Local Government Finance

HC Deb 05 February 1998 vol 305 cc1251-336

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

Before I call the Secretary of State, I should inform the House that Madam Speaker has ruled that there should be a 10-minute limit on Back-Bench speeches.

4.57 pm

The Secretary of State for the Environment, Transport and the Regions (Mr. John Prescott)

I beg to move,

That the Local Government Finance Report (England) 1998–99 (HC 506), which was laid before this House on 2nd February, be approved. As this debate is to be one and a half hours shorter than last year's debate—and as many hon. Members will wish to take part—I shall try to follow the spirit of Madam Speaker's demand. I hope to be reasonable in my contribution.

The House will recall that on 2 December I issued full details of my settlement proposals. The reports before the House today represent the outcome of lengthy discussions with local government, including the formal consultation process launched by my statement in December. These consultations ended on 13 January.

My proposals included the overall provision for local authority spending, known as total standard spending. They included the level of support distributed by the Government for the spending and my proposals for calculating standard spending assessments. I also announced provisional capping guidelines.

My colleagues and I have received written representations from 248 local authorities and have met delegations from 95, as well as from the Local Government Association and the Association of London Government.

We have considered carefully all the points raised during the consultations, and the reports set out our conclusions, which reflect the principles that I explained to the House in December. The settlement is fairer, better and more flexible. It is fairer, because the authorities with real need will get more resources; better, because it is the biggest increase for local authority services for years and includes £835 million for schools; and more flexible, because capping is less restrictive than under the previous Government.

The vital services provided by our local authorities affect everyone's quality of life. I want to express my appreciation to all those involved in providing such services under the most difficult circumstances.

Before I go into the details of the reports, I want to remind the House that, as well as any local authority funding that we are discussing today, the Government are also providing an additional £1.3 billion to improve the state of our school buildings, through the new deal for schools, and £800 million extra for housing, through the capital receipts initiative. That is good news for local government, and certainly for those in receipt of the services.

Mr. Christopher Gill (Ludlow)

May I draw the right hon. Gentleman's attention to my Question 44 on page 2796 of today's Order Paper: To ask the Secretary of State for Education and Employment, what additional funding he is making available to Shropshire Local Education Authority: and how the decision was announced."? I understand that a decision has been made to allow the LEA to spend more money, but I, as a Shropshire Member, have not been informed about it, and neither has my hon. Friend the Member for North Shropshire (Mr. Paterson). I understand that the Government saw fit to make the announcement in a private letter to a Labour Shropshire Member. That is a disgraceful contempt of Parliament, and entirely the wrong way in which to proceed. Does not it make a mockery of open government?

Mr. Deputy Speaker

Order. That was far too long-winded.

Mr. Prescott

The hon. Gentleman is referring to capital contributions made by my right hon. Friend the Secretary of State for Education and Employment, and he knows that those are not part of the settlement. He has recorded his views on the matter.

Mr. Gill

Answer the question.

Mr. Prescott

I am trying to answer it in the best way that I can. I am making it clear that it has nothing to do with the settlement. If the hon. Gentleman feels slighted by the procedures adopted by my right hon. Friend the Secretary of State for Education and Employment, his protest has been recorded.

Under the SSA for Shropshire, there is a 4.7 per cent. increase for education, and that must be welcome, especially as we rightly ensured that it would not be at the expense of other services, as it was provided for in the revenue support grant. Shropshire has done well, and got more than it could have expected from the previous Government. Education, in particular, has done far better than it would have done under the Conservatives.

Mr. Gill

I am most grateful to the right hon. Gentleman for giving way to me again, but I think that he is being most disingenuous, because the extra money is not to be provided by the Government: Shropshire council tax payers are to be allowed to borrow it at their own expense.

Mr. Prescott

It is nothing new for local authorities to borrow money. They are all doing it. I suggest that the hon. Gentleman protests to the local authority. His protest in the Chamber has been noted, and there is nothing more that I can add, other than to say that education is doing far better in his area under this Administration than it did under the Conservatives, both in the resources that are available for improving schools and in the quality of education, including nursery education. That is the contribution that the Government have made to his area and to many others.

Mr. Dennis Skinner (Bolsover)

I am interested in this discussion between my right hon. Friend and the hon. Member for Ludlow (Mr. Gill), because we in Derbyshire were also looking forward to a better settlement and did not get it; but my right hon. Friend might like to know that Derbyshire, having lost £220-odd million because of the previous Tory Government's cuts, will be quite happy—as will I—for him or any other Minister to send a letter about the settlement to anybody in the county. I do not care who it is, as long as there is some money attached to it. I could be the last to know, and I would be delirious.

Mr. Prescott

I am certainly grateful for my hon. Friend's support, as indeed I was when we discussed the channel tunnel rail link. As he knows, despite the considerable difficulties in Derbyshire—I acknowledge those, and they have been pointed out by other Derbyshire Members—an extra 5.4 per cent. has gone to education in the area. Derbyshire, like other shire counties, has done well, even though I acknowledge that it has had more than its share of problems arising from the difficulties of arranging the settlement.

Mr. A. J. Beith (Berwick-upon-Tweed)

Someone else who might want a letter from the Secretary of State is the Labour leader of Northumberland county council, who is faced with the lowest increase of any shire county and who says that, although he told people last year that things would be better this year, he will now have to give them worse services at higher cost. He says that Labour has let us down, even though the council presented a constructive case for a fairer settlement. What does the Secretary of State intend to do about that?

Mr. Prescott

I am almost bound to cite the record, which I am sure is known to the right hon. Gentleman. The increase for education in his county was £5.1 million. That is far more than was promised by any political party, including his own.

Mr. Beith

indicated dissent.

Mr. Prescott

The evidence is clear. Whatever the difficulties about other services—and it is legitimate to deploy arguments about them—we have certainly done well by education. That is a reflection of our "Education, education, education" priority. We have only made a start, and there is much more to do, but the record shows that we have allocated extra money for the improvement of education, of nursery education and of the fabric of schools. That is reflected in the settlement, and we have every reason to be proud.

On 2 December, I announced proposed total standard spending for England in 1998–99 of £48.2 billion, which included the provision for local government reorganisation. The figure is substantially unchanged, but the provision to cover the cost of council reorganisation has decreased slightly; I referred to that in December, and I shall expand on it in a moment.

The TSS figure of £48.2 billion represents an increase of 3.8 per cent. over the adjusted 1997–98 figure; so next year local authorities will have £1.78 billion more to spend than this year. We would all like to give more money, but we can at least say that local authorities are getting an increase in real terms, even under the current difficult circumstances.

Ms Julia Drown (South Swindon)

I welcome my right hon. Friend's statement, and the Government's support for Swindon borough council. He knows that I am keen that we should deliver everything that is in our manifesto and everything that is good for local democracy. When does he intend to reverse the Tories' destructive policy of rate capping and return more control of business rates to local authorities?

Mr. Prescott

This is the last year in which I intend that the crude capping principle of the Tory party should apply.

Within the total, we have been able to provide an extra £835 million for councils to spend on education, every penny of which will be covered by the extra £835 million of revenue support grant from the Government, so there is every reason for us to expect that the moneys that have been given should go to education and not be used for other services.

Mr. Andrew Miller (Ellesmere Port and Neston)

My right hon. Friend says that the money is allocated for education. Will he make it clear to local education authorities that by education we mean education, and not items such as expensive lawyers for special needs tribunals?

Mr. Prescott

I do not know the circumstances to which my hon. Friend refers, but I have a personal interest in education in his area, because I went to the Grange secondary modern school in Ellesmere Port. I know that moneys are needed in that area, and that has been recognised in the settlement: £10.7 million is to go there, and that money is well deserved and much needed.

Mr. Geoffrey Clifton—Brown (Cotswold)

I welcome those passported increases through to education, but in Gloucestershire they are putting severe pressure on the social services budget. One hundred national health service beds are blocked by people who could be clinically discharged, but there is not enough money in that budget to provide a home services, residential or nursing home package. Clearly, that makes no sense on a national scale when a hospital bed costs upwards of £150 a day, yet such a social services package costs between £30 and £50. Will the right hon. Gentleman urgently tackle that problem to find out what can be done nationally as well as in Gloucestershire?

Mr. Prescott

The hon. Gentleman makes a fair point about the difficulties of community care. All hon. Members are well aware of the problems in their constituencies. In this settlement, we have provided about £350 million towards that. It is never enough. The difficulties are considerable and we are all aware of people who have to be kept in hospital because no beds are provided outside, which is much more expensive.

Many aspects of the community care programme have been welcomed, but when the hospitals were closed an awful lot of people were dumped into the community. That was the policy pursued by the previous Administration and it has given us extra problems. Nevertheless, we have to find more resources. We have tried to do it this time by providing £350 million because we believe that local authorities are under pressure. As the hon. Member for Cotswold (Mr. Clifton-Brown) knows, we may say that the money should go to community services—we certainly hope that it will—but it is very much within the discretion of the local authorities. We have made it clear that that is a reasonably high priority and that that amount of money should be spent in that way. The Secretary of State for Health has made that clear and the education priority has been made clear. That raises the more fundamental question of how much Governments decide to ring fence and how much is at the discretion of the local authority. That may well be an issue that we shall be judging after this settlement, because we have made it clear that a lot of those resources should be spent in the way that we have stated; that is particularly true of education.

Mr. Clifton-Brown

That is precisely what has happened in Gloucestershire under the largely Liberal-dominated group. Money is not going to where it should be going to relieve that problem. Will the right hon. Gentleman look into it and find out whether he can direct the resources to solving the problem?

Mr. Prescott

Again, every Member of Parliament finds himself in that position and is advised in all quarters about how much is being given in every local authority. It is terrifying trying to understand how each local authority has so much for housing and for education. I am advised that the extra resources given to the hon. Gentleman's constituency amount to about £1.42 million for social services. I am certainly aware of the problem. Every Secretary of State who has stood at this Dispatch Box to tell the House what the settlement is, has been told by hon. Members that the expenditure is not enough in various areas. There is no doubt about that.

There are real problems with the priorities for expenditure, as well as the total. The priorities are not in the right order at present and that is why we will be undertaking a review with the local government associations to find a better way. Indeed, that question is related to the whole principle of capping and expenditure priorities. Shortly, having conducted the discussions with those associations we hope to be able to come to the House with a better way. I predict that however good I might think the new system, there will never be enough resources when I appear here. I am sure that hon. Members, carrying out their obligations and duties, will be telling me why not. That is the nature of democracy, and I accept that that is the case. This settlement is fairer, but it is not an easy one. It is tough and we readily accept that there is still a price to be paid.

I referred to the £835 million in revenue support grant for education and we have included a further £70 million for children's social services—the first substantial increase for three years. Again, that is to be welcomed. It is much better than local authorities could have expected under the previous Government. However, I recognise that the settlement is still tight for many authorities.

In 1998–99, we have gone as far as we can to help local authorities, within our public spending targets—commitments given in the House and during the general election campaign. Extra money has gone to our priorities. The total of aggregate external finance—known as AEF, which is the money distributed by the Government through grants and business rates to help meet the TSS—will be £37.52 billion for England, which is about £10 million higher than the amount that I announced in December. I explained then that less provision might be needed for the transitional costs of local government reorganisation and that has proved true. Within the total of £37.52 billion, the amount of money provided from central Government to local authorities through the revenue support grant will be £19.51 billion—up some £10 million for the same reason.

Mr. William Cash (Stone)

Can the Secretary of State explain something? In his discussions with the Treasury, to what extent have the Maastricht criteria been raised? To what extent are the decisions that have been taken in respect of the constraints on public expenditure, which are causing much trouble in Staffordshire because of the increases in council tax in three of the district councils in my constituency, driven by Treasury requirements that are themselves dependent on compliance with those criteria? Has the right hon. Gentleman had those discussions and what did they produce?

Mr. Prescott

I must admit that I have not had discussions with the Treasury about the effect on the settlement of the Maastricht agreement, although I well understand that arguments about the difficulties of public expenditure can be extended into arguments about the Maastricht agreement. We were more concerned with putting the public finances on a proper footing because we inherited quite a mess. The settlement was motivated more by that than by consideration of that agreement.

In December, I proposed a number of changes in the way in which the revenue support grant is shared out between local authorities—the standard spending assessments. The aim of our changes is to remove some of the unfairness in the system. We discussed a range of options with local government during the summer. Ministers then had to choose the most justified options, which most contributed to making the system fairer. We proposed five main changes. Clearly, we needed a new basis for the SSAs for educating children under five following the abolition of nursery vouchers and we needed to move towards our aim of making universal provision for three and four-year-olds.

Now, the SSAs will be distributed on a basis that reflects the number of pupils for whom local authorities currently provide. Authorities will be able to get help from the Department for Education and Employment, where they need to expand their nursery education provision. Of course, that is in addition to the out-of-school hours learning clubs, which will be supported by the new opportunities fund. We have reformed the measures of neediness within the SSA formula. Those carried little credibility before. We have now been able to apply explicit principles to determine what should be included in the formula. The result is a clear improvement on the previous system.

We have overhauled the formula for residential social services for the elderly, using the research commissioned by the Department of Health from the university of Kent, to take proper account of the changes in social services following the introduction of community care. We have also changed the treatment of debt incurred by local authorities before the SSA system was established in 1990. We now treat authorities that opted to invest their capital receipts broadly on a par with those that chose to repay debt.

Also, we have looked afresh at the way in which we take account of visitors and commuters. We have ended the link with the density and sparsity of population and also put an end to the assumption in the old formula that visitors and commuters have the same economic and social characteristics as the residents of the area that they are visiting. That was the nonsense that meant that people staying at the Ritz were treated as being as deprived as local people. That gave rise to absurd results, which were often debated in the House. From 1998–99, we shall take as much account of visitors and commuters as is fair.

We have received representations on many aspects of the SSAs and considered them carefully. Of course, some focused on the short term. There were complaints from those who felt that they had lost out this year as a result of the changes that I have described. Some pointed us more towards areas that we might want to look at again in the future, but where the full facts need to be established.

The result of those considerations was to confirm the methodology for 1998–99 that I proposed in December. However, we do not have closed minds on all this. Our present review of the local government finance system will look at grant distribution for the longer term. For the next settlement, we will look at further improvements in the SSAs, both in the criteria and the period of review.

Mr. Tom King (Bridgwater)

I apologise to the right hon. Gentleman for not being here for the beginning of his speech. He says that he has abandoned the sparsity factor, but I am not clear whether he has done so for this settlement. Rural poverty has recently been debated in the House. Is he aware that in Somerset, home care provision for the elderly is half that available in urban areas with a greater population density?

Mr. Prescott

There are some genuine concerns in the right hon. Gentleman's complaint, but I should correct him about sparsity, which related only to commuter issues. There are real issues in community services and SSAs must address that. There is a general feeling in the House that it is time for a review, and we are conducting one. When we have reached conclusions, it will be right for the House to discuss them.

Mr. Gill

rose—

Mr. Prescott

No, I have given way several times.

Several hon. Members have asked us to examine area cost adjustments. Local authorities may want to urge further changes on us for next year. We shall work closely with the Local Government Association in considering both the short and long term. Hon. Members whose local authorities were disappointed that changes were not made this time round should encourage them to make their case via the LGA.

Sir Teddy Taylor (Rochford and Southend, East)

Before the right hon. Gentleman gets on to area cost adjustments, were any changes made to the figures as a result of the mass of deputations that went to see his Ministers? I took part in one on behalf of the borough of Rochford, and I think that hon. Members sometimes wonder whether such meetings are worth while. I think that he knows that while I was happy with the deal that he did for Southend-on-Sea, and said so publicly, poor old Rochford was hammered.

Mr. Prescott

I confirm that changes were made for several reasons such as traffic flows and the use of roads. All sorts of things were considered, including whether mistakes were made in the figures. On the hon. Gentleman's constituency, the change in the Essex area was as much as an extra £3 million, based, I think, on figures for road and traffic movements. We made changes where it could be shown that we had made mistakes in the figures or in the criteria used to assess a local authority. His area was lucky to get an extra £3 million.

Judy Mallaber (Amber Valley)

I welcome my right hon. Friend's statement that he will seriously examine the issues in the forthcoming year. The head teacher of a school in my constituency, who had come from Hampshire, told me that because of the disparity in education SSA between us and some southern counties, he would have had £300,000 more for the school had it been there and would have had fewer statemented kids. Does my right hon. Friend accept that such anomalies have had a serious impact? That is why Derbyshire is in its current difficulties. The cumulative effect has been exacerbated by many years of Tory intransigence to counties such as Derbyshire. The impact of that needs to be examined.

Mr. Prescott

I accept a great deal of what my hon. Friend says. It is a mystery to me why the difficulties in financing Derbyshire under the previous Administration went on for so long. It seems to have been discriminated against for some years. That is history. It is clear that our settlement gave considerably more, as I said before in respect of the education increase of 5.3 per cent. Even that is less than the class average for the shires, which I think is about 5.7 per cent. We need to address such matters, and I shall do so in the Local Government Association assessments that are going on.

Mr. James Gray (North Wiltshire)

Wiltshire is run by a Lib-Lab pact. Half a dozen Labour councillors keep the Liberals in control. [Laughter.] They find it funny. Were it not for the Labour party, the Conservatives would be in control. I was interested by the right hon. Gentleman's response to the hon. Member South Swindon (Ms Drown). She is apparently happy with the education settlement for Swindon. That is not the case elsewhere in Wiltshire, where there have been deep and damaging cuts across the county because of financial incompetence in other budget areas. Will the right hon. Gentleman undertake to look into that incompetence and, in particular, into the off-balance sheet financing, which is coming back to bite? Will he find ways of getting the 5.7 per cent. that he mentioned through to Wiltshire children?

Mr. Prescott

I take on board some of those points, but, whatever the arguments, the education settlement for the hon. Gentleman's area means an increase of £7.4 million. That is more than he could have expected under the previous Administration. It is fine for him to declare that he is proud to be a Conservative, but the people, and children, of his area are better off under a Labour Government than a Conservative one.

Mr. Gray

rose—

Mr. Prescott

No. On phasing in, or what the jargon calls damping—which could be applied in the hon. Gentleman's case—I said in December that I would pay a special grant to phase in changes for authorities that have lost SSA as a result of the changes in methodology. I also made it clear that we need to make the phasing in—the damping grant—fairer. I shall therefore set the threshold for grant in terms of council tax equivalent. That will be fairer to areas with high needs and a low tax base. I shall also limit the amount of grant spent on phasing in the larger corrections to SSAs so that grant will be limited to the equivalent of half the SSA reduction. I shall also pay a damping grant to phase in the changes for certain police authorities on a similar basis. The Special Grant Report (No. 31) will establish those grants for 1998–99, and some £102 million will be distributed to authorities for that purpose.

I am maintaining my proposal to damp council tax increases that are a direct result of reorganisation and come above a £52 threshold at band D, £1 a week, for authorities reorganised in April 1998. The threshold will be £104 a year at band D for authorities recognised in earlier years. That scheme will result in the payment of grant worth £11.5 million and will benefit council tax payers in Cheshire, Newbury, North Lincolnshire, Reading, Rutland and Wokingham. I shall lay regulations to implement the scheme before the House tomorrow.

On notional amounts, I am specifying a base budget for authorities that are being reorganised or whose budgets are affected by the abolition of nursery vouchers. That will allow me to make a fair comparison between years for capping purposes. The amounts are specified in my report on relevant notional amounts for 1998–99.

Finally, I come to my proposed capping criteria. I have listened carefully to the arguments put to me to adjust or relax the provisional criteria that I announced in December. However, I have decided to maintain those provisional criteria. As I advised the LGA conference last year. I will take final capping decisions after authorities have set their budgets and ensure that caps are reasonable, achievable and appropriate to local circumstances. Let me make it clear that although my capping principles for 1998–99 give authorities more room for manoeuvre, I do not expect every authority to spend up to its cap. This year, 70 authorities are between them spending more than £150 million below their caps. There is no reason why local authorities should not do so again. We look to local authorities to set sensible budgets that will keep council tax increases as small as possible.

Mr. Edward Davey (Kingston and Surbiton)

On capping, we in Kingston are disappointed that despite representations from me and Kingston council, the right hon. Gentleman has decided to maintain the cap at 3 per cent. When he said that Kingston was a leafy borough, did he realise that it has areas of deep deprivation on a par with some of the neediest areas of inner London? Will he reconsider, even at this late stage, the capping limit for Kingston? Our borough needs that money for social services to protect people in great need.

Mr. Prescott

The capping limit is more generous than it was last year. That is not to say that the hon. Gentleman's area has not had difficulties. Most councils have difficulties with tough budgets such as this. I do not doubt that, and I am trying to explain the judgments that I reached. I cannot reconsider the position. We have given much thought and discussion to the matter. That is why we arrived at our conclusions.

The Government are committed to ending the system of crude universal capping, and we will do so. When we do so—and I mean when, not if—the freedom will carry with it responsibility. We have also made it clear that reserved powers will remain to protect council tax payers. We will shortly be consulting widely on the best way to do that as part of our review of local government. The sooner we can reach consensus on change, the sooner we can consign the old Tory capping system to the dustbin. I intend this year to be the last year of crude, universal capping.

Mr. Mark Todd (South Derbyshire)

I certainly say hear, hear to that. Will the effects of the past eight years of capping influence my right hon. Friend's judgment on the appropriate level of cap after the relevant budgets have been set?

Mr. Prescott

We have been in government for nine months, so I am afraid that that decision will not be reached overnight. We will, however, consider all the relevant factors. We have already started the review on which we gave a commitment. We did not agree with the crude universal capping practised by the Tories, which caused great damage to the quality of our public services. Our job is to come to the House with an alternative to that arrangement. Discussions are under way and we will learn from the experience gained in the years in which that capping arrangement has been in operation.

When I addressed the House in December I said that the way in which we talk about local government finance is somewhat obscure, overcomplicated and designed to make the subject inaccessible to the average person. I am pleased to announce that this week we published a plain English guide to local government finance, as I promised to do in December. To do that in two months is not bad. I have already sent a copy to Matthew Parris. I am glad that we have managed to produce that guide and I am pleased that it has been given the crystal mark by the Plain English Campaign. I offered to attend one of its courses, but it felt that I was too far gone and a hopeless case. Nevertheless, I am pleased to be the Secretary of State who introduced that guide. I hope that it will be a small but worthwhile contribution to making the democratic process understandable to many more people.

I have dealt with the main issues considered in the three reports before the House. I recognise that this year's settlement will be tough for local government. That is the price we must pay for the fiscal incompetence of the previous Administration and in order to put public finance on a sound footing. Despite the constraints that we face, this year's settlement is better, fairer and offers more flexibility for local choice than has been the case for many years. I commend it to the House.

5.31 pm

Sir Norman Fowler (Sutton Coldfield)

I shall try to be brisk because the time available for the debate has been truncated and it is clear that many hon. Members want to speak.

Three months ago, the Government announced to the House how they intended to distribute the resources available to local government for this coming year. Since then, the Secretary of State has received letters from almost 250 authorities and Ministers have seen almost 100 delegations from local councils. The net result—this is a more direct reply to my hon. Friend the Member for Rochford and Southend, East ( Sir T. Taylor) than that offered to him by the Secretary of State—according to the Secretary of State's press release of Monday and what he said today is that there will be no changes in the standard spending assessment methodology or in the capping guidelines. Apart from the use of slightly more updated statistics, nothing has changed.

The Secretary of State has claimed that this year's statement is, to use his words, "better, fairer" and more flexible. Many council tax payers and many councils that face increases in council tax of 10 per cent. or above will not see it in those terms. Councils such as those in London and the shires have been hit by the changes to the funding formula that the Secretary of State has introduced.

In last year's debate, the right hon. Member for Holborn and St. Pancras (Mr. Dobson), then the Opposition spokesman on local government, said: Conservative Members will be voting for a settlement that will force through average council tax increases of 6 per cent., equal to £40 extra for every household, together with cuts in services to local people."—[Official Report, 3 February 1997; Vol. 289, c. 691.] This year, even according to the Secretary of State's figures, Labour Members will be voting for an even higher council tax increase than that which they condemned last year. That is a fact.

It is fascinating to re-read the 1997 debate and see how the language used by those on the then Opposition Front Bench, including the hon. Member for North-West Durham (Ms Armstrong), now the Minister for Local Government and Housing, has changed.

Twelve months ago, we heard about how the Labour party would fundamentally challenge the system for financing local government. It claimed that a radical new system would be introduced. According to the leaked letter from the Minister for Local Government and Housing, the fear in her Department now is that the Labour party will disappoint its friends in local government because of the lack of radicalism in the Government's plans. In that letter, the hon. Lady warned that relations between Ministers and the Local Government Association could "quickly break down". We will soon learn what the Secretary of State's words about capping mean, but it is clear that they do not mean its abolition.

In the past few months, the Government, far from improving the budgetary position of councils, have imposed new cost burdens on local government. It is an issue of fundamental importance and there is no disguising some of those cost increases. I shall draw attention to what the Labour Government insist on seeking to conceal for some reason—the impact of the pensions tax announced in the Budget. It is a hidden iceberg of cost which will cost local government £300 million each year. It is not a one-off tax, but one that will continue to have an impact on pension funds year after year. The Government say that if the tax fell evenly over all local authorities it would add almost £20 to band D council tax. That average figure conceals the fact that several councils will be hit severely.

Cambridge county council has sent a letter in which it says that the Government's decision will cost it nearly £4 million a year, and more than £6 million a year when all other employers' contributions are taken into account. Devon county council has also written to say that its costs will be increased by between £7.5 million and £8 million. West Sussex county council has said in a letter that not only might there be a 30 per cent. increase in its costs, but its actuary considers it would be prudent to make additional contributions in the intervaluation years. In other words, contributions should be made in the years immediately to follow 1998. We have heard of similar reports from the authorities of Essex, Norfolk, Kent, Surrey, South Yorkshire, Greater Manchester and Merseyside, all of which complain that costs have been pushed up by the pensions tax.

The Minister for Local Government and Housing is trying to claim that that tax will have no impact on local government in 1998–99. The reality is that it has already taken effect. There has been an impact on local authority pension funds from the time the tax was introduced. In that respect, it is entirely the same as any other pension fund or personal pension. The pension tax is a £5 billion a year tax on pensions. It affects local authorities just as it affects everyone else.

Ministers claim that no assessment of the tax can be made until there has been an actuarial revaluation. They argue that since that revaluation will not take place until later this year, there will be no impact on local authorities until 1999. Let us be clear that the actuarial revaluation will simply measure the deficit; the impact is being felt now. All that Ministers are saying that is that the bill for the pensions tax will be postponed until 1999.

