Local Government Finance

HC Deb 01 December 1994 vol 250 cc1333-50 3.31 pm

The Secretary of State for the Environment (Mr. John Gummer)

With permission, Madam Speaker, I should like to make a statement about the local authority finance settlement for England for 1995–96.

In forming my proposals, I have listened carefully to the views of local authorities and their associations, and I have considered fully the demands which will be placed on local authorities in the coming year.

I have also given weight to the interests of the economy as a whole, and in particular the Government's objective of reducing the public sector deficit. Local government accounts for around a quarter of general Government expenditure and has been rigorously examined, as have all other spending programmes. I have had regard to the level of inflation, with the retail prices index increase to October at 2.4 per cent., and the underlying rate currently the lowest for decades.

Thanks to the Government's firm control of inflation, the resources available to local authorities this year are worth considerably more than they otherwise might have been or than local authorities expected them to be. I have also taken into account our policy that increases in pay and prices within the public sector must be met through greater efficiency and economy. It is clear that many authorities have considerable scope to increase their efficiency.

That is the background to the aggregate figures I published on 29 November. The Government's view is that the appropriate level of revenue spending for local authorities in England in 1995–96 will be £43.511 billion. Central Government grant and income from non-domestic rates in support of that expenditure will be £34.672 billion.

My right hon. Friend the Secretary of State for Health announced on 4 November that the Government propose to make available in 1995–96 a special grant of £647.6 million for the further increase in the number of people needing community care. That amount is included in the figures that I have just quoted. The figures also reflect some minor changes in local authorities' functions next year and a separate provision of £50 million for the transitional costs of local government reorganisation.

My proposal, including provision for community care and reorganisation costs, provides for a 2.2 per cent. increase in local authority spending year on year, including the spending of police authorities. Leaving aside the increase in provision for community care, my proposal still amounts to an increase in provision of just under 1 per cent. year on year. In allocating that sum between services, we have decided to give priority to education and to the police.

On 29 November, I announced that the distributable amount of non-domestic rates in 1995–96 should be nearly £11.4 billion and I am today publishing details of the distribution. I proposed that the revenue support grant should be £18.32 billion. In addition, some £5 billion of specific and special grants would be available.

I turn now to the means of distributing revenue support grant. At its heart is the standard spending assessment for each authority. Last year, we carried out a thorough review of SSAs in partnership with the local authority associations, although each of the associations tends to have a different series of priorities from the other, naturally reflecting its own interests in the matters about which it is concerned.

For this year, we have brought up to date our data on the SSA indicators wherever we can. That has been beneficial to authorities in inner London in particular. Aside from those data changes, I propose a year of relative stability in the methodology used to distribute resources among local authorities, which had to deal with a significant change last year. I felt that stability was the most important element this year. I know that many councils will welcome that because they were apprehensive that the sometimes large fluctuations in SSA would be repeated, even though those changes were damped. Last year, that damping helped many councils.

My proposed changes are quite limited and I shall not list them here, with two exceptions. First, we have revised the formula for the fire service SSA to take account of various factors that lead to higher costs in some authorities, and the formula for authorities such as Cornwall and the Isle of Wight, which have particular coastal problems.

Secondly, the police authorities reforms that we have put in place this year have made it necessary for the financial arrangements to be changed considerably. For many years, just over half police expenditure was met by a specific grant from the Home Office. Now, the police specific grant will be cash limited and distributed using the same formula as for police SSAs. In the past, that formula has been based on numbers of police in establishments approved by my right hon. and learned Friend the Home Secretary. From 1995–96, however, the Home Secretary will no longer approve such establishments. It follows that a new formula is needed.

There has been considerable work by representatives from the police and the local authority associations, along with the Home Office and my Department, to find the most satisfactory way of representing the needs for spending on police. We considered the new analyses in the context of factors that have previously been used to assess expenditure needs and of the scope for further work to be undertaken on the formulae.

We concluded that, for 1995–96, the size of the approved police establishment should be included as an indicator in the funding formula. As a result, the extent of change next year will be limited. It assists in providing stability and continuity of policing. The Home Office and my Department will carry out further work on the formula in 1995.

I propose that the change in police SSA and specific grant will be damped by a special grant in 1995–96 where they are reduced by more than 2 per cent. as a result of the changes. That is part of a policy to ensure that, where there are necessary changes in the money going to a local authority, and where the changes are above what can reasonably be borne in a particular year, a damping system to help them is in place. That grant will be paid to support expenditure by police authorities, cushioning the impact on council tax payers.

In view of the limited nature of my remaining SSA changes I do not propose to damp those. However, I propose to continue to damp the effects of the large changes made last year; that will be an encouragement to many local councils. In 1994–95 we are paying SSA reduction grant to protect council tax payers from the effects of the 1993 SSA review and the incorporation into SSAs of detailed data from the 1991 census. Grant is paid to authorities whose SSAs were reduced by more than 2 per cent. I propose a similar grant in 1995–96 in respect of the same changes, the threshold to be a further 2 per cent. I know that that will be widely welcomed.

The council tax has now been in operation for two years, and is well established as an equitable means whereby local residents contribute to the cost of local services. Council taxes will vary widely, depending on the spending decisions of each local authority and its performance in collecting the tax, on the circumstances of each household, and on individual entitlement to exemptions or benefits. There is therefore practically no meaning in talk about average taxes within or between authorities.

