Council Tax

HC Deb 15 June 1995 vol 261 cc904-52

Madam Speaker

We now come to the main motion of the day. I have had to limit speeches made by Back-Bench Members to 10 minutes.

4.8 pm

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

I beg to move, That the draft Council Tax Limitation (England) (Maximum Amounts) Order 1995, which was laid before this House on 12th June, be approved. It is the duty of any Government to balance genuine requirements for local services against the wider considerations of the level of public expenditure and taxation and the state of the economy as a whole. I recognise that this year's settlement is tight and that some authorities would have wished to have been able to spend more. That is perfectly understandable, but local authorities have to continue to take a rigorous approach to pay and efficiency and to make a realistic assessment of their spending priorities.

In the event, the great majority of authorities did set budgets that were within their cap. Only 10 did not. Those were South Yorkshire fire and civil defence authority; Barnsley, Newcastle and Sheffield metropolitan districts; the shire counties of Devon, Gloucestershire, Shropshire and Somerset; Norwich city council; and Lincolnshire police authority.

Mr. Patrick Thompson (Norwich, North)

My right hon. Friend referred to Norwich city council. Will he make it clear to my constituents that that council has had a fair deal as a result of the announcements and has increased money to spend? Will he confirm that council tax payers in my constituency are protected and will be excused from having to pay excessive bills that they would otherwise have had to pay?

Mr. Gummer

I am surprised at Norwich because it could have asked for special determination, to enable it to charge 80 per cent. of the cost of the ending of the temporary rule system. That would have saved the council more than £500,000, but it did not bother to take advantage of that. It is hard to understand how Norwich is in difficulties when it was not willing to ensure that it took the maximum opportunities. It had known for about 15 months that its present policies would end in it not being able to meet the proper requirements of the Government and council tax payers. It made that clear to my hon. Friend and officials some time ago. I shall come to the situation of Norwich in a moment.

I designated all the authorities that I have mentioned on 4 April and proposed for each of them a maximum amount or cap for its budget. The authorities then had 28 days in which to accept or challenge their caps. We listened carefully to the representations that were made by South Yorkshire fire and civil defence authority and by others, and accepted at the outset that the cap implied by the capping principles would not be achievable. Therefore, we proposed a cap at the same level as that proposed by the authority as its budget requirement. South Yorkshire fire and civil defence authority accepted that cap and is not included in the order.

The remaining nine authorities decided to challenge their proposed caps and suggested alternative maximum amounts. In each case they proposed as their alternative their original budgets and submitted detailed papers setting out their case for a higher cap. My hon. Friends the Under-Secretary of State, the hon. Member for Hertfordshire, West (Mr. Jones) and the Minister for Local Government, Housing and Urban Regeneration met delegations from all the authorities to hear their case. Before taking my decisions, I carefully considered the points of all the authorities, including those made at the meetings, and the representations made by hon. Members and other interested parties.

Much time and effort has been spent to ensure that each authority has had a full opportunity to put its case to us in an effective fashion and that we properly understood the points and figures that they put to us. In assessing the impact of our decisions, we relied, of course, very largely on the local authorities' own figures and estimates. Of course, it is bound to be true that, in presenting a case, local authorities will put those figures in the most effective way. The cases presented by the four shire counties focus primarily on their concerns about the impact on school budgets and, in the case of Gloucestershire and Shropshire, on social services.

Mr. Roger Knapman (Stroud)

Is it the case that Gloucestershire county council has acknowledged that, even if it was capped at the present level, there would be no need for cuts in school budgets? If that is the case, the Liberal and Labour parties in that county have been running an absolutely disgraceful campaign using individual schools and the pupils in them as political pawns.

Mr. Gummer

In its submission to me, Gloucestershire county council clearly said that school budgets were not cut in cash terms. Therefore, if any school in Gloucestershire finds to the contrary, it must immediately get in touch with its local authority, which has made the position quite clear. It is necessary for Gloucestershire county council to explain if that is not the position. My hon. Friend will want to make that point clearly. There is no doubt that in Gloucestershire there has been a great deal of party politicking by the Liberal-Labour alliance that runs that unfortunate county.

Mr. Nigel Jones (Cheltenham)

I am listening with great interest to the Secretary of State. He does not seem to have taken into account the pay award for teachers. School budgets have not been cut in cash terms, but the pay award has a significant effect on those budgets. Does he not realise that the budget that was proposed by Gloucestershire county council was a joint Liberal Democrat-Conservative proposal? The Labour party wanted to set a much higher budget. It was proposed by John Sewell, the leader of the Liberal Democrats on the council, and seconded by Richard Izett, the leader of the Conservatives on the council.

Mr. Gummer

The hon. Gentleman's point does not detract from the fact that, all around Gloucestershire, individual schools are finding that Gloucestershire county council has failed to meet its own demands. It said that there would be no cut in cash terms, but schools are finding that they are getting a cut in cash terms. That is because the council must be using the money that it said was going to schools in some other way, and it is blaming the Government for that.

Mr. Paul Marland (Gloucestershire, West)

Will my right hon. Friend give way?

Mr. Gummer

No. I must answer the hon. Member for Cheltenham (Mr. Jones). On the payment of schoolteachers, the fact of the matter is that Gloucestershire county council knew perfectly well that it was necessary to restrain expenditure. It was able to have an increase in what it was spending over last year, but it has not delivered in the way in which it claimed it would be able to deliver. It has the means to find ways of spending money more efficiently and effectively. What is more, schools in Gloucestershire have significantly large balances—about £5 million, or 7 per cent., of the direct schools budget is in balances. That puts those schools in an especially favourable position.

Mr. Geoffrey Clifton-Brown (Cirencester and Tewkesbury)

Is my right hon. Friend aware that Gloucestershire county council has inspired a campaign giving out all the fax numbers of Gloucestershire Members of Parliament, and that my floor is about half an inch thick with faxes from angry parents? It is a disgrace for the county council to blame Members of Parliament when it has cut individual school budgets by between 4 and 7 per cent. Will he clearly explain why Gloucestershire's appeal was not allowed, yet Somerset's appeal was?

Mr. Gummer

Gloucestershire county council had every opportunity to come and explain why it was not able to live within the same sort of restrictions within which most other counties lived. When it came to do so, I am afraid that it did not put up a convincing case. Somerset was able to show that, in the particular circumstances concerned, it would have had to cut its school budgets in cash terms, but Gloucestershire county council admitted from the beginning that it did not have to. Having admitted that it had the money to deliver a reasonable solution, Gloucestershire is now claiming something wholly different, to try to blame the Government for what is its own fault.

My hon. Friend is right: Gloucestershire is running a party political operation to excuse its own incompetence. Like everyone else, it had every opportunity to put its case. I am afraid that it failed to do so because its case was not very good.

I have therefore concluded that the cap for Somerset should be £264.920 million, an increase of £2.6 million above the original cap. In reaching that conclusion, I took into account the authority's overall financial position and the particularly severe impact that a budget cap would have had on school budgets in Somerset.

I considered carefully the cases put to me by Devon, Gloucestershire and Shropshire.

Mr. Patrick Nicholls (Teignbridge)

In the context of the meetings and conversations that I have had in recent days with my right hon. Friend, he will know that people in the west country are worried that there may be a disparity of treatment between Somerset and Devon. May I remind him in particular of a letter that was sent to me by John Garnett of Exmouth community college? He believes that there has been inequality in the way in which the two counties have been treated. Will my right hon. Friend deal with that point specifically, so that people in Devon will understand just how disgracefully Devon county council has behaved?

Mr. Gummer

The fact is that Devon could increase its schools budget by 1.2 per cent.

Mr. David Jamieson (Plymouth, Devonport)

How?

Mr. Gummer

It has the money to do so, largely provided by the taxpayer. Somerset would have had to cut its budget by 3.5 per cent. The difference is that Devon was in a position to spend something more than three times as much as Somerset. The difference between the two is about three times. Therefore, Somerset clearly had a much better case.

In order to cover up that difference, Devon county council has produced a series of—if I dare say it in the House—untruthful figures. For example, in order to pretend that it has been done down, instead of talking about spending per pupil, it wanted to use spending per head of the population in its figures and bring all the adults into its school population. Only in that way could it produce the figures.

When Devon came to compare administration costs, it included redundancy in the Somerset figures and left redundancy out of its own figures to show how much better it supposedly was on administration. I am afraid that a county that has to mislead its electorate shows by its own words that its case is extremely poor. Its case did not stand up under close consideration by myself and my officials when the council came to see us.

Mr. Marland

I should like to help out with Gloucestershire. My right hon. Friend is right when he says that part of the trouble in Gloucestershire is the historic overspending. That is the problem, as the hon. Member for Cheltenham (Mr. Jones) knows full well. The council went on a spending spree when the hon. Gentleman was on the county council and ran up a deficit of more than £120 million. The third largest item on the council's budget is now debt servicing. The first item is education, the second is social services and the third is debt servicing. Historic overspending by Gloucestershire county council is the problem.

May I tell my right hon. Friend that I and other Gloucestershire Members of Parliament are sick and tired of being the whipping boys for Liberal and Labour overspending on Gloucestershire county council? Does he agree that it is time now to start looking at the possibility of raising the cap in order that the guilty men can be exposed and the blame can be laid where it truly should be—at the door of the Liberal and Labour—

Mr. Deputy Speaker (Mr. Geoffrey Lofthouse)

Order. The House is aware that Madam Speaker has placed a 10-minute limit on speeches after the Front-Bench speeches. We are getting close to 10-minute interventions.

Mr. Gummer

The fact of the matter is that the Liberal-Labour hangover in Gloucestershire is a very serious worry. The Liberal party is a spendthrift party. It has a technique. It is to spend the money and then complain when there is none left and blame the Government. I agree with my hon. Friend that there is a great temptation to say that it should stew in its own juice and should have to charge the public with the sums that are the result of its misapplication of funds, its wastage and its inability to control funds when the whole of the rest of the public sector must do so. I was surprised that the hon. Member for Cheltenham (Mr. Jones) intervened. Everyone in the House knows where the fault lies in Gloucestershire. It lies in the inability of the Liberals not to spend money on anything that happens to be around and then to blame everyone else when they find that that is costly.

Mr. Nigel Jones

Will the Secretary of State give way?

Mr. Gummer

No, I will not give way. I have given way once to the hon. Gentleman. One time is enough for him. If I give way again, he might put his foot in it a second time. He is wrong in what he says. If Gloucestershire county council under Lib-Lab control, but particularly under the Liberals, had been less spendthrift in the past, it could have done better now. It must not blame the Government for its attempt to pinch money from the taxpayer generally to make up for its past spending. It is time that the people of Gloucestershire knew that rather than just hearing the carefully phrased clauses of the hon. Member for Cheltenham.

Mr. Richard Tracey (Surbiton)

Although I am not involved in the affairs of Gloucestershire, it seems very clear that there is confusion, whether in Gloucestershire, Devon or, indeed, in matters relating to the London boroughs, of which I certainly have some knowledge. May I suggest that, to avoid such confusion, the Government ought to consider lifting the policy of capping? In all seriousness, the public do not understand all the complexities and those guilty men should be seen to be responsible.

Mr. Gummer

My hon. Friend makes an important point. We shall—as always—be looking at the issue again this year. He must consider the other side of the argument. When we did not have capping, those guilty men made ordinary people's lives intolerable by increases in council tax. Although the sort of increases demanded in towns such as Harlow and boroughs such as Ealing—I declare an interest because I live in Ealing during the week—showed them to be the kind of councils that they were and they reaped electoral disbenefit afterwards, ordinary people were faced with bills that were extremely hard to pay. So there is a balance to be struck.

Mr. Mark Robinson (Somerton and Frome)

I would not want to draw comparisons with other counties, but once we got under the Liberal Democrat rhetoric in Somerset, we realised that a case for the schools of Somerset needed to be heard. That is why we supported the case for the cap to be raised in Somerset. That at least shows that the appeal system works fairly and properly, that cases are considered and that some win and some are not successful.

Mr. Gummer

My hon. Friend points to the fact that hon. Members have every right and duty to look behind the figures produced by their councils—even if they are produced by councils with which they do not agree—to see whether there is some basis for them. In the case, for example, of Somerset, there is no doubt that, despite the relaxation in the cap, Somerset is in a much less favourable position with regard to school budgets than Devon. Devon is in a better position even after the raising of the cap.

Mr. Nick Harvey (North Devon)

How?

Mr. Gummer

The hon. Gentleman does not know how because he does not understand the system. Like so many members of his party, he just shouts out parroted comments while not understanding what he is talking about. The truth is—I shall put it very clearly—that Devon is able to increase its schools budget by 1.2 per cent., whereas even after the cap has been raised in Somerset, Somerset can increase its schools budget by only 0.1 per cent. Therefore, my facts are clear.

Mr. Harvey

Will the right hon. Gentleman give way?

Mr. Anthony Steen (South Hams)

Will my right hon. Friend give way?

Mr. Gummer

I shall give way to my hon. Friend.

Mr. Steen

Is my right hon. Friend aware that most Members who represent Devon have been subject to a most vitriolic campaign involving students, young people, parents and educationists, who have been saying that because of the county cuts, hundreds of teachers will have to be laid off? Does my right hon. Friend agree that, to use a good agricultural phrase, the people of Devon have had the wool pulled over their eyes—or have Members of Parliament had the wool pulled over their eyes?

Mr. Gummer

It is about time that people in Devon recognised that, over the past two years, Devon has been able to increase its schools budget by 8 per cent. What is more, that has been possible while the county council has chosen to give greater priority to social services, the budget for which this year has risen by 3.6 per cent. That county council has chosen social services as its priority and increased that budget rather than the spending on education. It is still able to do better for education than its neighbours, yet it is blaming the Government for the fact that its competence has meant that that money has not got through to the schools concerned.

Mr. Rupert Allason (Torbay)

As my right hon. Friend has made a comparison in terms of expenditure per pupil, will he make that comparison between Somerset and Devon? That would be comparing like with like, rather than comparing apples with oranges.

Mr. Gummer

I can give my hon. Friend a detailed note, which will be available to any Member of the House, showing the difference between the case put forward by Devon and the truth of that case. My hon. Friend will be able to see the details exactly compared, and I am sure that he will want to use the information widely.

Mr. Patrick McLoughlin (West Derbyshire)

My right hon. Friend is right to talk about the great confusion surrounding local government expenditure. Central Government now account for about 90 per cent. of local authority expenditure, so will my right hon. Friend and his colleagues consider as a matter of urgency whether in future years a leaflet should be sent by the Secretary of State to every council tax payer explaining how much money the Government have given the person's local council, compared with the sums given to other councils? It is a nightmare trying to understand all those budgets.

Several hon. Members

rose—

Mr. Deputy Speaker

Order. That is the end of long interventions. I shall interrupt any further long interventions and stop them, because interventions must be brief and to the point.

Mr. Gummer

I am happy to tell my hon. Friend that we are now producing performance indicators that will enable people to see easily the difference in the quality of provision between one county or district and another. The performance indicators are simple to understand, and one of the facts that emerges clearly is the incompetence of Derbyshire county council, which, as I have said in the past, is and has been for many years one of the worst councils in Britain.

Mr. Harvey

The Secretary of State says that Devon could spend more on its education budget. Will he confirm that Devon is already spending more than its standard spending assessment on education? He says that social services is one of the departments that the money might come from, but what account has he taken of the fact that Devon was the hardest-hit shire county when the funding for community care was reorganised last year? Where is the money that the right hon. Gentleman proposes should be spent on education supposed to come from?

