§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Clelland.]
12.39 am§ Mr. Christopher Chope (Christchurch)I am grateful for the opportunity to raise the issue of the local government grant settlement as it affects Dorset and, in particular, council tax payers living in the borough of Christchurch and the East Dorset district in my constituency. I am delighted that my hon. Friends the Members for North Dorset (Mr. Walter), for Mid—Dorset and North Poole (Mr. Fraser), for Poole (Mr. Syms) and for West Dorset (Mr. Letwin) are here to support me because these issues affect their constituents as well as mine.
I shall go into the detailed figures later. The headline figures mean that unless a miracle happens and the Government alter their provisional grant announcement, a band D council tax payer in Christchurch will pay £100.25 more council tax next year—an increase of more than 15 per cent. A council tax payer in East Dorset will pay £98.72 more—an increase of 14.5 per cent. Those are truly staggering increases and they will require householders to make deep cuts in their other expenditure. Increases at five times the rate of inflation are totally unacceptable. This is obviously the real face of new Labour. The extra burdens are coupled with what we now know to be the highest mortgage interest rates for five years.
If the increases in council tax were intended to pay for a locally determined commensurate increase in services, they might be defended by those who support local accountability, but the increases result from a 1.5 per cent. increase in the budgets of East Dorset district and Christchurch borough, a 3.5 per cent. increase in county council expenditure and a 4.2 per cent. increase in police expenditure. It is no wonder that the Government are convicted on the charge of forcing council tax payers to pay more for less.
It is impossible in a short Adjournment debate to go into all the detail that councillors and others would wish. In recognition of that, I am grateful that the Minister has agreed that he will meet a deputation of my constituents in East Dorset and Christchurch and representatives from Dorset county council to go into more detail on the issues I am raising. In recognition of his courtesy, I shall try to ensure that all the groups come to see him at the same time.
In seeking to understand this year's local government grant settlement, the expression "pork barrel" comes very much to mind. "Pork barrel" is an American term applied to legislators who give to their political friends and take away from their political enemies to maintain popularity with their own party. What other explanation can there be for the fact that East Dorset district council suffers the largest percentage reduction in grant of any district council as a result of changes in the formula for allocation, otherwise known as the methodology, while the Prime Minister's district council of Sedgefield gains 14.6 per cent., the second highest gain in the country?
1156 I could not agree—my constituents could not agree either—with the Deputy Prime Minister when he said that the
new measures of neediness … are a clear improvement".— [Official Report, 2 December 1997; Vol. 302, c. 160.]They are not a clear improvement. From talking to the Minister earlier, I am not sure that they are even clear.I hope that the Minister will explain the Government's decision to allocate East Dorset only £68.25 per head grant next year, which is the fourth lowest grant per head of resident population in the country. The year after, the situation will be even worse as the full impact of the change in methodology bites, forcing the council tax up a further 10 per cent. for only 1.5 per cent. in increased expenditure.
If the Minister visited Dorset and drove from Verwood in my constituency to Blandford Forum in the constituency of my hon. Friend the Member for North Dorset, I would defy him to justify how it could be fair that a resident in Blandford Forum received 26 per cent. more grant per head than a resident in Verwood. If, instead of travelling to North Dorset, the Minister travelled to Christchurch, he would find that the Standard spending assessment per head was 28 per cent. higher than in East Dorset.
There is something peculiar about that. I hope that the Minister will concede that, on any objective basis, the differences are anomalous and indefensible. Councils comprising urban fringes with large rural hinterlands seem to be losing out particularly under the methodology. The consequence is that if East Dorset increases its budget by 1.5 per cent., its council tax will go up by 13.76 per cent.
My constituents in Christchurch have also been dealt a cruel blow. Christchurch's SSA per head is going down by 2.8 per cent., from £90 to £88, as a result of changes to the methodology. The consequences of that are dire. The council has already implemented £100,000 of savings for this year and approved £257,000 of savings for next year. It will have to make £130,000 of additional savings to keep within its cap, which permits an increase of only 1.5 per cent. in budgeted expenditure—just £57,000. The Government's settlement will result in band D council tax in Christchurch going up by 17.37 per cent. next year, from £71.67 to £84.12, for a 1.5 per cent. budget increase.