I remind the House that when we announced the figures last year it was widely reported that they would automatically lead to a 6 per cent. increase in council tax, but that in the event the increases amounted to only about 2.2 per cent. I therefore warn the House again that at this point there is no way of assessing any kind of average tax increase.

However, I am required to identify notional taxes for each valuation band for a standard level of spending—the so-called council tax for standard spending, or CTSS. [Interruption.] Had Opposition Members listened to the corresponding part of my statement last year they might not have gone out frightening people with figures that turned out to be entirely wrong. So I hope that this year they will listen.

My proposals incorporate a CTSS of £491 for band C. I emphasise to the House that that is merely an element in the grant distribution formula. If hon. Members remember that, the faults and mistakes of last year will not be repeated. It is neither a prediction of individual council tax bills nor a national average.

When the council tax was introduced in April 1993 we promised a scheme of transitional relief for at least the first two years, to help those facing the largest increases above their community charge bills. At present 1.4 million households benefit from transitional relief and many would face a considerable increase in their bills if it ended this year. I therefore propose to make available £30 million to enable transitional relief to continue for a further year. Relief in 1995–96 will be withdrawn at the same rate as in 1994–95; taxpayers will receive last year's relief less an amount ranging from £67 a year for band A to £137 a year for band H.

I also propose to remove the requirement for local authorities to repay community charge transitional relief grant, community charge reduction scheme grant and council tax transitional relief grant, in respect of charges that are written off or remain uncollected. I do not propose to make any change in the arrangements for recoupment of community charge grant.

I shall now deal with capping. We remain determined that local authorities should make a full contribution to the control of public expenditure, and should set budgets that their local taxpayers and the country can afford. I am today announcing my provisional capping criteria for 1995–96. I am also issuing proposals for the calculation of notional amounts for those authorities whose boundaries or functions will change from 1 April 1995, for reasons that include the transfer of responsibility for the police service from county councils to the new free-standing police authorities, and the reorganisation of the Isle of Wight. Those figures are the base from which I shall measure increases in budgets when determining whether those increases are excessive.

In addition, my provisional capping criteria make allowance for that expenditure on care in the community which is met this year by the special transitional grant, and for the abolition of inter-authority recoupment payments in respect of most pupils. Those adjustments allow a fair year-on-year comparison of budgets.

Where budgets are very substantially above SSA, I intend again to seek budget reductions. My general intention is that the provisional capping criteria should allow larger year-on-year increases for authorities with budgets closer to their SSAs than for those with relatively higher budgets. I have had particular regard, however, to the effect of our settlement proposals on the year-on-year change in provision for spending by different classes of authority.

My current intention is that there should be different criteria for police authorities and inner London boroughs than for all other authorities, reflecting the fact that those classes of authority have somewhat larger increases in aggregate SSA provision than others.

I must acquaint the House with the effect of my intended criteria. I am sorry that this is a detailed matter, but it needs to be put in the public domain clearly. First, for police authorities, any increase of more than 2.5 per cent. over 1994–95 will be considered an excessive increase if it gives rise to a budget requirement above the authority's SSA plus police grant. Any increase of more than 1.5 per cent. over 1994–95 will be considered an excessive increase if it gives rise to a budget requirement more than 5 per cent. above the authority's SSA plus police grant. Any increase of more than 0.5 per cent. over 1994–95 will be considered an excessive increase if it gives rise to a budget requirement more than 10 per cent. above the authority's SSA plus police grant.

For inner London boroughs the criteria will be comparable, but with increases of 2 per cent., 1.25 per cent., and 0.5 per cent. For all other authorities, any increase of more than 0.5 per cent. over 1994–95 will be considered an excessive increase if it gives rise to a budget requirement above the authority's SSA. In addition, I intend that any budget requirement more than 12.5 per cent. above SSA will be considered excessive, save that an authority will not be designated if it fulfils certain conditions equivalent to those which have applied in previous years.

Those criteria are necessarily provisional. I cannot take my decisions on capping until authorities have set their budgets for 1995–96. When I come to take those decisions, I shall of course take into account all relevant considerations.

In presenting this statement, I must emphasise that my Department is today writing with details of the settlement to every local authority in England. That package includes a consultation paper setting out how we propose to distribute central Government support between authorities, including my proposals on SSAs, for continuing to damp SSA losses from 1994–95 and for the new police authorities. It gives details of the proposed council tax transitional relief scheme. It sets out my provisional capping criteria and it includes my proposals for notional amounts. Copies of the package have been placed in the Vote Office and the Library.

The proposals that I have outlined today represent a balanced and reasonable response to the conflict between the pressure to provide ever more resources for local government and the need to control public spending. I promised the local authorities that I would not seek to present the proposals in anything other than a direct factual way and that I would, above all, insist that the settlement, although tough, was one that could be worked within. Therefore, I have sought neither to underplay the difficulties nor to overplay the advantages. So I am sorry that I have to end by drawing attention to a factual inaccuracy in some of the statements that have already been made.

You will know, Madam Speaker, that at the beginning of the year the standard spending assessment, gathered up together with other grants, reaches what is known as the total standard spending. That is the amount of money that the Government expect local authorities to be able to work within. That is assessed before the year in this statement. That is what we are talking about today—our assessment now. At the end of the year we discover that local authorities inevitably have spent more than that. They draw down from balances, they find money from various activities and they spend more than that. In those circumstances, we need to compare either the beginning-of-year figure from one year with that of another to get a fair measure, or the end-of-year figure. We cannot compare the beginning-of-year figure for one year with the end-of-year figure for another. That is precisely what local government organisations have done, however, to try to pretend that the package means a cut of £1.5 million. They have done so by comparing what they ended up with last year with what we are suggesting as the standard spending requirements, the TSS, for this year—a wholly fictitious figure.