Mr. Gummer

I have explained to the hon. Gentleman that, despite having decided to put more money into social services, Devon has still been able to increase its education budget by 8 per cent. over the past two years. If schools are not receiving the money that they hoped for, it is because Devon county council has not operated efficiently and effectively. It could deliver the money, but only if it were not run by people who do not understand how to be efficient. The hon. Gentleman does his county no good by standing up for the inefficiency of those who rule it instead of for those who ought to be getting a better service. He should intervene and press his friends who are getting it all wrong, instead of constantly trying to pass the buck.

The hon. Gentleman must realise that power demands responsibility, and it is not responsible to attack the Government for the faults of his Liberal Democrat friends. He ought to learn that fact, but he will not have long to learn it, as the Liberal Democrats will be turfed out at the next election because of the appalling way in which they have behaved. He should realise that his area is one of the places where the Conservatives will make gains at the next election, because the people have been shown what it is like to have their councils run by Liberal Democrats.

I shall now deal with the metropolitan districts of Barnsley, Newcastle and Sheffield, all of which made cases for redetermination. I have concluded that the cap for Barnsley should be £152.626 million—a relaxation of £2 million, but about £1 million less than Barnsley proposed. In reaching that conclusion, I took into account all the factors relevant to Barnsley's case, including the area's economic and social difficulties, which have been exacerbated by large-scale closures in local industries, and the special problem of education standards in the area.

I carefully considered the cases made by Newcastle and Sheffield. Sheffield was given a relaxation of £3 million in its cap last year, to give it time to adjust to a change in its circumstances. The benefit of that relaxation will be carried forward into the current year. In addition, the figures that Sheffield gave to me show that it has budgeted for significant savings in its financing costs in the current year. In consequence, the budgeting position for main services such as education and social services has eased sufficiently to enable the council to increase its expenditure compared with 1994–95.

On the figures that Newcastle has put to me, it can be seen that that council will be able to budget for modest increases in expenditure in main services such as education and social services. I have concluded that, by taking into account the overall financial situation and circumstances, it would be reasonable to confirm the original capping limits for both Sheffield and Newcastle.

Mr. Clive Betts (Sheffield, Attercliffe)

Will the Secretary of State confirm that, despite what he has said, the capping limit that he is intending to impose this year is lower in real terms than the initial cap for last year, which he decided was inadequate and later increased by £3 million?

Mr. Gummer

The hon. Gentleman did not mention to the House that Sheffield budgeted for a saving of £20 million on its financing costs, or that it will also benefit from the £13.5 million of savings that it achieved last year. Sheffield was given help last year because of its financing costs, much of which existed because of the hon. Gentleman's period in office in the city. The ordinary council tax payer in Sheffield is paying for the overspending of many years.

If the council tax payers of Sheffield want to know why their bills are so high, they must ask the hon. Gentleman and the hon. Member for Sheffield, Brightside (Mr. Blunkett). It was during their stewardship that the burden of debt was put on the shoulders of the people of Sheffield. The hon. Gentleman wants me to take the burden that he placed on the shoulders of the people of Sheffield and move it on to everybody else's shoulders. He wants the debt to be passed on to the shoulders of people who have been looked after by prudent Conservative authorities. I must tell the hon. Gentleman that I will not do that.

It is time that the people of Sheffield recognised that the prudent policies of the Government have brought reductions in the financing costs. The financing costs have come down because an economy with low inflation rates, and therefore low interest rates, enables the costs of past profligacy to be less than they would otherwise be. I am sure that, given the facts, the people of Sheffield would recognise that the hon. Gentleman has only one part to play in the House—to apologise for the extent to which the local council wasted the money of the people of Sheffield in the past.

Mr. Jim Cousins (Newcastle upon Tyne, Central)

Will the Secretary of State explain why the cap that he has set for Newcastle will not allow Newcastle to spend the money that he actually wants to give it through the SSA?

Mr. Gummer

If one looks at what Newcastle did to the council tax last year, one sees precisely that the council took from the people of Newcastle more than it should have. Am I supposed to say to the people of Newcastle that we shall protect everybody else but them in these circumstances? [HoN. MEMBERS: "Yes."] Many of my hon. Friends would prefer it if we did not give protection, and if we allowed the Labour and Liberal parties to show the electorate precisely how expensive they are. That is a view which I respect. The hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) cannot have it both ways. Under the present system, there is no doubt that our purpose is to make sure that the people of Newcastle do not pay the full penalty for having voted Labour.

Sir Irvine Patrick (Sheffield, Hallam)

Will my right hon. Friend pay tribute to the steps that Sheffield has now taken to get itself out of the financial mire? Those steps include a huge reduction in the number of staff. May I say that I am grateful for two things that the Government have done? The first was the help that they gave the fire and civil defence authority, and the second was the help that they gave Sheffield last year.

Mr. Gummer

My hon. Friend is perfectly right, and I pay tribute to Sheffield for what it has done. We gave Sheffield that breathing space because it has at long last—after the demise of the two hon. Gentlemen whom I mentioned—begun a management plan to face the issues of the debts that have been placed on the people of Sheffield. We gave Sheffield that help in respect of that plan and it continues this year. I am sure that that was the right thing to do.

Lincolnshire police authority was the only police authority to seek an increase in the capping limit. My right hon. and learned Friend the Secretary of State for the Home Department and I accept that the transition to a new cash-limited financial regime in 1995–96 has created particular difficulties for the authority. We have decided to agree to the budget proposed by the authority—a relaxation of £1.8 million. I must stress, however, that that relaxation is intended as a one-off adjustment, to enable the authority to adjust to the new financial regime and to give it the time that it needs to plan and implement the savings of about £1 million that Her Majesty's inspectorate of constabulary has identified as achievable through improved management efficiency.

This year, it is for Lincolnshire to do what Sheffield was asked to do last year. It must take advantage of the temporary help that has been given, to ensure that a situation that it ought to be able to put right, is put right.

Sir Peter Tapsell (East Lindsey)

First, may I say how exceedingly grateful everyone in Lincolnshire, including my constituents, is for the decision that my right hon. Friend has taken? We all feel, irrespective of party, that the Lincolnshire police are an extremely efficient organisation and, unlike Sheffield, there is no background history of profligacy or inefficiency. While I fully understand my right hon. Friend's argument about next year, will he also bear it in mind that, in the weeks ahead, we shall be explaining to him that the formula for deciding police authority grants is not appropriate to Lincolnshire for a variety of reasons?

Mr. Gummer

I certainly would be happy to discuss with my hon. Friend his views on the formula and I know that my right hon. and learned Friend the Home Secretary will be happy to do the same. One needs an objective scheme to share out money in central funds if the taxpayers' interests are, in fairness, to be protected, and my hon. Friend will understand that one problem with any formula is that those who benefit tend to be quiet but not very grateful and those who find it difficult want a different formula. I shall be happy to look into the matter. Of course, it is the first year of full operation and my hon. Friend may well have some points that we shall be able to take on board.

Norwich city council was the only one of 294 districts that did not set a budget at the level implied by the capping principles. It has known for some time that its spending relied on an unsustainable rundown of reserves. It has taken some steps to moderate spending, but nevertheless could have done more to adjust its budget and avoid the necessity of late change. The council chose not to do so. I considered carefully the council's representations, but concluded that the cap that we propose is reasonable and achievable, and should be confirmed.

If the order is approved by the House, we shall serve a statutory notice on all nine authorities, formally setting their cap. With the exception of Somerset and Lincolnshire police authority, the capped authorities will have 21 days to reduce budgets in line with their cap and to set new, lower council taxes.

I conclude by reminding the House of the long period of consultation that underlies our decisions on capping. Our intentions for the capping principles were published with the rest of the draft settlement in early December and again at the time of the local government finance debate in February. At each stage, we have listened to the arguments put to us. In February, the provisional capping principles were amended to relax caps for authorities that had been affected by major reductions in standard spending assessments in the 1993 review and to allow greater increases for metropolitan fire and civil defence authorities.

In April, when we confirmed the principles and designated authorities for capping, we accepted the particular problems of South Yorkshire fire and civil defence authority, and I am grateful to my hon. Friend the Member for Sheffield, Hallam (Sir I. Patnick) for his thanks on that subject. We therefore set the cap at the budget that the authority proposed. We now propose relaxations for a further three authorities.

That record shows that we have taken the greatest care to implement what was certainly a tough settlement as fairly as was practicable, and that we are prepared to make adjustments when there are especially severe problems. As my right hon. and hon. Friends will no doubt have noticed, however, that means that it is important to make the distinctions, in their counties and districts, between those that have been put in a position that it is difficult for them to meet because of the nature of the system and those that wished to blame central Government for the consequences of their own actions as county councils. County councils that have failed to deliver what their electorate expected must take the responsibility. The hon. Member for Cheltenham, who is no longer in the Chamber, has been trying to press the Government to take the blame instead of the local authority that he sought to control and now does control. He ought to take his own responsibility.

Mr. Robert Ainsworth (Coventry, North-East)

On a point of order, Mr. Deputy Speaker. This is the second time that I have raised a point of order with regard to this Secretary of State. Madam Speaker announced that it was necessary to impose a 10-minute limit on all Back-Bench Members' speeches and there are guidelines for Front-Bench spokesmen, yet we seem to have a continuing problem with the right hon. Gentleman, who has been wasting the time of the House and thus preventing other hon. Members from speaking.

Mr. Deputy Speaker

There may be guidelines, but as the hon. Gentleman will be aware, it is for the Secretary of State to deliver his own speech.

Mr. Gummer

I must point out that I have taken about 18 interventions and that my speech is extremely short. I had to answer those questions and I hope that the answers will save time for many hon. Members who need to speak. I understand that some people do not want to hear the facts of what happens when local councils are run by Labour and Liberal authorities.

Authorities whose caps have not been relaxed will be disappointed. I reiterate that we have not taken the decisions lightly, but have considered all aspects of the authorities' overall situation and listened carefully to the arguments put to us. We have changed the figures for a number of authorities—authorities whose policies we might not agree with, but which have been able to put a proper case that has been clearly acceptable within the rules. We concluded that the cases that they put to us provided a sufficient base for relaxing their caps, while others provided an insufficient base.

It is a tight settlement, but the great majority of authorities have been prepared to take tough decisions to set budgets within their caps. The caps that we have proposed in the order are reasonable, appropriate and achievable in all the circumstances of each authority. They will save council tax payers in the relevant areas about £24 million in 1995–96 alone. I commend the order to the House.

4.47 pm

Mr. Frank Dobson (Holborn and St. Pancras)

I must welcome three and a half aspects of the Secretary of State's speech. We welcome his acceptance—it was really forced on him by the Home Office, which supported the authority—that South Yorkshire fire and civil defence authority would have been endangering people if it had stuck to the cap that the Department originally envisaged. We also welcome the decision to allow Lincolnshire police authority to spend what it thinks necessary to police Lincolnshire, and I suppose that we should welcome the result of the Somerset SOS—save our seats—campaign from the local Tories.

To some extent, we should welcome the relaxation of the cap for Barnsley, but the order will mean further budget reductions of about £2 million in Norwich, £2.25 million in Newcastle, £4.5 million in Sheffield, £4 million in Gloucestershire, £4.5 million in Devon and £6 million in Shropshire. That is what the Secretary of State, not the people of those areas, has decided. In a sense it is appropriate that the Secretary of State should take those decisions, because he took the decisions that set the spending levels in the first place. The principal influence on the amount of money that a council can spend and that it must raise through council tax is the amount of grant that it gets from the Government. That amount was never adequate when it was first announced in November last year; we said that it would not match the rate of inflation, or what was likely to be the teachers' pay settlement then, and it has not done so. Consequently, councils are in trouble. It was a political racket then and it remains a political racket. It is not the product of some objective or God-given formula; it has been put together by politicians with a political purpose, the main object being to make everyone else suffer so that their friends in Westminster will be okay.

The capping system cannot be fair because it is the ultimate expression of a totally unfair system. The basic building block of the grants system is the Government's official indicators of need. An examination of the indicators shows that the system is rotten to the core because the Government regard Westminster as the fourth most deprived place in Britain. Nobody in his or her right mind believes that, not even the people who run Westminster city council, but as a result of it Westminster gets massive grants.

Let us compare the amount of grant per head that Westminster receives with the amount received by the capped authorities. If Norwich were to receive the same grant per head as Westminster, it would not collect any council tax this year but would give every council tax payer in Norwich a rebate of £816. In Barnsley, the rebate would be £867 per head, in Sheffield £588 and in Newcastle £293.

The same calculations could not be made for the counties because the financing is done differently, but I shall give some examples from the districts affected by the county decision. In Gloucestershire, for example, if each citizen of the city of Gloucester received the same Government help as those in Westminster, Gloucester city council could make rebates of £921 per head and the Forest of Dean council could make rebates of £685. In Devon, Plymouth city council could pay out no less than £992 per head, and Exeter city council could pay out £789 per head. In Shropshire, the Wrekin council could pay £777 per head.

It is not as though Westminster city council were the epitome of efficiency and financial prudence.

The Minister for Local Government, Housing and Urban Regeneration (Mr. David Curry)

If the hon. Gentleman were reorganising the standard spending assessment system to achieve the outcome that he would like for Westminster, what would be the implication for the cuts in rate support grant for Tower Hamlets, Lambeth, Southwark and the other inner-city, Labour-controlled authorities?

Mr. Dobson

I had always assumed that the Minister was in his right mind, but if he seeks to compare Tower Hamlets and the other boroughs that he mentioned to Westminster, he has clearly taken leave of his senses—[Interruption.] The Secretary of State made an enormously long speech. If he will keep quiet, I shall get on with mine and hon. Members will be able to speak up for the communities that they represent.

Mr. Curry

The hon. Gentleman knows that there is a connection between those authorities and Westminster city council because they are encompassed by exactly the same methods of calculation. Therefore, if the hon. Gentleman were to seek to re-engineer the SSA system to achieve the deliberate outcome of cutting grants to Westminster, the necessary consequences would be reductions in grants to Tower Hamlets, Lambeth, Southwark and the other inner-city London authorities, unless he were deliberately to rig the system.

Mr. Dobson

If the Minister wants to talk about deliberate rigging of the system, perhaps he should explain to Tory Members who voted for this settlement that Westminster city council receives a special allowance, for which virtually no one else in the country qualifies—that is why it was invented—for visitors to Westminster.

Mr. Curry

Anybody is entitled to it.

Mr. Dobson

Yes, just as anyone can eat at the Ritz. Anyone is entitled to the grant, but the grant is especially useful to Westminster.

Many visitors arrive in Westminster in cars and pay parking charges. Westminster city council receives more than £20 million a year in parking charges, which is not offset against any aspect of its grant. It is a racket, it has always been a racket and it will remain a racket so long as the Government are in office.

It is a racket that protects over-spenders in Westminster. The capped authorities spend much less on refuse collection: Newcastle spends £25 per head, Norwich spends £11 per head and Sheffield spends £14 per head. However, the Tories' over-subsidised fat-cat Westminster city council pays out no less than £53 per head on refuse collection. On street cleaning, Newcastle spends £8 per head, Norwich spends £5 per head and Sheffield spends £5 per head. Those councils have been capped so that Westminster, profligate as it is, can spend £36 per head on street cleaning. It beats me why Tory Members from Shropshire, Gloucestershire, Devon, Norwich and Sheffield are willing to go along with that racket, which lines the pockets of a few people in Westminster and does no good for the people whom they purport to represent.