In comparison with East Dorset and Christchurch, Dorset county council has done well. Its adjusted SSA has gone up by 3 per cent.— £6.167 millionx2014;to £224.031 million. As the population has also increased by 0.8 per cent., the SSA per head has gone up by only 2.2 per cent. and is still £40 per head lower than the average for English counties.
Dorset county council has also suffered a 50 per cent. greater blow than the shire county average, losing 1.3 per cent. of its SSA because of methodology changes. Dorset is most unfairly hit by the Government's fiddle to the SSA for capital financing. If, as spendthrift, debt-ridden Labour councils have long hoped, the Government are intent on bailing them out of the consequences of their profligacy by giving them extra grant towards the cost of those debts, that should not be at the expense of prudent authorities. However, that is what is happening. The reduction in the control total and the scaling factor from 85 to 78 per cent. will result in Dorset county council losing £855,000— £5.70 per band D council tax payer.
1157 The consequence of the settlement for Dorset county council is that increasing its budget by 3.6 per cent. to the capping limit will necessitate a band D council tax increase of about 10 per cent., from £556 to £610. However, that is not the end of the story. This year, all Dorset council tax payers benefit from a special reorganisation grant worth £26 at band D. The additional costs for Dorset resulting from Bournemouth and Poole becoming unitary are £78 per head at band D. That burden has not disappeared. It should have been reduced by the county council, but it is still significant.
The Government could give immediate and direct help to Dorset council tax payers by paying the transitional grant for a second year, as all the group leaders and my hon. Friends have argued in letters to the Secretary of State. The Minister shakes his head, but we have taken encouragement from the Deputy Prime Minister's statement that £130 million will be allocated for the transitional costs of local government reorganisation. On the basis of the present plans, he thinks it possible that less provision will be needed for that purpose. The Deputy Prime Minister said that any surplus would be added to the total of revenue support grant. I submit that it would be fairer to give £4 million of that to Dorset.
That brings me to the area cost adjustment. During the latter days of the general election campaign in April, the current Prime Minister—then the Leader of the Opposition—was asked whether he would reform the area cost adjustment. He told the Cambridge Evening News:
We will review the Area Cost Adjustment in time for the next financial year.The right hon. Gentleman added that, in relation to Cambridgeshire,changes in line with the recent Elliot review would bring the county an extra £10 million.The right hon. Gentleman, by those words, raised expectations and led people to believe in Cambridge and elsewhere that were a Labour Government to be elected, the Elliot review of the area cost adjustment would be implemented this year. If the Elliot review recommendations had been implemented this year, Dorset would have benefited by about £4 million, about £25 per charge payer. It will not have escaped the notice of the House that that is a similar sum to the transitional reduction grant that the Government are proposing to withdraw from Dorset this year. That grant was given by the Conservative Government in response to representations that were made in Dorset.Honour could be satisfied by keeping the grant for one more year in the expectation that the Government would then honour their pre-election pledge to implement the results of the Elliot review.
The final element in the council tax bill for my constituents is the precept from the Dorset police. The maximum spending power permitted by the Government for next year is £73.720 million, increased from an equivalent figure of £70.771 million for the current year. The police think that even expenditure at that cap will not be enough, so there is a fear that the precept will be raised from £63.59 to £71.37, an increase of more than 12 per cent., with only a 4.17 per cent. increase in expenditure.
1158 The Government's confidence trick of forcing up council tax is clear from the figures for the Dorset police authority. Raising the expenditure to the cap would cost £2.949 million, and only 27 per cent. of that would be funded by the national exchequer, the other 73 per cent. coming from local taxpayers. That is why, for a modest increase in contribution from the Government, local taxpayers are being expected to pay £3 for every £1 that the Government pay.
