I beg to move,
That the Local Government Finance Report (England) 2010-11 (HC 280), which was laid before this House on 20 January, be approved.
With this we shall discuss the following motion, on council tax:
That the draft Council Tax Limitation (Maximum Amounts) (England) Order 2010, which was laid before this House on 20 January, be approved.
Before I come to the main body of my remarks, may I say that it was and is the intention that the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Stevenage (Barbara Follett), should reply to the debate? Timings in the House are uncertain and she will be dealing with an Adjournment debate in Westminster Hall for half an hour. I hope that it will be acceptable to you, Madam Deputy Speaker, and to the House if she replies to the debate—she has undertaken much of the individual correspondence and meetings with local authorities and she might be in a good position to respond to particular cases that are raised.
Before I discuss the good financial settlement that is on offer for councils again this year, I want to draw the House’s attention to the 2010-11 “Housing Revenue Account Subsidy Determination” that the Government have issued today. It confirms that next year’s local authority average guideline rent increase will be set at 3.1 per cent., not 6.1 per cent. as was previously agreed, because the Government believe that the previous increase would not be fair or affordable for tenants. Those considerations have always been our priority, and that will not change. What we have put in place this year will not mean steep rent increases for council tenants in the next few years.
The same concern about affordability has informed the decision that was announced by my hon. Friend in November, that the Government were capping the police authorities of Cheshire, Leicestershire and Warwickshire because of previous excessive increases. Cheshire and Leicestershire have accepted the budget caps that we have proposed, whereas Warwickshire exercised its right to challenge. After careful consideration, I have laid an order for the House’s approval to set Warwickshire a maximum budget requirement of £90.395 million for 2010-11. The intention is to limit all three authorities to the equivalent of a 3 per cent. increase in council tax over 2009-10 and 2010-11. No other capping decisions have been taken for 2010-11, but we will not hesitate to cap excessive increases that have been set by individual authorities, if necessary.
Let me address the main subject of the debate—the financial settlement for local government. This is the final year of the first ever three-year settlement, which involves an £8.6 billion increase over three years, with an average increase of 4 per cent. over each of the three years and of 4 per cent. again for the coming year. The increase for this year is made up of a 2.6 per cent. increase of formula grant, bringing the total to £29 billion; a £5 billion area-based grant, which includes funding for the supporting people programme, the working neighbourhoods fund and the rural bus subsidy; and specific revenue grants of £42.2 billion, which includes, for example, the dedicated schools grant. Every council will receive an increase in funding.
This year’s settlement comes on the back of a 39 per cent. increase in real-terms funding in the decade up to 2007-08. In that decade, power and responsibility were transferred to councils, giving them greater stability, freedoms and flexibilities. Almost £6 billion has been moved into such budgets with no strings attached. The performance framework has been slimmed down from 1,200 targets to fewer than 200. Next year, councils will also gain responsibility for commissioning education and training, which will be worth a further £7 billion.
My right hon. Friend mentions that councils are free to spend their money with fewer strings attached, but does he expect councils to take more responsibility? Does he have a view on Birmingham city council’s inability to submit its accounts in such a way that the Audit Commission is able to sign them off? The council has had to waste £60,000 just to have the books re-audited to satisfy the Audit Commission.
My hon. Friend raises an important point. We had occasion, before Christmas, to raise concerns with Birmingham city council, which, on its own say so, had failed to use the working neighbourhoods fund money in a timely manner. It is the right direction of travel to give freedoms to local authorities, but we have to make it clear that with those freedoms and flexibilities comes the responsibility to use public money well and wisely for local people.
The Government’s record on funding is one of real achievement and real confidence in local government. There has been real change on the ground, backed by real investment. I suspect that this debate might not attract huge public attention across all the media, but it will be followed closely in council chambers across England. In this week, next week and the week after, councillors will meet in town halls and civic centres to set council tax. They will be considering the coming year and the years ahead. They will follow our debates with interest, not least because of the looming election and the possible consequences for local councils and council tax payers.
This Government’s support for local government is not in doubt. The settlement comes on top of a 39 per cent. increase in real-terms funding that compares with the 7 per cent. real cut in the final four years of the previous Conservative Government.
I reject the claim in yesterday’s edition of The Daily Telegraph from 35 Conservative council leaders that low council tax increases this year have nothing to do with the Government. They said that they had
“managed to keep taxes low in our authorities despite the efforts of John Denham and his department.”
Those councillors should be grateful. In January last year, the Leader of the Opposition proposed cutting my Department’s budget by £1 billion, of which it is certain that £240 million would have come from council budgets. So those 35 local authority leaders should at least be grateful that I protected them from the policies of their own political party.
The Minister is vaunting the significant amounts of additional money that his Government have made available, but is he aware that some councils are outliers, whose increases in cash per head can be counted in pennies? Richmond is a good example, with an increase of 87p per head. Many councils, like Richmond or Kingston, have had to go deep into their pockets to fund primary school places because Government help has been so limited. The number of children affected is very significant.
I do not agree that Government help has been limited. It is possible that when my hon. Friend the Minister winds up, she will be able set out how much Richmond has received over the years. However, I acknowledge that there is an underlying point, and that it is an inescapable part of the settlement. Almost inevitably, the funding formula that we have will reveal that some authorities are further from the formula target than others. Each year, the grant settlement is designed to make progress towards that target, but we must have a floor system that regulates the rate of change that takes place each year. Some authorities are affected by that, but it is very difficult to design a system that does not have some element of that sort.
I realise that we are moving towards target according to formula funding, but is it right that my authority should lose another £5 million this year because it is below target? That comes on top of the millions that we have lost already. Wandsworth is to receive an additional £51.653 million next year, and Kensington and Chelsea £10.061 million. I put it to my hon. Friend that my constituents are some of the poorest in the country.
The increase in Bolton is something like £13 million in the coming year. That is a significant amount of money, as my hon. Friend will recognise. The application of the funding formula requires a floor mechanism to regulate the pace of change towards the target that the formula produces. It has been widely discussed, and he is perfectly right to produce anomalies or examples that he thinks are unfair to his constituency. However, I do not accept that they are anomalies, as the system for regulating the pace at which we move towards target is broadly agreed across the House. I am pleased that his authority has been able to benefit this year from a significant amount of money.
I shall take a question from my hon. Friend the Member for Milton Keynes, South-West (Dr. Starkey). I shall take an intervention from the hon. Member for Croydon, Central (Mr. Pelling) later, after I have made a bit more progress.
My hon. Friend talks about floors and ceilings. Does he agree that, although councils, including my own, are ready to complain about a ceiling if it means that they do not receive as much extra grant as quickly as they might wish, they rarely complain about a floor, as that means that they do not lose grant as quickly as they might fear?
My hon. Friend may be aware that her local authority has received an extra £18 million this year. She makes a very valid point, but the reaction that she describes is perhaps an inevitable part of human nature. There will always be more complaints from those who believe that they should have got more than there will be praise from those who have been protected by the system. She is absolutely right to make that observation. My firm belief is that not only in this year, but in previous years, the Government have worked hard to get the balance right between the ceiling and the floor, to ensure that the pace of change is reasonably predictable and understandable by local authorities.
I was speaking about how I resisted the call of the Opposition last year to cut my Department’s grants to local authorities by several hundred million pounds. The councillors who wrote to The Daily Telegraph may have been embarrassed by the truth, which is that the councils that have loaded most burden on to council tax payers have been Conservative. Of the 50 councils with the highest increases in council tax over the first 10 years of this Government, around 30 are Conservative-controlled. Labour controls just five.
The current settlement means that we can expect the average band D council tax increase to fall to a 16-year low. Many councils have already indicated that they plan for modest council tax increases or none at all, including all eight London Labour councils, which have committed to a council tax freeze while protecting front-line services. Our expectation this year follows last year’s average increase of just 3 per cent., the lowest since 1994-95.
That is good news for council tax payers from the Labour Government. What would they get from the Opposition? An apparently attractive but empty and unfunded promise. On 30 September 2008 the right hon. Member for Witney (Mr. Cameron) told the BBC that council tax would be frozen for two years under a Conservative Government. The Conservative party press release of 29 September 2008 said that the cost would be £500 million in the first year and £1 billion in “subsequent years”. It said that that would be funded from cuts in advertising and consultancy budgets.
Latest costings show that the Opposition have seriously underestimated the cost. A two-year freeze starting this year would cost £1.97 billion—£650 million in the first year, and £1.32 billion in the second year and every year after that. Even on the Opposition’s own figures there is a £470 million gap, so I wonder whether that is likely to happen.
On 7 January the Leader of the Opposition told the BBC:
“No, no we have a pledge to do that”—
the two-year freeze—
“because we found the money to do that by cutting government advertising and government consultancy.”
Asked by the BBC’s admirable Evan Davis:
“Hang on, why don’t you cut the government advertising and other budgets in order to reduce the deficit, not council tax?”,
the Leader of the Opposition insisted that the freeze would go ahead. So would it happen? Is it a promise, or merely another vague aspiration? Apparently it will go ahead. [Interruption.] Well, those taking part in council tax debates throughout the country need the answer today.
Last Sunday, the shadow Chancellor had a different use for cuts in advertising and consultancy.
“To reduce the deficit,”
he said,
“we can move quickly on the advertising budget, the big government consultancy budget”.
Yesterday, asked by the BBC’s equally admirable Nick Robinson about cutting spending to cut the deficit, the hon. Member for Tatton (Mr. Osborne) said:
“We pointed to the advertising and consultancy budgets.”
Which is it? Cuts in advertising and consultancy to reduce the deficit or to reduce council tax? It cannot be both. The House and local councils need to hear some answers today before promises are made at local level. There have been many candidates from Opposition parties dropping leaflets through letterboxes over the past few weeks promising a freeze in council tax without any explanation of how even part of it is to be funded.
Will the Secretary of State give way?
In a moment.
The Opposition’s council tax plans are, as The Observer said on Sunday, “mired in confusion”.
We also need to know when the freeze will start. If it does not start until next year, there is another problem. As the pre-Budget report makes clear, advertising and consultancy will be cut by this Government by £650 million in 2012-13 as part of our plan to halve the deficit, so there is no money in the coffers to pay for the second year of the proposed council tax freeze. There is at least a £1.12 billion black hole in the Opposition’s local government spending plans in the first two years, and the same amount every year after that.
The right hon. Gentleman is doing a great job of setting out to the public the fact that we will help councils freeze council tax, whereas his Government will not. Perhaps he can explain whether it is his proposal to go ahead with another revaluation shortly.
We have no plans or preparations for a revaluation of council tax.
What about the database?
Oh, the database! A standard, routine contract is put out to tender every few years to update the valuation database in the normal way; that has nothing to do with council tax revaluation. I wrote to the hon. Member for Putney (Justine Greening) after she claimed in the Sunday Express that the database was evidence of secret plans for a revaluation of council tax. She never replied to my letter, and I am surprised that the Opposition continue to raise the issue.
Will the right hon. Gentleman give way?
No, because I am just going to make the point—[Interruption.] The hon. Lady had the opportunity to answer, so I shall make some progress on the statement—[Interruption.] She had an opportunity to explain what she cannot explain, which is how council tax revaluation would be paid for. I shall carry on, because we need to deal with more aspects of the settlement.
Will the right hon. Gentleman give way?
I shall give way to the hon. Gentleman, because he has been asking for some time.
The Secretary of State is clearly hitting the target as regards the Conservative party’s rather soft position on those issues, but, nevertheless, are not his comments a real comment themselves on the relationship between central and local government? This Government have not released local government to pursue its own financial affairs. The fact that national parties are talking about advertising in specific councils shows that local government is still far too dependent for its finances on national Government.
The hon. Gentleman might have welcomed the extra £20 million in all grants that his local authority will receive next year. The fact is that over several years there has been a process of devolving power to local government, of reducing ring-fencing and targets and of transferring responsibilities to local government—and we will continue to make progress in that direction. I shall say more about that in a moment.
Will my right hon. Friend give way?
I shall, but then I must make some progress, because I know that a number of hon. Members wish to speak.
