increase in council tax. At this time of economic downturn, councils should do everything in their power to keep council tax bills down and leave more money in people’s pockets.
When I came to the job of Minister for Local Government 20 months ago—[Interruption.] I missed that sharp comment from my right hon. Friend the Member for Makerfield (Mr. McCartney). I do not know whether he would like to repeat it—if I missed it, the Official Reporters may have found it difficult to follow, too.
Many of us wish we could turn the clock back in so many ways. However, I do not regret my good fortune in taking on the job. When I did, local government was asking for greater certainty, stability, equity and flexibility in funding for local councils. With the three-year settlement, that is exactly what they got this year, and they will have it next year, too.
I know that the economic downturn is difficult for local authorities, just as it is for central Government. Some significant costs are coming down, council reserves are up, and local government has a good track record to date on efficiency. The Local Government Association is confident that councils are up for the challenge of providing the services that people need at affordable cost. I, too, am confident that the settlement will enable councils to do that. I commend it to the House.
I thank the Minister, as I always do, for his care and attention in outlining the Government’s proposals and the invariable courtesy that he shows the House in taking several interventions. That said, in some respects, the Minister’s very reasonableness makes him a dangerous man because that reasonableness masks an indefensible case, which bears little detailed examination.
Let us start, however, where the Minister and I agree. He is right that the three-year settlement is welcome. It is welcome right across the piece—we on the Conservative Benches welcomed it, as did the Local Government Association—and it makes good sense. He is perfectly right that the settlement gives certainty. It is implicit in what he said, although the Local Government Association would appreciate confirmation, that excepting some cataclysmic circumstance, he anticipates that the net third year will remain unchanged. Confirmation of that point would give the LGA the certainty that it wishes for—and I see that the Minister nods.
The downside is that the LGA knows that the settlement is bad news. Indeed, in addition to welcoming the certainty of a three-year process, the LGA said that this three-year settlement was the worst settlement that local councils had had in decades. To that extent, the Minister was right when he said that the statement back in November does what it says on the tin, but it was not very good news for local councils and local council tax payers.
Yes, I will happily send the Minister the detail from the appropriate statement. I might add that I made the same comment, which he did not challenge, back in November, so nothing has changed in that respect since then.
It is also significant—the Minister will recognise this—that although we are in the middle of the three-year period, a lot has changed since the beginning of that period. Indeed, a lot has changed since November, and it has changed for the worse. The economic climate in which councils have to operate and in which council tax payers have to live has deteriorated. There is no getting away from the fact that that deterioration is the consequence of this Government’s policies. The Minister is certainly consistent in his figures—I recognise that—so let me do him the compliment of being consistent in the judgment that my hon. Friends and I make about his statement. The settlement was a bad settlement for council tax payers in November—I think I used the phrase “a thoroughly bad settlement”—and it remains a thoroughly bad settlement for the rest of the three-year period.
I thank little Tory for giving way to little Labour. The hon. Gentleman’s party mantra is to cut public expenditure substantially. That was confirmed again in a debate on the economy earlier this week. If we are talking about the worst settlement in decades, can he tell us what further increases he is saying that the Conservative party would put back into local government?
I will look the right hon. Gentleman straight in the eye, as I think I can—at least we have both retained our hair in our political careers—and say that the Minister answered that question when he said that efficiency and lower tax need not mean cuts in services. The Minister was right; indeed, Mayor Johnson in London and Conservative councils such as Hammersmith and Fulham are demonstrating precisely that point. However, it is perfectly reasonable for us to point out, in a spirit of constructive opposition, the concern that, even within the envelope of whatever settlement may be reached, there are areas where the system fails or does not work properly. However, I will turn to that point in a few moments, if hon. Members will bear with me.
The effect of the figures that we have—I hope that Government Members will remember this—confirms what was said in the debate in November. The Minister talks about the record levels of grant given to local authorities. The reality, however, is that council tax, which is the bottom line that most individuals and families are concerned about, will have doubled under this Government—that is, it will have doubled for families who are harder pressed than they have been in many years. The figures, which have never been disputed, are as follows. From 1997-98, the first full financial year under this Government, through to this year, 2008-09, a band D council tax bill—the standard measure normally used by the Government and all independent observers—will have increased from £688 to £1,374. The Minister said that he wanted to act on evidence and facts, and there we have incontrovertible evidence and facts.
Against that background, the Minister will know that the chairman of the Local Government Association wrote this year to say that the association anticipated that council tax increases would be about 3.5 per cent. on top of that rise. The reality is that such increases are well beyond inflation, as the Minister himself concedes. Why is this happening? It is not through a lack of effort by the local authorities. It is because, at the end of the day, the funding settlement has not kept pace with the rising costs that bear down particularly heavily on local government. The Minister is a sensitive man, and he knows that the rise in council tax has repeatedly been flagged up in opinion polls and other evidence as one of the most significant concerns identified by individuals and families. This settlement makes things worse. If the Government want to have a joined-up set of policies, this is not the way to do it.
This remorseless rise in council tax makes nonsense of the supposed fiscal stimulus that we saw introduced before Christmas. The anticipated 3.5 per cent. increase is actually less than the Government’s anticipated figure of 4.5 per cent., which was hidden away in the small print of the pre-Budget report. It is thanks to local government, not the Government, that that figure is coming down. A 3.5 per cent. increase would take band D council tax bills up to about £120 a month by April, and that would eat up much of the so-called spending power that the Government said they were putting back into people’s pockets. They are giving with one hand and taking back with the other.
Does my hon. Friend also recognise that particular parts of the population have been hit disproportionately hard, not least pensioners in constituencies such as mine? About a third of the increase in their pension has been gobbled up automatically by the rise in council taxes, and they do not have an income that can rise to compensate. There is a double whammy, in that pensioners with meagre savings are now receiving less—if any—interest on those savings to make up the shortfall. Those people are suffering a real-terms decrease in their living standards.
I am grateful to my hon. Friend for making that very cogent point. I have come across such circumstances in my constituency, as have many other Members in theirs.
The injustice being done to those pensioners is compounded by the complexities and difficulties that many of them face when negotiating their way through the system to claim council tax benefit. That is getting harder and harder, as I know from constituents and members of my own family who have negotiated their way through the system. The consequence is that, under this Government, the number of eligible pensioners taking up council tax benefit has fallen from about three quarters to a half. That is scarcely a record to be proud of, which, with respect to the Minister, makes it all the more ironic that he should say that the Government want local authorities to flag up efficiency savings on council tax bills. A little bit of flagging up of the Government’s inefficiency in handling the council tax benefit regime might redress the balance somewhat.
Those problems are compounded yet further. As the Minister knows, some of his cover was blown in the November debate. If we look at page 203 of the pre-Budget report—a document that no one in the Government has so far sought to disavow—we see that, in addition to above-inflation increases in council tax this year, which come on top of the doubling of council tax during the past 10 years of this Government, the report postulates a further council tax rise of 10.7 per cent. over the following two years—2011 and 2012. That additional 10.7 per cent. increase is postulated in the same pre-Budget report that postulates that retail prices index inflation will slip into a negative figure, giving a deflationary figure of minus 2.25 per cent. over that same period. If we put the two figures together, we can see the reality of the whammy that is going to hit people over that period.
The hon. Gentleman is very generous; he said that the Minister was being very reasonable because he was covering up for various unpopular aspects, and I think that the hon. Gentleman is being very reasonable because he is covering up for the fact that not a great deal is there in the way of an alternative. I would be interested to hear about the Conservative party’s position on council tax and its long-term position on local taxation. What big difference would his party make?
As I never like to disappoint the hon. Gentleman, who I know wants to get back home to the family in Cornwall—quite rightly in this bad weather and when he has a young baby—I will make a bit of my speech out of context especially for him, so he can hear it now. We have a very clear alternative, as we would assist local councils and work with them over the first two years of a Conservative Government to freeze their council tax. If they can keep their increases down to 2.5 per cent., we would match-fund them by taking moneys from central Government budgets to freeze the bottom line to their council tax payers. That is a very positive alternative.
Does my hon. Friend agree that the reaction of Labour and Liberal Democrat-controlled councils to that policy was absolutely outrageous, as they effectively said that they would not come to the table to help keep council tax low for their council tax payers?
My hon. Friend is absolutely right. That gives the lie to the weasel words we hear from other parties about their desire to protect council tax payers. There is only one sensible way to do that, and I urgently hope that councils of all political persuasions will, despite the difficult hand that the Government have dealt them, do their level best to keep council tax down and below inflation, where possible, in the knowledge that in due course we will work with them to freeze it. It is the bottom line that counts to hard-pressed people.
Funnily enough, and unhappily, I do not carry such a list with me on my mobile word processor. If the hon. Gentleman is patient, however, he will find out not only about the commitments that have been made, but about the local authorities that are already working to cut tax. Indeed, some local authorities such as Kensington and Chelsea have already announced a £50 efficiency bonus; some, such as Hammersmith and Fulham, have announced a 3 per cent. reduction; and the largest levier in the country, the Mayor of London, has announced a freeze. Action has already been delivered.
It might take me rather more than a day to produce it, but I would happily send the hon. Member for Telford (David Wright) a list of Labour council leaders who have been turfed out by their electorates for consistently raising council tax. We could start with Ken Livingstone, although he is not technically a council leader, and the leader of Hammersmith and Fulham council.
My hon. Friend is absolutely right. Of course I welcome the Minister’s recognition of the hard work done by local authorities and their efforts to achieve efficiencies, but I am sure that he would want to be as reasonable and generous as he always is by acknowledging that that has happened largely because those authorities are now under Conservative party control. It is thanks to the Conservatives that it is happening.
The hon. Gentleman is most gracious. A recent independent inspection of adult services provided by Leeds city council, which the hon. Gentleman probably knows is now controlled by a coalition of Conservatives and Liberal Democrats, saw those services downgraded to an inadequate one-star rating. Does he understand the concern that this council, under his Conservative colleagues, is now cutting grants to community care schemes for older people—Pudsey Live at Home, Horsforth Live at Home, Farsley Live at Home and Aireborough voluntary services to elderly and disabled people, for example—that are provided by voluntary organisations? Is that the sort of approach locally that the hon. Gentleman and the right hon. Member for Witney (Mr. Cameron) are encouraging Conservative councils to take?
I am well aware of the financial mess that the joint administration in Leeds inherited from its predecessor; it is endeavouring to sort it out. I suggest to the hon. Gentleman that some restructuring is necessary to take that forward, but it is the people on the ground who are close to their communities that are best able to decide on these issues. It is the local communities that passed judgment on the previous Labour administration, and it was that administration that got us into the situation in the first place. I hear what the hon. Gentleman says, but I will take no lectures from him on that matter.
