I have to tell the House that Mr. Speaker has selected the amendment in the name of the Prime Minister.
I beg to move,
That this House notes with concern that this year’s local government finance settlement will increase average Band D council tax to over £120 a month each year despite inflation being negative; cautions that this rise will mean that council tax has more than doubled since 1997 with a third of the increase in the basic state pension being negated by council tax rises; expresses concern at the effect of the Government’s social care plans on council budgets; urges the Government to help fund councils in delivering a council tax freeze in England, as is already in operation in Scotland; and asserts that this year’s settlement will increase the domestic tax burden at a time when households are already having to restrain their spending as a result of the prolonged recession.
This is an interesting opportunity for the House, it seems to me. For once, this year we were denied something of an annual ritual. Normally—on occasion, this does not happen, but it is normal practice—the local government finance settlement is announced to a waiting world by the Minister in an oral statement in the House, so that hon. Members can ask the Minister about it. It is usually quite a lively exchange. This year, for reasons that have not yet been made apparent although I hope that they will be, the Minister chose to announce the local government finance settlement in a written statement. I am at a loss to understand why.
It might be because of great shyness on the part of the Ministers, or because, as a consequence of the recent reshuffle, they have not quite worked out who is responsible. The Minister for Regional Economic Development and Co-ordination might have been engaged in the Department for Business, Innovation and Skills on that day; or perhaps—I hope not to be uncharitable—the Government did not want the local government finance settlement to be dissected and debated in this Chamber. Always anxious to be helpful, we have used our Opposition day debate to ensure that it can be. I think it is a shame that the Government have forced us to do that, because one would have thought that something of such significance would have been debated in Government time.
This is not a technical or inconsequential matter. The local government funding settlement affects every family and every community in the country. The sums involved amount to, at a modest estimate, about £47 billion in 2010-11. The fact that the allocation was slipped out, rather than announced as it has been in previous years, can only mean, it seems to us, that the Government have something to hide.
What the Government have to hide is apparent from a reading of the settlement document. I do not pretend that it is necessarily the most exciting document that right hon. and hon. Members will have read, but it is important. I was taken by the introductory note that is helpfully supplied with it, which sums up many of the problems from which local government finance suffers. Immediately under a statement that the document is the explanatory note for the local government finance settlement, it says:
“This guide replaces the ‘Plain English Guide to the Local Government Finance Settlement’”.
It might be simply for economy of printing that a word has disappeared, but it is, unfortunately, indicative of the layer upon layer of complexity that has accrued to the local government finance settlement in recent years. I am sure that that was genuinely inadvertent, but it is not a happy start.
When one gets through to the logarithms that take up the better part of several pages, one can understand why the Government might not want too much dissection of Government funding, but when one has ploughed through that, certain things become apparent. Despite the wording of the amendments, which I shall address in due course, there is no getting away from the fact that the Government do not want a debate on Labour’s record over the past 12 years on council tax, which is a key issue in relation to this local government finance settlement. If implemented, the settlement will mean that council tax bills have more than doubled on Labour’s watch—the percentage figure is 106 per cent. If anyone wants the exact figures, the average band D payment has gone up from £688 when Labour came to office to £1,414; it has more than doubled. The Government do not really want to have a debate about that.
My right hon. Friend is absolutely right and I shall return to that point later. That switch has been commented on by a number of independent commentators who are respected academics. One has only to look at the tabulations that are set out in the report to see quite clearly that, for reasons that are not yet apparent but that I hope will be apparent after Ministers have attempted to justify the position, there has been exactly such a shift.
The debate on additional unfunded burdens is a long-running one, particularly under this Government. It is something that I recall from when I was involved in local government as a councillor, and it has got worse, not better. I shall give an example relating to this year’s settlement that has been flagged up to me by the Local Government Association.
That is an interesting point, but I doubt whether most people would agree with the hon. Lady. I note that the former Prime Minister, Mr. Blair, whom Labour Members might remember, stated in 1997 that the council tax system worked well. Unfortunately, it has been broken—perhaps beyond repair—by the policies of the current Government. On the other hand, if the hon. Lady is going to say that the alternative is a local income tax, then, if she will forgive my saying so, she has certainly got the wrong solution to the problem.
Does my hon. Friend agree that constituencies such as mine—indeed, the whole of Suffolk, Norfolk and Devon—will now, in addition to the fact that they have all lost money in recent years, be faced with the cost of local government reorganisation that they did not ask for, do not want and know will be very expensive?
If the hon. Gentlemen will give me a few moments, I shall finish this point.
The reorganisation is another example, albeit of a different kind, of an unfunded burden. It is a burden that was not sought and that will have an impact on local government finances. No provision has been made for it here, it is not desired, and it is quite extraordinary that it should be pushed through in the dying days of this Government. All I can say to my right hon. Friend is that we will try to protect the residents of those three counties. If there is a change of Government, the Conservatives will take all steps to reverse that decision, even if the present Government have had the temerity to pass it into law and even if such a change requires legislation. Anyone who has spent money on it will find that that is a guaranteed way of losing their money. I hope that the Government will not pursue that entirely ideologically driven and pointless agenda.
The right hon. Member for Wokingham (Mr. Redwood) said that there has been a shift of finance from rural to urban areas. Is the hon. Member for Bromley and Chislehurst (Robert Neill) aware that when his right hon. Friend was the Secretary of State for Wales, he sent £120 million of the block grant from Cardiff to London?
I have always attempted to be a useful student of history, but there are limits to how far back one can go. Perhaps the hon. Gentleman should reflect on this point: if, as has been demonstrated, there has been a shift away from the south-east of England, London and the midlands towards the north, and if his Government are right in saying that that shift is needs-driven, why have needs increased so much in those areas on this Government’s watch?
I shall give way again in due course, but I should like to make a little more progress first. I know that it is fairly normal for there to be a lot of interventions at the beginning of a debate, but if hon. Members will bear with me, I shall try to fit them in in an orderly fashion.
The point that the right hon. Member for Suffolk, Coastal (Mr. Gummer) made about wasted money is entirely right. The impact of the reorganisation will be a severe burden on Devon’s taxpayers. That reorganisation has been driven partly by a second reorganisation by the boundary committee for England, which is driven by internal Labour party politics rather than anything to do with the electorate. [Interruption.]
Order. Perhaps the hon. Member for Bromley and Chislehurst ought to take his own advice and get back on track.
I have heard what my hon. and learned Friend the Member for Torridge and West Devon (Mr. Cox) has said, and no doubt the House has. I shall move on to the next part of my speech.
I was just observing that there has been a shift not only of funding within England, but of burdens, particularly on to council tax payers. A marked trait under this Government has been a shift of the financial burden away from the Treasury on to the council tax payer. That has been demonstrated conclusively by the amount of local government revenue that has to be raised by council tax, as opposed to the amount that is provided by central Government. That is not just about numbers or bill amounts; it is about the real impact that that has on people and their lives. I have already observed that council tax has doubled on the Labour Government’s watch. This settlement means that band D bills will go up this year by a further £23, at a time when inflation is negative. The average bill at that level will come in at £120 a month.
It is sometimes forgotten that the poorest are usually the hardest hit by such changes. For example, the increase in council tax will eat up one third of the increase in the basic state pension. There is lots of evidence from many sources to demonstrate that the level of council tax is one of the key areas of concern for many families, because it has grown exponentially over the years.
Will the hon. Gentleman give way?
I want to take the hon. Gentleman back one more time to the question from the right hon. Member for Wokingham (Mr. Redwood) about the alleged shift from rural areas to urban ones. When I talk to Conservatives in Birmingham who are doing something wrong, their normal answer is, “Well, we just don’t get enough money.” That is an urban area, so is he suggesting that its funding should be cut?
In due course, I shall deal with the question—[Interruption.] It is very interesting that Labour Members have become so used to the politics of the one-liner that they cannot follow an argument that requires more than two paragraphs to develop. In due course, I shall set out precisely how a sensible rebalancing of the local government financing system can be achieved. I am sorry that their crib sheet is not comprehensive enough to deal with the matter.
With respect, I want to make a bit more progress before I give way again.
I think that the Government’s track record is a pretty good reason why they did not want a debate on this topic. Their amendment is full of all manner of telephone-number figures, but it bears no resemblance to the reality of the experience of local authorities or their residents. For example, I referred earlier to the amount of expenditure that has to be met from council tax. It has gone up by something like 3 per cent., from 22 per cent. to 25 per cent., on this Government’s watch. In money terms, that means that council tax payers are having to raise an extra £14.3 billion. That is a measure of how the burden has shifted away from the Treasury and on to council tax payers, and it makes the figure in the Government’s amendment, which boasts about giving an extra £8.6 billion over the period, look pretty sick. It is nowhere enough to compensate for the burden that has been shifted away from the Treasury by the Macavity approach of this Government.
I give way to the hon. Member for Erith and Thamesmead (Mr. Austin).
The hon. Gentleman referred to the Mayor of London. Is he aware that the Mayor has placed the biggest financial increase in fares on the poorest people in London? Does the hon. Gentleman recognise that Bromley, the council for the area that he represents, was the one that took the Greater London Council to court over the “Fares Fair” campaign to challenge the idea of a fair fare policy for London?
I well remember what Bromley did. It was absolutely right to do so, and I make no apology for that because that previous regime did not have a proper approach to fares—[Interruption.] The hon. Gentleman is showing us his freedom pass, and we have made it abundantly clear that that will continue to be protected. It is funded by Conservative-controlled London councils, I might add, so I will not take any lectures from anyone in the party whose previous Minister with responsibility for local government complained that local authorities were not charging enough and were not charging up to the maximum potential. I do not think that the hon. Gentleman is on very safe ground to make any more interventions of that kind, if I might respectfully say so.
The hon. Gentleman is being most generous. He is pinning an awful lot on the band D council tax level, but that is not a good measure of the impact of council tax in the UK. In my constituency of North-West Leicestershire 75 per cent. of properties are below band D, whereas 60 per cent. of the properties in Bromley, which he partly represents, are band D or above. That must alter the argument that he is making.
On inflation, council tax may have doubled since 1997, but it increased at a greater annual rate in the period when the Conservatives were in government before 1997.
At least the hon. Gentleman makes a considered intervention, unlike some others, and I have a great deal of respect for his knowledge of local government, but I must beg to differ with him. First, the band D measure is universally accepted as the intellectually and academically approved average. One only has to look at the work of Tony Travers, the well-known independent commentator, who has said that on a number of occasions. Secondly, the use of the band follows common sense, as the other bands are set as percentages in relation to band D, so band D gives the average. It is well established by all respectable public bodies—apart from those who may want to make a point of their own—that that is the best means of comparing like with like. I am sorry to have to disagree with the hon. Gentleman, but I am afraid that he is wrong on this one.
I shall make a little more progress, if I may, but I shall give way to the hon. Gentleman in a moment.
We have seen the burden that has been placed on the council tax payer. We have seen a transfer of burdens to council tax payers within local authorities, but we have also seen a shift of regulatory burdens and costs on to local authorities. The doctrine of the “unfully funded obligation” is the reality, if not the wording, of Government policy. Many local authorities will have experienced that in relation to concessionary fares, for example, for which the burden was not picked up in full. Free swimming is another example: superficially attractive on the surface but, on further examination, not fully funded.
The problem is particularly evident in this year’s local government funding settlement, which refers specifically to the availability of free personal care for adults. Free personal care is another concept worthy of debate, but the funding figures are as follows. The estimation is that it will cost £670 million in a full year: £420 million is covered by the area base grant, as set out in the funding settlement, which assumes that the remaining £250 million will be found from local government efficiencies.
What it does not say, however, is that the Government have already increased to 4 per cent. the target for the efficiencies required of local authorities. The Local Government Association has pointed that out to Ministers, so I hope that the Minister responding to the debate will say clearly whether that £250 million is part of the 4 per cent. in efficiency savings being demanded. If it is in addition to those savings, how is that to be achieved?
The document before us is silent on that. If the £250 million is in addition to the 4 per cent. savings, how do the Government reconcile that with their policy on new burdens, which suggests that there should be funding for those new burdens? We need absolute clarity on that. Despite requests since the LGA issued its statement, that clarity has not yet been received.
