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Baroness Dean of Thornton-le-Fylde: My Lords, I begin by declaring an interest: I am chairman of the Housing Corporation. I am sure that the Minister will join me and other Members of the House in expressing how regrettable it is that the noble Lord, Lord Rooker, was not here today to deliver the Statement, due to a family bereavement. As some of us know, he has put hours of work into the communities plan.

That plan involves a step change. None of us has yet had the chance to study the document and the nine supporting documents. There is still much work to be done. Perhaps in that alone, I agree with the noble Baroness, Lady Hanham, that it would be good to have more time in which to debate this detailed and complex issue, which covers so much.

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From our point of view—housing is our raison d'etre—one of the major changes in the government document is the recognition that sustainability is not just about housing; it also involves hospitals, schools, transport and the local infrastructure. The document covers that.

Regional housing boards will be critical. We have seen the end of local authority and housing corporation funding for housing. There will be a single pot, the distribution of which will be discussed within the regions and sub-regions. That will involve local authorities, economic generators, the regional development agencies, the Housing Corporation and the government office in the region. That is a step change and it is up to those organisations to make the arrangement work.

As a corporation, we are delighted to be given the responsibility of examining in a taskforce—I hate that term—or in a group all areas in the private and public sectors involving home ownership. That is another step change. There are many models out there but many of them are not used. We welcome that step change.

I return to where I started; that is, the sustainability issue. We and other agencies have been closely involved in developing the plan and we welcome the openness of the discussions. In view of the fact that this approach involves several government departments, has the Office of the Deputy Prime Minister secured commitments from other departments that they are part of the plan in terms of health, housing, transport and infrastructure? If not, the plan will not be deliverable.

Lord Bassam of Brighton: My Lords, I place on record two observations at the outset. First, I agree with the noble Baroness, Lady Dean, and extend our tributes to the noble Lord, Lord Rooker. I know from personal experience—I have worked with the noble Lord for some time—of his personal commitment to housing and to tackling housing issues. He was particularly proud of this Statement and all that is in it, and he has worked long hours to hammer it out. The Deputy Prime Minister and the team in the ODPM that has been working on it have spent much time putting the building blocks in place and working out how they cover all the angles. This is a genuinely holistic approach to many of the problems confronting the nation.

The other tribute that I place on record is to the noble Baroness, who has been tireless in her efforts with the Housing Corporation. She has played a key part in ensuring that the plan is deliverable. Her advice and wisdom has been brought to bear to ensure that this is a practical Statement with practical outcomes. I do not underestimate the hard work put in by the noble Baroness and the Housing Corporation in getting us to where we are.

The noble Baroness asked the key question: will the departments pull together to ensure that this approach is deliverable? The answer must be yes. I welcome the opportunity to advance it today and I welcome future

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opportunities for us to debate the communities plan and ensure that it is kept on track. We must ensure that all departments work closely together when planning communities to ensure that those communities are sustainable. That requires putting transport in place—thinking about traffic—addressing the need for a community centre and ensuring that buses are available and that doctors are in place in surgeries. We want to create and generate healthy communities. We can best do that by working together to pool resources and activities and by having a shared outcome and a shared vision. That is key; yes, those commitments have been given and, yes, we intend to ensure that they are kept to.

Baroness Blatch: My Lords, will the Minister return to the question of my noble friend Lady Hanham and explain a little more about the issues raised in paragraph 328 of the paper, which refers to the leasing of empty properties? What defence will an owner of a property have when compulsory leasing is arranged? How will that happen and what do the Government envisage? What will be the definition of an empty property that is owned privately? Will the Minister also say more about building so many houses in the Stansted area in a sustainable way in terms of retaining the green belt in that area?

Lord Bassam of Brighton: My Lords, I consider it to be a scandal that properties have been empty for as long as they have and that the matter has not been tackled. Members of another place were very mindful of the issue. Empty properties are a vast untapped resource and we need to bring them into use. That is one of the clear objectives of this document and it is why we are adjusting the ability of local authorities to recover moneys against empty properties through council tax.

There will need to be consultation on the operation of the compulsory leasing scheme. Clearly, questions such as, "What is an empty property?" will have to be carefully thought through. There is no simple and easy answer to the noble Baroness's question with regard to that point. We shall be sensitive to the concerns raised about empty properties because we are required to get the matter right. On the other hand, I am sure that the noble Baroness will recognise that we must make good use of our stock. Every home that we can bring into occupation and use means that we can reduce the amount of building on land which can be better used for other economic purposes. That helps to ensure that we protect the green belt.

I know that the noble Baroness will not be entirely happy with that answer. But the detail needs to be worked through because it is a desirable objective. I am happy to invite the noble Baroness to repeat a point that I may have missed.

Baroness Blatch: My Lords, how is it sustainable to build so many houses at Stansted and yet retain the Government's pledge to maintain the green belt area there?

Lord Bassam of Brighton: My Lords, we made the objective clear. We do not intend to build on green

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belt. That is our approach and we must stick to it. Obviously, important representations will be made locally when the plans are worked out. The partners who implement those plans will need to ensure that green belt is preserved. That is the Government's objective. We have added to the green belt, and I do not believe that any previous government can make that bold claim.

Local Government

4.22 p.m.

Lord Hanningfield rose to call attention to the effects of government policy on local government; and to move for Papers.

The noble Lord said: My Lords, I am pleased to sponsor this debate and to see that the right reverend Prelate the Bishop of Truro will use it to make his maiden speech. We look forward to hearing him later.

In November, 19 Bills were announced in the Government's legislative programme. Nine of those Bills are of direct relevance to local government. Thus, an enormous amount of activity is currently impacting on local authorities. So now is a good time for us to have this debate. In future weeks and months, we are likely to discuss Bills covering planning, the regions and aspects of local government finance and performance. I hope that this debate will give us an opportunity to put those discussions in context.

As someone who has worked in local government for more than 30 years and is currently the Leader of a large county council—Essex—I believe that local government is very important to the health and democratic well-being of our nation. I also believe that local government delivers efficient and innovative services. For example, devolved budgets to schools, mobile libraries, neighbourhood mediation, sale of council houses, community care packages, bottle banks, advice centres for consumer affairs and rents-to-mortgages were all pioneered by individual local authorities in recent years.

Furthermore, Ofsted, the Social Services Inspectorate, best value reviews and, most recently, the Audit Commission's comprehensive performance assessment provide plenty of evidence to demonstrate that many local authorities provide high-quality and cost-effective services.

Despite those achievements, local government constantly has to fight to justify its position. That situation shows no signs of improving. We are currently seeing a number of developments which, taken together, threaten the future health and vitality of local government.

In my remarks today, I want to touch on two main areas that I believe will have a strong influence on the future health of local government: the new funding formula for the distribution of local government grant and the Government's policy on the regions.

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Later this month, Essex County Council, in common with hundreds of councils up and down the country, will be setting its budget and council tax level. The Government provide local authorities with a grant for approximately two-thirds of their expenditure and local authorities are expected to raise the rest of the money that they need from council tax. In other words, levels of council tax are directly dependent on the amount of money received in grant.

That imbalance in funding leads to the so-called "gearing effect". Every extra pound of spending falls on the council tax payer. Therefore, for most councils, an increase of 1 per cent in spending beyond what the Government choose to fund in grant leads to a 4 per cent increase in council tax. I do not believe that that point is always understood. With a low grant settlement, the problem is obviously severe. In a moment, I shall use an example from my own council.

A degree of uncertainty is inherent in local authorities' financial planning because of the imbalance of funding. This year, further complications were introduced by the culmination of the Government's review of the grant distribution mechanism. The objectives of that review were laudable. In the words of the White Paper, the Government were to:

    "Investigate thoroughly whether there is a better way of determining the distribution of revenue support grant which is simpler, more stable, more robust and fairer than the present arrangements".

No one could describe the new grant distribution system as simple. Certainly many would argue that it is not more stable, more robust or fairer than the old system.

In any changes to grant distribution methodology, there will be winners and losers. However, this is the first time that I have been involved in a situation where the mechanisms have been designed explicitly to create winners and losers. The new mechanism was never meant to be fair. Through what is described as "resource equalisation", the Government have shifted millions of pounds from authorities in the South East to authorities in the Midlands and the North.

Noble Lords will appreciate that the cost pressures on a county such as Essex—in the South East of England, bordering London—are immense. We have trouble recruiting social workers and teachers because we cannot compete with salary expectations. That situation can only get worse for many authorities in the South East—a point relevant to the discussions that we have just heard.

On education, we are exhorted by the Government to passport a minimum level of funding to schools. For Essex and 12 other authorities around the country, the money that we are asked to pass on to schools is more than the total new grant that we have received for the whole county council. That compares to other councils that have received up to 39 million more new grant than they have been asked to pass on to schools. Where is the equity in that?

The gap between the pressure on education spending and the grant increase brings out the gearing effect to which I referred earlier. I shall try to explain.

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In Essex, the amount that we are being told to pass on to schools by the DfES is some 7.5 million higher than the total grant increase for the whole council—I refer not only to the education component but to the total increase. That adds more than half a percentage point to our budget. But, because of the gearing effect, it adds 2 percentage points to the council tax increase. Therefore, for pensioners and others who compare the increase in council tax with the price protection for their incomes, nearly all that they have been offered this year has been offset by our council tax increase, which is government-inspired. That extra money is going into schools. In Essex, those are the figures before we take into account any pressures from community care, highways, waste disposal and other services.

In common with most counties in the South East of the country, the people of Essex feel that the Government do not care. The gross inequalities that have been produced by this settlement are unsustainable. The Government have created a situation in which the most vulnerable members of society will be hit the hardest. Either we shall be obliged to cut services to the elderly and the disabled or we shall have to ratchet up the council tax. No one suffers more than the elderly, the poor, and others on fixed incomes when council tax rises sharply.

This is not a case of Essex whinging—it is more important than that. The points of principle are: first, that the grant settlement is not transparent and, secondly, that it is deliberately and explicitly unfair. Thirdly, there is a lack of stability in the end result. For example, Essex now receives 45 million of damping grant that will, over time, disappear, as we lose it out of our education service. In order to engage in medium-term financial planning we need to know whether we will lose that money next year, the year after, or in 10 years time.

