§ The Secretary of State for the Environment, Transport and the Regions (Mr. John Prescott)
With permission, Madam Speaker, I should like to make a statement about the local authority revenue finance settlement for England for 1998–99. The Secretary of State comes before the House at about this time each year to make a statement about local authority finance for the following financial year.
There will follow a period of consultation with local authorities and others, after which I shall bring a report to the House, which, when approved, will finalise the arrangements. Today's statement is important to local authorities, because it gives them firm information on which to make progress in setting their budgets. The statement concerns England only. My right hon. Friend the Secretary of State for Wales will make an announcement today and my right hon. Friend the Secretary of State for Scotland will make an announcement shortly.
As this is the first such statement of the new Parliament, I hope that it will be helpful if I put it into a wider context. We were elected on a manifesto that pledged us to a renewal of local government. We aim to achieve the reinvigoration of local democracy, a commitment to best value, a prospect of greater fairness and increased local discretion allied to greater local accountability.
We have made good progress so far, although we still have some way to go. We have set up a new central-local government partnership to help local and central Government work in harmony. We have signed the European charter of local self-government, which the previous Administration refused to sign. We have brought forward legislation to provide for the release of £800 million in additional capital expenditure in England under our capital receipts initiative. That money will help the unemployed, it will be used to build and refurbish homes for those in need and it will support our wider new deal objectives. We have put local authority public-private partnerships on a clearer footing. We are supporting Lord Hunt's Bill on local authority innovation, which will allow for greater experiments in local democracy.
We are discussing ways of renewing local democracy with the Local Government Association. We are decentralising decision making to the local level. We have introduced a Bill to give London a voice once again. Tomorrow we shall publish our White Paper on regional development agencies, setting out how we shall work with local government and others to revive the regions of England. Shortly, we shall announce the pilot local authorities for our best value programme. Finally, in co-operation with the Local Government Association, we have started a review of the system of local government finance—and not before time.
Each of those items is important in its own right. Taken together, they demonstrate that we mean what we say about a new relationship and partnership with local government. We have done all that in just seven months in government, but our full progress will be judged not in seven months but over a full five years of a Labour Government.
158 We shall issue consultation papers starting later this year. Following that consultation, we shall publish a White Paper in the late spring.
This new relationship follows many years when the previous Government did not listen to local authorities and squeezed their expenditure year after year. Despite all that, local government has survived, I am glad to say. My aim is to build a strong partnership between central and local government to the advantage of our citizens and our communities.
The first important element of the local authority settlement is my proposals for the Government's provision for spending by local authorities. In forming my proposals, I have of course considered the pressures that local authorities will face in the coming year—which are considerable—and I have listened carefully to the views of the Local Government Association. In line with those views, we have chosen in the settlement to concentrate on the policy priorities—above all, education—that we set out in our manifesto, which was endorsed by the electorate.
We were elected on a pledge to stick to the previous Government's public expenditure totals for 1998–99. Nevertheless, my right hon. Friend the Chancellor of the Exchequer announced in his Budget on 2 July that, by careful consideration of the priorities for public expenditure, we had been able to make available an extra £835 million for revenue expenditure in English schools in 1998–99. I can confirm that we shall provide an extra £835 million of revenue support grant for our schools. That means that none of the cost of the extra schools spending will fall on the council tax payer, as was so often the case under the previous Administration.
We are providing £662 million for local authorities for the education of four-year-olds, following the abolition of nursery vouchers, as promised in our manifesto. I also propose to provide up to £130 million for the transitional costs of local government reorganisation, such as for the unitary authorities. We have also taken into account smaller changes that will take place in local government functions. Taken together, those factors mean that the Government's view is that the appropriate level of total standard spending for local authorities in England in 1998–99 will be £48.2 billion.
My right hon. Friend the Secretary of State for Health will today be making a separate announcement on resources for community care. My right hon. Friend the Home Secretary will today be making a separate announcement on resources for the police. Both are included in the figure that I have just quoted.
The £48.2 billion provides for an increase of £1.78 billion—or 3.8 per cent.—in local authority spending year on year. That is expected to be 1 per cent. above inflation, therefore allowing an increase in real terms, to reflect our key policy priorities.
Education is the top priority for this Government and, indeed, for the nation. Raising standards in schools is not only of benefit to children. It is an investment in our country's future. Altogether, we have made provision for an extra £1.06 billion—or 5.7 per cent.—to go into English schools in 1998–99. It can and should be spent in the classroom, reversing the years of neglect. It meets the pressures identified by the Local Government Association and enables a start to be made on raising educational standards, which we all are determined to see. That is a big step.
159 Community care is another important area in which local authorities are facing up to the difficulties involved. Local authorities provide a vital service by looking after elderly and disabled people. We have maintained previous plans to make resources available in that area—£350 million. We expect a reduction in the net costs of financing outstanding debt. Therefore, we have been able to make a larger than average increase in provision for some services, including a further £70 million for children's social services—the first substantial increase for three years.