So, we have seen transfers of burdens across a raft of areas, but that is not the end of the problem with the settlement. I referred half in jest to the nature of the document, and the complication of it. I am glad to say that it is generally accepted that the one person in the country who understands it is in the Chamber, but he is in the Box and cannot talk to us about it. However, it really is that complex and difficult to follow and that creates the real difficulty that there is a growing lack of trust in the local government world and among ordinary residents about the reliability of the criteria on which distribution takes place. One has only to look at some of the figures in the document for individual authorities to see differences that on the face of it are not readily recognisable, or attributable to an evidence base.
I am grateful to the hon. Gentleman, who has been very generous with his time.
The hon. Gentleman is talking about trust in the Government’s figures. Does he agree that part of the problem is that the Government are not delivering to local authorities what their own funding formula indicates that they should? He is quite right to say that anger is building up around the country, and a large part of that is because authorities such as my own in Stockport are being consistently short changed, and are consistently not receiving what the Government’s own formula says that they are entitled to. Is it any wonder that there is a complete lack of confidence in the system?
The hon. Gentleman makes an entirely fair point. I have only to look at the circumstances of my outer-London borough, which has many pockets of deprivation but is on the floor again for the seventh or eighth year running. When we see that fully two thirds of all London boroughs—of any kind—have ended up on the floor, we wonder about the reliability of the calculations that gave rise to that situation.
Although the floor system worked in the past, it has stretched many local authorities to such an extent that the gearing, particularly in shire districts, places very high burdens on them. The floor for a shire district is set at 0.5 per cent. Such districts are far more dependent than most local authorities on investment income, which has now fallen to about 0.5 per cent. so as their floor funding is limited to the same figure, the gearing effect means that their council tax rise is much more significant than in any other part of the country. Shire areas are significantly disadvantaged by the operation of the formula system.
The hon. Gentleman has been talking about floors and ceilings. He will be aware that many councils near the ceiling are a long way from their targets and are already experiencing massive pressures on the provision of services. Does he have proposals to get rid of floors and ceilings, or to replace them with something entirely different? Some information would be helpful.
Actually we do. I shall come to our proposals if the hon. Lady will bear with me. I was about to turn to missed opportunities and the things that a sensible settlement could and should be doing to deal with those issues.
Having set out the inadequacies of the system and put them in a broader context, I want to make a final point before I move to the next stage of the argument—what should be in the settlement but is not. The problem is that there are deficiencies not only in the settlement but in the methodology for formula distribution, as has been mentioned. The inadequacy of the population data—a point raised frequently by Members on both sides of the House—has perverse impacts, but the system is also wrapped up in the policy of micro-management and bureaucratic control that has become characteristic of the Government. All recent attempts to suggest otherwise are belied by the facts.
Table 2, attached to the settlement document, sets out no fewer than 39 separate ring-fenced grants. The number of national indicator sets in the comprehensive area assessment regime was originally badged up as a mere 196, but the Government were forced to accept that when the sets are split—which they are obliged to do—between heads and blocks, the number is about 290. Is there any serious attempt to deal with that? No, sadly there is not.
I hoped that the settlement would take a leaf from the good work of the Local Government Association—an all-party body. Its document, “Delivering more for less”, demonstrates practical and worked-through means of saving £4.5 billion. Efficiencies could be achieved without damaging front-line activity, and the document sets out specific examples. It goes further. The LGA has come up with 13 local authorities that are prepared to act as pilots. Do I see recognition of that in the Government’s settlement? No. Do I see any movement to reflect the fact that, for example, in Leicestershire and Leicester, in a Total Place arrangement involving the city and the county—exactly the collaborative model that should be encouraged—more than 3,000 performance data sets, reports or evaluations have to be processed? Is there any reflection of the fact that the average number of documents that has to be passed through by most local area agreements runs into thousands?
The hon. Gentleman talks about efficiencies without damage to front-line services. May I refer him to Conservative-controlled Warwickshire county council, which is currently advocating the closure of seven fire stations and the sacking of 100 firefighters? Does he see that as an example of Conservative efficiency without damaging front-line services?
Warwickshire county council is consulting on those measures as options following the serving of an improvement notice from the Government. I am sure that the hon. Gentleman does not mean that it is impossible ever to find efficiency savings. If he believed that, he could not support his Government’s document, “Smarter Government”, which was published only a few days ago. The test is always to try to find sensible efficiency savings, and I point out to him that the Government have a very good example in front of them. The National Audit Office—generally recognised as an independent and reliable body—cited £2 billion in 2006 prices as the cost of administering the inspection and control regime imposed by central Government. PricewaterhouseCoopers, which is a little more conservative, put the upward reporting costs for councils—not even the administration of the regime, just upward reporting—at £1.8 million per authority. That is precisely one of the things that can and should be stripped out. Not only is it a waste of money, but it also skews the behaviour of local authorities, as we have all seen. They are sometimes almost forced to play tick the box to meet the formula requirements, reporting upwards to the Government rather than downwards to their electors, who ought to be driving priorities.
Does my hon. Friend agree that not only is the reporting burden immense and over-cumbersome, but so too is the inspection regime? I am informed that Devonshire county council has to devote almost permanent employee time solely to the inspection regime under which it labours.
My hon. and learned Friend is absolutely right. I saw that system in its early days when I was still in local government. I still talk to colleagues in local government. Inspection has become an industry in itself, and the complexity of the regime and the burden it imposes, in terms of direct costs, officer time and the shifting of priorities, is wholly disproportionate to the level of risk involved. It breaches the fundamental rule that any inspection regime should be simple, sensible and rational.
There is nothing in the settlement to deal with issues that could sensibly have been dealt with, which is a major disappointment. The Government seek to get around things by quoting figures, but as I demonstrated, the impact of their figures is not borne out or supported by experience on the ground.
Before my hon. Friend moves away from the “more for less” report, does he agree that one of the great difficulties faced at present by upper-tier authorities in particular is that they have already calculated how they can make efficiency savings and have made the hard decisions, so the imposition of further efficiency savings—for example, for social care costs—are a particularly unwelcome burden because they come out of cycle?
My hon. Friend is completely right. That is why it is a serious dereliction on the part of the Government not to have given the explanations that the LGA has been asking for. Given that the announcement came out on 26 November, it would not have been too difficult to produce the figures. Not to do so is a serious breach of the Government’s own rule on new burdens and I fear that it indicates where their heart lies—to shift the burden on to local authorities for the sake of convenience.
I shall now consider what could and should be done in the local settlement. We are all agreed about one thing—that the three-year settlement regime is sensible and one that we hope continues for the future—but it is the only thing the Government got right. The rest does not stack up.
Lack of clarity undermines the credibility of the document. It does not deal with proper reform of the local government system, which is what is actually needed. Proper reform should take a number of steps. The first, most important step that the Government should take at a time when the country is in recession is to assist council tax payers—the hard-pressed families who are already suffering. A sensible local government settlement would have put in place mechanisms to support local authorities in freezing council tax, so that council tax payers did not suffer the burden that they are suffering as the country comes out of recession. The Government are not doing that. Another one, I hope, will be in a position before long to do so.
Secondly, longer-term reform of the methodology is necessary. In this day and age, it is quite inexcusable to use population data that are so out of date, and there should be a swift move to the use of updated data. Several local authorities have made a compelling case for having been significantly disadvantaged by the situation.
Thirdly, it is necessary to bring back a measure of independence to the evidence base for the distribution criteria, and that is why my party has always proposed an independent body. I hope that others will support us. We suggested the Audit Commission, but the body could be the National Audit Office. In any case, the body should be independent and tasked with evaluating on an evidential basis—[Interruption.] The Secretary of State laughs, but it works perfectly well in Australia. It seems to work very effectively. [Interruption.] I shall come back to him and his quangos in a moment if he wants to go down that route. That system works in Australia, and it provides an evidence base. The body would be tasked with reporting to Parliament, so that this House could properly debate the distribution criteria. There would be a debate about the criteria, and it would be separate from the political decision that Ministers make about the size of the pot that will be distributed. That long-term institutional change would, if properly dealt with, restore some credibility to an unbalanced system.
I have referred to Australia being able to perform that task and this Government not being able to. I should have made the point that the council tax freeze is perfectly practical and deliverable, because it happens in Scotland. If it is good enough for Scotland, it should be good enough for England; if it is deliverable in Scotland, it should be deliverable in England. What is lacking is not the methodology, but simply the political will to do that.
There should also be significant long-term reform to encourage local authorities to grow their tax base, because that has been completely lacking. That is why the Opposition have proposed that local authorities be able to keep the proceeds of growth by keeping the council tax that new development in their area generates. It is why we have proposed that they also be able to keep the growth in national non-domestic rates—business rates—that is generated by new commercial development. That would give them a stake once more in growing their tax base. Not only have the Government failed to take up any of those ideas, they strangled at birth the local authority business growth incentives—LABGI—scheme, which although small was at least a step in the right direction. They killed off any attempt to provide an incentive. In fact, the real argument, as all the evidence makes out, is that we should go much further and allow local authorities to keep all proceeds.
The Government have failed to give local authorities the freedom to raise funding by going to the market for, for example, bond finance. The Government have failed to give them the opportunity to set their own targets, and instead imposed them from above.
Does the hon. Gentleman accept that broadening the revenue base has several risks? My local authority, Westminster, has been heavily dependent on parking income; indeed, it has the largest parking income of any authority in the country. As soon as difficulties hit the authority and parking income started to fall, we found a £20 million hole, and that has led to a large number of redundancies and cuts in services. Does he understand that such reliance on other sources of money is fraught with risk?
I am sorry, but I do not think that the hon. Lady understands the concept, because broadening the base by enabling local authorities to retain the additional national business rate would spread the risk, rather than increase their reliance on it. If we were to broaden the tax base, we would be less dependent on any individual income stream. That is the reverse of her proposition.
The hon. Gentleman started to talk about allowing local authorities to borrow. Does he agree with the prudential borrowing rules that the Government introduced? They enabled local authorities to purchase capital assets from which they are receiving income streams through rent and other uses.
I want to be helpful to the hon. Lady, and, like LABGI, that scheme was a small step in the right direction, but, unlike LABGI, it has not been killed at birth. However, the scheme to which she refers is too limited. Why do we not go down the route that most other advanced democracies have taken and introduce a proper arrangement that enables local authorities to go for bonds? If I were to follow through the logic of her argument, I should hope that she might support us.
At the end of the day, the local government finance document is less than satisfactory. It is less than satisfactory in its presentation—
I am sorry, but I have done my best. I am sure that the hon. Gentleman will get the chance to speak in the debate in due course.
The document is unsatisfactory. It reflects an unsatisfactory settlement; it reflects, therefore, a Government who lack the will to tackle the serious issues of local government finance; and, above all, it reflects a Government who do not recognise the burden that that unsatisfactory arrangement places upon ordinary families and ordinary council tax payers. I do not know which is the greater indictment: the inability to recognise the harm that is being done, or the lack of will to do something about it. If we put it together, we find, as I would have said in my previous life, that the Government are bang to rights on all counts.
I beg to move an amendment, to leave out from “House” to the end of the Question and add:
‘congratulates the Government on introducing the first ever three year settlement for local government which will have provided an additional £8.6 billion for local government over three years, and continues to build upon the 39 per cent. real terms increase in funding provided to local government over the first 10 years of this Government; welcomes the four per cent. increase proposed for next year which, given the current level of inflation, would be the 13th straight year of above inflation increases; recognises the immense help this will give to local authorities throughout the country in dealing with difficult economic circumstances resulting from the global downturn; anticipates the lowest council tax increase for 16 years; rejects the calls from Her Majesty’s Opposition to cut the Department for Communities and Local Government’s budget by over £1 billion, which would lead either to cuts in local services or an increase in council tax bills of one per cent. to pay for the missing millions; and further welcomes the Government’s Green Paper, Shaping the Future of Care Together, which sets out its vision to reform the adult care and support system in England.”
That was a very long speech. There is not a lot else to be said about it, but it was a very long speech. As my hon. Friends will have noticed, I am no Denis Healey and the hon. Member for Bromley and Chislehurst (Robert Neill) is no Geoffrey Howe, but I have a sense of how Denis Healey felt when he thought he had been savaged by a dead sheep.
I am grateful for the chance to reply to this debate. I have my notes that I prepared earlier, and they say:
“Sorry to see the Hon Member for Meriden not here to lead the debate.”
I have now to say that the hon. Member for Meriden (Mrs. Spelman) is here but is not leading the debate, and that is a surprise because the hon. Lady has, after all, been complaining that Parliament has not debated these issues.