What advice would the Secretary of State give to Tory-run Nottinghamshire county council, which is determined not to increase its council tax and told me that it could do so because it was going to receive an increased grant from a forthcoming Tory Government—if there were one?
I would say to that county council that there is clearly no source of money to pay for the promises, which are being made throughout the country, of a council tax freeze. We saw the same situation with married man’s tax allowance at the weekend with spending—
Order. Perhaps the Secretary of State could now concentrate on the proposals that the Government are putting forward.
You have been characteristically generous, Madam Deputy Speaker, and I shall make progress.
We are happy to be judged on our record of steadily increasing investment and greater freedoms. This settlement, which underpins our ambitious vision for local government, is how we will not only protect but continue to improve local public services, despite the tighter financial climate. Local government has a good record on making efficiency savings, but the truth is that the really hard challenges have still not been tackled consistently in every council and in every area. Local people will rightly be intolerant if they are told by their council that front-line services will be cut when it has not taken the tough decisions to introduce shared services, sharing senior staff with other authorities, primary care trusts or other providers, or made the best use of public assets.
The new taskforce that I have established, led by Steve Bullock, the mayor of Lewisham, and Richard Leese, the leader of Manchester city council, will report by the end of the month on how well-led authorities can protect and improve services while meeting the new demands for greater efficiency.
The Secretary of State will realise that for many local authorities one of the biggest clouds on the horizon is the census in 2011. Many of us, particularly those of us in inner-city boroughs, recognise that there are great concerns about the rigour with which the census is being put in place, and that that will have a major impact on the grants that are made not just this year but for some years to come. The issue applies to hon. Members from all parts of the House. Will he explain what the Department is doing to ensure that the census is as rigorous as possible in order that there is a fair division of the spoils for many years to come?
The hon. Gentleman makes a perfectly fair point. Usually in this annual debate, the concern is that population figures are out of date, rather than about to be updated. The census is therefore enormously important, as is the ongoing work, on which the Office for National Statistics is consulting, about better ways of capturing more rapid short-term changes in population of the sort that we saw in the middle of the last decade. His point is well taken and well made, but I assure him that everybody concerned with the census is working enormously hard to ensure that it produces the accurate basis on which future local government projections can be carried out.
Will my right hon. Friend join me in encouraging the hon. Member for Cities of London and Westminster (Mr. Field) to join the London Regional Select Committee, because we are engaging in an in-depth study on the census, working with various Departments, and we are missing representation from the Opposition Benches?
Order. We are certainly not straying into the subject of Regional Select Committees.
Having set out the challenge to local government, whereby we need to ensure that every taxpayer’s pound works as hard it can, I should say that it is obviously important that the Government support local councils in making the necessary changes. That is why, with local authorities, this Labour Government have pioneered the Total Place initiative, which looks at all public service spending in each area and how it can best be used, together with local council and councils, with their democratic mandate, to ensure that local services respond to local needs.
I welcome the Opposition’s recent belated recognition that the extension of further scrutiny of health and other public services is needed to equip councils with the powers that they need to act decisively on behalf of local residents, including the powers to scrutinise, influence and shape other services. In future, this means that local government will not just be overseeing its own services; in addition, councillors will be able to challenge how all local services are delivered, regardless of the provider. As the pre-Budget report confirmed, Total Place is not just a direction of travel but the future of local government and local public services under a Labour Government. The Opposition may make a rhetorical commitment to Total Place, but we have shown in past debates where their polices will lead: a postcode lottery as entitlements and inspection are abandoned, and two-tier “Ryanair” councils providing a most basic service and leaving only those who can afford to pay able to access a decent service. That is not the kind of localism that I want to see.
This is a good funding settlement. We have delivered average increases of 4 per cent., giving councils scope not only to keep council tax down but to deliver the crucial services on which local residents rely. I think I have shown that some of the promises being made by the Conservatives are unfunded and cannot be believed, and they need to be exposed as such.
I now have to announce the results of Divisions deferred from a previous day. On the motion relating to EU enlargement strategy, the Ayes were 403 and the Noes were 20, so the Question was agreed to. On the motion relating to infrastructure planning, the Ayes were 231 and the Noes were 196, so the Question was agreed to. On the motion relating to financial management, the Ayes were 230 and the Noes were 202, so the Question was agreed to.
[The Division lists are published at the end of today’s debates.]
I thank the Secretary of State for outlining the Government’s proposals on local government finance. I think that we all accept that the formula as it stands is extremely complicated. When the Under-Secretary of State for Communities and Local Government, the hon. Member for Stevenage (Barbara Follett), outlined it in this Chamber at the end of last year, there was some humour in the fact that the guide that now goes with the formula claims to replace the previous plain-English-speaking guide. Local councils find themselves having to deal with an incredibly complicated formula.
The three-year local government finance settlement has been important for councils, and we recognise that it is important for them to be able to plan ahead. However, this is the last of the three years, and the Government have effectively delayed—many people would suspect cancelled—the comprehensive spending review, which could have given councils the framework for the next three years and an idea of what funding there may be. We now seem unlikely to get that before the election. If I am wrong about that, I am sure that the Secretary of State will intervene. [Interruption.] He indicates that it is not in his hands; it will be worrying for local government to know that he is not pressing to have more certainty in future.
This is an important matter. It is not just councils that need to understand the funding regime under which they will be operating. As the Secretary of State clearly demonstrated, it is important for families and local communities to understand the level of council tax and how the local government finance settlement could mean changes in their council tax bills, particularly as we are possibly still in the deepest, longest recession in many years.
The hon. Lady has started her contribution with a lot of talk about certainty. I am sure that she would welcome my excellent Labour council’s decision to give our community certainty with a council tax freeze. She is right that certainty is important for families and councils, so will she tell us here and now when her council tax freeze will start, when it will end and how it will be paid for? The country and the public have a right to know.
We have already published all those data. I am sure that it is wonderful for Ministers to try to pick holes in them, but in fact they seem to be taking some of our suggestions on clamping down on waste. Having only a few months ago challenged us by saying that it was a case of investment versus cuts, they now seem to accept that we need to trim back public expenditure.
Will the hon. Lady give way?
I will not, actually. I have not even quite finished dealing with the intervention by the right hon. Member for Salford (Hazel Blears). As she said, there is a genuine appetite for a council tax freeze. It is just a shame that her party’s Government cannot recognise that. We want to help local government deliver that, but her party wants to undermine it.
There was one question that I did not get to put to the Secretary of State. He would not rule out the revaluation that is coming down the track and could mean families paying hundreds of pounds extra. [Interruption.] Is he ruling it out? He says that there are no plans, but we have all heard the statement “There are currently no plans” in the past when we have known that there were. Preparation for the revaluation is well under way, and the Secretary of State’s own local government body, the Labour group of the Local Government Association, in its document “Putting Fairness First”, does not just talk about a revaluation but states that on top of that:
“At the very least, the council tax needs rebanding. The addition of more bands at both the top and the bottom of the scale will help to make it a more genuinely progressive tax”.
[Hon. Members: “Hear, hear.] We seem to be getting messages from Labour Back Benchers—perhaps the Secretary of State can confirm this—that Labour wants to continue adding bands and pushing up council tax for people across the country.
I repeat to the hon. Lady what I said earlier. We have no plans, and we have made no preparations, for a revaluation. With respect, she should really stop claiming that we have. We have said that often, and the constant repetition of something that is not true does not make it true.
People reading Hansard tomorrow will see from that response that there is no ruling out of a revaluation or of more bands. We all know exactly what is going to happen if the British public are unlucky enough to face this Government being in power after the next election.
Will the hon. Lady give way?
No, I am not going to give way—not today, thank you.
What we need is a new approach to local government. We need an approach of localism that will move away from the trend that councils have seen under this Government, which is more micro-management, more reporting upwards, less ability to decide local priorities and more top-down diktat from Westminster. What people actually want in their local communities across Britain is the chance for their local council to spend money on their local priorities, not on the priorities that are so often set by the Secretary of State.
I would be grateful if the hon. Lady helped me. She said that the data on the council tax freeze have all been published, but I am at a loss as to when the freeze will start—I may have missed her telling us that. Will she say very simply, to help a simple person, when the promised Tory council tax freeze will start?
We have always said that it would start in the first full financial year after the election.
Order. May I please bring the House back to order? We are discussing the Government’s proposals.
That is very helpful, Madam Deputy Speaker. It is interesting that Government Back Benchers are pressing the Opposition on when a policy will start, but will not admit when the next election will be. Pursuing that line of argument is disingenuous.
There is no doubt that council tax will be one of the most important things for people in today’s debate. The bottom line is that whatever the Secretary of State says about funding for councils across the country, under Labour, council tax has doubled since 1998-99. In fact, people are being charged £14 billion a year more in council tax than when Labour came to power. That is real money taken out of people’s pockets that they cannot spend on what they otherwise would have liked.
The Under-Secretary of State for Communities and Local Government, the hon. Member for Stevenage (Barbara Follett), came to the Chamber before Christmas and claimed that a 3 per cent. settlement—a 3 per cent. increase—was somehow reason for celebration among people who were, by and large, getting no pay rise in the private sector. If that 3 per cent. increase goes through, it will add £42 to the bill of an average band D home and push bills to more than £120 per month.
Does the hon. Lady share my concern that while she is focusing on council tax—I agree that nobody wants to pay more tax than they have to—there is a risk that we are missing the impact of charges? My local authority, Westminster, is in the process of raising an additional £7 million from parking charges alone, and it is putting up meals on wheels charges by 10 per cent. and introducing a new charge of £20 for the disposal of bulky items, which leads directly to fly-tipping. Of course, those costs fall directly on people to whom no rebate is available, with all kinds of unintended consequences for their purses.
The Housing Minister has left the Chamber, but I propose that the hon. Lady talks to him. Only last year he was saying that only one in five councils were actually charging for the services that they could charge for. The pressure for councils to charge is coming from her Government, not from councils. Councils across the country are being asked to pay for services and to fund more and more mandates from national Government without being given the money to do so. They have had one part-funded initiative after another.
I want to return to council tax, because there are people in this country who have been unable to afford council tax increases. A typical pensioner couple, for example, now pays £685 more a year on a band D property than they paid in 1997-98. In fact, only half of eligible pensioners claim the council tax benefit to which they are entitled. Ministers ought to focus on those issues. The Secretary of State was reluctant to answer any of my questions, but if we have another term of Labour in office, households across the country will see even more council tax increases coming down the track, because of more bands and a revaluation. Ministers never rule the latter out, because it is clearly going to happen, which is why we need a council tax freeze.
The hon. Lady is doing a good job of highlighting the problems with the council tax, which since its invention has increased at above inflation each year. How can she reconcile all these problems with the council tax while defending its existence to the hilt?
I guess that we would all love to know whether the Liberal Democrats would go ahead with their local income tax policy—[Hon. Members: “Yes.”] Well, it was not exactly popular at the last election, so that is probably good news for many hon. Members.
It is not only council tax rates that have been going through the roof under Labour. One of our biggest concerns is that this local government finance settlement is principally underpinned by receipts from business rates. The Government are about to press on with a business rate revaluation, which could fundamentally destabilise the main source of revenue for local councils and their services—
Will the hon. Lady give way?
No, I wish to make some progress. That revaluation comes on top of the business rate rises that have been seen across the country, at a time when local companies can ill afford them—
Will the hon. Lady give way?
No, I will not give way.
Will the hon. Lady give way to me?
No, I really must make some progress—
Order. The hon. Lady has clearly decided that at present she will not give way to anyone.
I am trying to respond to the Minister. We have some real concerns about business rates and we are worried that if Ministers go ahead with the revaluation they have planned it will destabilise one of the key revenues for councils—
Can the hon. Lady be clear that she is suggesting, as she did in questions last week, that the revaluation should not go ahead, knowing as she does that 60 per cent. of businesses would see an average of a £770 rate increase from April?