As the House will agree, fire services provide an essential and much appreciated service in the community. Therefore, I am pleased to announce that we have increased provision for the fire service by 4.8 per cent. within the overall increase for other services of 1.4 per cent. Other services include highways, libraries, probation services and environmental services.
I now refer to how much assistance local authorities will get from the business rates and the national taxpayer, which together totals £37.51 billion. That includes the extra £835 million, to ensure that the cost of our extra provision for schools does not fall on the council tax payer. It also includes an extra £20 million to make possible the development of £200 million-worth of local authority private finance projects.
The business rate will be increased to 47.4p in the pound, as provided by the legislation, following the 3.6 per cent. increase in the September retail prices index. That means that we can distribute £12.52 billion of business rates to local authorities in 1998–99. I am today publishing the detailed basis for that distribution to local authorities.
I propose that the revenue support grant should be £19.5 billion. In addition, some £5.49 billion of specific and special grants will be available. The total revenue support grant for England on which I am consulting may need to be altered slightly as a result of consultation. The total may be increased if it appears that less provision is needed for the transitional costs of local government reorganisation.
I come now to the means of distributing the revenue support grant. At its heart is the standard spending assessment for each authority. An authority's SSA is its share of the total provision for all authorities, taking account of its local circumstances. It is not a spending target.
We were elected on a pledge to remove the unfairness that has dogged standard spending assessments since they were first introduced. We have discussed with local government during the summer a wide range of ideas for improving fairness. I am today announcing changes that are well founded in research evidence, which respond to long-standing concerns of many local authorities of both parties, and which remove the more blatant cases of unfairness.
I first propose a new basis for assessing spending needs for the education of under-fives. The nursery voucher scheme was wasteful and a bureaucratic paperchase. The money released by its abolition will assist in our programme to make universal provision for four to five-year-olds. The new distribution will recognise the number of pupils for whom local authorities currently provide. Authorities that need to expand their nursery education, and put forward sound plans for doing so, 160 will be able to get an additional grant from the Department for Education and Employment. That is just one element of the national child care strategy, of which after-school clubs form another part.
Secondly, I propose to tackle a piece of nonsense in the present formula. Currently some authorities have an incredible ranking on the measure of neediness. It is hard to believe that leafy Kingston upon Thames is as needy as beleaguered Barnsley. [HON. MEMBERS: "Hear, hear."] I am sure that the Liberal Democrats also agree with that. We have carried out, with the Local Government Association, a thorough re-examination. We have at last applied explicit principles to those calculations. I believe that the new measures of neediness that we are proposing are a clear improvement on what went before.
Thirdly, I propose a new basis for the allocations for elderly residential social services. The formula has had a thorough overhaul, using research commissioned by the Department of Health from the university of Kent. For the first time, it takes proper account of the changes in social services in the past five years, following the introduction of community care.
Fourthly, I propose a new treatment of debt incurred by local authorities before the current system was established in 1990. During the 1980s, local authorities had a choice. They could use capital receipts to pay off debt or they could use them to finance new capital expenditure. However, in 1990, the previous Government decided to penalise those which had chosen new capital expenditure during the previous decade. The previous Government treated everyone as if they had chosen to repay debt, whether they had or not. I am proposing to put that right wrong. [Laughter.] Just for the record, I am proposing to put that wrong right. [HON. MEMBERS: "Hear, hear."] I propose that we should reflect in the standard spending assessment each authority's actual debt as at 1990, if that improves its position.
Finally, I have given priority to tackling the great unfairness whereby visitors and commuters were assumed to have the same economic and social characteristics as the residents of the authorities that they were visiting. That was an anomaly exposed time after time in the House. The previous Government's formula treated people staying in the Ritz in London as if they were as deprived as the average local resident. That was unfair and wrong.
Even the research on that, commissioned by the central London authorities themselves, which were the greatest beneficiaries, did not recommend keeping the existing approach. From next year, we shall get rid of that glaring injustice. We shall take account of visitors and commuters; but only fair account.
I shall mention only one of the many other proposals for changes which were pressed on me, but which I have not taken up. It concerns the area cost adjustment. That is the means by which higher employment costs, particularly in London and the south-east, are recognised in standard spending assessments. I do not believe that the evidence is sufficiently clear enough to warrant a change this year. However, I am commissioning research to see whether there is a sound basis upon which to consider changes for this time next year.
The changes that I have outlined, with some smaller technical changes, are a big step towards making the grant system fairer, as we promised at the election. 161 Those changes will have a large impact on council tax levels in some authorities if the authorities do not adjust their spending accordingly. I accept that authorities and their council tax payers may need a period in which to adjust to those changes. I propose to phase in changes in the way in which standard spending assessments are calculated.
I propose that damping—or phasing in, as I prefer—of the larger corrections that we have introduced should be limited to the equivalent of half the SSA reduction. That strikes a reasonable balance between the need for time to adjust and the need to get more fairness into the system. There will again be separate phasing-in schemes for police and non-police authorities.
