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Lord Bowness: My Lords, first, I thank the noble Baroness, Lady Farrington of Ribbleton, for repeating the Statement made in another place earlier this afternoon. I should declare an interest as a member of a local authority. There is one aspect of this Statement which I support unequivocally and which cannot come too soon for me; that is the promised plain English guide to the system.

I believe that this is a Statement which will be greeted on reflection with some dismay by both council tax payers and local authorities. What we have heard this afternoon is a formula for reduced services at increased cost, particularly in view of the more relaxed approach to capping which is envisaged in this Statement and because of the extra costs which must be met by local government.

For Band D taxpayers, who are always taken as a guide, it is a Statement which envisages increases in some local authorities of up to 10 per cent. of council tax or £60 at Band D. I do not believe that Her Majesty's Government can seek to avoid taking responsibility for that by claiming that they are adhering to the expenditure plans of the previous administration. First, they are not; and secondly, it is indeed their responsibility.

What have this Government done for local government since May? They have imposed an additional burden on local government which is estimated at some £1 billion. How is that made up? Principally, price levels are higher. They will have risen by nearly 1.5 per cent. over this year and as estimated over next year, costing local government as a whole £0.5 billion. There have been five interest rate rises since May. Rates are up from 6 per cent. to 7.25 per cent. And the changes in the treatment of advanced corporation tax for pension funds is costing local government an extra £300 million per year. That is not my figure but a figure provided by the Local Government Association, which has a very firm and solid Labour majority. It is no good members of the Government saying that this provision will not take effect until 1999. Councils will want to take action now to deal with the deficit with which many are faced. To leave matters until 1999 will only make the situation worse.

The consequences are that council tax will rise as I have suggested. The claim that the Government have increased funds for education by £835 million is not precisely as it seems. It is money taken from reserves left by the previous government, which would have been applied to education as part of the annual spending round. The effect of higher inflation rates has reduced this to a worth of only £480 million.

I believe that a number of questions arise out of the Statement. For example, how are the Government going to ensure that the money is applied to education? Will the Minister call on her colleagues in Labour-controlled councils to ensure that the money is indeed spent on that? Last year it did not. Is it not the case that the Secretary of State has no existing powers to ensure that

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that happens? Is there not a risk that councils put under severe pressure by the settlement may spend the money elsewhere, especially as the Local Government Association has predicted that there will be a significant shortfall in the total standard spending for non- education services?

The £662 million for educating four year-olds is not new money for education; it is merely recycling money from the nursery vouchers scheme. I ask the Minister what information she can give the House regarding the changes to the methods of distribution. We need to know what the effect of those changes will be. Where will the gains and losses be felt? Is there a shift from the south and the south-east to the north? Is there a shift from rural areas to urban areas? I believe that the House will want to know the answers to those questions. Changes of this nature in the formulae never affect only one authority, were that ever to be the intention of governments. The system is not that sophisticated or sensitive.

The changes in the treatment of debt will, I believe, be a matter of rewarding councils which have run up debts and penalising those which have paid them off. That is on top of the local authorities' supplementary credit Act which has already given a new capacity to borrow rather than releasing the actual moneys, as stated yet again in the Statement this afternoon. The encouragement to increase debt can only be to the detriment of council tax payers in future years. Will not the changes in the "damping" mechanisms, which have been changed themselves, not lead to unacceptably high levels of council tax in many local authorities?

In opposition, the Government made much play of how they would encourage and support local authorities and local services. By this settlement, and in particular their own actions, they have put at risk social services and other local authority services, reduced the value of the benefits claimed to have been given to education and placed another burden on council tax payers, many of whom are just coming to terms with the succession of interest rate rises that they have suffered on their mortgages. It is extra taxation--I know that it is because this time last year the then Shadow Chancellor of the Exchequer described his estimate of council tax rises as "locally-driven tax rises", as did the then Leader of the Opposition. But in the "People's Britain" there were supposed to be no plans to increase tax at all. I say to the Minister that the council tax payers who will pay for the settlement will see it as another tax on the people.

Baroness Hamwee: My Lords, I, too, thank the Minister for repeating the Statement. She must feel something of a poacher turned gamekeeper, or perhaps I have that the wrong way round. Like the noble Lord, Lord Bowness, I must declare an interest as a serving member of a London borough. I have never seen the play "The Mousetrap", but I believe that it must be a little like the Statement--the script remains much the same year after year, despite the new cast. Therefore, it is inevitable that the response from these Benches will not be very different from that given to previous Tory

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settlements; namely, disappointment, verging on despair, combined with anger borne of frustration and pain at what is happening to local services.

The new Government have undoubtedly written a better prologue to the play, but they have stitched it on to rather the same substance. Indeed, the noble Baroness referred quite directly to the previous government's plans which, it appears, this Government may be applying even more toughly. Reference was made to the European Charter for Local Self-Government, but the combination of the grant system and capping envisaged in the Statement does not seem to me to amount to the autonomy envisaged by the charter. I take the opportunity to ask, as I have done previously in this House, when the Government intend to ratify the charter? I am sure that that is very close to the noble Baroness's heart.

