I beg to move,

That the draft Council Tax Limitation (Maximum Amounts) (England) Order 2009, which was laid before this House on 10 June, be approved.

The draft order that I present for the approval of the House was laid under section 52F(7) of the Local Government Finance Act 1992, which was inserted by the Local Government Act 1999. In my view, the provisions of the order are compatible with the European convention on human rights.

The draft order sets out the maximum 2009-10 budget requirement for Surrey police authority, which means that we are proposing to cap the authority in-year. Subject to the House’s approval, I will make the order and issue a notice to Surrey police authority informing it of its maximum budget requirement for the year. The authority will then be required to recalculate its budget requirement at or below the level of its cap. It will also have to arrange for the relevant billing authorities to send out revised council tax bills for the current year.

The order is based on the notional budget, and the notional council tax as a result of the notional budget. Will the right hon. Lady explain, given the huge difference between the actual and the notional, how the notional figure was arrived at, and why, if the police authority—rather than the police force—received notification that the Government were using the notional rather than the actual and set the actual within hours of the notional, the Government did not return to accept the actual in their calculation?

The introduction of a notional budget, which is a change from the previous rather inflexible system, means that the Government, rather than using a straight, crude capping system, have been able to allow a budget to be set, which is what happened with Surrey last year. It was made quite clear to the authority that in calculating this year’s budget the Government would agree to it on the assumption of the budget that would have been set if the Government had not made an exception for Surrey last year. Today, we are taking this action because last year we allowed Surrey to have a notional budget, but it was always clear that when we considered what would be allowed this year we would return to that figure.

I follow that. The difficulty with that argument is that it would be more sensible to use the actual budget, which Surrey used in its calculation, in spite of the notional from the previous year.

The hon. Gentleman’s assumption—those on his Front Bench might think that this is the way to operate, although I am not sure—would effectively mean that authorities that had set a notional budget, therefore allowing them a higher budget, would be able to continue to do that year on year, which would not be fair on other authorities. The alternative would be to return to the crude capping system that applied under the previous Administration. I shall return to some of the background issues later in my speech.

During the debate on the provisional local government finance settlement on 26 November 2008, my predecessor as Minister for Local Government, my right hon. Friend the Member for Wentworth (John Healey), said that we expected to see an average council tax increase in 2009-10 substantially below 5 per cent. He also made it clear that the Government were prepared to act against excessive increases made by any authority, including requiring them to rebill if necessary.

Three-quarters of authorities set increases below 4 per cent., almost 40 per cent. set increases below 3 per cent. and a further 23 authorities either set no increase or are reducing their bills. However, two authorities did set excessive increases this year. On 26 March, my predecessor announced to the House that the Government were “designating” Surrey and Derbyshire police authorities. He proposed maximum budget requirements for the two authorities at levels that would bring them within the capping principles that were determined by the Secretary of State for 2009-10.

In his written statement to the House on 13 May, my predecessor said that both designated authorities had challenged their proposed maximum budget requirements. He and the former Minister responsible for policing, my hon. Friend the Member for Gedling (Mr. Coaker), met both police authorities to hear their cases in person. Having carefully considered the representations made by the authorities, and having taken into account all relevant information, the Government decided to take the following action: to cancel the designation of Derbyshire police authority and to nominate it instead, with a notional budget requirement for 2009-10 that will be used in any future capping comparisons; and to proceed with the designation of Surrey police authority with a maximum budget requirement at the level proposed on 26 March—£197,206,000. The draft order therefore covers Surrey police authority only. We believe that the proposed action in the draft order, and the separate action that we are taking in respect of Derbyshire, represent a measured and proportionate response to those authorities’ excessive increases.

I am very grateful to the Minister for giving way. She just said that she regarded the action in respect of Surrey as measured and proportionate, but what evidence base was used to draw a distinction between the Derbyshire case and the Surrey case?

