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7.10 pm

Mr. Don Foster (Bath): I am delighted to follow the hon. Member for Barnsley, East and Mexborough (Mr. Ennis). I share his concerns about the lack of time allocated to this very important debate and about the current mechanism for funding local government, which, as he rightly pointed out, was introduced by the previous Government but which many of us hoped would have been changed by now.

I do not want to belittle some of the improvements that the Government have made to the funding arrangements for local government, not least the significant improvements in capital funding, but I do suggest that the Minister over-egged the pudding in her statements tonight and over recent days.

How can it be, as the Minister tells us, the most wonderful settlement for local government ever, when her hon. Friend the Member for Barnsley, East and Mexborough told us about the cuts in services that his local council will have to make, which I fear will be reflected in many other councils around the country?

We welcome the money that has been announced in the past few days, in addition to the amounts that were announced in the statement in November 2000, but even the recent announcement contains an element of hype. For example, the Minister tells us that there will be an additional £100 million for the neighbourhood renewal scheme, which she would argue brings the total to £200 million. She does not tell us that when the Chancellor initially announced £100 million for the scheme, the Red Book shows that he was also cutting £160 million from the new deal for the communities scheme, which was designed to do the same thing. As a result, even with the additional £100 million that has just been announced, the net increase is £40 million.

Similarly, when I intervened on the Minister a few minutes ago, she acknowledged that the £11.6 million of so-called additional money to help with flood defences was not new money at all, but was from some pot--she could not quite recall which--that the Chancellor had previously announced.

Despite all the arguments that we could have about likely council tax rises, the reality is that increases will be significantly above the inflation rate, despite what the Government are doing. The electorate want to know how that is the case.

Mr. Bercow: Will the hon. Gentleman give way?

Mr. Foster: I will give way if the hon. Gentleman promises to be quick.

Mr. Bercow: I understand and sympathise with the thrust of the hon. Gentleman's argument, but in judging

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the adequacy or otherwise of revenue spending will he tell us what assessment he has made of the effect of the change in the rules on the use of capital receipts from the sale of council houses on the size of interest repayments on local authority debt?

Mr. Foster: The hon. Gentleman makes an interesting point, but I do not want to be drawn into discussing all the details. One of our current problems is that the capital financing system for local government is hugely complex. The one thing that I would love to see more than any other is the introduction of a system that enables our local councils to borrow the money that they judge they need, pure and simple, without all the bureaucracy and complexity. Our problem derives from the decision by the current Government and the previous Conservative Government to adopt a model that is designed to keep as many hands on the tiller as possible, denying local authorities freedom.

That observation leads me very nicely to the subject of freedom for local government, and the problems associated with funding mechanisms. Increasingly, central Government want local government to do more and more--for example, with personal social services--but do not necessarily make available the necessary resources. Our social services departments had already decided that, in the current financial year, they would have to spend well above standard spending assessment, especially on children's services. On average, social services departments are spending 27.4 per cent. more on children's services than the Government expected them to spend. That amounts to £550 million.

Only yesterday, the Local Government Association completed a survey of social services departments, which showed that they budgeted to spend much more than the Government expected. Those departments, collectively, are already £205 million overspent at this stage of the financial year. No wonder local councils up and down the land are unconvinced that the settlement for next year, as described today, will be sufficient to help them to repay the losses that they are making this year, let alone take account of their rising costs.

Rising costs are certainly not being funded by the Government. My local authority, Bath and North East Somerset council, has drawn my attention to the fact that a huge inconsistency between the capital asset thresholds determined by the Department of Social Security and by the Department of Health is to be introduced. That inconsistency will cost my local authority £100,000 in additional costs, which will not be met.

It gets worse. I welcome the Government's announcement in their NHS plan that they intend to boost the quality and availability of intermediate care to reduce the phenomenon of bed blocking. They say that, over three years, that will cost about £900 million, but they expect local government to provide most of the services to meet that aspiration. I have checked today with the Local Government Association, which has analysed the Minister's statement today and can see no evidence of any resources being made available in next year's settlement to help personal social services departments to pay for the boost to intermediate care. It is a further additional burden that local authorities are obliged to fund from their own budgets, which are already stretched to breaking point.