The Secretary of State fails to recognise that the decrease for those companies is funded by increases for other companies. If the Government had looked at the impact assessment of whether those companies could afford the increase, he would be on stronger ground. The reality is that those getting the biggest rises far outweigh the number getting the biggest decreases. In eight out of nine English regions, more companies will see a 20 per cent.-plus rise than will see a 20 per cent. fall. The Secretary of State cannot claim that the Government are pursuing a strong policy when they have not even bothered to look at how the 40 per cent. of companies that face a rise will manage to pay it. If the Government’s calculations are wrong—not that they particularly have any—business rate income could be destabilised.
It would be better to allow all companies to enjoy the minor reduction that they would all get from the inflationary decrease that would have resulted from the multiplier, had the revaluation not gone ahead. Instead of playing party politics, the Secretary of State should get out to the regions that will see the biggest losers and talk to companies about how they will afford to pay. Those increases alone could stifle the recovery before it gets going.
In Bolton, the regional development agency has been very helpful to local companies. This evening, MPs from the north-west have been invited to a meeting of the Northwest Development Agency. What can I tell the agency about the likelihood that it will still exist in the unlikely event that the hon. Lady’s party wins power on 6 May?
We have said that it will be up to local authorities and local regions to decide whether their regional development agency has been effective. In some parts of the country, the feedback is that the agency has been effective, but in others it has not. It should be down to local areas to decide how they want to organise regeneration.
The hon. Lady’s party has said that it would fund the council tax freeze partly by abolishing unelected regional tiers of government, so she has to be straightforward and honest. Will she fund the council tax freeze by abolishing excellent bodies such as the Northwest Development Agency? Again, we have a right to know.
The right hon. Lady has completely misunderstood the funding for the council tax freeze. She has even, within 10 minutes, contradicted the Secretary of State when he said that, apparently, he thinks that there is not enough in our advertising budget for our policy, which of course there is.
Will the hon. Lady give way?
So our policy is absolutely funded.
Will the hon. Lady give way?
That is one of the reasons why we would urge Ministers to match our council tax freeze, instead of saying that they want to see council tax raised when people can least afford it.
The settlement is part of a broader failure by the Government to work with local authorities. Under the Government, they have faced extra burdens, not just from top-down diktat, but because they have been able to spend less of their money as they would have wanted. That is one of the reasons for the pressures on council tax. In 1996-97, 22 per cent. of local government revenue expenditure was financed through council tax, but by 2006-07, that had risen to 26 per cent.
Will the hon. Lady give way at that point?
Councils are under so much pressure that they are being pressed to go out to their local communities and fund services by raising council tax. Local authorities now have a raft of extra measures to deliver that have never been properly funded. In fact, there is a live one here in London on concessionary bus fares—[Laughter.] I am sure that many Labour Members find that entertaining—[Laughter.]
Thank you, Madam Deputy Speaker.
That is of concern to many London councils, which face a shortfall of on average £1 million per council because the Transport Secretary has failed to—
On a point of order, Madam Deputy Speaker. The hon. Member for Croydon, Central (Mr. Pelling) was on the Conservative Benches a little while ago—as a result he increased the number of Conservative Back Benchers by 50 per cent.—but he is now on the Labour Benches. I think that he ought to be heard at some point. I do not know where he is going to go next.
Order. That is not a point of order for the Chair, and the hon. Member for Croydon, Central (Mr. Pelling) is in fact an independent Member of the House.
If the hon. Member for Croydon, Central (Mr. Pelling) wants to intervene, I will be delighted to give way.
I am sure that the hon. Lady simply could not see or hear me—that is why I came across to the Labour Benches. I am grateful to her for giving way. May I compliment her on dealing with the shells that have been dropped by some of the heavyweights who have decided to take part in this debate and have a go at her? May I ask her two questions about the points that she has raised? She mentioned the heavy burden of local government taxation, and it is welcome that any incoming Conservative Government would freeze the tax. Does she feel that perhaps the council tax has come to the end of its ability to take additional taxation increases? Given that she is a Member of Parliament for a south London constituency, does she sympathise with some businesses that feel that it is a little unfair that the supplementary business rate that they are paying goes into Crossrail? There might be important things to do in south London communities using some of that supplementary business rate.
The hon. Gentleman raises some interesting points. The first was about council tax and the pressures to increase it further. It should be up to local residents to decide whether council tax rises are affordable. That is one of the reasons why Conservative Members have talked about providing the ability for local residents to hold a referendum if they believe that council tax rises are unaffordable.
The hon. Gentleman also raised a point about Crossrail and supplementary business rates. The Government recently brought through the Business Rate Supplements Act 2009, about which we expressed the concern, when it passed through the House, that it could lead to extra burdens on companies. So I share his concerns about the concept of supplementary business rates—in fact, we have said that we want councils to be able to go in a different direction. We want to give them the power to levy a business rate discount, rather than a supplement. We need to give councils the ability locally to help regenerate their local economies, and I will come later to some of the incentives that we would like to see.
As I am sure the hon. Gentleman recognises from his own local council in Croydon, councils currently spend far too much time micro-managing Government initiatives and not enough time being able to tailor what they are doing locally to local community priorities. In fact, 36 out of 52 revenue grants for local authorities are ring-fenced, so it is simply not correct to say that local authorities are being given the freedom that they need to deliver for their local communities as well as they can. We would very much like the Government to move away from ring-fencing grants and towards giving councils more freedom to deliver on local priorities as they see fit.
Only today we heard the Prime Minister talking a good game, but the reality for local councils is that they do not see that change happening on the ground. As I mentioned to the hon. Gentleman, there is very little incentive in the funding formula for councils to deliver for their local authorities. Total Place has started to provide some of the fact base, as it were, for councils to be able to do so, but we should not kid ourselves. We are at the beginning of a long road towards councils being able to get out there and not just work with other local providers, such as the NHS and the police, and with the Department for Work and Pensions, but, more broadly, deliver value for money for their residents.
I have listened with interest to the hon. Lady’s arguments. In the absence of ring-fencing, could she tell me whether a potential Conservative Government would allow local authorities to raise their council tax to any level, without any action being taken?
I have just said what we would hope to do on council tax. We want to give local communities the ability to set the cap. That should not be done in Whitehall. If local communities decide that a proposed rise is unaffordable, they should be able to stop it. I understand the hon. Gentleman’s point, but it shows the difference between our approach, which is to trust local communities and local authorities to get on with running their own lives, and that of the Government, who take a top-down approach the whole time.
Will the hon. Lady give way?
No, I am going to make some more progress. I am conscious of the time and the fact that other Members no doubt want to express their views and represent their constituents.
The issue is not just about giving local people more authority to hold their local councils to account on council tax rises. We also need to put in place incentives, so that local authorities can benefit when they take good decisions on providing more homes for local people. Many local councils across England and Wales would say that they are concerned at the lack of house building that has taken place, but they have had to work within a framework of top-down targets that local communities have rejected.
It is wonderful to hear an Opposition Front-Bench spokesperson, however sincerely or not, talking about house building. Will the hon. Lady take this opportunity to condemn Hammersmith and Fulham council, which is planning to demolish 3,500 good-quality council homes?
Order. May I remind hon. Members that we are now discussing local government finance? That is the matter under consideration in this debate.
Thank you very much, Madam Deputy Speaker. I was making the point that part of the funding settlement that we are talking about should reward local councils when they develop their local communities by providing new homes. We would also like local councils to have incentives, so that they are rewarded for doing a good job in developing their local economies and generating local jobs. That is why we have talked about allowing them to keep the gain from business rates that they make when they do a good job of bringing new companies and new industry into their local areas.
Finally, it is time to say that local authorities with local responsibilities need to be more accountable. Authorities such as Windsor are already being far more transparent, as is the Mayor of London, putting all spend over £1,000 out for public scrutiny. We would like other councils to follow that measure. Indeed, I am sure that when the Minister wraps up, she will say that she, too, would like that—I am guessing that she would not want to go against increased transparency. We certainly want local councils to have increased transparency for their residents, because it is the best way to create an environment in which councils can not only have more power to deliver on local priorities, but be better held accountable by their local residents in doing so.
In view of the hon. Lady's comments about transparency and accountability, can she give an absolute assurance that this Friday Opposition Front Benchers will support my private Member's Bill, the Local Authorities (Overview and Scrutiny) Bill?
We are very supportive of moves to ensure that transparency is developed and improved in councils. We think that that is the best way to enable local residents to hold their local authorities to account.
In place of the local government finance settlement approach that we heard about from the Secretary of State, we want local communities and local authorities to be given more power to deliver their priorities on the ground. We want local residents to be able to cap their council tax if they think that that is their priority, rather than having Ministers do it whether it is or not. In the earlier debate, which you were here for, Madam Deputy Speaker, a variety of hon. Members complained about the fact that their police authorities had been capped, as local people were perfectly happy to pay more—their priority was to see more police on their streets. We think that that is the right way to go: to give local people the choice, rather than have it taken away.
Whatever the Prime Minister says this week, councils have nothing new to look forward to from the Secretary of State or from the Minister. It is more of the same when we look through this local government finance settlement. There is continued top-down ring-fencing of money that should be spent on residents' priorities, rather than Whitehall priorities. There is a continued lack of incentives for councils to develop their local communities and economies. There is continued pressure on council tax to rise, when family finances are stretched to the limit, because councils are asked to take up, on behalf of Whitehall, so many unfunded initiatives. There is continued micro-management and inspection from above, which costs money that could otherwise go into front-line services.
The bottom line is that we need to give councils the freedom that they crave to deliver better services and better value, and to deliver on the priorities that matter most to their local communities. However, as we have heard today, for that to happen, we will need a change of Government—it will not happen under this one.
I want to make a few observations and I will try to be brief because I know that many hon. Friends wish to speak. Like other hon. Members, before I was a Member of Parliament, I was the Labour leader of a council under a Conservative Government. I can attest that the experience under this Government, with their attitude to local government, although there are some things that I criticise them for, is light years away from the experience of council leaders under the previous Conservative regime. It attempted to set the budget of every council in this country, a Stalinist exercise that has never been exceeded and that, I hope, will never be emulated by any Government, and that is not to mention the gerrymandering of the grant system. That needs to be said. I know I am of an age that means that I perhaps have a longer memory than the hon. Member for Putney (Justine Greening), but take it from me: this Government are in a completely different, and much better league, as regards local government and the attitude of central Government to local government. Indeed I commend the steps that the Secretary of State has taken to move the balance further towards local government, although he still has a long way to go.
I want to make a number of remarks following the hon. Lady's speech. The way in which her hon. Friends—apart from the hon. Member for Mole Valley (Sir Paul Beresford), my fellow member of the Select Committee on Communities and Local Government—deserted the Chamber and left her in an acre of empty Green Benches is distressing. I guess that they have done that because, like me, they were somewhat distressed by the innumeracy that she demonstrated, and her lack of understanding of local government finance. That is incredibly distressing in someone who wishes to become one of the Ministers in charge of it.
First, we are not talking about the national non-domestic rate, which is not relevant, but about the system of local government finance as it relates to the council tax. The hon. Lady must know that revaluation, unless each individual council chooses to use it as an excuse for increasing the total council tax take in their area, does not mean that everybody’s bill goes up; it means that some people’s bills go up and some people’s go down. It is absolutely indefensible for her to continue in this way: either she does not understand it, or she is continuing to state something that she knows is not accurate.
We have already had a revaluation in Wales, which did raise more council tax, so the hon. Lady should look at that example to see why we should be concerned about revaluation.
The hon. Lady should look at the data she cites. The Welsh Assembly—I believe it was my party, but I am not making an excuse for it—took advantage of the revaluation hugely to increase the total take. The bills went up, because it decided to increase the amount of money raised. I am distressed to have to explain this to the hon. Lady, but that is how the system works. As a former chair of finance, I know the way the system works. A council decides how much money it needs to raise from council tax in order to fill the gap between grant income, charge income and what it takes from the reserves. It decides on the total amount it wishes to raise and then it turns to the city treasurer and says, “Looking at our local tax base, given the people we have in each band and so on, how much do we have to increase band D council tax to raise the requisite amount of money?” It follows that if there is a revaluation, unless the council decides it wants to increase the amount raised, some people’s bills will go up and others’ will go down. The Welsh Assembly example, cited all the time by Conservative Members, is not an example of revaluation leading to bills going up; it is an example of an elected council or assembly choosing to increase the total take and, of course, everybody’s bills going up. It has nothing to do with revaluation.