Mr. Frank Dobson (Holborn and St. Pancras)

The right hon. Gentleman does not know what he is talking about.

Mr. Gummer

For the hon. Gentleman to say anything about not knowing what he is talking about after his performance at Question Time yesterday would make Conservative Members extremely suspicious. The TSS will increase next year by £935 million, after adjusting for changes in the way in which the organisation operates. I do not claim that that represents anything other than a tough settlement, but one has to tell the truth rather than mislead the people of Britain by pretending otherwise.

Mr. Dobson

As we wake ourselves up after 20 minutes of moderate tirade from the Secretary of State, I can say for a start that the settlement is a bad deal for council tax payers throughout England. Next year, they will pay more and get less.

On the Government's figures, which were issued on Tuesday, the council tax will have to increase next year by an average of 6 per cent., which is more than twice the rate of inflation. According to their published figures, the Government expect council tax payers to cough up an extra £2.8 billion in the next three years, which is equal to almost 1.5p in the pound on the standard rate of income tax—another tax increase that the Chancellor did not quite get round to mentioning on Tuesday.

The deal is also bad for anyone who uses local services because councils will be forced to cut back. Next year, the cash available to councils for local services will be £1.5 billion less than they are spending this year. That figure makes no allowance for increased demand, for example, from the 110,000 extra pupils who will go to school, the increasing number of old people, inflation or any pay settlements that will have to be reached. The simple truth is that next year people will pay more council tax and get fewer services in return.

The Secretary of State said earlier this week that local services will not suffer. Tory Secretaries of State have said that every year, but it has never been true. Behind all the jargon and the fiddled figures, in real towns, cities and villages throughout the country, real people have suffered and will suffer further.

Let us take housing. In 1979, councils in England built 66,724 new homes, but last year the total was 1,235. In the mean time, rents have soared. How many new homes will councils build this year? Will it be more, or even less? I challenge the Secretary of State to deny the fact that average council rents will increase next year by three times the rate of inflation.

Look at what has happened to school meals. In 1979, 64 per cent. of school children took school meals. Last year, it was only 43 per cent. and that is because the price has increased from 20p in every school in England in 1979 to more than £1.20 in some areas today. With record levels of child poverty, will the Secretary of State tell us what will happen to school meal prices next year as a result of the settlement? Will they go up or down?

Let us take class sizes. Primary school classes are 9 per cent. bigger today than they were 10 years ago, and the same is now happening with secondary school classes. Can the Secretary of State tell us, since he says he is giving special priority to education, whether class sizes will go up again next year or down?

When compared with 1979, the number of meals on wheels served by luncheon clubs has slumped from 15 million to 7 million. Can the Secretary of State tell us whether the new settlement will allow councils to reverse that trend, or whether the number of meals will fall again?

Everybody knows that care in the community is not working properly. People who cannot cope are walking the streets, and others have to put up with neighbours who cannot help being a nuisance because no one is looking after them and because there are no acute or secure beds available in a crisis. Can the Secretary of State guarantee that this settlement will mean that enough funds will go to councils and the health service next year to resolve what everybody recognises is a crisis in community care?

The Secretary of State knows that the settlement will drive up the council tax and lower the standards of council services for local people. He will try to shift the blame on to local councils, but I must warn him that he will not succeed. Local people have seen through the Tories' lies. Forcing people to pay more to get less will not work any more.

Mr. Gummer

It is difficult for someone to grasp how things work at the beginning, but the hon. Member for Holborn and St. Pancras (Mr. Dobson) should have done more homework than that.

First, the hon. Gentleman talked about housing capital, when today's announcement is about revenue. We are talking today about revenue expenditure, and housing capital issues do not arise in the announcement. We can have that argument with him on an other occasion. The hon. Gentleman threw that in because he thought that it might have something to do with the announcement.

We must judge the hon. Gentleman also on the fact that he repeated his misunderstanding of the figures. The £1.5 billion to which he referred is totally untrue. He is comparing totally different figures from one year to another year, and the hon. Gentleman should be ashamed of himself for misleading the House. The House can forgive him only because he has not been doing the job long enough to know the difference between the TSS and the budgets of local councils and their spending at the end of the year. The hon. Gentleman has been in the House long enough to know that he should do his homework before he comes here, and not dump a load of old rubbish in front of the House.

The same is true about the hon. Gentleman's criticisms of successive Tory Secretaries of State. His predecessor, the hon. Member for Blackburn (Mr. Straw), tried to play the same kind of game. He said, for example, that a settlement of my right hon. and learned Friend the Home Secretary when he was Secretary of State for the Environment would mean job losses for teachers.

Mr. Jack Straw (Blackburn)

That was true.

Mr. Gummer

I am glad that the hon. Gentleman has just come in. He says that that was true, and he said that there would be job losses among teachers in one year, the next year and the year afterwards. I now have the figures—395,000 schoolteachers in the first year, 396,000 schoolteachers in the second year and 397,000 schoolteachers in the third year. The hon. Gentleman was wrong about every year. That is what the Opposition say every year, and every year they have been proved wrong. But the hon. Gentleman never comes to the House and says, "Madam Speaker, I would like to make a personal statement. I was wrong in what I said." The hon. Gentleman has never done that.