I shall compare the allowance made in the grant for education for the capped authorities with that made for Westminster. If Devon county council were to receive the same education allowance as Westminster, it could employ 2,566 extra teachers this year rather than think about getting rid of teachers. Gloucestershire could employ 1,618 extra teachers, Shropshire could employ 996 extra teachers, Sheffield could employ 892 extra teachers, Newcastle could employ 371 extra teachers and Barnsley could employ 451 extra teachers. I cannot understand why Tory Members voted for a settlement like that. It must be said, however, that that is the basic background to this decision. If something is rotten to the core, the final product—the capping—is also bound to be rotten.

Mr. Tracey

I have been interested to hear the hon. Gentleman constantly talk about Westminster. As he mentioned foreign visitors, will he say how many foreign visitors go to Newcastle, Sheffield, Manchester or the outer London boroughs, one of which I represent? The House should also know the total external grant that a Labour Government would give.

Mr. Dobson

The hon. Gentleman, who does not seem to rank among the star wranglers of the play, confirms my point. There is a grant for visitors because it suits Westminster and it is no use to virtually everyone else in the country. That is why the Government conceived it in the first place.

The decisions on the capping criteria do not make sense either. When the settlement was announced, the Secretary of State chided me, saying that I was new to the job, had misunderstood the figures and had not done my homework. I had the audacity to predict that the average increase in council tax would be 6 per cent. as a result of the settlement.

Sir Irvine Patnick

On a point of order, Mr. Deputy Speaker. The hon. Gentleman accuses me, as a Sheffield Tory Member, but appears not to hear when I seek to intervene.

Mr. Deputy Speaker

Order. The hon. Gentleman's point of order is an abuse of the House. He is an experienced Member, not least in the Whips Office, and knows full well the procedures of the House. What he has to say is a matter for his own speech or an intervention if the hon. Member for Holborn and St. Pancras (Mr. Dobson) gives way.

Mr. Dobson

As I was saying before I was so politely interrupted, the Secretary of State said that I misunderstood the figures and had not done my homework, but I predicted that the average council tax increase across the country would be 6 per cent. I freely confess that I was wrong; it was 5.2 per cent.

I plead in justification, however, that in Suffolk, Coastal, represented by the Secretary of State—I use the band D figure, because that is his favourite method—the increase was 6 per cent. It was 8.5 per cent. in Huntingdon, represented by the Prime Minister. It was 7.4 per cent. in the area represented by the Secretary of State for Education and, in the area represented by the chairman of the Conservative party, the right hon. Member for Richmond and Barnes (Mr. Hanley), it was actually 15 per cent.

If we then compare—[Interruption.] The Secretary of State made a long speech. Let me finish my argument. If we compare the increases in those places with the increases in the places that are to be capped, what do we find? We find that, if Barnsley had had its way, it would have been 12 per cent. In Devon, there would have been no increase, allowing for the police. In Gloucester, there would have been no increase, allowing for the police. In Shropshire, it would have been 12 per cent. and in Sheffield 13 per cent.

Staggeringly, if Newcastle city council had had its way, it would have reduced its council tax by 5.6 per cent., but it gets capped. It is a fiddle and a farce. If the Secretary of State wants to confirm that, he is welcome to do so.

Mr. Gummer

Did the hon. Gentleman notice that all those constituencies held by Conservatives can attribute the increase in the council tax to the Liberal-Labour county councils under which we labour? Will he explain why, when the Labour party was in power, Westminster did significantly better by comparison than it now does. If he is saying that there is something wrong with the present system, it is surprising that Westminster fares worse under the system that was introduced with the support of his hon. Friend the Member for Blackburn (Mr. Straw).

Mr. Dobson

I am not entirely sure that my hon. Friend the Member for Blackburn (Mr. Straw) was a Minister of the Crown in the most recent Labour Government. [Interruption.] Oh God, he was a special adviser, so it must be his fault. If we are talking about special advisers, this is the Secretary of State whose special adviser did a bunk on the night of the local elections. One can understand why.

Who does the Secretary of State believe that he represents? As I understand it, in Barnsley, Gloucestershire, Newcastle, Shropshire and Sheffield, all the parties on the council supported the budget and supported the representations asking to be allowed to go through the cap.

Mr. Patrick Thompson

The hon. Gentleman was talking about his forecasts of the increase in the council tax, and I genuinely want to know what the figure would have been for Norwich. Will he confirm that Norwich's citizens will receive a rebate as a result of the action that the Secretary of State is taking tonight?

Mr. Dobson

The hon. Gentleman will no doubt attempt to catch your eye, Mr. Deputy Speaker, and will tell us what horrors would have befallen the people of Norwich if the Secretary of State had not intervened.

It is not confined to members of the council. Shropshire Tory Members of Parliament, as I understand it, have made representations to the Secretary of State, saying, "Look after the old folks; look after the children in Shropshire". In Devon, one or two Members of Parliament certainly did that. They are not here, but one or two of them certainly started making public representations and then, apparently, changed their minds. The circumstances had not changed; they had simply changed their minds.

There appears to be public opposition from Tories in Gloucestershire, but I have been told by people from Gloucestershire that they have been led to believe by some of their Conservative Members of Parliament that they are making private representations, so I do not really know where we are.

Those matters were material to the local elections in all those places. The Tories had every opportunity—the right hon. Member for Richmond and Barnes could have raised the subject time and again at his press conferences—to say whether the councils should go through the cap.

What happened? The Tories lost half their seats in Barnsley; they now have one out of 66. They lost half their seats in Sheffield; they have four out of 87. They lost more than half their seats in Newcastle, where they have two out of 78, and they lost half their seats in Norwich, where they have one out of 48.

The Tories also made the issue a topic of the district elections in the counties concerned. In Devon, they lost 64 seats, in Gloucestershire they lost 20 seats and in Shropshire they lost 35 seats. Local people will express some concern that in—

Mr. Nigel Jones

Will the hon. Gentleman give way?

Mr. Dobson

I shall in a moment.

The people of Devon will be uneasy that the hon. Members for Exeter (Sir J. Hannam), for Plymouth, Sutton (Mr. Streeter), for South Hams (Mr. Steen), for Teignbridge (Mr. Nicholls), for Tiverton (Mrs. Browning), for Torbay (Mr. Allason) and for Torridge and Devon, West (Miss Nicholson) all voted for that rotten settlement.

People in Gloucestershire will be uneasy that the hon. Members for Cirencester and Tewkesbury (Mr. Clifton-Brown), for Gloucester (Mr. French), for Stroud (Mr. Knapman) and for Gloucestershire, West (Mr. Marland) also voted for that rotten settlement.

As we all know, the biggest impact of the settlement, with the exception of Norwich, is the threat to education and social services. It is having the same results throughout the country. Parents, governors and teachers are in revolt about the threat to their children's education. The Government have tried their desperate best to blame the authorities. They have failed in that effort, because people understand that it all depends on that rotten, rigged grant system.

I do not know whether the leaks came from the Education Secretary, who is trying to prove that she is friendly towards education, but shall we say that the newspapers gathered and then received a memorandum, which showed that the Education Secretary believed that the settlement was harmful to schools. She has been going round sweethearting teachers and other organisations, saying, "I am sticking up for you", but she has not done it sufficiently well to ensure that the caps are reduced.

The budget for Gloucestershire is the same as last year, and Gloucestershire is finding it necessary to abandon schemes to provide new centres for people with mental health problems in Newent in the Forest of Dean and in Gloucestershire. There are cuts because of massive cuts in the Government's community care grant. The council is getting fewer hours from 850 home care assistants who used to help people in desperate need in their homes so that they did not need any residential care. Some of those home care assistants have had their hours reduced by 50 per cent. because the county cannot afford to pay them. That, I gather, is being challenged in the courts.

Devon county council suffered the largest reduction in community care grant of any county in the country. It is being forced to contemplate redundancies in the education department, including teacher redundancies. Spending on pupils has, I understand, had to decrease by £270 per secondary pupil in the county, and the council is now confronted with a 10 per cent. increase in the pupil-teacher ratio. However much funny Tories may wish to argue, everyone knows that the lower the pupil-teacher ratio the better off children are. Counties have made substantial economies. Norwich city council has made economies of more than £8 million in one-off or recurrent reductions in expenditure and it has cut its staff by 15 per cent. in the past few years.

The Secretary of State usually rants on—he rants in a most seemly way, as you know, Mr. Deputy Speaker—about the Audit Commission report on the massive increase in white collar workers in local authorities. Sheffield has substantially cut the number of its white collar workers at a time when everyone else appears to be increasing theirs, but it has received no credit.

Shropshire has had to cut its spending by £26 million in the past four years. The cap will lead to cuts in schools, closure of old people's homes, cuts in home care, reductions in teacher jobs and reductions in books for children. The whole thing is wrong.

If the Government are trying to ensure that every local authority in the country can serve its local community in the way that it wishes and the way that it has been democratically elected to do, the settlement shows that the Government have got things wrong. If the figures are not the product of their getting things wrong, they are the product of a malign approach to the future of many people, especially children and old people, throughout the country, and the country will not forgive them.

5.8 pm

Mr. John Biffen (Shropshire, North)

My right hon. Friend the Secretary of State for the Environment was challenged on account of the length of his speech. I regret that, because it is all too much of a rarity now to have a ministerial speech peppered with interventions, yet that is at the heart of the practice of Parliament and the exposition of difficult and arcane topics, and there are probably few topics more arcane than local authority expenditure. It was rather refreshing to hear my right hon. Friend approach the subject with all the fervour of the Cambridge Union. Although I found that approach uplifting, I intend to be a great deal more prosaic in my own comments—

Mr. John Garrett (Norwich, South)

And more brief.

Mr. Biffen

And certainly more brief. I shall concentrate upon the fortunes of Shropshire. The county sought a budget of just more than £245 million against the Department of the Environment's preferred budget of £239 million. It is the £6 million difference that has been at the heart of the discussions and the dissent. I pay tribute to the Minister of State for his courtesy and care in consulting Shropshire Members of Parliament—I see that the hon. Member for The Wrekin (Mr. Grocott) and my hon. Friend the Member for Ludlow (Mr. Gill) are in their places. Although that courtesy, alas, did not culminate in justice as far as I was concerned, nonetheless, in this sad world even courtesy has its advantages.

When we move from the statistics to the reality, we are talking about what the county can provide in terms of education, fire services and care for the elderly. I shall make only two points, but I believe that they go to the heart of the general debate rather than to the argument about the formula which sustains local government financing.

First, in examining the county's provision of education, fire services and care for the elderly, we must leave aside the detailed statistical analysis and ask whether they are the consequence of prodigal, feckless or irresponsible budgeting. One may argue about the priorities of that service provision, but I do not believe that it invites any of those judgments.

Shropshire asked to be permitted to make a modest fiscal judgment in order to take account of what it believed to be its responsibility to provide core services in the county. After all, it is not seeking the £6 million from Brussels or Westminster and Whitehall; it is being sought from a council tax that is paid by the Shropshire electorate. That is the heart of the dilemma.

My hon. Friend the Member for Surbiton (Mr. Tracey) touched upon the question of whether the capping structure still has the legitimacy that it once possessed. We must ask whether it has become so pervasive that it has ceased to be a safeguard and has instead become a straightjacket.

That is the heart of our dilemma this afternoon. It is not about the knock-about political relationship between erring counties and Whitehall and Westminster; it is about whether the relationship between central and local government has enough flexibility to avoid oppressive centralisation. I sometimes think that the Department of the Environment is inspired by Jacques Delors in its relationship with local authorities. There is no place in the Tory pantheon for that degree of centralist dominance and that desire for formula uniformity.

I do not know how this evening's debate will conclude, although I understand that the motion will be passed. As a consequence of the debate, I hope that hon. Members will reflect upon the fact that we cannot return to this situation year after year because it will worsen year after year. We must now begin to think of a more flexible and acceptable arrangement.

Mr. Deputy Speaker

Order. When I called the right hon. Member for Shropshire, North (Mr. Biffen), I failed to remind the House that Madam Speaker has placed a ten-minute limit on the speeches of Back-Bench Members for the rest of the debate.

5.13 pm

Mr. Bruce Grocott (The Wrekin)

It is a pleasure to follow the right hon. Member for Shropshire, North (Mr. Biffen) in the debate. I often agree with his individual arguments but that is probably the first time that I have agreed with everything that he has said. It prevents me from making several points that I would otherwise have mentioned.

Many hon. Members may be surprised that Shropshire should be so strongly opposed to this year's financial settlement. The efforts of Shropshire Members of Parliament and local councillors, who have repeatedly made all-party representations to Ministers in the past four years, has culminated in overwhelming opposition. Ministers always listen courteously to our views and—I hope that it will not be the same pattern this year—then reply that first, we should look at our budget to see if we can make any reductions or economies; and, secondly, say that we should look at our reserves.

Shropshire has certainly made real expenditure cuts in the past four years. I shall not mention them all, as I am trying to make my remarks as brief as those of the right hon. Member for Shropshire, North. There have been cuts in residential care for the elderly—including the closure of Castle Lodge in my constituency—which always cause upheaval and unhappiness.

There have been cuts in expenditure on schools. Hadley Manor school has closed. We have debates in this place where we swap figures and talk about real terms and base budgets, but the reality sinks in when one visits a building that last year was a thriving school but which is now boarded up. Part of the building has been turned into a centre for people with disabilities, and I am delighted about that. But the fact is that a school has been lost and we owe it to our constituents to try to prevent such closures.

Ministers always tell us to look at the county reserves. We have looked at them. In 1990 the reserves totalled £9.7 million and they have now decreased to £3 million—the Department of the Environment has said that that is about as low as they should go. We have made genuine attempts to deal with our problems in numerous meetings with Ministers over the years.

It is against that background that there was such an outcry this year. I have never experienced anything quite like the public response to the announcement of this year's figures. Schools decided immediately that they simply could not impose the funding cuts and governors stated that they would not do so. There was unanimous opposition to the figures from the chairman of school governors, as well as all-party opposition on the county council.

Once again, we went to see the Minister. The council leader, Sue Davis; the leader of the Liberal Democrats, John Stevens; and the leader of the Conservatives, Brian Gillow, met the Minister to explain the seriousness of the situation and why they felt obliged to challenge the cap. Therefore, we were tremendously disappointed when we discovered that the Government had decided not to respond to our representations.

Small wonder that education has been hit particularly hard. Councillor Derek Woodvine, who is the chairman of the council education committee, also made representations to the Minister. Staff numbers in one primary school in my constituency will almost certainly decrease from seven to five, while class sizes will increase to 34 pupils. The working hours of nursery assistants employed on the home school link will be cut by two and a half hours a week, secretarial help will be cut by five hours a week and special needs will be cut by nine and a half hours a week. That is the situation at only one school. No wonder there was an enormous amount of opposition to the settlement. The depth of disappointment was not surprising.

I conclude with two thoughts. First, the cuts that will result from the decision will affect all council services. I cannot understand why the Government do not realise that the opposition from Shropshire reflects genuine community feeling. It is not orchestrated and it is not unique to Shropshire; it is a genuine reflection of what people feel and the Government ignore it at their peril. We hear rumours in the media that the Secretary of State for Education may realise it only too well.

Secondly, there really should be a better way of dealing with these matters. My first experience of local government was as chairman of the finance committee on a small district council more than 20 years ago. I look back on those days as a time of benign simplicity. Each year, we knew what the grant would be and we worked out the rate we had to set on the basis of the rateable value. We did not go to and from London with delegations to see Ministers. There was a Conservative Government at the time so it was not all happiness and light, but that was how things were done. They were times of great simplicity, when we did not always think that the people in Whitehall knew best.