While we are on this point and enjoying this happy interlude, let me say that one figure that my hon. Friend might carry around with him is the number of councils on which the Labour party is simply not represented at all on account of its past conduct. I think that it is more than 100, but my hon. Friend may have the right number. Does that not show what the electorate think of the hon. Member for Pudsey (Mr. Truswell) and his colleagues in respect of local government over recent years?
I suspect that my hon. Friend is right, although I must confess that I did not have time to look up the exact figure. It tends to change pretty regularly. I am reminded of Western films in which there is a sign saying something like “Deadwood Gulch, population 152”, and in which people strike the figure out and write “153” if they hear a baby cry, and if they hear a gunshot they strike it out and write “151”. In much the same way, the figure for the number of Labour councillors is struck out on a fairly regular basis. That is the ultimate passing of judgment.
The hon. Gentleman is most entertaining and most gracious, but may I return him to reality? In recent years, when electoral trends have been running against the Labour party nationally and in local government, Labour has made gains in Leeds. The Liberal Democrat-Tory coalition running the city council has made no gains. Does that not prove that what he is saying is nonsense?
There were times when one of the taunts from the Labour party was that there was no Conservative representation in the big cities of the north. In Leeds, Bradford and other such cities, that is no longer the case. With respect to the hon. Gentleman, he knows how these things ebb and flow—-
Order. Much as everyone is enjoying this interlude, I think it would be a good idea if we now returned to the matters in hand.
I am always happy to be guided by you, Mr. Deputy Speaker.
What is apparent from this exchange is Labour Members’ sensitivity on the topic that we are discussing. The simple fact is that it is local government that is the most efficient part of the public sector and local government that is delivering the best to people, and it is central Government who are dealing local government an increasingly tough hand. I am afraid that, with all respect to the Minister, the settlement that he has confirmed today makes that position no better.
The cumulative effect of the increases predicted in the PSBR document, which has not been sufficiently recognised by the public, leads me to revise one of my judgments. In November I said that this was a council tax bombshell, but I was wrong: if the Government were returned at the next general election, it would be a council tax bombardment that would continue for a number of years.
Let me take the Minister up on another point. We have referred to the LGA’s concerns about the settlement. The Minister used a formulation that he has used on a number of other occasions when he said that the grant was being increased by 4.2 per cent. He is clever with words, but—I say this with every respect to him—he will know that that is not quite how it works in practice. The 4.2 per cent. is the figure for all grants, but within that is the dedicated schools grant of about £30 billion, which completely skews the figure. It is a huge sum over which local authorities have no discretion. If we take that figure out and look at the formula grant, which does give local authorities some ability to respond to changing circumstances, we are down to 2.8 per cent. That is why many local authorities are saying that the figure does not reflect the costs being imposed on them, even in the current deflationary environment. They are currently tied into contracts and other costs that arose at an earlier stage.
The hon. Gentleman has given a figure of 2.8 per cent., but his own party’s commitment—the commitment of its shadow Chancellor and leader—is to a rise of 1 per cent. A gap of £240 million, not at some time far in the future but eight weeks from now, is what councils would be facing if the Conservative party were in power rather than us.
Not surprisingly, the Minister has not described the Conservative party’s policy accurately. In fact, as he knows, that the Government have been a little economical with the actualité. The 4.2 per cent. figure is the convenient figure that the Minister will always use, but local authorities of all political persuasions, including the cross-party Local Government Association, maintain that 2.8 per cent. is the real figure. They also point out that including the dedicated schools grant is not an accurate means of assessing discretionary spend. The Minister has done that for obvious reasons, given his position, but it does not give us the whole picture.
Can I also just point out to the Minister the second area of concern here? He makes something of having increased the amount of non-ring-fenced grant, but at the end of the day, that is still just a drop in the ocean; some £36 billion of the special grant remains ring-fenced. The bulk of it is still ring-fenced, so the amount of leeway for local authorities has eased a little, but not very much in the overall scheme of things. We are pledged to look at this again. Far too much of the expenditure outside dedicated schools grant is ring-fenced, and that gets in the way of local authorities’ ability to take appropriate decisions for their localities.
I am a little confused, and I wonder whether the hon. Gentleman can shed some light. Would a future Conservative Government give more money to local government in the support grant than the current Government are planning to give? That is a simple question and, despite all that he has said, I am totally at sea as to whether the answer is yes or no.
I understand the hon. Gentleman’s difficulty; he is probably as shell-shocked as I am that Wigan and West Ham United are in their current positions in the premiership. The Conservative position could not be clearer: we have spelled out that, for the first two full years of a Conservative Government, we will protect the interests of council tax payers by making a commitment that if a local authority is able to get its council tax increase under 2.5 per cent. we will match-fund it. We will, of course, work through the mechanisms by which we get to that, but that is the commitment, and it is plain enough. I will shortly come on to what we might need to do in future about a system that is increasingly creaking at the seams.
I am glad that my hon. Friend will now move on to addressing the future, as so far there has been a lot of banter, too much of which has looked back to the past. What would an incoming Conservative Government do in relation to the ongoing long-standing concerns that many Members, particularly those representing inner-city seats, have had about population statistics and the great inadequacies that have been built into the system in the past 10 years? Does my hon. Friend have some plans for ensuring that that concern is resolved?
I suggest to my hon. Friend that there are some solutions here. The Minister’s review is welcome in so far as it goes; nobody would dispute that. However, many of us would say that it has been a long time in coming, because these issues have been raised by Members on both sides of the House—the hon. Member for Slough (Fiona Mactaggart) attended an earlier debate, and she has raised it on a number of occasions. We need to bring this matter to a head.
There are things that could be done. There is a broad point about the way in which the formula grant is calculated and distributed. The criteria, the operation and the various indices that give rise to the distribution of the grant, whatever its overall size, to individual local authorities have become so opaque and unreliable that it no longer has credibility either with the professionals or the general public. The persistent use of significantly out-of-date population data is one very glaring example, although it is not the only one; several authorities have raised concerns about the fact that it is possible to interpret the deprivation indices in a number of different ways that produce different outcomes for local authorities.
We ought to be doing two things. First, perhaps we should move to a system in which the criteria for the distribution of the grant are no longer set entirely within the Department without reference to any independent body. Australia has an independent grants commission, which plays a role. Ultimately, there must be parliamentary accountability, of course, but that is an interesting model. It would be perfectly plausible to charge such a body with a statutory duty to review and update the statistical information. Under the current system, the Government could, if they wanted, choose not to rely on the outdated census statistics, but to take on board a vast array of more up-to-date data, such as national insurance registrations and school registrations. Westminster council, in the constituency of my hon. Friend the Member for Cities of London and Westminster (Mr. Field), has collected and put forward such data to Ministers. The Government could change the information, even in the current system, but we could find an even better means of embedding it. The Government could act on those updated figures now, because that would require only a change to the regulatory environment, which could easily be achieved. That is the solution.
The hon. Member for Cities of London and Westminster (Mr. Field) raised the problem that this matter poses for inner-city areas. Does the hon. Member for Bromley and Chislehurst (Robert Neill) agree that it also poses problems for more rural areas, which may contain a large number of seasonal migrant workers and so demands may vary within the year? There also is scope for huge demographic change because of other reasons. For example, in my constituency, the growth of a higher education institute has resulted in the 18-to-24 population increasing by 80 per cent. in just three years. The funding formula struggles to deal with all these things.
The hon. Lady is right, and her point demonstrates the urgency of the situation. I am glad that the Minister is taking this point on board, because many of us felt that when the Treasury was leading in this area it had a continuing reluctance to come to grips with the inadequacies of the situation. She is right to say that the problem applies across all types of authority, regardless of political or geographical circumstances. I hope that the Minister will come back urgently with the review. We will be constructive about that, but it may be necessary to go further—
I have been pretty generous so far, so the hon. Gentleman will understand that I now want to make some progress.
All of what I have said comes back to a suggestion that the grant system is creaking to the extent that it is no longer credible. The other evidence of that can be seen in the floor system. The Minister makes the point about the protection of floors, but, in reality, when the floor system reaches a stage when about one third of all the larger authorities are on the floor, when about 24 out of the 33 London boroughs are on the floor, and when a range of types of authorities and about 40 per cent. of district councils are on a worse floor—0.5 per cent., as opposed to 1.75 per cent.—something perverse is happening. It leads me to conclude that the system has gone beyond its useful life and that we need a much more significant and thoroughgoing reform as to how distribution takes place.
I noted, too, what the Minister said about looking at the operation of the area cost adjustments. I would welcome that, and again, I hope that he will use his good offices to inject some urgency into the matter, because it has been raised over a long time. It is not just about the operation of the grants for which his Department is responsible; one of the concerns that he will know has been raised both by the Local Government Association and by London councils is the lack of consistency between various Departments in the application of the ACAs. I hope that he will take that on board as a central point of the review, because I am sure that with political good will, consistency could be achieved swiftly.
My final point about the inadequacies of the grant formula relates to the peculiar results for local authorities of similar size and in similar, neighbouring areas. Let us consider a discrepancy in the formula grant in the west midlands. Solihull has a population of 205,000 and receives £53 million. Walsall has a population of 253,000. I accept that it has some other social problems, so one might expect a difference, but it receives £133 million, so the leap is so great as to be beyond credibility. The same applies closer to home for me, in the London boroughs. Bromley has a population of 300,000 and it receives £64 million. The next-door borough of Croydon has a population of 340,000, so it should get a bit more—but it receives £116 million, so there is a huge difference. Those apparently perverse outcomes cause people to question the way in which this system works in practice. With respect, I must say that those issues have not been addressed by the statement that has been made, because they relate to systemic problems that the Government could have dealt with, but have not dealt with over a period of time. That leads to suggestions that there is a degree of unjustified subjectivity in the operation of the system, and that needs to be dealt with if people are to have confidence for the future.
The net result of all that is that burdens on the council tax payers remain. The Minister talks about the desire to reduce them, but we did not go too much into the costs of operating what remains an over-intrusive inspection and targets regime. We are told that we should be grateful that the new regime has reduced the number of national indicator sets to 198 or 195, but that is still a huge amount and far greater than is necessary. That amount still involves real costs for local authorities. The need to tick the boxes still forces distortions on local authorities. If the Minister is serious about giving freedom to local authorities, as I hope he is, he could cut back further on that distorting inspection and targets regime.