The Deputy Prime Minister said when introducing the grant settlement for next year that when Labour was elected on 1 May it was declared that it was time to bury the hatchet. The right hon. Gentleman did not say where he was going to bury it. I hope that tonight the Minister will allay the fears of Dorset people that the Deputy Prime Minister's hatchet is targeted at Dorset in a vindictive vendetta against Dorset people who did not vote Labour in the general election.
I am conscious that in my constituency there was the second lowest Labour vote in the country. It was less than 7 per cent., and significantly less than in 1992. If we have a Government who are handing out money to their friends and withdrawing it from their enemies, we have exposed an example tonight. I hope that the Minister will be able to allay our concerns. From the examples that I have given, it is clear that charge payers in my constituency are being condemned to pay 15 per cent. more council tax next year for worse services.
Earlier this month, the Minister for Local Government and Housing told Radio Kent that if council tax increases by more than 7 per cent., the council concerned will be failing in its duty. I shall be interested to hear from the Minister whether he is prepared to make the same statement in respect of Dorset. If the council tax increases in Dorset by more than 7 per cent., will the hon. Gentleman consider that the county council and the district councils have failed in their duty? I hope that he will answer that question.
In announcing this year's settlement, the Government were guilty of a cruel confidence trick on my constituents. The Deputy Prime Minister promised that standard spending assessments would be fairer, and that spending could increase by 3.5 per cent., leading to a council tax increase of only 7 per cent. Yet SSA per head in East Dorset has fallen by 6.7 per cent. and in Christchurch by 2.8 per cent., and even for the county council it has increased by only 2.2 per cent.
We are getting mixed messages from the Government. The Secretary of State for Education and Employment has told me in a letter that I should demand that Dorset county council pass on its full SSA increase to schools, despite the fact that it is already spending 6 per cent. above its SSA. The Deputy Prime Minister, however, says that the changes in the SSAs will have a large impact on council tax levels in some authorities if they do not adjust their spending accordingly.
In other words, the Secretary of State for Education and Employment is saying that the SSAs must go towards additional spending by the council, whereas the Deputy Prime Minister is saying that because grant has been taken away from Dorset, the council's expenditure should be reduced accordingly. Those two messages are incompatible.
It seems that the Government recognise that local authorities need to spend more money, but they do not have the courage to provide the money themselves. 1159 Instead they are transferring the burden to council tax payers. This is a massive council tax increase—a tax increase by another name—and my constituents feel that they are being unfairly punished. I hope that the consultation is a real one, and that when it is over we shall find that there is more grant for Dorset than it is to receive under the present proposals.
§ The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Mr. Nick Raynsford)The hon. Member for Christchurch (Mr. Chope) has secured a useful opportunity to discuss our proposals for the financing of local authorities' revenue expenditure in the coming financial year. He has rightly focused on matters of concern to his area of Dorset, which is the subject of the debate. He ranged rather widely, and we got as far as Cambridge; none the less, I shall focus specifically on the Dorset area.
I can tell the hon. Gentleman at the outset that his allegations of a vendetta against any particular area are totally unfounded. Charges of pork barrel politics come ill from a party that was renowned for rigging the standard spending assessment arrangements to ensure such curious results as the fact that leafy Kingston upon Thames was deemed as deprived as Barnsley. That was the previous Government's record, and it is not surprising that it provoked considerable criticism.
We have committed ourselves to a fair distribution of Government grant to local authorities, and the provisional settlement announced last week is a start in achieving that goal. It is better, in cash terms, than many authorities must have expected on the basis of last year's plans. It is also fairer in its distribution, and reinforces local accountability by giving local authorities more discretion over local spending decisions.