Next year, as well as looking at the settlement for Shropshire again, I hope that the whole system of unnecessary bureaucracy, paperwork and delegations will be reviewed, and I hope that we return to the simplicity that worked for so long.

5.21 pm

Mr. Anthony Coombs (Wyre Forest)

I do not underestimate the difficulty of hon. Members representing such counties as Shropshire and I understand what my right hon. Friend the Member for Shropshire, North (Mr. Biffen) meant when he said that he would like the settlement to be a framework rather than a straitjacket. However, I would like to say a few words in favour of the rate-capping settlement, in the context of a tight local government settlement, but one that I believe will be manageable.

I spent 10 years in local government—possibly not as long as many right hon. and hon. Members—and I had some sympathy for the hon. Member for The Wrekin (Mr. Grocott) when he said that the way in which grant is allocated in local government has become increasingly complicated over the years. There seems to be an unnecessary shuffling back and forth from Whitehall. It is a matter of regret that some 80 per cent. of resources in local government is now provided centrally rather than locally.

Local government should be vibrant and responsive to its local communities and raise a greater proportion of its revenue from them. In principle, I am against capping where it is not absolutely necessary, as it avoids the sins of profligate local authorities. Sadly, until two years ago, my local Labour-controlled Wyre Forest district council was overspending by some £2 million, or 20 per cent. per year. The cap let the council off the hook in respect of the local population.

As the Irishman said, "If you want to get somewhere, you have to find out where you are starting from". We start from a system of local government in which 80 per cent. of funding is provided by the taxpayer; we have a budget deficit and no less than 25 per cent. of total Government spending—something in the region of £43.5 billion this year—is spent by local government. Although only 10 out of 448 local authorities were capped and four of those had adjustments made to their caps as a result of representations to the Secretary of State, we need to control central and local government spending. Capping is one way of dealing with the most profligate or potentially profligate local authorities and providing an effective deterrent to other local authorities that might otherwise be tempted to overspend.

We have to consider, however, not only the possibly justifiable complaints from right hon. and hon. Members that some local authorities have a worse deal than others, but, as the hon. Member for Holborn and St. Pancras (Mr. Dobson) said, the deterrent provided by capping, and the standard spending assessment system in particular, meant that the increase in local government spending was only 5.2 per cent. Although that is higher than the rate of inflation, it is a better performance than local government has produced in recent years.

We also have to bear in mind long-term trends that will lead to significant additional proportions of gross national product—in addition to the 45 per cent. now being spent—going into Government spending because of the aging population and the tendency of local government to spend money on bureaucracy that does not directly benefit the population. The Audit Commission, in paying the piper, showed that between 1987 and 1983 the number of non-manual staff in local authorities rose by some 93,000 people—enough to fill Wembley stadium—at a cost of £10 billion.

Having heard the speech by my right hon. Friend the Secretary of State, I believe that the capping criteria have been sensitive to local needs generally, although people may disagree. The fact that he changed the formula for inner London boroughs and for police authorities is evidence of that. The fact that only six out of 448 authorities were capped and then were unable to achieve any adjustment after talks with Ministers, is evidence of a certain amount of flexibility and demonstrates that capping has not been oppressive for the majority of local authorities.

Before we fall out with the SSA system upon which the capping regime is based, we should bear in mind that the Audit Commission recently concluded that SSAs were A more sophisticated system for equalising needs than any overseas system … and an improvement over its predecessor in many respects. In another recent study, Rita Hale of CIPFA and Tony Travers of the London School of Economics said: no overseas country appears to have a full grant system which goes so far in its attempt to achieve full equalisation. I appreciate that the way in which the SSA is calculated for education and the police service is extremely complex and I do not agree with every instance of it. In the debate on the SSA, I argued on behalf of my own county that the area cost adjustment ought to be either reformed or abolished altogether and that SSA adjustments did not reflect the needs of relatively large towns with inner city problems that are situated in rural areas, such as Kidderminster, Worcester and possibly Bridgnorth and other towns in Shropshire.

As any system of allocated grant on a national basis on such a scale inevitably will have an element of sophistication and possibly even rough justice, and as independent reports suggest that it is about as fair as any in the world, it would be unfair and wrong to fall out about it and say that capping necessarily leads to injustice.

In my own county, we have a very tight settlement, particularly in education where teachers' pay has increased by 2.2 per cent. instead of 3.7 per cent. We know that it is a tight year, but we think that it is manageable. If, in the long term, the capping regime reduces local government expenditure and therefore the total demands that central Government make on the taxpayer to allow a lower tax base and a more vibrant economy, it is well worth supporting.

5.28 pm

Mr. David Rendel (Newbury)

Capping must go, and capping will go. It must do so because, until it has gone, local government cannot fulfil its real purpose—the accountable provision of genuinely local services that serve local needs and are determined by local people. Capping clearly undermines the accountability of all elected councillors. I recognise that the Conservative party may not worry too much about that as they are now the least important party in local government with fewer councillors than either the Liberal Democrats or the Labour party. The Conservatives face the prospect of falling even further behind the two major parties next year.

Surely, a lack of accountability in local government should still be of great concern to Conservative Members. A lot of nonsense is talked by some hon. Members about irresponsible overspending by local authorities. Those Members seem to see it as their life's mission to denigrate their own councils, but in practice there is far more irresponsible waste of resources by central Government nowadays than there is by local government. We have only to look at Whitehall's expenditure on management consultants, for instance, to see that.

The truth is that only one county council has set a budget significantly under its capping limit, and that is Essex, controlled jointly by Liberal Democrats and Labour. The solitary Conservative-run county council, Buckinghamshire, is spending right up to its capping limit and has increased its council tax this year by more than 8 per cent.—a long way above inflation. Three quarters of all the counties and the metropolitan and London boroughs are now spending up to their capping limits. Their spending and their revenue is determined not by local councillors but by central Government.

The whole system, therefore, needs a complete overhaul—an overhaul that devolves power to local communities and starts from the premise that local people are the best judges of their needs and of what they can afford to pay.

Today, we have to take a decision as to whether we can set the ball rolling. We have to ask ourselves whether seven particular authorities have set such outrageous budgets that local people require the protection of nanny, in the form of central Government. For that is the Secretary of State's view of the purpose of capping.

On 1 February this year, the Secretary of State proclaimed: the capping mechanism was introduced because, in some areas, people were unable to pay the high cost of administrations".—[Official Report, 1 February 1995; Vol. 253, c. 1109] With that in mind, let us look at Devon and Gloucestershire. These authorities have set budgets which, when adjusted for the change in police authority finance, leave their council taxes at the same level in cash terms as last year. In real terms, the figures are well down. In view of the enormous burden placed on local authorities by the local government settlement, that is a formidable achievement.

So how can Devon and Gloucestershire be deemed by the Government to be acting extravagantly? Are the Government arguing that the level set last year was absurdly high—was, indeed, completely unaffordable? To argue that would mean an admission that last year the Government failed to cap those authorities at an affordable level. Since that would be the first time the Government have accepted that they made a mistake, it would seem highly unlikely that that is what they are arguing.

So are the Government arguing that what appeared at first to be affordable at the beginning of last year turned out unaffordable at the end of it? On the contrary, both counties have council tax collection rates that are much higher than average. Clearly the local people are able and willing to invest in their communities. So if this level of council tax was affordable, as it clearly was, last year, how can the same level of council tax be unaffordable this year? On the basis of the Secretary of State's own rationale for capping, there is no excuse for capping in these cases.

There is still some hope, however. Let us hear the views of Mavis, Lady Dunrossil, the Conservative spokesman in Gloucestershire who expressed her disappointment when responding to the announcement the other day that Gloucestershire's capping was to go ahead: I really thought Ministers had been persuaded by the justice of our case. There is still a chance of over-turning this decision if Gloucestershire's Conservative MPs will openly declare their support for us. The proposed County budget over-cap has the full support of all Gloucestershire GM and LEA schools, and involved no increase for the local taxpayers. I appeal to all Conservative MPs to support our schools". The councils that I am talking about are not profligate, loony councils. Gloucestershire, whose budget this year had the full support of the Conservatives as well as of the Liberal Democrats, has cut the central cost of its education department by 24 per cent. over the past four years. It has made savings of £1.5 million in central administrative departments and has cut the number of staff by 23 per cent.

In Devon, support costs are 36 per cent. lower than for the average county. Over the past three years, Devon's central support staff have been cut by 8 per cent. Senior managers' numbers have been cut by 15 per cent., and this year alone chief officers will have their numbers cut by 15 per cent.

Both Devon and Gloucestershire have already slashed their reserves to just 1 per cent. of their budgets. Indeed, Devon's level of reserves in March 1994 prompted external auditors to remark that the council should ensure that there is no further depletion of its non-earmarked balances. In the longer term, it should be looking to rebuild these to more prudent levels". The level of reserves today is little more than one third the amount that drew this cautionary note.

Contrast this with Buckinghamshire's increase in council tax, at twice the rate of inflation, or Huntingdonshire's increase, at twice the average for English districts. That shows how absurd it is when Conservative Members talk about profligacy merely in Liberal Democrat or Labour-run authorities.

We must examine the real cost of imposing a cap on these authorities. There are likely to be about 3,000 redundancies in the seven authorities covered by the order. I realise that many Conservative Members equate redundancies with efficiency, but even in their terms, ignoring the human cost, is it really efficient for the nation to have to pay all that extra unemployment benefit instead of keeping these people doing useful and productive jobs?

I ask Conservative Members to consider also the enormous cost of re-billing in those authorities; in Devon, it could cost more than £500,000. What kind of folly is it to impose further cuts on already tight budgets, just to spend millions of pounds on unnecessary postage? That is what the Government are doing with their capping recommendations.

We should also think about the impact on our schools, on road safety and on the provision of a whole range of vital services. We should think of the parent of a young child who requires a statement of special needs but cannot get one because there are never enough educational psychologists. We should think of the pensioner who depends on home helps and meals on wheels but who can no longer afford those crucial services even where they are still offered. We should think of the student hoping to further his education but who cannot obtain a discretionary grant because the council cannot afford one. We should think of the child who last year studied in a class of 30 but will now have to study in a class of 38 other children—a genuine example that has come to my attention.

It is time the Conservatives realised that local government services are not just some sort of luxury. Perhaps if they had grasped that fact they might not have had such a complete humiliation in the local elections last month.

Nor can the Government any longer use the argument that capping is necessary for the sake of the national economy—as some Conservative Members argued today. It is now clear that, in some cases at least, the capping regime means that local authority budgets are set higher than they need to be. Many councils feel under considerable pressure to budget right up to cap, whether the expenditure is necessary or not in a particular year, because of a fear that they will otherwise lose out next time round.

Capping can cost local authorities in other ways as well. In Devon, the county has resolved to secure as much European funding as it can—rightly so. That requires matched funding from the county. If the Devon Conservatives get their way, in order to meet their capping restriction, half the cuts will come from their European matching funds budget, thereby costing the county many hundreds of thousands of pounds in European revenue. I want to make it quite clear to all who are thinking of going into the Government Lobby tonight that they will be voting for Britain to lose out on its fair share of European funds.

Now there are strong rumours that the Government may be preparing another U-turn on capping. If there is any truth in those rumours, how can it be right to cap the seven authorities today, with all the costs that that entails, only to abolish capping next month? That is simply ludicrous. If the Government are ready to acknowledge that the system is not working, they should do so now.

Capping must go, and I urge Conservative Members to show some courage and vote against the motion. The order makes no sense. It will cost millions of pounds to implement, it subverts the whole purpose of local government, and the House should have nothing to do with it.

5.39 pm

Sir Irvine Patnick (Sheffield, Hallam)

On 25 May last year, when the House debated council tax in Sheffield, I, as a Whip, was not able to take part officially. Despite that stricture, however, I was heard, and Hansard records my participation.

During that debate, my hon. Friend the Minister congratulated Sheffield on establishing a more secure financial base. The united pleas of Sheffield city council and others—including the Sheffield Members of Parliament—resulted in a £3 million increase in the amount originally proposed for the city. Each year, I have made representations to ensure that Sheffield is given its proper chunk of the nation's cake, crumbs and all.

I do not propose to make party-political points about why Sheffield is in its present position, or to apportion blame for its past mistakes. Many Sheffield residents, however, have taken to comparing the city with Manchester for the purposes of standard spending assessments. As the Minister knows, Manchester has more ethnic minorities, more one-parent families and more people on income support. All those factors determine standard spending assessments.

Manchester does not have the same physical characteristics as Sheffield, which makes any direct comparison impossible; but many people continue to measure Sheffield against Manchester. When I first entered local government some time ago, a rivalry existed between Sheffield and Leeds: indeed, it still exists. At that time, Sheffield compared itself with Leeds, but now that it obtains more from the Government than Leeds it has sought another city on which to base its arguments and has chosen Manchester.

The Government have responded in many positive ways, making a Minister responsible for Sheffield, approving the city's bid for a single regeneration budget and allowing credit approvals for part of the Sheffield inner ring road. Many other instances debunk the myth that the Government do not care about Sheffield. I am grateful to Ministers for meeting me on many occasions, and also for meeting an all-party delegation from Sheffield, of which I was a leading member. Ministers at the Department for Education have also listened to claims relating to Sheffield's circumstances.

However, my hon. Friend the Minister will not be surprised to learn that, on several counts, I am disappointed by the decision for Sheffield. I am sorry that its request for redetermination was not accepted. The expenditure limits contained in its SSA allowed for the cost of supertram, which greatly concerns not only Sheffield city council but Barnsley, Doncaster, Rotherham and all the other south Yorkshire authorities.

It was always understood—at least by south Yorkshire authorities, and by me—that no financial burden would be placed on local taxpayers. Thanks to supertram, the city council's share of the passenger transport authority's levy has risen by £1.69 million: the 1995–96 figure represents an increase of 8.7 per cent. Just under £1.5 million of that relates to the city's share of the capital financing costs of supertram, which increased by 51 per cent. over the previous year. Furthermore, the effects of supertram road works have influenced the city's traffic count for SSA purposes. Against all predictions, there was a 9 per cent. reduction in traffic flow last year. Sheffield estimates a loss of just under £1 million in the city highway maintenance allowance for 1995–96; I trust that that will be rectified next year, if not this year.

Oddly, not much traffic was passing the census points selected. In fact, all the traffic had been diverted owing to the construction of the supertram route. That is nonsensical.

Difficulties were experienced during 1994–95 in achieving a renegotiation of the council's debt repayment profile with the banks. That was due to factors outside the council's control, resulting in a judgment in the Credit Suisse v. Allerdale district council case. The implications of the judgment have compounded the wary attitude of financial institutions towards complex financial dealings with local authorities. That originally resulted from the interest swap case involving the London borough of Hammersmith and Fulham.

Sheffield city council is near to completing new arrangements with the bank and the Housing Corporation in respect of its housing partnership funding, and believes that that will facilitate further progress in other debt rescheduling. The delay, however, prevented the council from taking advantage of comprehensive rescheduling at an earlier date, which it had hoped to do. The rescheduling had been estimated to involve over £20 million this year alone.

Sheffield acknowledges, and is grateful for, the assistance of the Minister for Local Government, Housing and Urban Regeneration and the district auditor in answering points raised by the banks and giving reassurance about the propriety of Sheffield's existing and proposed arrangements. The council has also identified several elements of the SSA which were omitted from the 1993 SSA review, and brought them to the Minister's attention. Those elements, which disadvantage Sheffield, are the social index, the children's social service SSA, the area cost adjustment and the treatment of capital financing.