If we are to achieve what is required for local authorities and council tax payers, we will need to give them more leeway than the Government have given them. I hope that Ministers consider that point for the remaining year, although I honestly do not think that they will be in a position to do so for the next three-year spending round. The bottom line is that people are now really hard pressed. Local authorities are doing their best, but sadly their job is being made harder by what is happening. I hope that, as a matter of urgency, local authorities will do all that they can to minimise the rise in council tax, despite the rotten hand that they have been dealt. We will work with them constructively. I am sorry that, for all the fine words from the Minister, the settlement will not give local authorities the constructive tools that they need to deliver as they wish for their communities.
I welcome the settlement—in the circumstances, it is an extremely good settlement for local government. It is as well to put on record the fact that this three-year settlement and the stability it provides are very important to local government. We will look back on it as a major reform by the Government that will continue to work in the future. Personally, I think that it should be a rolling settlement, so that in a three-year block we would have a two-year settlement with indicative figures for the third year, and in the third year the cycle started again. That is a refinement that we can work on in the future.
It is worth recalling that in the years since 1997 every local authority has had a cash increase in the amount they receive from Government. When you remember what was happening in the late 1980s and early 1990s, you see that there is a phenomenal difference. I cannot understand how the Local Government Association can say that this is the worst settlement in decades. It clearly does not remember what happened in the 1980s and 1990s, when my local authority in Wigan experienced cuts not only in real terms—below inflation levels—but in cash terms. The money we received from the Government was cut by £6 million, £7 million or even £10 million year after year under the Conservatives. How the LGA—now Conservative led—can claim that that was better than what we are getting now is beyond me.
My difficulty when Labour Members talk about cash increases for local government is that they never talk about the additional burdens. Ministers love coming to the House and announcing initiatives to provide free services such as swimming or culture, but they never explain that local councils will have to pick up the bill.
There will always be such changes, and it is right to strike a balance between what local government has to pay—through the local council tax payer who will receive the services—and what the Government give in grant. The point that you did not address is that when the Conservative Government were in power, my local authority received less cash, not just below-inflation increases. The hon. Member for Bromley and Chislehurst (Robert Neill) was challenged not once but twice about what the Conservative party, were it in power, would do about grants to local government, but he could not make any commitment to more cash for local government from a Conservative Government. We had some weasel words about matching increases of under 2.5 per cent., but he could not commit to a cash increase across the board.
The hon. Gentleman did not address the significant point made by my hon. Friend the Member for Bromley and Chislehurst (Robert Neill), which was that the Government tell local authorities what new services they are going to deliver and then put the extra costs on to the shoulders of local council tax payers, who do not get the choice one way or the other. That is the problem with the Government’s handling of the situation.
Secondly, I was the Minister responsible for the city challenge in Wigan during the 1990s, which brought millions of pounds for regeneration in Wigan and changed the face of Wigan. I would have thought that as well as discussing what happened in local government the hon. Gentleman might have made some reference to that initiative of Michael Heseltine’s, which made such a difference to Wigan and the surrounding area and put it on course for its present prosperity and all the good things that have happened since.
I would have some sympathy with that point if, at the same time, you had not been cutting all our mines and other industry and making the economy of Wigan, in a particularly short period of time, hugely difficult for us. It is only because we had an extremely good local authority, led by Councillor Peter Smith—now Lord Smith—that we could help the local economy following the devastation left by the closure of the pits. I accept that the city challenge made a difference—of course it did—but that does not answer the point that the Conservatives have not been able to give a single commitment to any increase across the board for local government.
I think that I have been fairly generous in giving way on that point, so I shall carry on.
It is important that we also welcome the floors and ceilings on funding. My local authority suffers from floors and ceilings, as it does not get as much funding as it would if we did not have floors and ceilings. Opposition Members talk about the amount of money that they are getting and about reductions because they are only at the floor, but they should be grateful to the people of Wigan. We are suffering—we are the ones who are paying for the fact that you are getting more money than you would otherwise be entitled to. That is important. I agree with the idea in principle. It is the right thing to do, because it gives local authorities the opportunity to make measured and manageable changes rather than the kind of changes that we would otherwise have—the kind of changes that we were forced into in the ’80s and ’90s. Hasty, ill-considered desperate short-termism was a hallmark of what we experienced.
The hon. Member for Bromley and Chislehurst was a little disingenuous when he talked about the changes to the formula, saying that it needs to be changed—creaking at the hinges was, I think, the phrase that he used. What he did not say was how he would introduce those changes. If he made a change that gave a £50 million increase to Bromley and Chislehurst and made a £50 million reduction in Wigan, would he do that overnight? Of course he would not. I would hope that he would introduce it in phases. In other words, all he would be able to do is to follow the same floors and ceilings process as we have at the moment. The end result would be different, but unless there was a massive change in local government overnight on 1 April of whatever year he introduced it, such changes would have to be brought in gradually.
Order. The hon. Gentleman has made that mistake several times now. I was hesitating before I intervened, but he understands why I have done so.
The hon. Member for Bromley and Chislehurst made the point that the Conservative party would introduce changes. If those changes are to be introduced, either they have to be introduced in one go or they will have to be phased in. If they are introduced in phases, there will be floors and ceilings. It is no use arguing against floors and ceilings and then saying that changes will be introduced.
The other issue that the hon. Gentleman raised, which is important, was to do with the accuracy of statistics. We all want statistics to be more accurate, and I noted that he welcomed the statement made on that point by my right hon. Friend the Minister—so do I. However, the hon. Gentleman was a little disingenuous when he said that the Australian system would somehow take the matter out of the political arena and put it into the academic arena. That would never happen. We are talking about local government and the services that it can provide for people. Those decisions are fundamentally political. The weighting given to each statistic will be a political decision. In the end, determining whether the allowance for free school meals should be £10 or £15 per head in a particular local authority will be a political decision. No matter whether the statistics are right or wrong, it is that political decision that will influence how much a local authority gets.
The Government have struck a balance between achieving equity for places such as Wigan that are below target and managing the necessary reductions for those authorities that get more than the formula says. I welcome the reduction in the floor from 2.7 per cent. in 2007-08 to 1.75 per cent. now. Unless the floor is reduced to a fairly low level, authorities that are entitled to more money will never get it. The reduction needs to continue, and I hope that my right hon. Friend the Minister will ensure that it does.
I shall give a couple of examples of what that means. If Wigan were to get its full entitlement, we would get an additional £6.5 million in 2009-10, and an additional £5.4 million in 2010-11. Obviously, that is £1.2 million better than what we are getting now, but we are still four or five years away from achieving equity. Adding that up, we are talking about Wigan receiving a total of £20 million or £30 million in additional money over a number of years. I believe that this is very much a work in progress, and I urge my right hon. Friend the Minister to make sure that it continues in future settlements so that all local authorities get the entitlement that they deserve from the formula.
I turn now to the important issue of revaluation. The hon. Member for Bromley and Chislehurst said that the formula was creaking at the hinges, but I think that the problem is that the council tax itself is creaking at the hinges. I believe that the Conservatives designed it to be unfair, and one of John Major’s few achievements from their point of view was to create the present unfair system.
The burden of council tax falls most on the poorest, and least on the richest. We need to change that unfairness, and I think that we missed a trick with the Lyons report. We should have gone for that, or some form of it, as I believe that a property-based council tax is the right way to go. Even so, we need something new and much more transparent that can be integrated with council tax benefit.
The Nationwide building society and others can tell us how house prices have gone up or down, year by year and month by month. I cannot see why we cannot build a system in which property bands move on a three-year basis, for example, so that values are constantly changing. In contrast, the present council tax was valued in 1989 or 1990.
I want to touch on housing, which is an integral part of local government finance and services. The housing revenue account is under review, and that is long overdue. The Audit Commission said a number of years ago that it was unsustainable, and that is clearly true. Given that rent increases are running at 6.75 per cent. at a time when inflation is below 2 per cent., and that mortgages are coming down on a monthly basis, the disparity between council house tenants and the rest of the population is clear to see. I hope that the Minister and his Department will take that on board, so that the convergence with registered social landlord housing rents is delayed and the impact on council house tenants is reduced.
There are issues that we can deal with. If we put more money into housing, it will help the national economy, and help local economies even more. Housing repairs and maintenance, and house building, are labour-intensive, and we source most of the materials from the local economy. They have a massive impact on local authorities and economies. We should put money into that. If we put money into disabled grants, there would be a double whammy: that would not only help the local economy, but would allow people to stay in their own homes. If we allow them to stay in their homes—that, as we know, is what the vast majority want to do—it will reduce pressures on social services and on the NHS.
The Supporting People programme that the Government introduced, and the money that they put into it, is hugely important to achieving those aims. Again, if we look at the amount of money that goes into that, and at the formula, we see that there are huge discrepancies between the money that local authorities should get and the money that they actually get. It suffers from the same problem as the local authority grant. The Department for Communities and Local Government needs to consider whether we can ensure that local authorities can meet people’s needs, and can put the money to good use in the local economy. To take the example of Wigan, in 2008-09, we got £7.2 million less than we should have done. In 2010-11 we will have £5.4 million less than we should; that reduction is £1.8 million less than the reduction in 2008-09, but it is still a significant figure. We could do with that.
When we talk about housing and the Supporting People grant, we also need to talk about the primary care trust. I know that that does not come under the heading of local authority funding, but it is an important issue. Often, local authorities and primary care trusts pool resources, grants and funding. The line between what the NHS provides and what the local authority provides is becoming increasingly blurred. Fights about who should fund what just allow vulnerable people to fall between the two. It is right that PCTs and local authorities should get together on that issue, as they increasingly do.
I have explained why the Supporting People programme and NHS funding is important. The difficulty arises when a local authority such as mine is underfunded under the local authority grant, under the Supporting People grant, and in its primary care trust funding. That compounds the problems and makes servicing those needs extremely difficult. To give the example of Wigan once again, in 2009-10, our PCT funding will be 4.7 per cent., or £25.5 million, below target. In 2010-11, we will have £25.4 million, or 4.5 per cent., less than we should. That is a £56,000 a year difference, under the final figures. I worked out that, on that basis, we will achieve our target on 14 April 6518 AD. I am not likely to be around then. It is important that we make progress on that issue because of the impact that it has on local government and the services that we provide.
The shortfall in those three programmes is £36.2 million in one year. If we carry that forward year on year, we can imagine the difficulty that my local authority and primary care trust will have in providing people with necessary services. Those are not services that I have plucked out of the air; I am referring to services that demonstrably and measurably cannot be provided, or fully provided, because of underfunding. I know that the Minister is aware of the issue because Rotherham, his local authority, is in a similar position; I think that the figure is £35.8 million for Rotherham, whereas it is £36.2 for Wigan, over the three years. He is well aware of the problems, and I know that he is working hard within both local and central Government to address those issues.
