Local Government

HC Deb 30 July 1998 vol 317 cc529-47 3.30 pm

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

With permission, Madam Speaker, I should like to make a statement on local government.

I have today laid before the House a White Paper, "Modern Local Government: In Touch with the People." Copies are available in the Vote Office, together with a summary leaflet.

Today my right hon. Friend the Prime Minister published the Government's annual report. It shows that we have made a cracking start in modernising Britain: 177 manifesto commitments, 50 kept or done and 119 under way. There is plenty more to do, and our White Paper today is part of doing more.

The Government are building a modern Britain and a fair society. The White Paper that I am publishing today will help to achieve both. After two decades of creeping centralisation, the White Paper returns power to the people. It sets out proposals to modernise English local government. Those reforms are at the heart of our programme for constitutional change.

The Parliament for Scotland, the Assemblies for Wales and Northern Ireland, a mayor and assembly for London and the regional development agencies are all part of a package for decentralising power in Britain. It is the most radical and comprehensive package of local government reforms for generations. Previous Governments have changed local government boundaries and structures. Those are not unimportant, but they are not the whole story either. We have seen over the past few years what a distraction such boundary and structure changes can be.

The changes that we are proposing today are about how councils work and how they can be more in touch with the people whom they serve. The changes have been developed in consultation with local government. I have been pleased to work with the Local Government Association, and I want to place on record my support for the LGA. I fully support a single all-party voice for local government. It has enabled my right hon. Friends and me to have regular dialogue with the leaders of the LGA in our central-local partnership meetings.

We want the changes to be the start of renewed, stronger and more accountable local government. It is a programme of reform for the next decade. Councils educate our children, house the homeless, care for the elderly, encourage arts and sports for all, plan better health care, help to regenerate local communities, plan better local transport and create real and lasting jobs. People look to the local council for support when things go wrong. From family breakdown to factory closures, from fire to flood, the local council picks up the pieces.

Earlier this year I visited Warwickshire, where communities were devastated by the worst floods in memory. I spoke to local families whose houses had been wrecked and who had nowhere to go. They looked to the local council and its emergency services. They knew that the council was there for them. When I visited Manchester, I saw the public-private partnership rebuilding the city after its centre was shattered by a terrorist bomb. I spoke to local business people whose enterprises were brought to the brink of disaster. They were dependent on their local council and they knew that their council was there for them.

It is right that the House should be reminded that councils serve the country well. Many thousands of councillors of all political persuasions do an excellent job under difficult circumstances. It is time for the House to make that clear when so many criticisms, often unjustified, are levelled at our councils.

I want all our councils to be up to the standards of the best, not hampered with political organisation from the previous century as they face the new millennium. These proposals will help councils to modernise, to improve their performance and, where necessary, to rid themselves of old-fashioned and inward-looking attitudes. The best councils will act as beacons to the rest. They will be pace setters and centres of excellence, and they will gain new freedoms to show how much the best councils can achieve.

Through best value, all councils will have to learn from and adopt best practice in the delivery of efficient public services, so I want to strengthen local accountability and streamline decision making. I am therefore proposing to allow local choice on new ways of running councils. I want voters to know who is responsible for taking local decisions and how to hold those people to account.

Councils will be required to review their political management structures and to draw up a plan, with a timetable, to introduce new arrangements which will separate the executive. Too often today, too many councillors get sucked into the meetings culture in their town hall, rather than representing their community to the council. We want to give all councillors clear and important roles in representing their communities—some as mayors and cabinet members, and others holding the executive to account.

At present, by law, passed by this House, councils have to conform to a single model of political organisation—the 19th-century committee structure. In place of centralised conformity, we propose a local choice. The local choice will be from a range of models including: an executive mayor directly elected by the people, with a cabinet of council colleagues; a cabinet with a leader appointed by the council; a mayor directly elected by the people to give a political lead, with a full-time manager to run the council; or local people will decide whether they want to keep a directly elected mayor. In special circumstances, if the authority tests the opinion of the electorate, the existing structure can be retained if the electorate so decide. Local people will vote if a council proposes a mayor, and they will have the right to demand a referendum themselves to create a directly elected mayor.