I am sure that the right hon. Gentleman is aware of the convention, through the usual channels, that each party is notified about who will speak in the debate. We understood that the Minister for Regional Economic Development and Co-ordination would do so for the Government. That is what our Whips Office was notified of, and therefore, in keeping with the convention, I asked my hon. Friend the Member for Bromley and Chislehurst (Robert Neill), in whom I have the utmost confidence, to lead the debate.
I assure the hon. Lady that it was always my intention to lead for the Government, because she complained that Parliament has not been debating these issues. She twice applied for urgent questions, and, although it is not for me to comment, in my humble opinion I think Mr. Speaker was right to decline. Now she has had the chance to lead the debate and she has not done so.
I shall turn to the background to the debate, on which the hon. Member for Bromley and Chislehurst spent 10 minutes at the beginning of his speech. Following the low level of participation in last year’s debate, the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Stevenage (Barbara Follett), wrote on 12 November to the hon. Member for Meriden, who speaks for the Opposition, and to the hon. Member for Falmouth and Camborne (Julia Goldsworthy), who speaks for the Liberal Democrats, saying that we intended to lay a written ministerial statement. The hon. Member for Meriden did not reply, but had she answered the letter and said, “I think there should be a statement,” we would have made an oral statement. However, she did not.
The hon. Lady is not that good at correspondence. My right hon. Friend the Member for Salford (Hazel Blears), my predecessor as Secretary of State, wrote to her on 21 January, asking her to explain the proposals by the Leader of the Opposition to cut the Department’s budget, when he said that he would restrict the budget to a 1 per cent. increase in real terms. Strangely, the hon. Lady did not reply to that letter, either.
I thank the right hon. Gentleman for giving way. I must set the record straight, as I really do object to the House’s being misled. The Leader of the House said during business questions that there had been “discussions” between those on the Front Benches about not having a written ministerial statement. I said in response that I had not seen a letter from the Department regarding having only a written ministerial statement. The hon. Member for Falmouth and Camborne (Julia Goldsworthy) had not seen a letter either. However, a letter does not constitute “discussions”.
Order. May I say to those on both Front Benches that I think we have now dealt at sufficient length with how we have arrived at where we are this evening; perhaps we could get on with the topic before the House.
I am delighted to do so, Mr. Deputy Speaker, noting that we still do not know how the hon. Member for Meriden thinks that cuts should be applied to my Department’s budget this year.
The reason the settlement was not controversial last year—nor indeed, in practice, this year—is that it was a good settlement. For the first time in this spending review period, the Government set out to give local authorities the certainty of a three-year settlement. Indeed, having spent most of his speech talking about changes that should have been made to the coming year, the hon. Member for Bromley and Chislehurst ended up saying that a three-year settlement was a good idea. One cannot have a three-year settlement and then change it in the second or third year. The three-year settlement involves an £8.6 billion increase over three years—an average annual increase of 4 per cent. This Labour Government have delivered on that commitment year after year so that local government has had increased funding, reduced targets, less ring-fencing, and more influence over more resources, including for 16-to-19 education, English for speakers of other languages, and informal adult learning.
Moreover, this has not been happening just over the past few years. Over the first 10 years of this Labour Government, local government funding has increased by 39 per cent. in real terms.
Indeed I will. I notice, however, that the right hon. Gentleman did not explain why there is a such a sharp contrast between the 7 per cent. real-terms cut last time the Conservatives had their fingers on power over local government and the 39 per cent. increase in real-terms funding under this Labour Government. That difference is important.
Let me first deal with the right hon. Gentleman’s point about population, as I was going to come to that aspect.
At the end of his speech, the hon. Member for Bromley and Chislehurst welcomed a three-year settlement. Part and parcel of having a three-year settlement was not to chop and change underlying data in the course of the three years. But of course the Government have recognised the importance of population issues, particularly at times of rapid population change. That is why, just a few days ago, at the request of Ministers, the Office for National Statistics produced a consultation document suggesting how population changes could be taken into account in future. I am surprised that the hon. Gentleman apparently had no knowledge of that taking place, as it is very important. It stems directly from the fact that Ministers recognised the issue and set in train the right processes, but, quite properly, stuck to the three-year settlement as local government wanted us to do. Although some councils would gain from a change and others would lose, they wanted a three-year settlement. We have produced the evidence—or rather, the ONS has, because that is its job—and that means that in future the council tax system can be more flexible and responsive.
We believe that this settlement means that in the coming year band D council tax increases will be the lowest for 16 years. The increase at band D was 3 per cent. this year, and I see no reason why it should not be lower in the coming year. In fact, measured by average household bills, last year’s council tax increase was already the lowest ever.
Let me address some of the points made in the debate so far. The Opposition have focused on the claimed cost of band D council tax. We ourselves use band D in announcements, as I just did, but perhaps the Opposition should have recognised more publicly that most people—two thirds, in fact—pay not at band D but at bands A, B and C; only 9 per cent. of properties are in the top three bands. However, even if we do focus on band D rates, we find that Conservative councils increased council tax for this year by more than Labour councils. The average increase for band D under the Conservatives was 3.3 per cent., whereas Labour councils kept rises to 2.8 per cent. on average. I would say that to grab a headline, the Opposition have at the very least deliberately overstated their case and not presented the arguments in the way that would be true for the great majority of people.
Let us look into this further. The official Opposition recently published data that they claimed showed the council tax burden doubling, but which were the councils pushing up council tax take? Why, out of the top 50, according to the information revealed by the official Opposition, 30 were Conservative-controlled and only five were controlled by the Labour party. On average, council tax in Labour areas is lower than in Conservative areas, and we can all see why. That is why Labour Hackney has frozen council tax for four years while improving and protecting front-line services, and it is why all eight London Labour councils have promised a council tax freeze for the coming year.
Under Labour, with active support from the Government, local government has become more efficient. Today I confirmed that local councils are on track to have made more than £3 billion in savings by March 2010—savings that they have been able to put back into front-line services. It is because local government has demonstrated its ability to save and reinvest that I am confident that local government can meet its share of providing free adult social care for those in greatest need. We should not forget that in a full year, local government will receive more than £400 million in new resources—the largest transfer of resources from the NHS to local government since the NHS was formed in 1948. I think local government knows that this is an opportunity and a challenge—the challenge of showing that local government can deliver consistently good services across the country.
We believe that in the coming year local government can make the additional savings that are needed, which total less than £250 million. Obviously for future years there has not yet been a comprehensive spending review, so we do not know the overall settlement for those years. However, I believe that local government can meet that target. I also believe that local government welcomes the commitment that has been made in the current proposals to the development of adult social care in its areas.
If local government is to save and reinvest in the way that my right hon. Friend says, is it not important that at a local authority level there is absolute transparency and straightness with local populations about what is going on? Does he share my concern about Birmingham city council, where apparently thousands of pounds are being taken from local budgets, including in my own constituency—£55,000 in 2007-08, £69,000 in 2008-09 and £241,000 in 2009-10? That is apparently in order to make efficiency savings that will be reinvested, but it is the devil’s own job to find out exactly where they are being reinvested other than to finance rather dubious city council reorganisation. Does he agree that authorities such as Birmingham need to be a lot more transparent with the people they are meant to serve?
I certainly agree with my hon. Friend that local authorities need to be absolutely transparent in their budgeting and in the way that they use resources. As he will know, a few weeks ago we had occasion to raise some concerns with Birmingham city council about the use of working neighbourhoods fund money. That came to light because a local strategic partnership had published minutes showing concerns that the money was not being used. In that particular case, we had no desire to punish the people of Birmingham for their council’s actions, so when we recently announced additional working neighbourhoods fund money we included Birmingham in that. It is important that this money is used effectively on behalf of the people of that city. Similarly, if local authorities are making changes to their budgeting arrangements, they should be open and people should know exactly what is happening.
On that point about transparency, what does my right hon. Friend think about a council that made a commitment before the last local elections that there would be absolutely no increase in council tax over the coming period—one of the parties in the coalition said that it would reduce it—and yet has increased it year on year for the past three years? That is Brent council. Does he not think it a disgrace that the hon. Member for Brent, East (Sarah Teather) is not in the Chamber to defend her party?
I certainly understand my hon. Friend’s concern about promises made and broken, which nobody likes to see.
I wish to say a little about the Opposition’s figures. I believe the House will agree that every word from the hon. Member for Bromley and Chislehurst suggested or implied that councils should have had more funding from this Government. He certainly made many references to councils that he felt were not getting enough, and he made no proposals that councils should have their funding reduced, so the only conclusion I can draw is that he thinks councils should have had more money. However, as we pointed out earlier this year, the Opposition’s official policy is that my Department should have had its funding cut by £1 billion this year.
The hon. Lady shakes her head, but if she cares to dig out the letter from my predecessor—I can send her another copy—I will be pleased to receive her reply explaining what the Leader of the Opposition meant when he said that growth in my Department’s budget would be limited to 1 per cent. We have never received a reply. The implication of the Leader of the Opposition’s policy is that my Department’s funding would have been cut, not next year, not the year after but this year, by £1 billion. Compared with the current funding, including our housing pledge, Conservative policy would mean a £1.8 billion cut in its funding. We have never had an explanation of where those cuts would come or of by how much council tax would have to go up.
On the subject of budgets being cut and promises broken, can the Secretary of State explain why, despite the Government’s claim to have made a fair settlement for local government this year, many local authorities, including Stockport, which covers my constituency, are receiving less in central Government grant than the amounts indicated in the Government’s own funding formula? How can that be fair, and why are people such as my constituents still being short-changed by this Government?
The hon. Gentleman knows enough about the system to recognise that under a funding formula, at any one time some authorities are above the strict position in the formula and others below it. Because convergence is difficult and cannot be achieved overnight, there is always a process of floors and transitional arrangements. In any system that is ever devised, some people will be able to say, “This year in my authority we are away from the funding floor,” but that does not mean we should not set up the system to make progress in the right direction every year. If one looks at the variations in the formula grant for different local authorities this year, last year and the year before, one can see progress in the right direction.
No, I must make some progress, or I will speak for as long as the hon. Member for Bromley and Chislehurst, and then I will be embarrassed having made comments about the length of his remarks.
The Opposition have said that they would pay councils to have a council tax freeze, but that adds another £1.3 billion a year to promises that they cannot possibly afford to carry through. No one can really believe that there is any credibility in what they are saying. The truth is that Conservative councillors and MPs up and down the country are saying that they want more money for their area, while they are all campaigning for a Conservative Government who promise to give them less. It is time that the Opposition were open and straightforward about their plans, which are pretty bad.
On that point, I have here a publication from the Bexley Conservatives. In claiming the credits of their council, it points to two new academies built, four schools rebuilt and nine new children’s centres, all achieved by the wonderful Bexley Conservative council. How does the Secretary of State contrast that with their spending plans if we were to have the misfortune of a Conservative Government?
My hon. Friend is absolutely right. Material of that sort, financed from Belize or wherever else, is dropping through letterboxes all over the country. There is a serious point at issue, because the 39 per cent. increase in real funding for local government achieved under the Labour party has made a huge difference to the quality of local services and the development of services such as Sure Start and Building Schools for the Future. That is jeopardised by the promises of the Conservatives.
Not only have the Opposition made clear that they would cut council spending now, but they would scrap house building, because they could not match our housing pledge just when that money is helping the country through the recession. They would impose top-down cuts on front-line services, as their shadow Chief Secretary has said in two interviews, and they would abolish regional development agencies and regional economic support, a policy opposed by the CBI. Fears on that front were not lessened when the hon. Member for Meriden personally intervened last summer to try to halt economic recovery by instructing Tory councils not to co-operate with making land available for growth, housing and jobs. They would do away with all entitlements to decent public services and make the postcode lottery the defining principle of a Tory Government.
In Southampton, Conservatives say that they will privatise, not for the good of the public but for ideological reasons. In Hammersmith, they say that tenants should lose security of tenure so that they can be evicted when the council no longer thinks they need a home and says they are hard to get rid of. In Barnet, we are promised a Ryanair council—presumably one that offers only the most basic standard of service, full of extra costs and hidden charges, and which everyone has to pay twice, once in council tax and once in charges just to get a decent service. The truth is that the future of local services is bleak under the Conservatives. They say that Conservative councils show what a Conservative Government would be like, and I agree. It is a fair warning.