I shall come to the difference between the two but, briefly, Surrey was given a notional budget last year yet still introduced an excessive increase this year. Ministers listened to the representations that were made and then came to their decision. As I said, even though Surrey moved to notional budget last year, it still imposed an excessive increase.

When assessing the pros and cons of the decision, was it taken into account that saving £1.6 million would cost £1.2 million in rebilling? In my constituency, that works out to a cost per head of £4.65, but council tax payers below band F will not make any saving above that.

We will find out Surrey’s actual costs in due course. Last year, Lincolnshire police authority estimated rebilling costs at £1 million, but the actual cost was £380,000. It is true that rebilling has to be done, but that is an inevitable consequence of setting an excessive increase and being capped in-year. All authorities know that, and that the best way of avoiding rebilling is not to set an excessive increase in the first place.

Of the 15 authorities that had previously been set notional budget requirements, Surrey is the first to have set an excessive increase in the subsequent year. As I have said, it is also true that the capping powers introduced by this Government are more flexible than they were previously. Under the regime that operated before, we would have had to designate Surrey police authority last year: instead, we were able to nominate it. That is an important difference.

Even after capping, Surrey police authority will get a 2.5 per cent. grant increase from the Government. It will get a total of £5.7 million extra compared to last year, and it is also being allowed to set a band D council tax increase of 3.2 per cent. That is higher than the average increase in England of 3 per cent.

I am very grateful to the Minister for giving way again and, as always, she is being most generous. My hon. Friend the Member for Mole Valley (Sir Paul Beresford) mentioned the cost of rebilling, and the Minister referred in part to that. Was any attempt made to consult and find out the rebilling cost before a decision was taken? How can she assert that the action was proportionate if Ministers did not know what the cost of rebilling would be, compared with what might be recovered?

As I have said, any authority that is going to set an excessive increase knows that it will have to carry out in-year rebilling. It is that authority’s responsibility to take that into account when it decides to set a higher increase than anywhere else. The hon. Gentleman may feel it is right for the council tax payers of Surrey to pay an extra £1.6 million. Presumably that is his proposition. However, we believe that there is a duty on the Government to curb excessive council tax increases, particularly in difficult economic times.

We recognise the inflexibility of the system introduced by the hon. Gentleman’s Administration. We adjusted the system, and for a number of years there was no capping whatever, but we have to take a balanced view. We are trying to get the balance right, to ensure that council tax payers are protected from excessive increases, particularly during these difficult times. It is not a bolt from the blue. No authority can think, “Oh goodness me, we didn’t think about the rebilling costs.” Authorities know about the costs when they set the increase, so it is their responsibility. However, as I said, although last year Lincolnshire police authority said that rebilling would cost about £1 million, the actual figure came out at £380,000. I am sure the hon. Gentleman will agree that it is important that we see the actual costs. My right hon. and hon. Friends met the authorities and listened to their representations, but if there is the flexibility for a notional budget one year and they still set excessive increases it is important that the Government take action.

I hope not to trespass too much on the Minister’s time, but will she deal with this simple point for me? Given that she says we must look to the actual figures—she quotes the Lincolnshire example—is it not all the more important to make at least some inquiry into what Surrey’s billing costs will be? Unless the Government know the actual costs, how can they decide whether the action is proportionate and in the overall interests of council tax payers? Perhaps there is a gap in the system that should be looked into.

Perhaps the hon. Gentleman’s policy will be that whatever figure is given will be taken into account in any future response. Of course, Surrey produced an estimate when challenging the cap we proposed, and that was taken into account. I merely point out that sometimes—as in Lincolnshire last year—there can be a slight difference between the estimated costs given at the time of the challenge to the cap and the costs that actually arise.

I will mention it to the right hon. Lady if I receive any letters from band D council tax payers, particularly those who pay by 10 monthly instalments, thanking us and the Government for the reduction, which will be about 32p a month.

I am sure the hon. Gentleman will pass on any representations he receives.