I also propose to repeat this year's scheme to phase in council tax increases that are directly due to reorganisation. The scheme would damp such council tax increases that are above a threshold of £52 a year at band D, for authorities that are subject to reorganisation from April 1998. It would also provide continued damping for the authorities reorganised in earlier years, where they exceed a threshold of £104 a year at band D.
Let me now refer to council taxes. We are examining in the local government finance review ways in which the fairness of the council tax might be improved. I do not propose to make any changes ahead of the results of that review.
I expect that, for the foreseeable future, the council tax will remain the prime means by which local residents contribute to the cost of local services. Each year, the Government identify a notional tax level for each valuation band. That is known as the council tax for standard spending.
We do that to calculate a distribution of grants that would enable all authorities to provide a standard level of service for a similar council tax level for a similarly valued property, whatever the differences in needs and resources. My proposals set that figure at £635 for a band D property. That reflects the previous Government's plans to increase council tax by 7 per cent.
The increase was built into the previous Administration's spending plans. That is not a prediction of the average level of council tax, nor of the band D bills for individual authorities. The actual council taxes in the individual authorities will vary considerably, depending on their spending decisions, their financing decisions, their collection performance and their efficiency. No Secretary of State could predict those factors with a high degree of accuracy for individual authorities.
The pressure on the council tax is inherent in the public expenditure totals set by the previous Government. We have sought to relieve pressures by a number of means, in particular by fully funding the £835 million extra for education. That extra funding for schools is worth £50 a year for the typical taxpayer. However, I have made it clear that local authorities must give full weight to the burden on their taxpayers when they come to set their budgets.
We remain committed to the ending of crude and universal capping, but in the light of our public expenditure plans, as both the Chancellor and I made clear to the Local Government Association conference in July, 162 capping will remain in place for 1998–99. We have provided extra money for schools. We cannot risk that being undermined by unplanned increases in spending.
I am today announcing my provisional capping principles for 1998–99. I am also issuing proposals for the calculation of notional amounts for authorities whose boundaries or functions will change from 1 April 1998. Those include reorganised authorities and local education authorities affected by the abolition of the nursery voucher scheme. The notional amount is the base level from which I shall measure the increase in budget in determining whether that increase is excessive.
My provisional capping principles make allowance for expenditure on community care, which is being met in 1997–98 by the special transitional grant, and for changing funding arrangements for the National Criminal Intelligence Service. The adjustments are necessary to make a fair year-on-year comparison of budgets.
Subject to the allowances that I have already mentioned and to other technical adjustments affecting individual authorities, my proposals for capping are as follows. As in previous years, authorities whose base budgets are more than 12.5 per cent. above their standard spending assessment will not be permitted any increase over their 1997–98 base budget, nor will any other authority be allowed an increase that would take it beyond 12.5 per cent. above its SSA.
I propose to allow each class of authority to increase its base budget more than in recent years. That will be helped by changes to the so-called passporting about which I shall tell the House. Let me explain the term passporting, as it had to be explained to me. There is a lot of science in the language of local authority finance, and I shall have a bit more to say about that later.
In the past, the Government recognised increased spending needs for a particular service, but prevented councils from spending that money, through the capping system. That was a ridiculous situation, and passporting is designed to deal with it. When an authority's standard spending assessment increases, that will follow through into its capping limit so that the money can really be spent.
The permitted increases that I propose for classes of authority are as follows. For inner London boroughs, the City of London and shire districts, I propose that the year-on-year increase should be limited to 1.5 per cent; for outer London boroughs, metropolitan districts, county councils, unitary authorities, and the Isles of Scilly, to 3 per cent.; for police authorities outside London, to 3.2 per cent.; and for the London and metropolitan fire and civil defence authorities, to 4.5 per cent.
For all classes of authority other than police, the year-on-year permitted increases are substantially greater than they were last year, particularly reflecting the extra provision that we have made for schools. Shire districts have been treated especially harshly in recent years, so I am permitting them an increase in 1998–99 that will be three times greater than in previous years.
That is not all. I can further announce today that, for all authorities, other than police authorities, budgeting up to 12.5 per cent. above their standard spending assessment, I intend to passport the increases for all service blocks within the spending assessments. That will extend the benefits of passporting to shire districts for the 163 first time. It will also be the first time that increases in highway maintenance, other services and capital financing blocks have been passported.
Those are important changes in the capping regime. They give greater discretion to local authorities; but I expect local authorities to look carefully at their permitted increases, including passporting, and to make a careful judgment about whether they need to make those increases in budget and whether their council tax payers can afford them.
Many authorities have budgeted below their capping limit in the past. I have given local authorities extra room within which to exercise their discretion, and I expect them to do exactly that. Those principles are necessarily provisional: I cannot take my firm decision on capping until authorities have set their budgets for 1998–99. When I come to take those decisions, I shall of course take into account all relevant considerations.