The public services that we need must be given those resources. On the Government formulas, the independent advice given by the Advisory Committee on Resource Allocation for PCTs, and other advice given through local government, is that the money that we are talking about is the kind of money that is necessary to provide services that people in Wigan, Rotherham and other areas need. It is not a matter of shifting money from the south to the north. There are areas in London that require additional funding. It is not about towns v. country. There are country areas that require additional funding. It is about fairness, justice, equity, equality, and giving support to those who need it. That is why we on the Labour Benches came into politics, and why it is so important that my right hon. Friend continues the work that he has done to make sure that all local authorities and all primary care trusts get the resources that they need to provide the services required by their people.
It is a pleasure to follow the hon. Member for Wigan (Mr. Turner). I have a great deal of sympathy with many of the points that he makes, because my local authority is also one that is near the ceiling and a long way away from its target funding, and it would benefit from the resources that it should receive, according to the funding formula. I also agree with the hon. Gentleman that it seems sensible to propose a rolling three-year budget that would provide stability, as well as extra flexibility to respond to the difficult economic situation.
We are in the second year of a three-year agreement, so there are no nasty or pleasant surprises in the reports that we are debating today, although I appreciate that some councils, such as West Somerset, would have been biting their nails until they found out whether they qualified for transitional funding. Ultimately, it is a very tight settlement and the Minister has been up-front about that. The hon. Member for Bromley and Chislehurst (Robert Neill) pointed out exactly how tight the settlement is, once the schools grant is taken out. It will be extremely difficult for many councils.
Even though the three-year settlement has offered certainty to local authorities and has been useful for planning purposes, as my hon. Friend the Member for North Southwark and Bermondsey (Simon Hughes) said, it is not surprising that there were not many responses to the consultation. I wonder, and the Minister may know, whether any of the responses were from individuals. The documentation provided to us is not the easiest to negotiate.
I notice that in November the Minister’s statement was published alongside a guide to the local finance settlement, which replaced the plain English guide to the local government finance settlement, first issued in 1998. No wonder these documents are difficult to understand. I worry that we have a system of local government finance that is very complicated: local government officers, civil servants and Members of Parliament all bury their heads in it to try to understand it, but for council tax payers it is difficult to understand what services they receive in return not just for their council tax, but for the taxes that they pay. We all need to do more to illuminate the process and make it simpler to understand. It is important that the public should be able to do that.
We have seen a fundamental change in the past year, and since the three-year settlement was announced. Despite the Government’s claims to have boosted funding through measures such as LABGI, it is pretty much unchanged since the earlier announcement, and there has been no response to the economic crisis. The economic turmoil is creating extreme funding pressures and uncertainties for many councils.
The credit crunch has had a significant impact on councils’ income, not just from their fees and services, which according to the Local Government Association totalled £11.5 billion last year, compared with the £23 billion that they received in council tax revenue. A significant amount of councils’ revenues is received from charges, and the LGA estimates that that could fall by up to £2.5 billion this year—a substantial hit on funding, which may not derive from central Government grants, but will certainly have an impact on their cash flow.
Councils have also seen lower income from their investments because of lower interest rates. Although the Minister said that as a result of those lower interest rates borrowing is cheaper, I wonder what assessment he has made of whether that borrowing is easier to come by, even if it is cheaper. Councils’ estimates of income from capital receipts have plummeted, which has not just impacted on their income, but is impacting on their investment programme. In spite of those pressures, there has been a significant increase in demand for services.
Before my hon. Friend leaves that point, may I draw attention to the impact of the unavailability of capital receipts from land sales on major proposals to repair and replace schools? That means that local authorities such as Northumberland continue to have a very high maintenance budget for schools such as the Duchess’s school in Alnwick, because the capital to rebuild it is not available from land sales.
My right hon. Friend makes an extremely important point. The lack of capital receipts impacts not only on capital spending but significantly on councils’ revenue commitments.
Other things, outside the credit crunch, are involved. The whole baby P episode, for example, has resulted in additional demands and pressures on children’s services. Furthermore, we still have to deal with the demographics of an ageing population, and that places additional pressure on adult services. My hon. Friend the Member for Kingston and Surbiton (Mr. Davey) cited other issues, such as the number of young people registering to transfer to primary schools. That is having a massive impact. During this debate, he told me that in the past year he has seen a 12 per cent. increase in primary school applications; that has a massive impact on a council’s resources.
As other hon. Members have pointed out, in addition to all that, councils are being asked to take on increased responsibilities. One of the most controversial has been the cost of concessionary bus travel, and there is a question about whether the grants given by central Government cover the costs. Also coming down the line is the roll-out of free swimming. In my local authority area, in Cornwall, we are worried about that because our population doubles in summer; a lot of holidaymakers will benefit from access to free swimming, but the council tax payers will have to meet the costs. There is increasing concern that such additional financial burdens are not being adequately funded.
Will the Minister provide us with information about how those pressures are impacting on councils and how councils are responding to them? I have seen anecdotal evidence of councils reporting recruitment freezes. Of course there will be further drives for efficiency, but I have heard that councils are using more temporary staff as a way of trying to keep cost pressures down. I would also appreciate the Minister’s comments on whether he is aware of any potential plans for significant service cuts. Councils want stability, but they also want reassurance that the Government are sensitive to such rising pressures. Today’s statement is a denial of some of the problems that many councils face.
My hon. Friend is making an excellent case about the pressures under which local authorities find themselves. She has talked at length about the economic problems that we face at the moment. What does she feel about the fact that local authorities have to take up the slack when other Government agencies have withdrawn from areas? I am thinking of jobcentre closures and so on. Local authorities now find themselves having to do the work of other Government agencies—
My hon. Friend makes an excellent point, to which I shall come later. Although last year’s pre-Budget report announced additional support for the Department for Work and Pensions for Jobcentre Plus, a lot of such pressures are now falling on local councils. Although increased support has been announced, its scale does not match the problem.
I now turn briefly to councils’ exposure to the collapse of Icelandic banks. That issue has not affected all local authorities, but it has had a significant impact on a number of councils. Before Christmas, the Minister stated that councils would not need to make provision for any possible loss on those investments in 2009-10; I understand that there will soon be draft regulations for us to consider. However, it now seems clear that many councils do not expect to recover any of the losses for the foreseeable future, and that the process of recovering them will be protracted. Does the Minister accept that we need legislation to deal with the issue beyond next year? Councils would appreciate certainty about their ability to deal with the problems in the long term. Is the Minister seeking to give affected councils the powers to capitalise their losses so that they can spread them over a number of years? That would be sensible, as it does not seem as if there will be any short-term resolution to the problem. Today’s debate is an opportunity to try to address the issue, but it has been overlooked.
Councils are not only impacted by the credit crunch themselves; they are already doing a huge amount to respond to it locally and to provide support for people who are struggling. I wonder whether the Government have missed an opportunity to make an announcement offering further support to councils in fulfilling this role. Business rate relief has already been mentioned. There has been talk about whether it would be appropriate to make that relief automatic, because a large number of small business that are entitled to it do not receive it. Surely every effort needs to be made to ensure that those businesses receive what they are entitled to. Why is the Department not following the lead of Her Majesty’s Revenue and Customs, which has offered a great deal of flexibility to businesses in paying their business rates? If it were able to offer the same support to councils in terms of flexibility of payment, that could be handed on to businesses and more could be done to ease the burden of many small businesses locally.
On benefit advice and support, extra resources have been made available to the Department for Work and Pensions to the value of £1.3 billion. There will be similar pressures on councils to deliver council tax benefit and housing benefit, yet they are caught up in the squeeze. I am not entirely certain that the levels of resource that the Minister has mentioned will be sufficient to meet that increase in demand.
Local authorities are in a good position in terms of being able to identify and deliver capital projects on the ground quickly, but I am concerned that projects are being held up. The private finance initiative is becoming more expensive and appears to be slowing down in some places, and capital receipts are not materialising to fund many of the projects that councils have been planning.
What more can the Minister’s Department do to ensure that these projects can be delivered more quickly on the ground? Has he considered allowing councils to bring forward future capital allocations to get projects moving? Will he support the Local Government Association’s recommendation to consider plans whereby councils would pool billions of pounds of existing investment to fund infrastructure projects and support the economy locally? What more can he do to help councils link in to other funds? In Northumberland, particularly in Morpeth, there are huge problems with the capital highway maintenance emergency fund following the huge problems caused by last year’s flooding. That could not have been foreseen, but the council is concerned about its ability to provide match funding and the impact that doing so will have on other budgets. Is there anything more that the DCLG can do to link in with other Departments to ensure that these important projects happen?
I am grateful to my hon. Friend for drawing the Minister’s attention to this, because he may be able to have a word with the Department for Transport. Only a third of the costs of emergency repairs to the highway system that was so devastated by the floods will be met by the central grant, because the local authority is expected to fund such a large amount from its existing transport grant, which is itself under pressure because of the overall effect of those weather conditions and flooding on roads throughout the county.
I am grateful to my right hon. Friend. These are unforeseen events that the council has to respond to in the context of a very tight funding settlement. Any kind of flexibility from the Department, or anything that it can do to link up with the Department for Transport, would make a dramatic difference.
Those are all relatively minor proposals that the Government could bolt on to the existing funding arrangements. That is why I am disappointed that no such imagination has been used in this local government finance report. It is a shame that the Minister is not feeling bolder, because we have missed an opportunity to make much more fundamental changes that would give councils a much bigger role in responding to the economic crisis. The hon. Member for Wigan alluded to that.
One of the key challenges is the lack of social housing. At present, councils are completely hamstrung in their ability to respond to that, and the situation does not change as a result of this funding announcement. Surely it would have made sense to link the publication of the report to an announcement on much-needed reforms to housing revenue accounts. This is an arcane system that prevents councils from using future revenue streams from rent to supplement and fund improvements to their council housing stock. Combined with freeing up councils to borrow prudentially, it could play a massive role in tackling the social housing crisis that we face. It would also be a much fairer way of using tenants’ rent, in stark contrast to the current system whereby some of the country’s lowest earners are in effect paying a tenant tax that often ends up, almost in its entirety, in Treasury coffers. That is simply unfair. I know that the matter is under review at the moment, but given the economic situation, would it not have made sense to bring that review forward rather than delay it further, which I hear is likely? There was an opportunity for more straightforward and fundamental change, which appears to have been passed up.
One of the other issues arising from the report is capping. Early indications are that council tax increases for most councils will fall by about 3.5 per cent., but does the Minister have anything to say about the authorities that were capped last time? Does he have any comment on how they fared in the past year, and whether they look likely to be able to deliver within the range that he specified for this year? We are debating the funding formula for new authorities, which I understand has been agreed with those authorities, but I wonder about the impact of many of the efficiency savings that will arise from local government reorganisation in the longer term. By contrast, there will be costs involved in making some of these immediate changes, and I wonder whether that has been reflected in the allocations we have seen.