Last year, the Local Government Association sent a circular to councils in which it stated: From the accounting and actuarial viewpoints, it would clearly be prudent to make advance provision, say by way of an agreed voluntary uplift in contribution rates. It went on to state, however, that regulations prevent councils from acting in that prudent way and noted: The LGA has been advised by the Department of the Environment, Transport and the Regions that authorities do not possess the legal powers to increase contribution rates in these circumstances. We need to be clear where the Government stand on the issue. Do they intend to change the regulations to allow councils to act prudently, or will they guarantee that every penny of the increased cost to local government of the pensions tax will be met by central Government? In other words, will the bill be picked up by taxpayers, many of whom have had to pay increased contributions to their occupational pensions and their personal pensions? The Government should clear up the confusion as a matter of urgency, because, the longer the issue is postponed, the greater will be the bill. If contributions are not increased until 1999 or 2000, the bill for local government will approach £1 billion.

Mr. Phil Woolas (Oldham, East and Saddleworth)

The right hon. Gentleman is raising concerns about the occupational pension schemes of many people in the local government sector. Does he agree that the biggest factor that undermined occupational pension schemes was the introduction of personal pensions, the mess of which is still being cleared up?

Sir Norman Fowler

I am not sure that the hon. Gentleman is quite on beam or that he comprehends what is being said. I do not remotely agree with what he says. Nor is there the slightest evidence that the introduction of personal pensions, which have benefited the vast majority of people who did not have pension schemes—unlike the right hon. Gentleman and me—has done the slightest harm to local government schemes.

Why do not the Government address the point that we are making? They introduced a £5 billion a year pension tax. There is no question about that. That cannot be contradicted. It is not just a one-off tax. It comes each year and has an impact each year. Every pension fund in the country and every personal pension provider is taking note of that, but local authorities are not.

Mr. Prescott

The House will recognise the right hon. Gentleman's concern for pensions. Our point is that the costs, which are not included this year, are still right. My right hon. Friend the Chancellor has said that he will review the situation. The right hon. Gentleman should be aware that he was the Secretary of State who dealt with National Bus, which was robbed of £250 million of its pension fund—and we have to find a solution. I shall bear in mind his record when listening to his remarks today.

Sir Norman Fowler

The right hon. Gentleman is wrong. I do not mind having a debate on National Bus, National Express and transport generally, but all the proposals that the Conservatives made on transport when I was Secretary of State were successful and they were consistently opposed by the right hon. Gentleman.

As for the Government's pension proposal, it is absolutely clear that the blustering Deputy Prime Minister does not understand a word of what is being said to him. I calmly ask him whether he in any way doubts what I have said: that the pensions tax is currently having an impact on local authority pension schemes throughout the country. Yes or no?

Mr. Prescott

The only argument that the right hon. Gentleman has made is that some pension trustees are saying that they should prepare for it now. They should have heard what the Chancellor said: we will assess it properly when the charge becomes due.

Sir Norman Fowler

Why was there a £300 million bill for local authority pension funds—[Interruption.] Of course it is a bill. The LGA wants to know how that bill will be met. Does the right hon. Gentleman believe that the regulations should be changed so that local authorities can make proper provision? What is clearly untenable is the position of the Minister for Local Government and Housing, who says that this is having no impact on local authorities. That is laughable.

Sir Paul Beresford (Mole Valley)

Does my right hon. Friend agree that competent local authorities do not look at one year in isolation, but look further ahead? They really need to know the balance and shift of money in the coming financial year and the next, the effect that the pensions tax will have and who will foot the bill. Surrey is looking at a shift of between 5 and 10 per cent. If the bill is not paid by central Government, it will be picked up by local council tax payers—and it will be bigger because of the knock-on effect.

Sir Norman Fowler

My hon. Friend is right. That is precisely the point that I am making. If there is a bill this year of £300 million, a bill next year of £300 million and by the time the Government get round to doing anything there is another bill of £300 million, local government will have to pick up a bill approaching £1 billion. The Government would do well to address that point.

Of course, the pensions tax is not the only additional cost that has been imposed on local government since May. Inflation has risen since the Government came to office, and the Government have missed the inflation target every month. Prices as measured by the gross domestic product deflator are expected to be some 13/4per cent. higher in 1998–99 than under the November 1996 forecast. In effect, that leads to an estimated cost to local government of about £350 million a year.

The Secretary of State made much of the additional resources for education, but he neglected to mention that the money was taken from the reserves left by the Conservative Government. In other words, the money was already in the previous Government's spending plans.

The principal difference between Labour and Conservative policies is that Labour's higher inflation means that the value of the increase in funds is much less. Once the increase in the GDP deflator is taken into account, the benefit of £835 million is substantially reduced.

Not only services will be adversely affected by Government policies. Substantial council tax rises are clearly on the way. Capping has been relaxed deliberately to allow the council tax to take the strain. According to The Sunday Times Ministers evidently believe that council tax rises are "less visible" than rises in income tax, but there should be no doubt about the impact. A 10 per cent. rise in council tax is equivalent to an average of £69 for a family in a band D house.

As we heard again today, the Government claim that none of the council tax rises have anything whatever to do with them, so in areas in the country that have a Labour council, under a Labour Government, it is entirely logical to blame any rises in council tax on the Conservative party. [HON. MEMBERS: "Hear, hear."] Exactly.

In his statement on local authority funding, and again today, the Secretary of State tried to claim that council tax rises of 7 per cent. would have occurred if the Conservatives had been re-elected, but many thousands of households face rises of substantially more than 7 per cent. If councils spend at cap, every London borough will increase its council tax by more than the Secretary of State's figure of 7 per cent.—and so would 18 metropolitan authorities, 32 new unitary authorities and more than 200 shire authorities. In total, almost 300 councils could increase their council tax by more than the figure that the Secretary of State has given.

Where such increases occur, who does the Secretary of State think should shoulder the blame?

Mr. Paddy Tipping (Sherwood)

Will the right hon. Gentleman give way?

Sir Norman Fowler

Not for the time being.

Only councils' efforts to improve efficiency—or decisions to cut services—will prevent increases of this magnitude. People throughout the country will have to pay significantly more council tax, but will get worse services. That is precisely the point that was made in last year's debate by the right hon. Member for Holborn and St. Pancras. That is the result of the current Government's policies.

Anyone who believes that the new Government are good news for our essential services should read what Home Office Ministers have to say on the subject. Defending his policy, the Home Secretary said:

The police are the only local authority service to have had an increase greater than inflation in each of the last four years. Under the Conservative Government.

In yesterday's debate, the Minister of State, Home Office made the position clear when he said:

The effect of the formula and capping principles to be applied by … the Deputy Prime Minister … means that two police authorities—Surrey and Lincolnshire—will be disappointed by the settlement. To be blunt, they are disappointed by it and have said so. The chief constables of those forces came to see me with representatives from the police authorities to express their concerns over the Government's funding proposals for 1998–99. I listened to them carefully, but my view remains that the special funding that they were given in 1997–98 cannot continue. Tough choices are sometimes necessary for the greater good. The Government stand by their tough decisions in respect of Lincolnshire and Surrey."—[Official Report, 4 February 1998; Vol. 305, c. 1070.]

Mr. Prescott

indicated assent.

Sir Norman Fowler

I am glad that the Deputy Prime Minister assents to that. I wonder whether the public in Lincolnshire and Surrey will be so cheerful about the prospect of police cuts.

Mr. John Hayes (South Holland and The Deepings)

Despite the fact that the police in Lincolnshire have less manpower than the national average, the net result of the change is that the number of policemen on the beat in Lincolnshire will be cut at the same time as the council tax rises. That is the reality of the settlement for the people of Lincolnshire. It is deeply unpopular, not only with the police but with the public.

Sir Norman Fowler

That is precisely the point. This has nothing to do with any decisions taken by the last Conservative Government. The police in Lincolnshire—

Several hon. Members

rose—

Sir Norman Fowler

Let me finish the point and then I might give way.

My hon. Friend the Member for South Holland and The Deepings (Mr. Hayes) is right. The number of police officers will fall and the council tax will rise. If the Secretary of State for Health were here, he would condemn outright such a policy.

Mr. Tipping

The right hon. Gentleman has made great play of the rise in council tax. Will he reflect on the last Budget plans of the previous Government and then acknowledge that they implied a 7 per cent. rise, which he has just complained about?

Sir Norman Fowler

I have dealt precisely with that argument. The point that the hon. Gentleman misses is on the redistribution and distribution of the SSA. In opposition, Labour's entire approach—we have heard a bit of it this afternoon—revolved around their dislike of Conservative councils such as Wandsworth, Kensington and Chelsea, Bromley and, of course, Westminster. What irritated Labour Members most of all was the sight of Conservative councils proving year after year that good, efficient local councils could keep council taxes down. The result was that the Labour party vowed to change the distribution formula, which is precisely what the Government have done. That is their responsibility—it can be nobody else's.

Dr. Alan Whitehead (Southampton, Test)

Will the right hon. Gentleman give way?

Sir Norman Fowler

No, I shall not.

No one but the Government can be blamed for those changes. They started by asking Westminster to cope with a 12 per cent. cut in SSA provision per head in one year. Worse still, in targeting Westminster, the Government have hit the rest of London too. In all, seven London councils, including Camden, Islington, and Hammersmith and Fulham, are having their per capita SSAs either cut or held constant in cash terms. This year, London borough councils have fared worse than county councils and unitary councils, and far worse than metropolitan councils with which they have most in common. In 1998–99, more than 80 authorities are having their SSA provision cut in cash terms.

That, however, is not the end of the story. As a direct result of the Government's changes in the funding formula, Bromley will lose £640,000 from its SSA, Croydon will lose £1 million and Lambeth will lose £1.7 million. Furthermore, London is not alone in being hit by the changes to the formula. In response to a written question tabled by my hon. Friend the Member for South Suffolk (Mr. Yeo), the Government listed eight sets of changes made to SSA methodology for 1998–99, not one of which helps shire England. Indeed, they seem designed precisely to shift money away from the shires.

The Government are rewarding councils that built up huge debts in the 1980s and penalising other, more prudent, ones. Changes to social services funding, including services for the elderly, have also affected the shires, as my hon. Friend the Member for Cotswold (Mr. Clifton-Brown) said. Overall, Oxfordshire loses £8 million from its SSA as a result of the Government's changes, while Kent loses £7 million, Wiltshire loses more than £4 million, Dorset loses £3 million, and East Sussex loses more than £2 million. Many of those cuts are hidden by the overall increase in education budgets, but they are nevertheless real cuts that not only affect councils this year but will affect them in years to come. As a direct result of the Government's changes in methodology, the shires lose nearly £100 million from their SSAs, and £55 million is taken from London.

If some authorities lose out, others must gain. Sedgefield is an outstanding case in point because it has done better than almost every other council in the land. It has a massive 13 per cent. increase in SSA and it does not even deal with education. Thus, the principal local authority in the Prime Minister's constituency provides an excellent illustration of precisely how the changes in methodology have worked. Sedgefield's 13 per cent. increase is more than double that for any London borough or new unitary authority. It is more than double the percentage increase for Birmingham or Coventry, three times that for Liverpool or the Wirral, and seven times that for Manchester.

Mr. Barry Gardiner (Brent, North)

Will the right hon. Gentleman give way?

Sir Norman Fowler

No, I shall not.

Had Brent received the same percentage increase in SSA as Sedgefield, its provision would have gone up by £24 million. Doubtless Labour will once again pose as a friend of London in the May elections, but it is the deeds, not the words, that count. In changing the funding formula, the Government have discriminated against London.

As the Deputy Prime Minister made clear, this is just the first year of changes. We are now told that further reviews are to take place. Seeing how many reviews can take place at the same time is becoming the sign of the Department of the Environment, Transport and the Regions' success. In a revealing reply on Tuesday at Question Time, the Minister of Transport claimed credit for the fact that this was the first Government for 20 years who had produced a White Paper on transport. They have not actually provided it, but that is what he claimed—not action, legislation or investment, but a White Paper.

The same is true of local government, only the Minister for Local Government and Housing does not seem to be quite as bullish about her paper exercise as the Minister of Transport. According to the Local Government Chronicle, she has written a letter to the Deputy Prime Minister about the issue. The mind boggles at the prospect of one Minister in a Department writing to another in the same Department, but that seems to be how they communicate in that massive Department. I know from personal experience that the Deputy Prime Minister is extremely fortunate to receive a letter from the Minister for Local Government and Housing; I wrote to her on 20 November and am still waiting for her reply.

The warning to the Deputy Prime Minister is stark. The hon. Lady wrote: We have to recognise that our plans may be presented as conflicting with expectations created by the announcement of the review, coverage in the local government press and the approach we have taken so far. There is a danger that if we do not seek views on the range of options we have discussed with the LGA and others, our new partnership approach to local government, which we have proclaimed loudly to considerable acclaim from our own backbenchers and local government, would quickly break down. The letter reveals the hon. Lady's concern about policy, because she says: We need to be particularly careful in how we present the issues in the consultation papers … We should avoid boxing ourselves in too soon'.

Mr. Woolas

Will the right hon. Gentleman give way?

Sir Norman Fowler

No, I shall not.

It is worrying when the Government talk about reform and change, because that is another way of saying that there will be new taxes for the public and for business. The Labour party is not the only party to talk about that. In the debate last week on London Underground, the spokesman for the Liberal party—I am sorry, the Liberal Democrat party—

Mr. Andrew Stunell (Hazel Grove)

That is the first thing the right hon. Gentleman has got right this afternoon.

Sir Norman Fowler

I shall get this right, too. In that debate, the hon. Member for Carshalton and Wallington (Mr. Brake) offered three concrete proposals on taxation. First, he suggested a charge on non-residential car parking spaces in London which would raise £150 million a year. Secondly, he wanted a congestion tax, which would raise £795 million a year in London. Thirdly, he wanted a temporary increase in business rates for London, which would raise £150 million a year. In that short debate, the Liberal Democrats committed themselves to £1 billion extra taxation for London. What concerns me is that that is precisely the same way that the Deputy Prime Minister wants to go. He is putting his hand up.

Mr. Prescott

I do not think that the right hon. Gentleman would want to do the Minister for Local Government and Housing an injustice. The letter to which he referred was sent to my hon. Friend, and was passed on three days later to the Home Office because it was about fire alarms. He is as confused about these letters as he is about his analysis.

Sir Norman Fowler

I am delighted, because that is the first information I have had about the letter since 20 November. What has happened to it? It was about local authority fire alarms. I do not care which part of the Government is in chaos: all I say is that one part is in absolute chaos and it is about time they got their act together. They obviously have the gravest difficulty sending letters. If they cannot do that, God help us when it comes to running the country.

More relevant than the Liberal Democrats—and almost everything is more relevant than the Liberal Democrats—are the Government's plans. In opposition, Labour talked about returning responsibility for business rates to local authorities. In government, its line has changed, but not to the benefit of business. National rates are to be retained, but there is now the prospect of councils having the power to levy a supplementary rate.

Another proposal that the Government are examining is for local authorities rather than the Department of Social Security to meet any extra bill for council tax benefit. That is an important change and it will be the council tax payer who will pay more.

In her winding-up speech, the Minister should tell the House precisely what she is proposing. What is her position on business rates? What is her position on council tax benefit? Are the Government considering increasing the number of council tax bands, or have they abandoned that proposal?

This afternoon, the Government's agenda for local government is becoming all too clear. It involves loading new costs on to councils and forcing the council tax payer to foot the bill. It involves rigging the system to hit London and the shires. That is not what people voted for last May and we should not vote for it this evening.

The Government talk about holding local referendums. We do not need periodic referendums in local government: we need consistent local government providing the best value for the council tax payer. That is what the Conservative party wants and stands for and it is the platform on which we shall fight the local government elections in the coming 18 months. Above all, it is why we reject the Government's proposals.

Several hon. Members

rose—

Mr. Deputy Speaker

Order. Before I call any Back Bencher, I remind hon. Members that they are restricted to 10 minutes.

6.4 pm

Mr. Jim Marshall (Leicester, South)

In the past 33 minutes, the right hon. Member for Sutton Coldfield (Sir N. Fowler) made an entertaining speech, but it did not advance the cause of local government. Nevertheless, he entertained his right hon. and hon. Friends. That may be the first time that that has happened since the election last May. I was bemused by his peroration. He used the term "consistent local government". Consistency was the last thing that local government faced while the Tories were in power from 1979 to 1997. Year in, year out, local authorities were faced with turmoil. I look forward to relative peace and tranquillity—if that is possible with my right hon. Friend the Deputy Prime Minister—for local authorities in the next four or five years.

My right hon. Friend said that tough choices must be made, and I agree. Representatives from my local authority in Leicester have been to see his ministerial colleagues: they are part of the special pleading brigade. The outcome of those discussions is that tough decisions were made, but they were to the disadvantage of Leicester. I want to make a case on behalf of my local authority.

I realise that the Government have faced some difficult choices. I cannot help but think that the commitment to maintain the previous Government's spending limits has imposed restraints, but those are the parameters within which we are working. I welcome the additional resources that the Government have made available, especially to education.

I welcome the commitment to a fundamental review of local government finance, which is long overdue. I hope that it will bear fruit in the not-too-distant future. I hope also that when the review is finalised, the outcome for Leicester will be more equitable than the present settlement.

I made a similar speech 12 months ago under the previous Government, so the House will know that the revenue settlements for Leicester over the past few years have been bad for the city. Before 1997–98, when Leicester was a district council, it fared badly as a consequence of funding formula changes introduced by the previous Government. As a result of those methodology changes, Leicester received £6.9 million in standard spending assessment reduction grant. That was the highest figure outside London.

In 1997–98, which was the first year that Leicester was a unitary authority, it fared little better. There were further losses in SSA, again because of methodology changes, with only a 1 per cent. permitted increase in the cap. Budget cuts to the tune of £17 million had to be made, but that was perversely accompanied by a 13 per cent. reduction in council tax. Despite the arguments that we put to the previous Government, they were not prepared to allow us to balance cuts with increases in council tax. As I said, last year, budget cuts to the tune of £17 million had to be made—and, as my hon. Friend the Minister of State knows, Leicester's woe continues into 1998–99. It is true that Leicester's SSA has been increased by a small amount, but the increase is smaller than that allowed to similar authorities, and the entire SSA reduction grant has disappeared. As a consequence of that and other changes, council tax in Leicester will increase by 26 per cent., and budgets will have to be cut by £2 million.

Let me briefly explain to my hon. Friend the Minister what that will mean in terms of service provision on the ground. It will lead to the closure of, probably, two training centres, and may well lead to the closure of a hostel for elderly Asians. It will also lead to the closure of an advice centre. Charges for meals on wheels will increase for 1,800 people, and 400 people using day centres will have to pay a new charge of £1 a day.

That is just the tip of the iceberg. The full horror of the cuts will materialise only when individual committees set their budgets in the coming months. The final picture could well be more horrendous than the one that I have presented.

Notwithstanding what was said by the right hon. Member for Sutton Coldfield, I concede that, in many ways, Leicester's problems arise from decisions made by the previous Government. As I have said, methodology changes in the SSA have had an impact on Leicester over the past four or five years. Nevertheless, I hope that, even at this late stage—I know that only another three hours and 50 minutes remain before the final decision is made—the Government will take steps to alleviate Leicester's problems. [Interruption.] Did I get the time wrong? [HON. MEMBERS: "Yes."] I do not want my arithmetic to be as bad as that of the Opposition.

Leicester's problems could be alleviated in a number of ways. One way would be to provide a slightly more generous cap for unitary authorities, covering the whole class of such authorities. But, as my hon. Friend the Minister knows from detailed studies of the figures, that would lead to only a slight increase in overall national expenditure—indeed, in terms of overall national expenditure, an insignificant increase. My hon. Friend could also introduce more protection for authorities that had been receiving SSA reduction grant that then disappeared overnight—the damping to which my right hon. Friend the Deputy Prime Minister referred. There is no doubt that the loss of the £3.6 million that Leicester received last year will have a major impact on the level of council tax in the coming financial year.

My hon. Friend could—here I refer specifically and directly to Leicester—make a technical adjustment to the cap to reflect the fact that the council has lost out because of the introduction and subsequent abolition of nursery vouchers.

Let me make two final suggestions that the Government should consider in their review of local government finance. First, education data changes can have a profound impact on the budget. The Government should consider introducing a clamping mechanism—I am sorry; I meant a damping mechanism. [Laughter.]. Perhaps my right hon. Friend the Deputy Prime Minister made a similar slip. The Government should consider a damping mechanism for below-average changes in pupil numbers.

Secondly, the new system should recognise more fully the needs of deprived urban areas. If a system akin to the SSA is retained, more weighting should be given to indicators of need and deprivation.

6.14 pm

Mr. John MacGregor (South Norfolk)

"Education, education, education" was the Labour rhetoric before the election. In Norfolk, hoping for a Labour Government, the ruling Labour party—aided and abetted by the Liberal Democrats—had, during the previous four years when it was in power, done a number of things. It had run down the reserves, abandoning the prudence of the preceding Conservative administration on the assumption that it would receive a good deal more when Labour came to power. Furthermore, before the election it had written to every school, urging those in charge to write to their Member of Parliament pointing out what a poor result there was for education in Norfolk. Again, there was a clear hint, or implication, that the council hoped that more money would come from Labour.

The people of Norfolk can now forget the rhetoric; what they are seeing, and getting, is the Labour reality. According to the 3 February edition of our local newspaper, the Eastern Daily Press, this was one of these most catastrophic rounds of cuts in memory". That was after a deputation consisting of Norfolk Labour Members—Conservative Members were excluded—and members of the ruling Labour council went to the Minister for Local Government and Housing pleading for more. They were rewarded—perhaps rebuffed is a better word—with a further cut of £400,000, £268,000 of which related to education. The Eastern Daily Press described that as

a final insult piling on more misery". In view of the shortness of time, I shall concentrate on the county council, although my South Norfolk district council has also had a lousy settlement. That is not very good from its point of view, given that it was chosen as one of the best-value "pilots" with no resources to help it.

For the county council, all this means real cuts of between £12 million and £15 million, along with a council tax rise of up to 17 per cent. I was amused to hear Labour Members talk of expecting a rise of 7 per cent. if the Conservatives were in power: we now face an increase 10 percentage points above that. That is not what we are saying; the Labour party in Norfolk says that that will be the consequence.

The people of Norfolk are now paying a heavy price for the running down of balances to pay for the higher expenditure of their Labour council in the hope of more jam tomorrow from a Labour Government. What we have is less; it might be described as a thin crust. The combination of a Labour council and a Labour Government is proving pretty lethal.

What are the likely implications? One likely implication—again, I quote what the Labour county council in Norfolk is saying—is that many teachers will go. That is why Labour's rhetoric about "education, education, education" sounds so hollow. Norfolk schools are being given a much worse deal than the one that they criticised last year. Moreover, the idea that more resources are being given is phoney: it is a myth. As my right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler) pointed out, the money was drawn from the reserves. Last year, the Conservative Government increased local authorities' education resources in exactly the same way. It was announced a little earlier this time, but there has been no change in the method. I think that, in terms of education, Norfolk will be worse off. I shall say more about the impact on social services shortly, but if there has to be some virement from the education budget to the social services budget to cope with the catastrophic position of the social services departments, education will suffer more.

There is also likely to be a considerable reduction in the number of front-line social services staff, and in free transport to schools, which is so important in rural areas. Day care centres for the elderly and residential homes are likely to close. Fewer older people will be taken into care this year than last, and there are substantial implications for roads and highways.

How has all that come about? It is one of the consequences of the switch of resources from rural to urban areas that was mentioned by my right hon. Member for Sutton Coldfield. In SSA terms, the shire counties have had a poorer deal than metropolitan and urban areas—apart from London—yet the cost of providing services in rural areas can be substantial. I refer the Minister for Local Government and Housing to the recent study for the Rural Development Commission by Rita Hall and to one that she is doing for Norfolk. I hope that the Minister will pay attention to that study because it shows that in some cases the cost of providing services in rural areas is as high as in urban areas.

The switch from rural to urban areas is the first reason for the bad settlement for Norfolk. The second reason is that, of the shire counties, Norfolk has the second lowest SSA increase, at 1.5 per cent., which is a reduction in real terms. Among a number of reasons for that, the most important is that, as the Minister will know, we have suffered a £5 million reduction in the social services budget. However, Norfolk has a higher than average proportion of elderly people, especially those over the age of 85, and that is rising.

All the implications for social services that I have described, including the blockage of hospital beds that was mentioned by my right hon. Friend the Member for Sutton Coldfield, result from the reduction in cash. That is the result of changing the formula on attendance allowance by putting considerable weighting on it in the formula for the distribution of the social services budget. So far, there is no strong evidence that that is one of the ways to achieve a more accurate distribution of the social services budget, and the change is the subject of dispute.

One of the consequences of the change is that it will encourage authorities that have so far not put many resources into encouraging a bigger take-up of attendance allowance to do that. That will increase overall public expenditure. My additional concern is that that is related to take-up rather than to need, and I am not sure that it is a fair way to allocate resources to need. I understand that there is to be no damping of that this year, which means that there will be an immediate £5 million reduction as a result of one small change in the formula. I noted what the Deputy Prime Minister said about looking at damping. Can he confirm that there will be no damping of that for Norfolk this year?

The Government's proposals are not the best way to target better the social services budget. They are not fairer and I ask the Minister to examine the matter again. Whatever she says, it is plain that there are serious implications for Norfolk that may have a spill-over effect on education. The situation is unlikely to be better next year.

My right hon. Friend the Member for Sutton Coldfield spoke about pension funds. The Government have said that they will look at that next year, but that tax will have a considerable effect on local authorities. if they meet it in full, they will require several hundred million pounds next year and I do not think that, on top of a normal revenue support grant settlement, they will provide enough resources to meet the whole effect of the pension fund tax. Serious problems will arise next year as a result of the introduction of the pension fund tax. No matter how it is timed, it will have a serious effect on local authorities.

The damage to Norfolk has been done for this year. The Government have said that there will be no closed minds when they look at changes to the formula next year. I have two pleas. First, I ask the Minister to look again at the issue of attendance allowance to determine whether the change in the formula is fair, especially in view of the weighting that is attached. Secondly, I ask her to take rural issues fully into account when considering changes to the formula and the area cost adjustment. From studies that I have seen, I am not convinced that rural areas are being fairly treated this year and I do not think that the switch in the SSA from rural to urban is justified.

There is no doubt that the hints to the people of Norfolk about what the local government settlement would be like under a Labour Government have proved to be totally false. We face one of the worst settlements that we have had for a long time.

6.24 pm

Ms Jean Corston (Bristol, East)

I was fortunate to be called in the debate on local government finance this time last year, and said that at that time in Bristol the mood verged on despair, not just in local government but in business and in the voluntary sector. That was because of the prospects for Bristol as a result of the then Government's financial settlement for that year and previous years. Bristol had less Government financial assistance per head than any comparable city. It was the lowest spender per head of all the big urban authorities, but was in the anomalous position of having to levy the third highest council tax in England.

I said in last year's debate that the standard spending assessment and the area cost adjustment were manifestly unfair and that after the general election there would be no Tory Members in Bristol. That was greeted with derision and hoots of laughter by Conservative Members. It is nice to have the last laugh because all the Bristol seats are now held by Labour Members who are co-operating as a team to represent the interests and needs of the constituents in our marvellous city.