There will, of course, be some authorities that are disappointed with the measures we have taken to ensure a fairer distribution of grant, and I can understand the concerns of the authorities mentioned by the hon. Gentleman that have had a reduction in their standard spending assessments. As the hon. Gentleman has pointed out, the authorities in the Dorset area around his constituency have been adversely affected by the changes. I do not seek to hide from that fact in any way, and I shall return to some of the reasons for it in a moment. We inherited tight spending plans, which meant that we had to make tough decisions if we intended to ensure a fairer settlement.
As you know, Mr. Deputy Speaker, education is the top priority for the Government and for the nation. That is where we have concentrated the new money for local authorities. Schools faced real problems after years of cuts and retrenchment, and we therefore made available an extra £835 million for revenue expenditure in English schools in 1998–99. There will also be £662 million of provision for local authorities for the education of children under five years old, following the abolition of the nursery vouchers scheme.
Adjusted for changes in funding mechanisms and in local government functions, that means an increase over 1997–98 in total standard spending of £1.78 billion, or 3.8 per cent. That is expected to be 1 per cent. above inflation, thereby allowing an increase in real terms to reflect our key policy priorities. It also allows 1160 £1.06 billion, or 5.7 per cent., more to go into English schools in 1998–99. That enables a start to be made on raising educational standards, which we are determined to see. It also allows £350 million for community care and £70 million more for children's social services, as well as a 4.8 per cent. increase in provision for fire services and other, smaller increases for the remaining services.
We have inherited extremely tight spending plans, and we are committed to living within those plans. I acknowledge that we have not been able, within those constraints, to meet all the pressures that local government has identified. However, I am sure that councils will wish to review critically all the tasks that they undertake and to continue to improve efficiency and effectiveness wherever possible.
There has already been a good deal of comment on how the increase is to be funded. The settlement led immediately to suggestions in the local press in Dorset that average band D council tax levels will rise by more than £90 for the coming financial year. The Government are fully funding, with extra grant, the £835 million of new provision for schools. We are also providing a new special grant to cover the revenue costs of local authority private finance initiative projects. Including these, aggregate external finance will be £37.51 billion, an increase of 2.7 per cent. compared with 1997–98.
That is not as big an increase as that for total standard spending. Although we have backed our new spending provision with grant, there was a gap in grant funding built into the spending plans that we inherited from the previous Government. That explains the difference between the total of aggregate external finance and the total standard spending.
The gap in grant funding implies a pressure on council taxes equivalent to a 7 per cent. increase. We have sought to release pressures that might otherwise have led to further tax increases, by a number of means, especially by fully funding the extra provision for education. That extra funding for education is worth £50 a year to the typical taxpayer. However, I will not be drawn into predicting actual tax levels. On that note, I must say that the unfounded and speculative claims that have been made about the effect of the settlement on council taxes are generally unhelpful and worrying to many local taxpayers.
The Government do not have targets for council taxes in 1998–99. The actual council tax in individual authorities is properly a matter for local discretion and local decisions on spending and financing. Tax rates will be affected by a range of factors, such as collection performance and collection fund surplus or deficit. I will say, however, that we expect local authorities to give proper consideration to the burden on their taxpayers when they come to set their budgets.
I will briefly discuss capping. Hon. Members will know that we remain committed to the ending of crude and universal capping. To achieve that, we announced in July a review of local government finance which will look at the matter, as well as a range of other issues. A sequence of consultation papers will be published over the next few months, with the intention of publishing a White Paper in the spring. The Local Government Association has been fully involved in these discussions.
1161 In the meantime—and in the light of our public expenditure plans—capping will remain in place for 1998–99. My right hon. Friend the Secretary of State for the Environment, Transport and the Regions announced provisional capping principles for 1998–99 to the House on 2 December. Those are subject to a number of changes this year. They will give local authorities more room to exercise local discretion and will help them to direct the additional provision for education to the schools, for which it is intended.
We recognise that there is the potential for increases in council taxes as a result of those changes in the capping principles. However, we 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. We have given local authorities extra room within which to exercise their discretion and we expect them to use this greater flexibility responsibly.