The fourth point of principle relates to changes by the Government to the data of the settlement, which were being made literally days before we had to put the budget to bed. Fifthly, there has been no real move to reduce the ring-fencing of funding through specific grants, which the Government themselves promised to do. If anything, the situation has got worse. Sixthly, we are still subject to the problems caused by the imbalance of funding between central and local government. I hope that the Government's recently announced review of the balance of funding will take a radical approach to this question.

There seems to be a strategy of loading more onto the council tax; that is certainly what is happening in the South East. However, the Government are mistaken if they think that people in the South East, facing the highest house prices in the country, can afford to increase endlessly the amount they pay in council tax. Just as a limit was reached on domestic rates, so we may now be approaching the limit that people are prepared to pay on council tax.

I turn to the subject of regions, although I know that we will debate it again in the House. The Government's policy, set out in their White Paper

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entitled Your Region, Your Choice, is to provide people with an opportunity to vote on whether they want an elected regional assembly in their area. On the face of it, that would seem perfectly reasonable, but this apparently reasonable position does not withstand much scrutiny.

First, the Secretary of State will decide which regions are to be allowed to hold a referendum on whether to have a regional assembly. Your region, the Secretary of State's choice. Secondly, any such referendum will be purely advisory. The Referendum Bill currently before Parliament would not prevent the Secretary of State from establishing an elected regional assembly even if there were an overwhelmingly negative referendum vote. Again—your region, the Secretary of State's choice. Thirdly, local people will have no say over which region they are in. The people of Essex believe that they live in the South East, not in something called the East of England. Your region, the Secretary of State's choice.

Fourthly, before voting in a referendum, the Boundary Committee will have conducted a review of local government structures, but the committee will not be asked to look for the best new local government structure under a region. It will not even be asked to look for the best new unitary structure under the region. It will be asked to look for the best wholly unitary structure in the existing two-tier areas under the region, leaving existing unitaries as they are, irrespective of how well they are serving local people at present. What is more, the Secretary of State will then have the power to implement those recommendations or to revise them as he sees fit. Again, it is your region, but the Secretary of State's choice.

At the polling booths, people will be asked to vote for an elected regional assembly. "What will the elected regional assembly do?" That is a question that they might legitimately ask. No one has been able to answer that question because there is, as yet, no legislation setting out the powers of the elected regional assembly. What we can guess from the White Paper is that elected regional assemblies will be required to enter into an agreement with the Government on key targets. The priorities of the regional assembly will thus largely be set, centrally, by the Government. Again, it is your region, the Secretary of State's choice.

I could go on but I fear that my point is made. The Government cannot present the move to elected regional assemblies as an exercise in democracy. It is not. My opposition to these proposals is practical. They constitute a massive and expensive distraction from our main focus which should be improving the delivery of public services.

I could say much more on the two topics to which I alluded in my speech. In addition to these points, I am sure that noble Lords will wish to explore the effects of other aspects of government policy on local government. The Government's modernisation agenda has created a small cadre of elite, quasi-professional councillors, and a much larger group of council members whose talents are not being fully

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utilised. Although all councils, including mine, strive to keep their members fully involved, the reality is that most councillors no longer have a part to play in the key day to day business of local authorities. Modernisation has consigned them to the margins.

In Essex, there are 79 councillors. For 69 of those councillors, the business of CPA, performance indicators, local government finance, planning changes and the other matters that we will discuss are of marginal interest. They do not understand what is going on. The Government's modernisation agenda should ensure that the concerns of local communities are met and linked to the day to day activity of local authorities. Local councillors are the means of achieving that link.

The more attention authorities have to pay to central government directives, the less time they have to pay to their local communities. We need to re-engage our communities in local democracy. I look forward to hearing the views of your Lordships on these and the other matters of Government policy affecting local government. My Lords, I beg to move for Papers.

4.36 p.m.

Lord Woolmer of Leeds: My Lords, it is a pleasure to follow the noble Lord, and I am grateful to him for tabling the Motion. I shall touch on some of the issues that he raised, but the debate is wide-ranging by the nature of the Motion. I shall address my remarks around three themes: constitutional reform, regulation and inspection and funding.

On constitutional reform, the movement away from the committee system to either mayoral or leader/cabinet arrangements has been the greatest constitutional change for decades. I believe that the changes have had a number of beneficial effects, although the noble Lord referred to some residual problems. I agree with him on those.

A cabinet with a maximum of 10 senior councillors is, by definition, required to handle large portfolios that deal with broad issues of public concern. There has been a move away from the concentration on committees supported by professional disciplines. A common development, for example, has been the establishment of a cabinet portfolio that oversees the quality of the local street environment. This contrasts with the trends that developed under the CCT model pursued by the previous government, which had the effect of fragmenting services.

As power has concentrated into a smaller, more visible and accountable group, there has been the growth of a more critical culture among non-executive elected councillors. That has disadvantages in terms of political party management, but it has also opened up public debate on contentious issues, which the committee system rarely generated. The constitutional changes have also sharpened the roles of officers and members, providing for greater clarity about who is making decisions, and increasing the speed with which they are made.

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The movement away from committees has meant more time spent by the majority of members representing their ward issues, and with it a momentum for more localised delivery of services which meet the needs of specific communities. Many authorities are introducing new area management arrangements that seek to give effect to this.

Connected to the constitutional reforms has been an increased emphasis on consultation and partnership. Councils are undoubtedly better informed of local priorities, and what the public think of their services, than ever before, which in itself creates a pressure for change. The requirement to develop a community strategy with partners for the good of the local area has re-emphasised the responsibility on local authorities to act as community leaders rather than simply as providers of services.

My own city, Leeds, has been running the Leeds initiative since 1990, which contains most of the elements that the Government sought in the model of the local strategic partnerships. The partnership in Leeds has contributed strongly to that city's success over the past 10 to 15 years. Regardless of party political control, few would seek a return to the old system at local council level, certainly in my area.

While there remain problems of transition, particularly engaging non-executive councillors, as the noble Lord mentioned, the constitutional changes have been generally welcomed as providing for better-managed authorities. At national level the central local partnership operating since 1997 has provided a forum for leading members of the Local Government Association to meet and debate key issues on a regular basis with Cabinet Ministers.

I turn to regulation and inspection. It seems to me that local authorities are reviewed and inspected in a way they have never faced before. The comprehensive performance assessment process, introduced last year, provides relief from that if a local authority is performing its functions well. The purpose of the comprehensive performance assessment is, after all, not only to provide an external judgment on a council but also to provide a base from which external inspection can be planned in a manner more proportionate to the difficulties faced.

For authorities whose performance is good or excellent under the process, there is offered a substantial reduction over time in the number of controls, ring-fencing, inspections, statutory plans and so forth, which they have to produce. In my view, inspections introduced by the Government have exposed weaknesses that previous governments did little to resolve. Efforts to improve performance of councils can now concentrate intensively on those authorities identified as below par, while restrictions and limitations can be relaxed for those councils regarded as good or excellent.

I turn to the question of funding. As long as I can remember, local government has always pleaded poverty: that central government funding is not sufficient or not distributed fairly. Increases in local taxes have been the fault of central government. At the

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same time local government often asks for more independence from central government and the right to raise a substantially greater proportion of its own revenues locally. The noble Lord referred to the 4:1 gearing formula. If local authorities were able to take control of, say, 50 per cent of their own fund raising, that would mean a 100 per cent increase in local taxes. There is a dilemma which we all recognise between the desire to achieve a greater degree of independence and the problem that gearing would involve in moving to that.

I, too, look forward to the discussion yet again in yet another review of local government finance. I have to say to the noble Lord that I do not have a great deal of optimism that a magic solution will be found to the problems I have experienced on and off in local government for what is now probably 35 years.

What is the record of central government funding for local authorities in recent years? Since 1997 under Labour Governments, central government grants to local authorities have increased by 25 per cent in real terms. That compares with a 7 per cent reduction in real terms in the last four years of the previous Conservative government. But, even faced with a 25 per cent increase in real terms, local government will still say that that is not enough.

The settlement for the next financial year announced in December will see total support from central government grant and business rates of over 51 billion, a cash increase of 8 per cent overall. That is by any measure a very large increase for local government yet the complaints, fears and worries I hear differ very little from previous years. Schools will receive an extra 200 on average per pupil and an extra 100 million is provided specifically to reduce the problem of bed blocking. That is not to say that there are no problems that need addressing, and noble Lords today will have their own list of such matters. All councils would like more central government funding and Leeds is no exception to that, along with Essex.

I share the concern about the problem of education funding and that in some cases local authorities are being asked to pass on more to schools than the total increase in their grant. I agree that that problem should be addressed. I look forward to the Minister's response and guidance on that later today.

With respect to local business rates, while I welcome the proposal to establish business improvement districts and the possibility of levying additional non-domestic rates, I believe that that does not go far enough. I should like to see the Government consider allowing local authorities to borrow in a prudential way within a prudential borrowing regime based upon the prospective increase in business rates—non-domestic rates—in areas of expansion. That would certainly help my own city.

There are problems of finance; it was ever thus. I see no early resolution to the dichotomy between desiring greater independence but at the same time having less pressure upon local tax payers. However, I believe that the changes in recent years have in some respects strengthened local government. When we look

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critically at these issues we can emphasise the problems on occasions. However, still today local government provides essential services extremely effectively and well and, in my area at least, with enthusiastic involvement of councillors. Long may that remain the case.

4.46 p.m.

Baroness Blatch: My Lords, I congratulate my noble friend on selecting this topic for debate and on his opening speech. Like others, I welcome to the debate the right reverend Prelate the Bishop of Truro. We look forward to hearing what he has to say. I particularly do so because I happen to be a friend of the Dean of Truro, and the outstanding reputation of the right reverend Prelate goes before him.

I want to concentrate on government policy as it affects local government's responsibility for education. Each year, as the Government announce local government grants, extravagant language is used to describe the generosity with which Ministers are treating education generally and our schools in particular.

However, in the first six years of this Government, the size of the department has grown; numbers of political advisers and secondees to the Civil Service have also grown and that can be mirrored right across all Whitehall departments, especially those dealing with local government and public services.

Over the same six years the Department of Education and Science—now the Department for Education and Skills—has taken central control over much of local government services. We in this House all remember that central direction and control was the theme of the last Education Act. Increased bureaucracy at all levels has been created and imposed upon local authorities and our schools. Ministers bypass local authorities by making statements to schools, massively raising expectations without giving local authorities the resources to fulfil them.