Local systems of political management can be adapted to suit local needs, but the Government will not allow complacency. All councils will need to review their structures and make proposals for change. The Government also want to improve accountability.

We want more people to vote, thus giving more local responsibility for taking crucial spending decisions. Reading the beginning of the White Paper—I cannot recall the page—it is remarkable to learn of the low level of participation in voting in this country as compared with others.

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

That is because of the first-past-the-post system.

Mr. Prescott

It is indeed a challenge for all of us to secure a better voting system, but I might add that the countries that do better do not necessarily have proportional representation, which is the Liberals' answer to everything. [Interruption.] I must be protected, Madam Speaker.

Our proposals are as follows: yearly elections in most areas, with councils also having a new power to hold referendums on local issues; improved procedures for councils to consult local people; and making it easier to vote. Councils will be able to try out new ideas to make voting easier—wider use of postal votes, electronic voting, mobile polling stations, and voting in supermarkets, railway stations and town centres.

Crude and universal council tax capping is over. As we said in our manifesto, new safeguards will mean more responsibility locally for council spending and taxation, and protection for local people from excessive council tax rises through new reserve powers. As I told the LGA conference earlier this year, I will have those reserve powers, and I will not hesitate to use them if necessary. It will not be crude capping, but it could be called crude Prescott.

Like all public servants, councillors must be beyond reproach. The overwhelming majority of the 2 million people who work for councils and the 20,000 councillors who serve on them perform an outstanding service to the public. They have a tough job and they do it well. Those councillors and public servants resent the doubts that are cast on their integrity by the activities of a few. Hon. Members have much experience, some of it as councillors. I have never been a councillor but I have a great deal of respect for councillors' hard work, dedication and commitment. It is my respect for the greater majority that makes me intolerant of the tiny minority who are guilty of dishonesty, corruption and sleaze.

Local government already has a strict regime—I might point out that it is stricter than the one that operates in the House. However, it has not proved enough, just as our arrangements here have not necessarily proved enough. We shall introduce for local government a tough new ethical framework with strict codes of conduct for councillors and council employees and an independent standards board to deal with complaints about improper behaviour. There will be no hiding place for dishonesty, corruption or sleaze. This is not a political issue: it must be the aim of all those who are in public life.

I now turn to the delivery of local services. I am pleased to announce the end of compulsory competitive tendering. It was divisive and was not always the best way to provide efficient services to local people who had no say whatever in those contracts. We propose a new and demanding duty for councillors to deliver best value. It will give councillors the flexibility that they need to be fair to the many dedicated people who work to provide our public services and it will guarantee the best deal for those who use and depend on those services.

Councillors will give more say to service users and, in partnership with local people, they will set clear service standards and targets for continuous improvement and will publish them so that local people will know the standards that they can expect. Services will be subjected to regular and independent inspection, and I am pleased to announce the creation of a new best value inspectorate as part of the Audit Commission. Local people will play a part in the inspection process. The Government will act swiftly and effectively if councils fail to tackle serious or persistent failures.

We propose a new duty on councils to promote the economic, social and environmental well-being of their areas in co-operation with public, private and voluntary bodies and local people. That will make councils more effective in leading their communities and serving their people. The capital finance system will be made simpler, so that councils can organise their capital investment and assets in the best way.

Just as I want to improve the accountability of councils to voters, I also want to strengthen the relationship between councils and their businesses. National business rates will stay but, within defined limits, we want councils to be able to vary the rate locally, with councils and business agreeing on how any extra money that is raised will be spent. Once again, that will give councils a stake in the success of their local businesses, and local businesses a stake in the success of their councils.

