Council Tax

HC Deb 17 July 1997 vol 298 cc537-84

4.7 pm

The Minister for Local Government and Housing (Ms Hilary Armstrong)

I beg to move, That the draft Council Tax Limitation (England) (Maximum Amounts) Order 1997, which was laid before this House on 14th July, be approved. Before referring to the order and the caps proposed for Oxfordshire, Somerset and Warwickshire, I should like to make a few general points about the Government's view of the role of local government.

We believe that local government has an important part to play in Britain's future. Our policies will be based on our wish to reinvigorate local government, outlined in our manifesto. Those policies encourage increased democracy, with local people having the chance to have more of a say in the affairs of their council; increased autonomy, with more freedom for authorities to take their own decisions; increased accountability, with elected representatives being more visibly accountable for their actions; and increased partnership between central and local government and between local authorities and the people they serve and businesses and groups in their areas.

Only yesterday, the first meeting of the new central-local partnership took place, chaired by the Deputy Prime Minister and attended by several Cabinet Ministers and representatives from local government, to consider major local government issues, including the pressures on local government and the policies that we want to take forward with it. We believe that within that framework, local authorities have important roles as commissioners and deliverers of a wide range of local services.

The announcement in the Budget of an additional £1 billion for education next year is a clear example of our commitment to help local authorities in the all-important area of education. The increase will allow local education authorities to plan ahead over the next 18 months.

In the longer term, we are committed to abolishing crude capping. We cannot do so, however, until we have put in place other policies on local accountability, such as best value and local performance plans. In the meantime, we must settle the 1997–98 capping round in a way that is consistent with our undertaking to live within existing public expenditure plans.

Mr. Harry Barnes (North-East Derbyshire)

There may be a number of Labour Members who are not entirely happy about the rate capping provisions and who are interested in the interpretation of manifesto and policy commitments, with which my hon. Friend has been dealing in connection with the position on rate capping. Once the order goes through, will that be the limit of the rate capping policy? If not, will the Government at least consider a rate capping policy that will be limited, in the way that it operates for Oxfordshire, Somerset and Warwickshire?

Ms Armstrong

My hon. Friend is right. We have a firm commitment in the manifesto, as I have just said. The Chancellor announced in his Budget, at the same time as providing substantial additional resources for education in the next year, that there would have to be a continuing capping regime. We inherited great public finance problems, which we have pledged to bring under control. It is, however, my right hon. Friend's objective and mine to meet the manifesto commitment to abolish capping as soon as possible.

My hon. Friend will have heard me say that we want to put in place other policies on local accountability. He will hear in the very near future announcements that begin to fulfil some of our manifesto commitments on matters such as best value. No one is more determined than I am to see local government become far more accountable to local people.

Mr. Jeremy Corbyn (Islington, North)

I hear what my hon. Friend says about the future of local government finance and her determination to have a different regime. Given that, why is it necessary to cap the expenditure of the three authorities when they have made it clear that they cannot deliver the services that their populations require within the level of the cap? What difference would it make if the capping order was simply not made?

Ms Armstrong

My hon. Friend will hear the reason as I continue my speech. This settlement was made by the previous Government. We made it clear at the time that if the settlement was agreed in Parliament, it would not be fair to authorities throughout the land to change the rules after the election, especially if the election was as late as 1 May, because they had set their budgets. All the councils had problems and during the debate on the settlement, hon. Members explained the problems that their local authorities faced. All authorities face severe problems. It would not be fair to vary the rules for three authorities without just cause. I would then be subjecting the Government and others to accusations of great unfairness.

Mr. Tony Baldry (Banbury)

Does not the hon. Lady recognise that by that answer she is running herself near to the possibility of judicial review? Under the legislation, she has to consider each local authority individually. By the nature of her answer, she has given the House the impression that she is not prepared to consider lifting the cap on any individual authority because, for electoral reasons, it would be unfair to the collectivity of other authorities. That is not the way in which the legislation is set out.

Ms Armstrong

If the hon. Gentleman reads Hansard, he will see that I have said that capping would not be lifted unless specific circumstances within the criteria allowed for it. Indeed, in one authority there were different circumstances, so the cap is not being placed automatically on all three authorities. My hon. Friend the Member for Islington, North (Mr. Corbyn) asked whether, without looking at the circumstances, I would say that the cap would not apply simply because certain authorities had spent over the cap. I was responding to the specific point that he raised.

Mr. David Heath (Somerton and Frome)

I am grateful to the Minister, but I still do not follow her argument and I hope that she will develop it further. She seems to be saying that her main criterion is uniformity, rather than the clearly expressed wish of local people to spend locally derived money on local services. What has that to do with central Government?

Ms Armstrong

The hon. Gentleman is making a different point. We are debating today's order within the rules that were set out for the 1997–98 settlement. The hon. Gentleman is making a point that is outside the previous Government's view of the relationship between central and local government and I shall address it in due course, when we have the legislative ability to do so.

Mr. Robert Jackson (Wantage)

I am grateful to the Minister, who listened courteously to the delegation from Oxfordshire, as was her duty, because she has to take an objective view of the merits of the case. Will she give a categorical assurance that no assurances were given to Labour local authorities before the election that, if they did not set a budget above the cap, a new Labour Government would make concessions to other local authorities? It is believed that such assurances were given and her decision reflects that belief.

Ms Armstrong

I continue to marvel at the rumours that go round. There was certainly no such commitment on my part. However, there was a commitment that once the process had been agreed by the House, we would abide by it. We did not think it right to change the rules in the middle of the process. We made that absolutely clear to all local authorities. The Secretary of State for Health made that perfectly clear on national television, and we both made it clear in the House and when we met the Local Government Association.

Mr. John Austin (Erith and Thamesmead)

I appreciate the real problems that my hon. Friend is experiencing, having inherited an inherently flawed system from the previous Government. I recognise the difficulties that she and her colleagues face, given that most authorities have operated within the rules. However, I hope that she will recognise my difficulties, as a former councillor of some 24 years and the former leader of a local authority that was rate-capped in every year that rate capping operated, although we were a low spender and a high provider of services and were recognised by the district auditor to be an efficient and effective council. Does she recognise, therefore, that there are difficulties for those of us who have an inherent objection in principle to the concept of capping? Is there any intention to review the system this year? What assurances can she give us that we shall see an end to the entire principle of capping in the not too distant future?

Ms Armstrong

I, too, was a member of an authority and I, too, have spent much of my life wanting to reshape and reform the relationship between local and central Government. However, I remind my hon. Friend that we have had 18 years of movement in one direction. We are now determined to turn the tide and move in a totally different direction, so that local people have the opportunity to hold their authorities far more to account than they are able to do at the moment. As I said, I shall be bringing forward proposals very shortly, on part of that agenda. I hope that, when the House is able to find legislative time, we shall be able to move on a much wider part of the agenda. We also have commitments in terms of public finance.

Sir Robert Smith (West Aberdeenshire and Kincardine)

Will the hon. Lady give way?

Ms Armstrong

I should like to finish answering one intervention. I shall then press on. I shall take some interventions later, but I am only at the end of the first page of my speech and we are quarter of an hour into the debate.

I say to my hon. Friend the Member for Erith and Thamesmead (Mr. Austin) that I am determined that we shall move as quickly as we can to a new regime. In order to be fair to authorities, my right hon. Friend the Chancellor announced in the Budget two weeks ago the pattern for next year's settlement, so that they are able to plan and begin their budgeting now. We are determined to put public finances on a good footing, so that we can begin to deal much more effectively with the real deficit—which I accept exists in far too many authorities—in the quality of services that authorities are able to deliver because of severe cuts.

Mr. Tony Benn (Chesterfield)

What is the bearing on public finances if a local authority raises money in accordance with the wishes of its local electors and spends the money? There is no increase in borrowing. Indeed, under the private finance initiative, it is perfectly all right for companies to raise money by selling shares and then use the money locally. I do not see—and I think that many local authorities do not see—any relationship between local democracy and public finances, although I agree that, at national level, the Government face a serious situation in regard to public finances.

Ms Armstrong

I have tried to make it clear to all hon. Members that the Government have a clear agenda on changing the relationship between central and local government and, indeed, between local authorities and their populations. That is, of course, an important issue. We are already involved in important and intensive discussions with local government on those very points. We shall be bringing forward consultation papers, which will arise partly from the consultation with local government, and they will be available for wider distribution.

I am determined that we move in such a way that local government knows that it is involved, so that the process is not simply government by diktat, saying, "This is what you will respond to." The previous Administration have got us into this situation, and I shall not take unfair decisions in order to try to get out of it. Although I understand what my right hon. Friend the Member for Chesterfield (Mr. Benn) is saying, because of the way in which the previous Administration ordered things, the amount that local government spends is a significant part of public expenditure. That is why the capping regime exists. We shall do what we can as soon as possible.

The House will recall that the total standard spending for England for 1997–98 is £45.66 billion—an increase of 2.5 per cent. on 1996–97—and that the settlement provided for what the previous Administration intended represented a 3.4 per cent. increase in education standard spending assessments.

It is of course for each local authority to set its own budget and to decide its spending priorities. The capping principles for 1997–98 allowed almost all authorities to increase their spending by at least the total of increases in their education, social services and fire SSA blocks. That has become known as passporting. The result was that English authorities could on average increase their expenditure by some 2.4 per cent. Shire counties, which are the relevant bodies today, could increase their expenditure by 2.2 per cent. on average.

I recognise that it has been a tough settlement for all local authorities, and it was not one that we voted for. However, we made it clear to local authorities well before they set their budgets that we had little choice but to stick to the caps already proposed by the previous Administration. By the time we came into power, all authorities had already set their budgets and only three had budgeted over cap. For us to announce a general relaxation of caps at that stage would have been totally unfair to all the authorities that had previously taken tough budget decisions. As a result, when we confirmed the capping principles on 22 May, we proposed cap limits that required Oxfordshire, Somerset and Warwickshire county councils to reduce their budget requirements. All three authorities have challenged their caps—as the legislation allows—and have proposed that they should be allowed to budget at the level that they had originally set.

I should stress that, in reaching a view on the final capping limit for those authorities, we have to take account of the specific local circumstances of each authority. We have, therefore, considered each county's case carefully and I have met delegations from each authority to hear its case in detail.

Mr. Robert Jackson

The Minister rightly says that she is obliged to consider the specific case of each authority, but that completely destroys her argument that she is simply implementing the previous Government's policies. Last year, the previous Government agreed to additional resources for Oxfordshire. They were prepared to consider the case and they met it. This year, the Minister—given the same opportunity to consider the local arguments and circumstances—has turned Oxfordshire down.

Ms Armstrong

Oxfordshire put a specific case this year and I considered it. I shall deal in a moment with the specifics of the case.

During the debate, I am sure that we shall hear many examples of the efficiency of each authority. I have made it clear before that it is important that authorities pursue efficiency gains, as that will enable them to provide the best services at value for money for local people. I look for that continuing improvement in authorities. Capping, however, is not about whether an authority is efficient: it is about whether the cap proposed for that authority is reasonable, achievable and appropriate. The fact that an authority claims to be efficient is not of itself a justification for it to take a larger slice of the cake of general Government expenditure. The demands of individual authorities have to be examined in the context of the needs of the economy as a whole.

Mr. Bill O'Brien (Normanton)

I accept that the limit set by the Government is within the confines of the amount that an authority needs to provide its services. My local authority and I are concerned about the formula that is used to distribute resources and determine their level, because it contains discrepancies in many areas, including the education of children, the provision of social care and other issues. Changes must be made for the sake of fairness and the genuine need to help local government. Will my hon. Friend take those concerns into consideration?

Ms Armstrong

rose—

Mr. Mike Hancock (Portsmouth, South)

Will the Minister give way, on the same point?

Ms Armstrong

I must deal with one intervention at a time, and I am sure that you, Mr. Deputy Speaker, will ensure that I do.

I accept the point made by my hon. Friend the Member for Normanton (Mr. O'Brien) that there is a feeling abroad, especially in his local authority and in many nearby, that the formula has not been fair. He will know—if he did not, I hope that he will ensure that his authority immediately takes advantage of the knowledge—that working parties involving the Local Government Association and officials from my Department are already examining the criteria, and the case that authorities such as his have made.

I hope that we shall be able to come up with a fairer system. We shall not be able to do everything that we would want to do, because that will need action such as revaluations and more research. None the less, we are determined to make things much fairer, and to ensure that local authorities at least know that they are part of determining the system, as well as having it imposed on them.

Mr. Hancock

The Chancellor of the Exchequer had a short period—less than 10 weeks—to prepare a Budget and present it to Parliament. So does the Minister not believe that her Department had ample time to prepare a change in legislation that could have been agreed, and would have allowed a fair system to operate in local government? Does she think it fair that a Labour Government are ordering local authorities to sack teachers and to deprive the elderly of domiciliary care that they desperately need and deserve?

Ms Armstrong

I am not certain exactly what legislation the hon. Gentleman would have expected us to put through the House in that time. We are not asking authorities to sack teachers; we are asking them to order their priorities within the organisation so as to deal with the priorities of their own areas.

Oxfordshire has set a budget of £345.530 million—£6 million above its proposed cap. It argues, as its representatives did when they came to see me, that since 1991–92 it has reduced spending by £60 million, so the scope for further savings is severely limited. It also argues that many of the spending pressures are outside its control, and that it has no significant reserves that it could use to support its revenue spending.

I do not dispute the fact that Oxfordshire has reduced its spending in recent years. I would point out, however—for it is not always made as clear as it might be—that we are talking about reductions against plans and projections, not about cash cuts. In fact, since 1991–92, Oxfordshire's budget has increased, on an adjusted basis, by 17 per cent. in cash terms. Furthermore, all authorities have had to make significant reductions in recent years.

Oxfordshire challenged its cap last year and as a result was granted a supplementary credit approval for £3.5 million. It was made perfectly clear at the time that that was meant as a one-off measure, to give the authority time to tackle its budgetary problem. As the right hon. Member for Suffolk, Coastal (Mr. Gummer), the previous Secretary of State, said in last year's debate, the SCA was intended to give Oxfordshire another year to get its budget into line with our assessment of an appropriate level of expenditure."—[Official Report, 22 May 1996; Vol. 278, c. 355.] There is nothing—and there was nothing either in its presentation to me or in the answers to the questions that I asked—to suggest that Oxfordshire used the time provided by that one-off support to bring its expenditure more into line with its cap this year. On the contrary, the SCA was used solely to support revenue expenditure at a level that clearly would not be sustainable this year.

Mr. Ken Livingstone (Brent, East)

rose—

Ms Armstrong

I think I have already given way enough—

Mr. Livingstone

The Minister is misleading the House.

Ms Armstrong

It is now even less likely that I shall give way.