The hon. Gentleman's successor, the hon. Member for Holborn and St. Pancras, was wrong in the way in which he attacked the settlement. Sadly, he was wrong in a worse way than the hon. Member for Blackburn, because his hon. Friend had at least done his homework and understood how the system worked.

Several hon. Members

rose—

Madam Speaker

Order. I remind hon. Members that we are not having a debate at this stage. I shall now want brisk questions if hon. Members wish to be called. I am not sure that all hon. Members who wish to be called will be, and they certainly will not be called if we go on at this pace. I now want brisk questions and brisk answers from the Minister.

Sir Peter Fry (Wellingborough)

Is my right hon. Friend aware that, for the second year running, Northamptonshire will have a disappointing settlement? Is he aware that, as a result, it is highly likely that many teachers will have to be made redundant because of the need to finance a new pay rise? Will he bear that fact in mind when he comes to make a decision on the capping of Northamptonshire county council?

Mr. Gummer

Although it is true that, last year—and this year, in advance—hon. Members representing Northamptonshire drew to my attention that they thought then, and feared now, that Northamptonshire had received less SSA than it should have done, its settlement was above the average last year. I hope that the outcome 'will be the same this year, but until the figures are agreed with the local authorities, I cannot be sure of that. If Northamptonshire has particular problems, I would be happy to meet my hon. Friend to talk about them.

Mr. David Rendel (Newbury)

Does the Secretary of State agree that staff salaries are by far the biggest part of education costs and that pupil numbers are going up in many areas? The efficiencies that must be achieved to pay for staff salary increases must mean that teachers will be sacked and that pupil-staff ratios will deteriorate.

Mr. Gummer

The fact is that local authorities will be able to decide how to spend their money. We have specifically insisted that significant extra resources should go into education, but it is for local authorities to decide their priorities. I am sure that the hon. Member would agree that the priority of many local authorities will be to ensure that the requisite number of teachers is available. That means that, if savings are necessary, they will have to be found in other areas. It is for local authorities to make that decision. Frankly, we are asking local authorities to do only what is already being asked of a large part of government and what private companies have had to do year in, year out during the recession through which we have now passed.

Mr. David Harris (St. Ives)

Will my right hon. Friend say a word about the position of Cornwall, particularly in the light of the thoroughly predictable annual exercise by the majority group on the county council, the Liberal Democrats, who, a week before every settlement, always prophesy doom and gloom and claim that the county council's finances will be thrown into chaos? Will he accept from me and other Conservative Members our thanks for at last doing something about the SSA for the fire service, which will benefit the people of Cornwall and the population of the Isles of Scilly?

Mr. Gummer

I thank my hon. Friend. I hope very much that those improvements will be widely welcomed in my hon. Friend's county. I am sorry that the county council has gone in for that popular activity of presenting a wish list for the kind of budget it might have had if everyone gave it every penny to fund everything it wanted—only to complain that it did not even get that money. It is important for the people of Cornwall to recognise that the SSA is a fair settlement—it is not an easy one—in which the county has been particularly carefully looked after, not least because my right hon. and hon. Friends have raised with me the difficulties in the far west.

Mr. Nigel Spearing (Newham, South)

Will the Secretary of State confirm that the SSA for Newham is £259.5 million? Does that include or exclude the supplementary transitional grant for community care? Bearing in mind the fact that, according to statistics, Newham is the most deprived borough in the country, is the right hon. Gentleman aware that £20 million must be deducted from education and community care due to defective formulae for homelessness and capital repayments? Is not that unjust by the standards of the old testament, let alone the new testament?

Mr. Gummer

By any of those standards, Newham has one of the highest SSAs of any part of the country. One cannot suggest that we have been other than very conscious of the particular problems of Newham. I cannot comment on the details for this year, because we have to agree with the local authorities the methodology upon which the details will be based. I am not prepared to offer any relevant figures for which the methodology has not been agreed by those authorities. That will be done as rapidly as possible, and I will then be happy to talk to the hon. Gentleman about the effect on Newham.

Sir Anthony Grant (Cambridgeshire, South-West)

On the police, my right hon. Friend will be aware that Cambridgeshire has fewer police officers per head of population than any other county in the land. Can he assure me that the representations I persistently made about that to the Home Office have been taken into consideration when deciding the settlement for Cambridgeshire? Will he also assure me that the new arrangements will mean that the Lib-Lab county council will not be able to tinker with the money allocated and salt it away for other purposes?

Mr. Gummer

I thank my hon. Friend for that, and for his constant pressure in relation to this issue. Cambridgeshire county council tackles those matters very badly, but we have tried hard to ensure that legitimate demands are met as regards the police. I think that my hon. Friend will find that there has been a significant increase in the settlement.

Mr. Roger Knapman (Stroud)

I congratulate my right hon. Friend and his team on that statement, and I also congratulate my hon. Friend the Member for Gloucester (Mr. French).

I am all for prudent public expenditure, except in Gloucestershire. I wonder whether my right hon. Friend will take on board my annual plea to reconsider the area cost adjustments element of the SSA, bearing in mind the fact that there should be some taper out from London rather than a sudden line saying, "There is Oxfordshire, which is eligible for ACA; there is Gloucestershire, which is not."

When my right hon. Friend reconsiders the method of funding the police forces, will he remember that there are three royal residences in my constituency, which require full-time permanent protection? That is very different from a temporary requirement arising from, for example, a party political conference.