As I have said, we think the response to the different authorities is proportionate. In this instance, Derbyshire has been treated the same as Surrey was last year.

It is worth remembering that two years ago—in 2007-08—the authority’s council tax precept stood at £171.27. It set an excessive 9.7 per cent. increase last year, and was designated for capping and in-year rebilling, but, as with Derbyshire this year, the designation was cancelled and instead the authority was nominated and set a notional budget requirement. In other words, the authority was allowed to keep its excessive increase in full in 2008-09, and it avoided any rebilling costs for the last financial year.

However, this year, the authority set a precept of £197.10, which is 15.1 per cent. higher than its 2007-08 precept. By contrast, the average council tax increase for England over those two years was 7 per cent. As I have said, even with in-year capping, Surrey is left with an actual precept increase of 3.2 per cent., and £5.7 million is going into policing there this year.

Out of 421 authorities, including 37 police authorities, Surrey is the only one that has set an excessive increase for two years in succession. The current economic climate makes it even more important that local authorities keep council tax under control. This Government increased Government grant for local services by 39 per cent. in real terms in the first 10 years after we took office. The 2007 comprehensive spending review provided a further £8.9 billion up to 2010-11. I urge hon. Members to support the order, because I believe that it is the right way to strike the balance, and to ensure that while authorities have extra money, excessive council tax payments do not fall on council tax payers.

I am sure that all hon. Members will want to thank the Minister for Regional Economic Development and Co-ordination for introducing the measure with her customary charm and courtesy, but I am sorry to say that her having done so does not alter the fact that the case is not terribly good. However nicely the case is put, council tax on band D properties has more than doubled in the Government’s time in office, so it is a bit rich for the Government to lecture anyone, including a police authority, on increases in expenditure, particularly as the Audit Commission has given Surrey police authority the highest rating for value for money.

My party introduced capping, and I accept that, but the world has rather moved on since. As time has gone by, it has become more and more apparent that the current system of capping is past its sell-by date, as I told the right hon. Lady’s predecessor a year ago when we debated the matter. The Surrey case very much demonstrates that. The right hon. Lady made a good deal of the proportionate nature of the response, but with respect, I point out that the evidence suggests that the response is not genuinely proportionate.

There was a Westminster Hall debate on 11 June, I think, dealing with the subject. Neither the right hon. Lady nor I was able to be present, but I know that we both read the transcript. Ten out of the 11 Surrey Members of Parliament attended; the other sent his views via one of his colleagues. The hon. Member for Chesterfield (Paul Holmes) was there, too. It was a lively debate, and every one of those Surrey Members of Parliament expressed the same view: the response was not proportionate. The figure quoted clearly then—it has never been contradicted by any Government source—was that about £1.2 million would be expended to recover £1.6 million, so all in all, the Government may get back about £400 million. That is not a proportionate response, given the background.

It is £400,000.

The hon. Gentleman is quite right; I am very grateful. The sum is so small that one could almost forget about it, in the overall scheme of things. It was also pointed out that although the Government are posing as a defender of the council tax payer, there is a certain irony, because there is not evidence of a level playing field. Under this Government, in the first eight years of the Metropolitan Police Authority’s existence, its precept was allowed nearly to quadruple, without any intervention from the Government by way of a threat of capping. It is interesting that no action was taken. Whether that had anything to do with the political complexion of the Mayor who then ran the police authority is difficult to say, but the opaque nature of the way in which the system works sometimes causes people to question whether decisions are taken on an entirely objective basis.

The treatment of the two police authorities is interesting. One wonders whether the treatment was entirely due to what I have just mentioned, or whether the Labour party hoped that Derbyshire was a county council it might just have hung on to in an election that was about to come up as the orders were being laid. The ruse did not work, of course, and I suspect that Labour will not have to worry about any shire counties being under its control for some considerable time.