Mr. Livingstone

rose—

Mr. Deputy Speaker (Mr. Michael J. Martin)

Order. The hon. Lady is not misleading the House; neither is she giving way.

Mr. Livingstone

On a point of order, Mr. Deputy Speaker. Most hon. Members have received a briefing that clearly states that Oxfordshire is the lowest-spending English county—whereas the Minister is making it sound as if Derek Hatton runs the damn place.

Mr. Deputy Speaker

Order. Briefings that may be circulating have nothing whatever to do with the Chair, who is concerned only with the business before the House.

Ms Armstrong

I have not put out any briefing, and I am going on to deal with the very point that the hon. Member has just raised. I am not saying that I will not give way at all, but I do think Members should listen to what I have to say about Oxfordshire before I give way again.

We accept that Oxfordshire has no significant useable reserves, although it is by no means the only authority in that position. Furthermore, that of itself is not sufficient reason to agree to a concession. If it were, it would be a perverse incentive for authorities to be profligate with their reserves so as to get a capping concession. That would hardly be a sensible signal to give local authorities.

We have carefully considered all the relevant aspects of Oxfordshire's case. We do not consider its position different enough from that of other LEAs to justify a relaxation in its capping limit. Its permitted increase of 2.2 per cent. was the average for the counties and more than the average for other LEAs, such as metropolitan districts, which received 1.8 per cent.—yet all of them managed to set budgets within their provisional cap. It was difficult and painful, but they did it. We therefore propose that the original cap should be enforced. If the draft order is agreed to, that will result in a council tax reduction of almost £28 for a two-adult, band D household in Oxfordshire.

I understand that Oxfordshire is taking steps to put its financial house in order; it discussed that with me at a meeting. Councillors told me that they are in the process of adopting an action plan, which will involve short-term reviews, medium-term planning, target setting and zero-based reviews. I hope that those measures will bring real benefits to the authority through efficiency gains and improved service delivery.

To answer my hon. Friend the Member for Brent, East (Mr. Livingstone), we do not think that spending per head is the best measure of need to spend. Making allowance for the differing circumstances of each authority, Oxfordshire spends more than 13 other county councils do, compared with SSA. I did not therefore have sufficient grounds to treat Oxfordshire as a special case and raise its cap.

Dr. Evan Harris (Oxford, West and Abingdon)

The hon. Lady has said that the £3.5 million supplementary credit approval is sufficient this year to solve Oxfordshire's problems, yet in last year's debate she agreed with other hon. Members that it would be no more than a temporary measure to solve the acute problems at that time. Do not Oxfordshire's problems this year result solely from that temporary measure? Interest has to be repaid on the loan—

Mr. Deputy Speaker

Order. That is far too long an intervention.

Ms Armstrong

I understand the point that the hon. Gentleman is trying to make. But I did not say it was sufficient; I said it was given for a specific purpose. The authority made the decision not to use it for that purpose, and that is part of the problem that it has this year.

Mr. Robert Jackson

Will the Minister give way?

Ms Armstrong

No. I believe that I have given way twice to the hon. Gentleman.

Mr. Livingstone

She has not given way to me, either.

Ms Armstrong

Fine. I said that I would give way when I had finished the Oxfordshire case, and I shall do so.

Mr. Livingstone

The problem is that in the 1980s a Conservative-controlled council kept spending at a bare minimal level. Now that a decent coalition has come together, the council is caught because of its inheritance. It is not fair, because the system depends on whether one has the good or ill fortune of having had a council of a particular complexion in the past.

The Minister speaks of the need for accountability, but is she not aware that Oxfordshire councillors went to the people on the same day that we in the House were elected, and won an overwhelming mandate for the council's budget? What right has a Cabinet dominated by people from Scotland and the north, who have had the good fortune to have long-standing Labour councils that have built up decent services, to tell people from southern areas that we cannot catch up?

Ms Armstrong

It is interesting to hear that the hon. Member now wants to represent a shire area. I would welcome him to Durham; we, too, are a shire area. We may be in the north, but my authority suffers many of the same problems as Oxfordshire, but with the lowest income per household of anywhere in the country. I will not take lectures, even from my hon. Friend, about problems in local authorities.

Somerset has set a budget of £288.145 million, £3.4 million above its provisional cap, and says that all the additional money will go to schools and social services. It argues that it has the lowest permitted increase of all the counties and no significant useable balances. It also stresses how efficient it is.

It is worth repeating that capping is not fundamentally about efficiency. I hope that I can introduce a regime that is much more about efficiency. If it were, local authorities could simply increase expenditure as they saw fit, provided that they remained efficient. Such an approach, however, takes no account of the need that all Governments have to ensure that local authorities work with them in their public expenditure ambitions.

Somerset claims that all its additional spending above the cap is for education and social services. If that were to be the case, a budget at cap would involve those services being reduced by £3.4 million. In fact, Somerset has told me that, if it budgets to cap, the £3.4 million of savings will be made this year by cutting capital expenditure.

Mr. David Rendel (Newbury)

Liberal Democrat Members recently congratulated the Government on signing the charter for local self-government, which was an excellent thing to do. Surely the Minister must realise that that is completely incompatible with what she has just said about the need for Governments to control local government expenditure.

Ms Armstrong

The hon. Gentleman will see in Hansard tomorrow that that is not what I said.

As with Oxfordshire, we accept that Somerset has no significant useable reserves but, as I have already explained, that of itself cannot be sufficient reason to agree a capping concession.

Sir Robert Smith

The Minister is saying that the absence of reserves cannot be accepted of itself as a condition for lifting the cap. She said in the case of Oxfordshire that the reason for not wanting to do that was that it would set a precedent, but she also said that she was planning to change the whole capping regime, so surely it would be reasonable to accept this year that with no reserves it would be stupid to impose a cap, which can only do damage to this last year of the current regime.

Ms Armstrong

I think that I have dealt with that matter already. It is truly remarkable what hon. Members hear: they hear what they want to. I did not say in regard to Oxfordshire that anything was a precedent. Indeed, I talked about Oxfordshire not having useable reserves, and that not being a reason to lift the cap. The hon. Gentleman may disagree with my explanation, but I have none the less given it.

Having carefully considered all the relevant aspects of Somerset's case, I do not consider its position to be sufficiently different in degree or in kind from that of other local education authorities to justify a relaxation in its capping limit. Its permitted increase of 2 per cent. was the same as that of 10 other counties, and more than the average for metropolitan districts. We therefore propose that its original cap should be enforced. If the draft order is agreed by the House, it will result in a reduction of council tax in Somerset of £20 for a two-adult band D household.

Warwickshire has set its budget at £294.335 million—£2 million above its proposed cap. Warwickshire's case is unusual in that it turns on a single issue: the interaction between capping and the supplementary credit approvals that it has received for its major schools reorganisation programme. The difficulty for Warwickshire is that, although it gets additional standard spending assessment to cover the costs associated with the SCAs, it cannot increase its expenditure in the same way—the allowance was not passported through. As a consequence, the costs of servicing the SCAs have to be met by making reductions elsewhere in its budget.

We would not normally make a capping adjustment to reflect the costs of SCAs. However, we are keen to encourage authorities to grasp the nettle of removing surplus places. Warwickshire has made a serious attempt to tackle the problem of surplus places. Its reorganisation programme is by far the largest in the country; it has needed £27 million of SCAs from the Department for Education and Employment and has involved the closure of 24 schools and the merger of 22 more.

The results have been impressive: surplus places are down from 19 per cent. at the beginning of the 1990s to a projected 9 per cent. by 1999. Warwickshire has demonstrated that the £2 million that it has budgeted above the cap is an accurate reflection of the impact on its revenue budget of the schools reorganisation programme. It has also said that, if the cap is relaxed, all the additional £2 million will go to schools.

We have taken account of the fact that Warwickshire has been prepared to take tough decisions that will lead to savings in the longer term. We therefore propose that Warwickshire be capped at £294.335 million, £2 million above its original cap. That means that it will not have to reset its budget or incur the costs of rebilling.

We have considered carefully all the points raised by all the authorities involved in the capping process, to ensure that the caps that we have proposed are reasonable, appropriate and achievable. Where there are special circumstances, we have been prepared to make a concession. If the order is approved, we shall serve a statutory notice on each authority formally setting its cap. The authorities will have 21 days to reduce their budget in line with their cap and to set new lower council taxes. The final outcome will be a reduction in this year's council taxes in the affected areas of more than £9 million.

I commend the order to the House.

4.48 pm

Mr. Tim Yeo (South Suffolk)

In proposing the order, the Minister attempted to claim that it maintains the previous Government's policy. That is an argument that I have heard with interest and increasing astonishment. It is not an argument that has been much used by the Government, even on those issues on which they have been attempting to maintain our policies. It is also not an argument that rests easily with their constant insistence, on many other issues, that they will stick to their manifesto commitments. Indeed, the inclusion of a commitment in the manifesto apparently removes the need for the Government to ask for parliamentary time to allow a debate to take place before the policies are implemented.

As regards this order, the argument is completely flawed—and not merely by virtue of the fact that it reverses the stance that the Labour party took when we last debated this matter just over a year ago. Since the previous Government set out the figures for council spending—the standard spending assessments, the provisional capping limits and all the rest of the data—the situation has materially changed in three respects. First, the inflation target has been officially increased from 2 per cent. to 2.75 per cent. both for the current year, 1997–98, and for 1998–99. By loosening the reins on inflation without any compensating increase in the spending limits, the Government have effectively cut the level of service that councils can provide and that council tax payers can reasonably expect to receive.

Secondly, having handed over control of interest rates to the Bank of England—not, incidentally, a manifesto commitment, but also an issue on which the Government did not feel it necessary to come to the House to announce—the Chancellor introduced an ill-judged Budget that attacked the corporate sector and penalised long-term saving but did nothing to curb consumer spending. As a direct result of that Budget, interest rates have risen, thus adding further to the costs that local authorities must bear.

Thirdly, the Chancellor's smash-and-grab raid on pension funds, which—[Laughter.] It may be a matter of amusement to Labour Members, but every holder of a personal pension will now have to pay considerably more to maintain the benefits that they thought they had secured until the Chancellor launched his smash-and-grab raid. That may be a matter of amusement to Labour Members, but it is not a matter of amusement to millions of pension fund holders outside the House.

Mr. Tom King (Bridgwater)

Is my hon. Friend aware that it is not merely a question of the extra that they will have to pay? According to the director in charge of the pension fund for all the employees of a company in my constituency, the employees are already paying the maximum that they are allowed under the Inland Revenue rules. The measure will mean that they will all face a cut in their pension, which is unavoidable.

Mr. Yeo

I am grateful to my right hon. Friend for pointing that out. It is a very serious matter.

Mr. Bill OIner (Nuneaton)

On a point of order, Mr. Deputy Speaker. The intervention had nothing to do with the order.

Mr. Baldry

Further to that point of order, Mr. Deputy Speaker

Mr. Deputy Speaker

I shall answer the point of order before we hear about anything further to it. The hon. Member for Nuneaton (Mr. OIner) has a point. This is a local authority matter. It relates to a number of counties in England. It is not, therefore, as wide as employees' pensions.

Mr. Baldry

Further to the point of order, Mr. Deputy Speaker. Clearly you were not here for the beginning of the debate when Madam Speaker was in the Chair. She allowed the Minister to range much more widely than the close confines of the order and to introduce the debate, as I am sure your Clerks will advise you, with a general summary of the Government's local government policy. It is staggering that the Treasury team should be afraid to acknowledge that the Budget provisions on pension funds will cost Oxfordshire £2 million, which it estimates will cost 100 teaching jobs.

Mr. Deputy Speaker

Order. We are dealing with local government finance, not pensions in general.

Mr. Yeo

I will explain the exact consequences of the Chancellor's smash-and-grab raid for the local authorities mentioned in the order.

Mr. Nicholas Soames (Mid-Sussex)

In the context of local authority finance—it is clearly in that context—is my hon. Friend aware that West Sussex county council has written a letter to Sir Jeremy Beecham warning him that the finances of the county council and, therefore, of council tax payers will be grievously affected by the Chancellor's smash-and-grab raid on the pension fund, as will pensioners? Will he explain to the Minister for Local Government and Housing on behalf of Conservative Members that it is not enough for her merely to sit there with a smug smile on her face when pensioners and council tax payers will be grievously undermined, having already been so undermined by a lamentable Liberal Democrat administration—now succeeded by an admirable Tory one? Nevertheless, the measure will cause great harm to West Sussex county council.

Mr. Deputy Speaker

Order. Perhaps the House can do me a service. As a guideline, interventions should not be as long as the hon. Gentleman's.

Mr. Yeo

Nevertheless, Mr. Deputy Speaker, in that case your tolerance was clearly justified. My hon. Friend has a growing—indeed, a formidable—reputation as a doughty champion of the interests of West Sussex county council, its council tax payers and all current and future pensioners of that council. That is a serious issue, which Labour Members persist in finding extraordinarily funny. It is not funny for pensioners whose pensions are now at risk or for holders of personal pension funds who will have to increase contributions to maintain their benefits, and it will not be funny for council tax payers throughout the country.

Ms Armstrong

Does the hon. Gentleman accept that there will be no impact on local government until April 1999 at the earliest? [Interruption.] I am intervening, so I cannot respond to all those sedentary interventions. We have already begun to engage with local government on how the change will affect it and on the necessary steps to ensure that council tax payers will not have to pay anything additional.

Mr. Yeo

To use a phrase used many years ago in the House, I intend to deal closely and with relish with precisely the point the hon. Lady made, which is wholly unfounded, completely untrue and reflects an arrogance, a disregard and a contempt for the interests of pensioners current and future that I find breathtaking even from a Minister as ignorant of her brief as the hon. Lady.

The smash-and-grab raid was carried out in defiance of warnings received from Labour Back Benchers. It has placed a massive extra burden on councils.

Mr. Andy King (Rugby and Kenilworth)

When?

Mr. Yeo

As of two weeks ago. The income of council pension funds throughout the country started to be reduced two weeks ago yesterday. Never mind whether the next valuation is this year, next year or in 1999, the consequences are being felt today and the bill grows daily. The abolition of advance corporation tax relief on dividends has been estimated by the Labour-controlled Local Government Association to cost councils £300 million a year. I will return to that point.

The three new burdens on councils—the increase in inflation, higher interest rates and pension tax changes—all result directly from—

Mr. Austin

On a point of order, Mr. Deputy Speaker. I seek your guidance. Is the debate about council tax or the council tax limitation order? In which case, is the hon. Gentleman in order to extend the debate?

Mr. Deputy Speaker

The hon. Member for South Suffolk (Mr. Yeo) is in order. If he had been out of order, I would have been the first to say so.

Mr. Yeo

I am grateful to you, Mr. Deputy Speaker.