The proof of the pudding is in the eating. What would the Secretary of State say to a council that is a net gainer from concessionary travel and pockets the difference, depriving pensioners, refuses to give free swimming to under-16s and closes cash offices? Its deputy leader, when asked whether it had consulted, said, “Why consult when the answer would be no?” That is how much it cares. It has cut sports development officers, all the while having £22 million or £23 million in the bank—
I get the gist, but I must tell my hon. Friend that there was a streak of honesty from the Conservative leader of the council who said that it was not worth consulting if nothing was to be agreed. That is refreshing compared with what we have heard this evening, but I agree with her.
On concessionary fares, which I was going to come to later, this Government have introduced free bus travel for pensioners, which is a great breakthrough. There are two truths behind that. First, all the evidence is that the funding nationally is the right amount for the concessionary fare scheme. Secondly, it is also the case—this was acknowledged by the Department for Transport just a few weeks ago—that we needed to make some changes to the distribution of funding, because as the system came in, we could see that some areas were gainers and some were losers. That was the right thing to do. I do not believe that there would be free bus travel for pensioners under the Conservatives. Even if adjustments in the formula have been proposed for the future, that reallocation was the right thing to do.
As for a local authority that takes the benefit of that and does not plough it back in—that is a real shame. The hon. Member for Bromley and Chislehurst said that free swimming was not fully funded, but there was a deal for local authorities. Labour councils thought, “That is a good deal for our people, so we’ll have free swimming,” and Conservatives councils turned round and said, “We’re not going to do it.” There is a difference between the parties. The offer was the same to both: the Conservatives said no in place after place, and the Labour councils said yes. That is the difference.
What would the Secretary of State say to the 92-year-old lady who knocked on the door of No. 10 Downing street yesterday in tears because her wardens had been removed from her sheltered housing, and the hundreds who walked from Trafalgar square to Downing street who are also finding, in all councils around the country, a relentless cut in the social services for the disabled and the elderly, presided over by this Government, because of an unfair funding system?
Perhaps it was not, but those I saw were from Barnet. It is right that local authorities make the best use of support. Some have chosen to remove warden support and others have found other ways of providing appropriate support for local people. I would expect any local authority to make the right decisions to provide the appropriate levels of support for the elderly people whose care they have assumed.
Does the Secretary of State think that local authorities would do better to spend some of their funds on the services that have just been mentioned, rather than on unjustified and excessive salaries for many of their senior officers, who do not even treat the public with civility?
I am sure the hon. Gentleman will have been very pleased by the statement made by my right hon. Friend the Prime Minister yesterday, which echoed and added to what I said at my party’s conference. The people at the top of local government often have a lifetime of public service behind them—they are not bad people—but things have got out of hand, and we need to deal with that.
The Secretary of State mentioned a moment ago the key role of RDA’s and the threat that they are under from the Conservatives. What would be the effect on Blackpool if the Northwest Regional Development Agency were scrapped? The RDA has identified the needs of Blackpool and the need for regeneration, and it has invested in the town.
The reality is that if RDA funding and RDAs were removed, the remaining funding—funding that was not simply cut to fund inheritance tax for wealthy families—would just be distributed on a formula basis. I pay tribute to my hon. Friend who has worked so hard for her constituency. Blackpool is coping with huge economic and social changes, and changes in the tourist market, which needs concentrated, focused effort, on behalf not just of the town, but of the whole region. The problem is that there would be no mechanism for providing that without RDAs. The money would either have to come from central Government, or it would be completely dissipated. That would be a disaster, which is why so many people, including house builders, and those in the CBI and chambers of commerce, are so alarmed by the Conservatives’ irresponsible proposals.
On grant distribution, we are told that money is being taken from the south and the midlands to go somewhere else. The fact is that the two largest gainers from grant distribution were the east midlands and the south-west, hard though that is to fit with the idea that money is being taken away from the midlands or rural areas. Two of the largest increases in the formula grant of any authorities in the country were in Dorset, at 7.1 per cent., and Somerset, at 5.5 per cent. That is hardly evidence that resources are being shifted from the south or from rural areas.
The truth is that the Government work as hard as we can to produce an objective basis for formula grant. It is widely discussed and widely debatable, and I do not see why the debate should not continue, but the argument that the system has been in some way manipulated just does not stand up to the fact of where the increases in the allocations that we are discussing are going in the coming year.
I have criticised the Conservatives, but I do not rest my case on that criticism or on our record of investment and support for local government. The truth is that we place local government at the heart of meeting the challenges that face this country. The hon. Member for Bromley and Chislehurst talked of Total Place as though it was something that would come as a surprise to Government, rather than being an initiative that was launched in the Budget last year by my right hon. Friend the Chancellor for the Exchequer. The 13 pilot projects to which the hon. Gentleman referred were set up with local authorities and other public services by the Government, and they report to a ministerial Committee that I chair.
I am pleased that there are 70 or more places doing the same thing as Total Place, because it shows that we are going in the right direction and that the public services can be further improved and made more efficient if we can look at all the public service spending in one area. Yesterday’s “Smarter Government” paper set out a series of new flexibilities for local government to support that role—easier pooling of budgets, fewer targets, better organised inspections, a reduction of £100 million in the compliance costs for local authorities, single capital budgets and reducing the number of funding streams. These are developments for the future—
The hon. Gentleman may come unstuck with his cockiness about that. On this issue and on many others, the values and policies of my party are much closer to what the people of this country want. Before he gets carried away with himself, I remind him that the election is yet to be held and we are determined that what we think are the right policies for this country will win out—and my right hon. and hon. Friends agree.
Yesterday’s paper promised a transformation in the amount of data about local services, costs and quality available on the web in a form that enables the public to scrutinise, to compare and to propose better ways of running services. Money will be tight, so we back a rebirth of municipal enterprise and the expansion of trading to generate new streams of income. All this is backed up by our commitment to give councils the powers that they need to scrutinise effectively public service spending in their area.
I am pleased that we have had this debate, because it has enabled us to set out clearly that we have had another good settlement for local government. It is a settlement that will lead to the lowest council tax increases for 16 years at least, and to the protection and improvement of public services. The debate has shown the Conservatives as having no policies and no views on how to protect public services for local people, whereas the Government believe in local government, work with it and support it.
It is useful to have this debate in the absence of the Government providing us with time to discuss this year’s local government settlement. Although I was not expecting it to be so bad-tempered on the part of the Secretary of State, I did know that the hon. Member for Bromley and Chislehurst (Robert Neill) is always good value on this subject.
I am not sure that the Secretary of State’s remarks can be squared with the fact that we were not to debate this subject. He has just said that local government is at the heart of government, but his Department did not deem a debate necessary. In the debate on the settlement last year, some important points were raised. We talked about the expected average council tax increases and the delivery of efficiency savings. We still have questions outstanding about resources invested in Icelandic banks, as councils still do not know when they will get those back. We also debated the impact on councils of falling incomes from charges. All those issues are still relevant today, as are the issues that hon. Members have raised about the impact of the current formula on their local authority. I cannot see any reason why a debate this year would not have been as valid as the one a year ago. If the Government really do have local government at the heart of everything that they believe in, why did we not have this debate in Government time and why was local government not mentioned at all in the Queen’s Speech?
The hon. Lady mentions charges. Can she explain why her Liberal Democrat colleagues on Brent council raised charges for elderly care by 300 per cent. at the same time as they broke their promise not to increase the council tax? Those are the issues about charges that concern my constituents in Brent.
And they are exactly the kind of issues raised in last year’s debate about the funding formula, so I look forward to the hon. Gentleman’s contribution on how he thinks the current funding arrangements are impacting on Brent. Hon. Members would be grateful to hear about that.
I want to make some progress. The hon. Gentleman will have an opportunity to make a speech.
The Secretary of State said that we do not need to have a debate every year because we have had a three-year funding settlement. There is a consensus that long-term funding settlements are a good thing because they allow for better planning. However, the fact that we have a spending review every three years does not mean that we do not have a Budget every year. I cannot understand the logic.
To be fair, the Conservatives’ motion contains several valid observations about matters such as the increasing unaffordability of council tax and the extent of the above-inflation rises that we have seen every year for the past 10 years. The comparison with the increases in the state pension is also valid, although it was the Conservatives who removed the link with earnings, which has made the problem 10 times worse. There are also valid observations about some of the spending pressures on councils, and the motion refers to one of them—the recent announcement on social care.
Other policies, however, such as concessionary bus fares, have already impacted on local councils. Regardless of what the Secretary of State says, as one who represents an area that gets a large number of visitors every year, I know that the costs for local government are not equivalent to the amount of money received. The cost pressures within Cornwall are different as well. If he says that the policy is fully funded, he should take another look at the evidence, because, as far as I can see, that policy represents a massive additional cost for several councils, which they struggle to meet.
The same can be said of the cost of meeting swimming targets, which are a difficult burden to manage, particularly in areas that are popular tourist destinations. Many of those areas are rural areas and a long way from their targets. The Secretary of State said that some of the biggest increases are in the south-west, but I would imagine that that is because those areas are the furthest from their targets and have the greatest distance to travel to reach them. That means that they are scraping along the bottom trying to reach the per-head funding that the Government say they should receive.
I, too, represent a popular tourist destination. Is the hon. Lady aware that the Government negotiated the original formula for distributing the money for the pensioners pass with the Local Government Association? All the councils deemed it to be fair. Particular pressures have been identified in areas such as hers and mine, so the Government have produced a consultation document on redirecting money from councils making a profit to those making a loss. Does she welcome that?
I will welcome it if I hear from my council that all its additional costs will be covered, but previous experience makes its cynicism understandable.
It is not clear to me from the Conservative motion and the comments of the hon. Member for Bromley and Chislehurst what the causes of the problems are. Are they simply a consequence of Government policy, or are they fundamental problems inherent in the structure of the local government finance system created under the Conservative Administration?
As my hon. Friend the Member for Twickenham (Dr. Cable) has made clear, we are talking about a national tax of 1 per cent. of the value of properties over £2 million, which will be put in place until measures can be fully implemented to replace the system of council tax with a local income tax.
Yes, it would be an annual tax. We are quite clear that the current taxation system is unfair, but rather than simply making observations about the fact that it is unfair, we have sat down and tried to come up with a package of policies to make the whole tax system fairer, not just locally but nationally.
Essentially, what we see in the Conservative motion is some interesting observations, albeit ones that are self-evident. However, I am not sure that we have had any analysis of what the problems are or what the alternative is. We have heard a lot about Total Place and the “Deliverying more for less” document and the savings that they can deliver. As the hon. Member for Bromley and Chislehurst said, “More for Less” is a document produced with cross-party agreement, but some of the conclusions that can be drawn from it are interesting. The implications of the report are that ring-fencing needs to be reduced to help delivery and that all local public service delivery agents need to sit round the table and to have the money at that table. However, the implication of that is un-ring-fencing things that are not just part of local government finance, and I have heard nothing, either from the Conservatives or from the Government, about whether they are prepared to go that far.
The hon. Gentleman also spoke about growing the tax base. Putting that proposal in the context of my constituency, as far as I can see it means that councils will receive more money for building more expensive houses in the areas affected. However, given the current gap between income and house prices in Cornwall, all I can see is that instead of central Government targets driving probably inappropriate development in some communities, financial pressures on councils will drive forward such development. Instead of responding to housing need, we will have centrally driven targets replaced by developers’ greed. I am slightly concerned about that.
I wonder whether the hon. Lady missed the observation made by my hon. Friend the Member for Welwyn Hatfield (Grant Shapps), who speaks for our party on such matters, which was that, precisely to deal with the issue of affordability, our scheme would fund affordable homes at 125 per cent. of council tax to give an incentive for such homes.
In anticipating what my hon. Friend might say in response to what the hon. Member for Bromley and Chislehurst (Robert Neill) said about how the money raised by the incentivised scheme would go towards developing affordable housing, I thought that he had already argued that it would go to the council to be used to provide services generally, so that money will be spent twice.
I am not entirely clear what the hon. Member for Bromley and Chislehurst was saying, which further underlines the point that I am trying to make. I am not exactly clear what the Conservatives are proposing. I asked him what his plans were for floors and ceilings, given how unfair he felt the current formula was, but I am not entirely sure that I got an answer on what he would do. The implication of his comments was that councils are getting a raw deal because they are not being funded better by central Government, so presumably he is suggesting that we need better funding from central Government. That means centralising more of what local government spends, whereas I would have imagined that a genuinely localist party would be coming forward with proposals for more to be raised and spent locally.