Let us take, for example, the letter to schools from Mr Miliband, which stated:

    "[We are] taking steps to ensure that the extra funding gets through to your schools".

That funding is the Government's grant to local education authorities. However, as my noble friend Lord Hanningfield stated, for 13 local authorities the amount of funding that they are urged by Mr Miliband to passport to their schools is greater than their increase in formula grant. I welcome the support of the noble Lord, Lord Woolmer, in saying that this issue must be addressed.

The only way that that can be achieved is to cut back on other services, to raise even more money through local taxation or not to passport the full amount to schools and to risk the Secretary of State using his powers, which were set up in the previous Act, to set minimum budgets for schools.

Ministers have given assurances that this power will be used only in extremis, but we have not had examples of what the Government mean by in extremis. For example, if an authority does not passport the money

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to schools because it claims not to have had the grant to enable it to do so, will that be an example of in extremis? It would be helpful to have one or two examples from the Minister when he replies.

On this matter, local authorities are between the devil and the deep blue sea or—perhaps more apposite—between a rock and a hard place. Perhaps I may ask the Minister whether, if the Secretary of State chooses not to use his power against the 13 local authorities for the reasons I have already mentioned, Mr Miliband will write a further letter to those schools and authorities explaining why it is not possible for the local authorities to meet their obligations and that he understands their position.

I also ask the Minister what amount or percentage of the total education budget is held back to run the Department for Education and Skills; what amount or percentage is held back to fund centrally determined initiatives and projects, including ring-fenced funding; What amount or percentage is available to local education authorities; and, of that amount, what figure is directly available to be sent to schools?

We were promised fair funding and a simplified system. It is certainly not fair—I take some points made by the noble Lord, Lord Woolmer—and I have to say that it is definitely not simple.

Since the Conservatives left office six years ago in 1997, the level of specific projects and special grants—that is, the proportion of local authority and schools' budgets that must be ring-fenced and spent on government-set priorities—has risen from 4.5 per cent to 15.8 per cent. That reduces very substantially the ability of local authorities and schools to determine their own priorities and it substantially increases the bureaucracy which must be in place in order to manage the allocation of that 15.8 per cent of expenditure. It also renders worthless government promises to give more autonomy to local authorities and schools.

There are other tensions for local authorities and schools. For example, the level of teachers' pay for the coming year is unknown, and yet the Government expected local authorities to give detailed information about their budgets by 31st January—last week. There is also the cost of the 1 per cent increase in national insurance contributions, which must pre-empt—there is no choice—some part of any increase in grant.

What is the cost to education of the 1 per cent increase in national insurance? As a result of that increase for employees there will inevitably be tension between employers and teachers' unions, who will regard that 1 per cent increase as a bargaining counter for more pay. Teachers and education workers in London will not only have to cope with the additional national insurance payment but also with congestion charges of up to 1,000 per year. That will again not only increase pressure on the employees, but also on the employers for more pay.

Why do the Government propose to give power to local authorities to limit savings balances held by schools? Surely, the greatest disincentive to save is for government, either local or national, to claw back

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those savings. Schools should be free to save both for the short term and sometimes greater sums in order to meet specific expenditure over a longer period. My suggestions as far as concerns balances are: first, to encourage schools to be more financially effective and to save where they can, and, when they do, to be allowed to benefit fully from their own efforts; and, secondly, to require governors to inform parents on an annual basis of the level of their balances and the purposes for which they are held.

Data from the most recent census are used to determine government grants. It is widely known that the census was unreliable. One Minister said that,

    "losses in population for London boroughs had been due to the way that mid year estimates allocated migration changes".

That glosses over a real distortion in the data which, in turn, results in serious injustices for many London boroughs. What are the Government doing about the complete loss of confidence by the London boroughs in the census data?

Sixth-form funding is also an area of great anxiety. The learning and skills councils are responsible for funding post-16 education. They are unelected, unaccountable and they second guess the role of local education authorities. However, there is now evidence of reduced budgets to sixth forms by learning and skills councils through local authorities, even where numbers of pupils have not declined.

Secondly, although Ministers have directed authorities to passport funding to schools, the learning and skills councils have received no such letter from Mr Miliband. What is the explanation for that? Or should we accept that Ministers intend to put pressure on local authorities but not on the learning and skills councils?

Encouraging local authorities to prepare three-year indicative budgets in principle is a good idea, and I support it. But how on earth can they do that? The Government cannot guarantee levels of grant over a three-year period and they regularly change the percentage of specific and special grants. What guarantee is there that there will not be further tax increases, such as the national insurance increase? The outcome of the teachers' annual pay review over the next three years cannot possibly be known—it must be uncertain—and, as we all know, the staffing budget is the largest part of any education expenditure. Any indicative budget with such a level of uncertainty would at best be meaningless and at worst misleading.

The recently introduced reduction of workload for teachers, although welcome, presents problems for local authorities and teachers; 140 million has been made available against a predicted requirement to meet the obligation of approximately 1 billion. What will happen if teachers take the Government at their word that the workload will be reduced and the local authority and/or school is unable to fund the proposal?

The essence of what I have to say in this debate is that there is a serious mismatch between government rhetoric and spin on the one hand, and the facts on the ground. National government has grown; central

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direction and control has grown and become almost stifling; unnecessary bureaucracy has also grown; the amount of resources held back at national level is now unprecedented; and the core funding to schools does not appear to match the massive expectation that has been raised by Ministers.

Schools could be better funded, not simply by bearing down on local authorities but by the Government leading by example and improving efficiency, reducing central control and bureaucracy, cutting the size of national government and devolving the moneys that could be released to local schools. On behalf of regional government I ask one final question: how secure is county government and, in particular, local education authorities?

4.58 p.m.

Baroness Maddock: My Lords, I also begin by thanking the noble Lord, Lord Hanningfield, for securing the debate on the effects of government policy on local government. Perhaps I may say how pleased I am, as I am sure are many noble Lords, that the right reverend Prelate the Bishop of Truro has chosen to make his maiden speech in an area that many of us hold dear.

I intend to talk a little about centralisation, a topic touched on by the noble Baroness. Since coming to power in 1997 the Government have talked a lot about decentralisation of power and in many aspects they have achieved it. They have also talked about the need to build strong and vigorous local government. But their record of action has been sadly disappointing, particularly in relation to local government.

Many who served on councils during the years of Conservative governments deplored the effect of their policies on local government. Therefore, it is particularly disappointing that the Government's actions have further reduced local authorities' influence in delivering local services. It is even more dispiriting because when the Government came to power in 1997, they signed the European Charter of Local Self-Government, but many of the changes that they have implemented since signing the charter have been entirely contrary to its aims. When Labour came to power in 1997, local government was struggling, as others have mentioned, with growing pressure on services and incredibly tight budgets. It was obvious that the quality of services was starting to suffer.

The Government attempted to respond to that challenge and gave some more money, but they massively increased the controls on how that money was spent and introduced a huge range of performance standards and demands for efficiency savings. The result has been that local councils have been emasculated and are struggling to be innovative in delivering services under that regime.

One thing that many of us who have served in local government for many years had been looking forward to was a change in the funding formula for councillors. Other noble Lords have given details of that, but in my area of Berwick-upon-Tweed, as a small council in a sparsely populated area, we expected to benefit from

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the new regime. I am afraid that that has not come to pass. That is true of other authorities up and down the country.

Lest I pretend that everything is doom and gloom, it certainly is not. Local government still makes a vital difference to local communities despite those difficulties. One has only to consider the radical changes that authorities such as Liverpool have introduced after the Liberal Democrats took control to realise that a really good local authority can change the fortunes of its community.

We want to change the system so that such innovation is easier to bring about. We want authority for change and control to be firmly rooted in the community that it represents. That involves releasing local government from many of the forces of central government, especially targets, performance indicators and centrally controlled funding. We would like a minimum service standard to be assured, but local authorities should then be allowed to react to local needs and provide services in a manner and to a level that matches the local preference. The key judges of that are the local electorate, not central government.

People should be able to expect a basic service across the country, but there should be maximum flexibility for local authorities to determine their local priorities and develop their local distinctiveness to suit their area. There should be far less prescription from the centre. The noble Baroness, Lady Blatch, explained clearly the difficulties that education authorities are facing in that regard. Although standards should be set nationally, there should be no prescription on how councils deliver the service.

A radical overhaul of best value is one starting point for that. Best value should be about putting local people in charge. It should be a process that gives service users the tools fairly to judge the performance of their services, but it should also allow for local flexibility and variation according to local priorities. Most councillors would like a much less bureaucratic and much more strategic system. That would assist both councillors and local people to focus on the important choices for their communities, rather than worrying about losing points in all the various reviews and inspections that they face.

The specific grants regime was also mentioned by the noble Baroness, Lady Blatch. One of the most dramatic trends in local government finance, which has already been highlighted in the debate, has been the growth in central Government's use of specific grants as part of an overall settlement. We heard about that change in education but across the board, since 1997, almost 25 per cent of total support to local authorities now comes from specific grants. That means creeping nationalisation of the functions of local government, as it is a mechanism for directing how local authorities spend the finance available to them. As someone with an interest in housing, nowhere is the ability to make financial choice more restricted than in that area.

I find that especially distressing. I remember being a member of a council with many Labour councillors who sang loudly about their problems under the

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previous Conservative administration. I thought that we might see something different, but we have been disappointed.

Some specific grant schemes involve competitive bidding processes, which can be a wasteful way to distribute scarce resources. Only the best bids win; about half of the applications are unsuccessful. That wastes a huge amount of time and resources, often of authorities that can least afford it. That hits especially hard small authorities with a small staff, for whom it is difficult to put together lots of good bids. Some schemes also require matched funding, which means that the authority must contribute some of its core funding to them. They may be the latest pet projects of the Government, but they may be fairly low down the local list of priorities.

Lastly, I turn briefly to the question of quangos. The Government have introduced many more quangos, as has been mentioned. Quangos and partnerships have become the pattern of local governance. That reduces the power and autonomy of local government. In the North East, there are 70 regional and sub-regional quangos, but only 23 councils. Many of those quangos have much bigger budgets than councils and can pay their board members much more than councillors. That is emasculating local government.

I recommend to the Minister some research conducted under the auspices of the Rowntree Foundation. Councillors recognise the value of working in partnership, but fear that their democratic role is being downgraded by the growing number of partnership policies introduced by central government. The Government should consider that research, which was conducted in Hull.