My Department is today writing with the details of the settlement to every local authority in England. That package includes a consultation paper setting out how we propose to distribute central Government support among authorities, including my proposals on standard spending assessments and damping. It sets out my provisional capping criteria, and includes my proposals for notional amounts. Copies have been placed in the Vote Office and the Library.
The package is large, and some elements are very complex and precise. That is possibly unavoidable for a system that distributes huge sums of money among 400 local authorities, all with different needs and resources. The basis of those calculations has been set out in detail, to assure the House and local authorities that each authority is being treated in exactly the same way.
We are reviewing how we might simplify the process in the long term, while retaining that reassurance. I know that if we can make the whole exercise simpler, it will be much appreciated by Members of the House, local authorities, the general public and especially me.
For the immediate future, I plan to provide the House, before the revenue support grant report is debated in the new year, with a plain English guide to these aspects of local authority finance. [HON. MEMBERS: "Hear, hear."] I told you we were radical.
The proposals that I have outlined today represent a substantial improvement on the settlement that local government could have expected, following the Budget of the previous Administration a year ago. There is £835 million extra provision for education. Standard spending assessments will be made fairer. Local authorities will have more scope to exercise their discretion on budgets. This is a better and fairer settlement than in previous years.
Too often in the past two decades, central Government in Whitehall seemed to be waging a war on local government in town halls. When Labour was elected on 1 May, we declared that it was time to bury the hatchet. Whatever the considerable difficulties we found—financial, social or environmental—we shall face them together, with local government, regardless of the party in charge of any specific town hall.
In just seven months, we have taken the first steps in developing that new partnership. We shall be judged on a full five-year programme, but the direction is right, the priorities are different and we are working in partnership.
164 The Government believe in local democracy. This year and next will be tough financially, but we are firmly on the road to reinvigorating local democracy, and restoring new and more positive relations between central and local government.
§ Sir Norman Fowler (Sutton Coldfield)
Government Back Benchers cheer, but I doubt that very many will cheer once the implications of the statement have been understood. Whatever else he has done, has not the Secretary of State opened the way for major over-inflation increases in council tax next year, which will affect millions of ordinary council tax payers throughout the country? Does he accept that the net result of what he has announced today will be that council tax bills could rise by as much as 10 per cent. next year? Does he realise that, for many elderly people, that wipes out at a stroke any advantage that they might have had from the winter payment scheme?
The Secretary of State says that he has inherited our Red Book figures, but can he confirm that, since May, local authorities have been burdened with a wide range of new costs? The increase in inflation since May will add more than half a billion pounds to local authority costs; there have been no fewer than five increases in interest rates since May, also adding to costs; and the £5 billion-a-year pension tax in the Budget has a direct impact on local authorities of £300 million a year.
Moreover, can the Secretary of State confirm that the £800 million for education in England, which was announced in the July Budget and has now been announced again by the right hon. Gentleman, comes from the contingency reserve provided by the previous Government? It was in the previous Government's spending plans. Is he aware that many Labour local authorities—not Conservative; Labour authorities—are saying that this settlement could have a dire effect on personal social services, especially those for children and the elderly?
Does the right hon. Gentleman remember that last year the then Opposition spokesman, the right hon. Member for Holborn and St. Pancras (Mr. Dobson), said that the 1996 figuresmake no allowance for inflation, the cost of pay increases or the cost of providing extra services for the growing number of old people and of children at school"?—[Official Report, 27 November 1996; Vol. 286, c. 343.]Is it not that very settlement that the right hon. Gentleman has just announced to the House?
As for debt, will the right hon. Gentleman confirm that he got it right the first time he attempted to make the announcement to the House? Will he confirm that his changes to standard spending assessments will mean rewarding councils that have run up large debts and penalising councils that have been thrifty? Will he further confirm that his changes to the damping mechanism will cause acute problems for many councils, which can be solved only by sharp council tax increases?
Does the right hon. Gentleman recall that in September last year, the Prime Minister, then the Leader of the Opposition, said:We have no plans to increase tax at all"?165 Will not these major council tax rises that the Secretary of State has just announced hit the very people who relied on those promises at the election?
§ Mr. Prescott
We will take no lectures from the Opposition spokesman on taxation, assessments of need, relationships with local authorities or the benefits that council tax payers got for their money under the previous Administration.
I have admitted to a 7 per cent. band D increase in council tax—
§ Mr. Prescott
Is the right hon. Gentleman suggesting that it was more than that? I say that it is precisely the same amount as the Opposition allowed for when they were in government. The facts are easily checked in the Library. Despite considerable criticism, we have accepted the public expenditure plans of the previous Chancellor of the Exchequer.
We have also made it clear that we are giving more money than is necessitated by inflation. The figures amount to a 1 per cent. real increase.
It is all very well saying that the money for education comes from the contingency fund, but of course the previous Government did not commit themselves to spending that amount on education. The previous Chancellor did not mention any extra resources for education. The fact that we choose to make education a priority is a reflection of our priorities, not those of the Opposition.