The noble Baroness referred to capital receipts and used the word "release". I cannot help but respond that it is not a release; indeed, it is a new borrowing arrangement and local authorities understand that fact. Reference was also made to the recently ratified concordat, the framework for partnership between local and central government. I hope that the consultation referred to in the Statement will mean that, in the future, if real consensus is not reached between the two sides--because that may not be possible--then very constructive dialogue will be organised with both sides listening extremely carefully.

In the run-up to today's announcement, the Government will have been told of local authority concern for education. We have been told about the funding for education. I have to say that I contest the view that it is good news. The Local Government Association estimated in June that LEA spending next year needs to rise by £529 million to meet inevitable costs and to restore pupil-teacher ratios only to 1995 levels.

Pupil numbers are rising and we now have just under 500,000 five to seven year-olds in classes of over 30. If one adds to that approximately £515 million for inflation and the teachers' pay award, education spending needs to rise by £1,044 million just to maintain current standards, the allocation for which we have heard is £835 million from reserves. Local education authorities will be more than £200 million short of what they need to meet basic educational needs in 1998-99. I hope that the Minister will accept that a shortfall of that order means that local government aspirations for education cannot be met.

With regard to the under-fives, the proposals are not entirely easy to follow. My own authority has already declared an interest and I know that it is seriously concerned. It believes that it would lose over £1 million of under-five SSA with a change in the basis for distributing the majority of funding--that is, 30 per cent. of this sub-block. That seems an impossible shift of resources in a single year. It also seems to indicate that the cardinal rule of the SSA system--namely, that an authority's own policies should not influence the SSA--is one which may be on the way to being breached. In other words, it seems not to be the unalloyed joy and benefit suggested by the noble Baroness.

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Reference has also been made to community care. I am sure that the noble Baroness will accept that the previous government underfunded community care. That led to local authorities considering rationing, grasping the nettle and being open about it in a way we have not yet seen in the health service, although I believe the issues are rather similar. It appears that in this area six out of 10 authorities will have to increase their charges at a rate above inflation; four out of 10 will have to introduce charges for services which were previously free, which means restriction on access; and seven out of 10 will have to tighten eligibility criteria. That, too, means restriction of access. The police and fire services and those who provide a whole raft of environmental and protective services still believe that there are considerable shortfalls.

Many noble Lords will have received representations from local residents as well as from local authorities as to the effect on their services. Only last weekend I received a letter from a resident of Oxfordshire, an authority which has suffered substantially under the capping regime. The letter referred to library closures. I am sure that your Lordships, with your respect for language, the written word and information, will understand the impact these proposals will have on a lower order service such as libraries not falling within the "headline" topics of education and social services. Only today a report was published by the Rural Development Commission on the loss of services in rural communities. When I read about the loss of bus services, I could not help thinking that this is just the kind of service which local government, in partnership with other providers, would want to ensure is available for their communities. It seems to me that that kind of partnership is now even further restricted.

It is entirely right to refer to local taxation in the context of taxation overall. One has to mention council tax along with other taxes, especially income tax. In many ways council tax is less fair and less transparent than income tax. That makes it all the more important to admit that this settlement means that people will pay more for less and that, because of the capping and the decision to stick with Tory spending plans, the responsibility for cuts and for council tax rises rests squarely with central government and Whitehall and not with town halls.

Your Lordships will have detected a reaction from these Benches when leafy Kingston was mentioned. The noble Lord, Lord Tope, and I are its neighbours on either side. We have noticed that other boroughs, including, for instance, Wandsworth, have leafy bits too. I am not surprised by this reference. Perhaps Barnsley is to become the new Westminster! If I have understood correctly, I think I welcome the announcement about the change in the approach to debt. The noble Lord, Lord Bowness, took a rather more moralistic view on that than I might have done. In the light of the financial constraints of the past few years, one cannot look at the question of debt entirely as a moral issue aside from an economic one. I am not entirely surprised that the area

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cost adjustment has been postponed. I am beginning to think that that needs a mediator rather than a researcher to settle it.

I note, too, the references to damping. I think that that gives something away. Of course there will be losers through the settlement and that is admitted by the Government. They are leaving in place capping for the next year. I have some difficulty in understanding the passporting rules but they seem to indicate that there may be more ring fencing and more central control. If that is the case, I cannot welcome them.

In the Government's review of all this, and their proposal to issue a plain English guide, might now not be the time also to consider whether this Statement is an appropriate presentation? I believe that the Statement comprises 54 pages, although some of the pages contain only a few sentences. No one would deny that the procedure provides a superb platform for the Government. However, some noble Lords will have collected the Statement only minutes before it was made. It is an enormous package. The noble Baroness referred to the precision and complexity of the settlement. There is, of course, obscurity too in some of its elements, if I may dare to say so. Real consultation in the future might be better served through a different form of announcement.

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