The three burdens on councils that I mentioned all result directly from actions of the Labour Government taken since 1 May. As councils all over the country, including the three mentioned in the order, start to feel the pinch, I have no doubt that the Government will repeat that they have merely maintained the limits set by their predecessors and that some of the burdens do not have to be dealt with until 1999. Those claims are rendered false by the deliberate way in which council costs have been substantially increased. Those extra costs arise as of now. It is because that situation has changed so fundamentally that the Opposition will not be voting to support the order this evening.

Mr. Robert Jackson

My hon. Friend is dealing effectively with the Minister's central argument that she is simply implementing the policy of the previous Government. As he explained, that is a highly implausible position. Does he accept that, last year, under the system by which it is possible for counties to set budgets above cap and appeal for their cases to be considered on their merits, Oxfordshire's case was recognised by the Conservative Government and that the Minister then responsible, my right hon. Friend the Member for Skipton and Ripon (Mr. Curry), has stated publicly that he would have recommended acceptance of a budget above cap if the Conservatives had been re-elected?

Mr. Yeo

My hon. Friend has placed on record a most important point. [Interruption.]

Mr. Deputy Speaker

Order. I am sorry to keep interrupting but there is too much noise in the Chamber. I must be able to hear what the Opposition spokesperson is saying. The House should be calm.

Mr. Yeo

The Minister gave an intriguing answer to the hon. Member for Normanton (Mr. O'Brien), who is no longer in his place. He asked about the distribution of resources among local authorities. The Minister replied that she hoped to achieve in due course a fairer distribution. What does that mean? If it means more cash for Normanton, which councils will receive less cash in the name of achieving greater fairness? Which of the criteria that are used to allocate resources among councils are she and her officials considering changing? When the Under-Secretary replies, will he say which criteria he proposes to revise?

In her 40-minute speech, the Minister, despite starting by saying that she would make some general remarks about the Government's intentions on capping, gave very little clue about their precise intentions. That is a great pity because there is much uncertainty among councils and council tax payers. Indeed, there appears to be a fair amount of uncertainty in the House, even extending to the Government Back Benches and the hon. Member for North-East Derbyshire (Mr. Barnes), who is no longer in his place.

The Labour party manifesto unequivocally pledged: crude and universal council tax capping should go". That pledge was repeated by the Deputy Prime Minister in his Budget day press release, but apparently it is not going to be honoured this year; nor, apparently, will it be honoured next year. When will it be honoured? When will councils enjoy the freedom that the Labour manifesto promised them and which many thought they would be starting to enjoy now? Will the Under-Secretary give the exact timetable?

Mr. Baldry

Does my hon. Friend agree that this is all the more extraordinary because it is one of the few changes that does not require primary legislation? Deciding on capping is a power, not a duty. There is nothing to inhibit the Government's exercising their power and achieving their manifesto objective, this year or any other, if they wish.

Mr. Yeo

My hon. Friend makes an important point. The matter could be dealt with immediately if the Government so chose. If when he replies the Under-Secretary is unable to give the House a firm timetable for the implementation of the pledge, the suspicion will grow that it will join the growing list of manifesto promises that Labour has thrown into the waste paper basket.

Mr. Robert Jackson

Far from abolishing the crude system of capping, the Government have made it cruder by not applying it with proper discretion.

Mr. Yeo

One of the legitimate criticisms of the capping system is that it has a substantial arbitrary element. [Interruption.] I acknowledge that it is not an unflawed system. If the pledge is eventually honoured, what will replace the present capping system? Labour's manifesto also states: we will retain reserve powers to control excessive council tax rises. I wonder whether the hon. Member for Brent, East (Mr. Livingstone) suspects that that is capping under another name. Perhaps the Minister without Portfolio thinks that that is how capping should be described.

Mr. Livingstone

I suspect that something nasty that I do not agree with may be coming along, but what depresses me is that I have not heard a word of apology from the party that brought in capping, imposed it on councils, and bankrupted the councillors who fought it. To make stupid partisan points when we are discussing the quality of life for children in care and the elderly in the local authorities concerned will be regarded as offensive by residents of those areas who are watching this stupid knockabout. We should focus on the parts of the Minister's statement that many of us are deeply unhappy with. All that this rant from the Opposition will achieve is to force some of us who had no intention of doing so to go into the Government Lobby.

Mr. Yeo

I expect to receive appreciation from an unexpected quarter. The Government are unable to persuade the hon. Gentleman to vote with them by their arguments but, speaking for the Opposition, I have been able to do so on their behalf. I make no apology whatever for having saved council tax payers in Lambeth, Southwark, Hackney and Islington from outrageous increases in council tax, which were hardly ever by matched by quality of service, by means of the capping system.

The Minister said that the Government have a clear agenda. If she has a clear agenda, under the system that will replace capping, will councils that set budgets that the Government consider too high be subject to a cap? Will the Government continue to set spending guidelines for each council? If they will not, will they each year set a percentage spending increase applicable to all councils to be regarded as the maximum permitted? Will the increase be equivalent to the rate of inflation, or inflation plus 5 per cent., 10 per cent., 20 per cent., or what?

The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Mr. Nick Raynsford)

That has nothing to do with the debate.

Mr. Yeo

It has everything to do with the debate because the Minister raised these very important questions in her speech. We wish to know the answers. In an hour or so, the Under-Secretary will have a chance to give them.

This debate is the ideal opportunity for setting out, even in general terms, the Government's thinking. Significant costs are incurred if a council that is capped has to revise its budget and send out amended council tax demands. If the Government retain a reserve power to cap without clearly stating in advance what specific criteria councils will be judged by, there is a danger of getting the worst of both worlds. Councils that still have spendthrift tendencies may wish to test the Government's resolve by setting sharply higher budgets. The general level of council spending is likely to rise quickly in the short term because councils may fear that they could later experience the re-imposition of capping. The sooner the Government clarify their intentions, the better.

Dr. Alan Whitehead (Southampton, Test)

Will the hon. Gentleman set out the criteria that the Conservative Government set for capping when they instituted it?

Mr. Yeo

I appreciate that the hon. Gentleman has not been here long, but his party is now in government. It is the Government who must answer questions. When we come to fight the next general election we will set out our policies on local authority spending. For the time being, it is the Government who must answer questions about their intentions on the control of council spending.

I shall now return to the crucial subject of the Budget's abolition of tax credits for pension funds. The Chancellor took that extraordinary decision—a smash-and-grab raid—despite a stark warning from the hon. Member for Putney (Mr. Colman), who wrote to the Chancellor that it had been estimated that the abolition of ACT would add at least £300 million to local authorities' pension costs and that no such increase could be afforded by local authorities without making further cuts to services to their local residents, given that the alternative—raising council tax—would be difficult under current restrictions.

The hon. Member's letter was written before the Budget and the figure of £300 million has been confirmed by the Local Government Association since the Budget.

The Government's reaction, however, remains extraordinary. We have seen this afternoon that many Labour Members consider it a matter of mirth. The Financial Secretary to the Treasury and, this morning, the Secretary of State for Social Security claimed that the Budget was good for pensions. Their claims fly in the face of reality. The reaction of the Minister for Local Government and Housing was dismissive and irresponsible. When she replied to the hon. Member for Putney on 3 July, she said that the Government would take all these factors into account in determining the level of local authority provision for 1999–2000 and subsequent years.

If councils do not increase their pension fund contributions until 1999–2000, the problem will have assumed horrendous proportions. Failure to act for the next two years does not make the problem disappear; it simply makes it much more serious. In some cases, depending on the actuarial position of individual pension funds—possibly those in West Sussex to which my hon. Friend the Member for Mid-Sussex (Mr. Soames) referred earlier—if the change is not responded to immediately by an increase in contributions, it might even jeopardise the possibility of individual pension funds meeting their financial liabilities. Extra contributions into those pension funds can come from only one of three sources: cuts in services, increases in council tax, or a higher revenue support grant. The significance of those choices for today's debate is that, as long as capping remains in place, the second option is effectively ruled out.

All councils, including the three referred to in the order, face the prospect of cutting services. The shortfall in dividend income to pension funds started to accumulate two weeks ago, immediately after the Budget, so the longer the Government postpone a decision on how to meet that shortfall the worse the problem becomes. The £300 million problem faced by the Government this year becomes a £600 million problem next year and a £900 million problem by the time the Minister proposes to get round to considering it.

Somerset county council faces the prospect of having to curb spending plans by £3.4 million. By 1999–2000, it will have to find £6 million of extra pension fund contributions. My right hon. Friend the Member for Bridgwater (Mr. King) will explain to the House in a moment the consequences of the order for his constituents and those in the rest of the county. Consider how devastating the consequences of the Chancellor's smash-and-grab raid will be for Somerset.

Warwickshire county council made a persuasive case about the consequences of a £2 million reduction in spending plans—the effect of the cap originally announced by the Secretary of State. By 1999–2000, Warwickshire will have to find almost £4 million for extra pension fund contributions.

Oxfordshire county council proposes to meet the required cut of £6 million by sacking 50 teachers, closing 15 small libraries, abandoning transport for post-16 pupils, cutting £500,000 from building maintenance and cutting £1 million from the roads maintenance programme. On the subject of Oxfordshire, which my hon. Friend the Member for Banbury (Mr. Baldry) will enlarge on in a moment, I ask the Minister for Local Government and Housing whether she agrees with the statement made on 22 May 1996: The Government are acting against the wishes of the people of Oxfordshire … The people want the opportunity to fund their schools and their social services properly, but they know that the Government will manipulate the figures to ensure that they cannot do that. That is not good enough."—[Official Report, 22 May 1996; Vol. 278, c. 359.] That is what the hon. Lady told the House in a debate last year. If she still believes that that is true, why is she moving this order today? If she does not believe that it is true, what caused her to change her mind?

Mr. Robert Jackson

My hon Friend has described the costs that will be imposed on pension funds against the background of the lowest-spending county council in the country—Oxfordshire. That county council would need to spend an extra £13 million if it were to spend at the average budget level. The Minister spoke about it as though it were a profligate council; it is a well-run council that will be gravely damaged by the order.

Mr. Yeo

My hon. Friend is absolutely right. On top of the cuts which Oxfordshire county council faces as a result of capping, it faces an extra £2 million bill for pension fund contributions every year from now on. That means that another 17 teachers face the sack, five more small libraries face closure and more buildings and roads will go unmaintained. That is the effect of the smash-and-grab raid the Chancellor has carried out on the pension fund to which Oxfordshire county council contributes.

Mr. Soames

Does my hon. Friend agree that the woeful tale of what has been inflicted on Oxfordshire as a result of the Government's decision could also be inflicted on West Sussex? If it has to make up the shortfall brought about by the smash-and-grab raid from its own resources, the same awful cuts will be inflicted on West Sussex county council—with a new administration—which has run its affairs with a good deal of prudence.

Mr. Yeo

My hon. Friend has put his finger on the point. His county council and many others will face a crisis when they draw up their budgets next year because of the Minister's refusal to say that she will even consider the problem for two years.

One local authority which, I am glad to say, avoided capping this year, is the London borough of Hillingdon. Its spending is currently some £190 million a year but it now faces a bill of £2.2 million a year extra for its pension fund contributions. Where do the Government think Hillingdon should find that money? Will Hillingdon's cap be raised next year so that the shortfall—

Mr. Deputy Speaker

Order. The hon. Gentleman must not dwell on local authorities that are not specifically mentioned in the order.

Mr. Yeo

I accept your ruling, Mr. Deputy Speaker. Hillingdon had been in my mind because I spent a pleasant morning there today in the company of an excellent local resident and business man, John Randall.

In dealing with this issue, the Government come face to face with an unpleasant reality. Those early joyful days when the Government Benches were packed with new hon. Members waving their Order Papers at every utterance of the Minister who was speaking are passing. Many Labour Members elected for the first time this year have backgrounds in local government. They know privately what this smash-and-grab raid means for councils throughout the country, which is why they have been told not to speak to the media about it. I hope that, before long, some of them will have the courage and integrity to recognise that they were elected not to echo the Prime Minister's words or to jump at the whim of the Minister without Portfolio, but to serve the interests of their constituents, to exercise their judgment on behalf of the voters and to use the freedom of speech in the House. Hiding from the problem created by the Government will not make it go away; postponing looking for a solution will not make the solution easier to find, cheaper to implement or more palatable to those who pay the bills.

This debate is timely. The order is a valuable reminder of the difficulties faced by many councils—difficulties created in the past two and a half short months by the new Labour Government. They are difficulties to which the House will return, time and again, in the coming months and they will get infinitely worse as each week goes by without the Government facing up even to the need for a solution. There is time, even during this debate, for the Government to show that they understand and are willing to grasp the nettle but, in the absence of any indication that they are doing so, Conservative Members will not vote for the order.

5.19 pm

Mr. Andy King (Rugby and Kenilworth)

Thank you, Mr. Deputy Speaker, for allowing me to use today's debate to make my maiden speech.

I am extremely honoured and privileged to be here representing the constituency of Rugby and Kenilworth. I turn first to the person whom I have replaced, Mr. James Pawsey. He was a good constituency Member of Parliament and an extremely worthy opponent. I wish him and his family well. A Member of Parliament who preceded James Pawsey was Bill Price, who served the constituency of Rugby between 1966 and 1979. Throughout the campaign, I was constantly reminded of how good a constituency Member of Parliament Bill Price had been by people who spoke of him warmly and affectionately. I have never met Bill Price, but I look forward to meeting him one day soon. I thank him for the service he gave to Rugby.

In preparing for my speech, I looked at the maiden speeches of both James Pawsey and Bill Price. It is strange how cyclical issues are—they come back to haunt one. James said: I move from the question of reorganisation to that of falling rolls. I believe that falling rolls, particularly in primary schools, represent a magnificent opportunity to improve the teacher-pupil ratio. Sadly, during their 18 years in government the Conservatives failed singularly to address that issue, which is so important to young children. He also said: Indeed, I hope that the present Administration will look for fairer means of financing local government, for the present system of financing local government is manifestly unfair."—[Official Report, 16 May 1979; Vol. 967, c. 346.] The Conservatives failed on that, too, I am afraid. They failed terribly in respect of Warwickshire and the people of Warwickshire do not feel that they have been treated fairly, especially in the past seven years. Lastly, James turned to another issue of the day—the Hospital of St. Cross, which has been constantly under threat throughout the period during which my predecessors were in this place.

The constituency of Rugby and Kenilworth is at the very heart of England. It has enjoyed local industry—especially manufacturing—and is now beginning to welcome new industries to the area. We have two large traditional industries. I wish GEC Alsthom especially well at this time. I visited it some six months ago with my right hon. Friend the Member for Derby, South (Mrs. Beckett), now President of the Board of Trade, and I was extremely impressed by the standard and quality of the manufacturing taking place in Rugby. Peugeot has a plant at Ryton in my constituency and is also doing extremely well. Warwick university is situated near Kenilworth and has an enormous influence on life in the town.