That does not alter the overall picture. As hon. Members from Surrey explained very well in the debate, the situation is a consequence not of profligacy on the part of the Surrey police authority, but of unfair funding that seems to leave Surrey police—a force that faces considerable policing challenges, which were well set out in the debate by the Members representing the county—one of the worst-funded police forces in respect of the pressures that it faces. I know that my hon. Friend the Member for Mole Valley (Sir Paul Beresford) will speak in the debate, so I leave him to develop that point in more detail.

Against that background, despite the Minister’s valiant attempt to present the order in her usual reasonable way, there is a bit of cheek in the Government capping Surrey and claiming to put right a problem of their own creation, because of the way in which the capping regime has become too blunt as time has gone on, and the lack of transparency in the funding formula.

If there is an issue about the people of Surrey’s priorities in relation to the policing budgets, and about what they think is the appropriate level to expend given the pressure of policing demands on the county, the right way is to let them decide. Rather than a decision being taken on high, with the right hon. Lady or any of her successors arriving in some vice-regal capacity to rescue them, it would be much better to let the people of Surrey have a vote and decide whether the proposed precept rise is excessive.

That would be a genuinely democratic result in which people could all have faith. It would save us all having to go through the annual ritual of the debate about what is notional and what is actual—I shall not go down that route—and it would save having to go through the annual ritual of householders being somewhat bemused when they open the rebilled bills for comparatively small amounts.

There was a time when capping had to be used to constrain large increases in council tax bills that went well beyond the norm. We are getting to the stage where a comparatively small excess on the part of an authority which, on the face of it, has a history of not having received its fair share of the available pot, is being dealt with in a manifestly disproportionate way. With respect, clodhopping might be a more accurate description of how the matter is being dealt with.

As on previous occasions, we do not intend to divide the House, but we want to register the fact that the situation is probably an indication that the system is approaching its sell-by date, and that next year others may have to put in place a different system to make sure that the issues are decided by voters, not in a debate that would seem somewhat unreal to people in the county of Surrey.

I agree with much of the speech made by the hon. Member for Bromley and Chislehurst (Robert Neill), as is often the case because he speaks very reasonably on such issues. He teased the Government a little, but it is time that his party was teased as well on the topic of capping. Let us be honest. The measure was introduced by the Government whom he supported. He proposes a referendum when an above-prediction increase is proposed in an area. That is an interesting concept and I generally approve of such a method, but we have discussed the cost of a rebilling exercise, and the cost of running a referendum might be rather high as well.

Last year my hon. Friend the Member for Montgomeryshire (Lembit Öpik) spoke in the equivalent debate, making many of the same points as the hon. Member for Bromley and Chislehurst has just made and with which I concur. If a police authority, in this case, or a local authority has been put in place to represent a community, it is best placed to set priorities and to engage with and consult its community, as I know has happened in this case, to ensure that there is support for the proposed funding level. I am surprised that there are not more Surrey Members here to debate the issue, but the hon. Member for Mole Valley (Sir Paul Beresford) is in his place and has already made a significant contribution.

If the hon. Gentleman looked at the debate that took place in Westminster Hall, he would find that 10 out of the 11 Surrey Members were present. We made it quite clear where we stood, and the Government just turned a deaf ear.

I certainly appreciate that the hon. Gentleman has taken the trouble to attend and contribute to this debate.

I have contacted locally elected representatives in Surrey about the issues that are being debated locally. Their view is that, at all the local liaison forums and meetings throughout the area, people have made it absolutely clear that they are behind the police authority in protecting front-line policing. As the hon. Member for Bromley and Chislehurst said, the authority has taken steps to be as efficient as it can, as the Audit Commission has noted. The authority has some of the lowest costs and grants per head of the population. It has already looked to cut office staff, and it has made senior officers redundant, so it has done what it feels it can to be as efficient as possible.