Mr. Gummer

I thank my hon. Friend for that. We have already moved in the direction of a tapering system for the area cost adjustments, and I think that he will be pleased at the way in which we have sought to take on board many of the requests that he and other hon. Members made, although we have not been able to meet all of them.

We have also accepted that the real need is to try to move more closely towards travel-to-work areas. That is another aspect that I hope will be taken into account, but I cannot now tell my hon. Friend whether it will have the effect in Gloucestershire that he so sorely needs.

As for the police, my right hon. and learned Friend the Home Secretary is on the Bench, and no doubt will have taken note of that.

Mr. George Stevenson (Stoke-on-Trent, South)

Does the Secretary of State realise that if local authorities—especially Labour ones—have used their balances to protect local services, it is because that is what local people want, despite the Government onslaught against local government finance? If the 2.2 per cent. overall settlement is to include special transitional grant, does the Secretary of State accept that that is a cut in real terms which will have serious effects, especially in areas such as Stoke-on-Trent, which I represent?

Mr. Gummer

I do not suggest that the settlement that I have announced will provide Stoke-on-Trent, or any other part of the country, with a considerably increased amount of money to spend on a range of things. I never suggested that. I say to the hon. Gentleman that there is sufficient grant, and local authorities have sufficient resources, to provide the services of a high standard that they should provide, without the fearsome cuts that the hon. Gentleman suggests will be necessary. That is all that I am saying, and I think that it can be achieved.

No doubt the hon. Gentleman will ask local authorities in his constituency to use some more of their balances, if they have them. Other local authorities will also make those decisions. It is up to them; that is what they need to do. If we want local democracy, people must decide how to spend their money.

Mr. Clive Betts (Sheffield, Attercliffe)

Does the Secretary of State accept that a half per cent. capping increase for most local councils is a draconian settlement, which cannot be achieved without substantial cuts in services? Does he realise that outside the House he will go down as "Gummer the Godfather"? His hand may not be on the knife that makes the cuts, but he will be responsible for organising them behind the scenes.

How does the Secretary of State explain to schools, which account directly for about half local government expenditure, how to make efficiency savings? Is not the reality that they will have to sack teachers and increase class sizes, which are already running at 35, and are increasing to 38, 40 and beyond in my constituency?

Mr. Dennis Skinner (Bolsover)

Go on, Scarface.

Mr. Gummer

On the Government Benches, the word "godfather" is rather a polite one, so I shall take it in the most polite sense. However, I say to the hon. Gentleman that if Sheffield city council did not have such a mess to clear up, it would not have the difficulties that it has, and the hon. Gentleman is the last person in the House to lecture anyone on how to run a local authority. He left behind a mess that the present Labour-run authority is having difficulty clearing up, and I have real sympathy with it.

Mr. Barry Field (Isle of Wight)

Can my right hon. Friend confirm that the welcome news—the culmination of a 32-year campaign—to revise the standard spending assessment for the fire service on the Isle of Wight will bring welcome relief to the hard-pressed community care budget? Does he agree that, if he and I had £1 for every time that the Opposition tell us that it will be the end of local government, we should have repaid the national debt five times over?

Mr. Gummer

I am not sure that that is entirely what we could have done, but we might have been able to help Sheffield to clear up the mess in which it was left. I thank my hon. Friend for his kind words.

Mr. Skinner

Why does not the Minister accept that when my hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson) and others use figures they are adopting the methodology used by the Chancellor of the Exchequer in his Budget? Like everybody else, he does not use year-on-year measurements. That was what my hon. Friend was doing in terms of showing the difference between the amount that is spent in any given year by local authorities, and the amount that he proposes they should spend in the next year. Why does not the Minister admit that, cumulatively, over the past 15 years, well over £50 billion has been taken by the Government from local authorities? That is what creates misery for pensioners and schoolkids and all the others. That is why we in Derbyshire are calling for more money.

Mr. Gummer

First, the hon. Gentleman comes from a county whose mismanagement is recognised even by the rest of the Labour party. For that reason the hon. Gentleman cannot teach the House how to run local authorities. Secondly, the hon. Gentleman should remember that it is not sensible statistically to compare a figure in one year with a wholly different figure in the next year. That is done only if one wishes to mislead and that is what the local government associations wish to do. It is what the Opposition have tried to do, and the Opposition spokesman has done it accidentally because he does not understand it.

Mr. Michael Jopling (Westmorland and Lonsdale)

Does the Secretary of State recognise that there will be a general welcome in Cumbria for the extra £180 million for the police, some of which will go to Cumbria police authority? That extra money refutes the malicious rumours put around some weeks ago about cash cuts. Does the Secretary of State agree that it is a great pity that Liberal and Labour councillors in Cumbria have already had their feet in the trough and have voted, against Conservative opposition, to grant themselves an increase of between 400 and 500 per cent. in attendance allowances for members of the regional authority?

Mr. Gummer

I do not know of the particular decisions of Cumbria county council, but, obviously, there are many areas in which savings can be made. For example, I have looked carefully at the London borough of Camden, where the opportunities for savings are considerable, although that borough is much overburdened by the fact that it is still paying for large debts that were incurred when some hon. Members were councillors in Camden. If the Liberal-Labour group in Cumbria is behaving in that way, it is typical of Lib-Lab pacts all over the country.