The proposals are good for councils and will enable them to fulfil their potential to be a powerful force for progress and social justice. The proposals are good for councillors because they will be able to do more for their local communities and able to serve and represent their voters more effectively. Above all, our proposals are good for local people. They will have better services that will be delivered by more accountable councils. The purpose of the proposals is to give people a bigger say and a better deal—to put local people first. I commend the White Paper to the House.

Mr. Tim Yeo (South Suffolk)

I am grateful to the Deputy Prime Minister for making his White Paper available to us at 2.45 pm. I warmly welcome the fact that the Government are now addressing a wide range of local authority issues. The Opposition share the right hon. Gentleman's view that the vast majority of councils and councillors conduct themselves properly and responsibly. I should mention that, of course, it is not councils that educate our children but teachers, many of whom, although not all, are employed by councils.

The Opposition will judge the right hon. Gentleman's proposals, first, by whether they improve value for money for service users and for taxpayers and, secondly, by whether they increase the accountability of councils to voters. Is he aware that the White Paper is published at a time of great concern about the rising cost of local government? This year, there were record rises in council tax, averaging 8 per cent. in England, which is more than double the rate of inflation.

Will the right hon. Gentleman confirm the figures that I received from the Library this week, which show that, as a direct result of the comprehensive spending review, council tax will rise by 5 per cent. a year in real terms for each of the next three years? Will he confirm that council tax payers will therefore pay substantially more council tax every year for the rest of this Parliament just to maintain existing services? Is he aware also that there is great concern about abuses in local government, to which he made some reference?

Will the right hon. Gentleman confirm that the replacement of compulsory competitive tendering by best value is in danger of being a smokescreen behind which the discipline of competition is removed? Will he not admit that CCT did bring huge improvements in the quality of service and delivered massive savings for the taxpayer? Will he confirm that many Labour councils are already anticipating the end of CCT by awarding more contracts in-house?

Will the right hon. Gentleman confirm that the reserve powers that he retains over council spending mean that, effectively, capping continues in all but name? From the point of view of councils, does that not simply replace crude and universal capping, which he has pledged to abolish, with crude and arbitrary capping, another broken Labour promise, alongside tax, class sizes, waiting lists and the welfare state.

On business rates, are not the right hon. Gentleman's proposals in effect just another new tax on business? Do they not mean that, for the first time since the uniform business rate was introduced, all businesses face the possibility of above-inflation increases in their business rate? Will he explain how businesses, especially small businesses, will be consulted before councils put the business rate up?

Will all types of council apart from parish councils be invited to adopt a new model of operation? Will councils be forced to choose one of the models that he has referred to, or can they opt to continue with present arrangements? If they choose the option of a directly elected mayor, with a full-time manager, what will be the role of elected councillors? Does he believe that those new models will involve more or less spending on administration? Does he claim that any of those new models will improve the scrutiny of council decisions?

I welcome the concern that the right hon. Gentleman expresses about ethical standards. I fully agree that concern about that issue is not a party political matter. Nevertheless, will he not admit that he is worried, as his Scottish counterpart is, about evidence of widespread abuse in Labour councils, of which we have had more reports even today?

I share the right hon. Gentleman's concern about the level of turnout. In the light of his comments—which were not in his written statement—I invite him to join the campaign against proportional representation that Conservative Members will shortly launch. Can he produce any evidence that introducing annual council elections will increase voter turnout? Indeed, given the poor turnout in the recent London referendum, what makes him think that the turnout in other local referendums will be any higher?

Is the right hon. Gentleman aware that we will examine the detail of his White Paper because we have found that the fine print of new Labour documents often contains nasty surprises? Finally, is he aware that best value will not automatically improve services or cut costs; that a new model of political organisation does not put a single extra teacher in the classroom or care for one more old person; and that no one will be persuaded that allowing him to select beacon councils, as the White Paper suggests, will return power to the people?