The police authority has reached the stage where it is considering front-line policing, and local people are understandably concerned. They have taken the trouble to engage with the issue, and they have indicated their support for the authority’s decision to level a rate that is slightly higher than that which the Government feel appropriate—hence, we find ourselves where we are today.

Unfortunately, I have not had the opportunity to check the following statistic, and I am sure that the Minister will correct me if I am wrong, but one locally elected representative told me that the grant per head of population in Surrey is lower now than it was 10 years ago. That conclusion is arrived at after taking account not of inflation, but of the basic funding. It highlights the pressures on the police authority, and it shows that, by increasing the precept to that level, the authority had to take action that it did not want to take.

The views of the public are on the record, and I am sure that local newspapers and media will have followed the debate and reported it widely. The former Member for Guildford, Sue Doughty, has run a petition on the issue, and local authority members in the district, borough and county tiers to whom I have spoken feel that the police authority has made every effort to be as efficient as possible. There is no option now but to try to raise the money locally in order to protect what is an important, front-line policing service on which Surrey communities rely.

A number of issues have been raised in Westminster Hall and in another place noble Lords and baronesses questioned the Government on the topic and raised issues about the county’s proximity to London and its effect on policing issues, and the county’s transport issues. I shall not revisit all those questions, but I should say that my party clearly opposes capping and does not think it necessary. The principle should be that locally accountable people are in place to take decisions on behalf of their communities. Had the authorities completely ignored the will of the local community, gone against it and not taken steps to ensure its support, as they might have done in times gone by, the Government might have had slightly more of an argument for their actions today. However, it is clear that the people of Surrey are willing to pay the increase to protect the front-line services that they need in their communities.

The point that the hon. Member for Mole Valley made about the pittance that will be saved from most people’s council tax bills shows the arbitrariness of such action. It has been taken not in a measured way by looking at the details of the case, but in order to hold the line and send out a signal to other authorities.

I am disappointed that the hon. Member for Bromley and Chislehurst feels that his colleagues will not be able to oppose this measure; I suspect that they have aspirations for where they might be in a year or so, and they may be concerned about setting precedents. That, however, is for the future, and we will see what the electorate make of that possibility.

If the debate on localism, to which all parties have been contributing, is to have any meaning, it is crucial that we allow locally accountable bodies to speak up for their communities, deliver services and levy taxes that those communities have demonstrated they are prepared to pay. I shall listen to the rest of the debate, but I am minded to divide the House on this motion.

The Minister should understand from my record that I am in favour of tight budgets, value for money and efficiency—and proportionality as well. The most interesting thing for me about this debate is that I expected to support enthusiastically my hon. Friend the Member for Bromley and Chislehurst (Robert Neill); unusually, however, I find myself supporting many of the points made by the hon. Member for North Cornwall (Dan Rogerson), although not necessarily the theory behind them. The hon. Gentleman has certainly done a little homework—presumably, it was for the Westminster Hall debate—on the background to the situation of Surrey police.

Surrey police force and Surrey police authority are very efficient, and have had plaudits from organisations such as the Audit Commission that have looked at them. The police force receives the lowest grant per head of population of any police force. It is rather galling to hear from Ministers about increases and how much money has been put into police forces nationally and then to look at the reality for Surrey. The grant for Surrey police has decreased in real terms. In 1997, it received £96 per head of population; now, 12 years later, it receives £93 per head. [Interruption.] I am sorry that the Minister is not listening; perhaps she will read what I am saying later. The real-terms reduction in grant is 39 per cent.—a considerable clobbering for Surrey police.

This saga’s big complication, which has only just been touched on, is that the Government have made their calculations on a notional budget and hence a national council tax. In June last year, the chief executive of Surrey police authority was informed that the Secretary of State had decided to nominate the authority for capping purposes and that it would be given a notional budget. However, no constraint or capping level related to that notional budget was mentioned at the time. When, in contrast to the police authority, Surrey police force started doing its budgetary calculations, the idea of a notional budget was raised with the Government as a precautionary measure. In a reply dated 25 July 2008, Department for Communities and Local Government lawyers replied that

“there is no requirement on the Surrey police authority to calculate a notional level of Council Tax (based on the notional budget requirement) for 2008/09 and Surrey police authority will set their budget requirement and their precept for 2009/10…in the normal way”.