The Government will undoubtedly make an announcement about the teachers' pay award in the next few days. I hope very much that it will be a good

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settlement; we desperately need it. Last September, we were 4,000 teachers short. Pupil-teacher ratios in secondary schools are now at their worst for more than 20 years. We desperately need to do something about that shortage. However, if that good teachers' pay award--some are now talking of figures as high as 3.7 per cent.--is not fully funded by the Government, it will impose huge pressures on our local councils, whose education budgets, too, are already massively overstretched.

It is no wonder, given those additional pressures, that council taxes are set to increase by significantly more than the rate of inflation. The Minister is not prepared to put a figure on it. The hon. Member for Eastbourne (Mr. Waterson) put a figure on it of about 9 per cent. I shall place on the record our figure, because I gave it last November and the evidence suggests that I am yet again likely to be right. I predict an increase of 6.7 per cent., but time will tell. However, the Minister, with her indication, the hon. Member for Eastbourne and I all predict that council taxes across the land will increase by more than the rate of inflation. That is the fault not of local government but of the local government finance settlement from this Labour Government.

The speech of the hon. Member for Eastbourne fascinated me. He says that we should deal with what is out there in the real world, but when he trots out the figures he uses council tax band D figures when it suits him and percentage increases when it suits him better. Let me choose one measure at random--the percentage increase--and remind the House that, for the financial year that has just been completed, the average council tax increase was 6 per cent. under a Liberal Democrat authority, 6.2 per cent. under a Labour authority and 8.5 per cent. under a Conservative authority.

I was staggered that the hon. Gentleman chose to introduce Liverpool into the equation. Of all the councils that he could have chosen, he should not have chosen to attack Liverpool, where, in the two years since the Liberal Democrats took over, the council tax rise was 0 per cent. and 0 per cent. I should have thought that he would welcome that.

Mr. Waterson: Surely the hon. Gentleman accepts that all the experts and pundits agree that the fairest comparison is the band D council tax. If he does, he must also accept that on average it is much more expensive to live under a Liberal Democrat or Labour-run council than under a Conservative council.

Mr. Foster: I said that when the hon. Gentleman wanted to attack authorities, on some occasions, he chose to use percentages and, on others, council tax band D. I therefore chose one of those methods at random. I am sorry if he does not like the figures, but they are correct.

Another important issue relates to the point made by hon. Member for Buckingham (Mr. Bercow), who referred to the global settlement for local government. The amount of money available is part of the problem, but the strings attached to the sum allocated is the second part of the problem. I agree with the hon. Member for Eastbourne that there has been a significant increase in the sums provided by special and specific grants--the strings that central Government attach to local government--but I slightly dispute the figure that he gave. I understand that the increase from the current year to next year is more

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than 20 per cent. I hope that he will agree that the proportion of local government money that came from specific grants, with strings attached, was 4 per cent. in 1997, but that it will increase under a Labour Government to about 10 per cent. next year. In some areas, the increase is considerably more than that.

Specific grants for education amounted to £250 million in 1997, but next year, under a Labour Government, £2.6 billion will be constrained in that way--a tenfold increase. The problem is worse than that, because if a local authority reaches out and takes some of that money, with all the strings attached, it must also find matching funds. Therefore, about £3.3 billion is effectively tied up in specific grants. All evidence clearly shows that the Government talk about reinvigorating local government, but simply cannot let it go. Rather like old, imperial Britain, they are trying to run a huge empire from the centre. They have decentralised tax raising without decentralising the power to match.

As the hon. Member for Barnsley, East and Mexborough said, no progress is being made in distributing the money more fairly. I shall choose some examples at random. Why is a secondary school pupil in Westminster worth £4,271, when a child in Warminster is worth only £3,077? Mr. David Laws of Yeovil has advised me that a child in Somerset is worth more than £200 less than the national average. Many hon. Members acknowledge that there are real problems in urban areas, but there are real problems in rural areas, too. We have not yet devised an area cost adjustment, or another funding distribution mechanism, that truly takes account of real need, so I agree with the hon. Gentleman on that point.

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