Mr. Prescott

It is nice that the Opposition have finally found some policies and are prepared to campaign on proportional representation. We await with interest what else will come about. We have applied different voting systems to elections to the Scottish Parliament, the Welsh Assembly and the mayor and the assembly for London. Lord Jenkins's commission is looking at proportional representation and we are committed to a referendum in respect of parliamentary elections. We will have to see how those matters affect local councils, but no decision has been taken, and the White Paper does not address the issue.

The Opposition seem to have changed their mind since they were in government about a mayor and assembly for London, devolution and a Scottish Parliament. They soon adjusted to the reality of political life, and we await their proposals on proportional representation.

Mr. Yeo

You have changed your mind.

Mr. Prescott

I have given examples of adjustments that have to be made. It is up to the hon. Member for South Suffolk (Mr. Yeo) to show whether I have changed my views. I certainly welcome his endorsement and that of many in the House of my view that, despite all the attacks that have been made on local councils, we should remind ourselves what an effective job they do.

There is common agreement on the need to improve the position of local councils, to give them powers and resources to be more accountable; and for local people to have a greater say. I understand that the Leader of the Opposition made that point to the local government conference when he said that he wanted people to have a greater say in matters relating to local councils. I welcome those remarks.

The hon. Gentleman referred to value for money. The efficient production of services is important and the White Paper is designed to achieve it. The compulsory spending review—[Laughter.] I gave the Opposition the chance to get a laugh in, but I think I was well ahead of them. I have done it before and perhaps that shows an attitude of mind.

On the comprehensive spending review, the settlement to local authorities is generally agreed to be most generous as compared with previous settlements. It also covers a three-year period so that local authorities have sufficient time to settle their planning priorities. Our projections for inflation and growth in the economy are consistent with that. We must wait to see what happens in the coming years, but most people would agree with us.

We have planned for three years instead of one. That will provide greater stability to local authority financing and it is what local authorities wanted. It is at the heart of what we have done. As for efficiency and value, the idea of having beacon councils is to say that certain councils are excellent and that we want to reward excellence and encourage other local authorities to reach their standards. That is another step in the right direction of getting good service efficiently at the best price and for the best value.

In regard to best value, it is generally agreed that compulsory competitive tendering was extremely expensive in the long run. It concentrated solely on price, largely at the expensive of the people employed in the industries concerned, and it resulted in a reduction in the quality of services. I do not have to make the case; it has been pretty well made by any analysis of compulsory competitive tendering.

Although we are interested in efficiency and price, other issues of best value must be considered. That has come out of all our surveys, and we intend to bring it home to people. It has been demonstrated in the 40 pilot areas where we have implemented new systems. There were some improvements in productivity under compulsory competitive tendering, and certain practices were changed that should have been changed.

The activities of some local authorities show that the initiative for change—whether or not it arose in that way—is to be welcomed, but other factors must be taken into account in achieving best value. That is why we have highlighted the fact that under compulsory competitive tendering there was much too concerned to pay contractors—

Mr. Bernard Jenkin (North Essex)

The unions.

Mr. Prescott

In many areas, they were not trade union members. If the hon. Member for North Essex (Mr. Jenkin) looked at the facts instead of indulging his obsession with trade unions, he would discover that many of the people involved were not trade union members. They could not be protected because, under compulsory competitive tendering, local authorities were obliged to accept the cheapest price.

The hon. Member for North Essex might also be concerned for the taxpayer because the consequence of reduced wages under CCT was very often a considerable rise in the cost of family credit. The taxpayer paid for the low wages enforced by CCT. The Opposition often lecture the Government on cutting expenditure on welfare and subsidies, yet at the same time, they propose policies that would have the opposite effect. Under CCT, employers avoided their responsibility to pay employees a fair wage for providing a decent service. That is the argument concerning best value and CCT.

I have made the position on capping reasonably clear. We need legislation on the reserve powers to which I referred. Present laws will, of course, apply in the next financial year. We have made absolutely clear to local authorities that they have a three-year expenditure programme and that we want them to take that into account. We will be setting rates for average council tax increases over that period on which we will make an announcement in—I think—November. It is then up to councils to act responsibly, as I hope they will.