I now refer to this year's settlement. Bristol city council met on 13 January and passed the following resolution: Council welcomes the improvements in Bristol's financial circumstances brought about by Labour government decisions. In particular, we welcome the substantial additional money for education and housing services and a local government financial settlement which requires spending and service reductions of approximately half those which could have been expected under the previous government. However, Council continues to express great concern that the existing local government financial regime manifestly fails to recognise Bristol's needs, and results in the imposition of low spending on council services, low government grant and unfairly high council tax. It is plain that the election of a Labour Government has been good for Bristol.

Miss Julie Kirkbride (Bromsgrove)

Will the hon. Lady give way?

Ms Corston

I have just 10 minutes in which to make my speech. Perhaps the hon. Lady could make her own speech.

It is plain that Bristol remains disadvantaged by the area cost adjustment. That is because, although it is bracketed with the rural south-west, it has M4 corridor costs. In terms of education, the budget increase of 4.7 per cent. this year as a result of extra Government funding is the best news that we have had for years. It will improve teachers' morale and raise their concept of professionalism. It will help governors who have complained to me about the way in which they have had to operate under the previous Government's disguised education market, and it will go a long way towards reducing under-achievement.

Structural problems remain, especially in the context of the SSA and its future. I understand that the future determinant will be need. The image that is conjured up by the mention of Bristol is of a dynamic financial centre with high-skill industries such as British Aerospace and Rolls-Royce. Clifton suspension bridge is another of the features that remind people of Bristol. But Bristol follows the familiar pattern of wealth and poverty cheek by jowl, each virtually ignorant of the other and separated by dual carriageways and main roads.

I hope that my ministerial colleagues will pay special attention to research that will soon be published by Bristol university's statistical monitoring unit. One of the authors of the unit's report, Professor Peter Townsend, is my husband. He has an international reputation as a social scientist, but that has no bearing on my role as a Member of Parliament. I mention that for the record in case anyone should think that I have tried to disguise his part in the authorship of that report.

The report is the first to look at need beyond regions and districts—an examination of Bristol in conjunction with a deprivation map might not reveal any helpful information. The research report contains an analysis of all 10,500 electoral wards in England, Wales and Scotland, and it provides for the first time a deprivation map of this country's wards.

Eight different measures were used to show how Britain's wards compare with one another in terms of deprivation and conditions: the Townsend z-score, which is the most widely used index, the Department of the Environment, Transport and the Regions' index of local conditions, which is the current "official" index, the social deprivation index, a weighted index using indicators drawn from the national "Breadline Britain in the 1990s" survey, the Carstairs (Scotland) index, the new Jarman index, the Bradford index and the Oxford index. Results were also compared with the ranking of wards according to outcome indicators, that is, standardised mortality rates, standardised illness ratios and average earnings—so the report is pretty comprehensive.

Bristol has 34 wards. The new report shows that 10 of them—about 30 per cent.—are in the top 20 per cent. of Britain's most deprived wards. They are the wards of Lawrence Hill, Filwood, Ashley, Whitchurch Park, Southmead, Knowle, Kingsweston, Cabot, Lockleaze and Bishopsworth. Some of those wards are in the constituency of my hon. Friend the Member for Bristol, West (Valerie Davey), who is present in the Chamber. The ward at the top of the list, Lawrence Hill—which is in my constituency—is the 242nd most deprived ward in England, Scotland and Wales.

In other deprivation indices, Lawrence Hill's position is worse: it ranks 35th, 75th, 100th and 140th. It is true that URBAN funding will be spent in the ward to improve employment prospects, but those figures—which show an extent of deprivation that has never been hitherto acknowledged, and patterns of deprivation that we have never appreciated before—should go a long way in persuading the Government to have an SSA regime that genuinely reflects a concept of need. I urge the Government to ensure that the report, which draws together much evidence and other available information, will be used in the reformulation of the SSA.

Bristol does not want any undue favours. Bristolians are proud people and do not expect to go round with a begging bowl. Like most people, they value their public services. Bristol city council is popular, as is the Labour party's commitment to local democracy, to the political legitimacy of local government and to the position of local councillors as elected representatives, with the same status as us, but Bristol's population wants fairness and a recognition of the extent to which the Conservative party, over 18 years, damaged our city, in ways that some people considered to be unbelievably spiteful.

That is why a seat that was previously held by a Conservative Chief Secretary to the Treasury, no less, now has a Labour Member of Parliament with a majority of over 1,000. The people of Bristol have spoken. They are pleased with the mid-term report. They recognise that these problems cannot be solved overnight and look forward to a local government regime that is fair and seen to be fair.

6.32 pm

Mr. Paul Burstow (Sutton and Cheam)

As part of my preparation for today's debate, I read some of the local government settlement debates in the House, and I have listened to the exchanges so far between the Government and Conservative Front-Bench teams. It sounds as though they have exchanged not only offices and Benches, but scripts. Labour is learning the language of fantasy figures and the Conservative party is beginning to relearn the reality of what happens when Governments impose the sort of settlement that this Government are imposing. This settlement does not take the pressure off councils' budgets and local government's ability to deliver services. Those are not my words, but those of the Labour-controlled Local Government Association in response to this settlement. It is right. This settlement does not mark the beginning of a new relationship between local and central Government. Rather, it is another milestone in the long and dreary succession of damaging settlements that have so undermined local services. As the hon. Member for Leicester, South (Mr. Marshall) pointed out, how could it be otherwise when a Tory Government conceived the spending plans that underpin the settlement?

Even the Secretary of State for the Environment, Transport and the Regions has admitted that the settlement is tough and that a price will have to be paid, so for many people in local government the settlement represents business as usual: more cuts, more hard choices about what to sacrifice and what to save and, to add insult to injury, a council tax rise well above inflation.

Like Labour, Liberal Democrats were highly critical of the previous Government for failing to make allowance for inflation, pay increases and the cost of providing extra services for the growing number of older people and children at school. Therefore, we might have expected this year's settlement to be different, but it is not. Indeed, the Local Government Association's own figures show that local government will be £800 million short of what is needed just to tread water in the coming year.

For many councils, the choice will be between not growth and the level of the council tax increase, but how deeply to cut services and the level of the council tax increase. This is about not real growth, but reshuffling the pack and moving money around. One county council was quoted by the Local Government Association in its recent report:

Our expenditure will rise by 3.09 per cent., our council tax will go up by 10.4 per cent., yet we will still be cutting services drastically. This year, for example, Somerset county council is allowed to spend an additional £10.6 million, but only £600,000 of that will come from extra revenue support grant and business rates, so the rest will come from council tax. Is that what new Labour mean by redistribution? To protect services, councils will be forced to tax and to spend up to their capping limits and still people will pay more and get less for it.

The Government have made much of the extra money that they will spend on education. All council leaders have had a very friendly letter from the Secretary of State for Education and Employment warning them not to spend the money anywhere else.

Mr. Nigel Jones (Cheltenham)

I also have had one of these very polite letters from the Secretary of State for Education and Employment asking me to ensure that the £11.2 million of additional funding goes into schools in Gloucestershire, but I look at the figures and find an increase of only £4 million in the revenue support grant. I am happy to suggest to my colleagues on Gloucestershire county council that they put that £11.2 million extra into education, but that means that social services will be desperate for funds and that the fire and rescue service and all the other services will suffer from cuts as well.

Mr. Burstow

My hon. Friend is absolutely right. Such fantasy figures are trotted out every year to try to persuade people that much additional Government money is going in, but local authorities, which are already often spending more than SSA for education and social services, have to face the fact that they will have to make cuts to accommodate the Government's bizarre view of what is necessary to keep services at a standard level.

Because of the small print in last July's Budget and the cost pressures on local education services, the extra money for education will not be enough to enable schools just to stand still and to continue to do what they are doing. For example, there is a requirement for an extra £137 million to meet the cost of an additional 55,000 children coming into schools this year. The Chancellor took full account of the extra revenues generated by changing the inflation assumptions in the Budget, but he failed to compensate public services for the cost of the extra inflation, so, in the coming year, under this settlement, even after the extra money for education, local authorities will be £48 million worse off in real terms.

As one inner London local authority put it: We are fully committed to using all the additional schools" SSA increase to increase educational achievement … but … we are going to have to make large additional cuts in other services or have a very large increase in council tax. In England as a whole, there is a £562.9 million gap between the Government's rhetoric on education spending and the budget realities of individual councils. Gloucestershire county council, which has been mentioned a couple of times, has a gap of £8.8 million. For many councils, delivering the Government's promises on class sizes and school standards will mean that, for every extra £1 that goes into schools, £1 will have to come out of another local service. Perhaps that is what Labour means by redistribution.

That leads me on to social services. Everyone knows that community care is underfunded and that, increasingly, councils are in the business of rationing care rather than meeting need. Again, the settlement does little to relieve the pressure. With social services departments spending on average 9.5 per cent. above their SSA in the current year, I sometimes wonder what would happen if councils spent down to their SSA.

For many local authorities, demand-led services are putting severe stresses on staff and budgets. Already, many have had to tighten their eligibility criteria and raise charges for care services. On the Local Government Association's own figures, seven out of 10 authorities will have to tighten their eligibility criteria further, and six out of 10 will have to raise charges still higher.

Only yesterday, at the Local Government Association's health and social affairs committee, it became clear that social services will bear the brunt of many of the cuts that will have to be made as a consequence of the cuts. Newcastle is set to cut £500,000, which will exacerbate bed blocking there. Hartlepool is about to make a 5 per cent. cut in social services. I understand that Gateshead will be cutting £800,000, and so on. Under this settlement, it will be granny and granddad who will pay for their grandchildren's education through inadequate care and higher home help charges.

Much has been made of the Government's extra £835 million for education—one-off money from the Government's reserves. As we have already demonstrated, that money effectively compensates local services for the extra inflation in the small print of the July Budget. There is no money to pay for smaller classes—another early pledge delivered late. To make a difference, Liberal Democrats have made it clear that we remain committed to the idea of an extra £2 billion being invested this year and every year. That is extra money above inflation.

Mr. David Watts (St. Helens, North)

Another penny on income tax—it is spent already.

Mr. Burstow

The same penny being applied to the same purpose yet again. [Interruption.] Labour Members may not like the fact that the Liberal Democrats are clear about their commitment to invest in education, but that is the reality.

Our plans would mean that the average primary school with 250 pupils would receive an extra £16,000, and a typical secondary school with 1,000 pupils would get an extra £110,000 this coming year.

Work by the independent Institute of Fiscal Studies shows that the Government have as much as £3 billion which they could spend in the coming year and still meet their golden rule for borrowing. It is therefore clear that it is dogma rather than debt which is stopping the Government putting money into public services in the coming year. The public will not understand if the Government allow that money to become part of their election war chest rather than using it to give local councils the fair deal that they so desperately need.

In the longer run, Liberal Democrats welcome the Government's commitment to overhaul local government finance. We want a system that ensures greater accountability, raises taxes that are based on the ability to pay and guarantees greater freedom of action for local councils. It is good news that this is the last year of crude capping, but what will Labour's subtle capping be like? Will it be a case of new Labour, new capping? Capping distorts local priorities and undermines local accountability.

In reforming local government finance, the Government must accept that greater financial independence is only one pillar. With it must come greater freedom of action allied to stronger democratic accountability. Liberal Democrats want to see a shift of tax raising from national to local government, with more of what local councils spend raised through local income tax and local business tax. A buoyant and independent source of revenue would do much to rejuvenate local government. It would strengthen local accountability. The funding of local government must be seen in the context of its powers and accountability.

Is the future of local government to be a mere administrative unit of the Government or will it be about being autonomous decision makers? In conclusion—[Interruption.] I am conscious of the time and of hon. Members pointing at their watches, but as a Front-Bench spokesperson I want to ensure that the Liberal Democrats' position is clear.

This question is a crucial test for the Labour Government. It goes right to the heart of the Government's commitment to real reform. In short, does the Labour party really trust local government? The Government's rhetoric has raised expectations in local government, but there are still far too many control freaks in the Government who believe that Westminster knows best and that Whitehall can lay down national blueprints for everything.

The Government must do far more to convince their colleagues in local government that they will adopt a radical agenda of reform so that they restore trust between local and central Government. This year, we shall begin to see whether the Government will honour the promises that they made to their colleagues in local government in the run-up to the general election and whether they are willing to trust to local solutions rather than impose national blueprints.

This year's settlement is another kick in the teeth for the innovative local government that many local councils of all parties offer throughout Britain. The cut in local authority budgets inherited from the previous Government, the hidden costs of the July Budget on local authority pension funds and the inflation fiddle mean that, for local government, it is business as usual—another year of cuts and hardship. That is hardly the fair deal that we were told was on offer. It is not the way to start a constructive partnership with local government. The settlement is another turn of the screw that the Conservative party used for years. It will lead to further false economies and damage local communities.

That is why, despite the fact that, for the first time in 18 years, Conservative Members will vote against the local government settlement, we shall hold our nose and go through the same Lobby to ensure that we stay true to our principles.

6.45 pm

Mr. Paddy Tipping (Sherwood)

I begin by thanking the Minister for Local Government and Housing for talking to me and Nottinghamshire county council about the tough choices that the county council faces. I commend her for what she has so far achieved in nine months. Local government finance is complex and difficult. It will take time to unwind it and bring forward major changes. However, there are things in the settlement of which we can be proud.

I do not minimise the publication of "The plain English guide to local government financial settlements". It is important for accountability and democracy that people know who is responsible and who pays for the services. At the moment, local government blames national Government and national Government blame the local councils. We must do better than that. The publication of that document will move us away from the situation where it can be said only that responsibility for the settlement can be fudged.

I draw the attention of the House to annexe II of last year's draft local government finance report, which defines the council tax base for revenue support grant purposes. The formula in question is: [(R-(S+T+U+V+W)) + (0.75xV) + (0.5xW)] x X/Y We must do better than that, and we are determined to do better than that to ensure that people know where responsibility lies and how local government is financed.

The significant thing about the settlement is the extra money for education—£835 million extra for education, of which £12.2 million comes to Nottinghamshire. Even allowing for the teachers phased pay settlement, that allows for 2 per cent. real growth for Nottinghamshire schools. Governors, teachers, parents and pupils welcome that as an important first step on the way forward for major change under the Government.

Thirdly, it is right that there has been a real attempt to move resources to areas of need. I can see that happening, but I am not convinced that it has happened entirely. I am concerned about what has happened to shire counties, particularly coalfield shire counties such as Derbyshire and Nottinghamshire and those in the north-east which my hon. Friend the Minister knows so well. It is disappointing that Nottinghamshire's SSA has been reduced by £8 million. At the same time, the Government task force aiming at the regeneration of coalfield areas is spending time in the area offering a better solution. Both matters are dealt with by the same Department. We can and must do better than that, and we can do so by the next settlement.

Taken together, Nottinghamshire's problems have led to real difficulties. Passporting into schools, an SSA reduction and a 3 per cent. cap on growth mean that non-education services are threatened. I shall focus on only one service—Nottinghamshire's library service. Until today, there were plans to close nine libraries. Across the library service, hours are being cut by 11 per cent., which comes on top of erosion of the book fund over recent years amounting to tens of thousands of pounds. Nottinghamshire is not alone in having to make library cuts, which are proposed also in the library services of Oxfordshire, Derbyshire, Shropshire and elsewhere. If we are serious about raising reading standards and achievement, we have to support our library service.

I pay great tribute to those in Nottinghamshire who have campaigned against library closures, and especially to the tremendous efforts of the Nottingham Evening Post in its "save our library" campaign. I commend its success. Only this morning, the county council listened to local voices and to local need, and at its budget meeting made it clear that an extra £77,000 will be made available to keep open those nine libraries. I praise the county council for making a tough decision—although it has yet to find that £77,000, which will mean service cuts elsewhere.

What might be done to help areas such as Nottinghamshire? My right hon. Friend the Minister of Transport recently met a delegation from Nottinghamshire to discuss the Robin Hood railway line. The county council is one of only three in the country that supports a passenger line, paying £1 million annually out of council tax to support that line. If the council were a passenger transport executive, it would have some prospect of recouping that money. My right hon. Friend said that he will consider the matter sympathetically, and I hope that he will do so.

I hope that we shall examine also the strange SSA for education of under-fives. There have been changes in methodology in determining that SSA, and grant will be based on the number of four-year-olds in nursery classes. In gross terms, Nottinghamshire provides more nursery places than any other county. However, some of those youngsters are three-year-olds and will therefore not be included in the equation. If we aspire—we do—to including more three-year-olds and four-year-olds in nursery education, we should be rewarding, not punishing, councils such as Nottinghamshire.

We should take action also to deal with bigger issues. As many hon. Members on both sides of the House have said in this debate, we have to re-examine the area cost adjustment. For Nottinghamshire, the adjustment acts like Robin Hood, but in reverse—taking money away from deprived areas and applying it to the affluent south. I hope that my hon. Friend the Minister will take action to change that. The previous Government examined the matter, but they were weak, listening too much to the voice of local government and asking for consensus. I tell my hon. Friend that she will never find consensus, but will have to drive through change.

Ultimately, local government finance needs radical reform. I am delighted that universal crude capping will go, and that this is its final year. More important, we must broaden local authorities' tax base. It is ludicrous for 75 per cent. of local council finance to consist of external support. Local authorities must be masters in their own kingdom and have the opportunity to broaden their financial support, so that they can develop local solutions to local needs.

Most important, we have to form a new relationship between central Government and local government and develop a partnership of equals. The sign of a good partnership is that two partners still talk to one another even if there are substantial differences. If we reform local government finance and give councils greater responsibility and autonomy, we shall be able also to expect things from them. We must be assured that, in partnership with others, they will work as champions for change, moving and being in touch with the needs of local voters. We have to ensure that we have empowering councils that, for the first time, have the opportunity to effect the real change that they need and to which their inhabitants aspire.

6.54 pm

Mr. Peter Brooke (Cities of London and Westminster)

The honour paid to Nottinghamshire local government in the new year's honours was matched by the speech of the hon. Member for Sherwood (Mr. Tipping). I represent the rich merchants of London who, in the middle ages, were regularly mulcted as they passed through his constituency. In the context of this settlement, nothing seems much to have changed in my own area.

It will probably not surprise the House to hear that I sought to catch your eye, Mr. Deputy Speaker, as the City of Westminster is widely regarded as the local authority which is most adversely affected by this revenue support grant settlement. That arises primarily out of two conditions: the first relating to the treatment of visitors and commuters, and the second to changes to the damping mechanism. I do not think that there will be much dissent from the view that Westminster is primarily and exceptionally affected by the application of the population density factor—obviously in relation to visitors and commuters. If anyone doubts that, I can bore for England with statistics on the subject.

The Deputy Prime Minister had a cheerful soundbite about the Ritz hotel that he used in his statement of 2 December, both in his initial remarks and in his reply to my right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler). I was not surprised that he used it again today. He knew—for he is not one of those Ministers against whom the charge is laid that they do not read their papers—that Westminster city council had withdrawn that particular argument some time ago.

Westminster still argued that the treatment was a proxy for the density factor as relating to visitors and commuters. Westminster was one of a number of central London local authorities that commissioned the KPMG report to examine the actual costs that central London authorities incur in the context of visitors and commuters. That chimed admirably with the Minister's own requirement that any changes to standard spending assessments must be based on sound research.

The Minister for Local Government and Housing, who is temporarily absent from the Chamber, will herself be aware that the KPMG study was done in conjunction with researchers at Bristol university—to whom the hon. Member for Bristol, East (Ms Corston) has charmingly paid tribute—who have standing in their field. By comparison, the report of the Special Interest Group of Municipal Authorities—on which the Department of the Environment Transport and the Regions relied heavily—was desk bound, and its evidence was selective and anecdotal.

The Treasury Solicitor commented on the DETR' s comparison of the two reports, saying that it had examined the statistical methodology and the evidence on both sides, weighed that competing evidence and concluded that Westminster had not made its case. A bystander might remark that, in line with the Minister's own criterion, it was for SIGOMA rather than Westminster to make out its case. Westminster's case was that the system adopted since 1991 should be maintained. It was therefore for SIGOMA to make out its case that the statistical methodology and evidence relied upon in all previous years was incorrect. The KPMG study, regardless, came to the unequivocal conclusion that there is an interaction between visitors and commuters and density.

The practical consequences of the Deputy Prime Minister's preference for SIGOMA' s views is that Westminster will receive £18 million to deal with those expenditure items, whereas KPMG assesses the actual costs of non-residents at £33 million.

Mr. Peter Bradley (The Wrekin)

Will the right hon. Gentleman give way?

Mr. Brooke

No, I shall not give way, partly because of time and partly because—if the hon. Gentleman will excuse me saying so—he did not mention in advance, on 21 January, that he planned to mention my name in the debate. May I give him one piece of advice, which was given to me by the hon. Member for Bolsover (Mr. Skinner) when I was first elected to the House? He asked, "Have you come from a council?" I acknowledged that I had been a councillor. He said, "Well, forget about being a councillor; concentrate on being a Member of Parliament, particularly if you come from a different part of the country." I commend that advice to the hon. Gentleman and I respect the hon. Member for Bolsover for it.

I shall be astonished if Westminster residents and electors are not deeply resentful of the transfer to residents, who are largely irrelevant to the expenditure, of the cost of visitors and commuters. I acknowledge, however, that they will be affected if the immense cost of street cleansing, environmental health, consumer protection, licensing, trading standards and waste disposal that non-residents impose cause those services to deteriorate, to the detriment of residents as well as tourism, the business community and inward investment.

The Government must ask themselves whether it is sensible to hobble the golden goose which London represents on a national basis, generating £2 billion of tax revenue which is then deployed outside London. If services deteriorate, the golden goose—which is a free-range goose—may go off its feeding and thus its laying. Even if we treated SIGOMA on its chosen criteria—under which libraries and museums were cases where the characteristics of clients were more relevant than the characteristics of the area—a fairly obvious rebuttal would be prostitutes' cards which the city council has to clear.

If the Government seriously believe that prostitutes' cards in telephone boxes, which are singularly prevalent in Westminster, are essentially addressed to local residents, they are attributing to my constituents, who are more elderly than the national average, capacities of energy, stamina and sexual proclivity which the Department believes are not remotely matched in other parts of the country. Currently, 4 million cards annually, or 11,000 a day, have to be collected—and not unviolently.

To his great credit, my noble Friend Lord Whitelaw introduced the licensing of sex shops in 1981, when there were already 164 sex establishments in Soho, and they were seeping outwards. His measure represented a generally effective darn. The Department's attitude to prostitutes' cards should be similarly discouraging instead of weakening the defences.

Westminster, however, is adult in more ways than that. It recognises—even if it thinks it is a wrong judgment—that the Department preferred SIGOMA's views to its own. Its mature response was to commission further, more detailed research on the actual costs that visitors and commuters engender and it has so advised the Department and the Local Government Association.

I shall now deal with damping—the smoothing out of reductions in SSAs—where the Government have chosen to cut the protection available by 50 per cent. at the level of reduction that applies to Westminster and the City of London. That represents a double jeopardy for residents of Westminster, which is sustaining an overall reduction, as my right hon. Friend the Member for Sutton Coldfield said, of £26 million or 12 per cent. of its budgetary requirement, but it applies to other councils, too, causing the Association of London Government to voice concern at a dangerous precedent for the future.

I mention the wider London effect of the change in damping because it had a significant effect on the changes to the Metropolitan Police precept, which was debated in the Chamber yesterday. I could not participate in the debate as I was chairing a Select Committee upstairs, but I watched the screen and was surprised that no London Labour Member voiced concern at the effect of the damping changes on what London council tax payers will have to pay.

If I had more time to speak, I would refer to the specific cost approach over the area cost adjustment and to asylum seekers. However, in the context of costs, Professor Elliott's study, of which the Minister will be aware, specifically determined that labour costs are differentially higher in Camden and parts of Southwark and Lambeth as well as the two Cities, so they, too, will be losers. It is a bipartisan issue.

Labour Members cheered the Deputy Prime Minister's soundbites about the Ritz on 2 December as they interpreted them as being anti-Westminster. So far, however, the Government are profoundly anti-London. It seems not to be chance that Ministers representing London constituencies are at the base of the ministerial pyramid and not at the apex. London is genuinely threatened and hon. Members on both sides of the House should make common cause with the Evening Standard to defend London's interests.

An erstwhile resident in one of my Cities said in the 18th century:

They now ring the bells, but they will soon wring their hands. A 17th century resident in the other said:

And therefore never send to know for whom the bell tolls; it tolls for thee. The Government have come—or gone—for Westminster in the settlement, but they will come—and go—for the rest of London when the elections and the referendum on 7 May are out of the way, and I hope that the whole of London will be watching.

7.4 pm

Mr. Jeff Ennis (Barnsley, East and Mexborough)

I start by thanking my right hon. Friend the Deputy Prime Minister for his speech in December on the provision of settlement when he openly recognised the problems faced by "beleaguered Barnsley". All my constituents appreciate that, after 18 years of non-recognition by the previous Government, Barnsley's grant funding problems are at last being addressed.

Barnsley has undeniable social and economic problems as a direct consequence of the demise of the coal mining industry. The local gross domestic product is currently estimated as 65 per cent. of the UK average—well within the conditions for objective 1 status—and anticipated growth over the next four years is the fourth lowest of any metropolitan district in great Britain. In addition, 35 per cent. of households have at least one person with a long-term disability. That is the highest proportion in any metropolitan district. Under previous Governments, SSA settlements failed to recognise those factors, famously classing Barnsley as less deprived than Kingston- upon-Thames. The 1998–99 settlement is a welcome first step in addressing the issues.

New social and economic indicators more closely reflect reality and have improved SSAs for coalfield and other industrial areas such as Barnsley. However, other elements within SSAs do not reflect need adequately and still need to be addressed. Let me draw attention to two specific examples. The first is children's social services, where Barnsley's SSA per child is 22 per cent. of that for the average inner London authority, but the proportion of children on the child protection register is higher than in 60 per cent. of inner London boroughs. The second relates to the additional educational needs index. Only 29 per cent. of Barnsley pupils achieve five GCSEs at grades A to C, but inner London schools receive more than £1 million more per 800-pupil secondary school than schools in Barnsley. That cannot be justified. Why do so many London secondary schools—many of which have better overall records of academic achievement than Barnsley schools—need up to 30 more teachers to deliver the national curriculum than a comparable school in Barnsley?

Barnsley has always been recognised as a prudent and comparatively low spending authority. However, since capping was introduced in 1990–91, there have been cuts of more than £50 million—or approximately 30 per cent. of the council's current net budget. As a consequence, many services are below national standards or cannot be provided. Barnsley has always responded well to initiatives such as challenge funding and best value and, prior to the Government being elected, it was introducing its own partnership strategy to improve educational attainment.

Economic regeneration has been high on the agenda—with some success—but the rapid closure of the coal industry has left the area needing to run to stand still. It has been estimated that Barnsley needs to create an additional 19,000 new jobs in the next few years just to reach the average unemployment rate for the UK—a mammoth task indeed.