As the right hon. Gentleman knows, the effects on pensions cannot be calculated until the revaluation of pensions is carried out; pensions in this financial year are unaffected. The Chancellor has made it clear that if extra costs are eventually involved, he will take them into account at the appropriate time. The fact remains that local authority pensions in this financial year are unaffected.
In answer to the implied claim that local authorities were better off under the Tories, I remind the right hon. Gentleman of the electorate's view: the Conservatives had 240 councils in 1979; they now have about 30. That clearly shows what the electorate thought of the Conservatives' administration of councils and services.
The right hon. Gentleman claims that there is no extra money for children's social services, yet I have announced £70 million in that context. Nothing at all was provided in the previous three years—the right hon. Gentleman's colleagues could not find the money for desperately needy children and social services.
Our assessment of the social needs of local authorities is a good deal sounder than the assessments used by the Conservative Government, under whose rule people staying in the Ritz and in the Westminster area benefited from resources that should have gone to authorities with 166 far greater needs. Our standard spending assessment system represents a fairer approach, of working with local government in partnership to improve local government services. We are justly proud of that
§ Mr. Stephen Timms (East Ham)
I particularly welcome the new emphasis on fairness in my right hon. Friend's announcement, and the change to the treatment of capital financing charges in the formula. Will he join me in paying tribute to the long fight by the Newham Needs campaign for the abolition of the concept of notional debt, which played such a significant part of the formula used by the Conservatives?
Will my right hon. Friend confirm that the beneficiaries of the change that he has announced are not profligate authorities, but several of the hardest-pressed authorities in the country, including Sunderland, Barnsley and Tower Hamlets, as well as my own authority in Newham?
§ Mr. Prescott
Yes, I agree with my hon. Friend. The reassessment shows that Newham is in desperate need. It did not have a very high ranking under the assessment that I am changing. We make it clear that we are adjusting the programme so that Newham gets more resources. The present assessment is better than the previous one and is based on the greater needs in Newham. It is a good example of the way in which our fair assessment of the principles has applied.
§ Mr. Paul Burstow (Sutton and Cheam)
We on the Liberal Democrat Benches welcome the Secretary of State's announcement on the local government finance review. Liberal Democrats want a more accountable system, which raises tax on the basis of ability to pay and guarantees greater freedom of action for local councils.
Is it not the case, however, that today's settlement is one of the tightest ever? Council tax bills are set to soar, and council services are set to suffer. People will pay more and get less. Will the Secretary of State confirm that the figures published only last week by his colleague, the Chancellor, show that council tax bills are set to rise by more than 10 per cent. this year—biggest increase since council tax was introduced by the previous Government?.
Does the right hon. Gentleman accept that the settlement fails to tackle the cash crisis in our schools? Does he accept House of Commons Library figures which show that, even after the extra money that is to be put in, this year there will be a 0 per cent. real-terms increase in funding for local authorities? Does he accept, therefore, that for every £1 that a school gets, there will be £1 off care for the elderly, as a consequence?.
Is the Secretary of State aware that more than 476,900 children aged five, six and seven are in classes of more than 30? Where in his statement today is the extra money that will pay for his pledge on class size reduction? Where is the extra money to pay for the 55,000 additional pupils coming into our schools next year? Can he tell us whether class sizes will go up or down next year?.
Does the Secretary of State accept that the previous Government underfunded community care, and forced social services into the business of rationing care for the elderly and disabled people? Will not the settlement mean longer waits for care assessment and provision, 167 tighter eligibility criteria and increased charges for home helps and meals on wheels? Are not the real losers from the settlement the most vulnerable pensioners?.
Will the right hon. Gentleman confirm that this is the last year of capping? Does he accept that capping distorts local priorities and undermines local accountability? Will he admit that because of capping and Labour's decision to stick to Tory spending plans, the responsibility for cuts and council tax rises this year rests with Whitehall, not with the town halls?.
Local council tax payers will recognise in the statement—[HON MEMBER: "TOO long."]—I am concluding—not just smoke and mirrors, which is how the previous Government always treated such settlements. This year. we have added Labour spin.
§ Mr. Prescott
We certainly have added Labour financial resources. I have spelt them out, and they have nothing to do with spin. Instead, there is extra money to fund the new services that are needed. All these matters are under review with the Local Government Association.
We have made it clear that this will be the last year of crude capping. We think that what we propose is different from what we had last year. We want to move forward to a proper form of financing local government.
I have already referred to the local government financial review. The issues are complex and detailed discussions are taking place. I shall report to the House at the appropriate time. It is necessary for the review to take place, for the very reasons to which the hon. Gentleman drew attention.
As for education, we have provided £835 million. It is apparent that there are extra resources for that sector, even taking into account increased demands. We have already started to abolish the assisted places scheme, and money has to be transferred for reducing class sizes, which will certainly not increase. We shall be judged over five years, and we have started to take the essential steps.