The Minister announced today that he would require local authorities to provide, in council tax bill statements, details of efficiency savings that they have delivered. Broadly, I welcome that. I wonder whether the Government will make equivalent information available, because a lot of local authorities are much better at delivering efficiencies than Departments are. I look forward to Departments providing readily accessible information in an equivalent way. Perhaps I can look forward to seeing on my P60 the efficiency savings that the Government have promised and delivered.
On a related point, an awful lot of public money is not spent by the local authority. Public money is spent locally that never ends up on any council tax bill, and is not part of any efficiency saving process. In the Sustainable Communities Act 2007, the Government made a commitment to produce local spending reports that would provide details of all public money being spent at local level, not just by organisations such as the NHS or the education authorities, but by the many quangos for which there is no direct accountability for how money is spent. I wonder whether the Minister has any plans to tie in his statements on delivering efficiencies with more transparency concerning the amount of money spent locally about which the public often know nothing. They do not know where it is being spent, let alone how effectively or efficiently it is being spent.
Last year, the Minister said that the settlement “does what it says on the tin”, and that this year would be a repeat performance. But the fundamental question remains: whether it is right to continue justifying the unchanging nature of the settlement in the light of such uncertain and unstable economic times. A judgment has been made that the assumptions behind the settlement are correct—and that is where we disagree. My party’s view is that such assumptions are wrong. Fundamental problems with the current funding arrangements have to be addressed, and as we face difficult economic times, the need to address those problems becomes more, not less, urgent.
Although we welcome the review of the area cost adjustment, there are wider systemic problems that must be addressed. There is an urgent need to review the formula, and the floors and ceiling system must be looked at. The councils at the floor feel that they are falling further behind, while those at the ceiling that are trying desperately to catch up look as if they will never have any prospect of getting the funds that the Government’s own formula says that they need. There is a need to continue to cut ring-fencing to free councils to raise and spend more of their resources locally. There is a need to recognise how completely inadequate the current system of local taxation is in providing a link for local taxpayers between the services that they receive and the tax that they pay. It must be recognised that the council tax continues to be an unfair burden for those on lowest incomes because it increases above inflation each year, and is paid out of people’s disposable income. They really feel any increases that are made each year. The Government have completely failed to recognise those problems, let alone address them.
I got quite excited in the debate this afternoon because I thought that the hon. Member for Bromley and Chislehurst was going to announce some amazing brand-new long-term plan for what a future Conservative Government planned to do. Sadly, I was disappointed. The worst-funded authorities will be the least able to deliver what the Conservatives claim will be a council tax freeze. That means that those in the greatest need will be the least able to benefit. Their suggestion is not a long-term plan; it is a two-year proposal. That will hardly address the systemic problems that the hon. Gentleman himself identified.
We need not a one-off gimmick but fundamental reform, not only of the balance of what is raised and spent locally but of how it is raised. That is about localising business rates, devolving powers and resources to a more local level from the regions and from Whitehall— and, of course, scrapping the council tax. Instead of considering those proposals, the Government have so far refused to act even on the most modest proposals in the Lyons report. They have ducked the matter altogether, and are still in a state of denial, when now, more than ever, we need fundamental reform.
On a point of order, Mr. Deputy Speaker. It has been reported on Radio Gloucestershire that Gloucestershire county council has been informed by United Salt, the country’s largest supplier of salt, that it will be unable to supply the county council in the near future. That means that after tonight, Gloucestershire county council will have to ration the salting of its roads severely. I understand that a number of other local authorities are in an even more parlous position. I am sure that you, Mr. Deputy Speaker, and the House will understand that that raises serious road safety concerns.
I ask your guidance on what we can do to get a Minister here tomorrow—[Hon. Members: “Today.”] Or even today, to make a statement, in view of the serious issues involved, about whether the country is running out of salt and, if not, how it can be better distributed among local authorities.
I think that the hon. Gentleman knows that that is not strictly a point of order for the Chair to rule on, and that the Chair cannot command the presence of a Minister on the basis of what the hon. Gentleman reports. However, his remarks will have been heard by those on the Treasury Bench, and there is also an opportunity for him to submit to Mr. Speaker an urgent question to seek to achieve a ministerial presence in the House. There might also conceivably be an opportunity for the matter to be aired during business questions tomorrow. I hope that with the matter on the record, and with the suggestions that I have offered the hon. Gentleman, it will be possible for some assurances to be given to the House, and through the House to the public, about what the situation is.
I thank you for your indulgence, Mr. Deputy Speaker. I simply wish to note that there is a Local Government Minister in his place, so given your suggestion, it might be helpful if before the end of the debate, he could arrange to inform the House of what the Government might intend to do, to save Mr. Speaker from having to trouble himself with deciding on an urgent question tomorrow.
I think that the hon. Gentleman is trying to be helpful. He will have noted that I used a generic term in referring to the Treasury Bench, in order not to pinpoint or embarrass any particular Minister, but he has probably aimed his remarks in a good direction. Shall we leave it at that?
I start by reminding the House that I remain a county councillor on Oxfordshire county council. I do not wish to use this opportunity to engage in special pleading for the council, but that experience is relevant to how the settlement can be implemented and how past settlements have been implemented on the ground.
For three of the four years for which I have served on the county council, I held a portfolio that was relevant to the debate. Its scope was to drive through efficiencies, make the council more effective and drive through business processes that would enable it to deliver on its financial commitments. I think that we did very well on that, removing several hundred posts from the establishment and introducing business processes in planning and budget management that I think would be the envy of many a multinational. We slashed office costs by creating a shared service centre, which works well and promised £27 million of gross savings in the first seven years. We more than met our efficiency savings targets. However, any sense of pride in those achievements was tempered by the frustration of our expectations that we could, after coming to power with a radical agenda, make radical changes for the benefit of local people. Too often, those aims were frustrated by the fact that the Government perceived us as little more than their local executive arm and placed significant budgetary constraints on us, which reduced our options. The settlement perpetuates that, despite the Minister’s words.
From the outside, councils’ budgets may appear large. My county council has an annual turnover just short of £1 billion. However, the amount of money to play with in terms of local choice is pathetically small—only a few million pounds. At this time of year, when budget debates take place in council chambers, there is a common cry of, “Why is so much time spent on so little money?” It is impossible to adopt a distinctive political slant. The debate always happens because there is so little scope to alter funding objectives in the rest of the budget. There are two reasons for that.
First, some spending could not be cut without catastrophic effects on services to vulnerable people. Secondly, a huge element of the budget is ring-fenced to ensure that it can be spent only to deliver the Government agenda. To add insult to injury, that agenda was often euphemistically expressed as “shared priorities.” I am not sure with whom we were supposed to share the priorities. For example, on highways, five were imposed and our “sharing” was restricted to one, which we had the option to create ourselves.
Despite the Minister’s comments, freeing up the ring-fenced council grants has not gone nearly far enough to bring back control to local councillors and provide that distinctive local feeling. The hard work of making savings and efficiencies was largely simply to stand still, as the cash made from efficiencies was soaked up by pressures from service needs, demography, which has been mentioned, or new impositions from central Government. Again, some of my hon. Friends have referred to the latter pressure.
Let me give an example, albeit a small one. Under the Building Schools for the Future programme, the attendant costs of submitting a bid are considerable in the time that senior council officers have to spend on it. A judgment had to be made about whether the costs were worth while, especially given the bias in the programme against affluent areas such as my county.
In the current climate, there is a huge take-up of services, not all due to the recession. After the baby P case, there has been a 32 per cent. increase in the number of referrals. It defies belief that, with such a mountain of evidence, the Minister can still claim that there are no exceptional circumstances.
It is perhaps worth considering where the headroom—the amount that we can decide how to spend to give some local character to a budget—comes from. It does not come from what the Government describe as a generous settlement. The three-year settlement in my council was increased by 2 per cent., 1.75 per cent. and 1.5 per cent. The boasts about investment in local government translate as pure spin and hide the wide regional variations that occur in the settlement as a whole.
The boasts also hide the fact, which I raised in an intervention on the Minister, that the real inflation rate that councils face has been well over 5 per cent. It is made up of various elements, but energy costs incurred when energy bills were much higher are only beginning to come through.
For the reasons that I have given, the headroom does not come mainly from savings, because they are used simply to stand still, nor does it come from excessive council tax rates. Being a good, Conservative county council, we have continued to put downward pressure on the rise in council tax in the three years for which there has been a Conservative administration there. Often, however, a major element of financial stability has had to come from the strategic measures that the council has had to take— for example in maximising its return on investments. It is no wonder that so many councils turned to Icelandic banks, relying on their interest rates in order to fund services.
The amounts involved are not insignificant. In the past, those strategic measures could have accounted for as much as 1.5 per cent. of a council’s total budget requirements. That is a phenomenal amount of money. In the current downturn, a council would be lucky if those strategic measures accounted for 0.5 per cent. of its budget requirements. That has a major impact, in terms of the need both to rethink the strategies for borrowing and to make reductions in the headroom—and, therefore, the need to cut services or achieve further efficiencies.
I do not particularly want to conclude with an image of total frustration, but I am afraid that it is one that many councillors would identify with, owing to the way in which the Government have handled local government and the current settlement. They have eroded the chance to put a local face to local services, undermined local democracy and shown that they simply do not trust local councillors to make good local decisions. The Government have undermined good business practices by making it more difficult for councils to plan for the long term, because all the effort is put into meeting short-term Government targets, and they have imposed a ridiculous and meaningless burden of inspections, the like of which they would not dare to subject themselves to.
In one year, we had the unfortunate experience of having a full comprehensive performance assessment of the council, as well as having to put all the information together for the Government’s ill-conceived plans to try to encourage us to bring forward unitary proposals. Both sapped senior resources in the council to a quite unimaginable degree. The effect of that on how we took forward our plans was quite significant. Moreover, the Government have presided over a financing system that is so opaque as to be practically incoherent. Many councillors believe, I think quite justifiably, that its whole purpose is to maximise the opportunities for central Government to get their own way. It is time for the Minister to put forward some proposals that allow the people to whom councils are really accountable finally to make the judgments.
It is a pleasure to take part in this debate. There is a form of friendship among those who have spoken at the Dispatch Box about local government—indeed, I hope that I can call the Minister and my hon. Friend the Member for Bromley and Chislehurst (Robert Neill), who represents our Front Bench, two of my friends in the House.