Rugby and Kenilworth have suffered quite badly during the recessions experienced under the Conservative Government, but we are at last seeing regeneration in our area. Large shops are returning to our town centres, which currently look more like Beirut than those of a modern economy. Sainsbury has recently moved into Kenilworth high street, which is excellent news because the shops there were dying. At long last, there is about to be a major redevelopment in Chapel street in Rugby, and Marks and Spencer is committed to opening a large new shop there. I welcome those moves by two large retailing companies, which show confidence in Rugby and Kenilworth.

As one of my first duties, I had the privilege of opening the new temporary library in Rugby—another long-awaited development. In fact, we have been waiting for the best part of 50 years and we are looking forward to having within one or two years a new library, a new museum and a new art gallery in Rugby.

Jim Pawsey referred to the reorganisation of schools and the use of receipts from such a reorganisation. As my hon. Friend the Minister for Local Government and Housing said, we undertook a major reorganisation of Warwickshire schools. We based that reorganisation on a full and proper consultation with all of the stakeholders in the system—pupils, governors, parents and teachers—and at the end of the process we came up with the right result. We took some very painful decisions, but the children of Warwickshire and of my constituency have benefited enormously from that reorganization.

Today the people of Warwickshire are about to embark on another consultation exercise, this time about the future of health services at the Hospital of St. Cross. I want that consultation to be as meaningful as the exercise undertaken in respect of the reorganisation of education in Warwickshire. I want my constituents to play a full and informed part in the debate, which is to take place over the next three months. I want us to emerge at the end with a national health service that is worthy of a Labour Government—one that enables us to deliver good-quality services at local level for our country's people.

I greatly welcome my hon. Friend the Minister's handling of the sensitive issue of the £2 million for Warwickshire. That money is vital to the county in delivering the quality of education to which we are committed. My hon. Friend listened to our case and understood our uniqueness and I am eternally grateful to her for doing so. She mentioned that we took out surplus places in Warwickshire—in fact, 10,000 were taken out during the reorganisation, and every penny of the money saved has been put back into the pupils. We have targeted all our expenditure on the children who need the resources for their education. We have also reinvested in crumbling schools, and I am proud of the results of our efforts.

I am also very proud to have been a member of Warwickshire county council for the past eight years. Ian Bottrill has provided superb leadership in guiding us soundly and safely through a very difficult period. I pay tribute also to John Airey, who was chair of education during the reorganisation. He recently left politics, and I wish him well. I hope that he will return to public office in the very near future.

In Warwickshire, we are determined to provide the best possible education for our children. We will use the £2 million to reduce class sizes for five, six and seven-year-olds, and we shall deliver on the Labour party's promise to make education our first priority. As I have said, the Minister has listened to and understood our arguments, and she has begun to address the unfairness in funding for Warwickshire.

The previous Government listened to us often, but they never took action to address the problems. This Government have acted: we are committed to a partnership between central Government, local government and industry. I look forward to participating in that meaningful partnership, and I shall truly value the experience of working together. At long last, we have a national Government who support local government.

Warwickshire representatives at all levels—Members of Parliament and councillors, both county and borough, district and parish—have worked together across party political boundaries. We have agreed fully when fighting for Warwickshire's cause not just in the past few months, but over the past five years. I hope that that spirit of co-operation will continue. I urge Conservative Members of Parliament to show the same level of support for Warwickshire's case as the local Conservatives in Warwickshire.

5.31 pm

Mr. Tom King (Bridgwater)

It is a great pleasure to follow the hon. Member for Rugby and Kenilworth (Mr. King), who delivered his maiden speech. Coincidences often occur in this place, and the hon. Gentleman may be aware that I spent five years of my life—at a rather junior age—in Rugby. I therefore, know the Hospital of St. Cross.

The hon. Gentleman showed a fine disregard of the rules in failing to mention one of Rugby's greatest achievements, which has become a substantial export earner for this country. I watched the poor English rugger team being mauled in Australia, but they earned £2 million in the process, so one can see what a powerful industry was founded by a humble school and a sound disregard for the rules.

I am sure that hon. Members enjoyed the hon. Gentleman's remarks and the sincerity with which he delivered them. We look forward to hearing from him again. He struck one very good bipartisan note. Too often in the House in recent years, we have heard allegations about the total collapse of manufacturing industry in this country. Such attacks do no credit to the fine manufacturing businesses in this country. The hon. Gentleman was right to pay tribute to two fine businesses which stand comparison with any in the world: GEC Alsthom and Peugeot. The House appreciated his references, as will the companies. One never knows one's luck in this place: perhaps the brief entrance and departure of my right hon. Friend the Member for Kensington and Chelsea (Mr. Clark) may secure the hon. Gentleman an entry in a future diary, as other hon. Members have enjoyed—or not enjoyed—in the past.

As a Somerset Member of Parliament, I am disappointed that, because of the breakneck speed of the timetable imposed on the passage of the Finance Bill, my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory)—who wished very much to participate in the debate—is not able to take part as he is helping to lead for the Opposition in Committee. I am sure that the Government will understand that this is a very sad day for Somerset, which faces the prospect of having to rebill every council tax payer in the county. This county, which faces a serious financial challenge and has no balances, now faces a bill estimated at £250,000—totally nugatory expenditure—to rebill the whole county.

I take no comfort or pleasure in telling the House that I gave the clearest possible warning to the Liberal Democrat administration on Somerset county council that it was virtually certain to face this outcome. Unless one was prepared to ignore totally the Labour party's assertions in opposition and in government and imagine that, within a month of coming to government, it would overturn its most elementary manifesto pledges and loosen the purse strings on public expenditure, one did not need to have much political experience to recognise the risks that were being taken by the Somerset county council Liberal Democrat administration. It took the decision knowingly: it was warned by the chief executive officer, the county treasurer and the county solicitor of the risks involved. Two former county councillors, now the hon. Members for Somerton and Frome (Mr. Heath) and for Taunton (Mrs. Ballard), took the risk and voted for the proposal.

Somerset county taxpayers now face added expense, on top of the money that the previous Liberal Democrat administration wasted on expensive lawyers when trying to ban access to council land. It also wasted money on an abortive scheme to provide sites for new age travellers. The county could have employed 10 new teachers with that wasted money.

Mr. Robert Jackson

rose—

Mr. King

I am sorry, but I must speak directly. So far as I know, my remarks do not relate to Oxfordshire.

I take no pleasure in making these points. We do better for our county if we work together and listen to, and take, advice. I do not claim false credentials in this matter. Two years ago, we fought successfully to raise the cap for Somerset. I see that the right hon. Member for Yeovil (Mr. Ashdown) is in the Chamber: at the time, he kindly congratulated me on my actions. I shall always be prepared to stand up for my county when the cause is just, when a case can be made based on the evidence, and when there is some prospect of achieving a successful outcome.

Hon. Members who read the excellent brief prepared by the Library will see that, when Somerset exceeded the cap, we stood together, fought the case and won it. Those who look at the present case will see that there is no prospect of our taking it to a favourable conclusion.

Mr. Jackson

One of the Government's central arguments is that they are simply continuing the policies of the previous Administration. However, as my right hon. Friend points out, the previous Administration agreed to increasing the budget over cap in Somerset a couple of years ago.

Mr. King

I find it offensive that, if the risks had not been taken, the county council could have accepted a perfectly sensible proposal for maintaining the cap and expenditure within it. Funding for education and social services could then have been protected properly. However, that amendment was rejected out of hand. We are back where we started—but £250,000 worse off. The county must now make economies, which could have been achieved through sensible planning much earlier in the cycle, in a rush, well into the financial year. Hon. Members representing Somerset constituencies will have received the letter from the county treasurer today saying that the council will have to search around to find the savings that must be made. Clearly, there will be hardship.

Mr. Paddy Ashdown (Yeovil)

I apologise to the right hon. Gentleman and to the House for intervening when I shall not be able to stay for much more of the debate. I regret that very much.

The right hon. Gentleman is right to say that we have fought together on a cross-party basis. For that reason I deprecate the fact that he is now making the cheapest party political point. He criticises the argument about breaching the cap, but when the argument was put before the county council, did the Conservative members vote against it? No, they did not. They abstained. The right hon. Gentleman will go into the Lobby tonight to vote against the break of a cap, which he did not oppose originally. That is a totally irrational and illogical position. Does he not understand that?

Mr. King

The right hon. Gentleman knows perfectly well that the amendment put forward by the Conservative group, which would have enabled the waste of £250,000 to be avoided—[Interruption.] Will hon. Members who are not even Somerset Members contain themselves so that I may reply to the right hon. Gentleman? The amendment proposed by the Conservative group was voted down, calling the entire budget into question. Of course the Conservative group could not vote against the main question or there would have been no budget.

The leader of the Conservative group said that the difficulty was that some wretched Liberal Democrat would say that because the Conservatives had not opposed the measure, therefore they had supported it. I never dreamt that the leader of the Liberal Democrats would fall right into that trap.

Mr. Ashdown

rose—

Mr. King

I know that the right hon. Gentleman has to leave, but I hope that he will not mind waiting a moment.

I quote from the right hon. Gentleman's speech in reply to the Budget. He said: Under a Labour Government, my county of Somerset will have to sack 90 teachers this year."—[Official Report, 2 July 1997; Vol. 297, c. 328.] I give the right hon. Gentleman credit—he has said that before. The leader of the Liberal Democrats and the hon. Member for Somerton and Frome have said the same thing.

That is outrageous. The letter from the county treasurer today states that the council will look around for alternative savings. I understand that it is not considered necessary to sack 90 teachers this year. Alternative economies can be made. I challenge the right hon. Gentleman to make sure that he stops his colleagues in the Liberal Democrat party sacking teachers in Somerset this year. That must not happen. It would be intolerable if it happened because of the incompetence and risk taking of a Liberal Democrat administration.

The case is not helped if it is accompanied by misleading propaganda. We constantly hear the statement that Somerset had the lowest increase of any authority in the country this year.

Mr. David Heath

No—county. [Interruption.]

Mr. Deputy Speaker

Order. There must be no interruptions when an hon. Member is addressing the House.

Mr. King

Hon. Members say that Somerset had the lowest increase of any county. That is, to say the least, economical with the truth. They do not go on to say that 16 other counties had the same level of increase. What they say is technically true, but grossly misleading.

I hear it endlessly repeated by the leader of the Liberal Democrats that Somerset is the most efficient county in the country. I am proud of Somerset and I have been proud to represent it. Some of the things that the county does, it does well, but such assertions do not help the county. The Department of the Environment can easily establish the facts. I spent three and a half years on the Government Front Bench as Minister for Local Government, the job that the hon. Member for North-West Durham (Ms Armstrong) is doing now. It does no good for a county's case when people pretend too much or do not tell the whole truth.

Mr. Ashdown

The right hon. Gentleman knows perfectly well that I said that Somerset was, by the Government's own figures—his Government—the most efficient in the delivery of education. It has the lowest administration costs per pupil. Those are not my figures. They are not even the Audit Commission's figures, but those of his own Government, when they were in power.

I am a little confused by the right hon. Gentleman. He seems to be criticising Somerset county council for seeking to breach the cap, yet we understand that tonight he will go into the Lobby in favour of breaching the cap. Can he explain this inconsistency?

Mr. King

I will deal with all those issues in my speech, but I am worried about the right hon. Gentleman. Will he tell me when he has to go? [Interruption.] He has come into the Chamber, intervened twice and threatened to leave at any moment. He has asked me a fair question, but I hope that in fairness he will allow me to reply in the right order.

Some may consider these matters to be cause for amusement, but I agree with the hon. Member for Brent, East (Mr. Livingstone). I weep for Somerset and the money that has been wasted. The county faces grave problems. I am to lead a delegation to the Minister next week to complain about the unfairness of the allocation system, and to seek to get the area cost adjustment altered. Those are serious matters. We cannot afford the waste and extravagance that we face.

I shall now say something that the right hon. Member for Yeovil may find more agreeable. I shall deal with the Government's performance. We listened to the Prime Minister being singularly economical with the truth in his exchanges with the right hon. Gentleman. The right hon. Member for Yeovil has been right. The Prime Minister keeps boasting about the extra money that he has provided for education, but the right hon. Gentleman is seeking to establish that it will not be available this year. The Prime Minister keeps trying to pretend that he is providing more money for education this year.

I am struck by the change that has overcome Labour Members. My hon. Friend the Member for South Suffolk (Mr. Yeo) referred to the Order Paper wavers during the Budget. Many new Members have not learnt that when a Chancellor delivers a Budget speech, they must wait for the end of the sentence or the end of the next sentence. The way in which the Chancellor manipulated his party and concealed the reality of the Budget had Labour Members cheering his announcement of £1.3 billion for new school building. The Order Papers were waving, and half the Labour Members never heard him say that that would be over the next five years. They did not realise that it was not such a substantial injection of cash as it sounded.

The Prime Minister has been seeking to establish, and the Chancellor has been seeking to persuade his party, that happy days are here again and that the Budget was generous. Yesterday, however, the Prime Minister changed to an earnest assertion that things are terribly tough and that the House must understand that. There is not much Order Paper waving any more.

Dr. Lynne Jones (Birmingham, Selly Oak)

I am a little confused by the logic of the right hon. Gentleman's argument. Did he or did he not support the provisions made by the previous Government to allow councils to apply for a redetermination of their spending limit? If he did, why is he condemning Somerset council for going through that process, when he accepts that it is operating under considerable spending constraints?

Mr. King

The hon. Lady will understand that I have some background in and knowledge of these matters. I was Minister for Local Government for three and a half years. I have some interest in and understanding of the way in which assessments are made. I made an assessment myself—my own judgment—which proved to be correct, that two years ago we could produce a case that was convincing and could justify and achieve the lifting of the cap. This year, my judgment was that there was no realistic prospect of repeating the exercise and that such a gamble simply could not be taken with Somerset county council taxpayers' money.

The hon. Member for Birmingham, Selly Oak (Dr. Jones) may be impressed by that judgment or think that it was luck, but it seems to have reflected accurately the outcome—the effect of which is that we shall have to rebill the county, and a quarter of a million pounds has been wasted. The county councillors who voted to exceed the cap said, "We thought that we'd have a go." I regarded that as profoundly unwise and I told them so. They were warned of the risks that they were running also by the council's chief officers.

Dr. Jones

Will the right hon. Gentleman give way?

Mr. King

No, I am sorry.

The county council is entitled to expect assistance from the Government because of the extra costs imposed by the Budget that were not provided for in the original local government settlement.