My right hon. Friend the Chancellor of the Exchequer talked of 10.5 per cent. in his pre-Budget statement, but that is not comparing like with like with my 7 per cent. The Treasury book figure was for Great Britain—scotland Wales and England. It takes account of increased earnings and employment, and it assumes that some authorities will use the headroom that is allowed in the new capping arrangements.
I made a joke about passporting, but that process will allow more services to be provided. The Government used to assess a local authority and the services that it should be allowed to cater for, and then tell the authority that it did not have the resources to make that provision. The passporting principle will allow authorities to meet local requirements without encountering capping. Surely that is a sound principle and one that meets the need for more resources.
I have no doubt that more needs to be done, but we have taken the essential steps to improve the relationship between ourselves and local government and to put things on a new footing, to ensure that better value and better services are provided by local authorities.
§ Madam Speaker
Order. Now that the hon. Member for Sutton and Cheam (Mr. Burstow), the Liberal 168 Democrat spokesman, has put his questions, I require one question per Member from the Back Benches. There will be a question immediately, not a statement.
§ Dr. Alan Whitehead (Southampton, Test)
May I congratulate my right hon. Friend the Deputy Prime Minister on his settlement and, especially, on the changes that have been made to the standard spending assessment reckonings, along with the ending of the pernicious bed-night factor, which did one local authority very well?
Will the principles behind the changes in the SSA continue, and does my right hon. Friend intend to ensure that there is greater transparency in SSA principles at an early stage in discussion between the Local Government Association and the Government?
§ Mr. Prescott
We are addressing an important principle on the SSAs. The process should be spread over a longer period than one year, and we think that three years could be appropriate. We shall continue to use the criterion that we have employed, but we are reviewing it under current financial arrangements. I think that Southampton will receive an increase in its SSA of 3.7 per cent., which is more than the average for the unitary authorities. We shall be using the present criterion and discussing with the Local Government Association how it can be further implemented.
§ Mr. David Curry (Skipton and Ripon)
Does the right hon. Gentleman accept that some council tax increases will be significantly higher than the 7 per cent. that has been predicated because of the weakening of the damping mechanism that he has announced? If the right hon. Gentleman is to get rid of crude capping, does he intend to maintain sophisticated capping? If so, what is it?
§ Mr. Prescott
It is a fair point that no Government can afford to ignore local authorities' expenditure. It would be foolish if I were to say otherwise. Indeed, I have made that clear already. When we set limits, we do not necessarily say that local authorities must spend up to them. We hope that they will exercise discretion. We are examining how we can have proper relationships between central and local government, because both have more than a passing interest in sound public finances. After 18 years of Conservative government, we were not left with sound public financing.
§ Mr. Peter L. Pike (Burnley)
Is it not a fact that the previous Government's final two statements at this time of the year on local authority financing did not fully fund education, which meant that local authorities had to squeeze other services? Does not it mark a significant change of direction that the new Labour Government are making a full commitment to funding £835 million, which shows that they are committed both to fairness and to local government?
§ Mr. Prescott
I am grateful to my hon. Friend for what he said. How education is dealt with is a very important point. The problem in the past was that Governments agreed that education expenditure could increase, but did not provide the resources. We have made it absolutely clear that the £835 million that we shall provide for 169 education will be fed directly into the revenue support grant, so that it can be spent and is not a penalty on the local tax payer.
§ Mr. Peter Brooke (Cities of London and Westminster)
Will the Secretary of State expand, preferably without rhetoric, on what he described as the fair account or amount for visitors and, in particular, commuters?
§ Mr. Prescott
The assessments, for example, of people in Westminster who are staying as commuters or visitors will now be considered at half the rate that applied before [Interruption.] We shall consider them just as visitors, not as residents. That is the main point that will apply in those matters. We have changed it in that sense.
§ Ms Rosie Winterton (Doncaster, Central)
Will my right hon. Friend give further consideration to a point that I have raised previously with Ministers, about allowing local authorities to use their collection funds accumulated from successful council tax collection schemes to alleviate their financial difficulties? Does he agree that that would not increase the amount ultimately paid by council tax payers, but could go some way to improve services for them?
§ Mr. Prescott
I recognise that my hon. Friend has been campaigning on that matter since she arrived in the House. It has forced me to see what resources are available from what is known as the collection fund, where, as an incentive, local authorities hold back certain moneys from the collection of rates and the council tax. The amount appears to be about £300 million. That money, according to previous legislation, which I believe still applies, can be used only to reduce the council tax payment. It is a matter of some concern. Resources are there. I am advised that current legislation prevents us from acting immediately on that, but we shall take it into account during the local government review.
§ Sir Paul Beresford (Mole Valley)
What does the Deputy Prime Minister anticipate will happen to the difference between local government total standard spending and budget next year compared with this year?
§ Mr. Prescott
If I heard the question correctly, the difference between the TSS and budget this year will be in the calculation of the expenditure.
§ Sir Paul Beresford
What does the Deputy Prime Minister anticipate will be the difference between the local authority TSS and budget next year compared with the TSS and budget this year?