Does my hon. Friend agree that, despite the Government introducing needs-based formula funding, too many authorities—I have mentioned Stockport already, but it is only one of many—continue to lose out in an unreasonable and unfair way? Does she further agree that the Government are now quite deliberately planning to overpay some councils and underfund others? Does she agree that that is nothing less than a monumental fiddle by the Treasury? After 12 years in government, it is about time Labour stopped cooking the books and instead put them in order.
Where I agree with my hon. Friend, and with the Conservatives, is on the need for a fundamental rethink about how the funding formula works, although that in itself will not be sufficient. If I refer to the motion to try to determine what the Conservative policy on council tax is, the only relevant thing that I can see is the part where it
“urges the Government to help fund councils in delivering a council tax freeze in England, as is already in operation in Scotland”.
That is not a policy. It looks like a tactic for a year, but it would not be sustainable year on year.
I love how the Conservatives pray in aid the council tax freeze in Scotland. I am glad to hear that they support that policy, but I wonder whether they would follow the Scottish National party minority Administration’s proposals to follow that up with a local income tax. Do the Conservatives agree with half that argument or with all of it?
I have been listening carefully to what the hon. Lady has been saying about local income tax, which her party supports. I understand that her party wishes to increase the threshold for the payment of income tax generally. Does that also apply to local income tax, and how does she propose to plug the shortfall arising from that?
I am grateful to the hon. Gentleman for showing such an interest in Liberal Democrat policy. Perhaps he is doing that because of the absence of any policy in his own party on this issue.
When I look at how the Conservatives propose to pay for that council tax freeze, I find that it would be paid for by reducing advertising and consultancy, which would involve about £700 million in year 2. I have already said that I have doubts about whether that measure would be genuinely localist, because it would increase the proportion of central Government spend in local government. The hon. Member for Bromley and Chislehurst did not say how many Conservative-controlled councils were planning to take him up on his offer. I wonder, too, whether there would be any perverse incentives for councils that wanted to benefit from additional resources. Might they have to make up the additional income that they needed to deliver services by increasing charges?
I have been listening to what the hon. Lady has said, but I have also been listening for what she has not said. The hon. Member for Hornchurch (James Brokenshire) asked her a pertinent question about her party’s policy on a local income tax. He asked whether certain people would be taken out of it. I am fairly sure that she has not yet been able to give him an answer, and I think that the House would be interested to know what her party’s policy is on that.
I must ask the hon. Gentleman to be patient, because I will come to that point all in good time. I have been on my feet for only 10 minutes, which is about a third of the time taken by the Secretary of State and only about a fifth of the time taken by the hon. Member for Bromley and Chislehurst. I will respond to that question when I turn to the alternatives that we think should be put forward, but at the moment I am dealing with the Conservatives’ motion, and their policy—or tactic, depending on which way we want to look at it. As I have said, it seems unlikely that it would provide a permanent solution, so I do not understand how it could form a programme for government.
I am also unsure about whether the Conservatives’ approach to revaluation has been made clear. Given that we have not had a revaluation for 20 years, and that the Government and the Opposition think that the council tax system is the right way to fund local government, it is logical that that system should be based on a realistic valuation of people’s properties, and that we therefore need to revalue. Unfortunately, neither party can have it both ways. They need to make it clear that a revaluation would be a consequence of staying with the existing system of taxation.
In the absence of any clear statement of Conservative policy on local government finance, either in the motion or in the remarks of the hon. Member for Bromley and Chislehurst, I have been forced to turn to other areas for evidence. Barnet council has already been mentioned, and I shall come to that later, but I have decided to start my investigation in the other place.
The most recent contribution to the debate seems to have come from Lord Hanningfield, who is also the leader of Essex county council. In an interview in The Observer—which was reported in the Western Morning News on 15 September—he talked about a policy of localising welfare benefits. He said:
“The cost of living is far higher in Essex, say, than it is in Cornwall, so people do not need the same level of benefit”.
Are we therefore going to see another tactic from the Conservatives? Are they going to use policy proposals such as these to make further cuts in services and penalise poor areas through the benefit system? They completely misunderstand that a low cost of living is not the same thing as a low-income area. I was disappointed that the hon. Member for Bromley and Chislehurst chose not to clarify that particular point.
I had a further look at some of the policies being pushed forward by Conservative-controlled councils. Perhaps the most eye-catching direction of travel seems to be from “easy Barnet”, although I am not sure whether it is best to draw the parallel with easyJet or Ryanair. At first sight, the service looks fairly cheap, but the more one delves into it, the more one finds that services that should be core to what is being purchased are suddenly defined as extras. I understand that if people want to use the toilet on Ryanair flights, they will have to pay to do so. In Barnet, it appears that some services are heading the same way. I understand that even refuse collection may no longer be viewed as a core service. What it boils down to is that people will have to pay more for a worse service, with additional charges being made through the back door. I am not entirely sure that council tax payers will welcome a council tax freeze if the money is being taken away from their other hand.
If there is a key theme running through all these Conservative ideas—I would not say that they have any policies—it is the need to cut spending. That should not be seen as an end in itself, even though we are clearly in a difficult financial situation and there is a need for spending restraint. The Conservative approach has the effect of encouraging top-slicing—shaving off all budgets across the board, which means that it is more likely to impact on front-line jobs. For most councils, the largest element of spending is wages. It is easier to cut staff numbers than to cut entire programmes, but what the Conservative Front-Bench team should be doing is clearly to identify the programmes of spending that it considers to be high and low priority.
The leader in today’s edition of The Times best summed all this up in pointing out that all the evidence points to the fact that the Conservatives want
“power rather more than”
“what to do with it”
“we still await a clear, unambiguous and compelling case for a Conservative government.”
That point could not be better summed up than by the lack of any policy content whatever in today’s Opposition day motion.
It is disappointing that there is a similar poverty of ambition in the Government’s approach, as once again it seems that talking the talk is more important than walking the walk. If we go back a few years, the Lyons report was commissioned by the Government to look at the problem of structural difficulties in our local government taxation system. What happened there was that some very limited recommendations were made, but they were then hoofed as far as possible into the long grass. We have also seen an incremental approach towards local government finance, which makes things more complicated and even less transparent than they already are.
I am drawn to reflect on the debates we had on the business rate supplement scheme. Although technically a better debate at a local level is possible, it takes place around the margins, which makes it even more difficult for businesses to understand what their business rates and any supplements are paying for, and there is little democratic engagement in what the increases will provide.
The Government’s latest offering is “Putting the Frontline First: smarter government”. Having read it, I have to say that one would never have guessed that it was written by a former management consultant—the Chief Secretary to the Treasury. The language provides some warm words, but there are also some words that send a chill down my spine. For example, some bullet points talk about letting local areas set priorities and giving them more control over resources, but if we look at the detail, we discover that letting local areas set priorities apparently means
“streamlining the national-local performance framework”.
That is obviously going to have a wonderful impact on allowing local people to determine priorities. Similarly, when it comes to local area control of resources, we suddenly find that this means:
“Enable local areas to guide the use of resources”.
I am concerned that some key powers are being reserved. It all sounds very intangible and it seems that national targets are going to be aligned with local ones rather than granting genuine control to the local level.
The fundamental point that this report and the Government’s approach miss is that we have an opportunity to re-engage people. The Government will be able to take advantage of that opportunity only if they offer—or at least talk about offering—options such as entering people who vote in a raffle for which the prize is an iPod. They think that that is what is necessary to engage people in voting.
On the question of localism, could the hon. Lady help us by clarifying one point? Who would levy the income tax proposed by the Liberal Democrats? Would it be levied by local district councils or—as was required by Liberal Democrat policy in the past—by regional assemblies?
As the hon. Gentleman would know if he were paying any attention at all, it would be levied by local government.
The key point about the time of fiscal constraint that we are entering is that it provides an opportunity. All too often, politicians assume the lowest of intentions among members of the public. They assume that no one wants to participate, and that that is due not to a lack of opportunity but to their refusal to engage. My experience has shown that people are more than willing to give up large amounts of their time to become involved in something that they think is important to their communities if it can be demonstrated that their involvement will have an impact on the outcome.
The aim of the Total Place pilots and the work achieved by the Sustainable Communities Act 2007—I was disappointed to note that neither the Secretary of State nor the Minister was able to attend the meeting that was held about that earlier this evening—is not just to provide more transparency, to make more information available online, and to allow councils to scrutinise more public spending in local areas. It is not just about a process; it is about engaging people.
What the “Smarter Government” report does not make clear, and what the Government have failed to understand, is that if tough decisions are to be made about what should be the priorities at local level, those decisions should be made, engaged with and accountable for at local level. The Total Place pilots provide a real opportunity not just to ensure that bureaucrats from a number of different areas of public service sit around a table with their cheque books, but to allow people to engage in a debate. We have not heard enough from Government about that, but it is critical, which is why I was so disappointed that there was nothing about it in the Queen’s Speech.
The Local Democracy, Economic Development and Construction Act 2009 represents another missed opportunity. Once again we were told that legislation would be all about engaging people in participation, but it ended up being about the architectural structures to which I believe the former Secretary of State has referred.
Indeed. It is entirely about turning people off politics, rather than showing them how their contribution can make a difference to the outcome.
All this makes clear to me that there are fundamental problems with the current system of local government finance, and that simply ignoring them will not make them go away. It is inherent in the current structure of local government finance that, on average, council tax will rise above the rate of inflation. It is also inherent in the system that we have a regressive council tax, because by definition it will hit hardest those on low and fixed incomes. People will feel the impact more because they are paying from net income rather than at source.
The position is made worse by the broadly 75:25 split between central Government’s contribution to local services and the amount that is raised through council tax. That gearing makes it difficult for councils to prioritise services that they consider important, and also makes it difficult for people to understand exactly what the money is being spent on. On top of all that, we have a council tax benefit system under which an incredibly high proportion of people who are entitled to benefit are still failing to claim.
All those things add up not to a need for a freeze or a pilot, but to a need for more fundamental change. I simply cannot understand why neither of the main parties is willing to face up to that. We need a change that goes beyond local government taxation. We need a whole package of reform. Yes, there is a need to replace council tax with a progressive form of taxation based on ability to pay, but that is a means to an end, not an end in itself. It is part of a process of ensuring that more is raised locally and less is raised nationally.
There are fair steps that can be taken to achieve that end. For instance, business rates could be localised, which would immediately ensure that councils raised more of what they spent at local level. We need a link with the national taxation system, which is why we have proposed a levy of 1 per cent. on each property with a value of over £2 million. We think that the priority should be making the whole tax system fairer, and that the best way to do that is to raise the income tax threshold to £10,000, which would make every person, on average, at least £700 better off. That would be a first step towards making the taxation system fairer, and it would be introduced alongside a whole series of other reforms designed to ensure that more money was raised and spent locally.
The hon. Lady mentioned the Liberal Democrat proposals for a local income tax. Can she briefly explain how it would work in respect of equalisation? More affluent areas where more people are working would obviously raise more local income tax to be able to invest in their services, but how would this work for more deprived areas with more people on benefits and lower value houses? Does the hon. Lady propose to have a central cap of some kind, or to have councils paying money into a central pot that is then redistributed?
I am pleased to learn that the hon. Lady is taking such a great interest in Liberal Democrat policy. Perhaps her party is studying it because it has yet to come up with any proposal of its own. Our position is clear: we are currently saying that the 25:75 split between local and central Government is the wrong way around. We have at no point said that 100 per cent. of all local government spending should be raised locally. Of course there will be a need for some kind of equalisation measure.
In the same way that we have an equalisation measure now. Of course, one of the biggest problems with the council tax system is that we have a benefit system whose take-up is very low. A local income tax removes the need for that at a stroke.
The hon. Lady refers to more deprived areas. One of the things that Total Place has exposed is that the more deprived an area is, the more likely it is that there will be lots of different agencies intervening to try to assist people. That results in a duplication of the administration that goes into supporting these areas and people. We need not only to look at local government spend and to tackle the problems of deprived areas, but to open up the whole area of spending that goes into supporting these groups of people.
No. I do not understand why the right hon. Gentleman does not understand that. We have never said that.
To conclude, we have a Government who fail to acknowledge that there is a problem at all. As far as they are concerned, there is no problem that cannot be sorted out by some kind of incrementalism that moves so slowly that I could almost watch my fingernails grow as the Government progress. The Conservatives may be able to identify the problem, but they do not propose any solution. Basically, the Conservative proposal is to put a different coloured label on the same tin, which has the net effect of changing a red label to a blue label. Whatever colour that label is, the product is the same, and, as far as I can see, it is certainly not a localist one, or one that will get anybody excited or engaged.