Despite the welcome improvements, the local authority faces further cuts of £8 million in the next financial year. Barnsley intends to passport the increase in its education SSA through to schools. However, £8 million of cuts to other services will result in cuts of up to 20 per cent. in other departmental budgets. That will impact on key project priorities such as regeneration.

This year's settlement is an improvement on previous years. However, the legacy of underfunding and the demise of the coal industry mean that the improvement is only a good first step. As I have said before, under any formula-funded mechanism there will be winners and losers. It is crucial that the gap between them is closed. It cannot be right that some local authorities receive over 75 per cent. more grant per head of population than similar authorities to deliver the same level of service. There must be a dampening mechanism to reduce that yawning gap. Barnsley still faces considerable difficulties in financing its services. I hope that the Government will continue to listen and address those funding problems.

7.10 pm

Mr. David Curry (Skipton and Ripon)

Given that the world was supposed to have changed dramatically on 1 May, the settlement has a curiously familiar feel. In its shape and most of its content, it could have come from the previous Government and I could have delivered it. Had I done so, Labour Members would have worked themselves into paroxysms of rage at the injustices inflicted on local government.

There is one important difference. The previous Government judged the council tax increases pretty cannily so that they remained below the pain threshold at 6 or 7 per cent. By raising the cap, but failing to provide the funding to go with that higher cap, the Government will push council taxes well above the pain threshold, with a 10 per cent. increase—three times the rate of inflation.

North Yorkshire will spend at cap and passport through all the education money to schools. Let us be clear that the money is to go to schools, not to education more widely. That will mean a cash freeze for all other services. The money going to schools will cause deep distress and problems in the social services departments of all local authorities. Even when the special grant for community care is set aside, there will be higher charges, a fierce application of the eligibility criteria for health, less frequent services and fees for private providers of residential care rising by well below inflation, if at all. That is all dependent on the local government workers' settlement. We have no idea what employees will get.

The precept for North Yorkshire, which was recommended yesterday, will go up by 13.4 per cent at band D—a £64 increase. The district precept for Scarborough will rise by 18 per cent. and that for Selby by a similar figure. Even if the figure for Harrogate falls slightly, because its funding has increased while its budget remains at cap, North Yorkshire council tax payers will be walloped.

North Yorkshire's education settlement has increased by £13.59 million on a comparable basis, but that must be set against the unavoidable increases. A significant amount of that—£6 million—will immediately be eaten up by pay increases for teachers and others. Our pupil numbers have risen by 2.2 per cent. against a national average of 0.7 per cent. That is another £3.2 million of unavoidable increase. There will inevitably be a knock-on effect for additional special needs and transport requirements. The burdens imposed by new legislation include the standards fund, which involves a higher local authority contribution, the second phase of the seat belts legislation and the last phase of the House of Lords equal pay adjustment.

That adds up to £15.7 million, leaving North Yorkshire with a funding gap of £2 million. North Yorkshire is not a profligate local authority. It dishes out 92 per cent. of its funding directly to schools. The rest goes on transport—the area has a widely scattered population—special needs and maintenance. It has desperately sought money to avoid cuts, but schools face a standstill budget. That is in a local authority that has had a relatively good settlement. It is like "One Day in the Life of Ivan Denisovich". The book describes a good day in his life and look how awful it is. This is quite a good settlement and it will still pinch very hard.

Who will pay? The rest of the education service will pay. Over the past four years—my Government must take some responsibility for this—other education budgets have been cut by 26 per cent., the discretionary grant has shrivelled to practically nothing, and charges have been introduced for music, outdoor education and a range of activities.

I should like to make some more general remarks about the settlement. The first is on the violence of the insistence that the money must go to schools. Old people's homes and care services are nowhere near as photogenic as young children in a classroom. We did some passporting. The Government must ask how long it will continue. There is supposed to be a principle of non-hypothecation. The Deputy Prime Minister gave some broad hints that the Government fancied a more formal mechanism to direct the way in which local authorities spend their money. We have to decide whether to give local authorities more freedom—I favour that approach and tried to deliver it as a Minister, but failed—or to continue with ever more hypothecation or formal direction. The Government appear to favour the latter option.

The Government have done some quiet modulation of the budget to push money towards the northern metropolitan boroughs. As my right hon. Friend the Member for Cities of London and Westminster (Mr. Brooke) said, that is not surprising, given that the constituencies of the Ministers involved are in Hull, Sheffield, Durham, Oldham and Wallasey. They have wangled that by taking more account of economic factors in the indices for the elderly, residential care and social services. They have given a sop to London in the way in which debt is accounted for.

The net result is a shift from inner London to the metropolitan authorities and outer London. The Deputy Prime Minister claimed to be giving the money where the need was greatest. Removing money from inner London is a curious way to achieve that. One cheerful consequence is the result for Camden, which I cannot bear not to mention.

I have always thought that if the Government do not remove capping in year one, they will not do it. I now think that they will not do it. The Treasury wants to keep capping. We shall have not crude capping, but sophisticated capping—the people's cap. It is like the torturer using more refined instruments of torture rather than simply hitting people on the head in the old-fashioned way. We have the old nudge and wink—little devices with the Audit Commission and referendums. All that glorious diversionary manoeuvring is designed to avoid the abolition of capping, which is what the Labour party led its people to believe would happen before the election.

The area cost adjustment is the equivalent of the search for the north-west passage. John Prescott is not John Cabot. The main discovery about the north-west passage was that it did not exist. The Government will discover that the magic formula for area cost adjustment does not exist either. Loyal, decent, intelligent civil servants have been searching for that philosopher's stone for years. They have not found it because it is not there. The Government will have to take a straight political decision, transferring the distortions from one formula to another, or abandon the search—unless they are prepared to spend millions of pounds searching for new data.

The Government have made great play of developing brown-field sites, not green-field sites. Will they contemplate directing SSA towards the urban areas in their review to compensate for some of the additional costs of developing contaminated brown-field sites? Do they intend to be consistent in their approach, using local authority funding as one means of fulfilling their planning objectives? I shall be interested to find out.

The Government have used sweet words about local government. The truth is that they suspect and mistrust local authorities, because they are a nest of old Labour. They want to divert our attention with mayors, cabinets and referendums, but really they want to duff up local government because that will go down well in the Daily Mail. There will be no new dawn for local authorities from the Labour party. They all thought that blessed it was that day to be alive, but they will soon regret that. Time will eventually show that on 2 May things only started to get worse.

7.19 pm

Mr. David Watts (St. Helens, North)

I am very pleased to be called in the debate. I regard it as one of the most important in the year. The decisions taken tonight will have a dramatic effect on every man, woman and child in Britain. They will determine what sort of education and social services each of our local authorities can provide.

There are no easy answers to some of the problems that have been raised. That is because the Government inherited a mess. They inherited a system that had been corrupted by 18 years of Tory misrule. It has not just happened that the system has become so complicated. The previous Government made it so. I shall demonstrate some fiddles in the system later.

I shall talk first about St. Helens. I am very pleased to be the first St. Helens Member of Parliament for 13 years who has not got to go back to his local authority to find it faced with dramatic cuts in services and dramatic increases in council tax. I should like to put on the record my thanks to the Special Interest Group of Municipal Authorities, which has done tremendous work in trying to highlight some of the differences between one local authority grant and another. I am sure that it will continue to do such work over the next 12 months.

If there is one reason why we have today's problems, it is that the Tory party's sleaze has been pushed into local government. Such sleaze is no longer just among Back Benchers taking brown envelopes.

I am pleased with this year's settlement because it meets a number of the criteria. The changes are fair. We must recognise that the Government have had very little time to make changes—less than a year. Under previous Administrations, we were promised reviews and changes, but not one occurred. I am especially pleased to see changes to standard spending assessments for elderly people and the under-fives, as well as to the visitors element, which I shall come to in a minute. If I were asked to assess the Labour Government's performance this year, I would give them nine out of 10. I hope that they get 10 out of 10 next year.

The Opposition seem to be trying to reinvent themselves. I remember the previous Government as the Government of the poll tax, the council tax and council cuts. They cut £400 million from standard spending assessments over 10 years. They cut the police budget; they cut the fire service budget. Those are the Tories whom I remember from my 18 years in local government. They are now trying to tell us that the Conservative party is the party of local government, of fairness. They believe that the Conservative party is the party of low council tax. That was not my experience as a council leader. My local authority had its staffing cut by 11 per cent. It also faced cuts of almost £13 million in just two years. At the same time, it had the highest council tax increase in the north-west. There we were with the highest north-west council tax, cuts in services and cuts in staffing.

This year's settlement goes some way to addressing some of the problems, but to find the real reason why we face them I shall talk about Westminster council. Westminster is the same size as St. Helens, and has the same population of about 180,000. In 1994–95, St. Helens had capital receipts of £3 million, and Westminster of £81 million. St. Helens had usable capital of £1 million, while Westminster had £34 million. Revenue balances in St. Helens were £19 million, but in Westminster they were £68 million. Council tax in St. Helens—this is an interesting figure—was £651, whereas it was £247 in Westminster. That is because Westminster used its visitors grant not to pay for services for visitors but to cut council tax. That was the fiddle; that was why the council tax was so low. The SSA for St. Helens was £151 per person; in Westminster, it was a staggering £571 per person. That is staggering considering the sizes of the areas and the difference in council tax.

I have mentioned the fiddle on the visitors grant in Westminster. Figures can vary, but someone told me that the estimate could be as high as £40 million. I have never known an overnight visitor need education, social services or all the other services provided by local authorities, but I do know—this is another fiddle, which I hope the Minister will take into account—that visitors often drive into Westminster, where they park their cars. I am told that that generates £27 million—

Mr. Peter Bradley

Profit.

Mr. Watts

Profit, I am told. If that is so, when the assessments are set, we should take into account Westminster's ability to generate such large amounts of money from visitors for whom, in the past, it has been given a large grant. Far from being a drain on the council, visitors generate such a profit.

I do not expect the Government to be able to change the whole of local government finance in two minutes. That will not happen, but they have done the right thing. They have picked out a couple of areas where the settlement is unfair and where a great deal of work has taken place over a long period, and have made changes this year. I do not believe that a solution to the area cost adjustment cannot be found. I believe that previously there was an unwillingness to find it. I hope that my Government will address that. I also hope that we can do something about the SSA for children. York university has done an awful lot of work in that area, statistics are available and changes can be made.

We hear of large council tax increases in some areas and of cuts in other areas. Given the system and the fiddles that we inherited from the previous Government, that is bound to happen. For poor Barnsley to be able to provide decent services from its allocation and not increase the budget, money must come from somewhere else.

We are looking for a fair system. We are not looking for one that spends more money. We are not asking for unfair treatment. We are asking for fairness based on fact. Nothing in the SSAs used by the previous Government over the past 18 years was based on fact. The Tories considered every possible way of cramming every Tory authority with the maximum amount of money. They tried to take away money from poor Barnsley and other local authorities, and at the same time tried to demonstrate that Westminster was more efficient than St. Helens. I must tell the House that that is not so. The district auditor said that St. Helens is at the forefront of efficiency.

I want Opposition Members to tell us what they will do about Lady Porter. It is absolutely scandalous that they gave her so much money, supported her for so long and allowed such corruption. It is a disgrace that they criticise a Labour Government for trying to put right 18 years of disgraceful sleaze.

7.27 pm

Mr. Patrick McLoughlin (West Derbyshire)

For the past 17 years, the Labour party has criticised Conservative Governments for unfairness and insufficient spending on local services. It now seems that the spending plans set by us were given by God Almighty. One of the constant refrains that we hear from Government Front Benchers is that they have inherited the Conservative Government's spending plans. The Government have not inherited them; they have willingly adopted them. There was nothing sacrosanct about the spending plans; they were not set in statute. The Government could change them if they wished. That must be borne in mind in the debate on local government settlements.

For at least 10 years, the Labour party built up expectations that everything would be put right when it was elected, and said that the area cost adjustment was a big con: it would all go to the shire counties and everyone would be happy. I looked at the effects of area cost adjustment on the areas of respected members of the previous Government. My right hon. Friend the Member for Huntingdon (Mr. Major), the former Prime Minister; my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), the former Chancellor; my right hon. Friend the Member for Suffolk, Coastal (Mr. Gummer), the former Secretary of State for the Environment; my right hon. Friend the Member for Skipton and Ripon (Mr. Curry), who understands local government finance better than most of us: their areas all received nothing from the area cost adjustment.

From my knowledge of the Treasury, I know that if there was any way in which it could have got around the area cost adjustment to take money from local government spending, it would not want that money spread across the rest of the country; it would cut the area cost adjustment. Why have the Government not changed the area cost adjustment, as they promised? Labour candidates built up that expectation throughout the country.

I was interested by the response of the Deputy Prime Minister to the hon. Member for Amber Valley (Judy Mallaber). He said that Tory intransigence had discriminated against Derbyshire for a number of years. If he feels that—and with the authority that the right hon. Gentleman has—I would not expect the people of Derbyshire to have to wait very long for that to be put right.

There is a lot of misunderstanding about local government finance, and I congratulate the Government on producing their plain English guide to local government. It is rather a pity that the guide does not mention the area cost adjustment—something which is controversial to some people. Their explanation of local government finance is, perhaps, selective; I wonder why. The Government have to move one step beyond that guide and ensure that we get proper information on how local authorities spend their money, because there are great variations across the country.

For instance, Department for Education and Employment figures show that Derbyshire holds back £135 more per pupil than the best delegator of local education budgets, which is Dudley borough council. Dudley, perhaps, is not a good example with which to compare Derbyshire, but let us look at Staffordshire. If Derbyshire delegated as much as Staffordshire direct to our schools, an extra £58 per child per year would be available. That could be targeted at primary schools in Derbyshire, which face a difficult budget this year.

Mr. Tom Levitt (High Peak)

Will the hon. Gentleman give way?

Mr. McLoughlin

No, I will not give way. I only have 10 minutes, and the hon. Gentleman may have a chance later to make his point. One of the problems with the 10-minutes rule is that one cannot give way as much as one might like.

We must address how the money that gets to local education authorities is monitored. From 1986 to 1995, Derbyshire subsidised school meals to the tune of £150 million. Over the same period, Staffordshire—a neighbouring authority of a similar size—subsidised school meals to the tune of £64 million. Some £90 million more over 10 years was spent by Derbyshire on subsiding school meals. If a county council decides to spend money subsidising school meals rather than on books or teachers, that is its decision.

I was surprised to hear the Deputy Prime Minister's words, but I was encouraged. It means that, next year, Derbyshire will reach Jerusalem; we will get all the money. There will be no problems as far as the local government settlement is concerned. As the Deputy Prime Minister, no less, has told us that Derbyshire has been unfavourably treated, the people of Derbyshire can look forward to county hall flowing with the milk and honey which, perhaps, the whole country expected.

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

The hon. Gentleman was not listening.

Mr. McLoughlin

I was listening very carefully—I wrote down what the Deputy Prime Minister said. It is true that it was a departure from his scripted speech, and he may not want to admit that he said it.

I wish to refer to capping. Doing away with capping and allowing local authorities to decide what they spend has its attractions. It has attractions for me—until I think back to what local authorities were like before we had capping. When I first stood for West Derbyshire, at a by-election in 1986, the county council had put up the rates by 26 per cent. in one year. That was the kind of increase that we saw across the country before we had the more rigorous system of capping. I do not want us to return to such increases, which hit those who were least able to afford them particularly hard. Although single people get a reduction of 25 per cent. under the new system of the council tax, they have faced huge increases in previous years.

Doing away with capping has superficial attractions—of course it does—but we must acknowledge that local authorities would go back to the spendthrift days of the 1970s and 1980s. That is not what the Government want, and I certainly do not want it. We need a more transparent system in terms of the way in which local government finance is distributed from central Government because—in spite of the Government's plain guide—it is still difficult to understand.

I would welcome a definitive answer from the Minister who is to reply about when the area cost adjustment review will be completed. Are the people of Derbyshire to get all the money to which the Deputy Prime Minister referred next year, the year after or the year after that? It is time for people to know where the local money is coming from. We all wait with interest for the answer.

7.37 pm

Mrs. Louise Ellman (Liverpool, Riverside)

The context in which this debate is taking place is important in terms of the legacy of the former Conservative Government. For 18 long and hard years, the Conservative Government denigrated local government and did all they could to destroy it. They passed more than 200 Acts of Parliament which removed powers from the locality, and either centralised them or moved them to unaccountable quangos.

As far as my constituency is concerned, the Tory Government were far more interested in trying to punish the city of Liverpool than in assisting it in trying to meet its needs. Liverpool is an objective 1 area; that means it is among the poorest areas in Europe. The new index of deprivation that is about to be published shows that Liverpool has the highest urban need in the country; it has the highest level of deprivation.

Unemployment in my constituency is the second highest in the country, and health is the sixth worst. Liverpool has a massive housing problem, and the major loss of population over the past 20 years has created huge difficulties, leaving a large percentage of economically inactive people: the permanently sick, the disabled and the unemployed. Perhaps above all, it is clear, from the fact that 70 per cent. of our domestic properties are in band A—nearly three times the national average—that Liverpool's economic crisis is acute.

In local government settlements in the past 18 years, the Conservative Government failed to address the area's social and economic needs or to recognise the significance of 70 per cent. of domestic properties being in band A. The Conservatives' failure to recognise the scale of deprivation and the inadequacy of the local financial tax base meant that, in practice, the city's needs could not be met, because the local authority was not given the means to meet them, while at the same time local tax bills rose.

It is important to bear in mind the legacy of the past 18 years, but we should also consider what new commitment the Labour Government have brought to the country in general and to Liverpool in particular, in their relatively few months in power. The release of capital receipts has allowed £900 million to be spent nationally, and Liverpool is already benefiting from about £9 million of new capital spending for housing. At least 5,000 properties will benefit as we try to do something about the terrible backlog of housing need and dilapidation.

My constituency is already benefiting from the new deal for schools, with its capital allocations. St. Michael's in the Hamlet school and Pleasant street school will benefit significantly from much-needed new building. More than £4 million of new money has been made available for education, to help to improve standards.

Initiatives have been instituted in Liverpool to try to address more effectively the social and economic needs. The city has already been awarded employment zone status; the health and local authorities are working together on a proposal for a health action zone; and there are plans to apply for an education action zone.

In my constituency, and in Liverpool as a whole, many people who are working hard together to try to address the needs are delighted by the fact that, after 18 long, forlorn years, the new Government have already started to provide the resources needed to put things right.

Most people recognise that what has been wrong for 18 years cannot be put right in about eight months; but it is possible to make a start. Making a start in an area of such deprivation as Liverpool, which has been treated so badly for 18 years, is extremely difficult; but let us consider what has been done.

The Government propose a significant increase in standard spending assessment for Liverpool: about 4.5 per cent. in real terms. Capping has been softened, to allow £22 million of additional spending: more than twice as much as was anticipated.

The pledge to support education and provide additional hard cash in grant is being delivered: £835 million nationally and £13 million for Liverpool will be passported through and spent in schools. The city is engaged in a £20 million new school building programme: the first programme of any significance for decades. That will start to reverse the long years of decline. The Government are starting to address the real needs of areas such as Liverpool. The relatively small but deeply significant improvements will be delivered by a council tax increase that, I understand, will be less than 6 per cent.

We all recognise that the decades of inaction and the punitive approach by the previous Government cannot be put right in one Budget, but I am encouraged that a start has been made: a start in house improvements; in regeneration that will lead to employment; in a reassessment of standards in education and school buildings; and in reconsidering the SSA and the way in which the area's economic and social needs can be met.

I note my right hon. Friend the Secretary of State's comment that crude capping will not be continued, and I warmly welcome the Government's commitment to best value, rather than compulsory competitive tendering. I welcome the discussions on financing that are under way with the Local Government Association so that we can ensure that, as we meet the acute and long-standing needs of areas such as Liverpool, other areas will not suffer unduly.

Local government is a vital part of our democracy. It was attacked mercilessly throughout the country in the past 18 years. The previous Government thought that vibrant local democracy presented a threat. They did not want fairness or equity, preferring inequality and the punishment of cities such as Liverpool for having social needs.

Local government is a provider of services: a lifeline for local people. It is an enabler, and can work with the private and voluntary sectors to provide services and to regenerate an area. It can provide community leadership: at its best, local government speaks up for the citizen and for the city and represents people to central Government, to the quangos and to the European Community.

I am pleased with the steps that the Government have already taken to revitalise and reinvigorate the whole of our democracy. I look forward to the time when local government is restored to its proper place at the centre of our democracy, as the true voice of local people.

7.47 pm

Sir Paul Beresford (Mole Valley)

I am intrigued to hear the hon. Member for Liverpool, Riverside (Mrs. Ellman) coming up with statements about local democracy, when the Secretary of State has just suggested moving towards hypothecation. He wants to remove capping but to ring-fence each of the budgets. My hon. Friend the Member for West Derbyshire (Mr. McLoughlin) has already made the point about capping. The hon. Lady should think carefully about the fact that democracy will be removed, especially in budgets, and that ring fencing will mean that capping is still effectively in place, but at a lower level.

My right hon. Friend the Member for Skipton and Ripon (Mr. Curry) mentioned similarities between our term of office and the current situation, and I endorse many of his points, if not all. He did not mention the subject, touched on by the Secretary of State, of councillors who complain to Ministers about not having been given enough money.

My right hon. Friend the Member for Skipton and Ripon and I saw a similar number—perhaps, slightly fewer—in our last session of meeting councillors. Many came to us with genuine points and many needed changes, which we recognised. Having done that job for several years, I also recognised that for some of the councils it was a ritual. I will not mention names, but one council used to send 15 people down from the north-west. They always arranged for an appointment first thing in the morning, so that they could come down the night before, first class on the train, have dinner and a night at a hotel, breakfast, a little shopping after the appointment and go home again, first class on the train. One member of the delegation of 12 or 15 would speak and it would cost the local authority in the region of £3,000. Some of the other local authorities—fortunately very few of them—used the same procedure and said the same things year on year, sometimes even forgetting to change the figures.

In the House, of course, the standard cry was to hit Westminster. I think that my right hon. Friend the Member for Cities of London and Westminster (Mr. Brooke) dealt adequately with that. As he and other hon. Members pointed out, in hitting Westminster this year the Government have also hit a number of other local authorities, particularly in inner London, but also, I suspect, elsewhere.

Since I have little time but to touch on one point, my biggest complaint is about the change in the way in which capital is assessed—from notional towards actual. The net effect is to support many of the spendthrift authorities that my hon. Friend the Member for West Derbyshire mentioned—the authorities that were squeezed by capping. They were the authorities that played games, always seeking to borrow more with little attempt to pay their debts. Until they were prevented from doing so, they attempted to move revenue expenditure into capital and with the recent small change in the legislation, they may well be able to do so again.

The small change on capital is a fiddle. It is a means of moving money away from the shires, many areas in and around London and some of the inner London authorities to the big metropolitan, Labour-controlled authorities, many although not all of which are particularly incompetent authorities up north. I shall pick on one authority in particular. It is on the eastern border of the M25 and it is Labour-controlled and has been for many years. It consistently spends 60 per cent. above standard spending assessment, or more. If we compare its figures with those of the rest of the Audit Commission family, its incompetence shines out. Year after year, it has overspent. One small example is that its staffing level per 1,000 of population has consistently been twice that of the family average. What happens to that authority with the small change? It will get a 4.8 per cent.—nearly 5 per cent.—improvement in SSA. If that is not rewarding incompetence, I do not know what is.

Moving a little further round the M25 to Surrey, we come to my own Mole Valley council. It is Liberal dominated and is not run as well as it should be, although it may well be later. Its SSA has been cut by 3 per cent. in cash terms and it will have to carry the county council, which has also been clobbered with an 11 or 12 per cent. increase in the precept. The Surrey police precept will go up by 48 per cent. because of a summary cut in the transitional grant. The behaviour—and the subterfuge—is utterly politically irresponsible.

There is no reasonable explanation. When Surrey Members asked the Minister of State for one, we were given one answer, "It was in the manifesto," which seems to be the answer to everything. This procedure is hitting rural areas again and again. We have debated green-belt and brown-belt sites and we have seen some of the changes, but one mean little change is worth mentioning. The previous Government set in train a procedure whereby county councils in rural areas could ease the burden for village shops. To ease that burden and to help local authorities absorb the cost, grants were made available, but payments were allowed to be put outside cap. This Government have brought them back within cap and yet they will tell us that they are friends of the countryside.

7.54 pm

Mr. Harry Barnes (North-East Derbyshire)

I must point out to the hon. Member for West Derbyshire (Mr. McLoughlin) that Derbyshire county council spends £21 per pupil on central administration, not £135 as he stated. Derbyshire is the third meanest shire in terms of provision for local education authority administration. The £21 is agreed with schools and it goes into school transport, child welfare and aspects of special needs, for example. Since the hon. Gentleman came here after that by-election, he has sought to do down Derbyshire county council at every opportunity and he has been successful, in that the Conservative Government picked up on those items and operated the formula in such a way that Derbyshire was one of the marked areas that they went for.

Mr. McLoughlin

rose—

Mr. Barnes

I will not give way as the hon. Gentleman did not give way during his contribution.

Mr. McLoughlin

On a point of order, Mr. Deputy Speaker. Is it not the case that when a Member names another Member he gives way to that person? I did not name any of the hon. Members who asked me to give way.

Mr. Deputy Speaker (Mr. Michael Lord)

It is for hon. Members to decide whether to give way.

Mr. Barnes

I hope that I will get injury time, Mr. Deputy Speaker. I shall begin my analysis. The previous Government fiddled and fixed local government financial settlements, especially after the introduction of the poll tax. The Local Government Finance Act 1988 is still in operation. The only part that has changed is that concerning the poll tax, due to the council tax provisions.

Two main devices have been used to manipulate the formula. The area cost adjustment was first used in education areas and then extended, with a large amount top-sliced for the south-east of England. The weighting could be altered so that that top slicing became reasonable instead of excessive, as it is at the moment.

Districts have mainly been affected because of the enhanced population figures. Although those have been slightly adjusted for Westminster, they have not been adjusted for the entire country. It is not the real population of an area that is taken into account, but the population that is there during the daytime. which allows for commuters, people travelling to work and so forth. Areas such as Westminster and Epsom and seaside resorts have received considerable extra sums of money and still receive extra money given the operation of the present formula. Areas such as north-east Derbyshire, where 18 per cent. of the population commute daily to other authorities, lose money.

Labour has a manifesto commitment to end those fiddles and to introduce a fair funding formula, which will require considerably more resources in areas of need. How far are we moving towards that objective? Initially, we waited because the previous settlement operated from April 1997, a month before we were elected. So, many of us told our constituents that they would have to wait until a later settlement, when there would begin to be adjustments.