§ Mr. Prescott
I thought that it was just me. I do not think that that calculation can be made. I do not have one at the moment, and I await the appropriate time for it.
§ Mr. Christopher Leslie (Shipley)
Is my right hon. Friend continually astonished, as I am, at the brazen way in which that lot over there made such a hash of the 170 financial programme for local government, and the way in which they fiddled the figures to benefit their own areas, unlike the way in which—
§ Mr. Leslie
Does my right hon. Friend recognise that that contrasts greatly with the way in which our Government are meeting the needs of local authorities, such as Bradford district, which have extremely diverse needs?
§ Mr. Prescott
Those are differences that one has to take into account. In this assessment, Bury was able to get an increase of 6.4 per cent.
§ Mr. John MacGregor (South Norfolk)
On pension funds, the right hon. Gentleman will be well aware that most local authorities are very concerned about the provision that they will have to make as a result of the abolition of advance corporation tax in a couple of years' time, and are looking to make that provision. Does taking into account mean considering but ignoring, or does it mean meeting in full the extra cost?
§ Mr. Prescott
That is a matter of some concern, and it has been discussed in the House. My right hon. Friend the Chancellor has made it clear that he will take into account the changes in the next financial year. We must await his statement to see exactly what he will do and what the proportion will be, after a decision has been made on the revaluation of pensions. A proper assessment cannot be made until the revaluation has been completed.
§ Mr. Alan Simpson (Nottingham, South)
I congratulate my right hon. Friend the Deputy Prime Minister. Will he confirm that Nottingham, which becomes a unitary authority this coming year, will not now be faced with the decision to make £13.5 million-worth of cuts so as to reduce the council tax? Will he further confirm that when responsibilities for staff are transferred from the county council to the city—the staff will do the same job in the same place but receive a different pay cheque—it will not be assumed to be facing increases of only half the rate of inflation that would have been allowed under the county council?
§ Mr. Prescott
The assessments affect authorities differently. My hon. Friend's authority will receive a permitted increase in the budget of 3 per cent., which, with passporting, will allow it to meet extra requirements without being penalised by the capping regime. That is how we have made the system fairer. We are moving away from the crude capping arrangements. I am sure that that is what his authority would want, and that is what we have done.
§ Mr. John Greenway (Ryedale)
Why has Ryedale district council been given a nil increase in its budget? Is not that a disaster for shire districts, which will result in cuts in services for some of the most vulnerable people in rural areas, as well as a massive hike in council tax?
§ Mr. Prescott
The reason is that the council's expenditure over the standard spending assessment is more than the 12.5 per cent. that I have announced will 171 be the capping limit. That is the reality. We have reviewed services and given our judgment on the SSAs. If an authority's expenditure over the SSA is more than 12.5 per cent., as the hon. Gentleman's authority's is, it will not benefit from the measure.
§ Ms Beverley Hughes (Stretford and Urmston)
I welcome the statement. If I had achieved such a settlement from the previous Government in the years when I was leader of a council, I would genuinely have been very pleased. Does my right hon. Friend agree that the total spending on personal services represents an increase of about 5.8 per cent.? That increase, together with the retention of the community care grant in special transitional grant and the increase in money for children's services, will be widely welcomed. It gives the lie to the contention of Conservative Members that personal social services would be cut in the settlement.
§ Mr. Prescott
My hon. Friend has given a good example of how we have made SSAs fairer. Trafford's SSA will increase by 2.9 per cent., and it has particularly benefited from the changes that we have made to the elderly residential social services formula. That is about needs, justice and fairness, and it is a good example of the changes that we have made.
§ Mrs. Virginia Bottomley (South-West Surrey)
The right hon. Gentleman made much of fairness and consultation. The town and country issues group of authorities represents a series of towns that dominate a rural hinterland. Will he or his Minister of State agree to meet that group, so that it can put its case direct to Ministers rather than through consultations with the Local Government Association? They can then hear its arguments for themselves.
§ Mr. Prescott
We intend to carry out considerable consultation with local authorities, including through video conferences and by other modern methods. I shall take into account the right hon. Lady's request for me to meet a delegation from her authority.
§ Mr. Phil Woolas (Oldham, East and Saddleworth)
My question is straightforward. Does the Prime Minister—[Interruption.] I am sorry, I should have said Deputy Prime Minister. I was wrong, then right; or right, then wrong. Does the Deputy Prime Minister welcome the announcement by Mr. Ken Charnley, the leader of the Conservative group on Chorley council, that he has defected to the Labour party? Does my right hon. Friend think that he has done so because he considers the Conservatives to be incompetent and mean? He has bypassed the Liberal Democrats because, as they have shown today, they are two-faced and incompetent.