Mr. Peter L. Pike (Burnley)

Does the Secretary of State recognise that, despite what he has said about community care, county councils such as that in Lancashire will have to continue cutting services for the most vulnerable sections of the community? Will he assure us that county councils will have sufficient funding to provide those essential services?

Mr. Gummer

Lancashire county council has been pinpointed by Labour Members as inefficient. The former Opposition spokesman on local government, the hon. Member for Blackburn, spent a great deal of time explaining that he wanted his district council to take over the functions of Lancashire county council because it was so poor. I should have thought that Lancashire county council could certainly find ways to safeguard front-line services.

Sir Ivan Lawrence (Burton)

Is my right hon. Friend aware that his decision to concentrate so much of the settlement on supporting the police in their fight against crime will have widespread support? Can he confirm that every police force will benefit from the extra cash and that nearly two thirds of all forces, including police in Staffordshire, will benefit by 3 per cent. or more?

Mr. Gummer

I can certainly confirm those improvements. I notice that only from the Conservative side has there been support and praise for extra help for the police. That is because the Conservative party cares about law and order, while those in opposition only talk about it.

Dr. Lynne Jones (Birmingham, Selly Oak)

I am sure that the Secretary of State will agree that, despite smears from some of his hon. Friends, which they immediately retract when challenged, Birmingham city council is acknowledged under all objective criteria and by the Audit Commission as being well run. Can he confirm that Birmingham will lose a further £18 million in grant this year, and that that is equivalent to more than £1 a week for the average council tax payer? These are hidden taxes for the people of Birmingham so that the Government can save money in their coffers to hand out next year in tax cuts. They will applaud themselves for that, although it will just be handing back to people money that they have already paid.

Mr. Gummer

If the figures were anything like the hon. Lady suggests, Birmingham would benefit considerably from the damping grant, which is much more generous than anybody thought it would be. She should note that if, over the past three years, we had accepted the demands of Birmingham and other Labour councils—supported by the associations and promoted by Labour Front-Bench spokesmen—we would have had to increase VAT to almost 21 per cent. to pay for them, or, if the Opposition prefer, add £510 to the average council tax. That would be the effect of what the Labour party wants us to do—and has wanted us to do for the past three years, never mind what would have happened cumulatively as a result of what it had demanded previously.

Mr. John Townend (Bridlington)

Does my right hon. Friend accept that this is a most welcome settlement that is relatively generous in the context of the whole Budget package, which had to produce a cut in the budget deficit of £8.5 billion? Does he agree that, if local authorities were to make as much effort as most private companies had to make during the recession, and as the Government are now doing with the freeze in running costs, those councils would have saved sufficient money through improved efficiency and by cutting the number of unnecessary administrators to prevent any reduction in service?

Mr. Gummer

It is absolutely essential for local authorities to find ways of using efficiency gains to ensure that they can protect their front-line services. As my hon. Friend said, the only alternative would be to increase taxation. I repeat that VAT would have to rise to 21 per cent. to fund the Labour party's proposals. I do not believe that the country wants that, so we must save the money through improved efficiency.

Mr. D. N. Campbell-Savours (Workington)

When the Secretary of State plays around with statistics the public become angry, as we do. Why does not he come to my constituency, where I will take him to areas of great deprivation in which the local authority provides the only machinery capable of dealing with the problems? Does he realise that, in constituencies such as mine, it is the vulnerable, the elderly, the children and disabled groups who will have to pay the price? Why does he not recognise that when he makes statements to Parliament?

Mr. Gummer

I recognise that the taxpayer is paying £34.672 billion to ensure that those vulnerable people are cared for properly. The whole system of SSAs is designed to ensure that the money goes mainly to those places where the need is greatest. That is how the system works. When people hear figures, they want them to be accurate and they want accurate comparisons. People get angry when the Labour party compares apples with pears and figures from one end-of-year with figures from another to try to mislead the public.

Mr. Robert Banks (Harrogate)

Does my right hon. Friend agree that local authorities should be encouraged to marry with the private sector for the funding and development of, for example, public buildings? Therefore, can he assure me that local authorities' notional capital spending for guarantees given to the private sector for the funding of and participation in, for example, the building of an exhibition hall, will not be prevented by a rigid capping procedure?

Mr. Gummer

I have just introduced some proposals for loosening considerably the arrangements for those local authorities which wish to enter into reasonable arrangements with the private sector. I have asked the local authorities to come back to me with their views on that, but I have already put many of the proposals into operation so that no one need be held up. If my hon. Friend has any particular points to make on that, I hope that he will come and see me, because I am determined to bring the private sector as much as possible into the activities of local authorities. I very much honour those authorities that are doing that and I am pleased to find that, after all the years of opposition, quite a number of Labour-controlled authorities have now joined us.

Ms Kate Hoey (Vauxhall)

When looking at the SSA for Lambeth, will the Secretary of State consider some extra resources, in particular to meet the difficult and sensitive problem that the borough has to face of finding extra resources for the homeless people who sleep in the bull ring, which will be closed fairly soon?

Mr. Gummer

We are in detailed discussions about those matters and I have considerable sympathy with the point that the hon. Lady raises. She, like us, operates against a background of a council which does not have a good reputation for collecting its rents or rates, or doing anything else. However, we must still look carefully at the matter. Lambeth is one of the worst councils and has been one of the worst councils for a long time.

Mr. Skinner

It is not as bad as the Government.