I share the hon. Lady’s experience of being a council leader under the Conservatives, so I can certainly corroborate what she said about that. Is not one of the problems with revaluation that the longer it is left, the more out of kilter the system gets, so that when the resultant rises inevitably come, they are even bigger for the losers? We have waited 20 years, so values are 20 years out of date. Are we going to wait for them to become 100 years out of date before somebody dares to carry out a revaluation or are we going to do the sensible thing, which is completely to change the basis of local government taxation?
As I am the Chair of a Select Committee and not a Minister, I can say what I feel on this matter. If we continue to have a property tax—I believe that we should—we need to revalue relatively frequently; otherwise, it becomes distorted. Then, as the hon. Gentleman says, if we make the changes, those who gain will gain a great deal and those who lose will lose a great deal. I am personally in favour of such revaluation.
Will my hon. Friend reflect on the consequences for balancing of having a freeze on council tax? What, for example, might be the consequence in year 3 of the freeze, if it were imposed without replacing the money cumulatively lost through council tax, for central Government funding, especially if the figures were not entirely right? Unless central funding took over, would not the likely outcome be a huge avalanche of council tax rises in year 3, thereby decreasing still further the ability of local authorities to raise their own finance?
Absolutely. My hon. Friend is a great expert on local government finance and I entirely agree with him. What he said suggests that any Opposition proposing such a policy do not really think that they are ever going to come to power, since they would still be in power when such an enormous hike occurred, thereby becoming incredibly unpopular.
There are other reasons why I believe the Opposition should reconsider their policy. I say this simply because I would not want my hon. Friend the Minister in any way to be tempted to take over such a policy from the Opposition. First, the whole basis of the hon. Lady’s arguments rests on the supposition that the council tax is itself a problem. The hon. Member for Falmouth and Camborne (Julia Goldsworthy) made the point that I was intending to make myself, namely that the council tax was introduced by the Conservative Government after their disastrous introduction of the poll tax. They could not go back to the rates, which in my view is what they should have done, so they opted for a poor relative of the rates.
At least the rates had the advantage of being relatively progressive. It is not a hard and fast rule, but on the whole the bigger the property in which people live, the better off they are, and the bigger the property in which they live, the more they will pay in rates. It is also true that the bigger the property in which they live, the more they will pay in council tax, but because council tax is banded rather than being a continuous system like the rating system, the difference between what is paid by someone living in a small house and what is paid by someone living in a big house is nowhere near as great under the rating system as under the council tax system. The council tax is a much less progressive tax; indeed, it verges on the regressive.
If the hon. Lady and her party are truly worried about the burden that the council tax places on low and middle-income households, there is a simple way of dealing with that. Increasing the number of bands would increase the burden on those in big houses and on big incomes, and—since the total amount to be raised would remain the same—it would reduce the burden on low and middle-income households. I suggest that she consider that simple method, which, once introduced, would perpetuate the improvement in progressivity from year to year without the need for further changes.
Secondly, I want to deal with the proposal that some authorities’ council tax should be frozen. The Opposition appear to be suggesting that a council that proposed to increase its council tax next year by 2.5 per cent. or less would receive a lump sum of 2.5 per cent. from the Conservative Government, in the ghastly event of their being elected. That is essentially adding to the Government grant system, but in a way that is not transparent and is in no way related to need. Effectively, it means giving money to councils if they are able to keep their council tax at 2.5 per cent. or below.
Order. In the short time for which I have been in the Chair, the hon. Lady has expressed herself with great force and eloquence on the subject of the policy of the Opposition. I have just looked at the terms of the main business. We are supposed to be debating the question of whether to approve the Local Government Finance Report (England) 2010-11 and the draft Council Tax Limitation (Maximum Amounts) (England) Order 2010. I think that further ruminations on the policy of the Opposition would probably be outwith our scope, however enjoyable or stimulating they might be for the hon. Lady.
Far be it from me to complain about your spoiling my fun, Mr. Speaker. I shall save the remainder of my interesting analysis for other occasions. I believe that the House has got the gist of my view. The suggestions that were advanced at some length by the hon. Member for Putney were indeed risible, and I am not surprised that most of her hon. Friends left the Chamber in order not to subject themselves to her speech.
I welcome the opportunity to discuss the settlement. When I saw the Secretary of State in his place I thought that his presence might raise the tone of the debate, but so far it has not really done so, although I am sure that the hordes of Labour Members sitting opposite me have contributions to make.
The debate concerns the third year of a three-year settlement. Notwithstanding the banter that we have heard, it contains nothing particularly controversial. Many councils were very happy to have a three-year settlement. It has been delivered according to plan, and given what has been going on in the wider economy, I think that a number of them were grateful for the stability that it offered.
We would have been very pleased to have had that stability in Somerset, were it not for the incoming Conservative county council deciding that an increase in the money from the Government was a signal for it to cut massively the services it provided to Somerset residents. I cannot quite work out that paradox.
My hon. Friend is right: that is an odd paradox. One would have thought that any incoming council would have been focused on meeting the needs of the people who had elected it, rather than on cutting services to them.
Let me speak a little more widely about some of the challenges councils have faced over the past three years, which is the period the settlement has covered. Councils have been feeling the pinch. The credit crunch has had an impact not only by putting pressure on the services that they have to deliver—if there are more vulnerable people, councils face increased pressures in trying to meet their needs—but in terms of the fees and charges they collect. They have already been feeling the squeeze, therefore, as the Minister for Housing acknowledged last year when he said this was a tight settlement. It would therefore be unfair to say that councils are in a luxurious position, given everything else that has been going on in the wider economy.
The Secretary of State rightly highlighted in his speech his concern about the impact rent increases might have on council tenants, and the impact of council tax rises on council tax payers, but we must also remember that there are huge pressures on councils, which in turn has an impact on the services they provide to vulnerable people. A number of terrible stories have been reported in the media recently, not least the case in Edlington. The knock-on effect of that case and the baby P case has created a massive pressure on authorities’ services. I know from talking to people delivering children’s services in my local authority in Cornwall that they have resulted in a massive increase in referrals, which they have to deal with, and they have also had a very negative impact on staff morale and turnover. Therefore, a lot of councils have fewer staff trying to deal with an increased burden.
It looks as though those pressures will increase in the future, because the Government’s proposals to give councils the responsibility for delivering free personal care to people with high levels of need living at home is a cause for concern to a lot of councils. They believe that they are being asked to part-fund that by savings that have already been accounted for, or that they may not be able to deliver that care. This is part of a long history of the Government giving councils responsibilities for something that the Government then fail to deliver on properly, such as concessionary bus fares and free swimming. The delivery of personal care will be another example of councils finding that their resources will be stretched further to cover more responsibilities, while they are not necessarily given the resources to deal with that.
I want to emphasise, too, that we face uncertainty. The Secretary of State made great play of the certainty that his Government had given to local councils through the three-year funding settlement, but he said absolutely nothing about what will happen in the next financial year—not the one that has been dealt with by the settlement, but the subsequent one. Basically, councils are completely in the dark about what kind of situation they will be operating in. The spending review was due last summer, and we do not now know when it will appear, but it certainly does not look as though it will do so until after the election. The closest we got to having any information about that was in the pre-Budget report, when the Chancellor said that public spending as a whole would be frozen between 2011-12 and 2014-15.
The Institute for Fiscal Studies has today published its “Green Budget”, in which it tries to tease out some of the implications of a real-terms freeze for Departments that have not been singled out by any party for protection. The following quote from the summary to chapter 8 of the “Green Budget” points out that
“spending on debt interest, social security and other ‘annually managed expenditure’ is likely to grow in real terms. Keeping to these overall spending plans would therefore require deep cuts in ‘departmental expenditure limits’ (DELs)—Whitehall spending on public services and administration”.
It also said that the Government had
“promised to ‘protect’ spending on priority areas, including health, schools and overseas aid”.
Once one takes out the protection of those areas and the increases in expenditure, the implication is real-terms cuts. The book says:
“These other areas—including defence, higher education, transport and housing”—
and, of course, local government—
“would likely see their budgets cut by 12.9 per cent.”—
in real terms—
“on average over the two years or by £25.8 billion”.
The book also extrapolated the Conservatives plans on ring-fencing over the four years, saying that
“if the Conservatives’ plan to protect aid and the NHS were combined with the more ambitious tightening plan implied by their proposed fiscal targets”—
that sounds like that might be slipping a bit—
“then the cuts in their unprotected areas could be more like 22.8 per cent. or £57.1 billion by 2014-15.”
So I do not understand why anyone is crowing about this amazingly “stable” settlement, given that it appears that next year we are about to disappear off the edge of a cliff and nobody is prepared to talk about what that actually means for services that have not explicitly been protected. We are talking about 3 per cent. real-terms cuts every year. By not coming clean and giving us an indication about this in a spending report, the Government are taking away from councils time to plan what they need to do and what services they need to prioritise. If councils had more time—if they had had from last summer or even from last October—they would be able to plan their services more effectively and smooth out some of the impact that such cuts will inevitably have on their services. If information is not provided urgently, councils will be preparing their budgets from October and probably having to carry out a slashing exercise on current services of which Freddy Krueger would be proud. All councils will be facing a nightmare on Elm street because they are not being told what to expect.
What does that mean for council tax payers? It raises a big question as to what will happen to council tax. In the past, there have been above-inflation increases every year since the council tax was introduced, but what impact would the introduction of capping have on services? It would certainly not help to sort out the public debt, because it would provide the Government with only a marginal gain from what happens to council tax benefits, so they would not obtain any advantage. What is most likely to happen is that there will be massive pressures on the council tax system, because if councils want to do anything to prioritise an important service, the only way that they will be able to find any discretion is through terrifying increases in council tax.
The hon. Lady talks about uncertainty. If the Liberal Democrats had leverage over an incoming Government in a hung Parliament—[Interruption.] You have no reason to smile, because that is a possibility. In such a circumstance, what timetable would you have for introducing a local income tax?
I will come to that, but the point I am trying to make is that this situation is urgent. Council tax payers will end up with council tax bill increases every year even though services are being reduced—that already occurs, but the extent of it will be more extreme. On the kind of extrapolations that the IFS has produced, there will be massive increases in council tax in return for massive cuts in local services. That will test the local government finance arrangements to breaking point.
We already have a system of gearing, which means that 75 per cent. of what councils spend is funded through central Government grants. That makes things difficult, but the situation will get harder.
I congratulate the hon. Lady on her relatively numerate presentation, in comparison with what was said by certain people sitting elsewhere in the Chamber. Would she care to speculate on the result for gearing of artificially holding down possible national increases in council tax so that a cumulative additional amount of central Government grant would have to go in to make up the gap and, thus, keep the total stable? As she has suggested, that would increase gearing still further over the years of that increase.
I shall be coming to that point later, but basically the Conservative proposals would have the effect of disproportionately benefiting the people in the best position. They would make it more unfair. There are Conservative-run and Conservative-led councils, such as my own, that are unable to deliver the council tax freeze that their national party is asking them to. Those proposals would perpetuate those unfairnesses and could result in the system being even more centralised.
I am very worried about one of the two district councils in my constituency, Mendip district council. South Somerset is happily well run and has shown that it is very good at running its resources. Mendip district council has, over the years, massively cut its services and then massively increased both council tax and charges. It is now considered by the Audit Commission to be one of the worst run councils in the country. I am not sure that it could survive that sort of impact. The problem is, of course, that the one-time leader of Mendip district council, Councillor Ken Maddock, is now leader of Somerset county council, which has hitherto been a top-rated authority. I am worried not only that Mendip will go down the pan but that Somerset county council will deteriorate.
That prompts a question about the motivation of such individuals in wanting to control a council. Is the aim to reduce council tax as much as possible, whatever the cost, or to provide value for money? They are very different things and it seems that the primary motivation is purely headlines rather than providing services in the best interest of local residents.