I should like to reinforce the comments on pension funds made by my hon. Friend the Member for South Suffolk. The Minister for Local Government and Housing is right to say that the issue will not arise for two or possibly three years. As we know, however, the impact has already begun to be felt. Comments such as, "Hopefully we can ignore the matter and hope that something turns up when we have to deal with it," are the route to bankruptcy. The Minister rightly said also that the Actuary will not examine the effects until next year. The county treasurer stated: the Actuary assesses the impact … in 1998 to take effect from April 1999". I think that the Minister realises that the Government's advice had better change, because it is insufficient. It is manifestly inadequate to pretend that the effects are not being felt—because they are, and provision should be made now to deal with them. Authorities are entitled to hear how the Government will deal with the matter. Ministers seem to be telling authorities, "You will incur the costs and lose the benefits now, and in two years' time we shall talk about what we might do to help you." How can a responsible authority budget in such circumstances?

Changes to pensions are not the only matter with which authorities will have to contend. Most hon. Members do not appreciate that the fuel duty increase, for example, will have a tremendous effect. The Chancellor has shown great skill in managing to introduce tough measures that half the population does not understand. In one year, his fuel duty increase will raise £1.25 billion. Somerset is a rural county and, therefore, has a substantial bill for school transport—which I think that the hon. Member for Somerton and Frome will be able to confirm is £4.8 million. The county will now face an unpredicted 10 per cent. increase in fuel costs.

Moreover, the Budget statement states that 0.8 per cent. increase in inflation will be directly attributable to the Budget, further adding to the Somerset's costs. Since the general election, the county has also had to face three interest rate rises, each of which costs it £270,000. Therefore, to date, the county faces a per annum increase of £810,000 in interest rate costs. Although each of those items might be manageable in circumstances in which Somerset was not against the wire, we now face a situation in which one cost is being piled on to another.

It was abundantly clear that Ministers would not agree to lifting the cap. In the first months and year of a Labour Government, they wanted to build confidence—with statements from the iron Chancellor on the strict control of public expenditure—in their ability to manage the economy. Nevertheless, the public received no warning about removing the advance corporation tax credit, which will increase pension fund costs for Somerset by £2 million. We were told that there would be a quick little Budget to implement the windfall tax, but what did we get? We got a major, completely unpredicted revenue-raising Budget.

Mr. Soames

Will my right hon. Friend give way?

Mrs. Louise Ellman (Liverpool, Riverside)

rose—

Mr. King

I am sorry, but I want to make this point.

I have made my position on capping clear, and I have given advice to the county based on that position. I now find, however, that the Government have imposed costs that were not mentioned in their manifesto. They gave no indication that they would impose those costs or accelerate duty increases, which usually occur in November, by five months. Somerset faces those additional costs.

Opposition Front Benchers have repeatedly challenged Ministers to contribute to compensation for local authorities so that they can meet the unexpected cost increases caused by the Government's revenue-raising activities. Ministers have not even been willing to respond to those requests, and I think that that is outrageous. Therefore, for precisely those reasons—in answer to the right hon. Member for Yeovil—I will certainly vote against the order.

Mr. Soames

Does my right hon. Friend agree that not only is it a matter of the Somerset ratepayers' position being jeopardised—because of irresponsible and reckless Liberal Democrat gamblers—but the Budget represented an overall assault on Britain's rural constituencies? The Chancellor's reckless smash-and-grab raid on pensions and increase in fuel duty will bear very heavily on rural constituencies. Will my right hon. Friend draw into his remarks not only those irresponsible people in Somerset but rural councils across the land?

Mr. Deputy Speaker

Order. I should hope that the right hon. Gentleman will not discuss councils across the land, because the order deals with only a few councils.

Mr. King

Any rural county council, whether in Somerset or West Sussex, must be concerned by the matter raised by my hon. Friend the Member for Mid-Sussex (Mr. Soames).

Sir Robert Smith

Will the right hon. Gentleman give way?

Mr. King

No, I am sorry.

I will fight for Somerset's interests if I think that a case can fairly be made and won. Sometimes one is disappointed and sometimes one would like to have more money. The challenge will be to achieve proper changes in the area cost adjustment—an issue on which I think that Opposition Members will be able to stand as one.

Yesterday the House held a debate on rural affairs which was attended by four Labour Members—just 1 per cent. of their number. The message I drew from that poor attendance is that grant distributions are about the appeal for resources and the relative requirements of urban and rural areas, of metropolitan districts and the shires and especially of London and the rest. When I was Minister for Local Government, I was told that the only real difference that might be made by the holder of that office was measured in terms of how much he or she did for London. Resources for the other authorities were crucially affected by the determination for London.

I warn other hon. Members from rural counties that we face a battle over the area cost adjustment because the voice of the rural counties is very much smaller in the House than it was. To get a fair share we shall have to fight against the voting mass of Labour Members representing urban interests. This is not a happy occasion for Somerset. I have had some pretty tough things to say and I regret that we have not been able to stand together, save money for Somerset and work constructively for a better outcome for the county.

5.59 pm

Mr. James Plaskitt (Warwick and Leamington)

I shall be happy to confine my remarks to the order.

I congratulate the Minister for Local Government and Housing on her decision with regard to Warwickshire. That decision is welcome news for my constituents and will be welcomed throughout the whole county. I thank her for receiving our cross-party delegation, and I thank her and her officials for listening carefully to our arguments.

Warwickshire's case arose from the consequences of school reorganisation, as my hon. Friend the Member for Rugby and Kenilworth (Mr. King) outlined in his excellent maiden speech. The council took a bold initiative and certainly demonstrated leadership in embarking on a school reorganisation that involved the closure of 24 schools and the removal of 10,000 surplus places. It was an extremely effective operation and showed other local education authorities, which may in due course have to face the same problem, how it could be dealt with. Not to have conceded Warwickshire's case would have gent a very unfortunate message, not only to the schools in my county but to all local education authorities which will need to deal with surplus places in due course.

There should not be a financial penalty for carrying through an efficient and effective reorganisation of schools, yet the way the capping rules are drawn means that such a penalty does or could exist. Because Warwickshire's spending is slightly above its standard spending assessment, the capital financing charge arising from the reorganisation was not automatically reflected in the cap. Listening to Warwickshire's entreaties, my hon. Friend the Minister saw the absurdity in that aspect of the capping regime and, accordingly, allowed Warwickshire's budget. That decision means that people in my constituency and throughout the county will see the benefit of the Government's commitment to education, but the story is very different in Oxfordshire.

I very much regret that my hon. Friend the Minister decided in the end to impose the cap on Oxfordshire. I served on that authority for 12 years and was one of its leaders for six years. I can assure my hon. Friend the Member for Brent, East (Mr. Livingstone) that he should not be fooled by the suit because I was certainly no Derek Hatton. The six years that I spent leading that authority were characterised by the fact that we had to set budgets that inflicted savage cuts in the whole range of services provided by the county council, all as a result of the capping regime.

In recent years, I was part of several delegations to the Department of the Environment and argued Oxfordshire's case with the previous Government. They were cross-party delegations; indeed, the hon. Member for Wantage (Mr. Jackson) accompanied me a number of times. We were grateful for his support.

The current set-up imposes a cap when increases are deemed to be "excessive", as it says in the regulations. It is absolutely impossible to argue that any part of Oxfordshire's budget can be characterised as excessive. In per capita terms, Oxfordshire is the lowest-spending county council in the country. Its cap is set at 1.3 per cent. above SSA, whereas the average is 2.4 per cent. At the capped level, the increase in Oxfordshire's council tax will be just 2.4 per cent., the lowest of any county council in the current round.

The council has gone a long way to try to meet the provisional cap. This year, it has already imposed cuts totalling £10 million on a wide range of services. They are very harmful cuts, but they still leave the authority with a budget provision £6 million above the provisional cap. That is on top of cuts of more than £60 million over the past six years.

The order will impose a further £6 million-worth of cuts which will hit all services. Where does that leave the education service in Oxfordshire? Thirty-two per cent. of primary children are already in classes of more than 30, which is twice as many as two years ago; 280 teaching posts have been cut in the past four years, and more are now under threat.

Dr. Lynne Jones

Does my hon. Friend agree that the order is hardly in line with our manifesto which contained a pledge to reduce class sizes to under 30?

Mr. Plaskitt

I am grateful for that intervention; I was about to make precisely that point.

Mr. Robert Jackson

It was always a pleasure to work with the hon. Gentleman in trying to get some sense out of the previous Government. Indeed, we succeeded in doing so last year. The hon. Gentleman is making a helpful speech on behalf of Oxfordshire, but I hope that he will answer the Minister's criticism of the way the county spent the £3.5 million that was agreed by the Conservative Government last year. He was the leader of the council and made decisions about the spending of that money. The Minister was critical of how it was spent, so I hope that the hon. Gentleman will take this opportunity to answer her accusations.

Mr. Plaskitt

The help, as the hon. Gentleman regards it, came in the form of credit approvals and was very much a temporary respite.

The measures that the Government have introduced are beginning to channel extra money into Oxfordshire for education. They are, of course, extremely welcome, but they are only a trickle when compared to the gaping hole in the bottom of the bucket which is caused solely by the impact of capping. It might be said that councillors in Oxfordshire could protect schools by making cuts elsewhere, but any cuts to fill the gap would have to be very savage and would affect the most vulnerable people. Therefore, if the order is passed, schools will be hit again. It is impossible to justify that when the alternative would have been to allow the public in Oxfordshire to choose to have an average council tax increase in order to maintain decent funding levels for their services. It is an indefensible situation, and, as my hon. Friend the Member for Birmingham, Selly Oak (Dr. Jones) pointed out, it is a real brake on our ability to advance the cause of education in that particular county.

The whole problem stems from the capping regime itself. It is, and in my view always was, incompatible with local democracy, and it must be abolished. I welcome the Government's commitment to move towards its eventual abolition. Those of us who have over the years campaigned vigorously against capping are not asking for a local government spending free-for-all. That is not the alternative to the abolition of crude capping. I am convinced that local authorities across the country are fully willing to play their part in the control of public spending, but the issue must be dealt with by mechanisms that are compatible with decentralising power and reinvigorating local democracy.

When my hon. Friend the Under-Secretary winds up, I hope that he will be able to give me and local authorities up and down the country reasons to hope that work is in hand, that consultations are under way and that we can anticipate as speedy a demise as possible of this discredited and damaging mechanism.

6.9 pm

Mrs. Jackie Ballard (Taunton)

I welcome the Government's decision to sign the European charter for local self-governance. I also welcome the announcement that they are committed to ending the capping of local authority budgets, although we do not yet have a timetable. I, too, welcome the decision to accept Warwickshire county council's appeal.

I am pleased to support the statement made by the right hon. Member for Holborn and St. Pancras (Mr. Dobson) in the House just five months ago that

The incoming Labour Government will be based on the supposition that democracy depends on the people who take the decisions carrying the can and the people who carry the can taking the decisions."—[Official Report, 3 February 1997: Vol. 289, c. 701.] I am a generous person, but I am afraid that that is all that I can welcome today. Today is a sad day for local democracy and must be the day when the honeymoon wears off and the local government bride and central Government groom start arguing about more serious matters than which end of the toothpaste tube to squeeze.

The Minister spoke earlier about increased partnership between local and central Government. It is a strange partnership when one partner tells the other how much they can spend. It is a recipe for marital disharmony if ever there was one. No wonder that even the Labour-controlled Local Government Association has started to criticise the Government.

Squeezing the toothpaste tube is a suitable analogy because, over the past few years of Tory government, local authority budgets and services have been squeezed from every possible direction. They have been squeezed so much that there is no waste left and no overblown bureaucracies to cut. There are scarcely any non-statutory services such as the youth service or discretionary grants left to cut. Even if the Government jump up and down on the toothpaste tube, nothing more will come out. Yet the Red Book figures show increasing misery over the next two years for local government—misery that this Government seem determined to continue.

As many hon. Members have said, today's debate is not about local authority funding in general. It is about the Government's proposal to override the will of local electors and impose a cap on the spending of two authorities. It will be a huge disappointment to many, not only in Somerset and Oxfordshire.

Why are the Government imposing caps on spending? Does the Labour party think that central Government know best on local services? Are the Government philosophically in favour of central Government taking away the powers of local councils? I have searched for the answers to those questions and have found that, during the same debate last year, the Minister for Local Government and Housing said:

The Government are so obsessed with ideological dogma that they are breaking their commitments on spending and on capping. They have demonstrated that, far from being in control of local government finance, they have lost sight of reason. The Government are acting against the wishes of the people of Oxfordshire and Cambridgeshire. The people want the opportunity to fund their schools and social services properly".—[Official Report, 22 May 1996; Vol. 278, c. 358–59.] One year later, the names of the Ministers have changed and the name of one of the councils on the capping order has changed, but nothing else has changed—not the ideology, not the dogma and not the determination to ride roughshod over the wishes of local people.

Education, education, education—as my right hon. Friend the Member for Yeovil (Mr. Ashdown) said in the Chamber yesterday. Forcing two councils to sack 140 teachers is not the way to show a commitment to education. However, education is not the only issue, important though it is. Social services are also important, providing vital care for the elderly and children. Those services will suffer in Somerset and Oxfordshire if the cap is confirmed this evening.

The main Conservative excuse for capping was that it protected the public from outrageous increases in local taxes. Somerset and Oxfordshire had local elections on 1 May and similar administrations to those that had been in place before were returned—a balanced council in Oxfordshire and a majority Liberal Democrat administration in Somerset. The public clearly did not want protecting from this year's council tax increases. Today's decision will save the average council tax payer in Oxfordshire £28 a year, and in Somerset £20 a year. The people of both those counties showed clearly that they had the will to spend that small amount extra to protect the services that they value.

My hon. Friend the Member for Oxford, West and Abingdon (Dr. Harris) has spoken before about the Oxfordshire settlement. I hope that he will be able to speak about it again tonight. He pointed out that the decision to set a budget above the cap level in Oxfordshire had all-party support. In Somerset, the decision had the support of Liberal Democrat and Labour councillors. As we heard earlier, the Conservative councillors abstained.

The decision is not about protecting council tax payers or listening to the will of the electorate. Perhaps the Government think that the two councils have transgressed by appealing against their cap limits. From the speech of the right hon. Member for Bridgwater (Mr. King), we might believe that they had, but the rules for capping are in place and there is a procedure for appealing. As part of that procedure, even Conservative Ministers would listen to the cases put forward by the few councils that appealed in any year.

Mr. Brian White (Milton Keynes, North-East)

Does the hon. Lady accept that those of us who set budgets in this year's local authority round knew the consequences of going above the cap? Most of us took that into account when setting the budgets.

Mrs. Ballard

All councils knew when they set their budgets that there was an appeal mechanism and that, if they had a strong enough case, they could put their appeal to the Minister and hope that it would be listened to objectively.