I know the hon. Member for Falmouth and Camborne (Julia Goldsworthy) rather less well, but she has a very good grasp of the subject, and always speaks knowledgeably and well on it. I was a bit surprised when she said that she was excited—I wondered what I had missed in the debate so far—but she managed to convey why she was excited. From that I took it that she was even excited by the prospect of our becoming the Government. I share that sense of excitement.
The hon. Member for Wigan (Mr. Turner) reminded me of when I was the sponsor Minister for the city challenge project in Wigan. I would like to put on record how much I enjoyed that experience and how much I enjoyed working with the excellent Peter Smith in Wigan. That project was an attempt by the Government to be involved in supporting a local authority when times were difficult. In answer to the occasional jibe that is thrown in our direction about apparently being a do nothing Government at the time of the last recession, I would say that, as the hon. Gentleman will know, there was not much vested political interest in the Conservative party being heavily involved in Wigan through the city challenge project. We were doing it because it was the right thing to do at a difficult time, when we were affected by, if I may say so, a global change in manufacturing, for which we were blamed by hon. Members on the Labour Benches. It is an ill wind that comes round to see another Government being affected by what is apparently a global change and catching the drift of public discontent—in this case, quite rightly.
I want to make some general remarks about the settlement, followed by one or two particular ones. When I spoke from the Dispatch Box a couple of years ago, at the time of the first three-year settlement, I said that I welcomed the certainty that three-year settlements established. Since then, however, we have seen one of the problems with such arrangements. In a land where boom and bust no longer exist, a three-year settlement has some merit, because there is stability and we can plan. In the real world, where it turns out—to the surprise of no one except the Prime Minister—that boom and bust have not been abolished, the deficiencies of a three-year settlement become exposed. The settlement is subject to pressures that no one could have imagined at a time when certainty was guaranteed. As we all know, those pressures come into the equation and cause difficulties, a number of which have been mentioned.
Investment income for local authorities, and income from property, searches and business rates, constitute a relatively small sum compared with the overall settlement, but because of the tightness of gearing in local authority finance, they actually constitute quite a significant amount. The pressures from these changes and the impact of the credit crunch on local authorities, which colleagues on both sides of the House have identified, are very real. The Local Government Association has published a series of figures, but I will not read them out because the Minister knows them well. Those new pressures have come into the equation, but some of our original concerns with the settlement, which my hon. Friend the Member for Bromley and Chislehurst highlighted earlier and my hon. Friend the Member for Henley (John Howell) has just explained, are still in the system to cause concern.
For example, adult social services remain a worry for everyone in local government because we know that the inflation figures that the Government have calculated do not meet the needs of those who come into the system needing care. That is a source of concern whenever councillors get together. Will the Minister pay particular attention to the transfer of youngsters who have been in care and who, on becoming adults, have found themselves in a situation where provision has tended not to be made, over the years?
I recently visited Hinwick Hall, a special school run by Livability, the organisation that was put together by the merger of the Shaftesbury Society and John Grooms. It cares for a number of youngsters in a residential setting, but the teachers and parents involved are constantly concerned about what will happen to the youngsters when they finish full-time education and leave that environment to go back to their original local authority, because the necessary provision is so often not there.
A growing number of youngsters are coming into that situation, and there will be a need for more provision, not less. I am not sure that the amounts already accounted for in the grant formula for adult social services will meet that need in the future. That will remain a concern for everyone. In relation to cash for highways, the inflation figures often outstrip the figures calculated by the Government. Public care costs, which a number of lawyers in my own area have mentioned to me, are also increasing, as my hon. Friend the Member for Henley has said.
I want to make some particular points about Bedfordshire. The Minister will know all too well the background to the situation there, and whatever hair he did not lose as a result of his previous job has certainly been lost through dealing with those problems. That applies to me as well. Some colleagues might remember that before I went to Bedfordshire I had a full head of hair, played football and all that sort of thing. Bedfordshire has dealt a savage blow to all that.
The background to the situation in Bedfordshire has been the steady rise in council tax—98 per cent. in Bedford borough and 105 per cent. in Mid-Bedfordshire district council since this Government took office—and the pressures now being created by the unitary process, which the Minister will understand very well. I have expressed concern in the past that the introduction of the unitary process involved a quick, late decision by the Government, which put extra pressures on the councils involved. Will the Minister reassure me that he will take a very close interest in the work of the excellent implementation teams in Bedfordshire and Bedford councils to ensure that, despite the difficult time scale, the process works?
There was some disquiet locally when both councils announced quite small local tax increases this year. It had been hoped initially that quite significant reductions would emerge through the unitary process—10 per cent. or 12 per cent. was quoted by the mayor of Bedford, but he recently had to announce that he was looking for a rise of slightly less than 1 per cent. That is very different from what was said previously, but I am sure that this is only the first stage and that savings will come from the unitary process as promised, particularly if both councils elect a Conservative administration at the first available opportunity. It is early days; I am sure that more will happen in future.
I would like to take the opportunity to put on record my thanks to councillors who have served on the councils in my constituency that are going to form the unitary council—on Bedford borough council, Mid-Bedfordshire district council and, last but not least, Bedfordshire county council, which will cease to exist in April after more than 100 years of service. Some sterling work has been done there by councillors and the council has largely been Conservative-run through most of its history. In recent years, it moved from being a no-star council to a three-star council over a very short period: it became one of the fastest and best-improving councils in the country.
I was reminded of that fact today when I attended the funeral of Councillor Phyllis Gershon, who recently died in harness. She was 89 years old. I suspect that most Members think very fondly of some councillors for their extraordinary service. Phyllis encapsulated what local authority service really means: genuine commitment to an area; no side; no privilege; doing her work honestly and well. Many councillors have done that over the years and they are responsible, I think, for some of the Government’s success in local government. They have helped the Government to meet targets that were difficult to achieve through Government Departments, and they have done so through the hard work and effort of local councillors. I hope that we would all give credit to them for that.
In the remaining moments available, I want to bring two or three particular issues to the Minister’s attention. As far as the credit crunch in Bedford is concerned, figures from Bedford council show that it expects to lose about a third of its investment income this year. It used to bring in about £2.6 million, but it will lose about £900,000 this year—quite an amount—from the change in interest rates. If we add in the property, the searches and perhaps section 106, I am slightly surprised that with all that going on, the Minister thought that his original settlement could stay stable.
Secondly, concessionary fares have been highlighted by several Members. Bedford council reckons that it will take a hit of about £250,000 on those fares. The Minister is adamant that the overall figure appears to the Government to meet the needs imposed as more people take up the concessionary fare scheme, but many councils have denied that, so I genuinely ask the Minister to reconsider it at some stage. The tight gearing means that these amounts really count for local authorities. If, when the scheme is fully implemented and the figures come in, it turns out that local authorities have lost out significantly, will the Minister give a commitment to looking at it again and make some recompense?
Thirdly, Building Schools for the Future is important for Bedford council. I am pleased about the support it is getting from the Government, but the local education partnership and the financing of the programme have come in for criticism from all sides. I would be keen to know what the Minister includes in the figures for the future financing of the partnership under the new unitary council and how he believes it will be paid by council tax payers in the future. People fear that it could be a considerable amount. I know that the Minister has looked at it very carefully and I accept that this is good news for Bedford council and its schools in the future, but how it will be paid for is a matter of concern. If the Minister cannot address that issue today, perhaps he will do so on another occasion.
Finally, on help for business, I recently had a meeting with the Sandy chamber of trade, which said that it had hardly noticed any difference as a result of the £12.5 billion spent on VAT changes, and that if that money had been put into reducing business rates for small businesses, it would have meant a great deal more. Perhaps the Minister will review this issue in due course and see whether better ways of supporting small businesses can be found than these VAT changes.
We will always have debates such as this. The expectations of local authorities are very high, and the expectation of Government is very high. There will never be enough money to satisfy all the needs, no matter who is in office locally or nationally. The idea of the three-year settlement is good, but it has the flaws identified by my hon. Friend the Member for Bromley and Chislehurst. I am sure that my hon. Friend, like me, looks forward to the occasion when he will sit on the other side of the fence and will have to put some of these difficult proposals into operation.
The Minister, for his part, is rightly proud of his work both in the Treasury and in local government. We know him to be an honest and extremely capable Minister— and in due course, I am afraid, he will make a very good shadow Secretary of State for the environment and local government when he is given the chance.
It is a great pleasure to follow my hon. Friend the Member for North-East Bedfordshire (Alistair Burt). As I listened to his speech, I was reminded that Bedfordshire, or rather Bedford, has the largest Italian population in Britain outside London. I think that that is worth remembering during these troubled times at the Lindsey oil refinery. I also congratulate my hon. Friend on promoting the Minister to the next Labour shadow Cabinet.
My hon. Friend clearly has the highest regard for the Minister, which I share.
The debate gives us an opportunity to honour some of the leading lights in local government. I do not think that council leaders are ever given enough credit in the House for the work that they do. Among those whom I know or have encountered is Keith Mitchell CBE—leader of Oxfordshire county council and a colleague of my hon. Friend the Member for Henley (John Howell)—who since the Conservatives took control of the council at the most recent local elections has done an outstanding job in putting its finances in better order while improving services at the same time. I shall say more about that shortly.
I am also thinking of men such as Stephen Greenhalgh, leader of Hammersmith and Fulham council. I know that the Minister received a presentation from that Conservative council last week on the excellent work that it has been doing in reducing council tax while improving services. Then there is a man who, in my view, is not given enough attention in the national press: Mike Whitby, the leader of Britain’s second city, Birmingham. He is a kind of pre-Boris Boris—the first Conservative mayor of a big city for some years—and he has been a superb leader of that city.
What unites the three gentlemen whom I have mentioned—and I have mentioned those three merely because they are the ones whom I know best—is a passion for the areas that they represent, and a passionate desire to give their council tax payers, the residents and the local population the best service possible. That, I think, goes to the heart of some of the frustration expressed by Conservative Members today about central Government’s attitude to local government—the stranglehold in which central Government hold local government, and the almost psychotic wish of central Government not to allow local government the flexibility to experiment or innovate. Local government is simply there as central Government’s whipping boy.
We see from the Government endless initiatives designed to catch headlines, particularly on issues such as free swimming, which concern me as a shadow Minister for Culture, Media and Sport, but also on issues mentioned by other Members, such as free local transport. The Government take the plaudits for those initiatives while expecting local government to pick up the bill. I suspect that the postbags of all Members in every part of the House will have been full of letters from constituents saying “I heard this announced by the Government six months ago: why is the council not implementing it?” We have to tell them that it is because, having announced it, the Government did not give the council the money.