Mr. Gummer

The hon. Member for Bolsover (Mr. Skinner) should be pleased about that, because it is the one council that is worse than Derbyshire county council.

Mr. David Faber (Westbury)

Is my right hon. Friend aware that under previous Conservative-controlled administrations Wiltshire county council traditionally funded the Wiltshire police force well above the level of Government support? Therefore, will he confirm that his statement today means that, as long as the present hung county council continues to fund well up to the level of need in Wiltshire and even above it, there need be no cuts in local government support for the police force in Wiltshire this year?

Mr. Gummer

My right hon. and learned Friend the Home Secretary will be going into details on that, but I am sure that he would agree that that is true.

Mr. Stephen Timms (Newham, North-East)

The Secretary of State will be aware of two particular problems with the SSA formula as it affects the London borough of Newham which have already been referred to by my hon. Friend the Member for Newham, South (Mr. Spearing). They are that the assumed outstanding debt figure within the capital financing element is a poor proxy for actual debt and that, in the past, the cost of meeting the statutory duties of local authorities with regard to the homeless has barely figured at all in the SSA formula. To what extent has one or both of those issues been addressed in the revisions to the formula this year?

Mr. Gummer

The latter point appears in the housing programme figures. There is always an argument about how the SSA should be made up depending upon which local authority group is pressing its point. I think that we have the balance right, but I am always prepared to reconsider.

On the hon. Gentleman's first point, it is impossible to take into account actual debt, or one would reward those authorities which had borrowed without any concern for the future, not those that had been sensible. That would be an intolerable position. How would decent authorities feel if the kind of borrowing arrangements that some local authorities have gone into, and would still be going into if they had not been stopped by law, were rewarded? That could not possibly be done.

I hope that the hon. Gentleman agrees that on recent visits to the London borough of Newham and for many years I have shown a particular interest in the special problems of Newham and I hope that he will find that the changes that have been made here will not be disadvantageous.

Mr. Roy Thomason (Bromsgrove)

Does my right hon. Friend agree that the effect of lower than anticipated inflation will be that many authorities will have over-provided for additional costs in the current year which will be incorporated into their balances carried forward to help them next year and that many of them will be able to effect a budget reduction by virtue of that lower inflation?

Mr. Gummer

Of course that must be so. If there had been higher inflation, they would have had to spend and find more money. They have not had to find that money. It is there and it can be applied in ways that they had not expected. It is also true that those authorities that have had a better performance in the collection of council tax—there are many—will have more money to spend as a result. I hope that efficiency therefore benefits the taxpayer.

Mr. Paddy Tipping (Sherwood)

Will the Secretary of State confirm that, in cash terms, the grant to be distributed to local authorities next year will be 0.4 per cent. less than this year, and that he is applying the toughest capping criteria ever? Will he confirm also that residents of Nottinghamshire and throughout the country will face a double whammy—cuts in services but the privilege of paying more for them?

Mr. Gummer

They will face that only in those parts of Nottinghamshire where councils are not effective enough to make up, by better efficiency, that which they do not receive from the centre. If Nottinghamshire county council had not spent so much money on campaigning for its own continuation, but had behaved itself rather better over its spending, it might have more money in the kitty to help.

Mr. John Whittingdale (Colchester, South and Maldon)

Will my right hon. Friend confirm that the level of community care funding that he announced is sufficiently generous that every local authority should be able to fund community care for all who need it? Does he agree that where authorities claim that they are unable to fund community care sufficiently this year, the problem is not underfunding but mismanagement of their social services budgets?

Mr. Gummer

My hon. Friend is right. We are providing significant extra sums for community care. Although local authorities were surprised by the generosity of the amounts, they used the opportunity to blame the Government for their own inefficiency. That is the long-standing view of the sort of local authority that takes no responsibility for its own actions but blames everybody else.

Mr. Andrew F. Bennett (Denton and Reddish)

It is nice to raise hopes that more money will be spent on education, which would be most welcome in my constituency—particularly in Tameside and Stockport, which must spend less on primary education than most other local authorities. However, most people will be disappointed that only pious words have come from the Secretary of State, not extra money. Does he agree that the only way in which local authorities can spend more on education is to cut other services? Does he not realise that local government is often the only employer in some deprived parts of the country, in terms of school meal and home help provision? People will be resentful if such services must be cut to improve education.

Mr. Gummer

That is precisely why, in a tough settlement, we have ensured that there is more money and a greater proportion for education, and why we have a system that is increasingly accurate in making certain that money goes to the neediest places. I know that the hon. Gentleman will be pressing his local authority to ensure that important front-line services are protected. That will be done by greater efficiency, more sharing with the private sector and ensuring that money that does not need to be spent will not be spent in less important areas.

Mr. John Marshall (Hendon, South)

How much money do local authorities have in balances directly, and how much indirectly through local managemenit of schools? Could not that money be used to improve local authority services, instead of being squirrelled away? What does my right hon. Friend propose in respect of capping the London borough of Barnet's SSA?

Mr. Gummer

Detailed arrangements will have to wait until we have discussed the matter with local authorities, both as a matter of courtesy and to ensure accuracy. As to the generality, a considerable amount of money is held in balances by schools and local authorities. I do not say that there should be no balances, because some are necessary. However, it is obviously sensible for local authorities to review their balances, to ascertain whether they should be spent in these circumstances. I have no doubt that they will do so. Unfortunately, some local authorities find it better to remove their balances from the public gaze.