I urge the Minister to re-examine Sheffield's pleas for reconsideration. Its request is based on the Supertram effect on the SSA, the Allerdale case and points—some of which I have outlined—that were made when the Sheffield delegation met Ministers to discuss elements of the SSA that were not reformed in the 1993 review. Action on any or all off those matters will assist Sheffield greatly.

I hope to receive a positive response that will enable Sheffield to continue the reorganisation of its financial base in line with its plans for improved efficiency and better financial management. It has shown its ability to put its affairs on to a more even footing; it now requires further consideration and assistance from the Minister. I give notice that I intend to press hard for a revision of the SSA on Supertram, further help with the rescheduling of Sheffield's debt and changes in the SSA to favour Sheffield.

5.47 pm

Mr. John Garrett (Norwich, South)

The city of Norwich has been grievously treated by the capping order. The level proposed will lead to a substantial loss of services and the closure of some heavily used facilities. The city is well run, as can be attested by outside and objective studies of its management by the Audit Commission and other bodies.

Norwich has a particular problem, in that its resource base is much smaller than the population that it serves. It is a regional centre of East Anglia in regard to employment, industry, commerce, shopping, tourism, the arts and culture.

The Parliamentary Under-Secretary of State for the Environment (Mr. Robert B. Jones)

Will the hon. Gentleman give way?

Mr. Garrett

I have barely started.

Mr. Jones

It is on the point that the hon. Gentleman has just made.

Mr. Garrett

How could the Minister disagree with it?

Mr. Jones

I do not disagree with it. If the hon. Gentleman is claiming that the aspects that he mentioned are important advantages for Norwich, however, how can he justify what the hon. Member for Holborn and St Pancras (Mr. Dobson) said about wanting to scrap the "day visitors" element of the SSA, which benefits Norwich for precisely the reasons that he has cited?

Mr. Garrett

The day visitors allowance does not benefit Norwich particularly. My hon. Friend was talking about Westminster. There is a small difference between tourist visitors to Westminster and visitors to Norwich. I must say that I wish I had not given way to the Minister.

The ratio between Norwich's daytime population and its resident population is higher than in any other shire district. A city of 100,000 people serves a population of 500,000 in the county. It has high levels of social deprivation and population density, and a low-income community—the 64th lowest paid in the country, including London and the metropolitan boroughs. Recent reports suggest that 30,000 people live below the poverty line in Norwich, a higher proportion than in Birmingham or Sheffield. Norwich has recently received some really hard blows with some 2,500 jobs losses having been announced this year so far. If one allows for the multiplier, 5,000 jobs will be lost as a consequence. That means that the standard of living in the city will fall rapidly.

The capping limit will require revenue expenditure cuts of £5.5 million over the financial years 1995–96 and 1996–97. This is almost one third of the net general fund revenue budget and will mean major reductions in direct services. Recurrent cuts of £5.5 million and a one-off cut of £3 million have already been made in recent years. The cuts have been made overwhelmingly from overheads and not direct services. In the same period, over 350 jobs have been lost, which is 15 per cent. of the council's employment.

By the end of 1995–96, general fund reserves will have been reduced to £1 million, which is the lowest prudent level. There are no other reserves for trading or other general fund activities. The level of further recurrent cuts to be made by 1996–97 has risen to £5.5 million. That means that over four years, cuts totalling £11 million will have been required if the current system of national financial control is to be complied with and the designated budget achieved. That scale of cuts represents over 40 per cent. of net general fund spending and 22 per cent. of gross general fund spending, excluding housing benefit payments.

The cuts will impact on virtually all services with reductions in quality and standards, the closure of facilities and the cessation of services. The scope for further cuts in overheads is limited, with the result that there will be major reductions of direct services. That will mean greatly reduced, almost non-existent, discretionary services. The council will find it extremely difficult to meet its mandatory obligations. The whole appearance, culture and life of the city will deteriorate.

It seems to me that that is an exceptionally vindictive action. It may have been taken because, for 60 years, Norwich has been controlled by a very competent Labour authority. The number of Tories on Norwich city council has been reduced to one; as she is the mayor, there is no Conservative voice whatsoever on the city council.

Two important and well-loved community centres will have to be closed. Today, a petition with 25,000 names was presented to the city council asking that those community centres be kept open. One receives 150,000 visits a year. The tourist information centre will have to be largely closed, yet we are trying to develop the tourist industry. The income from tourism is spread throughout the city, in shops, hotels and restaurants.

The fact is that capping is a rotten system that does not recognise the particular needs of the city of Norwich which, by the way, has 1,600 listed buildings to look after and the largest collection of pre-reformation churches in western Europe. All that is the result of being the capital of a region. The Government's formula does not reflect the needs of, or the demands made on, the city council. It is with great regret that I have seen that the Government will not change their mind but retribution will come at the next general election.

5.53 pm

Mr. Patrick Nicholls (Teignbridge)

The hon. Member for The Wrekin (Mr. Grocott) used a phrase that struck a chord with me. He said that whatever view one takes about how we got here, we must try to ensure that we do not get into this position again.

I have long taken the view that a system whereby education funding is split, with one body responsible for providing the funds and the other for spending them, can never run satisfactorily. Parents will never know who is ultimately responsible for funding, whether for a major crisis such as the present one, or the standard running crisis that we have from year to year.

When parents are told that there is not enough money, they go to their county councillor, who blames the Government and perhaps the Member of Parliament. They go to their Member of Parliament, who blames the county councillor. At worst, both are probably not being wholly accurate and at best they honestly believe that the other is to blame. As long as funding is split, parents will not, ultimately, feel confident about the education system.

I have noticed with this matter more than with any other issue in the 12 or so years that I have been in the House how desperate and horrified parents have been by developments in Devon. One problem is that politicians use words to try to make a point, but in the end the words become devalued.

To talk about desperation and terror is justifiable, given the letters that I have received and what the people who come to my surgeries say. People going about their daily lives are not interested in the constant party political battle. All they want is their children's education to be funded properly. They have one opportunity and one alone to have that education funded at the proper time for their children.

People going about their own busy lives do not feel qualified to try to understand the minutiae of local government finance. They feel desperate and that, to some extent, politicians are misusing the statistics to try to hide things from them.

Perhaps I ought to declare an interest. Many Back Benchers spoke with such confidence and assurance about the figures that I have to wonder why I do not. I can only pray in aid the fact that I have been a local councillor and an Environment Minister. If I find it difficult to get on top of the figures, I can well understand that others find them difficult, too.

People in Devon may consider how the argument has been presented in Devon. The first thing that Devon county council did was to trumpet its case to the public on the basis that it had received less money this year than last. That is simply not true. When such a thing is said by people outside the House, I can describe it as what it is: a lie. I specifically do not comment on the fact that the same point was made by the hon. Member for Newbury (Mr. Rendel). The fact is that Devon got more money for education, not less. It may not have been a great deal more, but even in Liberal Democrat-speak, an increase that is less than one would like does not amount to a decrease. Whatever figures one uses, that is a salient and cogent fact, but Devon county council has done everything in its power to ensure that the public do not understand it. This year, Devon county council got more for education, not less.

Devon county council next tried to say that it had been treated worse than the average. Depending on what measure is used, it has been treated at least as well as, and in some respects better than, the average. It has been caught on that as well.

Perhaps the most crucial and telling point of all that anyone, whether or not they pretend to understand the minutiae of local government finance, can understand is that in Devon, the Conservative county councillors proposed a budget that was feasible, involved no swingeing cuts in education and, in passing, would also have reduced the council tax. It was voted down by the Liberal Democrat administration.

I could understand it if the Liberals had taken the view that, although it is the party of permanent opposition, it was temporarily in control and perhaps ought to work responsibly to set its own priorities. It should have said, "We are sorry, but when push comes to shove, we prefer to cut education." That would at least have been honest.

Mr. Harvey

rose—

Mr. Nicholls

The hon. Gentleman can repeat his untruths later. He can repeat outside the case that the Liberal councillors are making in county hall. The longer he holds me up in my speech, the less opportunity the public will have for him to repeat it.

The fact is that a budget was put forward—not an easy budget; there are no easy budgets to deal with this settlement. However, it was a budget that could have been set and would have meant in the end no cuts in education. Surely it would have been more honest if the Liberal Democrat administration had been prepared to argue the case on its merits instead of trying to mislead people about the facts.

This very day, in an intervention to my right hon. Friend the Secretary of State, I put a series of figures that Devon county council came up with just hours ago. What do we find? We find that those apparently authoritative figures make a comparison between Devon and Somerset and exclude redundancy costs for Devon, but include them for Somerset. When the council still could not paint the picture that it wanted to paint, I understand that it got to the stage where it decided to recount adult heads of population rather than concentrate on the children. Perhaps we shall hear more about that in the winding-up speeches. Anyone who has been a west country politician for as long as I have knows that one cannot expect very much from the malignant nonentities who are the Liberal councillors. However, it is immensely sad to see experienced professional senior council officers prepared to traduce their integrity by producing such figures.

Mr. Gummer

Is my hon. Friend aware that the figures adduced by Devon city council when it put its case to my Department were not those that it gave to Members of Parliament today? In other words, faced with people who knew the facts, Devon produced figures different from those with which it sought to mislead Members of Parliament, who might not perhaps have had the background that would have enabled them to criticise the figures.

Mr. Nicholls

My right hon. Friend is entirely right. Not only were different sets of figures produced but, in due course and if necessary, Devon county council will produce different figures again.

The settlement has not been easy, but Devon was treated better than some counties. I hope that, in the end, parents in Devon will come to understand that, as long as we have a system under which functions are split, it is not sufficient to make the easy judgment that it must be the Government of the day who are to blame. Rightly or wrongly, for the time being we have a system under which the discharge of education obligations is shared by local and national Government. To judge by the figures, there is no doubt that the Government have played their part. Even without being able to understand every jot and tittle of the figures, one has only to consider the dishonest way in which the matter was presented in Devon to realise the truth.

6.1 pm

Mr. Jim Cousins (Newcastle upon Tyne, Central)

Having heard the lamentable and disgraceful speech by the hon. Member for Teignbridge (Mr. Nicholls), I begin by paying tribute to the 78 elected councillors in Newcastle, the 250 directly elected school governors in the city and the tens of thousands of people like them across the country who are prepared to take on responsibilities every day. I find it shocking that some, although not all, Conservative Members have snarled about such people or even called them, as the hon. Gentleman did, "malignant nonentities", or complain because such people have put them on the spot. In fact, such men and women are the bedrock of our democracy and have to make difficult decisions every day in the performance of the duties that they carry out on behalf of local people.

I said that I wanted to pay tribute to the 78 elected councillors in Newcastle, but I want to go a mite further and pay tribute to the former leader of the Conservative group on the city council, who lost his seat in the recent local elections thanks to his own party. He was my opponent at the previous general election, so if anyone has reason to use the type of language used by the hon. Member for Teignbridge, it might be me. However, he has behaved absolutely honourably over the issue of capping. He could not be described as a malignant nonentity; he is a man of honour and should be respected.

The situation in Newcastle is wholly perverse, and no one can understand it. The Government told the city council that its needs were such that it ought to spend £2 million more, but the capping criteria mean that, unfortunately, the council is not allowed to spend £1 million of that money. Who can understand and explain that?

The new Labour leader of the city council said that surely everyone in the city could work together to come up with a more sensible proposition. All parties on the city council, all the school governors and the local evening newspaper came up with a contract for Newcastle, which consisted of a proposal that the Government want to vote down this evening.

The proposition would have put money back into the city's expenditure specifically for education and social services and would have prevented the loss of some day care provision. It would have meant 250 to 300 people receiving the vocational training that they will not receive if, as seems likely, the order is agreed. The proposal would have put money back into the schools budget and saved more than 100 jobs, 75 of them for teachers, and provided flexibility.

The Labour leader of the city council said that he would not go to the Government simply to ask for extra money, but would set out how it would be spent. He would go to the Government only if he could say that he had the support of the people of the city and all the political parties on the city council. He worked at it and he achieved that support by working out a package of proposals that would have done all that I described and cut the council tax by £43.

It is hard to imagine that any sensible Government could possibly have turned down a package that would have allowed to be spent the money that the Government said should be spent, which would have avoided some nasty cuts and, at the same time, would have cut the council tax by £43. That is the proposal that the Government have turned down.

How can anyone of any political party explain such a decision to a primary school which has a 70 per cent. turnover of kids each year and which is faced with the loss of teachers? How can anyone explain it to a secondary school in my constituency which has just had a bad report but which is experiencing great difficulties and faces the loss of 17 teachers? How can anyone explain the Government's decision to vote down a package of proposals which would have cut the council tax, increased various aspects of the city's spending and saved jobs and which had the support of all political parties locally and the school governors?

This year, 10 or 12 councils came back to the Government for a revision of their cap. That does not mean that there were not 100 councils that wanted to do the same, but only 10 or 12 had seen the necessary anxiety expressed in their communities, which meant that they were prepared to have a go, although they knew that they would not be listened to. That is why only 10 or 12 councils went back to the Government. All but two or three of them have been turned down.

This is a bad day, not only for the city of Newcastle but for democracy as a whole. It is not only capping that has to go, but the Government, who are prepared to enforce it in this way.

6.7 pm

Mr. Christopher Gill (Ludlow)

I begin by endorsing the remarks made by my right hon. Friend the Member for Shropshire, North (Mr. Biffen), who thanked my hon. Friend the Minister for his unfailing courtesy on the many occasions when Shropshire Members of Parliament have met him to make strong representations on behalf of Shropshire and the particular difficulties experienced by the county. I hope that the Minister will forgive me if I preface my remarks by striking a slightly discordant note.

In speaking against the imposition of a cap on local government expenditure in Shropshire, I remind the House that last November I declined to support a motion to send extra money to the European Union because what is spent abroad cannot be spent at home. There was not then, nor is there now, a popular mandate for Euro-spending—quite the reverse—and there was no political kudos to be gained from increased spending in that direction. The popular demand, and the political price to be paid for failing to recognise it, is all here, at home, and home, as far as I am concerned, is Shropshire. Salopians, many of whom are observing these proceedings this evening, live in the same world as other citizens. We are subject to the same laws and, incidentally, the obligations that those laws impose on local authorities. We have to pay schoolteachers on the same salary scales as other local authorities and we have to pay the same taxes.

In Shropshire, incomes are below average. Economies of scale do not apply, because our county is large and sparsely populated. Those factors are not adequately reflected in the standard spending assessment formula. Our argument is with the way in which taxpayers' money has been distributed since the basis was changed in April 1990 from the former grant-related expenditure assessment to the current SSA, in such a way that, for example, Hampshire has been able to amass huge reserves—£92 million as at 1 April last year compared with Shropshire's £7 million. I do not for one minute accept that that is simply a result of good or bad housekeeping.

Adjoining Powys, for example, can levy a council tax of less than £400 on a band D, against a comparable figure of more than £600 in Shropshire. The education SSA for a primary school child in Shropshire is £1,862, and for a secondary school child it is £2,482, against corresponding figures in the London borough of Southwark of £2,947 and £4,097. The leader of that authority, incidentally, is on record as saying that it is well satisfied with this year's revenue support grant settlement.