So far in this debate, we have had contributions from those on the Front Bench. May I remind colleagues that the winding-up speeches will commence at 9.40 pm and that five Back Benchers hope to catch my eye? I want to try to accommodate everybody. I am afraid that I shall have to leave Members to do the maths for themselves.
I shall try to be brief—although my heart always sinks when I hear a politician say that, because we always end up saying far more, and taking far longer, than we intended.
I rise to welcome the debate and the amount of money that Blackpool has had from this Government. We have had above-inflation increases year after year after year. I also want to talk about the additional sums of money the town has received, because of course local government gets support from central Government through other Departments, and that also needs to be taken into account in this calculation.
Let me first say a little about the changes that have taken place. I served for 12 years as a member of Lancashire county council, and I can remember the days when we had annual allocations, and, as a local authority, we could not plan. We lurched from one year to the next, not knowing what the budget would be. There was therefore no forward planning. At the end of some years we were desperately trying to spend money, whereas in other years we had totally run out. I have to say that, more often than not, we did not have the money. The hon. Member for Bromley and Chislehurst (Robert Neill) talked about social care. For seven of these years, I chaired the social services committee of Lancashire county council, and we never had enough money to deliver services.
Through the National Health Service and Community Care Act 1990, the last Conservative Government transferred responsibility for supporting people in residential care from the social security system to the social services departments of local authorities. They introduced us as gatekeepers but, at the same time, they cut back on the money. I have been in local government when, year after year we had cuts, and year after year we could not plan. Under this Labour Government, we have had year after year of above-inflation increases but, above all, we have also been given the ability to plan. We must never underestimate that and I welcome the fact that the Opposition parties acknowledge it.
Another thing that the Government have done is introduce new planning regimes—new opportunities to look regionally at the needs of an area and also to look at a micro-level in local authorities. Sadly, in years past central Government gave funding according to travel-to-work areas, and Blackpool was then in the travel-to-work area that included Wyre and parts of Fylde, two adjoining district councils that are affluent. Blackpool got precious little direct investment because it did not qualify. Now, as a local authority, Blackpool can access specific funding for the wards in the town centre where special need is identified, but it can also access funding from a regional perspective because the Northwest Regional Development Agency looks at all the areas of the north-west and targets special support on those areas. We have benefited from that re-examination of how best to target taxpayers’ money in those areas of special need.
We also get money from other sources. My right hon. Friend the Minister for Regional Economic Development and Co-ordination will remember that when she was a Transport Minister, we had long debates about the Blackpool tramline. We have the money to upgrade the tramline and for new sea defences in both Blackpool and Cleveleys, where the money has come not only for sea defence but for beautiful new promenades that are improving the visitor attraction as well as the lives of our residents. We have had money spent on the schools and hospitals, but we have also recently had an allocation of £415,000 from the working neighbourhoods fund, which is helping the people of Blackpool who are unemployed and helping the local authority to get more people into work. We have had money from the Department for Culture, Media and Sport for the Sea Change programme, so Blackpool has had £4 million to help to do up our wonderful new promenade. Cleveleys has had the same, as has Fleetwood, in the top end of my constituency. Lots of money has been going into local government and we have had investment in our play areas.
I want to echo a point that was made in an intervention. My local Conservative councillors are not backwards in coming forwards to claim credit for that spending and to be photographed in new playgrounds, new schools and our Sure Start children’s centres. All this money comes from central Government and we here need to ensure that people understand that. It is that investment that has so improved the lives of my constituents. It goes into local government and is spent on their behalf and it comes from a variety of different Departments. I am hugely proud of the changes that have taken place. In my constituency and in that of my neighbour, my hon. Friend the Member for Blackpool, South (Mr. Marsden), who is here in the Chamber, we have seen those improvements.
Finally, let me make a brief point about prudential borrowing. When I was a councillor, not only was that not available but we could not pool budgets. We could not work with other local authorities, with health authorities or with anybody. Now, local authorities have a chance—especially through prudential borrowing—to come up with exciting initiatives.
Blackpool council wants to buy back, to buy and to bring into local control Blackpool tower, the Winter gardens, which last night hosted the royal variety performance—and an excellent show it was—the golden mile and Tussauds. It can do that only if it gets support from central Government, if it is allowed to carry out prudential borrowing to raise money and if it gets European funding. Local government works best if it works in partnership with central Government and if central Government acknowledges areas of need and delivers. That is what this Government have been doing with local authorities of different persuasions. Long may this Government continue in power so that we do not go back to days such as those when I was in local government, when we never had the money to deliver the services that people need.
I rise to defend myself against the strange charge from the Labour Benches that some years ago, when I was the Secretary of State for Wales, I sent back £120 million from the Treasury. I do not understand why, a few days after Labour issued the “Smarter Government” document, it should so strongly object to a Minister having practised smarter government some years ago. If only Labour had practised it in the past 12 years, we would not be facing the financial Armageddon that we currently face. That £120 million was not money that local government authorities needed, because they had had a full settlement. It was savings from changes regarding inefficiency, over-management and too much bureaucracy in the Wales Office.
Those savings were made by putting a freeze on staff and by stripping out back-office and overhead operations that we did not need. Of course, that money should have gone back to the Treasury because it was not money that we held. Even that Government were borrowing a bit, although we did not need to borrow as much. Surely Labour Members should welcome the fact that there was a pioneer of their smarter government. If only we had had their smarter government for the past 12 years, and if only we had had more for less, our economy would now be stronger and we would be in a better position. Instead, we have had 12 years of waste, incompetence, intervention, overriding local decision making, too much bureaucracy and inspection, and too many circulars. We have had ordeal by circular and ordeal by command and billions down the drain, and we have not been given better services.
Would the right hon. Gentleman describe his actions, when he was the Secretary of State for Wales, as the “Smarter Government” document would, by saying that he was aligning the
“different sector-specific performance management frameworks across key local agencies”?
No; I always try to speak in English. I think that that was another criticism of me at the time, but it is a good tip for politicians: they should not speak in jargon. In this place, they should always speak in English, which I believe is the preferred language of the Hansard reporters.
We meet today to debate, at last, an important settlement at a time of financial crisis. It seems that we are never allowed time to debate really big sums of money. We have had no debate on the £280 billion of guarantees of bad and toxic debts that have recently been announced, £170 billion of which was lent overseas in relation to things that make no difference to the jobs and prosperity of our country. The Government were trying to get away with a £47 billion expenditure block here with absolutely no debate, so I am grateful that my right hon. and hon. Friends on the Front Bench think that this issue is worth debating. The Government’s excuse, apart from lost letters, was that we do not need to debate the settlement every year because it is a three-year settlement. Of course we need to review the budget every year and consider the detail of the settlement every year, because it is fixed every year. It is a cop-out for the Government to say that we do not need to scrutinise such spending.
No, I do not find that strange, as there are many more Labour MPs because of the unfortunate decisions of the electorate at the last election, but we hope that they might think again in the light of what has happened in the past few years.
I have very little time left. The important question to ask is why, given that the Government have put a lot more money into local government, everyone is so unhappy. Councils are unhappy because they do not feel they have the money they need for all the requirements and inspections placed on them. The electors clearly are not happy because, as we have heard from Conservative Front Benchers, despite all that money going in, council tax has more than doubled during the Labour years.
I am not one who thinks that more money in total ought to be voted for this block of expenditure. I think that local government has to do more for less, just as central Government have to, but there is a simple solution that the Government ought to adopt. They ought to get out of the way. They should stop making all those demands on local government for information and inspection, and they should understand that we want local government delivered by local councillors and a limited number of offices. We do not want local councils to have to employ a very large number of very expensive people to fill in the forms, answer the inspections, deal with central Government or interpret all the information. We do not need 39 different special grants for local government: we want to get back to having a single block grant, over which councils have discretion. We do not wish to have this mighty inspection system, with its stars and black marks, that preoccupies so many very senior officers at enormous expense. We could probably halve the number of senior officers in a well run local authority if we stripped out all the demands from central and regional government.
We do not want regional government at all. We should trust local government, give it more power and take the powers away from the regions, which are unelected, unaccountable and much disliked in most parts of England. The Government have spent 12 years trying to get people to love their regions, but they do not and will not. The regions in England are artificial, and we do not want them. They are the layer of government that we wish to strip away.
That would save us billions and start to solve the conundrum of why, although the Government have tipped so much money in, we are getting so little out, why so many voters do not think that the services are good enough, and why the councillors do not think that there is enough money to make the services better.
No, I am saying that most planning should be done by the local community, with their representatives. The big items should be national items. If the aim was to drive a motorway across the country—and I do not think people want that at the moment—it should be a decision for national Government, defended and sorted out in the normal democratic way. If the wish was to build a new housing estate, that should be determined by the local council.
I think that my Front-Bench team are working on some very good ideas in this regard. A lot of councils do not want development in their area, sometimes for good reasons. If they were allowed to keep some of the benefits of a new development, and if there were a pot of money to provide compensation for people in the local area who would otherwise be adversely affected by the development, we might have the answer to the problem of achieving localism in action. There would still be development in the country, but it would be development that local communities and neighbours approved of or supported. People would not feel that developments were being rained down on them from the centre.
I would love to, but the time constraints on us all mean that I have to sit down very shortly.
I want to mention briefly the extraordinary position that the Liberal Democrats have got themselves into yet again in this very short debate. We learn that they want to place a 1 per cent. tax on houses, although there seemed to be a row between their Front-Bench spokesmen about the value of the houses involved.
The more vehement the denials, the bigger we know the row to be. I am sure that the problem relates to certain constituencies and the discovery, perhaps by the spokesman who came up with the lower value, that an awful lot of the houses would be in his constituency. We have learned tonight that the Liberal Democrats have no idea what they are going to do about the fact that, under the scheme, a few places in the country would have lots of money, but quite a lot of others would have no money at all. They do not know how they would redistribute it, but they said that the money would be raised in the ratio 75 local to 25 national, so most of the places without any expensive houses clearly would not get any money.
Then we heard that the Liberal Democrats want to introduce a local income tax. However, they have no idea what its threshold is, and we do not know whether there would be a higher rate and a lower rate. We do not know how progressive it would be. We have no idea how much money would be taken off the City of London and Westminster, where incomes tend to be quite high, and how much of it would be sent around the country.
The proposal is absolutely clueless but of course completely irrelevant, because parties that think they might win the election know that the public will never fall for a local income tax. National income tax is already quite high enough and there is no scope for doing what the Liberal Democrats propose.
When I was given the job of putting the council tax in place—which I did not want—I made only two claims for it. One was that it would be a little less unpopular than the community charge, and the other was that it would last a bit longer than the community charge. I am delighted to say that both things came true. I never thought it was very good. All taxes are unpopular and they all have their defects, but the fact that council tax is still around after 12 years of Labour Government shows that both main parties have come to the conclusion that it is the least bad option.
It is now up to us and local government to live within the amount the tax provides, which can be done only by smarter government, although that will need a change of Government. I like the phrase “smarter government”. We need to do more for less and the sooner we have a Government who can help councils do that by stripping away the on-costs and bureaucracy, the better it will be.
I have come to regard it as a painful duty to speak in debates such as this and to bring a report from the front line of Conservative local government in Hammersmith and Fulham—the Leader of the Opposition’s favourite council. We now hear from the Conservative party chairman that Conservative councils demonstrate how the Conservatives will run the country. After seeing how the financial settlement was treated in Hammersmith and Fulham, I feel that we need a post-watershed warning about violent and disturbing images. Three principles govern what happens in that authority: increasing charges, cutting services and disposing of assets.
In the last three years, charges for meals on wheels have been increased by 60 per cent. There is now a £15 million surplus in the parking account. Adult education fees, particularly for people of pension age, have shot up, because the council falsely claims that it is age discrimination to give concessions to the over-60s, despite the fact that many other London councils do so. The council even charged for recycling, and then claimed that the service was unpopular and cut it altogether.
Most significant, having given a clear, one-line promise in their manifesto not to introduce charges for home care, within six months of election the Conservatives introduced charges of £12.40 an hour for home helps. They have substantially cut the home care and resident warden services. I am sorry that the hon. and learned Member for Torridge and West Devon (Mr. Cox), who was complaining about resident warden services, is no longer in the Chamber, because such decisions are for local government. The Opposition cannot say that local government should have the power to make local decisions and then blame central Government for decisions taken locally. The proudest boast of the leader of my Conservative council is that he has cut 1,000 jobs in three years—1,000 jobs in the middle of a recession—not bureaucrats, but home helps, wardens and other people who provide front-line public services.