The hon. Lady was quite right to underline how she is talking about the urgency of reform. She mentioned gearing, and a strong example of that is the London authority, where the gearing is one in 12—the system there is ridiculous. As there is urgency, do you feel that a Liberal Democrat-influenced Government would seek an urgent change to the local government financial system in the first year?
Order. As this is the third time, may I remind the hon. Gentleman that the debate goes through the Chair? I do not feel or think anything on these matters, but I am sure that the hon. Lady does.
As I was saying, one of the weaknesses in the current system is the fact that 75 per cent. of what local councils spend is not raised locally. A number of things can be done—some more quickly than others—to try to reverse that ratio. Another weakness in the system is the fact that taxpayers and business rate payers see no correlation between what they pay to their local council and what they end up getting from their local council. Again, when we end up with significant cuts and very difficult decisions, it makes matters even more painful. I know that in the period leading up to my election, I was told increasingly on the doorstep that the current system was unsustainable and that council tax was hated. I think that that problem will be magnified as we go through this process.
We must not forget, too, that the council tax system is incredibly inefficient. We need only look at the successful application rates for council tax benefit, for example, and at how many people are entitled to it who do not receive it. What will happen in a situation where there might be potentially significant increases in council tax? On top of all that, a range of public services are delivered locally outside local government that might well be subject to similar pressures for which there is no accountability. There is a fundamental question about the other services that are delivered locally outside the local authority. This will lead to the unsuitable state of affairs that we have seen for a long time becoming completely unsustainable. The kind of changes that we need do not simply involve providing longer funding horizons for local authorities, although of course that is helpful. It is not just about getting the funding formula or equalisation measures right or about fully funding any additional responsibilities that central Government pass on to local government. It is about a much bigger issue, for which this situation might provide a catalyst.
We have a massive disconnect between the people who are accessing public services locally and the organisations that deliver them. Changes need to be more than bureaucratic; they need fundamentally to alter the relationships not just between central and local government but with the people who use those public services. That is why it is depressing when there is an amusing bit of knockabout in the Chamber on familiar issues—revaluation being the obvious one—when the subject is a complete red herring, with people arguing at cross purposes and both sides holding intellectually unsustainable positions. It is not possible to say, “We think that the council tax system is great, but we think that revaluation is bad.” If we want to keep the council tax system then we must, as my hon. Friend the Member for Somerton and Frome (Mr. Heath) has said, have regular revaluations. That is part of the system. If we do not like revaluations, we must rethink the matter and decide what is the most suitable way of raising taxes locally. It is embarrassing to hear the fake arguments about what is being considered and what is being done. If people really believe that council tax is the right system, they should stand up for the revaluation system.
In our previous debates on this issue, the most recent of which was on a Conservative Opposition day, the Conservatives have done an absolutely fine job of analysing the problem, but if they think that they will be in a position to run a Government, they need some ideas. Just being able to tell a good story is not enough. Their stance on the council tax freeze is a prime example of how they really do not get it. They are quite happy to talk about localism and to use some of the rhetoric that they think sounds great, but a council tax freeze would mean more centralised funding for local government and less local discretion over the delivery of public services. Their stance on that issue completely contradicts what they say they believe, and is nonsense.
The Conservatives’ proposal on planning is also nonsense. They want to replace central pressures on house building with financial pressures. If one sets that idea in the context of what I said about the IFS “Green Budget”, we are again talking about massive financial pressures on councils to approve huge developments, because that is the only way in which they will get additional income. In my view, housing policy should be based on what the local population needs, not on centrally driven targets or what are basically financial bribes. The priority should be local need, and policy should not be driven by financial incentives or central targets.
As far as I can work out, the Government’s approach to this issue has been displacement activity. There has been a bureaucratic response, but what really needs to be addressed is how people are consulted, how decisions are taken about the delivery of public services and how money is raised. A classic example of the situation is provided in a document published by the Cabinet Office, rather than the Department for Communities and Local Government, which exemplifies the kind of approach that the Government take. I shall be interested to hear from the Minister how effectively she thinks the “Smarter Government” document and its implementation will help to engage communities on what will be difficult issues. There is a chapter on dealing with local priorities, and page 38 talks about how the Government will improve such relationships. One section states:
“We will align the different sector-specific performance management frameworks across key local agencies—the NHS, police, schools and local government—thereby increasing the focus on indicators relating to joint outcomes. We will set out in Budget 2010 the key areas where frameworks for specific frontline sectors can be further aligned.”
If that is a good example of engaging people, sorting out local government and making it more accessible, and if that is the kind of bureaucratic approach that will be taken, then we have a depressing world to look forward to.
Another area in which such ideas are being investigated is Total Place. I have a particular interest in this issue because of the many similarities to the Sustainable Communities Act 2007, which I presented as a Bill to Parliament in 2006, following up the excellent work of Sue Doughty, the former MP for Guildford. A key strand of the Act involves the provision of easily digestible local spending reports that contain details of all public spending at local level. The idea behind the reports was that once that information was in the public domain, members of the public would want to have a say in how it could be better spent. It was part of a process to turn decision making around and make it work on a bottom-up, rather than a top-down, basis. The Government have decided, perhaps because that idea did not come from the DCLG, that they do not want to implement it as quickly as the tens of thousands of people who supported that campaign wanted it implemented. However, Total Place provides a way in which that information can be made available in a better way than is being achieved in the local spending reports under the 2007 Act.
Again, the Government have missed the point. They are making localism a worthy way of having local area agreements with knobs on, but they are not thinking about how to use it as a tool for engaging people, and are not using their expertise to ensure that the right things are prioritised and that money is spent effectively. It is very frustrating that the Government have missed the fundamental point of adopting a localist approach in the first place.
Instead of inertia and denial about the terrifying future facing a lot of Departments, we need radical action. We need a simplified, localist system of public services that is easier for people to understand and influence. The current difficult financial situation makes that more important, not less.
The Liberal Democrats have put the localist agenda at front and centre of what we want to do, and that stands in direct contrast to the approach taken by Labour and the Conservatives. The Government’s compartmentalised approach spreads across departmental silos, but it is also evident within Departments: today’s debate has made it clear that the section of the DCLG that deals with localism and participation does not feel any need to work with the section that deals with local government finance. The localist agenda must cut across both this and other Departments, although I am not convinced that that happens. It is beginning to happen with the Total Place initiative but, unfortunately, as with a lot of things, that is driven by the Treasury.
We need to encourage more cross-departmental thinking. The localist agenda is important now because some painful, difficult and controversial decisions will have to be taken on the delivery of local public services. Inevitably, they will have an impact on the front line in one way or another. We hear a great deal about how problems can be dealt with by efficiency gains, but that is not so—there will be dramatic cuts.
The IFS has shown how deep those cuts will have to be if we get a Labour Government after the general election, although a Conservative Government is likely to be even worse. The cuts will be really painful if the current set-up does not change. They will be imposed on communities, without involving or being properly accountable to the people in them.
The interim findings of the Total Place pilot revealed that councils spend an average of £7,000 per person on public services, of which only £350 is discretionary spending. There are likely to be a huge number of changes over which people will feel that they have no influence or say. It is important that that does not happen.
We need public services that are designed for, and accountable to, the people who use them, whereas currently we have a system that is designed for the benefit of the organisations involved in delivering them. The emphasis seems to be on administrative convenience, not on the interests of the people who use the services. A fundamental shift needs to happen, and it must cut across a variety of different areas. The tax system must change, so that the taxes that we pay locally no longer disappear into the Treasury to be spent elsewhere. We can achieve that by localising business rates and moving to a system of local income tax, although we would like to allow the councils that are keen to trial that system to pilot it first.
Money that currently goes to remote and unaccountable organisations could be redirected towards putting local communities in charge of economic regeneration. In addition, the housing revenue account needs to be sorted out, so that councils have greater freedom to borrow and invest in council housing. We also need to give people a proper say on decisions that affect them in other areas.
The approach that I am outlining would get rid of unaccountable quangos, but it would also have implications for electoral reform. The Prime Minister may have had a deathbed conversion to that yesterday, but he seems to be interested only in the Westminster Parliament. If we are serious about engaging people in politics, we must realise that there are thousands of politicians around the country who are in the same boat as we are.
People will have their faith and confidence in politics restored if politicians of all kinds go out and prove to them, on their doorsteps, that their vote counts and will make a difference. I was therefore very disappointed that yesterday we saw only baby steps taken for the Westminster Parliament. No such steps were taken at the level of local government, even though some progress in that direction has been made in Scotland. We should remember that the crisis in confidence in politics is not exclusive to Westminster.
That is the kind of debate that we should be having about the future of local government finance, and of local government more widely. I am disappointed that the Government have not proposed ways to deal with the fiscal crisis that we face and to ensure that people have a say and a stake in the process. The Government continue to assume the worst of local authorities and local people, while presuming that every action taken by central Government is in the best interests of those people and is the best possible outcome, which is certainly not the case. As we go forward into a fiscally tight situation, that is even more important.
Labour should have come clean on what their proposals will mean for local government, instead of denying that there is any problem with the current set-up. It seems that the Conservatives are intent on cheering them on in that double delusion. We need real change for a fairer, greener and more local system of politics.
I welcome the settlement. It is an extremely good settlement for local government and builds on more than 10 years of above-inflation grants to local government. It is particularly welcome because the circumstances in which it was first mooted are very different from the present circumstances.
In the 1980s and 1990s, when the Conservative Government’s home-grown recessions were putting pressure on local government, I remember the kind of things that they were doing. It must have been a temptation for my right hon. Friend the Secretary of State to follow their lead, with cuts in money, cuts in the percentage of funding that was given to local authorities, and cuts in the freedom of local authorities to act.
I was a councillor in the 1980s and 1990s and my local authority, Wigan metropolitan borough council, was losing £8 million to £10 million year on year because of the way in which the Conservative Government dealt with the recession. There was no planning or forward thinking. We got the first indication in November or December and confirmation in February, and we had to start planning our cuts from 1 April. It was a disaster. Cuts were implemented with no thought given to efficiency. It was inexcusable. Programmes were abandoned halfway through because we had been told that we could not have that kind of money. The Government could have done the same this year.
I was chair of finance at Sandwell metropolitan council during those years. I reiterate my hon. Friend’s point. After one settlement, we would start planning for the projected round of cuts in the next settlement. That continued for four or five years, and we ended up with large council tax increases combined with a slashing of public services to keep within the Conservative Government’s revenue support grant.
My hon. Friend replicates my account of my own experience, which is shared by many people who were councillors in Labour-controlled authorities, in particular. As was pointed out by my hon. Friend the Member for Milton Keynes, South-West (Dr. Starkey), who is no longer in her place, the Conservative Government used to gerrymander the system of grants to suit their own local authorities.
The Secretary of State could have done that, in response to the world recession that we are in, but he did not. Unlike the Eton old boys, we have learned some lessons. We learned not just in the 1980s and 1990s, but in the 1930s, that the way to make sure that we come out of a recession is not through public sector cuts, but by investing in that to slow the recession down and by investing to grow for the future.
The effect of the present policy, compared with the 1980s, is remarkable. In my borough, we have half the number of job losses that we had in the 1980s and 1990s, half the number of mortgage repossessions, and half the number of businesses going bust. Local government is a major factor in that. Obviously, central Government play a hugely important role, but local government is able to put the funds from central Government into ensuring that people’s homes are protected, businesses are supported and jobs are saved.
Would not local authorities be even more effective at economic development if we returned to them what a Conservative Government took away, namely full discretion over business rates? They could then run their cities and towns competitively in order to attract business and prosperity.
The proposal to return business rates to local government has a lot of merit, but it should not be considered in isolation. If we are to look at how local government is financed, we must do so in the round, rather than through a single issue, as I am sure the hon. Gentleman understands and agrees. However, I take on board his point about the return of the business rate to local government.