At the end of October, Surrey police force—the force, not the authority—was informed that if Ministers decided to use their capping powers, a notional council tax might be used. Again, there was a warning that no decisions had been made. In early November, Surrey police force—again, not the authority—sought further clarification and was told that the police authority was to be informed on the position regarding notional council tax in due course. That confirmation did not arrive with the police authority until 28 January 2009—literally within hours of the actual budget and precept being set.

The capping designation now is that Surrey police authority is faced with the ludicrous situation of rebilling all Surrey council tax payers for a minimal reduction. The squeeze on Surrey police authority’s grant and its budget ceiling means that it has had to cut staff progressively. It has calculated its manpower levels for the years 2009-10 to 2012-13. It commences, before the capping, with a reduction of 159 personnel for this year, moving to a total reduction of 373 policemen and women in 2012-13. This is before designation and rebilling take effect.

The cost of designation is a further £1.6 million cut. The cumulative effect over the same period is a further reduction of 55 policemen and women. The rebilling will cost Surrey police authority £1.2 million. It has used the rebilling authorities—the district councils—to assess this. That translates into a further reduction of 24 personnel—24 fewer policemen and women. In my area, Mole Valley, that works out at about £4.65 per bill. That means that at band D, it costs £1.47 more than the reduction: not until band F is the negative position reversed.

I hope that the Minister can visualise the huge sigh of relief in every band D household when their council tax bill drops through the door for the second time, giving them a huge annual reduction of £3.18. As most people pay in 10 monthly instalments, the reduction will be 32p a month. Most people will be confused; some will be bemused. If they are aware of the cost to their already strapped police force of the rebilling, in addition to the capping, they will be very unhappy, if not furious. Local authorities throughout Surrey will have to reset their direct debits for every council tax payer paying by those means. Many thousands of Surrey residents who pay by bankers order will have to send a new bankers order form, probably costing 20 per cent. of the total saving just in the stamp and the envelope, and more if one includes the costs to the bank of changing everything.

It is a ludicrous, disproportionate situation. Bearing in mind the tiny saving, the Department could easily set the designation to next year, but for Surrey police authority alone, Ministers have decided to place a further cut, with the expensive, unnecessary, bureaucratic rebilling. Looming in the background is the prospect of a judicial review, which will be interesting, as I think I am correct in saying that nowhere in the new legislation does the word “notional” appear in relation to capping as regards either budgets or council tax. However, that is not my decision or the Minister’s—it will be for the court.

The additional cuts to pay for this rebilling have meant a lesser, more stretched police presence in difficult circumstances that will be exaggerated by the current economic climate. The Government do not have to require a rebilling, and common sense demands that they do not.

In the course of this short debate, three issues have arisen. First, there is the concept of a notional budget and whether that has any status in law. As we have heard, that issue may be going to two judicial reviews, one relating to Surrey and one to Derbyshire. Secondly, what is an excessive budget? Who decides what an excessive budget is, and what are the criteria for deciding that there is one? Thirdly, if there is an excessive budget, who takes the decision to stop it and to punish the local body—council, fire authority, or, as in this case, police authority—that is introducing it?

We have heard about the principle of local democracy and local accountability. Over the past year or two, a big buzzword in the Conservative party and the Labour party has been localism. We hear a lot of talk about localism, but see almost no evidence of any move towards delivering it. Localism—local democratic accountability—means that the local community elects its police, fire and local government authorities and decides what is best for local people. It decides on levels of council tax, on what services to introduce or cut and on how to deliver the wishes that local people have expressed through the ballot box. That is localism, giving real power to local people, as happens in just about every other democracy in the world.