This argument, as the hon. Member for The Wrekin (Mr. Grocott) pointed out, has raged for four years. Every year, since 1990, Shropshire's position has become progressively worse, in spite of endless meetings with Ministers—including one with my right hon. Friend the Prime Minister himself—mountains of correspondence and an enormous expenditure of time and effort. But all to no avail. I very much regret having been put in the position where, in the final analysis, all that I can now do to express the frustration and justifiable anger of my councillors and constituents is to vote against the order tonight.

I hope that my right hon. Friend the Secretary of State will recognise that the fundamental problems intrinsic in the SSA formula have been accentuated by the imposition of capping, a feature of Treasury control that many of us had believed would never be applied other than to the most profligate of local authorities. The effects of capping are plain for all to see, but I shall rehearse some of them again in the hope that Ministers will now conclude that the time has come to end this erosion of local democracy and accountability.

Voters can vote for socialist councillors—of course, I regard both Labour and Liberal Democrats as being socialist—with impunity, knowing that the consequences of their actions will not result in dramatically increased council tax bills. Conservative councillors, on the other hand, have become demoralised, demotivated, and ultimately, as evidenced in recent elections, defeated. They can also, as can be seen in Shropshire, be driven into a coalition with Labour and Labour Democrats in opposition to a Tory Government.

There is only one practical way forward: capping has to be abandoned. Education and social services have to become a charge against the national taxpayer, and all other local authority expenditure has to be exclusively at the expense of the council tax payer.

I look forward to the day when my Government accept, first, the principle of subsidiarity; and, secondly, the importance of vesting responsibility, and the authority to discharge that responsibility, in the same hands—ideally, the hands of unitary authorities.

Several hon. Members

rose—

Mr. Deputy Speaker

Order. Some 30 minutes remain for Back-Benchers' speeches. Four hon. Members are hoping to catch my eye. With a little co-operation, they all might do so.

6.14 pm

Mr. Michael Clapham (Barnsley, West and Penistone)

It is disappointing that the Secretary of State for the Environment did not agree the re-determination of Barnsley council's budget in full. The £2 million relaxation of the cap will be only temporary relief. Barnsley has a good case for considerably more Government assistance, and I shall set it out in few moments.

Barnsley was capped at £150.625 million. In the face of the service implications of that capping, the council set a budget of £153.719 million. The budget was based on what it considered necessary to provide the local community with the essential services that it required. The cap adjustment, therefore, is £1.1 million short of what the council considered it needed to provide basic services.

My disappointment follows the Government's failure, it seems, to accept that Barnsley metropolitan borough council has special circumstances that set it apart, and to recognise that its problems will require more spending, not less, if they are to be tackled positively. Barnsley has intractable social, economic and environmental problems, which are directly related to the Government's speedy rundown—I emphasise that it was the Government's speedy rundown—of the coal industry, and the legacy that that has left behind. The statistics that I shall quote show clearly the problems that Barnsley metropolitan borough council has to face.

Since 1985, we have lost 21,000 mining jobs. The average wage in the mining industry is roughly £20,000 per annum. At today's prices, in wages alone, Barnsley has lost about £420 million from its local economy. That does not take into consideration the knock-on effect of that, or, indeed, the rates that have been lost from British Coal properties and from associated engineering properties that have since closed.

One third of households in Barnsley have at least one person suffering from a disabling disease. Between 1981 and 1991, there was a 19 per cent. decrease in employment in the Barnsley metropolitan borough council area. Since 1979, there has been a 230 per cent. increase in crime. In 1979, Barnsley was 25 per cent. below the average rate of crime; in 1994, it was 13 per cent. above it. I believe that that points clearly to the relationship between unemployment and crime.

The country has benefited for more than 100 years from the wealth that coal miners in Barnsley and district have released from the ground. The Government now have a duty to put something back. There is an urgent need to repair the damage that has been caused to the community by the demise of the coal mining industry and the associated engineering industry, and to rebuild the local economy. That will increase social and economic opportunities among the local population. Unfortunately, Barnsley's spending needs have never been addressed in a proper way within a proper framework. Consequently, the needs of the community have not been assessed in a properly measured way. We suffered from a low standard spending assessment and the formula has not been sophisticated or sensitive enough to pick up Barnsley's spending needs. As a result, in the period 1990–95 services were cut by £35 million in Barnsley metropolitan district area. This year there is likely to be a further cut in services of about £10 million. That will result in the loss of 270 local authority jobs. I was told today that between 20 and 30 teachers may also lose their jobs.

The problems have been compounded by the rigidity of the capping regime. The Minister will know that although Barnsley received an SSA increase in the 1994 review, it was capped at 0.5 per cent. above the SSA level. Therefore the ceiling was very low. If the revised formula of 1994 had been introduced in 1990–91, Barnsley would have had a £156 million budget this year compared with the capped budget set originally by the Secretary of State at £150.4 million.

I spoke about Barnsley's special problems. Poverty is one such problem that the local authority has to confront. I shall give three statistics to show the House the horrendous problems that the authority has to face. In the past four years there has been a 71 per cent. increase in the number of children receiving clothing grants, and a 71 per cent. increase in the number of children on free school meals. One in three households in the Barnsley metropolitan area receives council tax rebates, and one third of those who are unemployed have been unemployed for more than a year.

Under the funding system Barnsley has been hit extremely hard. That is particularly true of social services and education, and the latter service clearly illustrates the point. In the period 1990–94, the number of teachers was reduced by 3 per cent., and Barnsley has one of the highest pupil-teacher ratios in the country. Discretionary awards have all but ceased; the school music service has been deleted; the school swimming programme has been stopped; and community education has all but disappeared. There is currently a £12 million backlog of school building repairs.

Barnsley has to bear the cost of supertram and the impact of that project is another local circumstance that is causing a great deal of concern. The South Yorkshire passenger transport authority levy on Barnsley metropolitan council to fund the supertram in 1995–96 displaces £1.326 million worth of the district council's services within the capping limit. The share of that for Barnsley taxpayers is £525,000. I understand that south Yorkshire authorities were given a ministerial assurance that the supertram project would not have an impact on local taxation. Perhaps the Minister will say whether he intends to provide the assistance that he promised by way of revenue support grant.

Barnsley has had a raw deal over the past few years. Its proposed budget was unanimously agreed—I emphasise "unanimously agreed"—by all the political parties and by representatives of all sections of the community. The council has always steered a prudent line that has been acclaimed by the independent auditors. It works hard with its local partners. However, the Government need to recognise the circumstances that are peculiar to Barnsley and should meet their duty to the community by providing the funding that is necessary to stimulate the regeneration of the district.

6.24 pm

Mr. James Pawsey (Rugby and Kenilworth)

I wish to make three swift points, the first of which relates to area cost adjustment. As it is currently drawn, that adjustment leads to serious anomalies, especially when one authority gets the benefit of the ACA and an adjacent one does not. That point is strengthened when we remember that in much of local government national pay rates apply. A teacher in Oxfordshire is paid precisely the same as one in Warwickshire, yet Oxfordshire gets area cost adjustment and Warwickshire does not. The area cost adjustment should be abolished.

Secondly, the standard spending assessment is unduly complex and certainly not understood. It leads to difficulties, for example, in the fire service and education, and it undoubtedly needs major simplification. I shall confine myself to capping. We should abolish the cap. [HON. MEMBERS: "Hear, hear."] I was a local councillor for 21 years and for all that time there was no capping. It is a recent invention that has been in place for some 11 years and the time has come for it to be scrapped. We should restore a real measure of local democracy. Its abolition would substantially enhance and increase accountability and would improve the quality of councillors. But above all, it would allow local authorities to spend much more closely in accordance with perceived local needs. That is democracy in action. If local people wish to spend more on education, on teachers, they should be able to do that.

Mr. Tracey

Does my hon. Friend accept that the cries of "Hear, hear" from Opposition Members when he spoke about lifting the cap are rather cynical? In my area the Liberal-controlled council said, "Lift the cap", and blamed everything on central Government. But when there is a rumour that my right hon. Friend the Prime Minister might be about to lift the cap, it says that he wants to do so to stigmatise the local council.

Mr. Pawsey

I am grateful to my hon. Friend for his powerful intervention. I want the cap to be abolished, and if it is the buck will stop with the local authority. There will be no point in Opposition Members moaning and grousing about what the Government do or do not do because the buck will stop firmly with local authorities.

I am grateful to you, Mr. Deputy Speaker, for allowing me to take part in the debate and I thank Opposition Members for giving me a little of their time. There is concern that irresponsible local authorities may go on spending sprees. That concern could be allayed by letting them elect one third of councillors each year because there is nothing like an election to sharpen a councillor's mind. That is the answer to irresponsible local authorities.

6.27 pm

Mr. David Jamieson (Plymouth, Devonport)

I did not think that I would totally agree with the hon. Member for Rugby and Kenilworth (Mr. Pawsey). He could have made his speech just as easily from the Opposition Benches. Perhaps he has something in mind that he has not told us about.

The debate is unusual because the vote will have a direct and profound effect on our constituents. There is a direct link between the vote and the fortunes of our constituents and schoolchildren, and it will also affect the vulnerable and the elderly who are in local authority care. The debate is being carefully watched by people throughout the country and especially by those within the areas of authorities that are being capped. I am sure that those people will use that experience in deciding how to vote in future.

The debate raises fundamental issues about the accountability of councils. I agree with the hon. Member for Rugby and Kenilworth who, sadly, is now leaving the Chamber, that one can vote councillors in but also vote them out. If people like the high services and want to spend more money, let them carry on voting those councils in. If they do not like that, let them vote them out.

I shall contain my brief comments to matters that concern Devon and Somerset, two counties that have so much in common but that have been treated so unevenly by the Government. What is at issue is simple: do we accept Devon's figure, which is £4.4 million above what the Government say it should spend on its local services? Despite the attempts by Conservative Members—I am sad to see that no Conservative Members representing Devon are in the Chamber—to obscure so many of the issues, they are simple.

Taking our education budget for 1995–96 and including the teachers' pay award, inflation and increased pupil numbers, Devon would require another £9 million for a budget that, in real terms, would stay still; it is as simple as that. In 1994–95, Devon spent above its standard spending assessment; now it is told to spend at its SSA. We note in particular that the Secretary of State for Education said that this year's settlement was tough. The leaked memorandum, to which my hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson) referred, and which came out earlier this year, admitted that there would be profound cuts to children's education if capping went ahead.

After meticulous scrutiny of its budget, Devon county council found total cuts of £28 million and set the budget at £596.5 million. All it wants to do is put £4.4 million of that back into its budget. It wants to put back some of the £9 million that it needs to stand still in education terms.

This year, £3.8 million is needed just for the extra pupil numbers and £5.2 million is needed for the teachers' pay rise. As has been pointed out, this year Devon lost £8.6 million of its community grant from the Government for statutory services which is it is obliged by them to provide. As the hon. Member for Newbury (Mr. Rendel) said, Devon has just under 1 per cent. of its spending in reserves and in December 1994 it was told by the auditor that that position should be remedied.

Devon is an efficient authority. Those are not my words; they are the words of the auditors for several years running. Where will the cuts fall? Some Conservative Members have said that we can find some savings in administration. Only 3 per cent. of Devon's education budget is being used for administration. In Somerset, the figure is nearly twice that. Devon is one of the lowest spending authorities in the country in terms of administration—it lies 97th out of 109 local authorities. This year's budget will reduce further the 3 per cent. of money spent on administration in the schools budget. Cuts must therefore inevitably fall on schools. That will mean larger classes and a reduction in the number of teachers. We already know that 150 teachers will be made redundant and a further 200 may have to go.

In addition, making teachers redundant sucks more money out of the education budget just to pay redundancy money. Teachers are not standing in front of classes teaching children so that they can be idle. It is a sort of educational set-aside.

The cuts know no friends. I have had communication with a local grant-maintained school—the only one in my constituency. It too is suffering a cut in its budget of £64,000 this year. I have received, as I am sure many other hon. Members have, hundreds of letters, many of them from schools, governors, parents and the pupils and students themselves. One letter that I read, which was addressed to another hon. Member, was sent by the Cathedral school of St. Mary in Plymouth. The head teacher, Mrs. Susan Walsh, says that her small primary school is losing £17,000 this year. She is having to cut a catalogue of things. Her own deputy head teacher, who is aged just 51, is being forced into voluntary retirement early this year. The head is having to teach a full timetable so that she can keep class numbers below 39. She ends her letter by saying: Surely a caring listening government will put the welfare of schools as their first priority". I agree with that and any Government who cared would do just that.

Why is Devon being capped and why is Somerset being allowed to go above the cap? Many similarities exist between the counties but there are also many differences. The case put by Devon was the most convincing and deserving that could have been put. My hon. Friend the Member for Holborn and St. Pancras said that, if Devon had been treated in the same way as Westminster council in relation to the SSA, it would be employing another 2,566 teachers this year, not sacking them.

Why has there been a difference? The reason is not in the factual evidence before us, so it must be a straightforward plain political decision. There is an essential difference and I know what it is. The reason for the difference is that Somerset Members, in presenting their arguments, lobbied and campaigned in a sensible, cross-party manner to get the cap raised.

I congratulate the Conservative Members from Somerset on working on a cross-party basis for the benefit of local people. In particular, I congratulate the hon. Member for Taunton (Mr. Nicholson) on his tireless campaign and I hope that he will join us in the Lobby tonight so that he can replicate the success in Somerset in Devon. The expenditure cap did not fit in either Devon or Somerset. The difference is that the Somerset Tories were not prepared to wear it and in Devon the Tory Members saw the cap and put it on.

What about cross-party co-operation in Devon? The offer was there—the hon. Member for Teignbridge (Mr. Nicholls) is back with us. Tory councillors had the offer of joining the process of setting the budget, but they came into the budget meeting at the very last minute with what I can describe only as a back-of-an-envelope calculation, saying that the council could cut £1 million here, £1 million there and £2 million elsewhere.

Mr. Nicholls

Will the hon. Gentleman give way?

Mr. Jamieson

I am not giving way to the hon. Gentleman. He has spoken already and we have just a few minutes. He said that money should be cut from highways, from social services and from the matching European money. If the money had been cut from the 5a and 5h funds, we would have lost a further £1 million from European funding. A cross-party delegation had a meeting with the Under-Secretary of State for the Environment. The hon. Member for North Devon (Mr. Tyler) was there, so were Liberal Democrat and Labour councillors, but no Tory councillors or Tory Members were present.

Mr. Nicholls

rose—

Mr. Jamieson

Had the hon. Member for Teignbridge been there, he would have heard powerful arguments put by Geoff Rees of the Devon Association of Secondary Heads and Eric Howard of the Devon Association of Primary Teachers as to why the cap needed to be raised this year.

Mr. Nicholls

rose—

Mr. Jamieson

What has been the response of the Tory Members and the hon. Member for Teignbridge, who is trying to intervene? It has been a catalogue of confusion, contradiction and misinformation, surpassed only by the Secretary of State for the Environment this evening.

In a debate earlier this year and earlier today, the hon. Member for Teignbridge said that Devon had taken on another 718 staff this year. He omitted to say, however, that most of that staff were taken on by schools because they had extra numbers to fill. Many of them were taken on to meet the statutory obligations that Devon has for care in the community. That is where the extra people came from.

Tonight the matter is in the hands of Tory Members. Their vote could overthrow the cuts. A vote in the Lobby tonight could affect every budget in every school in the constituencies. Tory Members in Devon have been speaking in their own region in one way—

Madam Deputy Speaker (Dame Janet Fookes)

Order. I am sorry but the hon. Gentleman has had his time.