Another thing that all Members will find frustrating is the sheer hypocrisy of Government. I must say that I think it is a good idea for council tax bills to contain details of the efficiencies and savings that a council has managed to come up with. I suspect that Hammersmith and Fulham council will do that without any impetus from Government, because it has a fantastic story to tell about the savings that it has achieved for local council tax payers. It is, however, mind-boggling hypocrisy for the Government to patronise local government by saying, “You will do this, and you will be made to be more efficient,” but heaven forfend that local councils should push back and say, “Well, how about you putting some of the efficiency savings that central Government have made on your income tax bills, and the other bills that people receive from the Government?” Central Government spending continues to rise inexorably, while all the time they are strangling local government spending.
My hon. Friend the Member for North-East Bedfordshire alluded to the fact that we have these debates all the time. Particularly for those watching outside the Chamber, there might be the feeling that here we go again—that were there to be another Conservative Government, we might be in this Chamber in some years’ time with Labour Opposition Members complaining about the high-handed acts of central Government. However, I anticipate that there is on the Conservative Benches a genuine appetite for a change in the relationship between central and local government—for more power to be pushed down to local government.
We have talked about my hon. Friend the shadow Chancellor’s commitment to freeze council tax in partnership with councils that will come to the table. The hon. Member for Telford (David Wright) is no longer in his place, but I would remind him that he can put Oxfordshire county council at number one on his list of councils that said they would come to the table for that council tax freeze.
We have also proposed referendums, so that if a council wants to increase the council tax above a certain level, the local people will have a chance to say, “Yes, we approve of that spending; we think it is the right thing to do in the circumstances,” or “No, you’ve breached your covenant with us; that level of spending is too high, so go back and think again.”
We have talked about locally elected police commissioners. That is a radical idea that might frighten the horses, but it is about giving accountability—about allowing local people a say in how local services are delivered. That is very important.
I do not live in cloud cuckoo land; I know that there will always be frustrations between central and local government, particularly while central Government continue to provide the bulk of the funding for local government. However, I believe that our party is on a journey to push power back to local councils. The reason for that is partly historical; we have been in opposition for 10 years, so our opportunity to exercise power has come at the local level. That has given this House outstanding Members of Parliament, such as my hon. Friend the Member for Henley and my hon. Friend the Member for Bromley and Chislehurst (Robert Neill), who is another outstanding local government servant. It has also given us outstanding council leaders and an opportunity to think and innovate.
Let us look at what is happening in Oxfordshire county council. The increase in the budget from central Government is pathetic: it is 2 per cent. in 2008-09, 1.7 per cent. for 2009-10 and 1.5 per cent. for 2010-11. Those budget decisions were made by Ministers because Oxfordshire county council is, of course, a floor authority. In his budget speech, the leader of the council, Keith Mitchell, said—again, they were bitter words of frustration—that we now have a financing system for local government that is
“so opaque as to make any coherent analysis impossible”.
He said that if he was a cynical man he would have believed it was
“designed to minimise transparency and…maximise the opportunity for political manipulation.”
That is where we have got to in terms of the relationship between central and local government—a system that is so opaque that even a man who has served at county council level for 20 years, and who leads a county council with a £1 billion budget, cannot make head or tail of it, and neither can his officers—or, I suspect, officials in the Minister’s Department. We must rip this up and start again.
Despite the constraints I have described, the county council continues to deliver value for money for local council tax payers. It has achieved efficiency savings of £40 million, and it will be proud to put that on its council tax bills. It has reduced the rate of increase in council tax from 4.5 per cent. to 3.75 per cent., which is far ahead of its own target. My hon. Friend the Member for Henley alluded to the fact that it has achieved that through greater shared services. The council has other achievements: electronic social care records; the refurbishment of its offices; closer working between the special educational needs department and the primary care trust; putting in place, despite a lack of Government funding, new provision for post-16 SEN—a campaign in which I was closely involved; free parking; and the refurbishment of Oxford city station. Of course, the crowning glory is the fact that it is the first county council to receive a corporate charter mark. I have no idea what a corporate charter mark is, but I am immensely proud that my county council was the first to get one.
Let me inform my hon. Friend of what a corporate charter mark is. I happened to be the councillor who thought of the idea of the council’s going for it and then pushed it through. It is a statement to the people of Oxfordshire that the council takes its relationship with them seriously in terms of the customer service it delivers. The thing that excited me was the enormous enthusiasm of ordinary officers and officials in the county council for taking it up.
I am extremely grateful to my hon. Friend for explaining that to me. I knew when I was about to praise the county council for attaining the corporate charter mark that it was a good thing, but until his intervention I did not realise just how good a thing it was. I know that in his closing remarks the Minister will want to make that point again and perhaps encourage the few remaining Labour councils to apply for a corporate charter mark.
Will my hon. Friend speculate as to exactly what it is in the waters of the River Thames that makes Members for Henley have such a grasp of local government and makes them such local government geniuses? No doubt, the next Mayor of London is sitting right in front of us now.
My hon. Friend has hit on something there, and I wish to elaborate on the waters of the Thames, because by doing so I shall move on to Hammersmith and Fulham council—I know that the Minister has been given a presentation by it. The source of the Thames is in the area represented by the leader of the Conservative party and meandering down it one finds the constituency that was represented by the Mayor of London and is now represented by my hon. Friend the Member for Henley, who is going to be a star in the next Conservative Cabinet, and later Hammersmith and Fulham, which has a Conservative-controlled council, put in by the people of Hammersmith and Fulham after the abject failure of a previous Labour administration.
I am testing your patience, Mr. Deputy Speaker, and unwittingly the hon. Gentleman has just given me a hook whereby I could spend 10 minutes talking about whether my constituency should have a reservoir or whether it is better to concentrate on effluent reuse in order to supply the people of London with water. However, I shall not be distracted by that temptation, and I am aware that another Conservative Member wishes to speak, which again shows the massive commitment on these Benches to this debate and to local government.
Hammersmith and Fulham council has saved the average council tax payer £700 in three years. It has cut spending by 18 per cent. and it has reduced its debt, yet residents’ satisfaction has increased and council services have improved. There is a serious point to be made: Conservative Members constantly have to put up with Labour spin, if I may use that term in this Chamber, whereby any proposal made by a Conservative is described by Labour Members as a cut—they always ask what we are going to cut—and any proposal that the Government make is described as an efficiency saving, despite the fact that after 11 years we have never seen any example of an efficiency saving.
If people want to see efficiency savings and value for money in practice, they should look at the Conservative councils that have had to operate within this incredibly tight financial framework, but have still managed to reduce the rate of increase in council tax and improve services for council tax payers. In the June elections, I believe that the people of this country will put their faith in Conservative councils as a precursor to putting their faith in a Conservative Government.
I had not intended to speak in this debate, but I was so moved by the contribution from my hon. Friend the Member for Wantage (Mr. Vaizey) that I wanted to make a few comments—although I cannot claim to be inspired by the waters of the Thames. The water is rather saltier down on the south coast.
The Minister, my hon. Friend the Member for Bromley and Chislehurst (Robert Neill) and other hon. Members have spoken about the need for efficiency savings, smart purchasing and innovation. Too much innovation in local government is stifled by the stranglehold that the central grant system still has on the way in which local government runs. My local councils—Adur council and Worthing council—have been creative in working together in the last few years. Their joint working is so advanced that it is used as a model for many other councils. Without actually merging, Adur district council and Worthing borough council have merged some departments, so we now have a joint rubbish disposal department, which can buy a joint fleet of environmentally friendly, state-of-the-art trucks. We have merged the management system and the legal services department to save staff overheads. The councils also have joint IT purchasing agreements with other local councils. This provides a model for how councils can run their operations more cheaply without compromising quality—indeed, they can enhance quality.
We have much to be proud of, and that is why it is so galling that all that good work—to reduce the cost of running local government at the same time as improving services—can be undermined by an obligation, such as concessionary bus fares, that has been imposed on local councils. I should say that I am fully in favour of the concessionary fares. When I mentioned this in a debate last year, I was misinterpreted by irate pensioners who thought that I wanted to curtail their jaunts on buses. I had no such intention. If people want to take more bus journeys, that is fine. They are good for their health and I am fully in favour of that. However, if the Government are to be true to their word and fund the policy fully, the funding allocated between local authorities has to be fair.
I do not dispute that the total sum provided may be the total amount required, but the sum provided to run the scheme in Worthing and Adur falls well short of the actual cost. I will take up the Minister’s earlier invitation to send him details, and I hope that he will meet another delegation. This year, Worthing faces another deficit of £500,000, which is the equivalent of several percentage points on its council tax. The council would much rather have lower council tax and see that money spent on services. That is why the situation is so unfair and galling. In my part of the world, the high pensioner population creates extra demands. We have the highest proportion of over-85s in the country, at some 4.6 per cent., with the resultant extra requirements for expenditure—which we are happy to make.
As a floor council, West Sussex county council is right at the bottom of the pile. Our increase this year is 1.75 per cent., or an extra £1.7 million. If one takes away the school spending, that equates to 4p a week more per resident per week for all services except schools over the next year, and the increase is even less next year. In contrast, Dorset does not have the area cost adjustment and it will get a grant rise of 7.6 per cent. Its demographics are similar to ours.
The Minister asserted in his speech that councils have received above-inflation increases since 1997, but West Sussex is in no such fortunate position. Its rise of 1.75 per cent. compares with a RPI figure of 3 per cent. The same was true last year: our grant increase was 2 per cent. with an RPI of 4.3 per cent. Those low rises are a direct consequence of changes made by Government to the grant system, removing funding from West Sussex and many other south-east authorities for the benefit of authorities in the north and midlands. If we had received an average grant settlement since 2003-04, when the Government changed the grant system, that would have produced an extra £28 million per annum for the county—enough to fund 700 extra social workers or to provide 1,680 residential care placements or more than 600 foster care placements. The impact of general inflation on non-school services alone is more than £10.5 million this year, and we are getting £1.75 million.
On children’s services, the public law fees for child care hearings that have increased will cost the county £200,000—an extra cost beyond that funded by the Government in the 2008-09 settlement. All the extra requirements for child protection that we debated in the House last night will impact on our budget. On adult social care, a lot of extra costs simply will not be funded.
In other areas, such as recycling, West Sussex has made great innovations. It has committed £1 billion in total over the next 25 years for a state-of-the-art biological digester plant that will produce compost and dispose of our waste in a very environmentally friendly way. That will all be funded with no additional Government support. We are doing good things in our councils, but I am afraid that is despite rather than because of Government funding.
We welcome the area cost adjustment review that is under way. The most frustrating aspect of the ACA is that we are denied access to the data necessary to check and review the Government’s own calculations. There is too much smoke and mirrors. We need greater transparency in the way that local government is financed and we need to support, rather than undermine, the great innovations introduced by many of our local authorities in quite difficult positions, particularly in Worthing, Adur and West Sussex.