Mr. Mike O'Brien (Warwickshire, North)

Will the Secretary of State admit that he has failed to cover the cost of the police negotiating body agreement and that police budgets will be stretched even further after the settlement?

Mr. Gummer

That is not true.

Mr. Nigel Evans (Ribble Valley)

Will my right hon. Friend send a clear message to local education authorities that increased resources should be directed at improving classroom provision, not soaked up by a top-heavy bureaucracy? Should not all local education authorities scrutinise their administration costs, particularly in the light of the increasing number of schools choosing grant-maintained status?

Mr. Gummer

I am sure that my hon. Friend is right, and he now has the support of the Leader of the Opposition, who has clearly chosen grant-maintained schools because they spend their money on what matters and do not have to carry the extra costs of over-weighty administration.

Mr. Harry Barnes (Derbyshire, North-East)

How will the new formula on police affect the position in Derbyshire? One of the problems that Derbyshire faced was that, because it had adopted a policy of civilianisation—a policy now recommended by the Home Office—and thus had a smaller establishment, it did not receive the grants based on the old formula. Will that be taken into account? Will it be given any money back to compensate for the money that was lost through the fiddled formula that the Government operated?

Mr. Gummer

The long-standing anti-police attitudes of Derbyshire county council meant that it underspent on the police year after year. It will no longer be able to do that. An extra 5 per cent. is available for Derbyshire this year. The politicisation of the police by those who do not want to support the forces of law and order will now be overturned by this much better and independent method of funding.

Mr. Geoffrey Clifton-Brown (Cirencester and Tewkesbury)

Is my right hon. Friend aware that no less a body than the Police Federation has just issued a statement warmly welcoming the settlement for the police? Will he confirm that the change in funding formula for the police will be warmly welcomed by the people of Gloucestershire, because it will become more transparent how much is being spent, for example, on the excellently run constabulary in Gloucestershire? I thank him very much for listening to the representations that I and my hon. Friends who represent constituencies in Gloucestershire have made so that we get a reasonable settlement of around 3 per cent. this year for the police in Gloucestershire.

Mr. Gummer

I am pleased that the Police Federation has announced that. It stands in stark contrast to the Labour party, which clearly cannot welcome anything that is ever given to the police, because it does not make it a priority. The Labour party does not believe that law and order comes first.

Mr. Andrew Miller (Ellesmere Port and Neston)

Last year, Cheshire county council made cuts in front-line services. The figures show that, this year, it will have to make further cuts. Will the Minister tell us who is right—the Government or the Tory-Liberal alliance in Cheshire county council? Is the definition of sufficient resources those resources that result in charging for mental health day care centres?

Mr. Gummer

The SSAs are worked out in consultation with the local government organisations. It is never possible to get all of them to agree on every one, because each has a different set of priorities, but we seek to do it as closely as we can. That is the basis on which need is assessed. Like other county councils, Cheshire county council has found significant money to promote its own case for continuation. Perhaps it will be able to find even more money to deal with the specific problems about which the hon. Gentleman speaks.

Mr. Tony Banks (Newham, North-West)

Part of the additional money that local authorities receive in the year comes, in London's case, from the sale of assets by the London Residuary Body. It is then distributed to the London boroughs. Will the Secretary of State tell the House whether, in the LRB's most recent accounts, the £10 million of deferred capital relates to the sale of county hall and is money owed by Shiriyama to the LRB? If that is so, when does the Secretary of State expect that the LRB will receive that money? When will it be distributed to the London boroughs?

Mr. Gummer

I am happy to look at that particular matter, but I doubt whether it is has anything specifically to do with my statement today.

Mr. Dobson

I have two brief points. Before the Secretary of State attempts, as I predicted, to blame everything that is wrong in local government on the Labour party, perhaps he and the hon. Member for Bromsgrove (Mr. Thomason), who made his point and has now gone, should bear in mind the fact that the Tory councillor for Bromsgrove, Rita Taylor, said this morning, while speaking on behalf of the Association of District Councils: The public are going to have to pay more … Conservatives in local government are in despair at this settlement. Like every other Member on the Opposition Benches, I perfectly well understand that the capital available, or not, to councils for building houses is not covered by the settlement. But it does nevertheless have revenue effects, because if councils are not allowed to build houses, more people become homeless. Councils have the obligation to rehouse homeless people. Instead of the sensible solution—putting people into new houses that they have built for them—they are forced to put them into bed-and-breakfast accommodation, or rent from the private sector at exorbitant rents.

We all know that it would be cheaper, more humane, more sensible and more practical if councils were allowed to build houses and put people in them instead of having to dump them all around London and other big cities in privately rented accommodation or bed-and-breakfast accommodation. I should have thought that, as a self-proclaimed expert on local government finance, the right hon. Gentleman would have known that capital expenditure, or non-expenditure, has an impact on the revenue demands on local authorities.

Mr. Gummer

There is an impact only if one adheres to the view that the only houses worth counting as houses are local authority houses. The coming of the housing associations means that there are many nominations to those associations which local authorities have and use.

That is one of the reasons why the number of people in bed-and-breakfast accommodation has fallen steadily over the past few years: the fall is due to the Government's actions. It is one of the reasons why the number of people sleeping rough in the centre of London is now at an all-time low, according to figures provided by the charities concerned. It is also one of the reasons why Conservative Members believe that the hon. Gentleman has not read a figure or a fact for the past seven years: he is still quoting figures that are hangovers from a period of Labour government.