6.30 pm

Mr. Clive Betts (Sheffield, Attercliffe)

Last year in this Chamber, Sheffield was the only authority on which an order was placed and the Minister for Local Government, Housing and Urban Generation was at least partially helpful in raising the cap by £3 million. This year the city has had a lower cap set in real terms than last year and the Government have given us no leeway. When I challenged the Secretary of State for the Environment earlier, all he could say was that that was due to problems of financing, which were Sheffield's own problem and which were caused by the high cost of borrowing in the past. He knows, however, that for the building of our facilities in Sheffield, which are used by hundreds of thousands of people annually, we had a good financial deal in place and that was undermined by the Allerdale judgment—a court case that was in no way related to the local authority.

Last year, we explained that position to Ministers and they accepted that the authority needed time until the court case was resolved to refinance those facilities. They therefore lifted the capping limit. I went to a meeting with the Minister for Local Government, Housing and Urban Regeneration along with colleagues from Sheffield city council a few weeks ago. The city treasurer explained to the Minister that as a result of the court case, he could not guarantee that the money from refinancing would be available for the authority to spend this year.

For the Secretary of State to say that the city would have £20 million extra this year, so it did not need to have its capping limit raised, was simply not correct. It is not what the city treasurer advised Ministers. It is not the case. For the Secretary of State to base a judgment on that fallacious information was extremely unfortunate. I hope that the Minister will correct it in his reply to the debate.

Sheffield is a low-spending authority. We have a standard spending assessment which is lower than the metropolitan average. We have expenditure of £747 per head. That is lower than the expenditure in cities of a similar size. We have a record of extremely good management in local government. That is the judgment of other people in local government, which I prefer to accept rather than that of Ministers.

In the early 1990s, in a poll of people in local government Sheffield came out as one of the best managed authorities. We have always had good reports from the district auditor. We invented and used cash limits before the Government had thought about them. We entered into partnership schemes with the private sector when Ministers were advising the private sector not to enter into them. We have always concentrated our expenditure on front-line services. That is why this year the council has done its best to protect education and social services. That protection will not be possible to sustain if the capping limit is not raised.

In the report "Paying the Piper" published by the Audit Commission, Sheffield came out second of all local authorities for the reductions that it had made in bureaucracy, administration and overheads, not merely in the past couple of years but since the mid-1980s. Indeed, since 1987 the city has cut 7,500 jobs. Some of those savings were beneficial in the sense that they brought about reductions in the costs of refuse collection. Yet we still have an excellent service. The cuts could be supported. I was not proud to be involved in other savings because they reduced local services to local people, contrary to the wishes of local electors expressed in local elections.

Sheffield has particular problems. The hon. Member for Sheffield, Hallam (Sir I. Patnick) rightly referred to the cost of the supertram, which will also affect Barnsley, as my hon. Friend the Member for Barnsley, West and Penistone (Mr. Clapham) has explained. The funding of the supertram is absolute nonsense. The supertram is funded by central Government. The more that the Government spend, the less the council can spend on education and the lower the council tax is. That is crazy. I have to explain to people that their council tax goes down because of the funding of the tram that they can see running down the streets. That is a stupidity which even Ministers would find hard to explain to the electorate of Sheffield. I have certainly tried and failed. People look at me in blank amazement when I attempt to explain.

Let us take Sheffield's SSA for highways. When the streets were being dug up for the supertram, the Government left the monitors which count traffic flow in the same position. Of course, the monitors could not count any traffic because there was not any. That has cost the city council £800,000 in grant this year. That is a stupidity and Ministers know it. I have written to them three times and they have refused to do anything about it. They should be ashamed of a system which enables that to happen.

It is equally stupid that we are here today in the Chamber arguing about traffic counting and the detail of the financing of the supertram in Sheffield. It is nonsense that in a debate of less than three hours hon. Members will second-guess the views of hundreds of elected local councils throughout the country and the thousands of electors who went out to vote for them and substitute their views for local people's views.

I agree with the comments that were made by the right hon. Member for Shropshire, North (Mr. Biffen) at the beginning of the debate. The capping orders are a nonsense. They fundamentally undermine the democratic systems of Britain; they undermine local democracy; they bring into question the validity of local elections; they discourage people of quality and ability from standing for local government and remaining in it. That is something we try to avoid.

We are not debating capping only of the authorities in the capping orders. Everyone knows that the majority of other councils have set their budget within 1 per cent. of the capping limit that they have been given. It is effectively blanket capping of every local authority that we are debating.

Conservative Members said that the Audit Commission had examined the SSA system and given it a clean bill of health. That was not correct. The Audit Commission expressed many doubts about the SSA system. It said firmly that the system was for distributing grant between authorities, not for restricting expenditure and imposing caps. The Audit Commission has been clear in its opposition to the use of the SSA system in that way.

Nor are we talking about central Government expenditure tonight. The cap does not reduce central Government expenditure. All that it does is prevent the people of Sheffield, Barnsley, Newcastle, Norwich, Shropshire, Devon and all the other authorities from saying that they want to spend a little more of their council tax on local services, which are of benefit to them. For those reasons, I feel resentful this evening that Members of Parliament who do not live in my city and do not represent it will vote to impose the order and impose cuts on my constituents and the people of my city, who will have to suffer those cuts even though they did not vote for them and do not want them. That is undemocratic. It is time that we got rid of this unjust and unfair system once and for all.

6.45 pm

Mr. Eric Illsley (Barnsley, Central)

This has been a pitifully short debate, given the importance of the order to local government and in particular to those who will lose their job as a result of the vote. The debate has served to highlight yet again the Government's absolute control over local authority spending and their denial of local accountability and democracy. That denial of local accountability was brought into sharp focus on 5 May when the Conservative party was overwhelmingly rejected in the local elections. Yet the Government still come here today with a capping order which is against the wishes of both the electorate and a majority of the Members of Parliament who have spoken this evening.

The Government have no effective mandate for local government. Their policies have been rejected by an electorate who are sick and tired of cut after cut in local services and who are incensed at the cuts which are being imposed on education and social services, with the consequent sackings of teachers, increases in class sizes and closures of day centres and social services facilities. The Secretary of State has no support anywhere for his capping proposals, which are discredited, undemocratic and unacceptable.

The capping powers have been debated on several occasions. As I have been allowed only seven minutes to reply to the debate, I do not intend to rehearse the arguments today. I maintain that the capping powers are discredited and ridiculed. They create unaccountability time and time again. The Government have refused to allow democratically elected councils to put their budgets to the electorate. It is time that the Government lived up to the press speculation and announced the abolition of capping, which has been flagged up. As we know from the hon. Member for Rugby and Kenilworth (Mr. Pawsey), the aim of that might be to allow local authorities to increase their spending so that Conservative Members can say, "We told you so." The Government know that the reverse is the case. Most of the authorities that we are debating this evening are responsible, prudent authorities which have set responsible budgets.

Capping has increased the centralised control of local government finance. Now, 80 per cent. of local government funding is controlled by central Government. We have universal capping. We are debating only seven authorities this evening because most of the other authorities spent to the level of their cap. Most authorities now regard the capping level as the level to which they should spend.

The capping proposals are unfair. They are based on SSAs. I have spoken many times in the House on SSAs. They are a distortion of the needs of any local authority. The indicators are approximate. They are based on out-of-date information. They are discredited. They simply do not reflect need.

Last year, Barnsley was given a 7 per cent. increase in SSA, but then held at a spending level by capping. Even today, its capping level is only 0.5 per cent. above its SSA. The same problem applies to Newcastle. Its SSA gave it an extra £19 million of spending last year. It can spend only about £11 million of that. That is ridiculous.

The financial settlement this year has been extremely harsh. Local authorities were capped at 0.5 per cent. above their 1994–95 base budget. We can compare that to previous years. Hon. Members have referred to capping proposals of 12.5 per cent. above the SSA. There is a significant difference now in that SSAs and the capping regime are being used simply to cut services from local government.

Hon. Members from all parties have raised issues in relation to their own local authorities. I would like to emphasise one or two of the points that have been made and to make particular reference to the problems of the Supertram system, which affects Barnsley, my local authority, and Sheffield. Supertram displaces £1.3 million worth of Barnsley council services for a tram system which operates 20 miles away. How can that be fair? Barnsley has used up all its balances so it has reassessed its insurance cover and taken £700,000 from its insurance premiums to fund this year's settlement. The problems are not going to go away. Supertram will be there next year, as will the £10 million funding charges. Problems will recur and next year Barnsley will not be able to use balances or re-determine its insurance.

Hon. Members who represent Gloucestershire have referred to problems experienced by their council. We have heard, however, that the council tax could have been set at the same level as last year if the Gloucestershire budget had been approved. We have heard that Gloucestershire will be subject to a judicial review as a consequence of the cuts that it has had to make in funding for community care. Again, Gloucestershire, like Barnsley and Sheffield, has been required to make millions of pounds worth of cuts in previous years. For this year, Gloucestershire has had to made budget reductions of £22 million, yet the demand for community care has increased by 40 per cent.—all at a time when the authority is being referred to the courts.

In Newcastle, education and social services will be affected. Yet, under the budget which was proposed by the Newcastle authority, the council tax could have been reduced by £43. There will be cuts in the number of teachers employed by Newcastle. The library service will be affected and there will be cuts in the youth service and the money available for special educational needs.

Why has Devon been capped as opposed to Somerset—because Somerset had a better case than Devon in the Minister's office? Is that a consequence of all-party support? Should Conservative Members who represent Devon have accompanied Labour Members who represent Devon to have achieved a relaxation of their capping criteria? Is that why Somerset was preferred to Devon? The implications for Devon were well set out by my hon. Friend the Member for Plymouth, Devonport (Mr. Jamieson). He referred to problems in education, teachers' jobs and increased class sizes. He pointed out that administration costs in Devon were quite low. Devon has been treated unfairly.

The points made about Shropshire by the right hon. Member for Shropshire, North (Mr. Biffen) were relevant. It has had £6 million cut from its budget. Sheffield has problems because of the funding of Supertram and faces an absolutely ludicrous traffic situation. My hon. Friend the Member for Norwich, South (Mr. Garrett) made the point that a large day-time population causes particular problems for that authority.

I have made quite a rushed speech, but the main point, which, if anything, the Government should take on board, is that capping must be abolished.

6.53 pm

The Minister for Local Government, Housing and Urban Regeneration (Mr. David Curry)

Obviously, in such a short time, I cannot answer the detailed points raised in the debate, but I wish to answer some of the fundamental questions that have been asked. I shall start with the point that the hon. Member for Barnsley, Central (Mr. Illsley) has just made, which was also raised by my right hon. Friend the Member for Shropshire, North (Mr. Biffen), by my hon. Friends the Members for Ludlow (Mr. Gill) and for Rugby and Kenilworth (Mr. Pawsey) and by many other hon. Members: capping.

My right hon. Friend the Member for Shropshire, North said that it was at the heart of the debate, and he was right. We must be careful that we do not have that debate in too simplistic terms. There is sometimes a danger that the solution is seen as being a simple option. There is quite clearly an issue of the relationship between central and local government and the requirement of local decision-making; what one might call subsidiarity in its broader sense. My right hon. Friend mentioned Mr. Delors. If I may go a little further back, he would have been a Girondin rather than a Jacobin and I have no particular desire to play the Robespierre.

There is also a second question—

Mr. Dobson

He was decapitated. He was guillotined. [Laughter.]

Mr. Curry

The hon. Gentleman forgets what he did before all that happened. That is what counts in politics, is it not? There is a second issue which we must address [HON. MEMBERS: "He was capped."] No, that was de-capping, I believe. We must address a second issue seriously.

Any Government will always want to have in mind the economic consequences of expenditure which constitutes 25 per cent. of all public expenditure. It is quite legitimate to say, "Well, that does not matter. We can leave that entirely to local determination." If people want to say that, at least it is honest and reasonable, but I wonder whether Governments of any hue would not wish to have some mechanism by which, when economic circumstances required a particular form of management, they were able to bring that expenditure within their view. The argument must take place and we must be sure, when we have that argument, that we are confident that we want local decisions to take place.

Let me talk about a slightly perverse point. Opposition Members said that perhaps we could make local democracy function more effectively by introducing elections by thirds. Local government already has the ability to seek elections by thirds. The choice is with it. Do we, as part of a campaign to hand more responsibility to local government, impose on local government a particular mechanism of elections? There is a certain conundrum at the heart of that, which must be addressed. There is no point in doing something which is illiberal and, dirigiste, in the interests of a system that we regard as moving towards something which is more liberal.

I have addressed that issue because it is at the heart of the debate. There is another issue at the heart of the debate—

Mr. Rendel

indicated dissent.

Mr. Curry

It is no good the hon. Gentleman shaking his head. It is at the heart of the debate.

If local authorities say, "The present situation is unacceptable because we are capped and cannot raise our money locally," they must be confident that if the circumstances change and they can raise what they need locally—we can argue about the way in which local consent could be obtained for that—they do not immediately start using the Government as an alibi and say, "Of course, all this is happening not because it is what we positively want but because we have not been getting enough grant." There is no point in pretending. Those issues will arise, and there should be a mature and reflective debate on the whole subject.

Of course the area cost adjustment is a difficult issue, but it is not good enough simply to say, "Abolish it." There are differentials in the total cost of employing people, which have to be addressed across the spectrum of local government. The simple abolition of the adjustment would lead to utterly unmanageable changes in grant allocation throughout the system, not least in many of the local authorities run by the Opposition parties.

I believe that the hon. Member for Holborn and St. Pancras (Mr. Dobson) is being shortsighted and foolish in his constant derogatory commentary about the methods of distribution of Government grant. Whether he likes it or not, the method that delivers grant to Westminster is identical with that which delivers grant to many other local authorities, including Tower Hamlets and Hackney, which get more per capita than Westminster.

If the hon. Gentleman seeks to re-engineer that system specifically to do Westminster down, he will find himself in treacherous waters, defending to his leaders the consequences of the changes for some inner-city authorities. If he wants to take the charges for on-street parking away from Westminster, will he take from Bristol, Coventry and Plymouth the substantial revenues from their investments in city-centre property? There may be an argument for doing that, but he must be consistent and explain how he would do it. That, too, is at the heart of the debate.

Shropshire's standard spending assessment is £573 per head, and I must tell my hon. Friend the Member for Ludlow that 20 counties have lower SSAs, including Hampshire, Surrey, Oxfordshire, East Sussex and West Sussex, all of which receive the area cost adjustment. So there is a complexity in the system, and one must be careful not to make too rapid a judgment on it.

I recall that we had the same passage of arms with the hon. Member for Sheffield, Attercliffe (Mr. Betts) last year, and I must tell him that the figure of £20 million that we specified for refinancing is in the budget because Sheffield told us that it was sufficiently likely for the arrangement to be incorporated in its budget. We had to operate on the budget that Sheffield put before us.

The settlement is tough; we do not deny that. I hope that, in this rapid winding-up, I have acknowledged that it raises fundamental issues. The debate on it must take place, but I appeal to the House to recognise that the settlement cannot be debated in simplistic terms, and that wider issues connected with the management of the economy, as well as with local democracy, are involved. If we address those, we shall do a service to our electors.

It being Seven o'clock, the Deputy Speker put the Question, pursuant to Order [9 June].

The House divided: Ayes 270, Noes 242.