Change must be driven from the bottom up. Although the Government have said that that is what they want, steps in that direction have been slow. The best judges of the service quality in a local area are the people who live there. They should be primarily in charge of holding local government to account for what happens. They need sufficient information to do that; they need the opportunity to give the council their views; but, at the end of the day, local people should be in charge of the change. Central government seem to take some steps forward on decentralisation, but then they retreat. If the Government could properly grasp that concept and implement it, we would see a real step change—which we heard a lot about earlier in the Statement.

5.8 p.m.

The Lord Bishop of Truro: My Lords, one weekday evening last summer I was taking a service at Wadebridge in north Cornwall. Afterwards, there was the inevitable bun fight, but I said that I could not stay too long, because I would have to catch the sleeper train to be here in London at 11 o'clock. An old Cornishman heard that and told me sympathetically, "That London be a funny place. It's a long way from anywhere". Cornwall and its affairs certainly seem a long way from here. I think that I am the only person

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who lives full time in Cornwall who is now eligible to sit in this House, although I know that many in this House care for, love and want the best for Cornwall.

We are fortunate in Cornwall to have an active, good county council. It is one of 22 described as excellent in terms of its delivery of services. County councillors and officers work hard together. But, given the present structure and scope of local government, they are simply unable to meet the hopes and aspirations of local people. Inevitably, there are statistics, which may help to back the point. In a table of GDP per head in which the UK's score is 100 and the south-west region's is 91, Cornwall scores 65. The corresponding scores of Wiltshire and Gloucestershire are 108 and 106 respectively. The UK average weekly earnings of full-time employees with adult rates is 349.79; yet in Cornwall it is only 255.85—nearly 100 less than the national average. Recently, north Cornwall was described as the worst paid area in the whole country. There is a good deal of seasonal employment paid at the minimum wage in the area.

As noble Lords will know, the county has Objective 1 status and may receive it again because the problems are so complex and deep-seated. Not only is post-industrial Cornwall affected, the traditional industries of farming and fishing are also in decline. Objective 1 money and match partnership funding have helped, but the problems remain. Regional government, as put forward in the Government's White Paper, will not help our situation in Cornwall. Bristol is about 200 miles away from the middle of Cornwall. In what is called the south-west region, Tewkesbury is closer to the Scottish Borders than to Truro. It is a strange area.

If there were a south-west assembly, Cornwall would have only two members. How could they represent in a meaningful, down-to-earth way the needs and aspirations of Cornish people? We need to strengthen the local; to emphasise it rather than lose its distinctiveness. That means that we need to look hard, for instance, at the role and purpose of something that we have not heard about today: parish councils. They are often written off or talked and thought about in a patronising way. Perhaps, if they were given more scope and power, they would become exactly what is needed: a forum close to ordinary people, concerned with matters that affect their daily lives. There is no use in Westminster legislating for that. Parish councillors and others functioning at that level need to be involved from the word go. They know, or stand a chance of knowing, what works or could work, rather than what should or ought to work. That will take time. But it will be time well spent, because it will strengthen democracy, helping people to feel that they have a stake in their own history rather than being objects in someone else's.

At present, Cornwall is an exciting place to be, with the Eden Project and the soon-to-open National Maritime Museum, Cornwall. All sorts of other things are happening. Attitudes are changing. The majority of district councillors in Cornwall want to create a new structure for local government. Cornwall County

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Council backs a referendum on the question of a Cornish assembly. But if all that is to mean anything, a change of attitude is needed elsewhere.

One academic who spent years looking at Cornwall and its problems talks about distance deprivation. He uses a powerful image, saying that a map of Britain can be seen as roughly the shape of a human being, in which case Cornwall is the foot. If there is a problem in our feet, most often the cause is bad circulation. If that is the case, the problem that needs to be looked at carefully is not the foot, but the heart, for there the cause lies. Perhaps the man from Wadebridge said more than he knew when he remarked, "That London be a funny place. It's a long way from anywhere".

5.15 p.m.

Baroness Knight of Collingtree: My Lords, due to my position on the List of Speakers, I have the enormous pleasure and honour of referring to the splendid speech of the right reverend Prelate the Bishop of Truro. My noble friend Lady Blatch spoke of his reputation in Truro. I know of the wonderful reputation and respect in which he is held in Grantham, nearer my own home, and where the Lord Bishop stayed for a while. We all hope to hear many more speeches like his. Noble Lords speaking in this debate will watch keenly and carefully choose a subject to appeal to the right reverend Prelate so that he will also join in our debates.

We are all indebted to my noble friend Lord Hanningfield for introducing the debate. It gives me an opportunity to voice again my anger and disgust at the treatment of many good people who, out of a simple desire to serve their communities, agree to become parish councillors. Noble Lords may be astonished to hear that there are not queues of volunteers longing to spend their time in that way. Regular evenings in inadequately heated church rooms for no recompense, and with no powers to wield, are not everyone's idea of fun and games. Usually, the parish council chairman tries to persuade two or three neighbours whom he judges to be trustworthy and conscientious to join the parish council so that the parish can run its affairs.

But now the Government have imposed what parish councillors say is an intrusive and unnecessary requirement: to declare publicly details of their property and pecuniary situation. One such councillor, Mr Chris Garner, who served on Kings Langley Parish Council, saw no reason why he should do what he was told by placing in a publicly displayed register every detail of his financial and private interests. After all, there was a long-established rule, which was always adhered to, that any councillor with a financial or personal interest in a matter to be discussed in the council declared it openly before it was discharged, and did not speak or vote on the matter. No evidence has been put forward to suggest that councillors ignored that rule. Surely it is relevant that they get no pay whatever.

Mr Garner was yanked before an adjudication panel, prosecuted and is now disqualified. At least, he thinks that he is disqualified, but the tribunal did not

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stop to say so. For a bunch so keen on revelation, it is odd that they kept it a secret. Mr Garner is not alone. Ten members of Kingsland Parish Council who have refused to disclose their financial interests are taking the Government to court claiming a breach of their human rights. Other parish councillors are watching the case keenly and waiting to join them as a result of what they are sure will happen.

The parish councillors in my village have told me that they are resigning because they will not put up with what is happening. I have two questions for the Minister. First, if it is thought essential for parish councillors to declare their status and interests, why cannot those details be kept within the knowledge of only the local authority concerned? Why must they be published in an open book, where everyone can read them, and for every busybody and gossip to mull over? Secondly, was a law passed and properly debated by Parliament that those decent, public-spirited, unpaid people should be so penalised for serving their fellow men? It is such a denial of the right to privacy and such a snooper's charter. If that is the law, who passed it?

It seems that it all came about as the result of an order made in November 2001. In the interests of greater accuracy, I obtained a copy of the order. I shall tell the House a little of what it says. It says:

    "A member must regard himself as having a personal interest in any matter if the matter relates to an interest in respect of which . . . a decision . . . might reasonably be regarded as affecting to a greater extent than other council tax payers, ratepayers, or inhabitants of the authority's area, the well-being"—

noble Lords should bear the word "well-being" in mind—

    "or financial position of himself, a relative or a friend or—

    (a) any employment or business carried on by such persons;

    (b) any person who employs or has appointed such persons, any firm in which they are a partner, or any company of which they are directors".

Hang on a minute—all of that applies not only to the councillor; it applies also to his relatives. A little further down in the order, it says:

    " 'relative' means"—

I shall take a big breath—

    "a spouse, partner, parent, parent-in-law, son, daughter, step-son, step-daughter, child of a partner, brother, sister, grandparent, grandchild, uncle, aunt, nephew, niece, or the spouse or partner of any of the preceding persons".

I find it difficult to decide what the term "well-being" means. Does it mean that someone has cleared up the leaves or even the dog mess in the village street? If we suppose, just for the sake of argument, that an aunt or grandparent had established that it was better to walk in the street because the mess had been cleared up, one would—as far as I can see from that list—have to make all those factors available.

I do not think that Parliament ever considered the effect that such sweeping demands might have on parish councillors. Well, we know now. There is a heap of legal cases coming up because of it. The Government should be concerned, and I cannot help wondering why, when the powers are so wide-ranging and demand so many details, Parliament was not

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properly consulted and made to understand the effect of what it was doing. Are the Government trying to destroy parish councils?

5.22 p.m.

Lord Dixon-Smith: My Lords, I am grateful to the right reverend Prelate the Bishop of Truro for reminding us, through the words of one of his countrymen—if I can put it that way—how far London is from so many parts of the country. If London is the heart of the country, the Palace of Westminster is, in many ways, the heart of London. In that sense, we here are even further from most places in the country. We forget that fact at our peril.

I am grateful to my noble friend Lord Hanningfield for introducing the debate. There must be something in the Essex air; two former chairmen of that authority speak today. I shall adopt a perspective that is slightly different from my noble friend's factual and detailed examination of what is going on. We spend so much time tending the trees of local government that there is a danger that we will miss what is happening to the forest. I do not know whether my views are those of an extreme backwoodsman or an extreme radical; I suspect that they are those of an extreme radical. For sure, I do not like what I see.

As approximately 20 per cent of public expenditure is administered by local authorities and has a great impact on all sectors of the community and the people, it is inevitable that central government will take a detailed interest in what goes on. It is also inevitable that central government will take unto itself responsibility for creating the burden of additional duties, responsibilities and obligations that local government must bear. It is also a fact that, over the years, central government has interfered increasingly with the structure of local government, changing the physical structure, internal administrative arrangements and financial arrangements. All those facts distract from the business of local government, which, as my noble friend said, is to provide good services to local people and communities.

The rising level of central financing and central intervention and control and the increasing central desire for conformity have tended to erode local control, local interest and local initiative. Increasingly, local government becomes the agent of central government. That is a cul-de-sac at the end of which can only be the loss of local control. Local government is close to the end of that cul-de-sac.

We should consider the changes in the financial arrangements—the new "Glorious Revolution" that we are supposed to have gone through. If I read things correctly, the position amounts to this: if local government conforms and lives within the strict parameters that the centre sets, the centre will allow a little more freedom in one or two areas. The stick of conformity is used to create a little more freedom, and it is hoped that the freedom will be seen and the effect of the conformity missed. I could put it more strongly than that, "Be a slave, and we will allow you to play a bit more".