In Germany, France, Sweden, Norway, Finland, any of the 50 states of the USA or the provinces of Canada, people cannot understand the system that we operate in which 90 per cent. of taxation is brought to No. 11 Downing street, and then some of it is handed out with strings attached. Local authorities, and through them the police and fire authorities, get about 20 to 25 per cent. of their money from local council tax and the rest, with strings attached, from the central Government block grant.

The system is alien to most democracies in the world. It was alien to how we operated in this country in the 19th century, when major leaders such as Joseph Chamberlain in Birmingham pioneered the first public transport systems, gas, sewerage and all the rest. That was done by local authorities without their having to go to the Government, cap in hand, and say, “Please can we do this?”

Some of the first signs that we were abandoning that came in the 1970s. The famous Clay Cross rent rebels took action back in 1973, for example. Then in the 1980s, the Conservative Government introduced rigid rate capping. Labour opposed that in the 1980s and 1990s, but when it came to power in 1997, it continued the system. The Minister said that the Government had made it more flexible, and there is some truth in that, but they none the less continued the rigid control from the centre over locally elected bodies and local accountability. All the talk of devolution, accountability and localism is absolutely meaningless unless we give real financial power to local democratically elected people.

Who should decide whether a budget, in this case a police authority’s budget, is excessive? It should be local people. In Surrey, and in Derbyshire, which the Minister mentioned about nine times—I was counting—the police authorities got the full support of the local population through consultation groups. People said, “We think that the police in this area are so underfunded, under-strength and understaffed that we are prepared to pay a higher than normal council tax increase to support them.”

In both counties, it was a cross-party process. I know for a fact that it was in Derbyshire, and I understand from the Westminster Hall debate, in which I took part and in which, as we have heard, 10 of the 11 Surrey Members spoke, that it was in Surrey as well. It appeared from the consultations with electors’ groups and community groups that there was widespread support across all areas for setting the budget that the Government then decided was excessive.

Surrey’s budget is supported about 49 per cent. by council tax and about 51 per cent. by the Government, so local toes are being trod on very badly.

I thank the hon. Gentleman. Surrey is one of the great exceptions, as it is one of the police authorities for which as much as 50 per cent. of the money comes from local people. I remember a previous Police Minister, two or three Ministers ago, saying a couple of years ago when we debated the underfunding of Derbyshire police that one way forward was to use the Surrey example of switching the emphasis from central Government to locally elected bodies and council tax. That was about three Police Ministers ago and nothing has happened since, but if we do that, it will take us back to the principles of accountability, democracy, local devolution and localism.

If those principles mean anything, they must mean that local people make decisions through the ballot box, and their elected representatives decide on the level of council tax, local income tax or whatever taxation is in use. If people are unhappy about it because the council tax increase or in this case the police authority precept is excessive, they will decide that through the ballot box. That is what ballot boxes are about, and it is what local democracy should be about.

There is a key question that I want the Minister to answer, because we did not get an answer when I posed it in the Westminster Hall debate. When the Government use this power—I believe wrongly, because things should be decided locally—how do they decide that a budget is excessive? We have heard all the detailed statistics showing that Surrey is an efficient police authority, as the Audit Commission has stated. Derbyshire is the same. The police authority is very efficient and has made many backroom cuts in the past few years. The Government and the auditors have praised it for doing that. There is no fat to be cut. As the Government admit, every year since 2006, when they introduced a new funding formula, Derbyshire’s police budget has been underfunded by £5 million. This year, Derbyshire has increased the precept by £1.6 million to try to overcome some of that. If it is underfunded by £5 million a year and it has increased council tax by £1.6 million to offset roughly a third of the underfunding, how can the budget be excessive? If one should have £5 million more and one raises £1.6 million, one is still underfunded by £3.4 million.