The voluntary sector has been cut massively, particularly advice services and services for black and minority ethnic groups. The schools budget has been cut to the bare minimum, while schools have been loaded with additional central costs. So far, so typical.
The next phase of development is asset sales, including youth clubs, community buildings and 13 hostels for the homeless—65 self-contained units of accommodation sold off at public auction, which means that the price received by the council is about 20 per cent. below market value. Sixty-five families who were living in council hostels at a cost to the taxpayer of between £100 and £200 a week will now be in private rented accommodation at a cost of between £500 and £600 a week, but that does not matter to a Conservative council because the income tax payer rather than the council tax payer will pick up the increased bill.
Schools have been told specifically to sell their sites to private education institutions. One has to ask where it is all leading. I shall hold that thought for a moment while I fill in one or two other parts of the canvas in the little time I have for my speech.
I echo the words of my hon. Friend the Member for Erith and Thamesmead (John Austin) in relation to the chutzpah of Conservative councils in claiming credit for central Government initiatives. If Members drive around Hammersmith Broadway, they will see banners hanging from the lamp posts that North Korea would have been ashamed to put up, with claims about the £200 million the council has invested in secondary schools, the £200 million it has invested in decent homes or the 13 Sure Start centres it has opened. The council has taken over a local primary care trust and now even claims credit for investment in the NHS as well.
I am so pleased that the right hon. Gentleman has made that point. If he had been listening, he would have heard that about £63 million has been raised through increased charges for services and cuts in services. The service user and the taxpayer get a bad deal out of the average 50p a week saving, every year, on council tax. I shall put the question back to the right hon. Gentleman. If he is such a fan of the Conservative council and its leader, who is head of the Tory party’s innovation unit, he will agree, I am sure, with the comment that the leader made at a public seminar 10 days ago, when he said:
“My mates are all in the Shadow Cabinet, waiting to get those”—
“boxes, being terribly excited. I went to university with them—they haven’t run a piss up in a brewery.”
Actually, the right hon. Gentleman may agree with the comment about—
Absolutely, Madam Deputy Speaker. I should have said, “an occasion when a lot of alcohol is drunk in a brewery.” However, my hon. Friend the Member for Slough (Fiona Mactaggart) had that argument with a Deputy Speaker, and I believe that excretory terms are permissible, provided that they are in context, as I think the council leader intended that comment to be. It is one that I am sure we all echo.
I do not think that the right hon. Member for Wokingham (Mr. Redwood) made a good point, but one would not know that if one lived in Hammersmith. I wonder what he thinks of this: more than £1 million of taxpayers’ money is spent simply on propaganda, and that ranges from poster vans driving around the borough, advertising how good the council is, to advertising on stations, in phone boxes and on lamp post banners, and a fortnightly newspaper that costs about £750,000 to run.
I seem to remember that one of the cuts, as the hon. Gentleman calls them, that the council has made is to include advertising in that newspaper so that it has a nil cost to the taxpayer—unlike its predecessor publication, which was very expensive for the Labour council.
Sadly, the right hon. Gentleman is partially informed again. There is advertising, and that is principally from the public sector—from the council and other public institutions. However, in addition to that cost, which covers printing, there are on-costs and the cost of staffing, premises and so forth. The total cost before advertising is about £750,000; the net cost is still about £350,000. Again, I put the question to him. Is that particularly good value?
Is it particularly good value that both chief executives of the local authorities in my constituency are paid more than the Prime Minister? Is it particularly good value that, while boasting of a pay freeze for senior officers this year, those chief executives gave themselves up to a 9 per cent. increase last year? Is it particularly good value that the leader of one council attempted to give himself a 14 per cent. pay rise for doing the job that he was already doing? We in Hammersmith do not yet, however, have what Kensington and Chelsea has, which is the first £100,000 a year councillor, topping up his salary with money from London councils and, with great irony, the Audit Commission, too.
In the moment or so that I have left, I shall return to the question that I posed earlier. Where does a local authority go when it has raised charges for vulnerable people, in particular, cut services for people in straitened circumstances and sold off the assets—the schools and the community centres that people use? The answer, particularly in an area of deprivation such as Shepherd’s Bush, is quite simple: the local authority gets rid of the people themselves. As my right hon. Friend the Secretary of State suggested earlier, that is exactly what is intended when 3,500 social homes are due for demolition in the borough and there is no guarantee that the residents will receive like-for-like or replacement homes.
The tenants of the first of those estates earmarked for demolition, West Kensington and Gibbs Green, had been told that they live in “not decent neighbourhoods”. However, I am very proud to say that yesterday evening they served on the council leader a notice to quit, requiring him under the Labour Government’s legislation to transfer ownership of their estate to them. They are going nowhere; they are staying in the place that has been their home for many years; and they hope for the return of a Labour council, which will restore to them some of the services that have been cut.
In the meantime, the council’s plans range at one extreme, from the simple slash-and-burn cuts in services that we see from many other Tory councils, to the other extreme, which we have not seen in west London for 20 years, since the days of Shirley Porter, of gerrymandering and of social engineering. They are examples of exactly what the Conservative party says when it states, “This demonstrates how we will run the country.” I welcome any hon. Member from any party to come to Hammersmith and see exactly how that would be done.
It is a pleasure to be able to take part in tonight’s debate on local government funding. Several hon. Members have made clear the pressures that are placed on many local authorities in delivering value for their areas and ensuring that council tax increases are kept to the absolute minimum. That is why I support the policies that have been put forward by Conservative Members to try to ensure that there is a council tax freeze in relation to our own councils.
I want to deal with some general matters as regards funding for local authorities and, in particular, to localise the issue in relation to my own local authority—the London borough of Havering. There has been some debate about population data and methodology. I want to highlight the issue of the elderly populations contained within many local authority areas and the impact that that has on projections. That applies particularly to my area, which has the largest number of older residents of any London borough. In the years between now and 2023, we expect there to be an increase of some 9,300 in the number of people aged over 65, with a particularly marked rise in the number of those aged over 85. We need to think about what that will mean in terms of the pressures on social care and the ability of council budgets to cope with those demands.
Havering, as a nice leafy green borough, is seen as having lots of owner-occupied homes and historically low levels of unemployment, diversity and deprivation, although pockets of deprivation do exist. That apparent prosperity masks the increasing pressures of dealing with a settled and ageing population. Several residents live in mortgage-free homes—the asset-rich, cash-poor population—but their apparent comfort masks an increasing need for social care support. With an ageing population and dwindling resources, the pressures on services will grow, and there does not appear to be within the local government finance formula a proper recognition and acknowledgement of that issue and how it will increase in importance over time as the demand for social services and support services for the elderly continues to increase.
Talking about the pressures on local councils is not simply about the methodology arguments on how the funding is allocated, but about how the Government have changed their mind on certain key issues and the impact that that is having on local councils in dealing with it. We have had the discussion about how this is all about three-year funding settlements, which implies that councils should be given greater certainty and an ability to plan their budgets and to know what they can do for the benefit of their local residents. Yet two recent examples have thrown a very big spanner in the works for London councils, in particular, in being able to ensure that they can plan their budgets effectively.
The first example concerns the Government’s change of approach on the decent homes standard. It was said that if an arm’s length management organisation achieved two-star status, funding would flow through to it and the benefits would accrue to local residents, who would get the new windows, bathrooms and kitchens that many of them had been patiently waiting for. However, in Havering, when our ALMO, Homes in Havering, attained two-star status, that funding did not come with it because the Government had changed the rules and requirements and decided to reallocate the money under their Building Britain’s Future programme. Our ALMO had been waiting patiently to deliver the important changes whereby local residents could see the significant improvements that they had been promised, but it got a slap in the face instead of the funding that it had been expecting. That means that Havering council, in seeking to meet those aspirations and demands, is having to try to identify funding in order to deliver sooner the benefits that were expected to accrue. It is having to deal with the problems imposed on it by being promised that money and then finding out that it had been reallocated even though the planning and budgeting had been done on the basis that it would be available.
Councillor Michael Armstrong of Havering council recently said
“we will fight tooth and nail to reverse the Government’s U-turn and secure the funding we were promised. Homes in Havering has achieved the standard that the Government set and ministers must now honour their side of the deal.”
I hope that the Minister will provide some assurance about what is happening to the decent homes money, because my residents in Havering were promised something that has now been taken away from them.
The second example is the change in funding for the freedom pass. London was set to receive about £58 million in 2010-11 and councils had planned on that basis, but we now discover that they have not got that money, and the Department for Transport consultation proposes that about £30 million should be clawed back.
My hon. Friend from my neighbouring constituency will know that the increase in cash for Havering council this year is about £750,000, but £500,000 of that will be used up on the extra costs of safeguarding children, and the council now has to find another £1 million to pay for the change in special grant for the freedom pass, which all our elderly residents value so highly.
I agree entirely. I regard the freedom pass as extremely important for the over-60s, and the Government tinker with it at their peril. My hon. Friend is right that Havering is having to find an extra £1 million, and we may hear from the hon. Member for Croydon, Central (Mr. Pelling) that Croydon has a black hole in its budget. I know that Bexley will have to find another £1 million as a consequence of the very late change that has taken place. It is all very well telling councils to find efficiency savings and plan on a certain basis, but if they suddenly have to find an extra £1 million from their coffers at the last moment, it places them in an extraordinarily difficult situation.
It is telling that we have been told tonight that there is a consultation taking place and the Government are consulting us on whether they should press ahead with the changes. I listened carefully to what the Secretary of State said, and it struck me that he had a closed mind, that no consultation is taking place and that the Government have decided that that funding will not now be put in place. They want councils to take the lead and the responsibility for their residents, but the Government have responsibilities as well. Saying to councils at the last moment, “We promised you the money, it’s not there, you’ve got to deal with that now”, hardly makes it easy for councils to ensure that they deliver the value for money and council tax freezes that we want. The Government are reneging on the deal at the last minute and placing those councils in that extremely difficult situation.
We had a fairly acerbic start to the debate, with discussions about exchanges of correspondence or otherwise, which I felt was beneath the dignity of such a good Cabinet Minister as the Secretary of State. I would prefer to emphasise the importance of Front Benchers regarding themselves as accountable to the whole House, not to each other.
I start with some thanks, first to Her Majesty’s Opposition for securing the debate so that we have the opportunity to represent our constituents’ concerns, as the hon. Member for Hornchurch (James Brokenshire) said. I also thank the Government for the significant support that they have given Croydon in capital spending, promises of extra spending on schools, local enterprise growth initiative money and funding for extra social housing. I particularly wish to mention Councillor Dudley Mead of Croydon council, who takes a positive view of the importance of providing extra social housing, working in conjunction with the Greater London authority and the Government. I thank the Government also for the letter that I recently received about the money to support town centres that has come to Croydon, although the £50,000 provided may well be too little, bearing in mind that just in George street 17 properties are out to let.
The hon. Member for Bromley and Chislehurst (Robert Neill) was challenged on the relative bandings of the properties in his constituency and how highly they are rated. The key question would have been how much residents in south London pay in council tax. In many ways, the existence of London government inevitably means that a great deal of money is transferred away from south London to other priorities in both central and east London. There is very great deal of concern within the Croydon business community that the supplementary rate that was previously passed will mean that money will be taken away from businesses at a difficult time to support major schemes elsewhere in the capital.
I apologise for wanting to put Croydon first in this debate, but I should like to draw some issues to the attention of those on both Front Benches in looking forward to what will happen in next year’s review of local government expenditure, which will perhaps cover a three-year period. The London borough of Croydon has long suffered from how the area cost adjustment is calculated within London. Croydon is regarded as an east London authority, whereas neighbouring areas such as Sutton are regarded as being in west London, where costs are presumed to be higher. That is not entirely logical. When Croydon works on a strategic partnership basis on contracts with, say, Lambeth, it will pay the same rate for work done on its highways, but it will nevertheless be rewarded, in terms of grant, at a lower rate than Lambeth.
Croydon is facing particular challenges because of the number of individuals who, because of their migration status, have no recourse to public funds. The local authority quite rightly estimates that that costs £2.5 million a year, and that a further £2.5 million will fall upon council tax payers as a result of the closure of the walk-in asylum centre in Liverpool and the transfer of some of those applicants to Croydon. I warn the Government that that is very unpopular with the residents of Croydon. When the Home Secretary came to his home town to speak to the local Labour party, he was interviewed by the Croydon Advertiser and said that no money would be provided in compensation. That had a very deleterious effect on support for the Labour party in Croydon.