One major thing that we have done over the past few years is introduce the certainty of three years’ funding, ensuring that local government is able to forward plan and develop strategic responsibilities. That has been a major element in the improved efficiency of all local authorities. The National Audit Office’s figures show that almost every single local authority throughout the country, irrespective of party control, is more efficient and more effective than it was in 1997 at delivering its services. A major aspect of that has been the ability to plan three years on three years, rather than having to go hand to mouth as we did in the past. I do not know where the Opposition stand on that process, but it would be interesting to hear an indication—something that we could hang on to. Will they continue or abandon the three-year process?
Our concern is that the Government have abandoned the process. There is no comprehensive review and, apparently, no prospect of one. The hon. Gentleman would be better off asking the Minister whether his own Government have abandoned it, rather than asking the Opposition whether we will.
The Government have not abandoned that process. Clearly, we have a problem with the comprehensive spending review, and we all know that, but it would be nonsensical to undertake a comprehensive spending review immediately before an election that could lead to a change in Government, as it would have been in an economic downturn, which could have been a depression if we had followed the economic advice of the Conservative party. The Government’s policy is that the three-year settlement will continue from next year.
Despite the hon. Lady’s intervention, there was no commitment from the Opposition to a three-year spending review or package, but if local government is to plan properly it needs that commitment. If you want to think about the things that local government needs, you really ought to think about that, rather than some of the nonsense that you were coming out with earlier.
Order. May I just gently say to the hon. Gentleman, as I said to the hon. Member for Croydon, Central (Mr. Pelling), that debate is conducted through the Chair? I know that the hon. Member for Wigan (Mr. Turner) did not intend to abuse me with the pejorative language that he just deployed, but it would be good if he avoided a repetition.
Thank you, Mr. Speaker. Perish the thought that I would ever do anything to earn your wrath and ire.
I shall provide a couple of examples of what the three-year funding certainty has given us. First, on housing, we have 26,000 council houses in Wigan, and every single one has been brought up to the decent homes standard. We have been able to do so not only in the public sector, but in the private sector, where many thousands of houses have also been brought up to that standard. That is largely due not only to Government money, but to the certainty of being able to plan year on year.
Secondly, on education, we have been awarded a Building Schools for the Future programme in Wigan. That has now started, and we have a programme to rebuild every secondary school in the borough. I should also mention three primary schools: Canon Sharples, Woodfield and Westfield. For years under the Conservative Government, pupils at Woodfield were taught in timber huts, where in winter they were freezing and in summer they were sweltering. We have totally rebuilt that school under a Labour Government, and shortly we will start on Beech Hill primary school.
Most importantly of all, throughout the borough we have 19 Sure Start centres. These are not just glorified nursery schools; that is only part of the job that they do. They are also places where parents learn parenting skills. We do not live in a broken Britain—a silly, trite phrase; if we did not know better, we would think it was thought up by some second-rate advertising trainee—but we do live in a Britain where there are people and families who have very difficult problems, and Sure Start is one way of addressing those problems. Mums—many of them are 15, 16 or 17-year-olds—who come from dysfunctional families can go to Sure Start centres and start to learn how to be good parents and how to be communicative beyond their small peer group. They can learn social skills and, equally, the skills that can get them into work once their parenting responsibilities are less onerous.
Sure Start is absolutely essential to the long-term programme to give children from dysfunctional families, and those families themselves, a better start. They benefit from going from these facilities into much more modern primary schools, and then into modern secondary schools built under this Labour Government’s Building Schools for the Future programme, which the Conservatives have not yet said that they would continue with in government; in fact, as I understand it, they would reduce it dramatically, if not scrap it completely. This is a whole package of long-term reform that will reap rewards not only next year but 10, 15 or 20 years down the line. It would be class vandalism for any party to stop or reduce any part of that investment in our people’s future.
We have come a long way, but we could go further. We should implement not just a three-year settlement for local government but a rolling three-year settlement so that every year people will know three years in advance how much money they will be getting. Local government would then be able to plan even more effectively than it does now. I understand that it is not for the Department for Communities and Local Government to make that decision—it needs to be decided throughout Government, and with Treasury agreement. However, it would enhance local government’s ability to deliver its services more effectively and efficiently, and there would be benefits to the public good as a result.
With local area agreements, relaxed targets, Total Place agreements between councils, and health trusts, we have come a huge distance, but we need to go further. The council tax system is inherently unfair. It was designed to be unfair, so producing such a system was one of the few things that John Major managed to succeed in. It surely cannot be right that a millionaire old Etonian in Notting Hill pays only three times more in council tax as a minimum wage earner pays for the same local services. I personally like banding. It is simple to understand and to administer, but we need to reform it. We need more bands at the bottom and more bands at the top—an open-ended banding at the top, I would suggest—so that, as my hon. Friend the Member for Milton Keynes, South-West (Dr. Starkey) said, the amount of money that is paid more accurately reflects the income of people and their ability to pay for those services.
Revaluations should be carried out on a regular basis. We should never have cancelled them in the first place—we should have gone on with them at the beginning of this Government and done them again since. As the hon. Member for Falmouth and Camborne (Julia Goldsworthy) said, if we do not do this we will bring the whole system into disrepute; it will become similar to the poll tax in having to be totally reviewed in future. We can do that revaluation—it is not a difficult exercise. Every month building societies tell us by how much house prices have risen or fallen over the period. If they can do that on a monthly basis, I do not see why the Government, via the Valuation Office Agency, could not do it every four or five years. Let me reiterate what my hon. Friend said, because it did not seem to have any impact on the Conservative spokesperson. This is a zero sum game. Having a revaluation does not mean that local authorities will get more money. They may choose to get more money from it, but that is a different issue and a different argument. Some people will pay more, and some will pay less. It is important that there is some kind of damping effect in revaluations so that those who pay more are not suddenly faced with 10, 15 or 20 per cent. increases but they are brought in gradually. It is absolutely essential that we have revaluations if we are to ensure that the system does not fall into disrepute again.
The final area in which we need reform is the grant itself. The formula is about right, as it recognises deprivation and the needs of councils to tackle the problems that come from that deprivation. It also recognises rurality and the extra costs of delivering services in sparsely populated areas, but it has not been fully implemented. We are still suffering from the disgraceful way in which the previous Conservative Government gerrymandered the grant to their own local authorities. In the years from 2008-09 to 2010-11, Wigan will have been underfunded by £8 million, £6.5 million and £5.5 million respectively—a total of £20 million over those three years.
There is no doubt that there has been year-on-year improvement, and it has ensured that we are getting closer to the target. We have moved from 6 per cent. below it in 2008 to 4 per cent. below now, but we have to quicken that pace if we are to tackle deprivation properly in areas such as mine. That is all the more important when councils are linked in with primary care trusts. One difficulty is that local authorities and PCTs are now delivering services on a common basis much more. They have common offices, pooled resources and joint funding. When a local authority is underfunded, such as Wigan and many others, the PCT that serves the same area is underfunded. In Wigan, the PCT was underfunded by £26 million in 2008-09, £25.5 million in 2009-10 and £25 million in 2010-11, so £76.5 million that should have gone to Wigan borough for its health services has not. If we want to tackle the health and social inequalities that exist in our country, we must urgently tackle health and local authority funding inequalities.
There is no doubt that that would cause problems for local authorities that are overfunded. I heard the hon. Member for Richmond Park (Susan Kramer) complain about the funding for Richmond. We hear a lot from the Liberal Democrats about the fact that they believe in equality, yet here we can make an impact in that regard by reducing the amount of money that Richmond gets—it receives more than 200 per cent. more than it is entitled to. We could reduce that and put it into areas such as mine that are underfunded.
I think that my hon. Friend’s point was that the situation is a bit similar to that of the council tax revaluation. The longer the period over which we try to deal with such issues, the more out of kilter they get. That makes it more painful for areas waiting to get up to their target funding, and more painful for areas that are a long way above their target to get back down to it. Because the problem has not been addressed over a shorter period, it has become even more of a problem to deal with.
That is not my understanding of what the hon. Member for Richmond Park said—I will read Hansard. I believe that the hon. Member for Falmouth and Camborne agrees with my point that we need to move more quickly towards the formula funding, so that each local authority gets the grant that it is entitled to under that formula. I welcome that agreement, as it is very important that that happens as quickly as possible. The pace of change is vital to local authorities if we are to achieve things.
Finally, I welcome the confirmation of the settlement, which I hope will make local authority funding more effective and better in future. The three-year settlement builds on 10 years of growth in funding and allows local authorities to plan. Because of all the things that the Government have done over the past 12 years, local government is in a much better place than in 1997 when we came into power.
One of the delightful things about this debate was that the Secretary of State launched it, which is a little unusual. He gave a premier performance. He managed to present figures by using percentages where they were appropriate and actual figures where they were not—it was the performance of a magician, and I look forward to Debbie McGee following it up at the end of the debate to solve the whole thing for us. I suppose, as it has been put to me, I am speaking from a position of poacher turned gamekeeper, or watching from the sidelines. Today’s debate has been intriguing. We have wandered round all over the place before eventually coming back to the subject, which I intend to keep to.
The Minister said that the Government gave a generous cash increase of 4 per cent. to local government. In those broad terms, as a headline, that is correct, but as with all local government announcements, those who gain are silent, with one or two exceptions, such as the hon. Member for Wigan (Mr. Turner), and those who lose complain. In London and the south-east, local authorities have had plenty of opportunity to complain and plenty of reasons to do so. In a way, it is fortunate that they have recognised that we are at the end of the three-year cycle and that they are looking for post-election changes, whoever the Government will be. They have knuckled down to produce savings, to ensure that they provide better services at a lower cost, so they do not hit their local citizens with high charges.
What has happened under the 4 per cent. increase has varied. The Chairman of the Select Committee touched on this but skidded off it almost immediately. A recent Committee report, “The Balance of Power: Central and Local Government”, reflected on local government expenditure and local council tax. Successive Ministers, some of whom have attended the debate, would tell us that the ties, targets and bureaucracy for local government have diminished, which they have. However, one must recognise that they have diminished from the enormous high that this Labour Government introduced. There has been a knock-on effect on expenditure and, because of gearing, a massive effect on council tax.
The cry from local government, which is still valid, is that it wants the bureaucracy, auditing, ties and so forth removed, and local councillors, who have been elected by local people, to be given the opportunity to get on with the job with the minimum of direction from above. The implications of that include considerable savings for both central and local government—an easy example is the Audit Commission, which is five times the size it was in 1997.
As a response to that reaction by local government, the Local Government Association recently produced a paper that said it could cut the total bill for local government by £4.5 billion, with a positive knock-on effect for central Government. If that were extended to the structure of local government finance, there could be large reductions in council tax, because there is reverse gearing. Gearing was mentioned earlier, but if savings were made in the right sort of areas, there would be reverse gearing, so council tax would go down.
Perhaps the Government will heed those points. After the election, whoever wins, I hope to have the opportunity to take the new Secretary of State to some local councils—I am thinking in particular of one that my hon. Friend the Member for Putney (Justine Greening) knows. I want to have people explain to him or her in no uncertain terms just how damaging the current Government have been to local government, regarding not financing, but the burdens they have placed on it.
Of course, the behind-the-scenes selective local government funding cuts have not come up in the debate. As I said, we are at the end of the three-year cycle and there are going to be changes. One problem with a set three-year cycle is that the Government are inflexible. In the current financial situation, it would be risky for them to be too dogmatically tied to a three-year spending cycle. Over the next three years, flexibility will be required.
Local government claims that its cost inflation is running at approximately 3 per cent. In the light of that, the 4 per cent. is generous, but the distribution, even under this Government—or perhaps particularly under this Government—is slanted. For example, it has not been mentioned tonight, but for most authorities in London the grant increase is only 1.5 per cent. Many of those authorities, especially in inner London, face the sort of dire problems that the hon. Member for Wigan raised. Those authorities are struggling with those problems, although hon. Members have failed to recognise that and, indeed, have criticised the funding for two inner-London authorities, one of which I know quite well. It would benefit those complaining to take a tour of those local authorities to see what has been done with much less money than in other local authorities around the country.