With the leave of the House, I want to respond to some of the points made in the debate. I had not quite expected to be called to speak just at that moment, Mr. Deputy Speaker, but I am grateful to you for calling me. Let me pick up where the hon. Member for East Worthing and Shoreham (Tim Loughton) left off and say that I look forward to any further information that he chooses to send me.
May I also pick up on the point of order made by the hon. Members for Cotswold (Mr. Clifton-Brown) and for Forest of Dean (Mr. Harper)? You pointed a finger in my general direction at that juncture, quite understandably and reasonably, Mr. Deputy Speaker. I am sorry that neither of the hon. Gentlemen is in the House to hear the brief update that I can give. They expressed concern about salt supplies in Gloucestershire. The Government, through the Government office resilience teams, are monitoring the situation very carefully, with the prospect of bad winter weather later in the week in some areas of the country. The Local Government Association is working very closely with us and is brokering an arrangement to ensure that the stocks of salt and grit in different areas can be best used and can be moved when required to the areas where the priorities are most pressing. That mutual aid arrangement involves not just local authorities and local highways authorities but the Highways Agency, which carries stocks of grit and salt. Such arrangements are now relatively common and relatively well proven to deal with a range of problems. Assistance from local government and other agencies, where necessary, is provided to those areas where the problems are greatest.
Such arrangements have worked well in dealing with other problems in the past. We are keeping a close eye on how the salt and grit supplies last, but at this stage I have confidence in the arrangements that local government, working with the highways authorities and Highways Agency, can put in place.
I am grateful to the Minister for giving way. I am sure that all hon. Members will welcome that information and be grateful to him and his officials for taking the trouble to supply it. Have the highway authorities, the Local Government Association or his Department made any assessment of the total quantity of salt available in the country? What arrangements will be made for rural areas, where the danger is that roads may become impassable before the salt can be shipped in?
I do not have an audit of salt and grit stocks across the country, and I am not sure that one has been completed. The levels being held will depend on the preparations that local authorities have made, and on the amounts that they have deemed necessary to put on the roads in recent days. The Highways Agency has sufficient stocks that it has been able to make at least a day’s worth available to local highway authorities. That is a valuable contribution to the arrangements that the LGA is helping to broker to ensure that salt and grit are where we expect the greatest pressure to be, or where the priorities seem most pressing. I hope that helps the House.
I turn now to the substance of the debate, beginning with the hon. Member for Bromley and Chislehurst. He said that things had changed since the start of the three-year settlement, and it is certainly true that his party’s promises about local government have changed. [Interruption.] We are talking about funding for local government, and what has changed is that a Conservative Government would now make the limit for local government a rise of 1 per cent. in real terms above inflation. That compares with the 2.8 per cent. rise in real terms for the core grant that we are putting in place for next year.
Moreover, if a Conservative Government were elected, the change that I have described would be introduced—and felt by local government—not in some distant future but after only eight weeks. Some £240 million would be taken out of central Government’s core grant to local government. It is really not good enough for the hon. Member for Bromley and Chislehurst to suggest that somehow that could be dealt with through efficiency savings. They cannot be made in such a short space of time, so the Conservative plan can mean only one thing—that the services that people need would be cut.
In many ways, this is a case of back to the future—
There is a bit of chuntering on the Opposition Benches, and I am not surprised, as Conservative Members do not like to be reminded that central Government funding for local government in each of the four years up to 1997 did not rise by an amount above the level of inflation, as it has done since 1997. Nor did that funding rise in line with inflation: instead, it fell by 7 per cent. compared with inflation in those four years—a point of which my hon. Friend the Member for Wigan (Mr. Turner) quite rightly reminded the House.
The hon. Member for Bromley and Chislehurst was challenged by the hon. Member for Falmouth and Camborne (Julia Goldsworthy) about his policies on council tax. I understand why he shifted uncomfortably and chuntered rather vaguely for a while, as the shadow Chancellor is conning the public with his announcements and suggestions about a council tax freeze. For example, he said to the Conservative party conference:
“I can tell you today that the next Conservative Government will freeze your council tax for at least two years”,
but that was a con, as not all council tax payers’ bills would be frozen, only those in the areas taking part in the scheme. Moreover, how would the freeze be paid for? The Conservative leader has said that the money would be taken from central Government advertising budgets, but he has suggested that those same budgets would pay for other policies.
One of the Government’s difficulties is that they spend so much time reading Conservative proposals that they never have time to do anything themselves. Does the Minister agree that the Institute of Fiscal Studies has confirmed that the Government are cutting spending by £35 billion? Can he name a single Labour council that has ever cut council tax for its council tax payers?
When I spoke earlier, I named three Labour councils that are keeping council tax under control. Hackney, Greenwich and Newham are set to freeze council tax next year. One of those, Hackney, is to freeze council tax for a fourth successive year at a time when it is improving services, not cutting them; too often, cuts are Conservative councils’ method of keeping council tax pressures under control.
Perhaps the right hon. Gentleman would like to contrast the amount of grant received by those three local authorities with the average grant for Greater London authorities of all complexions. Secondly, will he confirm that regardless of whether something has changed since the last settlement, something has changed for him in the past three hours since he said, “Low tax does not have to mean service cuts”?
Low tax does not need to mean service cuts. It does not mean it in Hackney, Newham or Greenwich. The hon. Gentleman asked about the funding formula for those three councils; it is precisely the same funding formula that is applied to other London councils, and to all councils across the country.
I welcome the hon. Member for Wantage (Mr. Vaizey) to this debate on local government. It is good to see him here. He was right to pay tribute to our council leaders. Many councils across the country are well led, and it is important that we make that point, irrespective of party. He described their passion for their areas, and he is quite right. We see in the best of local government a commitment to the very best in public service. I am just disappointed that his contribution to the debate went downhill after that.
I had not heard the hon. Member for Henley (John Howell) speak in this House before. I genuinely welcome his experience in local government. I welcome the interest that he and Members of all parties take in the subject and in our debates. I hope that his clear and genuine localist commitment does not disappear during the time that he looks forward to spending in this House. Like the hon. Member for Wantage, I am grateful to the hon. Member for Henley for his exposition of what a corporate charter mark is. It was instructive to Labour Members, as well as to Conservative Members.
The hon. Member for Henley talked about the settlement figures in Oxfordshire and took me to task on the figures for local government generally. The figures speak for themselves when it comes to investment and increased funding from central Government to local government. The distribution of the funding reflects the relative wealth of an area, and its ability to raise revenue locally in light of its council tax base. It also reflects the relative need and deprivation of areas. He complains that Oxfordshire is a floor authority that had a 2 per cent. rise last year, a 1.75 per cent. rise this year and a 1.5 per cent. rise next year, and then complains about the floor. I have to say to him that those rises are a result of the application of a formula that takes into account the relative wealth and needs of an area. Without the floor, which we introduced several years ago, Oxfordshire would be £9 million worse off this year, so I am surprised that he does not welcome, rather than criticise, the floor.
No, the hon. Member for Henley has had his speech.
I now turn to the contribution of my hon. Friend the Member for Wigan. My hon. Friend was right to say what a significant reform to local government policy the three-year settlement is. Like the hon. Member for Henley, he speaks with great authority about local government; I believe that he served not just as a councillor, but as chair of a finance committee—
My hon. Friend was a senior councillor on Wigan council. He made wide-ranging comments about primary care trust funding. He made strong arguments for the economic value of council activity and council investment in housing. I listened with care and interest to his views on the future reform of council tax.
I come to the speech of the hon. Member for North-East Bedfordshire (Alistair Burt). Let me start by reassuring him that I am keeping a close eye on the preparations for 1 April and the new unitary authorities in Bedfordshire. Like him, I want the change to be successful and in the interests of all Bedfordshire residents. If he has a particular concern about the plans for schools, I will happily discuss it with him later, as he asked me to.
The hon. Gentleman was right to remind us that he welcomed the three-year settlement from the Opposition Dispatch Box when I first announced it. He went on to argue that the settlement should be set aside because of the economic downturn, rather than the period of economic stability that we have had in the recent decade. I was curious about that, because it is not what local government are saying to us. The association that represents his county council, for instance, the Society of County Council Treasurers and the County Councils Network, said that it
“is pleased the Minister has confirmed that the 2009/10 Local Government Settlement would not be re-opened and reduced, providing counties with the financial stability promised by multi-year settlements.”
That is a view that crosses party lines. Labour-led Barnsley responded by saying:
“Barnsley welcomes the stability and predictability offered in this second year of the three-year settlement and is pleased that there were no changes made to the initial announcement as a result of the current economic climate.”
East Sussex county council, an interesting one to pick, stated:
“We also welcome the decision not to reopen the 2009/10 Local Government Settlement announced last year, and thereby continuing to provide the financial stability promised by multi-year settlements.”
The hon. Member for Falmouth and Camborne made the point that the support that we have been prepared to give to councils that may have had investments in Icelandic banks has been insufficient. We made the financial experts available to those councils that felt that they might experience short-term pressures. We funded that extra expertise. We are now allowing accounting treatment next year, so there will be no hit on council budgets or on council tax.
Beyond that, surely the best thing for us to do is to continue to press for depositors to recover their funds as fully as possible, rather than writing off those deposits now and looking to a case for capitalisation or some other measure to make good any potential losses. Those are funds, as I said earlier, that are not lost. They may be at risk, and surely taking steps now and concentrating our attention on trying to get those funds back, with local government and the Local Government Association, is the best thing to do.
The hon. Lady was right, and I think I made the point in my remarks, that the recession is creating pressures on local authority budgets and cash flows, but as the chief executive of the Audit Commission said in its recent report,
“the pressures are real but councils are coping with them well.”
It was the Conservative leader of the all-party Local Government Association who only this month said:
“Councils are working hard to keep council tax down, to keep local businesses afloat and help people deal with the impact of the recession.”
The funding settlement for local government will help them do just that. The increase in flexibility and freedom allows them to decide how best to spend the funds for their area, and above all, the increase in funding—above inflation next year, as it was last year, and every year since 1997 under a Labour Government—will help them do just that.
Question put and agreed to.
That the Limitation of Council Tax and Precepts (Alternative Notional Amounts) Report (England) 2009-10 (House of Commons Paper No. 149), which was laid before this House on 21 January, be approved.
LOCAL GOVERNMENT FINANCE
That the Local Government Finance Report (England) 2009-10 (House of Commons Paper No. 150), which was laid before this House on 21 January, be approved.—(Ms Butler.)