This year, only three councils appealed, because they believed that they had a case that the Minister would listen to. Together with my right hon. Friend, sorry, my hon. Friend the Member for Somerton and Frome (Mr. Heath)—he will be right hon. one day—I was one of the councillors who voted to set a budget above the cap limit. That was not an indulgent or wayward political gesture. It was done in the full knowledge that, if an eventual appeal failed, the cost of sending out new council tax bills would add to the cuts needed to reduce the budget to the cap level. It was also done in the full knowledge that local elections would take place within a few weeks of the bills being sent out. I know that some Labour Members voted in the Oxfordshire decision.

Legally and technically, councils are allowed to appeal. The right hon. Member for Bridgwater said that he knew that Somerset's case would fail. How could he know? The Minister had to listen to each case and judge them on their merits. She could not fetter her judgment in advance—that would not be allowed.

Mr. Robert Jackson

I agree with the hon. Lady. The fact that they are merely implementing the previous Government's policies makes nonsense of the Government's case. There is an appeal mechanism. The appeal has been made and has not been heard.

Mrs. Ballard

I find it hard to believe that the Secretary of State thinks that his predecessor was so infallible that he could not have been wrong on Oxfordshire or Somerset. My hon. Friends the Members for Oxford, West and Abingdon and for Somerton and Frome have spoken in detail in Adjournment debates about the cases of the two counties. Neither council is spendthrift or inefficient. Somerset's budget is 1.2 per cent. above its cap limit and the cap was set at 2 per cent. Oxfordshire's budget is 1.7 per cent. above the cap. As we have heard, it is the lowest-spending county in the country.

Somerset county council has an unrivalled record of efficiency and prudence. No aspects of its spending are over the top, except, of course, that it spends £12 million more than its education SSA. Is that spent on costly county hall bureaucracy? Is that where the cuts can be found? No. Somerset has the lowest administrative costs of any authority in the country—£9.29 per child. Some authorities spend more than £120 per child. Somerset devolves the highest proportion of spending to schools. The Minister said that she took account of Warwickshire's actions to remove surplus places yet, although Somerset already has the lowest proportion of surplus places in primary schools, it is to be punished today.

As the Minister admitted in the Adjournment debate on 12 June, Somerset's education SSA is low compared to that of other counties; it is 33rd out of 35 counties. The Minister then said that Somerset was lucky because its highways maintenance SSA was in the top 20. She knows, however, that more than 60 per cent. of a county council's total budget is spent on education so, if its education SSA is low, the shortfall cannot be made up from other services. Indeed, any road user in Somerset will tell the Minister about the parlous state of our roads. Perhaps she would like to see them for herself and at the same time visit some of our schools to explain to them why this Government, in common with the previous Government, feel that our children are worth so much less than children in Westminster or Buckinghamshire.

Somerset's social services are equally prudent. It was one of the first counties to externalise its residential care service and it was the first to have externalised domiciliary care. Many Liberal Democrat councillors—I was one of them—were unhappy about being forced down those routes and were also unhappy about the recent decision to externalise the highways service, but those decisions have saved council tax payers money and have protected local jobs.

There is no spare money in Somerset, there are no reserves to dip into and there are no uncommitted rainy-day funds. Confirming the cap will mean larger class sizes in schools, fewer social workers and less care for the elderly. Clearly, this evening's vote is not about protecting services and it is not about protecting local taxpayers from council tax increases. I believe that it is about firing a warning shot at Labour-controlled councils for next year. The Government trust them so little that they are prepared to see teachers sacked and elderly people go without care in order to flex their muscles and to show local government that they will not be a soft touch in future. Far from being a soft touch, they will be as much a bully as the Conservative Government were.

Mrs. Ellman

Does the hon. Lady not recognise that this Government, in the relatively few weeks in which they have been in power, have already made more funding available for schools and for essential house building? They have already made plans to start to get our young people and the long-term unemployed back to work. After 18 years of decay under a Conservative Government, watched over by Liberal Democrats who, in their own patches, have done very little better than the Conservatives, praise should be given to this Labour Government for making a new start on the long road to recovery.

Mrs. Ballard

The Government have done nothing this year for local services and they have given crumbs for next year. We have already heard about the hole in the finances which has been unearthed by the Liberal Democrats, and the Conservatives have now jumped on the bandwagon. Local government will be very little better under this Government than it was under the Tory Government. This year, it will be no better off. Tonight, the hon. Member for Liverpool, Riverside (Mrs. Ellman) has the chance, if she really believes in protecting local services, to vote against the capping order.

This decision will dismay and anger many people across the country who expected better from a Government who were so eager to sign the charter for local self-governance and who have such a large local government base. So many Labour Members have local government experience.

Mr. Livingstone

Will the hon. Lady give way?

Mrs. Ballard

I will give way to one such Member

Mr. Livingstone

There may be some confusion after the intervention by my hon. Friend the Member for Liverpool, Riverside (Mrs. Ellman). Does the hon. Lady agree that this order is not prompted by anyone asking for extra Government money? The authorities concerned are saying, "Please allow us to spend the money we have already collected on services that are vital." The order cannot be part of Government policy unless people think that, by cracking down on the two councils concerned, they will give a warning to councils throughout the country to restrain their spending in the coming year. Labour Members who are offering comfort to this Government policy may be stabbing their own constituents in the back later on.

Mrs. Ballard

I could not have put it better than the hon. Gentleman. People knew that the Conservatives had given up on local government, but they expected better from Labour. Capping is wrong in principle. That is a view that my party has always held and I thought that the Labour party held it too.

After tonight, the young, the old, the weak and the disabled will bear the brunt of the Government's macho muscle flexing. The Liberal Democrats will vote against the order. The hon. Member for Brent, East (Mr. Livingstone) and other Labour Members will be most welcome to follow their conscience and to vote with us. They should ignore the fact that Conservative Members are doing a strange about turn. They, too, are welcome in the Lobby. There can be no doubt that the people taking this decision are the members of this Government. They must carry the can for the damage to services in Somerset and Oxfordshire as a result.

6.24 pm

Mr. David Crausby (Bolton, North-East)

I thank you, Mr. Deputy Speaker, for allowing me the opportunity to make my maiden speech in such an important debate. I served and, indeed, suffered, for 13 years as a local councillor under the previous Government, with all that capping meant, so I am pleased now to be able to say that I am the first Labour Member of Parliament for Bolton, North-East. I have been joined, I am delighted to say, by my hon. Friends the Members for Bolton, South-East (Dr. Iddon) and for Bolton, West (Ms Kelly) to make Bolton truly a Labour town.

Some 85 per cent. of my constituency was previously represented by Peter Thurnham and the other 15 per cent. by Tom Sackville, so I am responsible in part for the replacement of two Conservative Members of Parliament. I understand that both were diligent and hard-working Members. Peter Thurnham was a man of independent mind and felt that he had been poorly treated by the Conservatives. In the end, he decided to join the Liberal Democrats so I like to think that I am responsible for replacing a Liberal Democrat as well. I have some sympathy for Peter Thurnham's view that he was badly treated by his party because after all, most of the country felt the same way about how they were dealt with by the Conservatives, which is why the previous Government were swept from power.

Peter Thurnham and Tom Sackville were preceded by two excellent Labour Members, David Young and my right hon. Friend the Member for Dewsbury (Mrs. Taylor), as she now is. They represented Bolton well when it was the barometer town which decided general elections, before the boundary commission changed everything.

Bolton, North-East is an ideal mix of town and countryside. There are also some stark economic contrasts in the constituency which so much mirror the divisions that most of us have experienced nationwide over the past 18 years. Bolton was the heartland of the industrial revolution and has suffered more than most, as a result, from the decline of Britain's industrial base. Samuel Crompton was born in Bolton. He cleverly built on the skills and knowledge of local people to make it all happen in Bolton. It could all happen again because we still have a fine tradition of highly skilled tradespeople. Unhappily, too few of them survived the absurd economic experiment of the early 1980s which was perpetrated by the more extreme elements of the previous regime. We witnessed a real crime when we saw the destruction of more of Bolton's industry than had been caused by two world wars. The great challenge that the Government face will be to repair the damage that was done in the 1980s.

We shall be able to repair that damage only if we use the energy and expertise of local people and local politicians. Central Government spent too many years treating local politicians and local government as if they were the enemy. Bolton was represented throughout those difficult years by a Labour council, which delivered, as it continues to deliver, efficient services against the odds.

There is a desperate need to avert the annual round of cuts in services. We clearly need a radical review of funding and, more importantly, a new relationship with our local politicians who do such good and important work. They will be the rock on which we will build a better society and they must be allowed to govern locally.

I was lucky to serve my apprenticeship in the engineering industry in the 1960s. I want today's young people to be offered the same employment opportunities that I had—not just because young people deserve the chance to earn a decent living in order to bring up their families, but because the country needs skilled young people to provide the wealth that our great nation is so capable of achieving.

I am proud to be an engineer and a committed and active trade unionist, having been brought up in that family tradition. I was elected to represent the largest factory in my constituency, where I have been the works convenor for the past 18 years. I spent much of my time trying to persuade that private employer to improve the company pension scheme, despite the fact that there had been many years of contribution holiday. I am not surprised that my right hon. Friend the Chancellor took action on pensions. In my view, there is a great deal of scope to do more. I intend to represent my constituents with the same tenacity that was required in my previous job.

Bolton, North-East and its people have a fine industrial history, and with the right industrial policies intelligently applied together with the active support of local government, we shall have an even better industrial future. Not only do we have good prospects and three Labour Members representing Bolton; we have a newly promoted premiership football team, Bolton Wanderers. Thanks to the assistance of the local council, the Wanderers now have a brand new football stadium.

For Bolton, 1997 was truly a great year. All we need now is university status for the Bolton institute of higher Education and our year will be complete. We have much to look forward to in our town because our people are the real strength of our community and I am deeply honoured to represent their cause in Parliament.

6.32 pm

Mr. Tony Baldry (Banbury)

I congratulate the hon. Member for Bolton, North-East (Mr. Crausby) on a first-class maiden speech. I am sure that we shall hear him again on many future occasions and he spoke clearly and eloquently. Obviously, Conservative Members were sorry to see Tom Sackville go. Many of us were close friends with Peter Thurnham and were sorry to see him go, but, as far as we were concerned, he went rather earlier than the general election.

I have many happy memories of visiting Bolton when I was a Minister in the Department of the Environment. I was most impressed by Bolton council and I was pleased to be the Minister who gave planning permission for Bolton Wanderers to build its present stadium. The other day, when I was in Bolton, I was delighted to see what a wonderful edifice it turned out to be. I hope that the hon. Gentleman will consider inviting a few Opposition Members to watch some of its matches.

I hope that the hon. Gentleman will also invite the Minister for London and Construction to see the work that Atkins is doing in Bolton, building the wonderful millennium structure that will be in the hon. Gentleman's constituency very soon. However, I shall be in trouble if I talk about Bolton for too long. As I am the first hon. Member to talk about Oxfordshire, let me refer in some detail to the order.

I have some sympathy with the Minister for Local Government and Housing. I fully appreciate that as local government takes up a quarter of all public spending, one has to be reasonable in these matters. Clearly, the hon. Lady has a broader duty to governance, and those of us who have had to deal with these matters have some understanding of that.

One has to look at the past to understand why Oxfordshire has got itself into its present financial pickle. Until the mid-1980s, Oxfordshire had a Conservative administration. From 1982–83 to 1985–86, the average growth in the county council's budget was 3.4 per cent., while the average growth in inflation was nearly 5 per cent. Oxfordshire then became a hung council and in the next four years, under a Labour-Liberal Democrat coalition, it went on a spending bonanza. The average growth in the council budget was nearly 12 per cent. when the increase in inflation was about 6 per cent. That spending bonanza continued until 1992–93, when Oxfordshire county council's budget increased by nearly 7 per cent. and inflation increased by only 2 per cent. There was a considerable increase in spending until the early 1990s.

Eventually, that level of expenditure became unsustainable and the county started to run into its present difficulties. In order to maintain its spending, Oxfordshire spent all its reserves and began to get into difficulties with the capping regime, with all the financial gearing that that involves. Oxfordshire is in the rather unique position of being the only local authority that has sought to break the cap last year and this year. As we have heard, the then Secretary of State listened to the representations that Oxfordshire county council made last year and enabled it to find a way through.

This year, Oxfordshire again set a budget above cap. Between November 1996 and 1 May, my hon. Friend the Member for Wantage (Mr. Jackson) and other hon. Members representing Oxfordshire constituencies, including myself, and Oxfordshire county council had numerous discussions with the then Minister of State for local government, my right hon. Friend the Member for Skipton and Ripon (Mr. Curry).

We put our case on the basis that Oxfordshire had got itself into a pickle and somehow had to get out of it. The position was made worse because Oxfordshire had no reserves to fall back on and no means of finding resources elsewhere. It is fair to say that my right hon. Friend the Member for Skipton and Ripon, in so far as he was able—one recognises that Ministers are always bound by the danger of being taken to judicial review if they are too incautious in what they say—suggested that if a Conservative Government had been elected on 1 May, they would have been sympathetic to Oxfordshire setting a budget above cap.

The Minister for Local Government and Housing may smile, but we also need to know what the Labour party said to Labour councillors before the general election. This year's budget in Oxfordshire was rather curious in that it was set by a combination of Labour and Conservative county councillors. One can only assume that, in the run-up to the general election, Labour county councillors in Oxfordshire would take some advice from their party as to their position if Labour won the general election. One can only assume that they, too, were given some comfort; otherwise, they would not have set a budget above cap.

Indeed, the Labour group on Oxfordshire county council cannot see any way forward other than the Government allowing Oxfordshire to continue at the budget that it has set. Only yesterday, the leader of the Labour group of Oxfordshire county council wrote to hon. Members representing Oxfordshire stating that this council needs a clear medium-term financial plan … if it has any chance of steering itself away from imminent bankruptcy. We also heard from the hon. Member for Warwick and Leamington (Mr. Plaskitt), who used to lead the Labour group on the county council until 1 May. In his view, Oxfordshire had set a responsible budget this year, having regard to all the circumstances.

Mr. Robert Jackson

Did my hon. Friend note that, when I asked the Minister to give a categorical assurance that she had not entered into undertakings with Labour councils before the election, she refused to do so and dismissed the suggestion as an idle rumour?

Mr. Baldry

That clearly needs to be addressed at some stage because there had to be—and were—discussions between the Labour group on the county council and the national Labour leadership. One would hope that the Labour party nationally would have recognised that the Labour group on the county council had been party to the budget setting.

Dr. Harris

Will the hon. Gentleman give way?

Mr. Baldry

No, I shall not because I am very conscious that time is pressing on. I suspect that the hon. Gentleman will want to speak, as do other hon. Members.