There will be the threat of capping, but those London authorities will probably look for, and find, efficiency savings so as not to pass excessive costs on to their council tax payers. The same applies in many south-east authorities. My constituency receives services from Mole Valley district council, Guildford council and of course Surrey county council. All are Conservative controlled and all would have been delighted to have received a 4 per cent. increase in grant. In fact, going by trends over many years, they would have been utterly amazed. Guildford’s formula grant increased by 1.45 per cent.—not by 4 per cent. This 1.4 per cent. increases Guildford’s grant to approximately £62 per head. The average for English district councils is approximately £79 per head. Mole Valley district council would have been delighted with Guildford council’s increase, let alone the 4 per cent. Government headline, because it received a 0.5 per cent. Government grant increase. Following the same trend, Surrey county council’s grant increase was 1.5 per cent., which follows on last year’s 1.75 per cent. and the year before, which was 2 per cent.
I look at the figures for Mole Valley and I see that it will receive 30 per cent. more than the formula funding says that it should get in 2008-09, dropping to 21 per cent. more next year. How can the hon. Gentleman justify any increase above the floor when the council already receives so much more than it is entitled to? Moreover, half of the super-output areas in Mole Valley are in the top 10 per cent. most affluent in the country.
It might help the hon. Gentleman if he took half a day to come with me to some of the Mole Valley villages, which have deprivation to match anything he has in Wigan. In addition, he should think back to when we had an Office of the Deputy Prime Minister and the funding formula changed dramatically. That change reduced the grant to Surrey county council and the local district councils dramatically. The year-on-year loss to Surrey county council was £39 million, and that loss was reflected by the other councils. The hon. Gentleman should reflect on the fact that the money moved with the change in the formula, but that does not mean that the formula is right.
I accept that there are differences in needs from authority to authority, and that this must be reflected in the allocation. But even the Audit Commission a few years ago commented on the fact that there had been a huge shift of grant from London and the south-east to the north and predominantly—at that stage—Labour authorities. The needs indices calculations are opaque. They are much more unintelligibly dense and complex than pre-1997. Pre-1997, shadow Ministers claimed that they would make the formula more transparent. I note, with some trepidation, that my own Front-Bench team says the same. Of course, it is always a balance. The more transparent and less complex a formula, the more there is rough justice. The fairer the assessment system—taking into account detailed needs—the more complex the formula. However, recent Government formulae have been designed to justify grant movement north despite increasing pressures from population, increased school rolls and increasing Government bureaucratic red tape in London and the south-east. I hope that we will have a new Conservative Government, who will have a massive reorganisation on their hands. It is overdue.
I spoke in a similar debate a year ago when we discussed the previous financial settlement. I struggle to see where the massive improvement that the Secretary of State talked about in his opening remarks has come from. Instead, there is greater uncertainty, and the attitude of central Government to local government during this year can be described only in terms of a master-servant relationship. One specific piece of legislation illustrated that fact for me and many other hon. Members when it was in Committee and as it progressed through the House earlier in the year, but I shall come to that later.
Is the settlement really an attempt, as the Secretary of State made out, to talk up a Labour view of localism? I cannot recognise it as localist, and I do not think that any councillors could either. Overriding everything is the feeling of utter powerlessness of councillors, and that was one of the major reasons many stepped down at the last elections. Many still have that feeling of powerlessness, and nowhere is that more apparent than when it comes to money and their ability to set their own budgets.
The Secretary of State referred to the importance of this time of the year, not just in relation to this debate, but because of the budget setting that many councils are going through and how the information before us feeds into it. My former colleagues on my own county council remain as frustrated and disappointed as I used to be every budget time because of the little influence they have in setting the budget and allocating money to their own priorities in the area covering a range of different subjects. That is partly a question of ring-fencing, and again the Secretary of State made great play of having improved the business of ring-fencing.
In preparation for this debate, I asked my local council to give me an idea of the ring-fenced and non-ring-fenced balance amounts. I have an e-mail from the finance and procurement team stating the latest grant figures for 2010-11: a total of £526.2 million, of which £484.8 million is ring-fenced and only £43.2 million is non-ring-fenced. When it comes to councillors being able to use the money and make changes according to their own lists of priorities, even major councils with overall budgets of about £1 billion have just a few tens of millions of pounds at the most. That is not the reason councillors—there are many former councillors in the Chamber—stood for election.
Does it not have a tremendously debilitating effect on both the quality of candidates and on voting if people do not feel that councillors have real influence in the community or can make a difference? Is it not in many ways a reflection of the pretty poor state of British politics? Does it not in reality underline how the Executive continue to absorb powers whether from Parliament or by abstraction from local discretion?
The hon. Gentleman makes some powerful points with which I agree. The Local Government Association has done some survey work showing that a large majority of people think that councillors should have the ability to make financial decisions. If anybody is to cut anything in their own area, they believe that it should be local councillors, who stood for their position, and over whom they have a great deal of democratic control and see regularly. I worry that if we carry on like this, it will be more and more difficult to recruit people to stand for election, because what will be the point of standing for election?
The challenge of running an authority with a budget of £1 billion is completely frustrated when one gets down to the £20 million that can be distributed. The talent that is out there—the people who would otherwise come in and make a contribution—will simply go elsewhere, including to the golf course. I have nothing against golf, but if I had to choose between recommending that somebody play golf in their retirement and recommending that they be a councillor, I hope that I would be able to persuade them that it was still worth becoming a councillor.
Ring-fencing has clearly made no impact whatever on the current situation. However, formal ring-fencing is only part of the problem, because even where it has been formally lifted and the funds transferred to the area-based grant—I am thinking of the Supporting People grant—it is still not possible to show genuine localism. Are the Government seriously saying that simply transferring the Supporting People grant to the area-based grant will give councillors the choice between spending on the Supporting People programme and spending on roads? That simply will not happen. In addition to legal ring-fencing, there is therefore also a practical ring-fencing that has happened with many grants, even where they have been shifted.
We also need to focus again on the need for certainty. There are some examples, which I shall come to, of the Government creating considerable uncertainty about the funding for local councils. However, I do not accept the points made by the hon. Member for Wigan (Mr. Turner) about the reasons why his Government have not pursued a three-year settlement, particularly when the Local Government Association has shown that the funding gap by 2013-14 is likely to be in the region of £11 billion a year. That level of uncertainty is difficult for councils to live with.
The Secretary of State also boasted of the overall increases in local government funding under this Government’s administration. However, if he is going down that line, he has to look at the totality of individual councils’ settlements. He can no longer concentrate on only one side of the profit and loss account. If he is going down that line, he has to accept the other side of the profit and loss account: the cost side, and the increases in those costs. Indeed, the percentage of expenditure that is borne by council tax increased from 22 per cent. in 1996-97 to 26 per cent. in 2006-07.
Councils in my area have experienced a couple of issues that illustrate that point, and one of them is personal care at home. I know that that was covered in the House recently, but there are some specific issues about it, one of which is the cost. It is difficult to know what the cost will be. The Government have produced some airy figures, but it is difficult for councils to assess what the costs of the measure will be to them. First, there would be a loss of income from some of those who currently pay for care arranged by the council. Councils will need to assess what that loss might be, but that is not straightforward. It involves reviewing the detailed circumstances of everyone who currently receives domiciliary care to see whether they would be eligible for free personal care.
Secondly, some people will have not presented themselves to adult social care, but will decide to come forward if they can obtain care for free. Trying to work out the figures for that is almost an imponderable, but given the experience in Scotland, they are likely to be great. The other aspect of personal care at home is about placing the risk and determining where it lies. Given that the amount proposed for personal care at home in the area-based grant will be fixed, all the financial risk will be put on local authorities if the costs are higher than anticipated. The Association of Directors of Adult Social Services has already made its estimate, which is considerably higher than the original costing in the Budget. There is a review of that in 18 to 24 months, so that could leave significant pressure on councils until any changes are made.
The council side of that funding is supposed to come out of more efficiency savings. I rather took exception to the Secretary of State's comment that, when councils had shared services and shared their management with the primary care trust or whatever, they could complain about being made to make efficiency savings. My own county council and district council have shared services that are in operation; in fact, I was the person at the county council who put that in. The councils have shared senior management. We share a director of public health with the PCT. My district council has shared management with the neighbouring district council. Both those councils have year after year had robust and aggressive efficiency saving targets, which year after year they have met.
Perhaps in the winding-up speech the Minister—or if he would like to intervene now, the Secretary of State— would like to tell me what I am supposed to tell councils such as my own, which have already gone through the pain of that, registered that pain with their voters, come through and increased their majority at the county council elections. They will feel insulted that they are dismissed in that way and that all that effort and pain was, in his idea of things, for nothing.
Two other issues arise in respect of pressures on funding. I have no idea how widespread those issues are. I suspect that one is more widespread than the other. One is unaccompanied asylum seeker children. There have been ongoing pressures in that area in Oxfordshire since 2002-03. There was a special circumstances grant of just under £500,000 in 2008 for 2008-09, but it does not reflect the ongoing shortfall, and the current forecast for 2009-10 is for an overspend of £800,000. There is no suggestion that that will be funded by central Government.
The last illustration of an area that has not been costed is the abolition of the Learning and Skills Council. That will pose a major challenge for directorates in county councils, which will have to reorganise their services to deliver what the Government want. There is not expected to be any additional funding to enable that to happen. There are burdens, too, from the micro-management of partnerships.
At the evidence session on the Child Poverty Bill, Paul Carter, leader of Kent county council, discussed the big outcomes of the first round of local area agreements. He admitted to having been a sceptic initially, but he was won round by the size of the outcomes. However, he complained bitterly about how the LAA had descended into micro-management and had become far too complex, and with that complexity will come considerable cost.
There are initiatives that could make a big difference on the cost side. One of them has been mentioned by many hon. Members, and that is Total Place, which is not just about the money that is saved by eliminating duplication. It is also about how services can be reconfigured. I want to stick to the money part of it. There is huge criticism of the way it operates. Again, at the evidence session on the Child Poverty Bill, the leader of Kent county council made it clear:
“There is still a silo mentality across the public agencies, which are acting in isolation and not in concert. If you can get them all working together in a defined area with the totality of their budgets…public agencies will start to deliver things in a fundamentally different way.”––[Official Report, Child Poverty Public Bill Committee, 20 October 2009; c. 53, Q124.]
However, the biggest culprit as regards participating in an open way with Total Place is the Government, particularly the Department for Work and Pensions. Richard Kemp, the deputy chairman of the Local Government Association, who is a councillor in Liverpool, provided an example. He said:
“In my area, someone from Jobcentre Plus was supposed to be leading the worklessness stream, which is of vital importance in Liverpool. She pulled out because she said that it was not part of her day job, although we were trying to create a partnership to help her do her day job in that case.”––[Official Report, Child Poverty Public Bill Committee, 20 October 2009; c. 63, Q137.]
The Government really need to look at themselves if they are to establish how they are going to make Total Place work.
I mentioned the evidence sessions on the Child Poverty Bill because this provides a very good example of the master-servant relationship that we have seen between central and local government this year. I will not detain the House by recapping the Bill, but broadly speaking, the Government set national targets in the first part of the Bill and then handed it all over—just dumped it—on to local government in the second part. They ignored the fact that many councils were already doing a tremendous amount of work, and they imposed a new duty that many people, including those we took evidence from, consistently said was not necessary. They imposed a level of bureaucracy, which must have a significant cost element to it.
When it came to the impact assessment, however, it showed a minimal cost amount. That is hardly surprising because the meat of the Bill was in the secondary legislation, which had not yet been introduced. How on earth was it possible to make an accurate costing of the effect on local councils and their budgets—in other words, how much would need to come from council tax—if the very secondary legislation was not there, not even in draft form, to enable such an assessment to be made? That is highly illustrative of the Government’s approach and attitude towards local government. That is another nail in the coffin for people with talent, interest and enthusiasm coming forward to take part in local government.
It is time for the Government to play fair with councils and with council tax payers. It is time for some real localism and it is time that we set out to encourage real innovation. It is lying out there among the general public. They need to be brought into local government so that they have a chance to show their innovation, particularly in the delivery of services and particularly in the costing of those services so that they deliver real value for money.