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We should also consider the new distribution formula. My noble friend went into it in considerable detail. Even the Government admit the perversity of the changes that they have brought about. The Government have introduced two new factors: floors and ceilings. There are floors below which a grant may not be reduced and ceilings above which it may not be increased. That is an attempt to reduce the impact on council tax payers in areas that are adversely affected. The fact that that change had to be introduced illustrates the difficulty. I accept that there is a great deal of history to what goes on and that the Government are building on what was done in the past. The trend that I am talking about has been going on for a long time, and it is weakening local government.

What is going on in the structure of local government? My noble friend discussed the impact of the advent of regional government. Central government is disturbed by local government. Counties and metropolitan areas with unitary authorities and districts are democratically elected bodies with a will of their own. All too often, they are prepared to take decisions that governments find inconvenient and unhelpful. That is as it should be.

What do the Government do to change that situation? In several instances, that democratic process, involving local communities, has proved an obstacle, so they invent the regional assembly. Once invented, the Government decide that the regional assembly will have a few more powers and the fig-leaf of democracy. They say that they are enhancing democracy and increasing devolution and local control. However, underneath the fig-leaf of democracy at the regional level, in the shire areas, as my noble friend has said, the county councils and district councils will have to go and a new structure will be imposed. When people vote in a regional assembly election, will they be aware that they are voting for not simply the creation of a region, but the creation of a new structure of local government in which the building of the new institutions, with newcomers, will mean that there will be strangers who will be more susceptible to government imposition and control?

The picture is immensely depressing. I do not like the world that I see in local government. My noble friend Lord Hanningfield is a brave man to stay within it. At some point there will have to be a change of climate and direction. We shall have to start our exit from that cul-de-sac. Under this Government, I see no sign of any move in that direction. I wish that I did. If there is not a change of direction, the day is not far away when local government will be simply the agent of the centre. At that point, public interest in it, which is pretty marginal already, will disappear completely. If that happens, the country at large will be the loser.

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5.32 p.m.

Lord Brooke of Sutton Mandeville: My Lords, it is a pleasure to follow my noble friend Lord Dixon-Smith—Essex's Castor to my noble friend Lord Hanningfield's Pollux. My noble friend Lord Hanningfield brought his long experience in local government most helpfully to the debate. He has also given us the opportunity to hear the notable maiden speech of the right reverend Prelate the Bishop of Truro. My late noble kinsman and my late noble relative served in local government in combination for 45 years on different authorities. I served on Camden Borough Council for only 17 months—although at the time I thought I was getting 17 years' experience from the process—so I come without a background in local government.

Yesterday, I employed the hours of the Divisions on House of Lords reform by looking up a particular quotation in Kipling about "lords of the parish pump". I fear I did not find it; therefore, your Lordships will be spared. However, I reached the stage, having read 800 pages of Kipling, where I suspected the quotation was perhaps by G K Chesterton instead.

I do not pretend that my party got everything right in local government. One academic on local government matters, with considerable access to private Conservative papers, opined that our own policy-making in local government declined once the people who had been heavily involved in it ceased to make those policies for us when in government. However, it will be a bonus to our party if new Labour centralisation drives Conservatives back to decentralisation in local government.

This is a large subject for a half-day debate. I am reminded of the moment in 1944 when Mr Churchill's government were defeated—the only occasion during the war—by 117 to 116 votes on an amendment by the late Lord Eccles who had just arrived in the House of Commons. It was proposed that after the war female teachers should have the same pay as male teachers. Because Churchill feared what Goebbels would do with the government's defeat, he made it a confidence measure on Report; it was reversed by 417 votes to 17. Voting beside the late Lord Eccles in favour of that amendment were the late Lord Thorneycroft, the late Lord Hailsham and my late noble kinsman. When it was over, Churchill summoned Lord Eccles to a private meeting. He said:

    "Young man, I have much sympathy with the general proposition you were putting forward, but to introduce it as an amendment to an education Bill in the midst of this great conflict is like putting an elephant in a perambulator".

I have a sense that in trying to debate the whole of local government in half a day, we have the same sort of test. Therefore, one will inevitably be somewhat telegraphic.

First, I turn to finance. I am a veteran of the European Union Budget Council. Only those who have served on it know how complicated the budget systems of the European Union are. When the shift occurred between the two major parties in another place, I tried to remember the budget systems, but I

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found that in eight years I had entirely forgotten how they worked. How much more is that the case in terms of local government finance when the system is changing the whole time? I believe that people behave in the way that they are treated. If central government does not give local government the impression that it is trusted, I fear that less than wholly trustworthy behaviour may emerge.

The proof of the pudding is in the eating. In the same dietary mode, it is often said that rural poverty is alleviated by the capacity of countrymen to grow vegetables in their back gardens. But the current doctrine on rural sparsity does not augur well for the countryside. I refer to the Kent figures, which were quoted immediately after the settlement. Kent has an increase in grant of 3.9 per cent, but it is required to spend 6.6 per cent more on schools and 8.6 per cent more on social services. I follow my noble friend Lady Blatch in quoting a recent comment from the Financial Times that specific grants are still increasing faster than general grants.

I am reminded of the manner in which my bank approaches me when it wants to change the way in which my account is being handled. It assures me that I shall be the beneficiary of the changes it makes. It always strikes me that the benefits I receive from the change are less than the benefits received by the bank. I have quoted previously C S Lewis's remark that if one hears about somebody going around doing good to others, one can always tell the others by their hunted look.

A Labour Minister in another place defended the present settlement by saying:

    "Some Labour MPs thought it had not gone far enough".

Returning to the European Union, I remember that we were unable to make serious and mature economic decisions on behalf of Europe except at six o'clock in the morning; and at four o'clock in the morning, the Irish Minister would say that unless the Irish received another 100 million ecus, Irish public opinion would not stand for it. We found it a little difficult to be convinced by that argument at four o'clock in the morning. A whole host of people in this country would be surprised by the observation that Labour areas had not done well enough from the recent settlement.

My second point concerns regional assemblies and planning. I have seen the reaction of the Local Government Association concerning the loss of democratic accountability on planning in the present plans. Although I saw that the Town and Country Planning Association was in favour of the strategic element in the policy, even it thought that the regional spatial strategies did not provide the right to a fair hearing. Unless regional assemblies are elected, decisions in planning matters will be taken by regional officials. But if regional elections are thus thought to be an incentive to vote for them in a regional referendum, one must allow for the fact that regional assembly constituencies look like being three times the size of a parliamentary constituency. Therefore, the link between the elected person and the voter will be greatly diminished, when it has been treasured in

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planning matters in the past. It is a choice between the devil and the deep blue sea. If the devil is always in the detail, he is around in another capacity in the incredible complications of local development plans and planning arrangements.

Finally, one cannot but help ironically notice that the CBI is to campaign against regional assemblies on the strength of the cost over-runs of devolution in Scotland and Wales. One has an uneasy sense that, as classically with decimalisation, but also with all prior local government reorganisations, job inflation and cost inflation will occur. My instinct tells me that the reaction to my bankers which I described—who are not Greek but ostensibly and, indeed, obsessively, bear gifts towards me—will recur.

The Minister in another place is an old hand and an old fox at these matters, but he also has form. We can read what he has said about the benefits that all these reforms will bestow, but some of us were also privileged to sit with him through 270 clauses and 27 schedules in Committee in another place on the Greater London Authority Bill—I appreciate that it became much larger in your Lordships' House—and to hear his silver tongue tell us of all the benefits that strategic planning in London would bestow there. We have also now had the opportunity to taste the fruits of those reforms, and I have to say that trust is a two-way process.

The chief executive of Westminster City Council—the authority many of whose citizens I used to represent in another place—is no doubt gratified that his authority was one of the 20 or so rated as excellent by the Audit Commission, but he has been quick to point out that immunity from Whitehall for some councils does not protect the rest from suffering,

    "the straitjacket of obtrusive inspection regimes and central government constraints that hamper service delivery".

To go back to those elusive "lords of the parish pump", to whom I referred at the beginning, I hope that it will not be too long before a government of my party are able to restore to them the freedom which the present Government have, in the spirit of 1945, when Whitehall knew best, sought to constrain. When Winston Churchill was preparing his speech to the Conservative Party conference in Blackpool towards the end of the 1940s, Geoffrey Crowther offered him the phrase, "Set the people free". Winston retired to the bathroom while the others continued to prepare the speech, and through the bathroom door they heard him saying, "Set the people free", "Set the people free", with a series of variations on emphasis. The emphasis is not important. What is important is the credo itself.

5.41 p.m.

Lord Hodgson of Astley Abbotts: My Lords, I, too, add my congratulations to my noble friend Lord Hanningfield on introducing the debate today, and to the right reverend Prelate the Bishop of Truro on his interesting maiden speech.

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I am obliged to declare an interest—or, in my case, not an interest: I am not and never have been a councillor. Indeed, I am not a frequent participator in debates on local government finance in your Lordships' House. As a mere banker, I find the topic of local government finance too arcane and too intricate to get my brain round. But recent developments in the field—most notably the proposed local government finance settlement for 2003–04—seem to make the issue clearly discriminatory.

I hope that the House will forgive me if I use a personal example to illuminate this. I comfort myself with the thought that the ringside is perhaps the best place from which to watch events. I am lucky enough to own two houses—one outside Ludlow in south Shropshire and the other in central London in Kensington; one in the centre of the capital city and the other in one of the country's most sparsely populated counties, with an area about the size of Essex—with respect to my noble friends Lord Hanningfield and Lord Dixon-Smith—but with a population of about one-fifth, or 20 per cent, of the latter; one in a capital city, where there has been a dramatic rise in house prices and where the past 10 years have been a time of considerable prosperity, and the other in a rural area, hard hit by the decline in agriculture and the consequences of foot and mouth disease. This has given me the chance to see at first hand the impact of the local government finance settlement.

I find it very curious that the council tax payments for the two houses differ not as I would have expected—with Kensington having a higher council tax than south Shropshire—but the other way around. In the current year, 2002–03, my council tax in Shropshire for a band H house is 2,015; in Kensington it is 1524—a difference of 500.

Next year the difference will increase further as the Shropshire County Council has informed me that the council tax is to go up by 16.6 per cent. In case your Lordships should think I am concerned only about band H householders, I should point out that in south Shropshire that will mean an increase of 1.85 a week—nearly 100 per annum—for a band B householder.