To be fair, most councils spent within their expenditure ranges. Only a handful found themselves facing conflict and the imposition of capping. That applied only once most recently—and there were special circumstances—as it did the previous year. We are quite prepared to allow councils a three-year programme, and we want them to be flexible on it. We are not indifferent to levels of council expenditure—no Government can be. After all, central Government provide councils with about 75 per cent. of their expenditure. I will properly take into account the reserve powers.

On the issue of new model organisations, we provide different choices. If we move more towards having paid councillors and reducing allowances, if we want to attract more and different people to council work, and if we have full-time mayors or executives, there will be some cost involved. That is the same for Parliament, where we have moved more towards full-time than part-time conditions. That is a price that one can pay for democracy. We want an improved democratic local council structure, which allows much more open and accountable decisions to be made and which gives councillors more power to check the executive's decisions.

All the models split the decision-making power between, on the one hand, an executive, as we have in Parliament, and, on the other, councillors who can openly question what is going on. All too often, decisions at council committee meetings are decided beforehand and councillors merely act as administrators, putting their hands in the air. We want to change that; I do not think that people like that. We want fundamental change, and that is what we will bring about.

Mr. Andrew F. Bennett (Denton and Reddish)

I welcome the White Paper. Will my right hon. Friend confirm that, in order to implement it, we need legislation? What timetable does he envisage for such legislation, and when does he hope that it will begin affecting local councils?

Mr. Prescott

As early as possible, I sincerely hope. My hon. Friend will know that the matter is for the Ministerial Committee on the Queen's Speeches and Future Legislation, since it proposes which Bills are to be in the Queen's Speech. I cannot comment on that at the moment.

Mr. Paul Burstow (Sutton and Cheam)

We very much welcome much of the language in the Deputy Prime Minister's statement, although, when we look at the White Paper in more detail, I think that we shall find quite a few areas in which our approach will substantially differ from the Government's. The Liberal Democrats believe that local government is in need of reform. Too many councillors do not listen to the public. Too many councils are one-party states, and complacent about the way in which they run town halls. That is why the White Paper is a missed opportunity. Rather than a White Paper that tackles the first-past-the-post voting system, which so undermines local government legitimacy, we shall have annual elections and supermarket voting. We will return to the subject time and again, no matter how much certain hon. Members snore.

Does the Deputy Prime Minister recognise that the prospects of a close result, the possibility of a change of council, and councillors who are more than just mere agents of Whitehall will do more to increase voter turnout and interest in local government? Is he aware that a fair voting system based on the single transferable vote would have done more to open up town halls and challenge one-party states? Will he confirm that the proposals give the Secretary of State wider powers to intervene in the affairs of town halls? If councils deliver new Labour's agenda, they will be rewarded with beacon status, which is not so much freedom as a slightly longer leash from Whitehall.

Does the right hon. Gentleman accept that his proposed changes to the capping and financing regime fail to clarify accountability, and that local electors will still be left wondering whether Ministers or their councillors are responsible for council tax rises? Will he also take this opportunity to go a little further with the proposals for citizens' initiatives with regard to directly elected mayors, and provide for the electorate to seek to recall a directly elected mayor if he proves incompetent?

The White Paper hands more power to central Government and reduces local discretion; it sees democratic local government as nothing more than an administrative arm of Whitehall. Do not the Secretary of State's proposals therefore represent another victory for Whitehall over town hall?

Mr. Prescott

I am grateful for the hon. Gentleman's opening remarks, especially his congratulations on my use of language—not something with which I am usually associated, as Mr. Parris will tell us if he is in the Press Gallery. That is welcome praise, wherever it comes from, and I thank the hon. Gentleman.