Those principles are necessarily provisional. Firm decisions on capping cannot be made until authorities have set their budgets for 1998–99. When those decisions are made, the Government will of course take into account all relevant considerations.
§ Mr. Robert Walter (North Dorset)Will the Minister give way?
§ Mr. RaynsfordI regret that I cannot, because I have been left very little time to reply, and the hon. Gentleman did not ask in advance for permission to intervene in the debate.
The hon. Member for Christchurch has raised several issues relating to the way in which standard spending assessments apply in Dorset. SSAs play an important part in the overall financial system for local authorities. The Deputy Prime Minister's statement outlined our proposals for local government finance for the coming year. I should like to remind hon. Members of what we are seeking to achieve and of some of the main changes for SSAs, since they put in context those affecting Dorset.
Our election pledge to tackle the issue of fairness remains a priority and the provisional settlement announcement has begun to overcome the injustices of the system. We are prepared to do whatever is necessary to reach that situation. As a result, the way in which SSAs are determined and how they might be improved is an important part of our review of local government finance. We are also ready to consider new evidence for changes in SSAs to bring about improvements.
The changes that we propose, like many of our other priorities, begin with education. The education formula assessing the spending needs for under-fives will be changed to reflect the abolition of the nursery vouchers scheme. The formula will be based on the number of pupils for whom local authorities provide nursery education, rather than on the total population of four-year-old children, regardless of whether they receive 1162 pre-school education. Where local authorities have increased provision beyond the level in spring 1997, they will be able to apply to the Department for Education and Employment for transitional specific grant.
§ Mr. ChopeI raised some specific, narrow issues relating to my constituents and some particular matters concerning the settlement in Dorset. The Minister is responding with banalities and generalities. Will he confine his remarks in the remaining time to the specific issues affecting Dorset? If council tax goes up by more than 7 per cent. in Dorset, will it be the councils in Dorset that are failing in their duty, or will it be the Government's responsibility?
§ Mr. RaynsfordThe hon. Gentleman took rather more than the customary time, leaving me less time than is the normal courtesy to reply to his questions. I was giving him a detailed response on the issues that he raised, including the rationale for changes in the SSA methodology. I intended to come to his other specific points, but if I do not manage to do so, because time runs out, that will be his fault, not mine.
The principles that we adopted for changes in the SSA methodology were all agreed with the Local Government Association. The principles now make it more explicit how measures of need are evaluated. That represents an improvement on the previous formula, whereby some affluent areas were ranked higher in terms of deprivation than other parts of the country with more obvious economic and social problems. Indicators such as morbidity rates and the proportion of residents on income support have been—in my view, rightly—added to the indices.
We have confronted the inequity in the present system whereby visitors and commuters were attributed the same economic and social characteristics as residents. Previously, sparsity, density and measures of neediness applied to all those categories. That was clearly a gross anomaly and now they will apply only to those living in such areas. There was clearly something wrong with a system that prescribed that all visitors and commuters to an area were as deprived as the average resident. We shall continue to take account of the extra costs of visitors and commuters, but only the fair costs.
We have proposed in the settlement to change the way in which we deal with the costs of borrowing. During the 1980s, local authorities had several choices about how to use capital receipts. They could spend them on new investments or they could use them to repay debt. At present, the capital finance system works to the advantage of those who repaid debt. We propose to change it so that where an authority would do better from having its capital financing SSA worked out using its actual level of debt in 1990, rather than the notional level previously used, that measure will be adopted.
One significant part of the calculation of SSAs in which we have decided not to implement any change at present concerns the area cost adjustment, which the hon. Gentleman mentioned. The Prime Minister said that we would review that, and we have done so. We have received considerable representations from people in 1163 local government who were unhappy about the Elliot proposals and supported a specific cost approach. We therefore specifically commissioned further work to examine the merits of such an approach.
Dorset county council fares well from the proposed SSAs. Its—
§ The motion having been made after Ten o'clock, and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
§ Adjourned at nine minutes past One o'clock.