I accept the argument of the noble Lord, Lord Woolmer of Leeds, about the rub of the green and that you cannot measure these things precisely—that is absolutely fair—but a difference of 33 per cent is a fairly strong rub of the green.

Why is this happening? I follow the argument of the noble Baroness, Lady Maddock. While the Government are talking about devolving responsibility down to reflect local conditions, they are doing no such thing. Let me take education in Shropshire as an example. Because the Government set the spending level for education—"passporting", I have come to learn, is the phrase we have to use—Shropshire is faced with an increase in its education budget of 15 million, a figure over which it has no control. Of this 15 million increase, 7 million will be covered by switches from specific grants to the revenue support grant, but Shropshire County Council still has to find the remaining 8 million.

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And what is the increase in the revenue support grant for next year? Surprise, surprise—it is 8 million! I therefore agree with my noble friend Lady Blatch that this will leave county councils and local authorities with absolutely no surplus; they will have nothing further to spend. Even though some increases will be built in—for example, the national insurance contribution increase—there will be no increase for support of older people at home, for children's social services—and I have tabled an Unstarred Question, which will be debated later today, in which children's social services play an important role—for libraries, for highway maintenance or for rights of way, unless increases in the current council tax rates take place.

Education is not the only example. In a rural county such as Shropshire, to provide the Fire Service cover necessary to maintain safety there remains an excess over the SSA/FSS which the council tax payers have to fund.

The Government talk about resource equalisation but, having read the papers, on any objective analysis this represents nothing more than a cover for the diversion of resources to the Labour Party's heartland constituencies in the urban areas.

I conclude as I began. I find it extraordinary that a resident of south Shropshire—which is an agricultural community where many are not particularly well off—should be paying a council tax more than one-third higher than a resident of Kensington in the heart of the capital city. I look forward to hearing the Minister's comments on that.

5.47 p.m.

Baroness Gardner of Parkes: My Lords, I thank my noble friend Lord Hanningfield for introducing this interesting debate, to which I have listened with great interest. I arrived in the Chamber a couple of minutes late because, when the debate started, I was watching my noble friend on television and I realised that I could not leave the television and take the time to come up here or I would miss what he was saying. I was in a slight dilemma at that moment.

As a politician, I have been fortunate to serve as an elected member of a local authority and a regional authority and, since 1981, as an appointed Member of your Lordships' House. Throughout these many years, local government has complained of increasing government interference, and usually it has been a well justified complaint.

If ever I am asked by some young, enthusiastic, aspiring politician to compare those roles, my reply is that I found being a local councillor the most fulfilling. As a local councillor one is part of the small community that one represents; you are close to the people and able to be of genuine help because you are available locally and known personally to your electors.

As a member of the Greater London Council—the then regional government for London—I discovered a different situation. Voters really did not identify in the same way with their elected GLC members. Few could even name them, much less know their duties and

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responsibilities. On the whole, they were perceived as remote and almost irrelevant, although in reality they had a considerable effect on people's lives.

Much the same applies to the Greater London Authority today. I happen to know who the local member is, but only because I am a politician. I am quite sure that a street poll would reveal a void.

Now the Government are proposing more regional assemblies. I do not favour them. The creation of the GLA has been costly and I am not at all satisfied that the residents of London are deriving any benefit from it. Each elected member of the GLA is paid a salary not much less than an MP and the cost of running the GLA, including payment of staff and members, is 52 million. The Mayor's office alone costs 2 million. If we include Transport for London and other responsibilities, the amount becomes 2.45 billion a year.

The Mayor is currently proposing a 38.4 per cent increase in precept for the GLA in the coming year. Based on a band D property, that is an increase in precept for the authority of 66.70, bringing the total precept to 240.58—an amount that would be added to the council tax charge payable to the local council; and the local council has no control over the precept of the Greater London Authority. Did those voting for the creation of the GLA realise that it would be a considerable added expense?

Last year, I would have said that the one real merit in having a Mayor for London, was to have a figurehead representing all the boroughs, the famous "voice for London". Now, with congestion charging looming, I am reserving judgment until seeing whether the system works. I am presently one of the many who find it quite impossible to register, as my Internet applications are repeatedly refused and it is impossible to get through on the telephone number offered. I await confirmation from the Chairman of Committees as to when and where we shall be able to pay our daily 5 from 17th February.

It is not only the Greater London Authority that is proving costly. The Welsh Assembly, supposed to be cost neutral, has running costs double those of the pre-devolution Welsh Office.

The Welsh Assembly was set up following a referendum with a very poor turn-out. Now, it is suggested that referenda should be held to decide on future regional assemblies. It was mentioned earlier that the Government will decide when and where such a referendum will be held. I consider it essential that there should be a certain minimum requirement for the percentage of voters taking part, so that any future authorities are soundly based rather than brought into being on a half-hearted result. The extra cost and bureaucracy involved should also be made clear as a factor to be considered in any referendum.

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The Government are currently intending to change the planning laws. I welcome the proposal to speed up planning for major infrastructure projects, but I am unclear as to how the Government can reconcile this with their stated aim:

    "better community involvement which takes into account the needs of all those with a stake in the system".

The Government have pressed local councils to have more fora for the public to attend and take part in meetings. Westminster City Council—assessed as a four-star level authority in the recently published table, the Comprehensive Performance Assessment—held such a meeting yesterday—a joint committee of social services and health committees—at a venue in the north of the borough to make it convenient for voters remote from Westminster City Hall in the south of the borough. Many officers and committee members took part as usual. The number of members of the public who attended was three.

This reminded me of the public meeting that we held in Havering, my GLC seat in 1970–73, to discuss the Thames Barrier. This was considered to be a matter of great importance to local people, whose homes would be saved from flooding if the barrier was built. The platform and a good many seats were taken up by officers and members. Public attendance was a handful.

It is much easier to interest the wider public in issues in theory than it is in reality. There is a small hard core of individuals who pursue every planning application—but the views come more from the amenity associations; again, it is those who are really interested who form the associations. An example is the case of the Paddington Basin, a development the size of Canary Wharf, where there were virtually no local residents in the immediate vicinity.

I note that the Government will provide financial assistance to planning aid ensuring that local people have cheap and easy access to applications and other documents relating to planning. I suppose that it is 10 years since I went to Westminster City Hall to inspect a planning application, but all these facilities were readily available in a one-stop centre then. There is nothing new in this. There was a photocopier available, and for a small payment you could copy any plan or other documentation.

I welcome the use of business improvement districts. These are already progressing well in London. I have in front of me a document produced by the London Development Agency, The Circle Initiative—One Year On", which gives details of the five inner London schemes: Bankside, Coventry Street, Holborn, Lower Marsh and Paddington. These schemes will enhance the areas and will be of great benefit to local communities.

The freedom for councils to use income from fines is again good news. Perhaps I may quote the Local Government Association:

    "councils will perform better if they are free from the burden of regulation and control".

More freedom and less interference should be the aim.

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Local people understand local needs. The noble Baroness, Lady Knight, expressed exactly what I felt. I view with concern the effect on parish councils of the need for councillors to make very wide declarations of their affairs and, I believe, to declare any item received with a value over 25. My parish council in Steeple Aston is very active and wonderfully effective. It is asking a lot for people to give up their time to serve on parish councils. The least the Government can do is to show appreciation and encourage their activities rather than give them unnecessary worries. Transparency is desirable and important in national and regional politics, but it can be taken too far.

As a Conservative, I am pleased to see from the Comprehensive Performance Assessment that 27 per cent of Conservative councils were excellent, against 12 per cent Labour and 11 per cent Liberal Democrats in the same category.

Of course, all council activities have to be funded. Management is important, but the local government finance settlement is the crux of the matter. According to a research note that I saw today the settlement for 2003–04 was due to be published today. Perhaps the Minister will tell us whether that has happened?

Some services imposed on councils by the Government are not fully funded. In Westminster, the cost of looking after asylum seekers is a considerable expense to the council tax payer and attempts to distribute asylum seekers outside London have not been successful.

It is possible that the Licensing Bill, when enacted, will impose quite a heavy expense on those councils, particularly in central London and other major cities, where enforcement in "stress areas" will need resourcing. Enforcement is expensive. At present, late night music and dancing licences produce an annual fee for a council and make a significant contribution.

Most councils act in accordance with their legal obligation. If, as is so often the case, the Government introduce laws or changes in the law that add to council duties, it is only right that government grants should reflect this in full. Historically, that has never been the case, and council tax payers have had to foot the Bill. In introducing the debate, the noble Lord, Lord Hanningfield, pointed to the situation in Essex.

In conclusion, I point out that since 1997 average council tax bills have increased by over 40 per cent—the equivalent of a 2p rise in income tax.

5.57 p.m.

Baroness Hamwee: My Lords, the passion of the noble Lord, Lord Hanningfield, for local government has never been in doubt. He is not one of the members of his party who might be said to be a "gamekeeper turned poacher", although I think that there are some—not in this House.

I thought that the right reverend Prelate the Bishop of Truro had chosen the subject of local government for his maiden speech as being less controversial than that of regional government, to which we shall come. I was delighted to hear his remarks, as we all were. I look forward to debating, on 20th February, local

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distinctiveness in the regional context. I cannot help thinking that, if Cornwall is the "foot" of our country, we can all work out what part of the anatomy London is!

I declare an interest as a member of the Greater London Assembly, which is part of the Greater London Authority. I shall resist being drawn by the noble Baroness, Lady Gardner, into a debate on its virtues and vices. But I agree with the noble Baroness: being a local councillor has, for me too, been the most rewarding and real of the three political jobs that I have done.

I recently met someone who, many years ago, had sought selection as a parliamentary candidate. He described how he was taken on a tour of housing estates in the constituency by the leader of the council. He was shown the estates, but he was not introduced to people. After two or three hours, the penny dropped that the leader of the council was saying: "This is my territory; as the MP, you will be number two, not number one, around here". I wonder whether the same is still the case. The duties, responsibilities and rewards of local government have been notably reduced for councillors over the past few years.