Oxfordshire county council now finds that it will have to make some very substantial cuts over the next few weeks—against the background of being the lowest-spending county in the country. The proposed cap allows Oxfordshire to spend just 1.3 per cent. above its standard spending assessment, compared with an average of 2.4 per cent. for all other county councils. At the moment, the local authority is not spending profligately.

I find the position of Ministers somewhat curious, as others have said. During the debate this time last year, the Minister, who then led for the Opposition, congratulated Oxfordshire on its spending and said: Oxfordshire comes 45th out of 47 counties for total expenditure per head. It spends £560 per head … The county average is £629 … The Government are acting against the wishes of the people of Oxfordshire … The people want the opportunity to fund their schools and their social services properly, but they know that the Government will manipulate the figures to ensure that they cannot do that. That is not good enough."—[Official Report, 22 May 1996; Vol. 278, c. 358-59.] It was unclear from the hon. Lady's speech today that, last year, she and her colleagues on the Labour Benches supported Oxfordshire in its claim to be allowed to spend moderately above its cap.

The situation this year is almost exactly identical, so I am at a loss to understand—I think that people in Oxfordshire will be at a loss to understand—why the Labour party is doing a volte-face and imposing a cap on Oxfordshire, which will inevitably lead to redundancies among teachers, the closing of libraries and the deterioration of personal social services, such as home helps, meals on wheels, and so on. I could understand if the hon. Lady had displayed financial rigour last year, but, given her comments, which are clearly recorded in Hansard, and given the voting record of Labour Members last year, I cannot.

What has changed since last year that has caused the Labour party to do a complete turnaround on this issue? The people in Oxfordshire will want to know, especially as they recognise that a substantial part of the reason why Oxfordshire is in a financial pickle is that Labour and Liberal Democrat councillors drove up spending in the late 1980s and early 1990s without, sometimes, any great benefit from the increased spending. Now that we have got into difficulties, the Labour party is doing a runner.

I therefore very much hope that, when people in Oxfordshire start to see the deterioration of services, they will recognise that it has come about because of the Government's actions—not only capping Oxfordshire but, since the election, increasing inflation, putting up interest rates three times and lumbering the county with an extra bill of £2 million for pensions. All that will mean that providing services in Oxfordshire will be very much more difficult.

6.43 pm

Mr. John McDonnell (Hayes and Harlington)

The genesis of this debate goes back 13 years to the introduction of rate capping under the Thatcher Government. It was introduced to cut public expenditure under monetarist economic theory and in an attempt, for short-term political expediency, to deliver tax cuts as a bribe before the election.

The Labour party, the Liberal Democrats and all progressives opposed the capping legislation, basically for two reasons. First, we opposed it because we concretely believed that central Government limitation of local expenditure would result in cuts in services to local communities. Secondly, we opposed it because it was the first time in this country that central Government were to take control of local government expenditure, thus weakening the concept of local democracy. We felt that that was a loss of basic civil liberty.

We have been proved right; such arguments were proved right throughout the 13-year period—even from the earliest stage. Year on year, capping has resulted in the forcing downwards of local public investment. It has meant the rundown of local services—cuts in education, environmental health and social services. It is a major contributory factor to the loss of teachers, the lack of investment in equipment, the inability to care for those most in need and the ability to maintain decent modern services on which all our communities rely.

The effects on our communities are self-evident. A generation ill taught is educationally lagging behind our European and international competitors. On estates in urban areas, Thatcher's children are coming out to play, with increased crime, drugs, violence and incivility. There has been a deterioration of basic municipal facilities which were established by previous generations of local councillors. That is why the Labour party consistently for 13 years held a clear and firm position in opposition to capping.

I was enthused by the Labour party's record and speeches of Labour party spokespeople during those 13 years, as they outlined the iniquities of capping and the commitment to abolish it once Labour was elected. Let us run through some of the forensic evidence of those commitments—just in recent years.

In 1993 in a statement to the party conference, the speaker from the national executive committee said: How can the Tories justify laying new responsibilities on local authorities … and at the same time cap their attempts to ensure proper funding for the task? In 1994, the shadow spokesperson for the environment said at the Labour party conference: Along with our plans for elected regional councils, my friends, we shall be giving back responsibility to local communities as well. We are going to take the shackles off local government. We are going to end capping and compulsory competitive tendering. The comments go on.

In 1995, the conference carried overwhelmingly a resolution which said: Conference recognises the constraints on local authorities placed by the current system of local government finance. It said that the conference notes and reaffirms the existing policies to remove the cap". Also in 1995, we issued our policy statement on local government, in which we said: Under the Tories, the government hasn't just taken increasing control over the money which councils need to raise. It has also taken detailed control of the amount that councils can spend. But the present capping arrangements suggest that some civil servant or minister in Whitehall knows better than local people and local councillors about the depth, degree and urgency of the needs of each and every local community and its capacity to pay for what it needs. This can't be right—in principle or in practice. I was especially enthused by the speech of my right hon. Friend the leader of the Labour party at our conference in 1995, in which he said: A young country shouldn't be frightened of such change. It will strengthen Britain. The only thing that threatens the Union is a government that refuses year on year to listen to the people. We will rebuild local government and end the muddled system of rate capping. In 1996, we published "New Labour New Life for Britain" and, in 1997, we published our election manifesto—both of which included a commitment to end capping.

For more than a decade, we have been preparing for power and, in that preparation, we have been clearly committed to scrapping the capping regime. Therefore, it is with extreme concern that I say that, with the first order on local government revenue, we are about to enforce capping—unreformed, unreconstructed and unrelenting.

The same arguments that led us to make the speeches, applaud the leadership statements and vote for the resolutions over the past 13 years apply today. I was convinced then by what the party said and I remain convinced. In all honesty, with all integrity, I cannot support the Government in the Lobby to cap councils. I do not do so lightly. I come from a tradition of democratic centralism and I believe that when a democratic decision is made in a party, the members and representatives should adhere to it. That is what I am doing. I am adhering to the policies determined democratically by the majority of the party. Why is that so important for us? It is because it strikes at the heart of internal party democracy in the Labour party and also at our concept of socialism.

In 1996, we adopted a statement of Labour's values, entitled "Socialist Values in the Modern World". It said: This core belief in the power of community to liberate the individual is the oldest and most enduring basis of socialism. Even before Keir Hardie led the Independent Labour Party in the 1890s, people in Britain and abroad came together to argue for the use of collective power—through political parties, trade unions, local authorities … to attack privilege and domination and advance the individual interests of the majority of people. Those are the values we adopted then. Capping is an element, no matter how small, in undermining that power of the community and, therefore, cannot be supported.

6.50 pm

Mr. Yeo

I shall comment briefly on what has been an excellent debate about a crucial subject. The debate featured two maiden speeches of high quality. The first was from the hon. Member for Rugby and Kenilworth (Mr. King), who gave an eloquent description of his constituency and an interesting account of his work in removing surplus school places. Unfortunately, he did not give a great place in his speech to the achievements of Rugby school in inventing an important new British export, but I am sure that the House looks forward to hearing again from him.

The second maiden speech was from the hon. Member for Bolton, North-East (Mr. Crausby), who spoke enthusiastically about the role of manufacturing in his constituency and the achievements of Bolton Wanderers. I share his hopes about job prospects for his constituents in the future and I am sure that the House also looks forward to hearing from him on other occasions.

My right hon. Friend the Member for Bridgwater (Mr. King) relentlessly exposed the failings of the Liberal Democrat-controlled Somerset county council. He also renewed his credentials as an independent and powerful defender of his constituents' interests and, importantly, of the rural community as a whole. He rightly pointed out that the countryside is less well represented in this Parliament than in previous ones, at least those in which I have served.

The hon. Member for Warwick and Leamington (Mr. Plaskitt) convincingly demolished the case for capping Oxfordshire county council, of which he is a former member. With the assistance of an intervention from the hon. Member for Birmingham, Selly Oak (Dr. Jones), he underlined the importance of early notice from the Government of their intentions on the replacement for capping.

The hon. Member for Taunton (Mrs. Ballard) pointed out that much of what the Government have said on capping today and in the past few days has been meant as a warning to Labour-controlled councils that might have been deluded enough to believe that the Labour party election manifesto meant what it said when it referred to the abolition of capping. My hon. Friend the Member for Banbury (Mr. Baldry), who has temporarily left his place, underlined the illogicality of the Minister's arguments. He also emphasised the additional burdens that Oxfordshire county council now faces and which I mentioned earlier.

The hon. Member for Hayes and Harlington (Mr. McDonnell) pointed out that, two years ago, even the Prime Minister gave an unequivocal pledge on capping. I salute the hon. Gentleman's intention to vote against the Government tonight. That is a brave gesture and I hope that I will not put him off by saying that when I did the same myself, as a new Member, it took me a long time to recover from the damage to my career in the eyes of the Whips. Nevertheless, I applaud his stance on such an important issue of principle.

Two clear conclusions have emerged from the debate. First, the Government must clarify their intentions on the timetable for ending capping and on its replacement. They must tell us what the new regime will mean at an early date if damaging uncertainty and confusion are not to plague the important decisions that councils have to take when they set council tax levels next year and the year after.

Secondly, the urgency of the need for clarification of the Government's intentions has been enormously increased by the time bomb that is now ticking away. It was introduced by the Chancellor of the Exchequer in his smash-and-grab raid on the pension funds, and it will seriously affect all local authorities. I hope that the Under-Secretary, when he winds up, will at least acknowledge the existence of that problem and the importance of responding to it sooner rather than later. That alone would be a considerable advance on the Government's position so far. I hope that he will shed some light on those two important issues.

6.55 pm

The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Mr. Nick Raynsford)

We have had an interesting debate which has ranged widely. The hon. Member for South Suffolk (Mr. Yeo) has spoken twice. On the second occasion, the level of support for him on the Conservative Benches was significantly lower than on the first. Being charitable, I hope that that was not a reflection on his colleagues' view of his oratory or the force of his argument. In his first attempt, the case he put was relatively weak, but he compensated for that by the force with which he expressed it. He reminded me of the advice given to a young politician who was nervous about the force of his argument. He was told, "If you have a weak case, shout loudly."

The hon. Member for South Suffolk made a number of points and I shall seek to address them. He asked about the changes to advance corporation tax, although he was stretching it, in a debate on council tax caps in 1997–98, to drag in that measure, which will not come into effect until 1999–2000. The impact of Budget changes on local authority pension funds cannot be known until after the revaluation that is due after March 1998. That revaluation will decide any changes that authorities must make to their contributions to the funds. Those changes will necessarily take account of all factors affecting funds, including, for example, early retirement. The new level of contributions will not affect local authority budgets until 1999–2000.

Mr. Yeo

Will the Minister confirm that the income received by local authority pension funds will be lower, from the date of the Budget, because of the change in the tax treatment of dividends received by all pension funds and that, therefore, the income of those funds will be substantially reduced?

Mr. Raynsford

No, a number of different factors will affect the income that pension funds receive and, until the revaluation is made after March 1998, local authorities will not know what deficit—if any—they will have to cover. Therefore, it is not possible for them to make any provision currently as the hon. Gentleman suggests. That is not a relevant factor to the order.

The second issue that the hon. Gentleman raised was the review of standard spending assessments. He asked for an indication of the changes that the Government might make. He is an experienced Member of Parliament and he knows very well that Governments review the options until they reach a conclusion, at which point they share their thinking with the House. We are considering with local government representatives the range of possible changes that have been suggested. We will reach a preliminary view in the autumn about which changes should be made, we will consult local government in the autumn and we will then bring a report before the House in the new year to implement any changes that we propose. That is the timetable that has been followed in previous years, as the hon. Gentleman will know.

Finally, the hon. Gentleman asked about the implementation of our manifesto pledge to end crude and universal capping. As my hon. Friend the Minister of State made only too clear at the outset, we shall make those changes at the same time as we introduce the replacement scheme, based on best value and local performance plans.

My right hon. Friend the Chancellor of the Exchequer said in his Budget statement that we would review future arrangements for local authority finance, but that we would retain capping for 1998–99, while putting in place measures to improve local accountability that will allow us to fulfil the manifesto commitment. It was right for us to take an early opportunity to let local authorities know the position, so that they could plan accordingly.

My hon. Friend the Member for Rugby and Kenilworth (Mr. King), in an impressive maiden speech, paid tribute to his predecessors and to his constituency. Appropriately, he referred to education reorganisation in Warwickshire, which he described as painful but right. I appreciate his kind words about the handling by my hon. Friend the Minister of State of the case put to her by Warwickshire for the relaxation of the cap.

The right hon. Member for Bridgwater (Mr. King) made the fair point that there was no doubt about the new Government's commitment, made clear in opposition before the election and made clear again after the election, to stick to the inherited local government settlement this year.

Mr. David Heath

rose—

Mr. Raynsford

I was talking about the speech by the right hon. Member for Bridgwater. I trust that the hon. Member for Somerton and Frome (Mr. Heath) will have the courtesy to listen to my response to what was said by another Member from his part of the country.

The right hon. Member for Bridgwater made that valid point, and recognised the fact that there was no prospect of Somerset county council's being immune from the impact of the cap. He then became involved in a private altercation with Liberal Democrat Members from that county, into which I do not feel that I should intrude, so I shall pass on to the comments of my hon. Friend—

Mr. Heath

Will the Minister give way?

Mr. Raynsford

No, I will not give way to the hon. Gentleman.

My hon. Friend the Member for Warwick and Leamington (Mr. Plaskitt) expressed appreciation of the Minister of State's decision in respect of Warwickshire, but expressed concern about the position in Oxfordshire, an authority with which he has had considerable involvement. Indeed, I believe that he was leader of the county council for a time.

My hon. Friend suggested, as have some other hon. Members, that Oxfordshire is the lowest-spending county per head—a factor that he thought should justify special treatment. I have to tell him that spending per head is not in itself the best measure of need to spend. Standard spending assessments are designed to provide that other measure, and using SSA comparisons, which make allowance for the different circumstances in each authority, Oxfordshire spends more than 13 other counties.

The hon. Member for Taunton (Mrs. Ballard)—

Dr. Harris

Will the Minister give way.

Mr. Raynsford

I am afraid that, as the hon. Gentleman knows, this is a very short winding-up speech. I have less than five minutes before the debate has to end, so I regret that I cannot.

The hon. Member for Taunton argued that Somerset and Oxfordshire should be able to spend respectively £6 million and £3.4 million above cap. However, as was pointed out in an intervention by my hon. Friend the Member for Milton Keynes, North-East (Mr. White), many other local authorities have faced similar difficulties, yet have managed to set budgets within the cap limits that they knew would apply this year.