Many of us have confessed our local government experience, and I probably have more to confess in that respect than others, as I was elected to Croydon council in 1982, serving there until 2006, and I also served as a London Assembly Member. If I am allowed to be a little sentimental, I perhaps have an obsessive interest in local government financial settlement systems owing to the fact that my father was a senior civil servant who dealt with these issues in the 1970s, and matters associated with the Layfield report.
It is fair to say that during the extended period of economic growth, moneys to local authorities were very generous. Indeed, the amount given to local authorities has often been greater than the corresponding overall rate of growth in the UK economy. Nevertheless, it is a bad habit of Government to continue to centralise and to restrict the room for manoeuvre for local authorities, despite the slight row back on the part of Government in recent times.
I very much feel that the removal of the business rate inflicted substantial damage on the borough of Croydon and greatly undermined the very good work that Lord Bowness did for Croydon council and the town during the 1980s and early 1990s.
Speaking as someone from Croydon or for central London, I believe that the removal of the business rate has had a positive side, but it has had a negative effect on much of the rest of the country where there is little business. That is why, in my personal opinion, there must be equalisation across the country; otherwise many local authorities with no or next to no businesses will be savaged.
The hon. Gentleman has demonstrated his long-standing experience of local government, along with a recognition of the inevitability of Government involvement. In my view, while authorities continue to have a degree of discretion, equalisation is inevitable. I think that that 1980s Croydon local authority adopted a rather municipalist approach, perhaps a little more independent than the more robust conservatism represented by the hon. Gentleman.
The former Mayor of London rightly recognised that many suburban areas in outer London faced considerable challenges, and I think that that applies particularly to Croydon. We suffer, or perhaps enjoy, dynamic population changes—what could be described as “population churn”—while also confronting the challenge posed by the Government’s desire to remove a significant number of public sector jobs from the area.
The Government are right to emphasise the £20 million of extra grant that Croydon will receive this year. There is no good reason why the borough should not be able to match the Labour authorities that are aiming for a zero per cent. increase—or, as that is rather a Brownism, perhaps I should say a freeze—in council tax. Nevertheless, Croydon has fundamental underlying problems.
I will make only the briefest reference to a Regional Select Committee, as another Member was chastised from the Chair in this regard. However, I think it is a positive result of the establishment of Regional Select Committees that the London Committee is examining the important issue of the forthcoming census and its impact on local government financial settlements and other public sector flows.
According to evidence given to the Committee by the London borough of Croydon, its population is likely to be 37,000 greater than the 340,800 that is presumed by the Office for National Statistics and used in local government financial settlement processes. Moreover, 41,034 migrants have registered with GPs in the last seven years, and 25,290 national insurance numbers have been given to non-British workers by Jobcentre Plus over the last three years. Those fundamental problems are undermining the credibility of the moneys given to the borough.
The operation of the area cost adjustment and the distinction that is made between west and east London—Croydon being regarded as an east London authority—have led to a cumulative shortfall of £16 million. Obviously the operation of the ACA is valuable, but the way in which it is not applied to specific grants has a distorting and unhelpful impact on Croydon’s allocations. The difference between the amount given to one authority and the amount given to another can be hard to explain. The London borough of Croydon considers itself to face challenges similar to those faced by the London borough of Enfield—in fact, I think it faces rather more severe challenges—but Enfield receives £423 per head, while Croydon receives £348. That is difficult for the authority to explain to local residents and taxpayers.
In addition, the authority could face significant pressures as a result of changes in the funding of the freedom pass in London. Given that support for London local government as a whole is to be reduced by £28.6 million, Croydon will lose £1.3 million. Croydon must also spend £1.9 million a year on supporting migrants—or asylum seekers—who, having exhausted the legal system, find themselves with no recourse to public funds. There has been considerable controversy about the decision to close the asylum walk-in centre in Liverpool and to concentrate activities in Croydon. I feel that the Home Office has turned a deaf ear to our concerns, and I have organised a petition on the issue which is securing a great deal of local support.
I plead for the Department for Communities and Local Government to adopt a more open-minded approach, and to agree that, perhaps over the coming year, it will try to measure the number of additional asylum seekers who are resident in Croydon, in order to see whether the local authority’s demand for a better allocation is fair.
A couple of years ago, a former DCLG Minister, the current Minister for Borders and Immigration, the hon. Member for Oldham, East and Saddleworth (Mr. Woolas), got quite animated with me when I expressed concern about the amount of money that Croydon received, and reference was made to local enterprise growth initiative money. The point was made to me that £77 million of LEGI money came to Croydon, but in reality that money is not guaranteed, and there is a great deal of uncertainty as to whether it will continue to be given. That is an important concern.
I am also worried about the negative effect on a very weak local economy of the supplementary business rate in terms of all of that money being abstracted from Croydon businesses and being spent entirely on Crossrail. That will have an adverse effect on potential positive investments in the business improvement district in Croydon.
It is important that Croydon council aspires to achieve the same as some Labour councils in London have achieved: a council tax freeze this year. The incomes of many Croydon residents are either going down or are frozen, and they would find it entirely unaffordable to have yet another increase, especially bearing it in mind that the London Borough of Croydon has increased the council tax by the maximum amount allowed under the informal capping system. I am joined in this call for a council tax freeze by Labour councillors in Croydon, but they have no credibility as they previously increased the council tax by 27 per cent.
Let me turn now to a matter of great concern, on which I hope the Minister will be able to help. At a time when Croydon council is making real cuts—not merely efficiencies—in services, it has arranged for a loan of £145 million in order to build a new town hall. In addition, there is the prospect of £93 million of interest payments until 2036, making a total of £238 million. Considerable concern has been expressed to me by residents who have received a communication from the Labour party suggesting that the total cost will be £1,115 per household. That is a kind underestimate, as it does not take account of interest payments. The real cost for residents is £2,016 per household.
I well remember the very important speech given by Neil Kinnock at a Labour party conference about how it was obscene to see Derek Hatton’s Liverpool council issuing redundancy notices by taxi. In some ways, I think it is similarly wrong for Croydon council to be setting about cutting services while at the same time putting aside the equivalent of £3.5 million a year to service such a large loan for such a project. Now is not the time to be building a new council headquarters for the benefit of councillors.
The hon. Gentleman has identified an interesting trend. The proudest boast of the leader of Hammersmith and Fulham council is that he has got rid of 1,000 jobs in the last three years—he has sacked 1,000 people in the middle of a recession—yet that same council is investing £35 million in a new extension to the town hall. These municipal monstrosities are examples of just the sort of grandiose projects of local government that we thought were things of the past, but they are not. This is not only happening in Croydon, therefore.
I am extremely interested to hear that similar projects are being pursued elsewhere in London. It has always been a great weakness of local government and local councillors that they are obsessed with the grandiose, and with aggrandisement at home in the town hall, when it is services that are important. It is wrong that services are being cut back at the same time as such new projects are being taken on. This loan with the Public Works Loan Board is in place, but it has not yet been drawn down. Will the Minister have an opportunity to assess whether this really is appropriate behaviour? I know that our appropriate approach is to say that local authorities should be given discretion to make their own mistakes, but I think that this mistake will fall very heavily on Croydon council tax payers in future, particularly given that the local authority refuses to provide much detail on what the contract involves. It has been taken out in partnership with John Laing plc, which is no longer a public company—it is in the ownership of a private equity fund. Bearing in mind the difficult state in which private equity finds itself in terms of financing from the City, this is a dangerous circumstance for the local authority to have involved itself in.
The hon. Gentleman may be surprised to learn that the same problem occurred in Castle Point a few years ago under a Conservative Administration. It built what is known locally as “the bunker”, spending millions of pounds in the process. That has proved to be a very expensive waste, it is much underused and local people are still paying for it.
A worrying trend is being revealed in this debate. It is incumbent on local authorities to be concerned primarily about services, rather than about building new town halls. If Croydon council desires to move location, the best way of doing so would be for it to become a tenant of Stanhope, which has the real desire to start developing on the site next to East Croydon station. No doubt many Members have taken a flight from Gatwick and seen the desolate site next to that station, which gives a bad impression of the town. If the development of that site can begin, that would provide confidence to others to invest in the town. Such an approach from the local authority would have more vision and would have a multiplier effect on investor confidence in Croydon.
It is also important to stress that local authorities face great dangers in being obsessed with their own party political propaganda. In many ways, I can often see little difference between what is produced by the chief executive’s office and by the campaign of the Conservative parliamentary candidate in Croydon, Central. A recent example of that could be seen during the launch of a petition calling for extra police for Croydon. It is extraordinary that the council should be campaigning for extra police given that it has discretion to provide funding for extra police and that it is of the same party as the Mayor of London, who could decide to provide more police to Croydon. Indeed, the local London Assembly member, Steve O’Connell, is also chairman of the finance sub-committee that could decide to provide extra money for police. It is nonsense, and it is an abuse, for Croydon council to be spending money on this matter, given that at the same time as the council launched the petition it was also launched through e-mails from the Conservative parliamentary candidate. It is an inappropriate use of public money to have such a close relationship between a parliamentary campaign and the spending of council money.
As many Members have said in Westminster Hall debates, there are also great dangers in councils trying to get into the media business. The number of newspapers being produced by councils is unacceptable and risks undermining things. I know that the hon. Member for Ealing, Acton and Shepherd’s Bush (Mr. Slaughter), who takes a great interest in the performance of Hammersmith and Fulham council, has been very critical of the way in which his local authority does that. I believe that the Your Croydon newspaper wrongly continues to be run so closely with the Conservative parliamentary party campaign and to give great prominence to things during this election purdah period.
Finally, I wish to return to the issue of the role of business, because the pro-business borough was at the very heart of Croydon’s success in the 1960s. I know that, in many ways, the approach taken then had many weaknesses: it was very municipalist and dirigiste, and it was perhaps a little old-fashioned compared with the more appropriately aggressive and laissez-faire approach taken in the London borough of Wandsworth. Nevertheless, co-ordination and co-operation between the council and businesses has an important role to play.
It is fundamental to note that moneys are taken away through the business rate and the supplementary business rate, but we have no prospect of any of that supplementary business rate being reinvested in Croydon’s economy. We need to deal with the significant issue of trying to improve confidence and reduce the fear of crime in the centre of Croydon—a justifiable fear, bearing in mind the number of killings that we have had along the A23 corridor—and of trying to leave some money behind. May I call on the Government—I know that the London Mayor also has some discretion—to try to use their persuasive powers so that some of that money comes back?
I am very impressed by the campaign that is being run by Max Menon of Allders, the only remaining Allders store in the country. Calling for some discretion and for moneys to be returned to Croydon means that we can defend an exposed and fragile economy that, unfortunately, has not been helped by some real lack of vision from the local authority in Croydon.
We have had a most interesting debate that has, at times, ranged far more widely than the 2010-11 local government settlement and over a far wider time frame. The settlement means that every one of the 421 councils in the nine English regions will receive an increase in their formula grant this year, as they have for the past two years.
The hour is late and I shall confine myself to thanking the right hon. and hon. Members who have made such valuable and interesting contributions to the debate. There have been contributions from the hon. Members for Falmouth and Camborne (Julia Goldsworthy), for Croydon, Central (Mr. Pelling), for Richmond Park (Susan Kramer), for Cities of London and Westminster (Mr. Field) and my hon. Friends the Members for Milton Keynes, South-West (Dr. Starkey) and for Wigan (Mr. Turner), as well as many other hon. Friends who took part in a debate that was, on the Government side of the House at least, extraordinarily well attended. In deference to the injunction from the Chair, I shall not mention the concerns about the dubious mathematical basis of the assertions made by the Conservative Front-Bench spokesperson. However, I think that all Members present welcome the stability offered by this, the first ever three-year settlement. I reassure hon. Members that this Government have every intention of having another three-year settlement. I hope that it will be as fair and as good as this one.
Question put and agreed to.
Resolved,
That the Local Government Finance Report (England) 2010-11 (HC 280), which was laid before this House on 20 January, be approved.
Council Tax
Resolved,
That the draft Council Tax Limitation (Maximum Amounts) (England) Order 2010, which was laid before this House on 20 January, be approved.—(Helen Jones.)