Division No. 164]	[7.00 pm
AYES
Ainsworth, Peter (East Surrey)	Day, Stephen
Aitken, Rt Hon Jonathan	Deva, Nirj Joseph
Alexander, Richard	Devlin, Tim
Alison, Rt Hon Michael (Selby)	Dorrell, Rt Hon Stephen
Allason, Rupert (Torby)	Douglas-Hamilton, Lord James
Arness, David	Dover, Den
Arbuthnot, James	Duncan, Alan
Arnold, Jacques (Gravesham)	Duncan-Smith, Iain
Arnold, Sir Thomas (Hazel Grv)	Dunn, Bob
Ashby, David	Durant, Sir Anthony
Atkins, Robert	Dykes, Hugh
Atkinson, David (Bour'mouth E)	Eggar, Rt Hon Tim
Atkinson, Peter (Hexham)	Elletson, Harold
Baker, Nicholas (North Dorset)	Evans, David (Welwyn Hatfield)
Baldry, Tony	Evans, Jonathan (Brecon)
Banks, Matthew (Southport)	Evans, Nigel (Ribble Valley)
Bates, Michael	Evans, Roger (Monmouth)
Batiste, Spencer	Evennett, David
Bellingham, Henry	Faber, David
Bendall, Vivian	Fabricant, Michael
Beresford, Sir Paul	Fenner, Dame Peggy
Bonsor, Sir Nicholas	Field, Barry (Isle of Wight)
Booth, Hartley	Fishburn, Dudley
Boswell, Tim	Forman, Nigel
Bottomley, Peter (Eltham)	Forsyth, Rt Hon Michael (Stirling)
Bottomley, Rt Hon Virginia	Forth, Eric
Bowden, Sir Andrew	Fowler, Rt Hon Sir Norman
Bowis, John	Fox, Dr Liam (Woodspring)
Boyson, Rt Hon Sir Rhodes	Fox, Sir Marcus (Shipley)
Brandreth, Gyles	Freeman, Rt Hon Roger
Bright, Sir Graham	French, Douglas
Brooke, Rt Hon Peter	Gallie, Phil
Brown, M (Brigg & Cl'thorpes)	Gardiner, Sir George
Browning, Mrs Angela	Garnier, Edward
Bruce, Ian (Dorset)	Gillan, Cheryl
Budgen, Nicholas	Goodlad, Rt Hon Alastair
Burns, Simon	Goodson-Wickes, Dr Charles
Burt, Alistair	Gorman, Mrs Teresa
Butcher, John	Gorst, Sir John
Butterfill, John	Grant, Sir A (SW Cambs)
Carlisle, John (Luton North)	Greenway, Harry (Ealing N)
Carlisle, Sir Kenneth (Lincoln)	Greenway, John (Ryedale)
Carrington, Matthew	Gummer, Rt Hon John Selwyn
Carttiss, Michael	Hague, William
Cash, William	Hamilton, Rt Hon Sir Archibald
Churchill, Mr	Hamilton, Neil (Tatton)
Clappison, James	Hanley, Rt Hon Jeremy
Clark, Dr Michael (Rochford)	Hargreaves, Andrew
Clifton-Brown, Geoffrey	Harris, David
Coe, Sebastian	Haselhurst, Alan
Colvinn, Michael	Hawkins, Nick
Congdon, David	Hawksley, Warren
Conway, Derek	Hayes, Jerry
Coombs, Anthony (Wyre For'st)	Heald, Oliver
Coombs, Simon (Swindon)	Heathcoat-Amory, David
Cope, Rt Hon Sir John	Hendry, Charles
Cormack, Sir Patrick	Heseltine, Rt Hon Michael
Cran, James	Hicks, Robert
Currie, Mrs Edwina (S D'by'ire)	Higgins, Rt Hon Sir Terence
Curry, David (Skipton & Ripon)	Hogg, Rt Hon Douglas (G'tham)
Davies, Quentin (Stamford)	Horam, John
Davis, David (Boothferry)	Hordem, Rt Hon Sir Peter

Howard, Rt Hon Michael	Renton, Rt Hon Tim
Howarth, Alan (Strat'rd-on-A)	Richards, Rod
Howell, Sir Ralph (N Norfolk)	Riddick, Graham
Hughes, Robert G (Harrow W)	Robathan, Andrew
Hunt, Rt Hon David (Wirral W)	Roberts, Rt Hon Sir Wyn
Hunt, Sir John (Ravensbourne)	Robertson, Raymond (Ab'd'n S)
Hunter, Andrew	Robinson, Mark (Somerton)
Jackson, Robert (Wantage)	Roe, Mrs Marion (Broxbourne)
Jenkin, Bernard	Rowe, Andrew (Mid Kent)
Jessel, Toby	Rumbold, Rt Hon Dame Angela
Johnson Smith, Sir Geoffrey	Ryder, Rt Hon Richard
Jones, Gwilym (Cardiff N)	Sackville, Tom
Jones, Robert B (W Hertfdshr)	Sainsbury, Rt Hon Sir Timothy
Jopling, Rt Hon Michael	Scott, Rt Hon Sir Nicholas
King, Rt Hon Tom	Shaw, David (Dover)
Knapman, Roger	Shaw, Sir Giles (Pudsey)
Knight, Mrs Angela (Erewash)	Shephard, Rt Hon Gillian
Knight, Greg (Derby N)	Shepherd, Richard (Albridge)
Knight Dame Jill (Bir'mn E'st'n)	Sims, Roger
Knox, Sir David	Smith, Sir Dudley (Warwick)
Kynoch, George (Kincardine)	Smith, Tim (Beaconsfield)
Lait, Mrs Jacqui	Soames, Nicholas
Lamont, Rt Hon Norman	Spencer, Sir Derek
Lang, Rt Hon Ian	Spicer, Sir James (W Dorset)
Lawrence, Sir Ivan	Spicer, Michael (S Worcs)
Legg, Barry	Spink, Dr Robert
Leigh, Edward	Spring, Richard
Lennox-Boyd, Sir Mark	Sproat, lain
Lidington, David	Squire, Robin (Hornchurch)
Lightbown, David	Steen, Anthony
Lilley, Rt Hon Peter	Stephen, Michael
Lord, Michael	Stem, Michael
Luff, Peter	Streeter, Gary
Lyell, Rt Hon Sir Nicholas	Sumberg, David
MacGregor, Rt Hon John	Sweeney, Walter
MacKay, Andrew	Sykes, John
Maclean, David	Tapsell, Sir Peter
McLoughlin, Patrick	Taylor, John M (Solihull)
McNair-Wilson, Sir Patrick	Taylor, Sir Teddy (Southend, E)
Madel, Sir David	Temple-Morris, Peter
Maitland, Lady Olga	Thomason, Roy
Malone, Gerald	Thompson, Sir Donald (C'er V)
Mans, Keith	Thompson, Patrick (Norwich N)
Marland, Paul	Thornton, Sir Malcolm
Marlow, Tony	Townend, John (Bridlington)
Marshall, John (Hendon S)	Townsend, Cyril D (Bexl'yh'th)
Marshall, Sir Michael (Arundel)	Tracey, Richard
Martin, David (Portsmouth S)	Tredinnick, David
Mates, Michael	Trend, Michael
Mawhinney, Rt Hon Dr Brian	Twinn, Dr Ian
Mellor, Rt Hon David	Vaughan, Sir Gerard
Merchant, Piers	Waldegrave, Rt Hon William
Mitchell, Andrew (Gedling)	Walden, George
Mitchell, Sir David (NW Hants)	Walker, Bill (N Tayside)
Moate, Sir Roger	Waller, Gary
Needham, Rt Hon Richard	Ward, John
Neubert, Sir Michael	Wardle, Charles (Bexhill)
Newton, Rt Hon Tony	Waterson, Nigel
Nicholls, Patrick	Watts, John
Nicholson, David (Taunton)	Wells, Bowen
Nicholson, Emma (Devon West)	Whitney, Ray
Norris, Steve	Widdecombe, Ann
Onslow, Rt Hon Sir Cranley	Wiggin, Sir Jerry
Oppenheim, Phillip	Wilkinson, John
Ottaway, Richard	Willetts, David
Page, Richard	Wilshire, David
Patnick, Sir Irvine	Winterton, Mrs Ann (Congleton)
Patten, Rt Hon John	Wolfson, Mark
Pawsey, James	Wood, Timothy
Peacock, Mrs Elizabeth	Yeo, Tim
Pickles, Eric	Young, Rt Hon Sir George
Porter, Barry (Wirral S)
Powell, William (Corby)	Tellers for the Ayes:
Rathbone, Tim	Mr. Sydney Chapman and
Redwood, Rt Hon John	Mr. Timothy Kirkhope.

NOES
Abbott, Ms Diane	Field, Frank (Birkenhead)
Adams, Mrs Irene	Foster, Rt Hon Derek
Ainger, Nick	Foster, Don (Bath)
Allen, Graham	Foulkes, George
Alton, David	Fraser, John
Anderson, Donald (Swansea E)	Fyfe, Maria
Anderson, Ms Janet (Ros'dale)	Galloway, George
Armstrong, Hilary	Gapes, Mike
Ashdown, Rt Hon Paddy	Garrett, John
Ashton Joe	George, Bruce
Banks, Tony (Newham NW)	Gerrard, Neil
Barnes, Harry	Gilbert, Rt Hon Dr John
Battle, John	Gill, Christopher
Bayley, Hugh	Godsiff, Roger
Beith, Rt Hon A J	Grant, Bernie (Tottenham)
Bell, Stuart	Griffiths, Nigel (Edinburgh S)
Benn, Rt Hon Tony	Griffiths, Win (Bridgend)
Bennett, Andrew F	Grocott, Bruce
Benton, Joe	Gunnell, John
Bermingham, Gerald	Hain, Peter
Berry, Roger	Hall, Mike
Betts, Clive	Hanson, David
Biffen, Rt Hon John	Hardy, Peter
Blair, Rt Hon Tony	Harman, Ms Harriet
Blunkett David	Harvey, Nick
Bradley, Keith	Henderson, Doug
Bray, Dr Jeremy	Heppell, John
Brown, Gordon (Dunfermline E)	Hill, Keith (Streatham)
Brown, N (N'c'tle upon Tyne E)	Hinchliffe, David
Burden,Richard	Hodge, Margaret
Caborn, Richard	Hoey, Kate
Callaghan, Jim	Hogg, Norman (Cumbernauld)
Campbell, Mrs Anne (C'bridge)	Hood, Jimmy
Campbell, Ronnie (Blyth V)	Hoon, Geoffrey
Campbell-Savours, D N	Howarth, George (Knowsley North)
Cann, Jamie	Howells, Dr. Kim (Pontypridd)
Chidgey, David	Hoyle, Doug
Church, Judith	Hughes, Kevin (Doncaster N)
Clapham, Michael	Hughes, Robert (Aberdeen N)
Clarke, Eric (Midlothian)	Hutton, John
Clarke, Tom (Monklands W)	Illsley, Eric
Clwyd, Mrs Ann	Ingram, Adam
Coffey, Ann	Jackson, Glenda (H'stead)
Cohen, Harry	Jackson, Helen (Shef'ld, H)
Cook, Frank (Stockton N)	Jamieson, David
Cook, Robin (Livingston)	Janner, Greville
Corbett, Robin	Jones, Jon Owen (Cardiff C)
Corbyn, Jeremy	Jones, Lynne (B'ham S O)
Corston, Jean	Jones, Martyn (Clwyd, SW)
Cousins, Jim	Jones, Nigel (Cheltenham)
Cox, Tom	Jowell, Tessa
Cummings, John	Keen, Alan
Cunliffe, Lawrence	Kennedy, Charles (Ross,C&S)
Cunningham, Jim (Covy SE)	Kennedy, Jane (Lpool Brdgn)
Darling, Alistair	Khabra, Piara S
Davidson, Ian	Kilfoyle, Peter
Davies, Bryan (Oldtham C'tral)	Lestor, Joan (Eccles)
Davies, Rt Hon Denzil (Llanelli)	Lewis, Terry
Davies, Ron (Caerphilly)	Liddell, Mrs Helen
Davis, Terry (B'ham, H'dge H'l)	Litherland, Robert
Denham, John	Livingstone, Ken
Dewar, Donald	Lloyd, Tony (Stretford)
Dixon, Don	Llwyd, Elfyn
Dobson, Frank	Loyden, Eddie
Donohoe, Brian H	Lynne, Ms Liz
Dowd, Jim	McAllion, John
Dunnachie, Jimmy	McAvoy, Thomas
Dunwoody, Mrs Gwyneth	McCartney, Ian
Eagle, Ms Angela	Macdonald, Calum
Eastham, Ken	McKelvey, William
Etherington, Bill	McLeish, Henry
Evans, John (St Helens N)	Maclennan, Robert
Fatehett, Derek	McMaster, Gordon
Faulds, Andrew	McNamara, Kevin

MacShane, Denis	Prentice, Bridget (Lew'm E)
Madden, Max	Prentice, Gordon (Pendle)
Maddock, Diana	Prescott, Rt Hon John
Mahon, Alice	Primarolo, Dawn
Mandelson, Peter	Purchase, Ken
Marek,Dr John	Quin, Ms Joyce
Marshall, Jim (Leicester, S)	Radice, Giles
Martin, Michael J (Springburn)	Randall, Stuart
Martlew, Eric	Raynsford, Nick
Maxton, John	Rendel, David
Meacher, Michael	Robertson, George (Hamilton)
Meale, Alan	Robinson, Geoffrey (Co'try NW)
Michael, Alun	Roche, Mrs Barbara
Michie, Bill (Sheffield Heeley)	Rogers, Allan
Milburn, Alan	Rooker, Jeff
Miller, Andrew	Rooney, Terry
Mitchell, Austin (Gt Grimsby)	Ross, Ernie (Dundee W)
Moonie, Dr Lewis	Ruddock, Joan
Morgan, Rhodri	Sedgemore, Brian
Morley, Elliot	Sheerman, Barry
Morris, Rt Hon John (Aberavon)	Short, Clare
Mowlam, Marjorie	Simpson, Alan
Mudie, George	Skinner, Dennis
Mullin, Chris	Smith, Andrew (Oxford E)
Oakes, Rt Hon Gordon	Smith, Llew (Blaenau Gwent)
O'Brien, Mike (N W'kshire)	Soley, Clive
O'Brien, William (Normanton)	Spellar, John
O'Hara, Edward	Squire, Rachel (Dunfermline W)
Olner, Bill	Steinberg, Gerry
O'Neill, Martin	Stevenson, George
Orme, Rt Hon Stanley	Stott, Roger
Patchett, Terry	Strang, Dr. Gavin
Pearson, Ian	Straw, Jack
Pendry, Tom	Sutcliffe, Gerry
Pickthall, Colin	Taylor, Mrs Ann (Dewsbury)
Pike, Peter L	Taylor, Matthew (Truro)
Pope, Greg	Thompson, Jack (Wansbeck)
Powell, Ray (Ogmore)	Timms, Stephen

Tipping, Paddy	Williams, Rt Hon Alan (SW'n W)
Turner, Dennis	Williams, Alan W (Carmarthen)
Tyler, Paul	Wilson, Brian
Vaz, Keith	Winnick, David
Walker, Rt Hon Sir Harold	Wray, Jimmy
Walley, Joan	Wright Dr Tony
Wardell, Gareth (Gower)	Young, David (Bolton SE)
Wareing, Robert N
Watson, Mike	Tellers for the Noes:
Wicks, Malcolm	Mr. Robert Ainsworth and
Wigley, Dafydd	Mr. Stephen Byers.

Question accordingly agreed to.

Resolved, That the draft Council Tax Limitation (England) (Maximum Amounts) Order 1995, which was laid before this House on 12th June, be approved.