Nevertheless, like many hon. Members on the Government Benches—and, I suspect, on the Opposition side too—I still do not feel that many of the evils and wrongs in our society could be removed simply by changing the electoral system to one of proportional representation. I do not want to enter into that argument now, but we can examine electoral systems in different parts of the world and see that such changes are not necessarily guaranteed by this or that voting system. Participation in voting is crucial, and there are also other factors, as well as the type of vote.

I do not dismiss other ideas entirely; we have tried different types of votes, as the hon. Gentleman knows, in Scotland, in Wales and in the London mayoral elections, so we are being quite radical in introducing change. We may not perhaps be as radical as —

Mr. Burstow

We want more.

Mr. Prescott

I understand that, but we choose to strike a balance. We are not convinced of the argument for local authorities, although we are now examining it in connection with constituencies, through Lord Jenkins's commission on proportional representation. I am not a great fan of that myself, as hon. Members may have guessed. None the less, that is where we are at the moment.

We need to make a judgment, and turnout certainly does not depend simply on the voting system. We will consider the commission's findings and all the ideas; I agree that it may contribute to the arguments and debates on the Government side of the House. However, new ideas will have to be judged in terms of accountability. I have always thought that proportional representation means that 5 per cent. of the electorate run the Government, as we have seen in Germany and other countries. So I am not convinced about that either. [Interruption.] Of course, the 5 per cent. in Germany were Liberals, so I can see why some hon. Members argue that case.

As for the Secretary of State's powers of intervention, on balance, Secretaries of State will have to reserve powers for themselves. They cannot be indifferent to levels of expenditure on providing services when 75 per cent. of it comes from the state. Both the Government and local councils will carry the responsibility for what the electorate feel about the bills for council spending, because people are aware that it is both the Government and councils that make the choices. We are saying that it is reasonable to expect a certain level of services to be provided and a certain level of finance to be required. That is a matter for political decision.

As we said in the White Paper, if councils want to spend more than we allow, they can, but they will not necessarily get a subsidy from central Government to do so. Councils can make that choice and explain it to the electorate. That is taking things further than any previous capping system, and it is a step in the right direction. Local authorities have to make the decision themselves.

As for the powers of intervention and the powers of local authorities to get on with some jobs, new powers and new resources are involved, and the procedures that we have set out for partnerships give them greater authority and autonomy to do some of those things within the balanced framework that we have set.

I cannot read my notes here; I am sure that the hon. Gentleman made one last point—[Interruption.] The point about Whitehall—

Mr. Burstow

I said "recall".

Mr. Prescott

I am sorry; the hon. Gentleman was talking about the right to recall the mayor. Where a council does not carry out any of the changes, the electorate will have the chance to have a kind of referendum—a 10 per cent. petition, we could say—to call for a mayor. However, the argument that, once the mayor has been elected, there should be a right of recall if he has not done too well after 12 months in office will, I imagine, send a shiver through the House, when hon. Members think that judgments could be made on individual Members' competence within their first 12 months. I am not convinced of the argument, and I suspect that, if I invited hon. Members to vote for it, I would not carry the Liberals with me, either. None the less, it is another interesting idea from the Liberals, who never get the chance of having the power to implement their ideas.

Mr. Derek Foster (Bishop Auckland)

Will my right hon. Friend totally reject the lectures from Conservative Members, who brought us the poll tax, continually denigrated local government and changed our constitution by making local government merely an agent of central Government? In wholly welcoming the White Paper, may I say that his celebration of local government's performance will be widely welcomed in the county of Durham? His words represent one of the best ways in which to ensure that local councillors will embrace his modernising agenda. May I ask him to go further and to pay tribute to all local councillors, who in many cases have sacrificed their careers, families and social lives without any thought of return?

Mr. Prescott

I am grateful to my right hon. Friend for his remarks; I very much agree with what he says. To be fair, the Opposition have agreed with us on the need for change and I welcome their commitment. Indeed, that was almost bound to come, as the Leader of the Opposition said to the Local Government Association: I've come here today to tell you the Conservative Party is changing. That little I accept and welcome; change in the right direction is for the good whether in the Tory party or in the Labour party.