According to the Government’s figures, in 2006, 2007 and 2008, Derbyshire police were grossly underfunded, but the Government will not let Derbyshire police authority, with the backing of all three political parties and community consultation throughout Derbyshire, do anything about it. That is illogical. Next year, Derbyshire could well be in the same position as Surrey. What was done to Surrey last year has been done to Derbyshire this year. The Government have said that they will not make Derbyshire rebill or cap it directly, but they will knock £1.6 million off next year’s money. Derbyshire, which has among the lowest numbers of police officers per head of population of any shire county in England, will have to lose 60 front-line police officers by next April to meet what is capping, in all but name, this year.

I repeat that I would like the Minister to answer, not so much the questions about accountability and localism, which we have debated previously, but the question that I asked in the Westminster Hall debate at the start of June. How do the Government decide what constitutes an excessive budget in the case of Surrey and of Derbyshire? If Derbyshire, on the Government’s admission, is underfunded by £5 million, how can raising £1.6 million towards that be excessive, when it makes up only about a third of the shortfall?

I recognise the concerns that hon. Members have expressed today. I emphasise that capping is not something that we do lightly. Indeed, as I explained earlier, we have introduced a much more flexible system. In some years, no action has been taken, but we need to examine the overall situation and ensure that we get the right balance between local accountability and the Government’s role in ensuring that council tax rises are not excessive. Of course, it is, first and foremost, for local authorities to set their council tax and justify it to local electors. However, we also have a duty to protect council tax payers from excessive increases.

I want briefly to comment on several points that have been made. The hon. Member for Mole Valley (Sir Paul Beresford) talked about the overall financial situation. There has been a total increase of £48.4 million of Government grant—23 per cent. in real terms—between 1997 and 2009, and an increase of £32.5 million, which is 80 per cent. in real terms, between 2001 and 2009-10. There has therefore been a big increase. Even with the cap this year, Surrey will receive £5.7 million more.

To answer the hon. Member for Chesterfield (Paul Holmes), capping principles were announced to the House on 26 March. They were: a budget requirement of 4 per cent.; a council tax of 5 per cent. Although it is obviously up to Surrey police authority to decide how to spend its budget, its figures show reserves of £9.4 million, of which £5.6 million is not earmarked. As I have said, it is up to the authority to decide how it uses that money.

If the right hon. Lady looks further behind those figures, she will realise that, as a percentage, they are below the level required by the Audit Commission.

I should also add that, because of the increases that the Government have put into local government and policing, police numbers in Surrey in September 2008 were 262 higher than in March 1997. On 30 September, Surrey had 1,882 police officers and 1,721 police support staff, which is 994 more than in 1997. I think that we have taken the right decision in this instance.

If we extrapolate the budget that results from the capping, the designation and the anticipated grant, the reality is that Surrey will lose 373 policemen and women over the next three years, and, because of the capping, the designation and the rebilling, a further 55. So, to use the Prime Minister’s approach, this is a negative increase.

I think that I have explained fully the way in which we have changed what was a rigid system so that, last year, we were able to give Surrey a notional budget, meaning that it would not have to rebill. However, it has always been made clear that the changes that were made last year would be taken into account this year. The authority ignored the warnings that it was given. As I have said, Surrey is the only authority that, having been notified of a notional budget requirement, set an excessive increase in the subsequent year. I have to say to all the hon. Members who have spoken that, having considered the case, the Government have no doubt that firm action needs to be taken.

I think that the hon. Member for Bromley and Chislehurst (Robert Neill) raised the issue of judicial review—

indicated dissent.

Perhaps it was the hon. Member for Mole Valley. I understand that this morning the judicial review application was refused on the papers. Of course there is a right to appeal—a right to request an oral hearing—but the application was refused this morning.

I emphasise again that we do not take these decisions lightly. We have to balance the issues of service provision and local accountability with ensuring that council tax payers do not face excessive council tax bills. That is why we have taken this action, and I hope that the House will support the order.

Question put.