The total standard spend has now increased by 3.8 per cent., partly due to the extra £835 million for schools from the July Budget. Otherwise, we have stuck to the two-year commitment to act on Tory spending limits. Therefore, resources for the needy areas can only come from relatively affluent areas as there is nothing more in the pot—apart from that odd bit for education, which is beginning to be available. That cannot happen in one fell swoop because it would undo commitments which areas of relative affluence have entered into. Hence, damping arrangements operate for those areas.

If the changes in methodology for determining SSAs lead to grants and expenditure entitlements being moved from Westminster to Barnsley or from East Dorset to Easington, that will be practical rough justice. What about mixed areas, where areas of serious social need and areas of relative affluence are within the same local government boundary? Are not such areas given extra money with one hand only for it to be taken away with the other? Further, if the Tories deprived such areas of resources in the past, they remain deprived of resources under the new arrangements. Areas so affected cannot see their way out of the crisis. Derbyshire is such an authority. Before the SSA system, it had the smallest class sizes of any shire county; now it has among the largest. It has high class sizes across the board, in both relatively affluent and poorer areas. Schools are dropping to bits. Children are in overcrowded schools that present teaching and safety problems.

The cumulative cuts in SSA in Derbyshire are tremendous, the worst of any shire. Essex has received the average cumulative increase since SSA was introduced in 1989–90. East Sussex has had increases 30 per cent. higher than has Essex and is top of the league table. Derbyshire is bottom, with 37 per cent. less than the average increase that Essex received. The county above Derbyshire is Warwickshire, which is 10 per cent. better off in terms of deprivation. As my hon. Friend the Member for Bolsover (Mr. Skinner) said, it is like being bottom of a ladder with two or three rungs missing. The situation in Derbyshire is horrendous because of the formula produced by the previous Government, which has not yet been tackled by our Government. We are now into a long-term review. Some of the factors that I have mentioned will have to be taken into account.

I am worried about next year's settlement. If it is based on the same sort of arrangements, with adjustments only here and there, Derbyshire will be caught in the same position again. We will still be stuck with Tory spending limits, which is another problem that we need to face up to. Instead, we require resources for the needy that are not internal transfers from one bit of an authority to another. We want some recompense for the cumulative years of deprivation that the hon. Member for West Derbyshire was at the forefront of creating and was able to grin at.

I wish briefly to turn to North East Derbyshire district council. That, and Easington where I originate from, are similar areas, and I have lived in them for about 30 years. They have former collieries surrounded by rural areas and new housing. In Easington, there is the new town of Peterlee. The only difference is that places such as Dronfield have wider areas of relative affluence than places such as Peterlee.

Under the new SSA arrangements, Easington gets an 18 per cent. increase in its SSA and is top of 238 district councils. North East Derbyshire gets only 0.7 per cent., which is below the inflationary increase, and stands 138th out of 238. Worse still, on SSA per head, North East Derbyshire gets £74, Easington £105 and Hastings, which is at the top, £127. We are in 221st place out of 238, Easington is 19th and Hastings is top. North East Derbyshire suffers the same problem as Derbyshire. It has a mixed population, with areas of relative affluence and areas of deprivation. The areas of deprivation have funds taken away to some extent by the formula because of how it operates for the areas of affluence.

North East Derbyshire is also hit by the enhanced population figures that I mentioned: 18 per cent. of its people work in or travel to other areas. As a 0.25 per cent. consideration is made for that in working out the calculations, we lose 4.25 per cent. of the grant that we would otherwise have received. Some 95 per cent. of its grant comes from the enhanced population category because it gets so little from other categories. Areas such as Easington and Hastings benefit from that provision. In terms of need, North East Derbyshire is probably the worst-funded district in the worst-funded county in England. That cannot go on for another year.

8.5 pm

Mr. James Cran (Beverley and Holderness)

I have sat through the debate from the beginning and I am bound to say that I have not heard such a load of old tosh from Labour Members for a long time. It is clear that they have all raced to the Whips Office, picked up the brief provided by the Government or the Labour research department and, parrot fashion in the main, read it out as the Government would have wished.

It is clear why Labour Members have not chosen to quote from the letter that all hon. Members received today from Sir Jeremy Beecham, the chairman of the Local Government Association. I used to know him in Newcastle when he was leader of the Labour-controlled Newcastle city council. He could hardly be said to be a captive of the Opposition. He might be considered relatively impartial—someone who would tell his Government what things were really like rather than seeing them through rose-tinted spectacles as Labour Members choose to.

I venture to suggest that the LGA is a Labour-dominated organisation, but its briefing states: The LGA is disappointed that the Government has not done more to take the pressure off councils' budgets in response to representations from the LGA and individual authorities. It follows that the Government have not listened to representations made, if I may say with a certain partisanship, by their own side. That is in contradistinction to all the stuff that we have had to listen to.

Sir Jeremy says: this is a tough settlement"— the word "tough" is in bold black letters so that no one can ignore it— for most authorities and some will face a combination of real cuts in services with large increases in council tax". That is the reality.

Mr. Woolas

On a point of order, Mr. Deputy Speaker. Is it in order for the hon. Gentleman to quote selectively from the letter, which at the top clearly says that the LGA welcomes the extra resources"?

Mr. Deputy Speaker

Order. The way in which the hon. Member for Beverley and Holderness (Mr. Cran) chooses to make his speech is entirely a matter for hi

Mr. Cran

Thank you, Mr. Deputy Speaker. The hon. Gentleman's response shows the irritation of Labour Members. I shall not be distracted from going further into the document to quote another sentence that I know will irritate them even more. It says: the LGA is looking for a fair deal"— again in bold black letters—

for local government from the Comprehensive Spending Review". Again, it follows that it does not have that. We all look forward to the future when the Government may start to listen even to the very people who support them.

I do not intend to go into the details of the settlement for my authority, but I merely note that East Yorkshire council will have to make cuts of about £9 million—at least according to the latest figures it has given me—or equivalent to 3.8 per cent. of its budget. I am merely waiting for all the people who were deluded into voting for the wrong party at the general election—I remember that Labour said that it would make a difference—to realise that, according to the statement, and in contradistinction to what we have heard from Labour Members, little difference has been made because the Government are not listening to the very people who supported them. I shall leave it to my constituents to judge that behaviour for themselves, as inevitably they will.

I am concerned about the education SSA for East Yorkshire, because it represents the biggest problem for my constituency and the authority. The Minister may be aware that the Under-Secretary, the hon. Member for Greenwich and Woolwich (Mr. Raynsford), had a meeting with delegates from my authority on 12 January. I should point out that that delegation did not consist of a load of biased Conservatives, but of Labour representatives, Conservative representatives and Liberal ones. They all agree that we have a problem with the education SSA.

I am a fair-minded individual, which has been demonstrated by everything that I have said up until now, and I shall have to agree with the Minister if she says that the East Riding's education SSA has been increased by 6.6 per cent. I am perfectly happy to admit that. Because of various problems in the education sector in East Yorkshire, however, spending levels will be about 7.3 per cent. higher. That poses a problem.

My authority has chosen to spend on education because, as I recall, at the election, the then Labour Opposition kept on talking about "education, education, education." They called for more spending on education, and that is exactly what my authority has done. It will look to the Government to offer their solutions to the educational problems of East Yorkshire. It will not be satisfied by Ministers simply saying to us all that all the problems stem from 18 years of Conservative rule and are nothing to do with them. Labour is now in government. It can now take decisions and, of course, it should do so.

The biggest problem in East Yorkshire is simply that of class sizes. In 1997, East Yorkshire was 7.3 per cent. above the national average for classes of more than 30 pupils and 4 per cent. above the national averages for classes above 36 pupils. One can quickly appreciate that East Yorkshire has nearly three times as many classes of more than 36 pupils as the national average. It would be perfectly legitimate for my constituents to ask the Government what they are prepared to do about that. It is not a question of asking the Conservative party what we were prepared to do when in government; rather, people are entitled to know what the Labour Government are now prepared to do. Class sizes will go up in 1998 and 1999 if there is no change to the education SSA.

My authority might compare itself with surrounding local authorities. The main one is Hull, where the constituency of the Deputy Prime Minister is located. In 1995–96, Hull and East Yorkshire were part of Humberside county council, and virtually the same money was spent on each authority. My authority now tells me that the East Riding SSA has declined by £7.7 million in real terms whereas in the same period, including under the new Labour Government, Hull's SSA for education has increased by £7 million. 1 and, more important, my constituents would like the Minister to explain the £14 million difference between those SSAs which has become apparent in the past two years. Because of the differences, Hull is able to spend an extra £207 per pupil at primary level and an extra £301 at secondary level. That is all possible despite the fact that Hull is spending at its SSA level whereas the East Riding is spending 4 per cent. above it. If anyone can offer me an explanation for that, I should like to hear it, although, once again, it is not me who needs it but my constituents.

There are two reasons why my authority's SSA is kiltered in the wrong direction. One is a demographic problem. We have had a substantial growth in the number of pupils in our schools because of housing development and because education provision in East Yorkshire is better than it is in Hull. The parents of Hull want their children to be educated in the East Riding and they are prepared to move to ensure that that happens. That is causing problems with class sizes but, according to the SSA regime, it takes five terms for such problems to be taken into account. That should not be allowed to happen.

The second reason my authority's SSA is kiltered in the wrong direction is that the sparsity costs in a rural area such as East Yorkshire are not recognised. We want to know what the Government intend to do about that.

8.15 pm

Mr. Phil Woolas (Oldham, East and Saddleworth)

I am grateful for the opportunity to speak, having listened carefully to the speeches of hon. Members on both sides of the Chamber. I welcome today's statement, as I did that made on 2 December, because I believe that it is fair, flexible and responsible. It is particularly important to appreciate that it represents a first step. In common with my hon. Friend the Member for Liverpool, Riverside (Mrs. Ellman), I should like to consider the context in which the statement has been given.

A legacy of bias undoubtedly exists against the areas that are most needy. No hon. Member truthfully believes that there was a fair allocation of resources across the country during the 18 years of the Conservative Government. It is important to appreciate that the regime governing local government finance, which rests on capping and capital receipts, was established after the poll tax was withdrawn. It comes rich from Conservative Members to criticise today's settlement when all of us who were involved in local government at the time of the poll tax saw the utter crisis into which that sector was plunged by that fiscal measure, which was introduced despite many objections.

It is also true that a consensus now exists in favour of reform. I believe that every hon. Member agrees that local government finance is too complicated to understand. I certainly find it so and I imagine that it is too complicated for many constituents.

It is important that the review of local government finance also addresses the unintended consequences for local authority budget heads of one budget head being changed. I shall give three examples from my constituency. First, the changes to rate relief on schools has had a direct, albeit unintended, impact on the council's schools budget. Possible changes in landfill tax, which could be brought in by the Government at the Budget, would have huge consequences for the local authority's ability to plan. The third example relates to the demolition of the St. Mary's flats in Oldham—a terribly dilapidated block—which I am to witness tomorrow. As a result of its demolition, the number of children in the area who feed into the Beaver county primary school will be reduced. Because of the financing regulations, that school, other things being equal, will therefore receive less money from the authority. I hope that the review will address such relationships.

The lack of clarity and understanding of local government finance and the complicated relationships between budgets also cause a lack of confidence among the electorate in local authorities' ability to deliver their policies. That is often reflected in the low turnout at local government elections. I am delighted that Ministers are addressing that important point as part of the modernisation of local government.

What separates Labour Members from Opposition Members is the belief in partnership. I have been astonished by many of the remarks of Opposition Members, particularly their criticisms of our policy on capping. I shall quote from a speech made last October on that issue at the Conservative party conference:

Too often in the past local government has been seen as the poor relation of Conservative politics. Too often in the past we have not given our councillors the backing they deserve … And no more treating Conservative councillors as second-class citizens"— protected species, I should have thought, rather than second-class citizens.

That is why I am announcing today the establishment of a new policy group to examine every aspect of Conservative policy on local government … Where previous ideas were wrong, they won't be rewritten—they will be scrapped. We will look at each and every aspect of the running of local government. Not just structure and funding but also at the services where local government is responsible. And yes, we will look again at whether or not we should support the capping of every local authority. Among the great newspaper headlines at last October's Conservative party conference, the right hon. Member for Sutton Coldfield (Sir N. Fowler) apologised to Conservative councillors in the assembly hall and pledged to change Conservative policy, yet what we heard tonight was no more than a repeat of the same attacks on local authorities. I am proud that the Government are addressing partnership and not attacking local authorities. My right hon. Friend the Deputy Prime Minister has set out to put right the balance. It will be a partnership with all local authorities, of whatever political persuasion.

I am glad that the hon. Member for Sutton and Cheam (Mr. Burstow) has returned; he has been creating confusion and not a little mischief because early-day motion 735 attacks our colleagues on Liverpool council. If hon. Members want to see real political mischief, I draw their attention to a letter from the leader of the Liberal group on the LGA, Councillor David Williams, who has circulated to chief executives a letter, on LGA headed notepaper, posing as an LGA research project, when it is in fact a piece of party political propaganda on which the hon. Gentleman's figures are based—so no lessons there.

My question on the Order Paper today will not, I fear, add to the campaign for plain English that my right hon. Friend the Deputy Prime Minister is promoting. I shall paraphrase. It asks the right hon. Member for Yeovil (Mr. Ashdown) what, if he truly believes all local government services should be paid for from local tax, the council tax or its equivalent would be. I await the answer with great interest, but I suspect that it would be more than £4,000. The Liberal Democrats' policies are confused and are not helping the debate.

The statement is welcomed by my borough council. There is an increase in the education budget of more than 5 per cent. in real terms. The benefits are already being seen. There is the release of capital receipts—nearly £1 million. Again, the benefits are already being seen.

The hon. Member for West Derbyshire (Mr. McLoughlin) asked when the review of area cost adjustments, which my right hon. Friend the Deputy Prime Minister announced in his statement in December, would be complete. I urge a look at the real level of unemployment, not least to comply with the welcome announcement this week that, in future, the Government will publish real, not bogus, unemployment figures. That would benefit my borough immeasurably.

We also have to bear in mind the impact of the national minimum wage, which will attack poverty in some of our most deprived areas. We need clarity, as councils need to plan. The capping regime is coming to an end. There is consensus on that from the Liberal Democrats. Their manifesto says that it needs to be done gradually. It is on page 14 if they want to check it.

Non-domestic rating is coming to an end, which is welcome. Opposition Members who have criticised the practices of councils in hiking up business rates should remember that my borough council works with the chamber of commerce, the training and enterprise council and other agencies to attract inward investment to our area for desperately needed jobs. Councillors would be the last people to make business rates prohibitively high. They need that control to help create jobs.

The statement is a beginning. It is a step in the right direction and it should be welcomed by all hon. Members. It is no good Opposition Members criticising it because their boroughs have the least increase, which is what one hon. Member said. Of course there will be winners and losers. [Interruption.] He said the least increase. It is in Hansard. Opposition Members can read it tomorrow if they like.

The point of the settlement is that, after such bias, after such destruction by the poll tax, the Deputy Prime Minister—

Mr. Deputy Speaker

Order. Time is up.

8.25 pm

Mr. Nigel Waterson (Eastbourne)

It is a pleasure to follow the hon. Member for Oldham, East and Saddleworth (Mr. Woolas), if only because of the apparent tensions that he exhibited on the Lib-Lab pact. He managed after 10 minutes to whip himself into a frenzy of excitement and enthusiasm and described the revenue support grant as a step in the right direction. Like my hon. Friend the Member for West Derbyshire (Mr. McLoughlin), I expected a bit more. We expected a new Jerusalem in local government finance, not a step in the right direction. As my right hon. Friend the Member for Skipton and Ripon (Mr. Curry) said, there is an element of déjàvu about this debate.

I am delighted to be able to raise concerns on behalf of my constituents. East Sussex county council has been keen to make representations to the Minister. I understand that she has already seen representatives of the metropolitan districts, but has arranged, belatedly, to see representatives from county councils only after the debate. I hope that she will carry with her to that meeting some of my comments.

The situation with Eastbourne borough council is relatively good—an increase of 1.8 per cent., enabling an increase in the budget of £277,000. If the council spends up to capping level, which is always a difficult decision to make, it will have an additional £218,000 to spend. The problem is the effect of the settlement on East Sussex county council. In a nutshell, the combined income from rate support grant and business rates will rise by £2.1 million to our total capping increase of £11 million, and the difference will fall on the council tax payer. The budget limit proposed by the Government is £324.8 million, leaving a net difference of £4.9 million to be found from savings—a painful process in which the current Conservative administration is engaged. Thanks to the squandering approach of the former Liberal Democrat administration, the council no longer has reserves and balances that can be put towards the shortfall.

The SSA increase of £9.2 million for education will be fully passported through to education, but a reduction of £2.8 million will be made because of the non-availability next year of funding from balances.

The county council has corresponded with the Minister about debt charges. There are debt charges of £0.9 million on the current school building programme, which is an active matter in my part of the world, which were not included in the capping limit for next year but will be charged to education unless the Government agree to the council's request for a higher capping limit. The chief executive has written to the Minister. I am sure that there has been some discussion between officials. The benefits from the SSA for education have been entirely negated by the charges. No allowance has been made in the spending limit for debt charges on new school buildings, and the county council proposes an alternative approach.

All other services in East Sussex are being asked to make 3.5 per cent. savings, which are likely to fall most heavily on social services, transport and the environment. The target for social services alone is £2.7 million, which is a serious prospect when one considers the massive overspend under the previous Liberal Democrat administration, who squandered up to £4 million a year by insisting on keeping their own nursing homes open rather than sending clients to the private sector. They must face that question sooner or later, whoever runs the county council.

Transport and the environment face possible cuts of £800,000 following a cut of £5 million in road maintenance in the past year alone. Sadly, as with many other county councils that we have heard about this evening, it is clear that one of the driving philosophies behind this year's settlement is the redistribution of grant from rural counties to metropolitan districts. It is plain as a pikestaff and I should be amazed if the Minister attempted to deny that in her winding-up speech. East Sussex was to have rises of between 9 and 10 per cent; the ultimate figure is likely to be a council tax of £574—an increase of 8.7 per cent. That is a staggering increase for my constituents to bear.

The chief executive of East Sussex county council summarised matters in a letter to me by saying that Government support for the coming year has risen by only £2 million while we"— the county council—

are being urged to increase spending on Education by £9 million as part of an overall increase of £11 million in the capping limit. Will the Minister confirm—she has no choice but to do so—that the Government's policy is to switch resources from county councils to metropolitan districts? Does she not appreciate that counties such as East Sussex have substantial pockets of deprivation?

Dr. George Turner (North-West Norfolk)

Will the hon. Gentleman give way?

Mr. Waterson

No, I shall not.

New Labour may dominate the towns and cities, but it knows and cares nothing about country areas. As we have seen on a range of issues, Labour Members simply do not appreciate that in places such as East Sussex, which from their narrow perspective sound lush, rich and awash with milk and honey, there are areas of deprivation and substantial need. Does the Minister appreciate the special needs of counties such as East Sussex, particularly in terms of transport in rural areas, which has been hit badly? Road maintenance has been cut, there has been a lack of investment and, on top of all that, we must suffer the impact of the Government's recent decision to shelve projects such as the Polegate bypass and improvements to the A27 between Lewes and Polegate. Those are all extra burdens in addition to those already placed on the British people by the Government in a few short months.

I mentioned the subtle shift in how the RSG has been calculated and the fact that we are witnessing a serious transfer from income tax to council tax. That confirms, if confirmation were needed, that this is, across the board, a tax-raising Government.

8.33 pm

Mr. Derek Twigg (Halton)

I would go a step further than my hon. Friend the Member for Oldham, East and Saddleworth (Mr. Woolas). I think that this is a good settlement and I shall explain my reasons later. Let me point out at the start that I accept that fewer tourists come to Halton than to Westminster, but we have a national chemical industries museum and quite a lot of people come to see that. I am intrigued by the bleating that we have heard from Opposition Members about authorities such as Westminster, which still receive a higher SSA per head than Liverpool. I wonder what Opposition Members call real poverty, because people in Halton take a different view of it.

The settlement is a step in the right direction, and the Government have taken a sensible line. They have understood the position that they have had to take, kept to their manifesto promises and set the scene for the future. They have made certain important changes in the area cost adjustment and have promised to look at the matter further. Great strides have therefore been made this year in local government finance, in stark contrast to the 18 years of Tory government, when change after change simply led to confusion and cuts throughout local government, and no one knew what was happening from one year to the next. There was no stability, and people could not plan ahead.

The new settlement makes planning possible, and there will be more stability because local councils can now plan their services. I particularly welcome the extra money for education, children's social services and community services. That is an important example of how extra resources can be used for the benefit of the community.

The settlement was awaited with anticipation in Halton, because in April it becomes a new unitary authority and takes over education and social services. Our excellent settlement allows us to get the unitary authority off to a good start in funding its services. Interestingly, that has been quite a battle, and I congratulate my hon. Friend the Minister for Local Government and Housing on spotting the fact that, over many years, Halton and Warrington council tax payers have been subsidising those in the rest of Cheshire.

People in Halton have been saying that for some time. As a result, the county council and its friends, including the Chester Chronicle, which is not widely read in Widnes and Runcorn, have now mounted a campaign against the settlement. Whether they have a case is another matter, but they claim that the rest of Cheshire has not been subsidised by the likes of Halton and Warrington.

Three clear independent views have been expressed to the contrary. A report by the Department of the Environment in 1994 said that Halton was losing some £5 million. If the period since 1974 is taken into account, Halton has lost some £100 million over that period, give or take the adjustments that have taken place in the allocation of grants. That is an immense sum to have been lost by one of the most deprived boroughs in the country, which has the fourth highest unemployment in the north-west and 23 per cent. of all the unemployment within Cheshire.

The Government now recognise what has been happening, but the county council still says that it is not true. Not only do we have reports by the Department of the Environment and by someone hailed as the foremost expert in local government finance, but we now have clear evidence submitted by the Department of the Environment, Transport and the Regions. The county council must therefore understand the facts. That money will allow Halton to invest in services, and we shall invest some £2.5 million in education. Given that we have one of the worst problems with literacy and numeracy in the country, and many classes of more than 30 pupils, not to mention the poverty and deprivation in the area, that money is particularly important. It is warmly welcomed by the people of Halton, especially teachers and parents.

The settlement is an excellent start. It gives Halton the chance to build an excellent unitary authority. Other hon. Members have mentioned council tax rises; Halton has not raised its council tax for five years—indeed, it has reduced it—and probably has the lowest council tax in Cheshire. It has also managed to maintain its front-line services and achieve some growth through innovation and inventive ideas. The county council should take heed of the fact that the central services provided by Halton borough council are very lean, and the new unitary authority will have lean central services. Perhaps the county council does not have that, but Halton will be in a position to reduce council tax again this year. That Labour authority in a Labour heartland is able to reduce its council tax, maintain its services and invest in new services. That takes some doing, and not many councils have such a good record.

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

Does my hon. Friend accept that some of the earlier unitary authorities have not been as fortunate as Halton, and have lost out because of the previous Government's disaggregation rules?

Mr. Twigg

Yes, that is a fair point. I am not aware of the position in Milton Keynes, but the Labour Government have seen what needs to be done to support new unitary authorities in the transitionary period, and I welcome that.

At last, a partnership will be established with local government. There is a future for local government: people will be consulted and will be encouraged to participate. I should like to thank the Minister for what she has done for Halton.

Mr. Mike Hall (Weaver Vale)

I also represent the area, and I congratulate Halton borough council on its achievements. Unitary status will enable services to be brought closer to the people. I look forward to many years of excellent delivery of local government services in Halton.

Mr. Twigg

My hon. Friend was instrumental in the campaign to ensure that Halton became a unitary authority. He deserves much praise for his hard work.

The future is brighter for Halton. Investment in services will help the borough of Halton, my constituency and the Weaver Vale constituency to develop their cultural, social and economic life.

8.41 pm

Mr. Geoffrey Clifton-Brown (Cotswold)

I am privileged to be able to participate in this local government revenue support grant debate, and to follow the hon. Member for Halton (Mr. Twigg).

The plain fact of the revenue support grant settlement is that it will channel money out of the rural areas and central London into urban areas. This year, Gloucestershire will provide less domiciliary care and less psychiatric care, libraries will close and the roads, already with one of the lowest indices of any shire county, will be even worse maintained.

Richard Butt, the chief executive of the Rural Development Commission, explained how difficult and more expensive it is to maintain services in rural areas. He said in a press release: Earlier research for the Commission showed that the current system for allocating resources to local authorities and others operated to the disadvantage of rural areas. This present study shows clearly that less money means less service and that people living in rural England are losing out. There is now a body of evidence to support the case that funding for local government does not properly recognise the needs of rural areas nor the additional costs involved in meeting them. Rural communities have relatively poor access to important public services. Contrary to the popular myth, not all of Gloucestershire is a rural idyll. Parts of Gloucester and Cheltenham are as rough as most inner-city areas. We lose out on the SSA distribution system. The city of Gloucester and the town of Cheltenham are substantial conurbations only six miles apart, so we lose out on the urbanisation factor. They have significant populations, so we also lose out on the sparsity factor. Heads the Government win, tails Gloucestershire loses.

Gloucestershire county council is relatively well run compared with many, despite the fact that its room for manoeuvre is constantly being reduced. Its reserves have been run down since 1996 from £6.9 million to £3.5 million today. That cannot go on.

Ms Tess Kingham (Gloucester)

Will the hon. Gentleman give way?

Mr. Clifton-Brown

No, I will not give way, because I have only 10 minutes.

Those reserves can be used only once, and the Government cannot run them down indefinitely in their settlement. Flexibility is further limited by the fact that the amount of revenue spending that can be capitalised is also limited.

A further factor in Gloucestershire that must be emphasised is that the ruling Liberal Democrat group insists on running up the council's debt. At £259 per head, it now has the fifth highest debt per head of population of any shire county. The Liberal Democrats argue that the Government have allowed it. If they go on running up the debt, our children and our children's children will have to repay it.

I want to refer to national factors and the method of distribution. Mention has been made of the area cost adjustment, but in Gloucestershire it is a particularly sore point. We have a 30-mile common boundary with Oxfordshire. Last year, Oxfordshire received £12.9 million in area cost adjustment, and this year it will receive an estimated £15 million, whereas Gloucestershire receives nothing. There is no rationale for that. [Interruption.] The Minister laughs, but it is the people of Gloucestershire who suffer because of that unfairness. Gloucestershire incurs almost the same costs as Oxfordshire and any other out-of-London borough. It has to pay its teachers and local government workers the same amount, and its maintenance and insurance costs are virtually the same. Why should the children of Gloucestershire be near the bottom of the league of expenditure on primary and secondary schools simply because it does not receive an area cost adjustment? It is unfair.

The Government have taxed every pensioner who has a private or occupational pension scheme. That applies to all local government groups. My local authority has done an actuarial calculation. To make up the shortfall, it will require £2 million this year and another £2 million next year. That is the equivalent of an extra £10 each year on every council tax bill in Gloucestershire. The council is not allowed to make provision for that this year, so the amount will have to be doubled next year, and that will continue to have an effect year on year.