Like the noble Lord, Lord Woolmer, I want to start with the executive/scrutiny split, which is imposed by local government. None of us has referred to the big Downing Street idea of elected mayors, and I shall not go down that route either. I remain concerned about the effect on councillors—the career structure for those who are not members of the executive and the two classes that are created. We have set up something that is an even greater deterrent to entering public service. I am also concerned about the effect on officers, as the executive role blurs their position. I part company with the noble Lord on this point. Some cabinet members seem tempted to take the executive role as well as the title. Indeed, some feel that because they are being paid quite substantially, they should be in the town hall every day. I know of one London borough which has quite deliberately created what it calls a strategy committee rather than a cabinet. It has an executive, and the executive is its chief executive. It has been determined to continue to acknowledge that difference.

The public's interest is, as many noble Lords have said, in service delivery. One of the services is planning, which we will debate later this year. But I recall that when I chaired a planning committee, I spent a lot of time every weekend going round the borough looking at sites and talking to people who were affected by planning applications. I could not do that now—I would be disqualified from voting on any of those applications if I did. I think that central government have simply got it wrong—they do not understand what it is like on the ground.

Many duties have been imposed. There have been references to bed blocking—the fear that money will be paid in fines rather than going towards the service—and the Licensing Bill. In the Planning and Compulsory Purchase Bill, which we will come to later, it is for the Secretary of State to determine

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whether major infrastructure projects are of national or regional significance, and it is for the Secretary of State to direct simplified planning zones. In the Greater London Authority Act 1999, the Secretary of State is mentioned more than the mayor. Some might think that a good thing, of course.

Much local government activity takes place through partnerships but they, too, are often imposed. Surely the very essence of partnership is that it is organic.

I should like to refer to CPAs. Because local government activity is being assessed, we have a regime of centrally prescribed performance indicators. I do not know how many are now set locally rather than centrally but I do not think that the number has increased very substantially. The noble Lord, Lord Brooke, called central supervision a straitjacket. One of the many criticisms that I have of the regime is the diversion of effort among those who are delivering local services to meet a target that someone else has set. However, I am very grateful that the terminology was revised so we no longer have striving and coasting councils.

I question the experience and expertise of those who are put in to oversee councils that are not doing quite so well. As I have asked before, what happened to the freedom to make mistakes?

Funding—arcane, complicated and highly political—is inevitably part of this debate. Will the Local Government Bill assist accountability to council tax payers who are also national taxpayers? We tend to separate out those capacities. Will the Bill assist transparency? External support has reduced. In principle, that is a good thing, but the gearing effect to which the noble Lord, Lord Hanningfield, referred is confusing not only for noble Lords. I do not say that in a pejorative fashion, as I count myself among them. The noble Lord said that it was not always understood—a masterly understatement. I used to find it extraordinarily difficult to explain it on the doorstep, particularly in the part of my ward which bordered on another authority under a different political regime whose finances were different, so that council estate occupants were paying far more in council tax than those in large houses across the road.

Reference has been made to ring-fencing by the noble Baroness, Lady Blatch, among others. My noble friend Lord Shutt called that special offers during a debate in this House. Ring-fenced grants are becoming earmarked grants, but whatever the language, as my noble friend Lady Maddock said, they are actually nationalisation. There seems to have been almost no consultation by the Government over the split of resources between earmarked and general grant. To inject a positive note, since the Government are unlikely to go down the route of local income tax, I urge them to have more meaningful consultation on the split.

We have recently gone through the funding review. As an official in the Greater London Authority said to me—and I thought he was generous in putting it this way—the rationale on individual decisions, as distinct

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from the package, was not always clear. The review started in 1999, but, apart from education, I believe that work in any detail began only at the end of 2001, so there was relatively little serious consideration or consultation regarding most of the areas of spend.

Once we received the settlement, the announcement of the cash was made at the same time as the exercise was concluded. That does not seem to assist transparency or understanding of what is no less complicated a subject than it was under the previous government.

I have not managed to put the elephant in the perambulator, but I will end with one observation. We do not have a written constitution in this country. Local government is regarded as the creature of Parliament which, in effect, means that it is the creature of central government. That is not how I approach it; it is not how we on these Benches approach it. Our philosophy is that power is given up by the people—it is bottom-up, not top-down. I do not think that central government recognise that.

6.7 p.m.

Baroness Hanham: My Lords, I made a disgraceful omission earlier, which I would like to remedy. I did not pass this Bench's condolences to the noble Lord, Lord Rooker. I have done so personally, but not formally from this Bench. Rather belatedly, for which I apologise, I record our deepest sympathy for him.

Secondly, I congratulate the right reverend Prelate the Bishop of Truro on his excellent maiden speech. It is a delight to have somebody else in this House who understands local government. I hope that he will join in the many debates on this matter in the House in forthcoming months. We are delighted indeed to have him and congratulate him on what he said.

I think that everybody would recognise that there have been some excellent contributions to the debate. They demonstrate that there is a great deal of practical expertise in this House to which, I am afraid, the Government do not always listen. But there we are—if we keep on dripping the water, drip by drip we will get somewhere in the end.

I thank my noble friend Lord Hanningfield for instigating the debate. It is the second we have had in a fairly short space of time, and I never cease to admire the ingenuity of all noble Lords in bringing enthusiasm, excitement and knowledge to these debates. The Motion was deliberately widely drawn to emphasise the considerable responsibilities of local government, its importance to the local community and the amount of legislation that is coming forward that will affect it. The main elements have been referred to during the debate—the Local Government Bill, the Planning and Compulsory Purchase Bill, the Regional Assemblies (Preparations) Bill, changes to local government finance and now, today, the communities plan, which we discussed briefly on the back of the Statement and which will have many implications, bringing massive new development,

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largely in the South East of England. We have discussed that already today, so I do not need to go into it any further for the moment.

In addition we have the impact of the result of the comprehensive performance assessment, from which it is plain, as my noble friend Lady Gardner has pointed out, that most of those acknowledged as high performing councils before the assessment was undertaken are Conservative councils. They are now expecting to reap the rewards of their expertise by gaining the freedoms promised by the Government and a lessening of the centralised control of continual inspection. The noble Lord, Lord Woolmer, in particular, drew attention to the adverse impact of these on local government.

Before I go any further, I remind the House that I am a member of the Royal Borough of Kensington and Chelsea council. Instead of just saying that it is a local council, I will enlarge and say that it is one of the high performing councils.

The one thing that most reasonable people looked for in the Government's blast of modernisation was evidence of a lessening of its impact on their lives. That will certainly not come about when the reality of the new finance settlement, carried out against the modernising agenda, means that even though the verbiage may have changed, there is once again a shift in resources as well as an intention in the budget that there will be real-terms uplifts in council tax. That will be exacerbated by the result of the local government financial settlement.

It is clear that as a result of the changes—which are nothing to do with the local authorities, but for which they will undoubtedly get the blame—the average band D council tax will be in the region of 1,000. Of course, averages hide the highest and lowest, as the noble Lord, Lord Hodgson, has demonstrated. As the noble Baroness, Lady Gardner, has pointed out, that will be inflated in London by the Greater London Authority's extra precept, which is increasing, and in Wales and Scotland—the neutral zones—by the increase in costs there.

That will not have been helped by the disappointing result of the census figures, which have shown a substantial reduction in population in many areas, consequently affecting the base on which grant is paid.

The Government's review of the formula for grant distribution has taken four years to bring to fruition. As the noble Lord, Lord Hanningfield, pointed out, it is as opaque and complicated as all those that have gone before, involving inexplicable shifts of resources from one part of the country to another and inadequate damping arrangements—floors and ceilings—for many authorities. Also, rather than the amount of specific grant being reduced, these have increased to about 16 per cent of the total allocation. It is clear that once again there are winners and losers as a result of the formula changes.

Governments used at least to pay lip service to the fact that the grant was a block grant, which, even if it was allocated against certain criteria, could be spent as each local authority felt was most appropriate to the

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needs of its own community. That is now a forlorn hope. My noble friends Lady Blatch, Lord Hanningfield and Lord Brooke and the noble Lord, Lord Woolmer, referred to the iniquities of the requirement to passport a directed extra percentage to education and to social services. In a number of cases, those increases amount to more than the grant itself. My noble friend Lady Blatch drew attention to the danger of the impact that that would have on the local education authority's budget.

The direct result of the problems I have outlined is that the local authorities concerned will have to increase council tax or cut other services. That is a result of direct diktat from central government.

The Local Government Bill, which is currently being considered in another place, includes proposals for a new banding system for council tax, raising the spectre for those living in higher value properties in London and the South East of a substantial increase in that tax in the future. The Government need to remember that, while there has been a substantial rise in property values since the council tax was introduced, many people cannot access that value unless they sell their home. Their income has not risen in tandem with those increases by a long shot.

A major rise in council tax as a result of re-banding could have an effect proportionately as serious as the disastrous reduction in life savings and potential and actual pensions, the reason for at least some of which can be laid at the door of the Government's policies.

Noble Lords have also referred to the plans for regional government, which we shall discuss within the next few weeks. It is fair to say that they are seen as a direct and unwelcome threat to the current tiers of local government, particularly the county councils, but potentially to either tier, as it is apparent from the Bill that the Boundary Commission will be able to reorganise the lower unitary tier to a region.

That Bill is not yet law, so it is informative at least to note that consultation is already being carried out in putative regions so that the Deputy Prime Minister can take an early decision on those areas where it would be possible for him to unleash a Boundary Commission review before a decision is taken to hold a referendum. Experience seems to be that practically no one at present has any idea what regional government is about. Apart from the niceties of anticipating the outcome of legislation, it seems odd to try to canvass views on something about which a vast proportion of the population remains profoundly ignorant. As the noble Lord, Lord Dixon-Smith, said, will people be happy when they know what it is about and realise the implications? We shall return to that in more detail when the Bill reaches this House.

The threat to county councils is also raised in the Planning and Compulsory Purchase Bill and in the stated intention of transferring strategic planning to regional assemblies, to which has now been added the housing strategy. No one should underestimate the amount of change that is affecting or about to affect the whole of local government from top to bottom. While the Government say that they intend to devolve

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their responsibilities, that is unlikely to happen. History does not support the view that such daring action ever transpires. It is more likely that local government will just become less local and government impact will remain at least the same as before. We will have plenty of opportunity in the next few months to test out the Government's intentions and to judge the value of what has been put forward in the various Bills that this House is still to consider. If today is anything to go by, I can promise the Government a robust and questioning passage of these measures.

6.17 p.m.