In response to an intervention by my hon. Friend the Member for Liverpool, Riverside (Mrs. Ellman), the hon. Member for Taunton claimed, incorrectly, that the Government were making no additional finance available to local authorities this year. She must be aware of the Local Government Finance (Supplementary Credit Approvals) Bill which has begun the process of honouring our policy of releasing capital receipts. Those will be available as finance to local authorities in the current year.

Mrs. Ballard

Will the Minister give way?

Mr. Raynsford

I was simply correcting an incorrect statement that the hon. Lady made, but I shall give way to her.

Mrs. Ballard

I am sure that the Minister knows well that the Local Government Finance (Supplementary Credit Approvals) Bill affects capital receipts for housing projects. We are talking about two county councils tonight, and county councils are not housing authorities, so they will not benefit from that Bill.

Mr. Raynsford

I am well aware of the responsibilities of county councils as opposed to those of district councils, but the hon. Lady said that there was no additional finance for local authorities. That is what I was correcting.

Mr. David Heath

Will the Minister give way?

Mr. Raynsford

I have already said that I shall not.

My hon. Friend the Member for Bolton, North-East (Mr. Crausby), in an impressive maiden speech, paid tribute to his predecessors and to his constituency, which I have had the pleasure of visiting a couple of times in the past two years.

The hon. Member for Banbury (Mr. Baldry), after a brief excursion via Bolton, with which he, too, has associations, focused on Oxfordshire and offered us an interesting suggestion. He said that the former Minister responsible for local government, the right hon. Member for Skipton and Ripon (Mr. Curry), had said privately that he would have considered relaxing Oxfordshire's cap had he remained in office. Hindsight is a wonderful thing, but it is not a basis for policy making, as I am sure the hon. Member for Banbury knows.

The hon. Gentleman asked whether the Minister of State's advice to councils before the general election had revealed the appropriate policy that the Government would follow. My hon. Friend was absolutely clear in her advice to councils, both Labour and others, before the election. She said that if we were successful in that election, the new Government would work within the existing settlement, so all authorities should plan accordingly.

Sir Robert Smith

Will the Minister give way?

Mr. Raynsford

My hon. Friend the Member for Hayes and Harlington (Mr. McDonnell) outlined, in a speech of political philosophy, his view of capping. However, as he made no specific comment about Oxfordshire or Somerset, I shall move on to my concluding remarks.

We have carefully considered all relevant considerations in each authority's case before reaching our final decisions on the caps for Oxfordshire, Somerset and Warwickshire. The Minister of State has seen representatives of the authorities in person, and I have responded to Adjournment debates on both Somerset and Oxfordshire in recent weeks.

We are persuaded that the proposed caps are reasonable, achievable and appropriate in the light of all the circumstances of each authority, and of our view of the appropriate level of local authority spending as a whole. Local authorities are responsible for a quarter of all public expenditure, and no sensible Government can overlook that fact.

Some hon. Members have suggested that the cap may undermine our party's commitment to education. That is nonsense. We inherited this year's settlement from the previous Administration, and we made it clear well in advance of the election that we felt that we had no choice but to stick with it.

The Budget, however, makes it clear that we are committed to education. We are making extra provision of £835 million for schools. That is for revenue spending in 1998–99, and is £1 billion more than this year's figure. The new deal for schools will also provide an extra £83 million for repairs. We are committed to education and we are committed to local government. I commend the order to the House.

Question put:—

The House divided: Ayes 301, Noes 36.

Division No. 62]	[7.6 pm
AYES
Abbott, Ms Diane	Benton, Joe
Adams, Mrs Irene (Paisley N)	Best, Harold
Ainsworth, Robert (Cov'try NE)	Blackman, Liz
Allen, Graham (Nottingham N)	Blears, Ms Hazel
Anderson, Donald (Swansea E)	Blizzard, Bob
Anderson, Janet (Rossendale)	Blunkett, Rt Hon David
Armstrong, Ms Hilary	Boateng, Paul
Ashton, Joe	Borrow, David
Atkins, Charlotte	Bradley, Keith (Withington)
Banks, Tony	Bradshaw, Ben
Barron, Kevin	Brinton, Mrs Helen
Battle, John	Brown, Rt Hon Nick (Newcastle E)
Bayley, Hugh	Browne, Desmond (Kilmarnock)
Beard, Nigel	Buck, Ms Karen
Beckett, Rt Hon Mrs Margaret	Burden, Richard
Bennett, Andrew F	Burgon, Colin

Butler, Christine	George, Bruce (Walsall S)
Byers, Stephen	Gerrard, Neil
Caborn, Richard	Gibson, Dr Ian
Campbell, Alan (Tynemouth)	Gilroy, Mrs Linda
Campbell, Mrs Anne (C'bridge)	Goggins, Paul
Campbell, Ronnie (Blyth V)	Golding, Mrs Llin
Campbell-Savours, Dale	Gordon, Mrs Eileen
Cann, Jamie	Graham, Thomas
Caplin, Ivor	Griffiths, Jane (Reading E)
Casale, Roger	Griffiths, Nigel (Edinburgh S)
Caton, Martin	Grocott, Bruce
Cawsey, Ian	Grogan, John
Chapman, Ben (Wirral S)	Gunnell, John
Chaytor, David	Hall, Mike (Weaver Vale)
Chisholm, Malcolm	Hall, Patrick (Bedford)
Clapham, Michael	Hamilton, Fabian (Leeds NE)
Clark, Dr Lynda (Edinburgh Pentlands)	Hanson, David
	Heal, Mrs Sylvia
Clark, Paul (Gillingham)	Henderson, Doug (Newcastle N)
Clarke, Charles (Norwich S)	Henderson, Ivan (Harwich)
Clarke, Eric (Midlothian)	Heppell, John
Clarke, Rt Hon Tom (Coatbridge)	Hesford, Stephen
Clarke, Tony (Northampton S)	Hill, Keith
Clelland, David	Hinchliffe, David
Clwyd, Ann	Hoey, Kate
Coaker, Vernon	Home Robertson, John
Coffey, Ms Ann	Hood, Jimmy
Cohen, Harry	Hoon, Geoffrey
Coleman, Iain (Hammersmith)	Hope, Phil
Colman, Tony (Putney)	Hopkins, Kelvin
Connarty, Michael	Howarth, Alan (Newport E)
Cook, Frank (Stockton N)	Howarth, George (Knowsley N)
Cooper, Yvette	Howells, Dr Kim
Corbett, Robin	Hoyle, Lindsay
Cousins, Jim	Hughes, Kevin (Doncaster N)
Cox, Tom	Hurst, Alan
Cranston, Ross	Hutton, John
Crausby, David	Illsley, Eric
Cryer, Mrs Ann (Keighley)	Ingram, Adam
Cummings, John	Jackson, Ms Glenda (Hampstead)
Cunningham, Jim (Cov'try S)	Jackson, Helen (Hillsborough)
Curtis-Thomas, Mrs Claire	Jamieson, David
Dalyell, Tarn	Jenkins, Brian (Tamworth)
Darvill, Keith	Jones, Barry (Alyn & Deeside)
Davey, Valerie (Bristol W)	Jones, Helen (Warrington N)
Davidson, Ian	Jones, Ms Jenny (Wolverh'ton SW)
Davies, Rt Hon Denzil (Llanelli)
Davies, Geraint (Croydon C)	Jones, Jon Owen (Cardiff C)
Dawson, Hilton	Jowell, Ms Tessa
Dean, Mrs Janet	Keeble, Ms Sally
Dismore, Andrew	Keen, Alan (Feltham & Heston)
Dobson, Rt Hon Frank	Keen, Mrs Ann (Brentford)
Donohoe, Brian H	Kennedy, Jane (Wavertree)
Doran, Frank	Khabra, Piara S
Dowd, Jim	Kilfoyle, Peter
Drew, David	King, Andy (Rugby & Kenilworth)
Dunwoody, Mrs Gwyneth	King, Ms Oona (Bethnal Green)
Eagle, Angela (Wallasey)	Ladyman, Dr Stephen
Eagle, Maria (L'pool Garston)	Laxton, Bob
Efford, Clive	Lepper, David
Ellman, Ms Louise	Liddell, Mrs Helen
Ennis, Jeff	Linton, Martin
Etherington, Bill	Lloyd, Tony (Manchester C)
Field, Rt Hon Frank	Lock, David
Fisher, Mark	McAvoy, Thomas
Fitzpatrick, Jim	McCafferty, Ms Chris
Fitzsimons, Lorna	McCartney, Ian (Makerfield)
Flynn, Paul	McDonagh, Siobhain
Follett, Barbara	McFall, John
Foster, Rt Hon Derek	McGuire, Mrs Anne
Foster, Michael Jabez (Hastings)	McIsaac, Shona
Foster, Michael John (Worcester)	Mackinlay, Andrew
Foulkes, George	McNamara, Kevin
Galbraith, Sam	McNulty, Tony
Galloway, George	McWalter, Tony
Gardiner, Barry	McWilliam, John

Mahon, Mrs Alice	Rowlands, Ted
Mallaber, Judy	Roy, Frank
Marek, Dr John	Ruddock, Ms Joan
Marsden, Gordon (Blackpool S)	Russell, Ms Christine (Chester)
Marshall, David (Shettleston)	Sawford, Phil
Marshall, Jim (Leicester S)	Sedgemore, Brian
Marshall-Andrews, Robert	Shaw, Jonathan
Martlew, Eric	Sheldon, Rt Hon Robert
Maxton, John	Shipley, Ms Debra
Meacher, Rt Hon Michael	Short, Rt Hon Clare
Meale, Alan	Singh, Marsha
Michael, Alun	Smith, Rt Hon Andrew (Oxford E)
Michie, Bill (Shef'ld Heeley)	Smith, Angela (Basildon)
Milburn, Alan	Smith, Miss Geraldine (Morecambe & Lunesdale)
Miller, Andrew
Mitchell, Austin	Smith, Jacqui (Redditch)
Moffatt, Laura	Smith, Llew (Blaenau Gwent)
Morgan, Ms Julie (Cardiff N)	Snape, Peter
Morgan, Rhodri (Cardiff W)	Soley, Clive
Morley, Elliot	Spellar, John
Morris, Ms Estelle (B'ham Yardley)	Squire, Ms Rachel
Morris, Rt Hon John (Aberavon)	Starkey, Dr Phyllis
Mountford, Kali	Steinberg, Gerry
Mowlam, Rt Hon Marjorie	Stevenson, George
Mudie, George	Stewart, Ian (Eccles)
Mullin, Chris	Stoate, Dr Howard
Murphy, Jim (Eastwood)	Stott, Roger
Murphy, Paul (Torfaen)	Strang, Rt Hon Dr Gavin
Naysmith, Dr Doug	Stringer, Graham
Norris, Dan	Sutcliffe, Gerry
O'Brien, Bill (Normanton)	Taylor, Rt Hon Mrs Ann (Dewsbury)
O'Brien, Mike (N Warks)
O'Hara, Edward	Thomas, Gareth (Clwdy W)
OIner, Bill	Thomas, Gareth R (Harrow W)
O'Neill, Martin	Timms, Stephen
Organ, Mrs Diana	Tipping, Paddy
Osborne, Mrs Sandra	Touhig, Don
	Trickett, Jon
Pearson, Ian	Truswell, Paul
Perham, Ms Linda	Turner, Dennis (Wolverh'ton SE)
Pickthall, Colin	Turner, Desmond (Kemptown)
Pike, Peter L	Twigg, Derek (Halton)
Plaskitt, James	Twigg, Stephen (Enfield)
Pollard, Kerry	Vaz, Keith
Pond, Chris	Vis, Dr Rudi
Pound, Stephen	Ward, Ms Claire
Powell, Sir Raymond	White, Brian
Prentice, Ms Bridget (Lewisham E)	Whitehead, Dr Alan
Prentice, Gordon (Pendle)	Wicks, Malcolm
Prescott, Rt Hon John	Williams, Rt Hon Alan (Swansea W)
Primarolo, Dawn
Purchase, Ken	Williams, Mrs Betty (Conwy)
Quin, Ms Joyce	Wills, Michael
Quinn, Lawrie (Scarborough)	Winnick, David
Radice, Giles	Winterton, Ms Rosie (Doncaster C)
Rapson, Syd	Worthington, Tony
Raynsford, Nick	Wray, James
Reed, Andrew (Loughborough)	Wright, Dr Tony (Cannock)
Robertson, Rt Hon George (Hamilton S)	Wright, Tony D (Gt Yarmouth)
	Wyatt, Derek
Robinson, Geoffrey (Cov'try NW)
Roche, Mrs Barbara	Tellers for the Ayes:
Rooker, Jeff	Mr. Greg Pope and
Ross, Emie (Dundee W)	Mr. Clive Betts.

NOES
Allan, Richard (Shef'ld Hallam)	Beith, Rt Hon A J
Ashdown, Rt Hon Paddy	Breed, Colin
Baker, Norman	Burnett, John
Baldry, Tony	Burstow, Paul
Ballard, Mrs Jackie	Cable, Dr Vincent

Campbell, Menzies (NE Fife)	Maclean, Rt Hon David
Chidgey, David	Maclennan, Robert
Davey, Edward (Kingston)	Oaten, Mark
Feam, Ronnie	Öpik, Lembit
George, Andrew (St Ives)	Rendel, David
Gorrie, Donald	Russell, Bob (Colchester)
Hancock, Mike	Smith, Sir Robert (W Ab'd'ns)
Harris, Dr Evan	Tonge, Dr Jenny
Harvey, Nick	Tyler, Paul
Heath, David (Somerton & Frome)	Webb, Professor Steve
Heathcoat-Amory, Rt Hon David	Willis, Phil
Hughes, Simon (Southwark N)
Jackson, Robert (Wantage)	Tellers for the Noes:
Jones, Nigel (Cheltenham)	Mr. Andrew Stunell and
King, Rt Hon Tom (Bridgwater)	Mr. Adrian Sanders.

Question accordingly agreed to.

Resolved, That the draft Council Tax Limitation (England) (Maximum Amounts) Order 1997, which was laid before this House on 14th July, be approved.

Mr. Paul Tyler (North Cornwall)

On a point of order, Mr. Deputy Speaker. The hon. Member for South Suffolk (Mr. Yeo) may have unwittingly misled the House. He said that he and his Conservative colleagues would be voting against the order. Perhaps he was guilty of misunderstanding the situation or was misinformed. Certainly, he and his colleagues did not vote against the order. Perhaps he would like to explain why he unwittingly misled the House.

Mr. Richard Ottaway (Croydon, South)

Further to that point of order, Mr. Deputy Speaker. I believe that my hon. Friend has been misinterpreted. He said that he would not vote for the order.

Mr. Deputy Speaker (Sir Alan Haselhurst)

I am sure that that explanation removes the need for any ruling by me