The Government came in on a proud boast that they would run a sound economy. What has happened? The local government settlement was based on a GDP deflation factor of 2 per cent., which was set by the previous Chancellor, who had an excellent economic management record. The GDP deflation factor this year is 2.75 per cent., and the difference will have to be found by each local authority. Gloucestershire will lose £9.1 million from its budget. As my right hon. Friend the Member for Skipton and Ripon (Mr. Curry) said, we have not yet been given the settlement for local government workers. That may push the figure higher.

The problem with the abolition of capping is that in an authority such as Norwich, which I know well, far fewer than half the council tax payers pay the full amount: they benefit from the council tax reduction scheme. Capping should be abolished, and every authority should be allowed to spend what it wants. The problem is that not everyone pays the full amount of council tax. I suggest that the council tax reduction should be related to council spending if it exceeds the level of inflation. That would put some fairness into the system, and would provide accountability for every council tax payer, whether or not they received a council tax reduction.

The Government's declared policy is to return the non-domestic rate—the uniform business rate—to local authority control. [Interruption.] The Deputy Prime Minister referred to this issue, so I do not see why I should not do so. Hon. Members from Derbyshire have spoken in the debate. We all remember the ravages of the Bookbinder regime. Businesses were driven out of Derbyshire, and it became an ever-decreasing circle. Businesses were driven out, the tax base was reduced, and the authority had to raise even more money from the unfortunate businesses that were left. Let me issue a strong plea to the Minister: do not return non-domestic rates to local authority control. That would merely lead to a lack of representation for businesses, and to unaccountability in regard to how money is spent.

Judy Mallaber

Will the hon. Gentleman give way?

Mr. Clifton-Brown

No. I have made it clear that I will not give way; we have only 10 minutes in which to speak.

In an earlier debate, the Deputy Prime Minister said that his Government had been elected on a pledge to remove the unfairness that has dogged the standard spending assessments since they were first introduced."—[Official Report, 2 December 1997; Vol. 302, c. 159.] I want to hold the right hon. Gentleman to that. I want a fair level of service for every person in the country, and fairness for every local authority. If that does not happen, the voters will have their say in next year's local government elections—and I have no doubt that more Conservative councillors will be elected then.

8.50 pm

Judy Mallaber (Amber Valley)

It has been an extraordinary experience to listen to the speeches of Conservative Members. May I ask the hon. Member for Cotswold (Mr. Clifton-Brown): if Gloucestershire really is at the bottom of the league tables, which I have not looked at, who put it there? Perhaps the hon. Gentleman could also explain how that awful Derbyshire county council managed to attract Toyota to the constituency of my hon. Friend the Member for South Derbyshire (Mr. Todd), where 170 of my constituents work.

As I have said, it is extraordinary to listen to Conservative Members. It seems to be a case of schizophrenia. Those who, as Ministers, nearly destroyed local government, are now pretending to be the friends of local government. They need to do that, of course, because the only way in which they can rebuild their destroyed political base is by attempting to restore their credibility in local government. They will have a difficult job, after all they have done to all our councils over the years.

However, I hear another familiar attack—the denigration and doing down of individual authorities that became so familiar to us in Derbyshire for so many years thanks to Conservative Members there. That partly led to the loss of two Treasury Ministers at the election, including my predecessor, and to the loss of three other Members of Parliament. If we wish to talk about any Conservative Members in Derbyshire, we must name them. Only one remains: my neighbour, the hon. Member for West Derbyshire (Mr. McLoughlin).

Before I deal with matters relating specifically to Derbyshire, let me say that the damage caused by the anti-democratic dogma of the last Government and their vindictiveness against local government will take a long time to put right. Anyone who knows anything about local government finance will be aware that it cannot be dealt with overnight. A party in opposition does not have the necessary resources with which to do the detailed work that must be done to ensure that it does not make yet more mistakes.

Much has been done. I welcome both the consultation documents on local government finance that are being produced and the document on democratic renewal. That document is about giving local government a proper place. It is not just about finance; it is about our relationship with our local electorates and with people in those areas. I am delighted at the emphasis on education, and I am pleased that we have started to iron out some of the unfairness and anomalies in local government finance. As I said, that cannot be done overnight.

Ministers are aware of the problem. My hon. Friend the Member for North-East Derbyshire (Mr. Barnes) explained some of the oddities that have led to the changes that have already been made having a neutral effect on Derbyshire, and Ministers are aware of the difficulty. It has meant that the settlement has not yet managed to deal with the historic problems that have resulted from years of vindictiveness and rigging of the system by the Tory Government. That has been encouraged by the perpetual undermining of our county council and of local government in our county by past Conservative Members, which has not helped us.

It is important that we work in partnership in our areas, and our Government will be looking for that partnership at all levels to benefit local people and children in our schools, and to regenerate areas and their economies. It will take time to deal with problems that were created in the past. Unfortunately, the settlement has not yet managed to deal with the historic difficulties that were set out very clearly by my hon. Friend the Member for North-East Derbyshire.

If we had the same SSA per primary school pupil as the county council average, we should have an extra £4.3 million. If we had the same SSA per secondary school pupil, we should have an extra £4.1 million. That would go some way towards dealing with our present deficit. I could give many other examples. As has been said, we did have the best class sizes, but we now have some of the worst. We had the best record on home help hours, but we now have one of the worst records, because of what has happened historically.

The truth about Derbyshire county council is not what has been portrayed by Derbyshire Tory Members over the years. Leaders of the council have been among the foremost in trying to be active and supportive on the new Government initiatives. They are keen to implement the standards agenda in schools, and to implement best value and quality. We are not going around shroud-waving about what the current settlement will do for us, because that is not the right way to proceed. We want to see how the settlement can change to have a positive effect in the future, and we are keen to take the initiative to implement the Government's agenda. I hope that Ministers will recognise that that is at the top of the agenda of Derbyshire's county council leadership. However, we have problems with the passporting of education money, and with the fact that changes that have already been made have not yet enabled us to deal with historic unfairness in the county.

There are problems that the Minister could consider. We have talked about a number of the problems relating to the coming year. Several hon. Members have mentioned the area cost adjustment. I know that a review is taking place, and I know that difficult decisions will have to be made, as always happens when the redistribution of a particular level of resources is involved.

I hope that the Minister agrees that the local government finance review should ensure that the vagaries of SSAs do not have quite such a dramatic effect on budgets. One or two changes can have a dramatic effect on budgets and the taxes that then need to be imposed.

As for this year, I hope that, when she makes decisions on designation and capping levels, the Minister will look at some of our particular problems in Derbyshire. She will know that the county council is considering whether it will be able to live within the budget as currently set, and there are a number of decisions to be made in that regard. It is not just a question of this year's settlement; we are talking about the cumulative effect of many years of Tory administration.

We have no reserves. Would that we could share the £3.5 million reserves that we heard about from the hon. Member for Cotswold (Mr. Clifton—Brown)! We should be happy to share them with him, but we have nothing like that amount. Perhaps the Minister will agree that, after nine years of successive and significant budget cuts, the abruptness and scale of any further cuts required by Derbyshire will prove extremely difficult for the county council in the coming year. I hope that the Minister will take account of that and that she will also examine some of the structural issues. I shall refer to three that she might like to consider.

First, the county council had cuts of more than £200 million in its budget during the 1990s and no other council has been left with such a legacy of voluntary redundancy and early retirement costs. Some 4,500 staff were affected. Contrary to what Conservative Members have said, council staffing is 20 per cent. below the county council average and the 4,500 job losses mean that the council has to pay £4.2 million into the pension fund before it starts to pay for services. I hope that the Minister will take account of that specific problem.

Secondly, perhaps the Minister could look at the structural issues that arise as a result of Derby city leaving the county to make sure that that has been properly dealt with.

Thirdly, perhaps the Minister will consider economic restructuring in the area. I am not being emotive because a calm assessment is needed, but Derbyshire has many problems resulting from economic restructuring. It lost its coalfields and suffered from the resulting devastation, especially in the constituencies of my hon. Friends the Members for Bolsover (Mr. Skinner) and for North-East Derbyshire. Longer-standing problems arise in my constituency. Perhaps an examination of those issues will explain why Derbyshire has ended up with such difficulties. I hope that the Minister will take account of those historical and structural difficulties in taking her decisions this year.

Mr. Levitt

Does my hon. Friend agree that the Derbyshire problem can be summed up by saying that, of the £14 million additional money that is available this year, £13 million is to be passported to education and £1 million is to be levied to the fire authority? That leaves nothing for anything else, which means that there will be cuts in all services.

Judy Mallaber

My hon. Friend's analysis is correct. My county council is considering the position.

Mr. Deputy Speaker (Sir Alan Haselhurst)

Order. The hon. Lady's time is up. She was perhaps a little too generous for her own good in allowing an intervention.

9 pm

Mr. Adrian Sanders (Torbay)

We have heard so much about Derbyshire that I am beginning to wonder whether this is the local government finance debate for that county and that perhaps we shall debate another county tomorrow. Some hon. Members have attacked the Liberal Democrats, but that is not surprising because we control more councils, have more councillors and are responsible for spending more public money than the official Opposition. We have heard a great deal about the complexities of local government and about some of the difficulties that are faced each year by central Government in determining the local government settlement.

I congratulate the Government on their plain English guide to the settlement, but that is where the congratulations end because it is not so much a new deal as an old meal. We have been here 18 times before debating the previous Government's annual settlement. The fundamental question of how to levy fair taxes to pay for essential services such as education has been dodged. Like the previous Government, this Labour Government have shifted the burden of tax to the hard-pressed council tax payer, the users of services and those who pay for them.

All Governments are crafty over local government finance, and some Governments are craftier than others. We welcome extra money for schools, but less money for services such as school transport, discretionary student grants, libraries and museums leaves our local education authorities with a deficit. We must also take account of cuts in the funding of non-statutory services such as traffic calming, parks and recreation, tourism promotion, economic development, grants to voluntary organisations, closed circuit television and community safety. The list is long.

Charges for car parking, home helps and domiciliary care and council house rents are all likely to rise and be an extra burden on residents to whom those extra taxes have been transferred by a Labour Government who are carrying out Conservative spending plans. The Secretary of State said that concerns about other services were legitimate. They certainly are, but how would he or the Minister for Local Government and Housing advise a council that had to choose between spending on school books or library books; between the upkeep of school buildings or the repair of public buildings; and between looking after children in school or transporting students to and from school.

The settlement is not fair: it is dishonest. Crude capping remains, with the promise of "a kinder kind" of capping in future, whatever that means. The burden of taxation is being placed firmly on the shoulders of the council tax payer because the Government do not trust local democracy and do not believe in fair taxes, such as 1p on income tax, in case that frightens their wealthiest backers. At the local elections, they will pay the price that was paid by the previous Government. If the Secretary of State cannot trust Labour councillors, who control most the local authorities, I urge him at least to trust the people. They will pay a fair tax for a better service. However, he should not expect them to pay an unfair tax for poorer services and think that the public will blame their local council, when it is the Government who are behind every cut, every increased charge and every service reduction.

9.4 pm

Mr. Stephen Timms (East Ham)

I welcome with particular enthusiasm the settlement that my right hon. Friend the Secretary of State for the Environment, Transport and the Regions has announced because it meets the key demand of the Newham Needs campaign, which attracted enormous support in the east London borough over a long period. That key demand was that the SSA's capital financing element should equate to reality and not to fiction.

In 1990–91, the previous Government announced that the SSA's capital financing element would be based not on each authority's actual debt, but on its notional debt. That was an entirely new approach. It rested on a notional debt figure that assumed that, during the 1980s, debt had been repaid at a standard rate and that a set proportion of capital receipts had been applied to paying debt.

In Newham and in many other authorities, neither of those assumptions was valid. During the 1980s, the council had continued to invest in the borough's needs—in schools and in housing—and had continued, where possible, to apply its capital receipts to those purposes. We believed in investing. In passing, may I say what a welcome and important change it is that this Government are now allowing local authorities to apply housing capital receipts to their area's needs on a far broader and better basis.

In Newham, we did what we could to continue our level of investment. We did not—I underline this—indulge in creative accounting or in anything else that Conservative Members could describe as profligate or reckless. All our borrowing was wholly straightforward and legitimate and within the approved capital allocations that the Government of the day had issued. It was entirely transparent and above board. At that time, there was nothing to suggest that local authorities would be penalised for behaving in that way.

The new system was introduced in 1990 and an explicit penalty was incorporated retrospectively for councils that had invested not more than they were allowed to, but more than the notional formula that was devised in 1990 assumed. Newham discovered that, although the actual debt that it was servicing was more than £200 million, the notional figure was just over £100 million.

The difference in, for example, 1993 meant that the capital financing SSA was more than £10 million less than the capital financing charges that the council had to pay. Like most London authorities at any rate, and many more now, Newham was capped at SSA, so that £10 million difference could be found only by holding other spending—on education and social services in particular—below the SSA level. Then Ministers criticised Newham for spending less than SSA on education.

I accept that a Government could choose to penalise a local authority for what they regarded as excessive capital spending, but that is what the capital controls system is for. For the 1990 scheme to introduce an additional penalty retrospectively to punish local authorities that spent more in the 1980s than the standard level that the Government set only in 1990, was clearly unfair, yet that was how the system worked from 1990, until my right hon. Friend the Secretary of State reintroduced fairness with his announcement for next year.

The previous system was unjust and unfair. It cannot be right to punish deviation in the 1980s, using a standard that was not invented until 1990, but that is what the previous Government did. Year after year, we made that simple point to successive Conservative Environment Ministers.

Earlier, I read the 1993 submission from the Newham Needs campaign to the then Minister of State, the right hon. Member for North-West Hampshire (Sir G. Young). The delegation was led by my predecessor, the late Ron Leighton, who was chairman of the campaign and who was supported by the two other Newham Members. I was there as leader of Newham council. Representatives of the council trade unions, the voluntary sector and Newham Youth Forum, and the editor of the Newham Recorder, Tom Duncan, were also part of the delegation. We were courteously received by the right hon. Gentleman, but, sadly, our pleas fell on deaf ears. That was also our experience when we put the same points to the right hon. Member for Skipton and Ripon (Mr. Curry) and the hon. Member for Mole Valley (Sir P. Beresford).

Mr. David Chaytor (Bury, North)

Does my hon. Friend agree that, quite apart from the fairness of the formula, one of the most significant changes this year is the way in which the Government have listened to representations from local authorities? After 18 years of local authorities' pleas falling on deaf ears, it is a refreshing change for a local authority such as mine in Bury to have the Minister listen carefully and respond to our points.

Mr. Timms

My hon. Friend's experience chimes with mine.

The Newham Needs campaign was immensely popular. Newham had conferences involving hundreds of local residents and a road show touring the borough. Volunteers formed a Newham Needs choir, and two specially written Newham Needs songs were composed, one by a local clergyman and the other by the assistant director of the Theatre Royal, Stratford, in their own time. That was a hugely popular campaign because the formula applied by the previous Government was so obviously unfair. However, nothing happened to right the wrong until the Labour Government were elected. People in Newham will not forget that lesson—for a fair deal one must elect a Labour Government.

In attacking the change to which I have referred, the right hon. Member for Sutton Coldfield (Sir N. Fowler) said that it was a handout to profligate councils. That is simply not true. From a Conservative point of view, however, that would be a fair charge if the punishment resulted from Government policy at the time when the spending was incurred, but it did not. The penalty was dreamt up only after the spending had been made—years afterwards for a large part of it.

In any case, Newham council is in no sense a profligate authority. Since 1995, the authority has reviewed all its services to achieve savings of £25 million while protecting front-line services and, in so doing, releasing funds for investment in schools and information technology for further improvements in effectiveness.

In the past two years alone, the council has won the information technology department of the year award and achieved ISO 9002 accreditations for a wide range of its services. Last year, the council was commended by the National Home Improvement Council as the authority that had done most to encourage home improvement in the private sector. It won the Cabinet Office award for the best local publication of the Audit Commission's performance indicator, and it also received a charter mark for its revenue services. This year, it is on a short list of five for the council of the year award.

That is a superb record of achievement. Newham council is a determined, imaginative, creative organisation, tackling a tough job effectively, with impressive results. That is what local authorities are capable of, given the opportunity. Thank goodness we have left behind the confrontation, hostility and unfairness of the Tory years.

This was a good settlement. I pay tribute to the energy and determination of the Newham Needs campaign and to all those who contributed to its struggle for fairness. I also pay tribute to my right hon. Friend the Secretary of State for demonstrating that in a democracy wrong can be put right and, after years of cynicism and gerrymandering, for placing fairness once again at the heart of Government.

9.14 pm

Mr. Peter Luff (Mid-Worcestershire)

My constituents will take a rather different lesson about the merits of a Labour vote from those of the hon. Member for East Ham (Mr. Timms), whose vigorous speech I enjoyed but did not find particularly convincing.

This is a debate on two levels. There is the national dimension, and that is simple—a concealed tax rise to pay for reduced services, and a shift in resources from London and the shires to places such as, of all places, Sedgefield. I am glad that the people of Sedgefield have more than reflected glory to show for having the Prime Minister for their Member of Parliament, but I am deeply sorry that my constituents are having to pay for that privilege for those in Sedgefield.

There is a view in London that Worcestershire is just a leafy shire, but it has at least its fair share of rural poverty and urban deprivation. I am not sure that the previous Government always understood that, and this Government do not understand it at all.

I must record my admiration for the officers of the new Worcestershire county council, and for the many teachers who do a great job in our schools. However, thanks to this settlement, they will have to face an impossible year—Worcestershire county council's first year after its split from Herefordshire. It is true that Worcestershire has had years of tight and uncomfortable settlements. I and other Conservative Members, who did not always agree with the old Hereford and Worcester county council, have made our reservations clear—particularly our reservations about the area cost adjustment, about which we have heard a great deal in this debate.

As my hon. Friend the Member for West Derbyshire (Mr. McLoughlin) pointed out, the area cost adjustment was not even mentioned in "A Plain English Guide to the Local Government Finance Settlement". It is no wonder; if the area cost adjustment were explained clearly, its total illegitimacy would be exposed. The area cost adjustment allows Oxfordshire, which is only about 10 miles from my border, an extra £15 million—which amounts to £1.5 million per mile. I do not understand why.

The standard spending assessment formula consistently discriminates against Worcestershire. There is absolutely no fairness in the settlement, only further discrimination. Linking the SSA to capping limits—which is what we are dealing with in Worcestershire—means that the SSA is the capping limit. [Interruption.] Labour Members shout, but that system is not democratic and allows absolutely no headroom or flexibility.

Although I welcome the review that the Deputy Prime Minister announced at the beginning of the debate, I am not holding my breath. He said that it is currently a crude system, and he promises something more elegant in the future. One may associate many fine words and noble qualities with the Deputy Prime Minister, but elegance is not among them. I somehow suspect that the new system will not be that different from the old one.

The only Hereford and Worcester county council ran down its balances expecting some glorious cornucopia from the new Labour Government—but now the chickens have come home to roost. The new Worcestershire county council has no reserves to speak of, and a disgraceful settlement from the Government. Council tax in Worcestershire will rise by 9.1 per cent., and we will have worse services for the extra money.

My hon. Friend the Member for Bromsgrove (Miss Kirkbride)—who wished to speak in this debate, but, sadly, because of time pressure, has not been able to—has specifically asked that I should associate her with my comments on our county's education settlement. Worcestershire's education SSA increase is well below the national average and is the smallest of all county councils' SSAs. It does not even cover pupil numbers and inflation. Next year, there will be education cuts in Worcestershire. The expectations raised by the Prime Minister, and by the various Labour Members who campaigned—successfully—for seats in Worcestershire, have been dashed by the settlement. Worcestershire's settlement makes a mockery of the boast "education, education, education". Even the Labour council leader, in a letter to the Minister, said that there is a "strong sense of injustice". I would call it a strong sense of betrayal.

Compared to other counties, we have had very low increases in other SSAs, especially for our fire service. Because the formula is inadequate, we are already spending 25 per cent. above the SSA to maintain a bare minimum service. Moreover, we have the lowest per capita fire service spend of all the shires.

The settlement's overall effect will be huge cuts. There will be cuts of about £1 million in education, and massive cuts—of about 10 per cent.—across the board in other services. Last week, the Worcester Evening News quoted Worcester's education director as saying that most schools should "survive the cuts", which is hardly an encouraging thought. He went on, however, to say that a significant minority will face a year that is likely to produce the need for some painful adjustments, including teaching staff reductions and increases in class size. That is quite the opposite of what Labour was promising. Thanks to the settlement, Worcestershire is facing the prospect of class size increases.

Cuts will have to be made not only in education and social services—where huge cuts will have to be made—but in other important spheres, such as the roads budget. The Liberal Democrat vice-chairman of the relevant county council committee said: The road infrastructure across the county is fast reaching crisis point. It is a bit like a domestic situation where you put off repairs to your house for a while but after a few years it starts to hit the inner woodwork and costs multiply. That is the situation that we are facing in budget after budget.

Councillors are being forced into policy options that they do not support. I personally do not have a problem with the concept of privatisation, but "Prescott's privatisation" in the county is imminent. All the old people's homes in the county are to be sold off to meet this year's dreadful budget. Tomorrow, I am going to visit Westmead, an old people's home in Droitwich Spa, to discuss with the residents and staff their concerns about the sell-off forced on Worcestershire county council, against its will, by the settlement and the Government.

There have been sensible proposals for change. There was a delegation to the Minister, but, strangely, Conservative Members representing the county were not invited. However, I associate myself with the views that the delegation expressed. It managed to get only a few hundred thousand pounds more from rebalancing the split between Herefordshire and Worcestershire and a reduction in the education SSA. It made no progress on capping. The headroom above the SSA is 0.03 per cent. or about £90,000—roughly the salary of the Deputy Prime Minister. The county council average is 3.7 per cent. Why could the Government not give Worcestershire 1 or 2 per cent. and let the county council justify the extra expenditure to its voters at the next local elections?

Carol Warren, the Labour leader of the council, wrote to the Minister for Local Government and Housing on 19 December last year:

The elderly, the frail and most vulnerable in our community will struggle to understand why after four years of spending cuts … we continue under a new Government, to withdraw services, raise charges that are already the highest in the country or curtail funding to the voluntary sector. Relationships with the NHS will suffer as hospital discharge arrangements become even more strained. Is the settlement as flexible as the Deputy Prime Minister boasted? Not at all—there has been no flexibility whatsoever for Worcestershire. Is it fairer? If robbing Worcestershire schools and slashing services for the vulnerable is fair, then it is fair. Is it better? Not even the inventive mind of the Minister without Portfolio could present it to my constituents as better. It fails all the Deputy Prime Minister's tests. I hope that Labour Members representing Worcestershire, who were not even present in the Chamber for today's debate, will have the courage to join me in voting against the settlement.

9.21 pm

Mr. Mark Todd (South Derbyshire)

Listening to the debate has been rather like watching a tired episode of "Star Trek". It is as if one were visiting a twin planet where the people spoke the precise opposite of what their identical figures elsewhere were saying.

We have heard Opposition speeches about class sizes and the terrible impact that they can have on a child's education. One would hardly believe that, in government, they declared class sizes to be quite irrelevant to whether education could be delivered. We have heard Opposition speeches condemning capping or demanding that it should be more liberal. One would hardly believe that, in government, they ruthlessly applied capping throughout the past few years. We have heard speeches saying that the area cost adjustment is a criminal regime for distributing money between local authorities, yet it has was in place throughout the last few years of the Conservative Government.

Mr. Andrew Lansley (South Cambridgeshire)

Will the hon. Gentleman give way?

Mr. Todd

No. I have very little time.

The revenue support grant settlement contains a number of features that I welcome unhesitatingly. Some of the blatant fixing that marred the previous arrangements has been ended, and that is most welcome. The extra money for education that reaches even my county of Derbyshire is tremendously welcome. We wish that we could use it fully and more effectively.

Nevertheless, the settlement brings a prospect of further substantial cuts to my county. In the past nine years, £228 million has been cut from the county council services—far more than for any other county authority. From 1989–90 to the current year, the cap has been raised by 30 per cent. East Sussex has been referred to as a particular example of iniquity, yet it received an increase of 62 per cent. over that period—the highest increase in the country. If Derbyshire had merely the average increase, it would get an extra £90 million, but we are not asking for that. If, as my hon. Friend the Member for North-East Derbyshire (Mr. Barnes) said, we merely caught up with the next lowest increase, we would get an extra £20 million, but we are not asking for that either. We merely want enough to implement the Government's policies. We want to carry through the commitment to passporting the education money. That would require an extra £14 million. The door is open for further discussion. That is great.

I cannot describe Derbyshire's services as a bleeding stump. I have spent too long talking to the people who deliver them and have developed too much respect for what they have done to say that. Our key stage 2 results, announced a few days ago, were excellent. They represented a fantastic achievement by educators in our county. A small rural primary school in my constituency was particularly praised in the chief inspector's report published a couple of days ago. There is tremendous innovation and commitment to achieve, against a wall of desperation in our resources shortfall.

Bureaucracy has been cut to the bone. The hon. Member for West Derbyshire (Mr. McLoughlin) made a tricky speech in which he pulled out some statistics, claiming to prove that the county council distributed less money to schools than other authorities. That is true for the examples that he chose, but it is an administrative issue which depends on which services are funded centrally and which are funded locally in individual schools. It says nothing about the amount of spending on education or any hidden administration costs. It is just a question whether school transport and special needs are delegated or kept at the centre. As my hon. Friend the Member for North-East Derbyshire has shown, Derbyshire has an excellent record on cutting bureaucracy.

I have no desire to take money from other local authorities. I understand the difficulties faced by my right hon. Friend the Deputy Prime Minister and his ministerial team in deciding how to parcel out the limited resources available. However, I should like the Minister who is to reply to explain why Derbyshire should have a standard spending assessment per head of £605 when Hertfordshire has £681 and Kent has £684. I am sure that there are excellent reasons. I am not saying anything against those two counties. I am sure that my hon. Friend the Member for St. Albans (Mr. Pollard), who is sitting next to me, would speak up eloquently for Hertfordshire. However, I want to know why a primary school child in Derbyshire should receive £200 less in SSA recognition than a Hertfordshire child. I do not believe that the gap is justifiable.

There are ideas on how we can make the situation better. In the long term, we need to examine how we assist elderly residents. I am strongly committed to Derbyshire's policy of seeking to fund people to stay in their homes, supporting them with carers. That is the not the cheapest policy, but it is the best. It should be recognised in a financial settlement, rather than using the standard residential home calculations that are used elsewhere.

I would also like a review of the area cost adjustment. There has been near unanimity on that tonight.

Representing a rural seat, I believe that sparsity is a key factor in the delivery of services. It is more expensive to deliver services in a rural area. It is critical that we retain our small village schools, which are often the heart of our communities. There is no way round the cost of that commitment. I have many schools in my constituency with 40, 50 or 60 pupils. They do an excellent job of educating young people, but they cost disproportionately more than larger conglomerations of schools. That must be recognised.