§ Mr. Prescott
I am sure that my hon. Friend will agree that that Conservative has left his party and joined the Labour party because these figures show that it is a fairer party and has dealt fairly with the problems in his area. In my hon. Friend's local authority area, the figure for education has now increased by 5.3 per cent., and the permitted increase in the budget is 3.8 per cent., whereas for Rochdale the figures are 6.5 per cent. and 4.9 per cent. That Tory party member has done what many Tory councillors have done over the years—left the Tory party, 172 leaving it with no organisation. The party that proudly proclaimed that it had 240 councils in 1970 now has fewer than 30. Councillors have left the party because the Conservative Government were not concerned about fairness.
§ Mr. James Paice (South-East Cambridgeshire)
Does the Deputy Prime Minister realise that people in Cambridgeshire will see nothing fair in a settlement that breaks a promise that was given during the election campaign by the Prime Minister, to get rid of the iniquitous area cost adjustment? The settlement means that council tax in Cambridgeshire will rise by an iniquitous amount—considerably higher than the amount that was stated by my right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler). However, the overall capping limits mean that expenditure cannot rise by more than the rate of inflation.
§ Mr. Prescott
As I have said, I am concerned about the area adjustment matter, but I am not convinced by all the current evidence. I take on board the hon. Gentleman's point, but I have promised to review the matter and make a statement about it. Cambridgeshire has had its resources for education increased by 5.5 per cent., although the permitted budget increase is 3.6 per cent. I do not think that the people of Cambridgeshire are likely to say that that is not good for the county.
§ Mr. Harry Barnes (North-East Derbyshire)
May I pursue the matter of weighting in the context of people moving to areas such as Westminster, because that affects my constituency in the other direction? Has the enhanced population figure been given a reduced weighting? I do not think that that can be the case, because north-east Derbyshire suffers terribly. It has finished up with a smaller revenue support grant than it received previously. Rather than the principle itself, the weighting for people moving and the area cost adjustment need to be considered.
§ Mr. Prescott
My hon. Friend has spoken to me about the matter of the proper weighting for visitors and commuters. I know that he has another scheme in mind. Perhaps he would like to discuss with me how that might be considered in the financial review.
§ Sir Teddy Taylor (Rochford and Southend, East)
Is the Deputy Prime Minister aware of the special situation in Southend-on-Sea where, incidentally, we had five gains from Labour and no losses on 1 May? It will become unitary in May and will totally break away from the county of Essex. Southend has a much higher than average share of social problems because of the number of bed-and-breakfast establishments and houses in multiple occupation. It also has a much higher than average percentage of elderly people and a much higher percentage of unemployment than the rest of Essex. Will those factors be taken into account in assessing our needs in comparison with those of Essex?
§ Mr. Prescott
I think that the hon. Gentleman is correct. We have done what he asks, as is reflected in the figures. Those for Rochford and Southend, East show an increase in education spending of 6.5 per cent. 173 The increase in the budget, taking into account some of the factors that the hon. Gentleman mentions, is 8.4 per cent. I hope that that is acceptable.
§ Mr. Terry Rooney (Bradford, North)
When will the Government move to a triennial review system and get away from this annual nonsense? Will my right hon. Friend promise not to visit Bradford, because every time a Conservative Minister visited Bradford, we lost money?
§ Mr. Prescott
I cannot give my hon. Friend a timetable, but as I have said, we are reviewing the matter and considering a period longer than one year. Every year, much time is taken up by considering standard spending assessments, and meeting all sorts of delegations for many types of marginal changes seems to take up much of my Ministers' time. A fairer way to deal with this matter could be on at least a three-year period. We shall certainly take that into account in our review.
§ Mr. Tony Baldry (Banbury)
Is the Deputy Prime Minister aware that Oxfordshire is already threatened by the closure of day centres and by a reduction in provision for respite care and home help? The situation is desperate. The right hon. Gentleman's figures propose for Oxfordshire a reduction of nearly £2 million in the provision for personal social services. How on earth can people there be expected to accept a year-on-year reduction, when they already face a critical situation? Is not the consequence of his statement for Oxfordshire and for other counties that the most vulnerable will be hit and will have a substantial hike in their council tax bills?
§ Mr. Prescott
I believe that my hon. Friend the Minister for Local Government and Housing met the hon. Gentleman on Friday to discuss the implications of the settlement and, as he knows, the Government have had considerable discussions with the Oxfordshire authority, particularly arising out of the capping position last year. I hear what the hon. Gentleman says. We are dealing with more than 400 authorities. All have similar problems and all are trying to deal with them. We are trying to provide a fairer system.
With regard to Oxfordshire, there has been a 4.4 per cent. increase in the education budget for Banbury—
§ Mr. Prescott
Yes, but the hon. Gentleman's constituency is to have a 4.4 per cent. increase in its education budget and the permitted budget increase is 3.1 per cent. That compares well.
§ Mr. Prescott
I understand all the problems that local authorities face, and they are no more difficult in Oxfordshire than they are in other areas. We have to be fair in how we deal with the matter and in how we distribute national resources. That is what we have done. I have stated how the hon. Gentleman has fared, and that is our position.