The hon. Member for Hornchurch mentioned the important matter of the freedom pass. The cost in his borough will be £1 million, but in Croydon the cost will be £1.5 million. I am sure we are all determined to ensure that such financial issues do not stop us defending the provision of the freedom pass within London.
It is not as though Croydon has been slow in trying to be efficient. Sixty million pounds of efficiency savings have been found in recent years. The local council outperforms the 4 per cent. target for efficiency savings that the Government expect and seeks savings of 5 per cent., partly by working through strategic partnerships. However, with further legislation such as the Personal Care at Home Bill before the House, the reality is that the council will struggle to find such efficiency savings. It may well be difficult for Croydon to deal with the prospect of the introduction of a cap at 3 per cent. Unlike London Labour authorities, Croydon has been unable to match those zero per cent. approaches towards setting budgets. Indeed, it has been disappointing that it has had to set increases at 4 per cent. a year.
There are ways in which Croydon can make savings. It is more difficult to make the case for Croydon when a very significant loan of £145 million has been secured to build a new town hall. That cannot be a priority when the town has other important and pressing needs. I would have thought it better for Croydon to consider becoming a tenant in a development at east Croydon, on the Croydon Gateway site. That approach would have a multiplier effect in terms of getting that development going and giving others the confidence to invest in Croydon’s property market. It also needs to be borne in mind that councillors receive £6 million in allowances over the four-year period that they are in office. Some transfer of that money to improve policing, for example, would be more effective.
Finally, please remember that Croydon is facing dynamic population change, partly because we are the headquarters for the migration service in this country. Please also remember that many of the jobs that Croydon people enjoyed were in the City, and not necessarily at the high rates of pay talked about in the media. Croydon is dependent on public sector jobs—29 per cent. of our jobs are in the public sector. The prospect of jobs being transferred outside the south-east could prove a particular challenge for Croydon and increase the need for effective local government financial support in the future.
This has been an interesting and important debate. The announcement of the local government finance settlement is an opportunity for Ministers to outline their plans for the future of local government funding. How much council tax people have to pay and, critically, how much money their council will get to enable it to provide local facilities and services are of huge relevance to many people’s everyday lives. The debate has never been more important, given the current economic situation, but in spite of that the only reason we have had this debate today is that the Opposition have made time for it. We have used an Opposition day to force the Government to debate a fundamentally important topic for local communities across the country. Parliament is moving—we hope—towards more accountability and transparency. Ministers’ attempts to stifle debate on the local government finance settlement fly in the face of that progress.
Today’s debate showed starkly the choice that the British electorate face. They can have either councils that are accountable to them or councils that are accountable to Ministers in Whitehall, who think that local communities need to be spoon-fed with central Government diktat and priorities. We have heard that repeatedly in some interesting contributions to today’s debate. I do not have time to mention all of them, but the hon. Member for Blackpool, North and Fleetwood (Mrs. Humble) talked about how her council is making the most of the powers that it has. I note that it is a Conservative council, but I am sure that she is working with it to help it to make the most of its opportunities.
I have little time, so I will not give way. I apologise to the hon. Gentleman.
We also heard from my right hon. Friend the Member for Wokingham (Mr. Redwood), who talked about how his drive for efficiencies when he was in office has, in many respects, set the tone for what can be achieved. He expressed real concern about the waste and incompetence that we have seen in recent years.
We never fail on these occasions to hear from the hon. Member for Ealing, Acton and Shepherd’s Bush (Mr. Slaughter). I nearly renamed him the hon. Member for Shepherd’s Bush, because Ealing and Acton never seem to get a look in. Residents in that area have an MP who does not talk about their council much. He did talk about residents getting a bad deal from Hammersmith and Fulham council, but it must have been 10 times worse when his party was running the council.
We also heard an important contribution from my hon. Friend the Member for Hornchurch (James Brokenshire) who sensitively and carefully pointed out the pressures on care budgets for the elderly, many arising from demographic changes that will be hard to deal with, however hard we try. He was right to raise his concerns about the cuts to the freedom pass, which enables many elderly people across London to remain independent in their day-to-day lives, which is critical.
In the speech we just heard, the hon. Member for Croydon, Central (Mr. Pelling) rightly made the case for his constituents. That is an example of why having an oral statement rather than a written one is so important to Members’ ability to do their job and represent their communities.
The bottom line is that, however Ministers dress it up, council tax has doubled under this Government and is set to rise further—way above the current rate of inflation. As we have heard, next year, residents in many parts of the country can expect rises of 3 per cent.—well above inflation—which will push up many people’s council tax to £1,500 a year. In a recession on the scale of the present one, that is unaffordable for many people.
Why are councils under so much pressure? It is partly because they have extra burdens. A raft of initiatives has been pushed down on them by Ministers. So many initiatives have been inflicted on them that the proportion of individual, area and specific grants that are ring-fenced has risen from about 4 per cent. of the grant in 1997 to 15 per cent. now. Councils are less and less able to deliver flexible services for their residents. In fact, the Local Government Association worked out that if councils had more flexibility, they could save £900 million a year. That is surely worth having to reinvest in better local services. The bottom line is that we need our councils to set their priorities locally and deliver them locally, but they cannot do that under the current Government.
My hon. Friend makes an excellent point. We did not get much chance to discuss today the fact that debate on local government financing in this Chamber often focuses on how to divide up the pie, when it should be more about how we can help and encourage local councils to increase the amount of investment available to them locally. That is precisely why we have talked not only about our council tax freeze policy, under which we will work in partnership with local councils to help them to keep council tax down, but about how we will help councils willing to develop their communities through a council tax matching policy, which will help to alleviate residents’ concerns about pressures on infrastructure when they develop housing in their areas, for example.
We will also encourage councils to develop local economies, jobs, businesses and extra facilities in their communities through business improvement grants. That means that we will incentivise councils’ growing their business rates by allowing them to keep any increases above the inflationary rise set in Whitehall.
That is certainly not a point of order for the Chair and is simply wasting time at this point in the evening.
Thank you, Mr. Deputy Speaker.
I was about to say that the other big cost pressure that many councils have had to put up with has been the huge cost and waste involved in inspections. The Lyons inquiry estimated that about £2 billion is spent on the monitoring process. We have to reduce that. That money should be going into improving local services and cutting council tax bills for residents. Instead, it is spent on exactly the wrong things: it is spent on councils reporting upwards and being accountable to Ministers, when the focus should be on being accountable to their own electorate.
The worst thing is that such burdens, ring-fencing and top-down scrutiny from Ministers in Whitehall who do not know the communities that they are dealing with are only set to grow. We have had a similar Opposition day debate before, and now we are talking about further financial pressures on local councils resulting from some of the Government’s plans for taking care of the elderly. The situation is not tenable, which is why we want to set out a different vision for local government finance.
As I have said, we want to introduce incentives and to ensure that the formula is developed sensitively and that the Audit Commission can look at it to ensure that it is transparent and fair. We need to move on to a new chapter in local government finance where councils get the powers, flexibility and resources necessary to deliver what local communities, not just Ministers, want; where there are real incentives; and where councils and the communities that they represent can truly share the benefits. It is a clear choice, and the sooner the public get to make it at a general election, the better.
I wish that I could say that this had been an interesting and wide-ranging examination—[Hon. Members: “It says here.”] No, it does not say that here. I wish that I could say that this had been an interesting and wide-ranging examination of the local government finance settlement, but it has not. With one or two honourable exceptions, on both sides of the House, this has been just the sort of blustering, grandstanding, smug, “We know better than you and just wait until our side gets in” kind of exchange that puts most normal people off politics and, frankly, puts me off listening to you all.
When I wrote to the hon. Members for Meriden (Mrs. Spelman) and for Falmouth and Camborne (Julia Goldsworthy)—I did write to them, on 12 November—I pointed out that there was going to be an oral statement. The last time there were very few Members in the Chamber, and we regretted that there were so few. We would have liked to debate it, and you do get a chance to debate it in January, when you debate the financial settlement, so you have not lost the chance—
Order. I am reluctant to interrupt the Minister, but she must use the correct parliamentary language.
Yes, you should.
Order. There are rules for manners all round in the House. Hon. Members should now listen to what the Minister has to say.
Thank you, Mr. Deputy Speaker.
We in the Chamber should have known better, because we have wasted an opportunity this time. In his opening remarks, the Opposition spokesperson, the hon. Member for Bromley and Chislehurst (Robert Neill), conceded that the three-year settlement was a good thing. On that, if very little else, my right hon. Friend the Secretary of State agreed with him. He pointed out that this year, the last year of that three-year settlement, councils will get a 4 per cent. increase in funding, bringing the investment in local government to £76.3 billion in 2010-11.
The Liberal Democrat spokesperson, the hon. Member for Falmouth and Camborne, at least managed to get off the subject of who did or did not initiate this debate and why. For the record, let me point out again that the House will have a chance to debate the settlement for 2010-11 when it approves the finance report in January. I will certainly try to find out what happened to the letters. I have a copy here and will give everyone one later. I was sorry that the hon. Lady did not develop her party’s ideas a little more clearly. She spent most of her time telling the other parties what they were doing wrong and hinting at what she might do right if the Liberal Democrats got into power.
My hon. Friend the Member for Blackpool, North and Fleetwood (Mrs. Humble) was quite a change: she was positive and proud. I really understood her pleasure in seeing her constituency develop in the way that it has. Like her, I have seen changes in my constituency, Stevenage. I am glad that she has found the prudential borrowing regime so helpful.
Despite remarks from the Opposition, my hon. Friend the Member for Ealing, Acton and Shepherd's Bush (Mr. Slaughter) has been a doughty campaigner for his constituency, including against the injustices that have come in under the Conservative council.
The hon. Member for Hornchurch (James Brokenshire) made some thoughtful comments about the high proportion of elderly residents in Havering and the growing number of older people, with whom Governments of all types will most certainly have to deal in future, and deal with seriously. I hope that he will welcome the Government’s engagement with the issue of future funding for adult social care, and also that he will get involved when his local authority makes representations to the consultation on the distribution of concessionary fares that is now being held by the Department for Transport.
The hon. Member for Croydon, Central (Mr. Pelling) made some telling points about highways maintenance in Croydon. This is a problem across the country, and he will no doubt welcome the fact that we are keeping the formula under review, including the area cost adjustment, to which he referred, in relation to highways costs. Of course, Croydon and other London boroughs are welcome to put their evidence into the review being held by the Department for Transport, and I hope that they will do so.
I realise that I might have been impatient and immoderate at the beginning of my speech, but, as someone who cares deeply about this place and its reputation, I do not think that any of us did it any good today with the kind of debate that we indulged in. Local government finance is a highly technical and complex area that would benefit from a much more in-depth debate than the one we had here today. I regret that we have wasted our time in this way.
On a point of order, Mr. Deputy Speaker. It seems to me that we should fill the time allocated for the debate. That statement from the Minister was a disgrace. If she is so critical of all the rest of us, she could at least have done the House the courtesy of giving us some information and offering a defence of a badly thought-through settlement that has been inadequately debated. Instead, she comes to the House, insults those of us who did participate in the debate, and gives us absolutely nothing in the way of argument, fact or consideration in the light of the many powerful points that have been made today. I hope that she will reflect on that and apologise—
Order. I am now going put the question.
Question put (Standing Order No. 31 (2)), That the original words stand part of the Question.
Question put forthwith (Standing Order No. 31(2)), That the proposed words be there added.
The Deputy Speaker declared the main Question, as amended, to be agreed to (Standing Order No. 31(2)).
That this House congratulates the Government on introducing the first ever three year settlement for local government which will have provided an additional £8.6 billion for local government over three years, and continues to build upon the 39 per cent. real terms increase in funding provided to local government over the first 10 years of this Government; welcomes the four per cent. increase proposed for next year which, given the current level of inflation, would be the 13th straight year of above inflation increases; recognises the immense help this will give to local authorities throughout the country in dealing with difficult economic circumstances resulting from the global downturn; anticipates the lowest council tax increase for 16 years; rejects the calls from Her Majesty’s Opposition to cut the Department for Communities and Local Government’s budget by over £1 billion, which would lead either to cuts in local services or an increase in council tax bills of one per cent. to pay for the missing millions; and further welcomes the Government’s Green Paper, Shaping the Future of Care Together, which sets out its vision to reform the adult care and support system in England.