I hope that the Minister will also take note of some short-term elements. Reference has already been made to reorganisation costs. The impact of the loss of the city of Derby has been underestimated and should be reviewed. We also need a review of the early retirement costs from the accumulated cuts. We carry a huge extra cost from what has happened in the past nine years. Those are reasonable steps.

This is not a satisfactory settlement for Derbyshire. Other hon. Members have said how marvellous their settlements are. I cannot pretend that I feel that way. I have made my representations, as have my colleagues and the county council. No progress has been made—at least as yet. I am delighted that the Government are still prepared to listen to us and talk to us. On that basis, and with further elements of discussion about the cap still to come, I shall certainly be supporting the Government.

9.29 pm

Mr. Tim Yeo (South Suffolk)

The Secretary of State opened the debate by claiming that the settlement was better, fairer and more flexible". The truth that has emerged in the debate paints a different picture. The settlement is inadequate, unfair, perverse and fraudulent.

The settlement is inadequate because, through their actions since 1 May, the Government have directly placed huge new burdens on councils. They have totally failed to provide councils with resources to cover those new burdens. The settlement is unfair because the Government have taken cash away from parts of the country, such as inner London and most rural shires, and given it to other councils, many in the north, mostly metropolitan, but notably Sedgefield. Sedgefield's standard spending assessment has increased by more than the SSAs of all but two of the more than 400 councils.

The settlement is perverse because the Government's changes to the way in which cash is distributed among councils have deliberately rewarded incompetence and extravagance, and penalised good management and thrift. The settlement is fraudulent because the Government's claim that it provides £800 million extra for schools is simply not true. The Secretary of State repeated that myth in his opening speech, but it has been exposed by speaker after speaker—not only on the Conservative Benches.

The inadequacy and unfairness of the settlement was powerfully demonstrated by my right hon. Friend the Member for South Norfolk (Mr. MacGregor). He eloquently described the consequences for the people of Norfolk of what he called the "lethal combination" of a Labour-controlled council and a Labour Government.

When the Minister replies, will she confirm that consideration will be given to the plight of counties such as Norfolk, which are mainly rural? Will she admit that the consequences of a cash cut in the social services SSA in Norfolk, and in many other places, are extremely painful—and not just for the social services departments and their service users? The squeezing of the social services SSA will mean that many authorities, including Norfolk, will have to dip into their education SSAs to prevent unacceptable cuts in social services.

Mr. Hayes

I apologise for re-emphasising this point. Will my hon. Friend also ask the Minister to reverse here and now the £2.5 million cut in Lincolnshire's police service? The cuts are not just in social services. A Home Office Minister has admitted that the cut in Lincolnshire police service has nothing to do with inefficiency.

Mr. Yeo

The Minister will have heard my hon. Friend's question. Will she also reverse the cash cuts in the SSAs of Nottinghamshire, Staffordshire, Surrey and Wiltshire police services?

Mr. Levitt

Will the hon. Gentleman give way?

Mr. Yeo

No, I am sorry. [Interruption.] If there is time, I will in a moment.

My right hon. Friend the Member for Cities of London and Westminster (Mr. Brooke) entertainingly exposed the very flimsy basis for the Government's attack on the funding of Westminster city council—in whose area I am happy to have had a home for more than 10 years. Its combination of good services and low council tax has long been a model of good practice—a model which has constantly attracted the envy and jealousy of incompetent Labour councils and Labour Members. So determined were the Government to take away money from Westminster that other inner London boroughs—even those controlled by the Labour party—have been dragged down as well.

My right hon. Friend the Member for Skipton and Ripon (Mr. Curry)—who has much expertise in these matters—eloquently warned of the enormous increases in council tax that the settlement inevitably will lead to. He thoughtfully explored the consequences for services—even within education—that arise directly from the settlement. My hon. Friend the Member for West Derbyshire (Mr. McLoughlin) argued persuasively for the retention of some kind of capping, and recalled quite correctly the very high price paid by tax payers in the past for allowing certain Labour councillors the unrestricted freedom to set their own tax levels.

My hon. Friend the Member for Mole Valley (Sir P. Beresford) also has much experience of these matters. He exposed some of the anomalies in the system and the way in which the Government have, frankly, perpetrated a fiddle this year in relation to the treatment of capital funding. My hon. Friend the Member for Beverley and Holderness (Mr. Cran) drew attention to the views of the Local Government Association—a body controlled by Labour councillors—which has underlined how the settlement will inevitably lead to higher tax and poorer services.

My hon. Friend the Member for Eastbourne (Mr. Waterson) was right to identify the switch of resources away from rural areas as one of the key aspects of the settlement. My hon. Friend the Member for Cotswold (Mr. Clifton—Brown) spoke with passion and conviction about the way in which his constituents and the people of Gloucestershire have been adversely affected by the settlement. My hon. Friend the Member for Mid-Worcestershire (Mr. Luff), in a spirited contribution—and like many others—criticised the operation of the area cost adjustment and pleaded convincingly for his constituents.

Mr. Lansley

On the matter of the area cost adjustment, is my hon. Friend aware that, days before the last general election, the Prime Minister pledged in Cambridge that the Elliott review would be implemented in time for the coming financial year of 1998–99—a pledge he has now broken?

Mr. Yeo

My hon. Friend is quite right to draw attention to yet another broken promise from the Government.

Mr. Levitt

I am sure that hon. Members were very touched by the hon. Gentleman's description of the problems in Norfolk. As a Derbyshire Member, I can identify with the difficult decisions that had to be made. Derbyshire suffered £214 million of cuts in its budget under the previous Government. Will he join with me in asking for the same for Derbyshire as he would wish for Norfolk, and will he apologise on behalf of the previous Government for the damage they did to services in Derbyshire?

Mr. Yeo

Any apology to be issued about Derbyshire would be on account of the disgraceful record of the Labour-controlled Derbyshire county council, which was a byword for extravagance and incompetence for which an abject apology is immediately required.

Mr. Prescott

They discriminated against Derbyshire.

Mr. Yeo

The Deputy Prime Minister suggests from a sedentary position that the previous Government discriminated against Derbyshire. If there had been any discrimination—which there certainly was not—it would perhaps have been justified, because giving money to the Labour councillors who ran Derbyshire county council would have been a gross irresponsibility on the part of any Secretary of State.

Labour Members described the consequences of the settlement in a variety of ways. The hon. Member for Leicester, South (Mr. Marshall) had the courage to admit that the woe would continue into 1998–99. He might like to know that if Leicester had been treated the same as Sedgefield, the SSA increase would not have been under £5 million, but over £34 million. The hon. Members for Sherwood (Mr. Tipping), for North-East Derbyshire (Mr. Barnes) and for Amber Valley (Judy Mallaber) all criticised the distribution formula. Others—like the hon. Members for Oldham, East and Saddleworth (Mr. Woolas), for East Ham (Mr. Timms) and for St. Helens, North (Mr. Watts)—seemed to me to be still fighting the last war; perhaps because they have so little confidence in their prospects for the next one.

I was glad to hear that the hon. Member for Sutton and Cheam (Mr. Burstow) will be joining us in the Lobby. He recognised that even though many councils will be forced by the settlement to cut their services, they will also have to introduce substantially higher levels of council tax. The hon. Member for Torbay (Mr. Sanders) went further and called the settlement dishonest.

The day of reckoning is truly approaching, when councils or, more particularly, service users and council tax payers, will have to face the consequences of the huge £1 billion burden that the Government have placed on councils throughout the country. By far the biggest part of that burden is the Chancellor's new pensions tax. It is grossly irresponsible for Ministers to go on burying their heads in the sand about the problem.

It is not realistic for the Government to say that they can wait until the actuarial valuations are completed later this year. Almost two out of every three council pension funds did not have enough money to meet their liabilities when the funds were last actuarially valued in 1995. Their income has been cut by £300 million a year, so the situation is clearly worse.

In a circular issued on 2 October, the Local Government Association said: It would clearly be prudent to make advance provision, say by way of an agreed voluntary uplift in contribution rates. That is a sensible view. If no provision for the liability is made in 1998–99, by the following year the total loss of income in pension funds since the Chancellor's pensions tax was introduced last July will be more than £800 million, which is equivalent to an extra £50 on band D council tax for every council tax payer in the country.

Will the Minister confirm without reservation that the revenue support grant next year will be increased to cover the shortfall in full? If not, does she expect councils to prepare by starting to cut services in 1998–99? How many teachers and home helps does she expect to be sacked to swell the Chancellor's coffers? Will she confirm that the annual cost of his pensions tax to councils is £300 million, and that if council tax does not increase, 12,000 teachers will have to be sacked to meet the shortfall?

A few councils escape the consequences of those burdens. As my right hon. Friend the Member for Skipton and Ripon and my hon. Friend the Member for Beverley and Holderness said, many Ministers in the Department have constituencies that do rather well out of the changes to this year's distribution formula.

The council that did most especially well is Sedgefield. The voters who go to the polls on 7 May in London may be interested to know that if the London boroughs were treated in the same way as Sedgefield, Bexley would receive an extra £13 million on its SSA; Croydon, £24 million; Enfield, £19 million; Hillingdon, £21 million; Ealing, £21 million; and Redbridge, £14 million.

What is worse, the settlement was not merely about exploiting the system to take cash away from London and many rural shires: the Government have taken cash away from those councils that manage their affairs efficiently and carefully. Changes to the distribution formula and the treatment of debt have penalised the thrifty. That is in line with the Chancellor's attacks on personal savers; his tax on pension funds; and his retrospective tax on savers, through the limit on TESSAs and PEPs.

In this revenue support grant settlement, the Secretary of State has gone even further: he has rewarded the extravagant and incompetent Labour councils that allowed their debts to pile up. That is an astonishing approach which sends a clear signal to every council in the country: do not bother to pay back debts or to manage money carefully, because Big Brother will come along and bail councils out.

Mr. Prescott

They build houses, you twit.

Mr. Yeo

We know that they will build houses: they will build them on the green belt in Newcastle, when the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) says that there are 4,000 empty houses in Newcastle alone; on the green belt in Stevenage, where 14 Labour county councillors sneaked through the decision after changing the standing orders with the help of their coalition partners in the Liberal party; and all over West Sussex.

The Minister of State will have heard what the so-called extra cash for schools means in one council or another. Let me tell her what it means in Suffolk. A letter from the heads of the 345 schools in Suffolk spelt it out. They were led by the Secretary of State for Education and Employment to expect that Suffolk would receive more than £12 million in extra cash for education funding, but the actual amount turned out to be under £11 million. Because of the budgetary pressures affecting Labour and Liberal-controlled Suffolk county council, the true figure is £8 million, according to the heads. The consequence is a reduction of 1 per cent. in real terms in Suffolk school budgets. As one councillor put it:

David Blunkett's letter to schools led them to expect something which local authorities were in no position to deliver. The debate has shown four things about the settlement. First, it has proved that the Government's claim that the revenue support grant settlement was based on the previous Government's figures is little more than a fraud. Secondly, it has exposed the Government's systematic switch of cash away from councils in London and the rural shires to Labour's urban strongholds in the north, such as Sedgefield. Thirdly, it has revealed how the Government are rewarding those Labour councils that have mismanaged their finances. Fourthly, it has uncovered how, despite the Government's boasting about the priority that they attach to education, the only way in which most councils can get more cash into schools is by cutting other services or increasing the council tax.

This is a settlement which will cost taxpayers dear and hit service users hard. It is a disgraceful settlement, which the House should reject.

9.45 pm

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

The debate on the local government settlement has shown how strongly most hon. Members want effective local government, which is able to deliver services that local people want at a price that they can afford. The Government share that view and it is fully reflected in the settlement that the Deputy Prime Minister laid before the House on 2 February.

Tonight, we have heard much from hon. Members on both sides of the House. Indeed, from the Conservatives, we have largely heard pent-up frustration at 18 years of their own failure and their failing policy on local government. They complained about area cost adjustments, but who introduced them? Which system are we working on? They introduced council tax capping, about which they were also complaining and they introduced the standard spending assessment. No wonder they are angry at their council tax legacy.

The difference is clear. We opposed the Tory introductions and the Conservatives supported them. We are beginning to change the formula and we will continue to do so. We will reform it and they will oppose everything.

Many hon. Members have made representations about their areas, which is what a local Member of Parliament has a responsibility to do. Several hon. Members representing Derbyshire have made it clear that their authorities were targeted. Indeed, the Conservative Front-Bench spokesman virtually confirmed that. They were targeted and they have suffered. We have moved. They have not suffered as much as some places in the change, but we know that they have a huge legacy to make up.

I recognise that many local councils share the Government's ambitious agenda to modernise Britain. They share our priorities for higher education standards and our commitment to best value in public services. They are sharing in the effort to get young people off welfare and into work as part of the new deal. In short, they share our belief that we can make Britain better.

Dr. Evan Harris (Oxford, West and Abingdon)

I have sat and listened throughout this debate. As the hon. Lady will know, the Liberal Democrats—the second party of local government—will be voting against this flawed settlement. What the third party of local government, the Conservatives, choose to do, in terms of voting against their own plans and capping, is a matter for them and their crocodile tears.

Will the hon. Lady justify how she can ask Oxfordshire county council to ask the most vulnerable people in social services to pay for her education prioritisation when Oxfordshire is one of 116 out of 150 councils that did not have the funding to match the increase in the education SSA?

Ms Armstrong

Every authority got the money directly from the Government because we paid it through the revenue support grant. Every democratically elected authority got that. There is one that is not democratically elected and it did not. Local government spends £80 billion a year, a quarter all public expenditure. The Government were elected on a manifesto of not increasing Government spending targets in our first two years in office. Inevitably, because of the scale and importance of council spending, the settlement is tight for many local councils.

Unlike my Conservative predecessors, I am not going to insult the intelligence of hon. Members or of local councillors by saying that everything is fine and that funding is adequate to meet all the ambitions and plans of every local authority. That is plainly not true, as has been stated often tonight. Local councils, like the Government, will have to set their priorities and allocate available resources carefully to meet them. As we have been doing in the comprehensive spending review, I expect every council to review the efficiency and effectiveness of its spending and, in consultation with residents, set priorities and performance targets.

Let me turn to education, which most hon. Members who spoke raised. We have made a start on honouring our pledges: £1 billion more than the Conservatives planned and an extra £835 million of new money for schools. Unlike under the Conservatives, every democratically elected council will get more money for education next year and the freedom to spend it.

In the context of a tight settlement, the Government's priorities have also included social services. The settlement provides £350 million extra for community care, and a further £70 million for children's social services, the first substantial increase for three years. It also includes £21 million more for adult services and £73 million ring-fenced for mental health services.

As well as making extra resources available, the settlement is fair to all councils and is not fixed in the interests of one or two. We are committed to a fair distribution of Government grant and we have moved quickly in that direction. In addition, the Government will not discriminate against councils that used capital receipts for local investment in the 1980s. I reject what was said by the right hon. Member for Sutton Coldfield (Sir N. Fowler) and the hon. Members for Mole Valley (Sir P. Beresford) and for South Suffolk (Mr. Yeo). The resulting standard spending assessment formulas are not motivated by politics but by fairness. They are the product of much discussion with local government and are applied equally to all authorities regardless of political control.

A number of rural issues were raised. [Interruption.] Conservative Members know nothing about geography. If they did, they would know that North-West Durham covers a substantial part of the north Pennines. If there is anywhere more rural in this country, I would like to see it. For the first time in four years, we have provided an increase for the services delivered by shire districts. We have treated all local authorities, rural or urban, on a fair and consistent basis.

Several hon. Members

rose—

Ms Armstrong

The formula therefore includes elements that allow for the needs of rural areas, such as sparsity. Urban areas have larger populations and so will generally get more grant, but I have made it clear to every authority that has raised the matter that we will consider other factors this year. I have invited them—I invite Conservative Members who raised the matter to talk to their authorities—to put sparsity on the agenda for this year's discussions.

I have looked at the Rural Development Commission report written by Rita Hale. I found it interesting, although it contained nothing new. We would be quite happy to use it to inform our decisions for next year. I invite local government representatives to put it on the agenda for this year's discussions.

As my right hon. Friend the Deputy Prime Minister said when he opened the debate, we believe in more local discretion and less central control. Next week, we will publish the first in a series of consultation papers on modernising local government. Hon. Members will have the opportunity to raise many of the issues that they referred to tonight in that long-term review, and I invite them to do so.

Mr. Hayes

rose—

Ms Armstrong

No, I will not give way.

A number of hon. Members raised the issue of the area cost adjustment. My hon. Friend the Member for South Derbyshire (Mr. Todd) said that there was unanimity on it—I wish that were true. I accept that there was unanimity in the sense that many people have raised it, but not in the required outcome. We will study the additional research that is being done this year on area cost adjustment, along with that which has been conducted before, to see whether we can reach a more satisfactory conclusion than that achieved so far.

Many hon. Members will have been astounded to hear the right hon. Member for Sutton Coldfield and the hon. Member for South Suffolk talk about the cost to councils of pension changes. They will have been astounded because they were members of a Conservative Government who allowed a contributions holiday for local government's superannuation funds in order to keep the poll tax down. Councils are still paying the price for that funding fiddle.

We have provided a regime under which local government pension funds can be properly managed and where local authority contributions can be matched with what is needed, following proper actuarial review. It would simply not be sensible administration to allow local authorities to guess what might be needed in advance. We have already promised that we will look at how that will be accounted for in future settlements.

We heard a great deal about higher spending from the Liberals.

Sir Norman Fowler

rose—

Ms Armstrong

I will not give way.

In December, the hon. Member for Sutton and Cheam (Mr. Burstow) demanded an extra £800 million for local government Today, that figure has risen to £1 billion. All of it will be paid for by the Liberal's flexible friend, the 1p on income tax. But the Liberal spokesman's figures do not add up. They bleat about the Government sticking to previous spending plans, which is their excuse for voting against the Government tonight. [Interruption.] It is an excuse, because in the costings supplement to the 1997 Liberal Democratic manifesto, it said: With the exception of specialised costed items, all Departments will have to work within current spending plans. It appears that the Liberals do not read their own manifesto.

The local government settlement is another important contribution to the Government's actions to make Britain better. Our education spending will be judged alongside the £1.3 billion extra from the windfall levy, which will be spent on capital investment in schools. Our social services spending will be judged alongside our extra health spending of £300 million this year and £1,200 million next year, together with the £1.3 billion for the hospital building programme, delivered through the private finance initiative.

Our support for local councils' economic development activities complement our £1,400 million welfare-to-work programme. All our efforts are designed to support and assist local councils to provide a better quality of life for their residents. That is supported by £800 million from housing capital receipts.

That is the big picture. It is a settlement which delivers our pledge on education—£835 million of new money for schools. It is fair to all councils, not fixed in the interests of one or two. It reflects the needs of local communities through our revised social and economic needs index.

This is only the start. We know that there is a long way to go to modernise local government after all those years of centralisation. Tonight, we have an opportunity to vote to make that start, to get this country back on the road.

Question put:—

The House divided: Ayes 262, Noes 170.

Division No. 154]	[9.59 pm
AYES
Abbott, Ms Diane	Davidson, Ian
Ainger, Nick	Davis, Terry (B'ham Hodge H)
Ainsworth, Robert (Cov'try NE)	Dawson, Hilton
Alexander, Douglas	Dean, Mrs Janet
Allen, Graham	Dewar, Rt Hon Donald
Anderson, Donald (Swansea E)	Dobson, Rt Hon Frank
Anderson, Janet (Rossendale)	Doran, Frank
Armstrong, Ms Hilary	Dowd, Jim
Ashton, Joe	Drown, Ms Julia
Atherton, Ms Candy	Dunwoody, Mrs Gwyneth
Atkins, Charlotte	Eagle, Angela (Wallasey)
Austin, John	Edwards, Huw
Barnes, Harry	Efford, Clive
Barron, Kevin	Ellman, Mrs Louise
Battle, John	Ennis, Jeff
Bayley, Hugh	Field, Rt Hon Frank
Beard, Nigel	Fitzpatrick, Jim
Beckett, Rt Hon Mrs Margaret	Fitzsimons, Lorna
Bell, Martin (Tatton)	Flint, Caroline
Benn, Rt Hon Tony	Foster, Michael Jabez (Hastings)
Benton, Joe	Foulkes, George
Bermingham, Gerald	Galloway, George
Best, Harold	Gapes, Mike
Betts, Clive	Gardiner, Barry
Blears, Ms Hazel	George, Bruce (Walsall S)
Blizzard, Bob	Gerrard, Neil
Boateng, Paul	Gilroy, Mrs Linda
Bradley, Peter (The Wrekin)	Godman, Norman A
Brinton, Mrs Helen	Godsiff, Roger
Brown, Rt Hon Gordon (Dunfermline E)	Goggins, Paul
	Griffiths, Nigel (Edinburgh S)
Brown, Rt Hon Nick (Newcastle E)	Grocott, Bruce
Browne, Desmond	Grogan, John
Burden, Richard	Hain, Peter
Burgon, Colin	Hall, Mike (Weaver Vale)
Butler, Mrs Christine	Harman, Rt Hon Ms Harriet
Byers, Stephen	Heal, Mrs Sylvia
Campbell, Alan (Tynemouth)	Henderson, Ivan (Harwich)
Campbell, Mrs Anne (C'bridge)	Hepburn, Stephen
Campbell, Ronnie (Blyth V)	Heppell, John
Cann, Jamie	Hewitt, Ms Patricia
Caplin, Ivor	Hill, Keith
Casale, Roger	Hodge, Ms Margaret
Caton, Martin	Hoey, Kate
Cawsey, Ian	Hoon, Geoffrey
Chapman, Ben (Wirral S)	Hope, Phil
Chaytor, David	Hopkins, Kelvin
Church, Ms Judith	Hoyle, Lindsay
Clapham, Michael	Hughes, Kevin (Doncaster N)
Clark, Rt Hon Dr David (S Shields)	Hurst, Alan
Clark, Dr Lynda (Edinburgh Pentlands)	Hutton, John
	Iddon, Dr Brian
Clark, Paul (Gillingham)	Jackson, Ms Glenda (Hampstead)
Clarke, Charles (Norwich S)	Jackson, Helen (Hillsborough)
Clarke, Tony (Northampton S)	Jones, Mrs Fiona (Newark)
Clelland, David	Jones, Ms Jenny (Wolverh'ton SW)
Clwyd, Ann
Coaker, Vermon	Jones, Martyn (Clwyd S)
Cohen, Harry	Kaufman, Rt Hon Gerald
Coleman, Iain	Keeble, Ms Sally
Cooper, Yvette	Keen, Alan (Feltham & Heston)
Corbett, Robin	Keen, Ann (Brentford & Isleworth)
Corbyn, Jeremy	Kelly, Ms Ruth
Corston, Ms Jean	Kemp, Fraser
Cousins, Jim	Kennedy, Jane (Wavertree)
Cranston, Ross	King, Andy (Rugby & Kenilworth)
Cryer, Mrs Ann (Keighley)	King, Ms Oona (Bethnal Green)
Cryer, John (Hornchurch)	Kingham, Ms Tess
Darvill, Keith	Lepper, David

Levitt, Tom	Roche, Mrs Barbara
Linton, Martin	Rooker, Jeff
Livingstone, Ken	Rooney, Terry
Lock, David	Ross, Ernie (Dundee W)
Love, Andrew	Roy, Frank
McAllion, John	Ruddock, Ms Joan
McAvoy, Thomas	Ryan, Ms Joan
McCabe, Steve	Salter, Martin
McCafferty, Ms Chris	Sawford, Phil
Macdonald, Calum	Sedgemore, Brian
McDonnell, John	Shaw, Jonathan
McGuire, Mrs Anne	Sheerman, Barry
McIsaac, Shona	Sheldon, Rt Hon Robert
McKenna, Mrs Rosemary	Shipley, Ms Debra
Mackinlay, Andrew	Simpson, Alan (Nottingham S)
McNamara, Kevin	Singh, Marsha
McNulty, Tony	Skinner, Dennis
MacShane, Denis	Smith, Rt Hon Andrew (Oxford E)
Mactaggart, Fiona	Smith, Angela (Basildon)
McWilliam, John	Smith, Rt Hon Chris (Islington S)
Mallaber, Judy	Smith, Jacqui (Redditch)
Marek, Dr John	Smith, Llew (Blaenau Gwent)
Marsden, Gordon (Blackpool S)	Snape, Peter
Marsden, Paul (Shrewsbury)	Soley, Clive
Marshall, Jim (Leicester S)	Spellar, John
Marshall-Andrews, Robert	Squire, Ms Rachel
Martlew, Eric	Starkey, Dr Phyllis
Maxton, John	Stevenson, George
Meacher, Rt Hon Michael	Stinchcombe, Paul
Meale, Alan	Stoate, Dr Howard
Michael, Alun	Stott, Roger
Michie, Bill (Shef'ld Heeley)	Strang, Rt Hon Dr Gavin
Miller, Andrew	Sutcliffe, Gerry
Mitchell, Austin	Taylor, Rt Hon Mrs Ann (Dewsbury)
Moonie, Dr Lewis
Moran, Ms Margaret	Taylor, David (NW Leics)
Morgan, Ms Julie (Cardiff N)	Thomas, Gareth (Clwyd W)
Morgan, Rhodri (Cardiff W)	Thomas Gareth R (Harrow W)
Morris, Ms Estelle (B'ham Yardley)	Timms, Stephen
Morris, Rt Hon John (Aberavon)	Tipping, Paddy
Mountford, Kali	Todd, Mark
Mudie, George	Touhig, Don
Mudie, George	Trickett, Jon
Norris, Dan	Turner, Dennis (Wolverh'ton SE)
O'Brien, Mike (N Warks)	Turner, Dr Desmond (Kemptown)
O'Hara, Eddie	Turner, Dr George (NW Norfolk)
Olner, Bill	Twigg, Derek (Halton)
Palmer, Dr Nick	Vis, Dr Rudi
Pearson, Ian	Ward, Ms Claire
Perham, Ms Linda	Wareing, Robert N
Pickthall, Colin	Watts, David
Pike, Peter L	White, Brian
Plaskitt, James	Whitehead, Dr Alan
Pollard, Kerry	Williams, Rt Hon Alan (Swansea W)
Pond, Chris
Pope, Greg	Williams, Alan W (E Carmarthen)
Pound, Stephen	Wills, Michael
Prentice, Ms Bridget (Lewisham E)	Winnick, David
Prescott, Rt Hon John	Winterton, Ms Rosie (Doncaster C)
Primarolo, Dawn	Wise, Audrey
Prosser, Gwyn	Wood, Mike
Purchase, Ken	Woolas, Phil
Rammell, Bill	Worthington, Tony
Raynsford, Nick	Wright, Dr Tony (Cannock)
Reed, Andrew (Loughborough)
Robertson, Rt Hon George (Hamilton S)	Tellers for the Ayes:
	Mr. John McFall and
Robinson, Geoffrey (Cov'try NW)	Mr. David Jamieson.
NOES
Ainsworth, Peter (E Surrey)	Baker, Norman
Allan, Richard	Baldry, Tony
Amess, David	Ballard, Mrs Jackie
Ancram, Rt Hon Michael	Beith, Rt Hon A J
Arbuthnot, James	Bercow, John
Atkinson, David (Bour'mth E)	Beresford, Sir Paul
Atkinson, Peter (Hexham)	Blunt, Crispin