Lord Bassam of Brighton: My Lords, this has certainly been a wide-ranging debate and I have greatly enjoyed it. Like many noble Lords who have participated, I have spent many hours in local authority business. I spent all but four years of the previous Conservative administration as a councillor and was involved in local government in one way or another for pretty much all that time. The issues still have a strong and recurrent theme. They are about powers, centralisation, finance, the iniquities of central government as against local government and concerns about the way in which central government, the regions and local government never quite seem to work or get their act together. This afternoon's themes have a familiar ring and a familiar feel.

Like other noble Lords, I shall pick out some of the contributions to this important consideration of local matters. I pay tribute to the right reverend Prelate the Bishop of Truro, who clearly occupies a world that is strongly imbued with a sense of the local. His contributions to this debate and, I am sure, to debates in future will be widely welcomed for their richness and experience. I was much taken by his story about the man in Wadebridge telling us that it was a long way from London. The last time I was in Wadebridge it felt a terribly long way from Padstow. I had cycled there over the Camel trail, which had caused me some grief. I think that local is as local feels. It is certainly true that local government is very important to all of us. It felt that way when I was in local government, and that remains the case.

I congratulate the noble Lord, Lord Hanningfield, on securing this debate. Like me, he is an Essex man. I have great affection for that part of the world. I pay tribute to his determined efforts to represent Essex forcefully in every possible forum. Like him, I want to ensure that local government plays its part, as it always has in Essex, and remains strong. Local government filled that role when I lived in Essex and Essex County Council was kind enough to provide me with a reasonably decent education. I am sure that it will continue to do so, in one form or another, for generations to come.

I am pleased to have this opportunity to debate the changes we have made in relation to local government since we took office. We want to see local authorities which are autonomous and responsive to local needs. We want to ensure that councils have the right funding and legislative framework to enable them to move

5 Feb 2003 : Column 257

forward on their agenda while taking account of the overall priorities on which the general public wish them to concentrate. I believe that the measures we have taken to date and the new measures proposed in the Local Government Bill, in other legislation relating to local government, and in other measures relating to the communities plan will do a great deal to enhance the status, standing and role of local authorities and ensure that they are much better placed to deliver the quality services that we and the public expect of them.

This debate also comes at a time when local government will no doubt be looking very closely at the reports and accompanying papers which were laid on Monday in another place dealing with the local government finance settlement 2003–04, to which many noble Lords have referred. The settlement makes this debate all the more prescient. This debate secures a useful opportunity to discuss that settlement, which confirms the good grant increases we are providing for councils next year—grant increases which provide an overall increase in general grant for authorities in England of 5.9 per cent.

I spent a little time today pondering some of the complaints we have received from noble Lords about the inequities of the settlement, and I was drawn to compare the settlements in the past three years with those in the last three years of the previous Conservative administration. I have made a careful note of the average settlements for Essex, Kensington and Chelsea, Shropshire, Westminster and Birmingham. In the last three years of the previous Conservative government, Essex enjoyed an average real terms increase of 1 per cent; Kensington and Chelsea, 2 per cent; Shropshire, 2 per cent; Westminster, 1 per cent; and Birmingham, 1 per cent. With Labour at the helm of central government, the comparable increases have been 5.3 per cent in Essex; 5.8 per cent in Kensington and Chelsea; 5.5 per cent in Shropshire; 5.8 per cent in Westminster; and 5.6 per cent in Birmingham. Those are the best like-for-like comparisons that we can make. It seems to me that my Government have a rather good record with regard to those local authorities. It is a record of which they can be proud.

The report mainly confirms the proposals we announced on 5th December 2002, and which we announced in this House at that time. We carefully considered all the 385 written representations we received within the consultation deadlines from the Local Government Association, the Association of London Government, local authorities, local authority groups, noble Lords and those in another place. We listened carefully to the issues raised by the 55 delegations which met with Ministers to discuss those finance proposals. It is perhaps unusual, as I suspect noble Lords who have served as Ministers in central government under either party will agree, that we have received 89 favourable responses to that settlement. However, when one looks at the general thrust of the settlement, pitched as it is well above the level of inflation, it is perhaps not surprising. We

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decided to make one change to our original proposals for the methodology of grant distribution concerning the area cost adjustment. However, we did not believe that other changes would have been justified.

This year's settlement provides a good increase in money for local authorities overall and guarantees that all authorities will see at least an above-inflation grant increase. Most councils will receive substantially more. That means that since we took office we have been able to increase government grant, including money for specific initiatives, by 25 per cent in real terms. That compares with a real terms reduction of 7 per cent in government grant in the last four years of the previous government. That should allow councils to improve services while setting reasonable council tax increases, though, of course, that is their decision to take.

The use local authorities make of this money is a matter for them. Noble Lords will know that some authorities manage better than others, as various announcements have made clear. Many of those local authorities are Conservative and many are Labour; the point applies to parties across the board. The important point is that we care a great deal about improving the standards and quality of the services that those authorities perform. One of the changes we have made since taking office is to ensure that there is a comprehensive performance assessment of every local authority with education and social services responsibilities. We will be extending that to district councils in the coming year. That helps democratic accountability. We believe that quality of service and management should be a matter of public record. It will help motivate service improvement.

Having listened carefully to all the points raised in the debate, I can assure noble Lords that we are under no illusion that we are always able to solve all of the local authorities' ills. It would be unwise of any Minister or government to say that they could do that. However, I must put in context the concerns of those who spoke in this debate. On the matters raised concerning the level of grant, we have, as I said, been able in successive spending reviews to increase significantly the amount of grant support which local authorities receive.

There are funding increases particularly for education, the specific concern of the noble Baroness, Lady Blatch. This year, there will be an increase of 2 billion. The spending review provides for a further, year-on-year increase of 1.36 billion in 2004–05. That follows increases of 1 billion in 1998–99, and increases each year to 2002–03. That means that since we took office real terms funding per pupil has increased by an average of 690, a 24 per cent increase. Next year, it will increase by a further 200—a year-on-year real terms average increase of 6 per cent. By 2005–06, it will have increased by an average of more than 1,000 in real terms since 1997–98.

In addition, all schools will see their direct grant increase. A typical secondary school in England with 1,000 pupils will see direct grant payments increase by 50,000 in 2003–04. A typical primary school with 250 pupils will see its direct grant payments increase by 10,000 in 2003–04.

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Personal social services resources are increasing in real terms by 6 per cent a year. That includes an extra 15 million for carers; an extra 106 million for the children's services grant; a new grant of 170 million for access and systems capacity, which will increase to 542 million by 2005–06; and an extra 31 million extra for child and adolescent mental health services, which more than doubles the existing level of funding. We have also been able to increase funding for the environmental, protective and cultural services block.

On the method of distributing grant between authorities, I can assure noble Lords that we have made changes only after a long and considered look at the system. There was general agreement that the old standard spending assessment system was outdated and we needed a grant distribution for local authorities which was fairer and more transparent. We have had a series of debates reflecting the wide range of views held on the formula grant review. We have held meetings with technical groups. We have held complex discussions with local government, and had detailed meetings with other government departments.

Only after all that did we put forward suggestions for changes last year. We carefully considered all responses received during consultation on those suggestions in putting together our proposals for the new formula grant distribution system. The result is a grant distribution system that removes outdated and inadequate indicators. The system now is necessarily complex—we could not justify distributing 40 billion of public money without some complexity—but we have simplified its structure. The system is now based on a basic level of funding with top ups for various factors such as deprivation, high labour costs and sparsity.

Questions were asked about census and population data and their veracity. Many authorities have put arguments to us on this issue, or have asked us to consider using their own figures. Our position now remains as it has been: we must use the best data available at the time on a nationally consistent basis. To do otherwise would lead to a large element of judgment being used in terms of what data to use and would not be fair. Therefore, we are going to use the population figures provided to us by the Office for National Statistics.

The ONS is confident that the approach taken for the 2001 Census provides the most accurate estimates of the population both nationally and for each of the 376 local authorities in England and Wales. As such the ONS has no plans to revise the 2001 population estimates. I know that a number of councils have been talking to ONS about the methodology used to get those figures. If ONS does make any such revisions, we shall have to look at the position at that time. We shall need to consider the situation carefully, and if appropriate we shall be prepared to issue an amending report.

Resource equalisation was raised. The grant distribution system has always equalised for authorities' relative ability to raise council tax income. If we did not do this, taxpayers in areas with a high tax

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base would pay much less than those in areas with a low tax base. For 2003-04 in line with the principles we set out last summer, we are bringing the system into line with reality by equalising at broadly the national average band D council tax, instead of at the previous unrealistically low amount.

The system is complex. The noble Lords, Lord Dixon-Smith and Lord Hanningfield, and the noble Baroness, Lady Maddock, referred to the complexity. We have tried to ensure that we develop a radically simpler system. That is not easy to achieve but we have tried to secure that objective.

One of the things that we are trying to do is to get away from telling councils what to do with council tax. That matter was mentioned in the debate. We believe that the local authority is best left to determine its level of local taxation in consultation with its electorate. Ultimately, the local electorate is best placed to pass judgment on that matter. This Government have awarded historically high levels of grant increase and use floors and ceilings to moderate the impact of distributional changes. These factors should enable all authorities to deliver improvements to public services while setting reasonable council tax increases.

The noble Baroness, Lady Blatch, referred to the important issue of the passporting of the increase in education funding. This is the amount which government tell councils should be spent on school funding. We inherited that policy and have refined and developed it. The Government do, of course, have a longstanding interest in the increases of school spending from year to year, which authorities with education responsibilities will want to take into account in setting their budgets. I understand that almost all authorities have notified the Department for Education and Skills of their proposed schools budget. A substantial majority intend to pass to schools at least the target amount suggested by DfES. We shall consider the remainder over the next few days and will announce the decision within the 14-day deadline. I can assure the House that we shall be taking all relevant factors into account, including each authority's own submissions, when reaching that decision. Any use of the reserve power will be limited to a very small number of authorities in exceptional circumstances.

In addition to this financial framework, we have devolved power and responsibility so that local decision makers have more opportunity to shape services. I am at a loss to understand from where the conspiracy theory of increased centralisation comes, particularly when one considers the most recent of our legislative proposals. Those that extend freedoms and flexibilities have been widely welcomed by local government, the Local Government Association and many individual local authorities. The best performing local authorities at their peak of performance will have more freedoms and flexibilities extended to them. I find it hard to take from noble Lords opposite who, after all, were in government for some 18 years—

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