Bottomley, Peter (Worthing W)	Kennedy, Charles (Ross Skye)
Bottomley, Rt Hon Mrs Virginia	Key, Robert
Brake, Tom	King, Rt Hon Tom (Bridgwater)
Brand, Dr Peter	Kirkbride, Miss Julie
Brazier, Julian	Kirkwood, Archy
Breed, Colin	Laing, Mrs Eleanor
Brooke, Rt Hon Peter	Lait, Mrs Jacqui
Browning, Mrs Angela	Lansley, Andrew
Bruce, Ian (S Dorset)	Leigh, Edward
Bruce, Malcolm (Gordon)	Letwin, Oliver
Burnett, John	Lewis, Dr Julian (New Forest E)
Burns, Simon	Lilley, Rt Hon Peter
Burstow, Paul	Lloyd, Rt Hon Sir Peter (Fareham)
Cable, Dr Vincent	Loughton, Tim
Cash, William	Luff, Peter
Chapman, Sir Sydney (Chipping Barnet)	Lyell, Rt Hon Sir Nicholas
	MacGregor, Rt Hon John
Chidgey, David	McIntosh, Miss Anne
Chope, Christopher	MacKay, Andrew
Clappison, James	Maclean, Rt Hon David
Clark, Rt Hon Alan (Kensington)	Maclennan, Rt Hon Robert
Clark, Dr Michael (Rayleigh)	McLoughlin, Patrick
Clifton-Brown, Geoffrey	Madel, Sir David
Collins, Tim	Malins, Humfrey
Colvin, Michael	Maples, John
Cormack, Sir Patrick	Maude, Rt Hon Francis
Cotter, Brian	May, Mrs Theresa
Cran, James	Moss, Malcolm
Curry, Rt Hon David	Nicholls, Patrick
Davey, Edward (Kingston)	Norman, Archie
Davies, Quentin (Grantham)	Oaten, Mark
Davis, Rt Hon David (Haltemprice)	Öpik, Lembit
Day, Stephen	Ottaway, Richard
Duncan, Alan	Page, Richard
Duncan Smith, Iain	Paice, James
Evans, Nigel	Paterson, Owen
Faber, David	Pickles, Eric
Fabricant, Michael	Prior, David
Fallon, Michael	Redwood, Rt Hon John
Fearn, Ronnie	Rendel, David
Flight, Howard	Robathan, Andrew
Forth, Rt Hon Eric	Robertson, Laurence (Tewk'b'ry)
Foster, Don (Bath)	Roe, Mrs Marion (Broxbourne)
Fowler, Rt Hon Sir Norman	Rowe, Andrew (Faversham)
Fox, Dr Liam	Ruffley, David
Fraser, Christopher	Russell, Bob (Colchester)
Gale, Roger	St Aubyn, Nick
Garnier, Edward	Sanders, Adrian
George, Andrew (St Ives)	Sayeed, Jonathan
Gibb, Nick	Shepherd, Richard
Gill, Christopher	Simpson, Keith (Mid-Norfolk)
Gillan, Mrs Cheryl	Smith, Sir Robert (W Ab'd'ns)
Gray, James	Soames, Nicholas
Green, Damian	Spelman, Mrs Caroline
Greenway, John	Spicer, Sir Michael
Grieve, Dominic	Spring, Richard
Gummer, Rt Hon John	Stanley, Rt Hon Sir John
Hamilton, Rt Hon Sir Archie	Stunell, Andrew
Hammond, Philip	Swayne, Desmond
Hancock, Mike	Syms, Robert
Harris, Dr Evan	Tapsell, Sir Peter
Harvey, Nick	Taylor, John M (Solihull)
Hawkins, Nick	Taylor, Matthew (Truro)
Hayes, John	Taylor, Sir Teddy
Heald, Oliver	Townend, John
Heath, David (Somerton & Frome)	Tredinnick, David
Horam, John	Trend, Michael
Howard, Rt Hon Michael	Tyler, Paul
Howarth, Gerald (Aldershot)	Tyrie, Andrew
Hughes, Simon (Southwark N)	Viggers, Peter
Hunter, Andrew	Walter, Robert
Jack, Rt Hon Michael	Wardle, Charles
Jackson, Robert (Wantage)	Webb, Steve
Jenkin, Bernard	Wells, Bowen
Jones, Nigel (Cheltenham)	Whitney, Sir Raymond
Keetch, Paul	Widdecombe, Rt Hon Miss Ann

Wilkinson, John	Yeo, Tim
Willetts, David	Tellers for the Noes:
Willis, Phil	Mr. Nigel Waterson and
Woodward, Shaun	Mr. John Whittingdale.

Question accordingly agreed to.

Resolved, That the Local Government Finance Report (England) 1998–99 (HC 506), which was laid before this House on 2nd February, be approved.

It being after Ten o'clock, MR. DEPUTY SPEAKER proceeded, pursuant to Order [3 February], to put forthwith the Questions necessary to dispose of proceedings on the motions relating to local government finance.

Motion made, and Question put, That the Special Grant Report (No. 31) (HC 507), which was laid before this House on 2nd February, be approved.—[Ms Armstrong.]

The House divided: Ayes 257, Noes 109.

Division No. 155]	[10.13 pm
AYES
Abbott, Ms Diane	Clarke, Charles (Norwich S)
Ainger, Nick	Clarke, Tony (Northampton S)
Ainsworth, Robert (Cov'try NE)	Clelland, David
Alexander, Douglas	Clwyd, Ann
Allen, Graham	Coaker, Vermon
Anderson, Janet (Rossendale)	Cohen, Harry
Armstrong, Ms Hilary	Coleman, Iain
Ashton, Joe	Cooper, Yvette
Atherton, Ms Candy	Corbett, Robin
Atkins, Charlotte	Corbyn, Jeremy
Austin, John	Corston, Ms Jean
Barnes, Harry	Cousins, Jim
Barron, Kevin	Cranston, Ross
Battle, John	Cryer, Mrs Ann (Keighley)
Bayley, Hugh	Cryer, John (Hornchurch)
Beard, Nigel	Darvill, Keith
Beckett, Rt Hon Mrs Margaret	Davidson, Ian
Benn, Rt Hon Tony	Davis, Terry (B'ham Hodge H)
Benton, Joe	Dawson, Hilton
Bermingham, Gerald	Dean, Mrs Janet
Best, Harold	Dewar, Rt Hon Donald
Betts, Clive	Dobson, Rt Hon Frank
Blears, Ms Hazel	Doran, Frank
Blizzard, Bob	Drown, Ms Julia
Boateng, Paul	Dunwoody, Mrs Gwyneth
Bradley, Peter (The Wrekin)	Eagle, Angela (Wallasey)
Brinton, Mrs Helen	Edwards, Huw
Brown, Rt Hon Nick (Newcastle E)	Efford, Clive
Browne, Desmond	Ellman, Mrs Louise
Burden, Richard	Ennis, Jeff
Burgon, Colin	Field, Rt Hon Frank
Butler, Mrs Christine	Fitzpatrick, Jim
Byers, Stephen	Fitzsimons, Lorna
Campbell, Alan (Tynemouth)	Flint, Caroline
Campbell, Mrs Anne (C'bridge)	Foster, Michael Jabez (Hastings)
Campbell, Ronnie (Blyth V)	Foulkes, George
Cann, Jamie	Galloway, George
Caplin, Ivor	Gapes, Mike
Casale, Roger	Gardiner, Barry
Caton, Martin	George, Bruce (Walsall S)
Cawsey, Ian	Gerrard, Neil
Chapman, Ben (Wirral S)	Gilroy, Mrs Linda
Chaytor, David	Godman, Norman A
Church, Ms Judith	Godsiff, Roger
Clapham, Michael	Goggins, Paul
Clark, Rt Hon Dr David (S Shields)	Griffiths, Nigel (Edinburgh S)
Clark, Dr Lynda (Edinburgh Pentlands)	Grocott, Bruce
	Grogan, John
Clark, Paul (Gillingham)	Hain, Peter

Hall, Mike (Weaver Vale)	Mountford, Kali
Harman, Rt Hon Ms Harriet	Mudie, George
Heal, Mrs Sylvia	Norris, Dan
Henderson, Ivan (Harwich)	O'Brien, Mike (N Warks)
Hepburn, Stephen	O'Hara, Eddie
Heppell, John	Olner, Bill
Hewitt, Ms Patricia	Palmer, Dr Nick
Hill, Keith	Pearson, Ian
Hodge, Ms Margaret	Perham, Ms Linda
Hoey, Kate	Pickthall, Colin
Hoon, Geoffrey	Pike, Peter L
Hope, Phil	Plaskitt, James
Hopkins, Kelvin	Pollard, Kerry
Hoyle, Lindsay	Pond, Chris
Hughes, Kevin (Doncaster N)	Pope, Greg
Hurst, Alan	Pound, Stephen
Hutton, John	Prentice, Ms Bridget (Lewisham E)
Iddon, Dr Brian	Prescott, Rt Hon John
Jackson, Ms Glenda (Hampstead)	Primarolo, Dawn
Jackson, Helen (Hillsborough)	Prosser, Gwyn
Jones, Mrs Fiona (Newark)	Purchase, Ken
Jones, Ms Jenny (Wolverh'ton SW)	Rammell, Bill
	Raynsford, Nick
Jones, Martyn (Clwyd S)	Reed, Andrew (Loughborough)
Kaufman, Rt Hon Gerald	Robertson, Rt Hon George (Hamilton S)
Keeble, Ms Sally
Keen, Alan (Feltham & Heston)	Robinson, Geoffrey (Cov'try NW)
Keen, Ann (Brentford & Isleworth)	Roche, Mrs Barbara
Kelly, Ms Ruth	Rooker, Jeff
Kemp, Fraser	Rooney, Terry
Kennedy, Jane (Wavertree)	Ross, Ernie (Dundee W)
King, Andy (Rugby & Kenilworth)	Roy, Frank
King, Ms Oona (Bethnal Green)	Ruddock, Ms Joan
Kingham, Ms Tess	Ryan, Ms Joan
Lepper, David	Salter, Martin
Levitt, Tom	Sawford, Phil
Linton, Martin	Sedgemore, Brian
Livingstone, Ken	Shaw, Jonathan
Lock, David	Sheerman, Barry
Love, Andrew	Shipley, Ms Debra
McAllion, John	Simpson, Alan (Nottingham S)
McAvoy, Thomas	Singh, Marsha
McCabe, Steve	Skinner, Dennis
McCafferty, Ms Chris	Smith, Rt Hon Andrew (Oxford E)
Macdonald, Calum	Smith, Angela (Basildon)
McDonnell, John	Smith, Rt Hon Chris (Islington S)
McFall, John	Smith, Jacqui (Redditch)
McGuire, Mrs Anne	Smith, Llew (Blaenau Gwent)
McIsaac, Shona	Snape, Peter
McKenna, Mrs Rosemary	Soley, Clive
Mackinlay, Andrew	Spellar, John
McNamara, Kevin	Squire, Ms Rachel
McNulty, Tony	Starkey, Dr Phyllis
MacShane, Denis	Stevenson, George
Mactaggart, Fiona	Stinchcombe, Paul
McWilliam, John	Stoate, Dr Howard
Mallaber, Judy	Stott, Roger
Marek, Dr John	Strang, Rt Hon Dr Gavin
Marsden, Gordon (Blackpool S)	Sutcliffe, Gerry
Marsden, Paul (Shrewsbury)	Taylor, Rt Hon Mrs Ann (Dewsbury)
Marshall, Jim (Leicester S)
Marshall-Andrews, Robert	Taylor, David (NW Leics)
Martlew, Eric	Thomas, Gareth (Clwyd W)
Maxton, John	Thomas, Gareth R (Harrow W)
Meacher, Rt Hon Michael	Timms, Stephen
Meale, Alan	Tipping, Paddy
Michael, Alun	Todd, Mark
Michie, Bill (Shef'ld Heeley)	Touhig, Don
Miller, Andrew	Trickett, Jon
Mitchell, Austin	Turner, Dr Desmond (Kemptown)
Moonie, Dr Lewis	Turner, Dr George (NW Norfolk)
Moran, Ms Margaret	Twigg, Derek (Halton)
Morgan, Ms Julie (Cardiff N)	Vis, Dr Rudi
Morgan, Rhodri (Cardiff W)	Ward, Ms Claire
Morris, Ms Estelle (B'ham Yardley)	Wareing, Robert N
Morris, Rt Hon John (Aberavon)	Watts, David

White, Brian	Wood, Mike
Whitehead, Dr Alan	Woolas, Phil
Williams, Alan W (E Carmarthen)	Worthington, Tony
Wills, Michael	Wright, Dr Tony (Cannock)
Winnick, David	Tellers for the Ayes:
Winterton, Ms Rosie (Doncaster C)	Mr. David Jamieson and
Wise, Audrey	Mr. Jim Dowd.
NOES
Ainsworth, Peter (E Surrey)	Hughes, Simon (Southwark N)
Allan, Richard	Hunter, Andrew
Ancram, Rt Hon Michael	Jackson, Robert (Wantage)
Arbuthnot, James	Jenkin, Bernard
Baker, Norman	Jones, Nigel (Cheltenham)
Ballard, Mrs Jackie	Keetch, Paul
Beith, Rt Hon A J	Kennedy, Charles (Ross Skye)
Bercow, John	King, Rt Hon Tom (Bridgwater)
Beresford, Sir Paul	Kirkwood, Archy
Blunt, Crispin	Laing, Mrs Eleanor
Bottomley, Peter (Worthing W)	Lansley, Andrew
Bottomley, Rt Hon Mrs Virginia	Leigh, Edward
Brake, Tom	Letwin, Oliver
Brand, Dr Peter	Lewis, Dr Julian (New Forest E)
Breed, Colin	Lilley, Rt Hon Peter
Brooke, Rt Hon Peter	Lloyd, Rt Hon Sir Peter (Fareham)
Bruce, Malcolm (Gordon)	Luff, Peter
Burnett, John	MacGregor, Rt Hon John
Burstow, Paul	McIntosh, Miss Anne
Cable, Dr Vincent	Maclennan, Rt Hon Robert
Cash, William	McLoughlin, Patrick
Chapman, Sir Sydney (Chipping Barnet)	May, Mrs Theresa
	Nicholls, Patrick
Chidgey, David	Oaten, Mark
Chope, Christopher	Öpik, Lembit
Clappison, James	Ottaway, Richard
Clark, Rt Hon Alan (Kensington)	Paterson, Owen
Collins, Tim	Pickles, Eric
Colvin, Michael	Redwood, Rt Hon John
Cotter, Brian	Rendel, David
Davey, Edward (Kingston)	Robathan, Andrew
Davies, Quentin (Grantham)	Ruffley, David
Davis, Rt Hon David (Haltemprice)	Russell, Bob (Colchester)
Duncan, Alan	St Aubyn, Nick
Duncan Smith, Iain	Sanders, Adrian
Evans, Nigel	Smith, Sir Robert (W Ab'd'ns)
Fearn, Ronnie	Soames, Nicholas
Flight, Howard	Spring, Richard
Forth, Rt Hon Eric	Stunell, Andrew
Foster, Don (Bath)	Syms, Robert
Fowler, Rt Hon Sir Norman	Tapsell, Sir Peter
Fox, Dr Liam	Taylor, John M (Solihull)
Gale, Roger	Taylor, Matthew (Truro)
Garnier, Edward	Tredinnick, David
George, Andrew (St Ives)	Tyler, Paul
Gibb, Nick	Walter, Robert
Gill, Christopher	Webb, Steve
Greenway, John	Wells, Bowen
Grieve, Dominic	Widdecombe, Rt Hon Miss Ann
Gummer, Rt Hon John	Wilkinson, John
Hancock, Mike	Willetts, David
Harris, Dr Evan	Willis, Phil
Harvey, Nick	Yeo, Tim
Hayes, John
Heald, Oliver	Tellers for the Noes:
Heath, David (Somerton & Frome)	Mr. Nigel Waterson and
Howarth, Gerald (Aldershot)	Mr. John Whittingdale.

Question accordingly agreed to.

Motion made, and Question put, That the Limitation of Council Tax and Precepts (Relevant Notional Amounts) Report (England) 1998–99 (HC 508), which was laid before this House on 2nd February, be approved.[Ms Armstrong.]

The House divided: Ayes 254, Noes 93.

Division No. 156]	[10.23 pm
AYES
Abbott, Ms Diane	Eagle, Angela (Wallasey)
Ainger, Nick	Edwards, Huw
Ainsworth, Robert (Cov'try NE)	Efford, Clive
Alexander, Douglas	Ellman, Mrs Louise
Allen, Graham	Ennis, Jeff
Anderson, Janet (Rossendale)	Field, Rt Hon Frank
Armstrong, Ms Hilary	Fitzpatrick, Jim
Ashton, Joe	Fitzsimons, Lorna
Atherton, Ms Candy	Flint, Caroline
Atkins, Charlotte	Foster, Michael Jabez (Hastings)
Austin, John	Foulkes, George
Barnes, Harry	Galloway, George
Barron, Kevin	Gapes, Mike
Battle, John	Gardiner, Barry
Bayley, Hugh	George, Bruce (Walsall S)
Beard, Nigel	Gerard, Neil
Beckett, Rt Hon Mrs Margaret	Gilroy, Mrs Linda
Benn, Rt Hon Tony	Godman, Norman A
Benton, Joe	Godsiff, Roger
Bermingham, Gerald	Goggins, Paul
Best, Harold	Griffiths, Nigel (Edinburgh S)
Betts, Clive	Grocott, Bruce
Blears, Ms Hazel	Grogan, John
Blizzard, Bob	Hain, Peter
Boateng, Paul	Hall, Mike (Weaver Vale)
Bradley, Peter (The Wrekin)	Harman, Rt Hon Ms Harriet
Brinton, Mrs Helen	Heal, Mrs Sylvia
Brown, Rt Hon Nick (Newcastle E)	Henderson, Ivan (Harwich)
Browne, Desmond	Hepburn, Stephen
Burden, Richard	Heppell, John
Burgon, Colin	Hewitt, Ms Patricia
Butler, Mrs Christine	Hill, Keith
Byers, Stephen	Hodge, Ms Margaret
Campbell, Alan (Tynemouth)	Hoey, Kate
Campbell, Mrs Anne (C'bridge)	Hoon, Geoffrey
Campbell, Ronnie (Blyth V)	Hope, Phil
Cann, Jamie	Hopkins, Kelvin
Caplin, Ivor	Hoyle, Lindsay
Casale, Roger	Hughes, Kevin (Doncaster N)
Caton, Martin	Hurst, Alan
Cawsey, Ian	Hutton, John
Chapman, Ben (Wirral S)	Iddon, Dr Brian
Chaytor, David	Jackson, Ms Glenda (Hampstead)
Church, Ms Judith	Jackson, Helen (Hillsborough)
Clapham, Michael	Jones, Mrs Fiona (Newark)
Clark, Rt Hon Dr David (S Shields)	Jones, Ms Jenny (Wolverh'ton SW)
Clark, Dr Lynda (Edinburgh Pentlands)
	Jones, Martyn (Clwyd S)
Clark, Paul (Gillingham)	Kaufman, Rt Hon Gerald
Clarke, Charles (Norwich S)	Keeble, Ms Sally
Clarke, Tony (Northampton S)	Keen, Alan (Feltham & Heston)
Clelland, David	Keen, Ann (Brentford & Isleworth)
Clwyd, Ann	Kelly, Ms Ruth
Coaker, Vermon	Kemp, Fraser
Cohen, Harry	Kennedy, Jane (Wavertree)
Cooper, Yvette	King, Andy (Rugby & Kenilworth)
Corbett, Robin	King, Ms Oona (Bethnal Green)
Corbyn, Jeremy	Kingham, Ms Tess
Corston, Ms Jean	Lepper, David
Cousins, Jim	Levitt, Tom
Cranston, Ross	Linton, Martin
Cryer, Mrs Ann (Keighley)	Livingstone, Ken
Cryer, John (Hornchurch)	Lock, David
Darvill, Keith	Love, Andrew
Davidson, Ian	McAllion, John
Davis, Terry (B'ham Hodge H)	McAvoy, Thomas
Dawson, Hilton	McCabe, Steve
Dean, Mrs Janet	McCafferty, Ms Chris
Dewar, Rt Hon Donald	Macdonald, Calum
Dobson, Rt Hon Frank	McDonnell, John
Doran, Frank	McFall, John
Drown, Ms Julia	McGuire, Mrs Anne
Dunwoody, Mrs Gwyneth	McIsaac, Shona

McKenna, Mrs Rosemary	Ruddock, Ms Joan
Mackinlay, Andrew	Ryan, Ms Joan
McNamara, Kevin	Salter, Martin
McNulty, Tony	Sawford, Phil
MacShane, Denis	Sedgemore, Brian
Mactaggart, Fiona	Shaw, Jonathan
McWilliam, John	Sheerman, Barry
Mallaber, Judy	Shipley, Ms Debra
Marek, Dr John	Simpson, Alan (Nottingham S)
Marsden, Gordon (Blackpool S)	Singh, Marsha
Marsden, Paul (Shrewsbury)	Skinner, Dennis
Marshall, Jim (Leicester S)	Smith, Rt Hon Andrew (Oxford E)
Marshall-Andrews, Robert	Smith, Angela (Basildon)
Martlew, Eric	Smith, Rt Hon Chris (Islington S)
Maxton, John	Smith, Jacqui (Redditch)
Meacher, Rt Hon Michael	Smith, Llew (Blaenau Gwent)
Meale, Alan	Snape, Peter
Michael, Alun	Soley, Clive
Michie, Bill (Shef'ld Heeley)	Spellar, John
Miller, Andrew	Squire, Ms Rachel
Mitchell, Austin	Starkey, Dr Phyllis
Moonie, Dr Lewis	Stevenson, George
Moran, Ms Margaret	Stinchcombe, Paul
Morgan, Ms Julie (Cardiff N)	Stoate, Dr Howard
Morgan, Rhodri (Cardiff W)	Stott, Roger
Morris, Rt Hon John (Aberavon)	Strang, Rt Hon Dr Gavin
Mountford, Kali	Sutcliffe, Gerry
Mudie, George	Taylor, Rt Hon Mrs Ann (Dewsbury)
Norris, Dan
O'Brien, Mike (N Warks)	Taylor, David (NW Leics)
O'Hara, Eddie	Thomas, Gareth (Clwyd W)
Olner, Bill	Thomas, Gareth R (Harrow W)
Palmer, Dr Nick	Timms, Stephen
Pearson, Ian	Tipping, Paddy
Perham, Ms Linda	Todd, Mark
Pickthall, Colin	Touhig, Don
Pike, Peter L	Trickett, Jon
Plaskitt, James	Turner, Dr Desmond (Kemptown)
Pollard, Kerry	Turner, Dr George (NW Norfolk)
Pond, Chris	Twigg, Derek (Halton)
Pope, Greg	Vis, Dr Rudi
Pound, Stephen	Ward, Ms Claire
Prentice, Ms Bridget (Lewisham E)	Wareing, Robert N
Prescott, Rt Hon John	Watts, David
Primarolo, Dawn	White, Brian
Prosser, Gwyn	Whitehead, Dr Alan
Purchase, Ken	Williams, Alan W (E Carmarthen)
Rammell, Bill	Wills, Michael
Raynsford, Nick	Winnick, David
Reed, Andrew (Loughborough)	Winterton, Ms Rosie (Doncaster C)
Robertson, Rt Hon George (Hamilton S)	Wise, Audrey
	Wood, Mike
Robinson, Geoffrey (Cov'try NW)	Woolas, Phil
Roche, Mrs Barbara	Worthington, Tony
Rooker, Jeff
Rooney, Terry	Tellers for the Ayes:
Ross, Ernie (Dundee W)	Mr. David Jamieson and
Roy, Frank	Mr. Jim Dowd.
NOES
Ainsworth, Peter (E Surrey)	Burstow, Paul
Allan, Richard	Cable, Dr Vincent
Arbuthnot, James	Cash, William
Baker, Norman	Chidgey, David
Ballard, Mrs Jackie	Chope, Christopher
Beith, Rt Hon A J	Clappison, James
Bercow, John	Clark, Rt Hon Alan (Kensington)
Blunt, Crispin	Collins, Tim
Bottomley, Peter (Worthing W)	Colvin, Michael
Bottomley, Rt Hon Mrs Virginia	Cotter, Brian
Brake, Tom	Davey, Edward (Kingston)
Brand, Dr Peter	Davies, Quentin (Grantham)
Breed, Colin	Davis, Rt Hon David (Hattemprice)
Brooke, Rt Hon Peter	Duncan, Alan
Bruce, Malcolm (Gordon)	Duncan Smith, Iain
Burnett, John	Evans, Nigel

Fearn, Ronnie	Maclennan, Rt Hon Robert
Flight, Howard	Nicholls, Patrick
Forth, Rt Hon Eric	Oaten, Mark
Foster, Don (Bath)	Öpik, Lembit
Fowler, Rt Hon Sir Norman	Ottaway, Richard
Fox, Dr Liam	Paterson, Owen
Gale, Roger	Pickles, Eric
George, Andrew (St Ives)	Rendel, David
Gibb, Nick	Robathan, Andrew
Gill, Christopher	Ruffley, David
Greenway John	Russell, Bob (Colchester)
Grieve, Dominic	St Aubyn, Nick
Hancock, Mike	Sanders, Adrian
Harris, Dr Evan	Smith, Sir Robert (W Ab'd'ns)
Harvey, Nick	Spring, Richard
Hayes, John	Stunell, Andrew
Heald, Oliver	Syms, Robert
Heath, David (Somerton & Frome)	Tapsell, Sir Peter
Hughes, Simon (Southwark N)	Taylor, John M (Solihull)
Hunter, Andrew	Taylor, Matthew (Truro)
Jackson, Robert (Wantage)	Tredinnick, David
Jenkin, Bernard	Tyler, Paul
Jones, Nigel (Cheltenham)	Tyrie, Andrew
Keetch, Paul	Walter, Robert
Kennedy, Charles (Ross Skye)	Webb, Steve
Kirkwood, Archy	Widdecombe, Rt Hon Miss Ann
Laing, Mrs Eleanor	Wilkinson, John
Lansley, Andrew	Willis, Phil
Lewis, Dr Julian (New Forest E)	Yeo, Tim
Lloyd, Rt Hon Sir Peter (Fareham)	Tellers for the Noes:
Luff, Peter	Mr. Nigel Waterson and
MacGregor, Rt Hon John	Mr. John Whittingdale.

Question accordingly agreed to.