My right hon. Friend was right to say that councillors feel almost besieged by press comments. We should say loudly and more often that the great majority of councils are not involved in any wrongdoing. As I know from my experience in Hull, if I may be so bold as to mention it, the press pays a great deal of attention to any allegations that are made. I wish the same amount of publicity was given when it is found that there is no evidence to support the allegations and the allegations are withdrawn. We would all welcome balanced reporting and more credit being given to the work that councillors do.

Mr. Peter Brooke (Cities of London and Westminster)

Will the Deputy Prime Minister explain the intellectual paradox whereby the Government are delegating greater powers to local authorities, but power in the Labour party nationally is being increasingly centralised?

Mr. Prescott

I will not pray in aid Mr. Archie whatever his name is. I thought that the right hon. Gentleman was going to say that the intellectual paradox was that central Government wanted both to give local government more power and to retain some influence and control—striking the right balance is the problem at the centre of any debate about local government. In the White Paper, we have tried to strike a balance; it will not be acceptable to all, but at least we have tried to outline the proper responsibilities of central Government and local government.

I am happy that the right hon. Gentleman accepts that the thrust of the White Paper is to decentralise, as that is contested in other quarters. If I have time, I shall tell him all the things that the Labour party has decentralised in the past two or three years—they are considerable, they are consistent and they work.

Mr. Bill O'Brien (Normanton)

I thank my right hon. Friend for the action that he is taking to lift the shackles that the Tories imposed on local government over the past two decades. I also thank the Minister for Local Government and Housing, my hon. Friend the Member for North-West Durham (Ms Armstrong), who has worked hard to improve the relationship between the House and local government—long may she continue to do so. I believe that the problems in local government commenced in 1974, when the Tories reorganised local authorities and moved responsibilities from local communities to remote metropolitan district authorities.

As chairman of the special interest group of metropolitan authorities in the House of Commons, may I ask my right hon. Friend to look at financing? The distribution of resources needs to be fairer. Some London authorities receive one and a half times as much as some metropolitan authorities do to teach a pupil, and the same applies to community care. I thank him for tackling the problem of capital debt, but will he also ensure that resources are much more fairly channelled to local government nationally? The electorate would be much more interested in electing people to serve them if they realised that they would receive the services that they wanted.

Mr. Prescott

I thank my hon. Friend for his comments. The House will have listened to him with considerable care owing to his long experience, not only in local authorities but as an Opposition spokesman on these matters. He made some interesting points. He asked whether we should begin to change the financial distribution between different types of authorities, and he referred to metropolitan, unitary and district authorities. There is an argument there. We have talked about changing the standard spending assessment distributions, and our commitment to a three-year review will bring some stability to achieve that.

I was struck by all the delegations which used to come to see me and my Ministers each year to discuss and marginally change the SSAs—in most cases, not change them. That was not a good use of the time of councillors or of Ministers. I have said that we needed to change that, and the three-year financial programme for local authorities means that we can settle down and look at how SSAs can be properly distributed. There are many complaints about the system.

Finally, I endorse what my hon. Friend said about the Minister for Local Government and Housing, my hon. Friend the Member for North-West Durham (Ms Armstrong). Anyone standing at this Dispatch Box as Secretary of State knows that much of the hard work is done by Ministers of State and by Under-Secretaries. I could not be better served than by the present Minister of State in this matter.

Sir Paul Beresford (Mole Valley)

Does the Secretary of State accept that a rising group in local government are concerned at his replacement for capping which they see as interventionist and subjective? What will be his criteria for action in that matter?

Mr. Prescott

We have said that capping is unfair and we have made our case on that. We accept the responsibility for public expenditure in that area. We have chosen to use an element of reserve powers which identify what councils can spend. That will have an implication, as I will announce, for what we think the average rises will be. If a council chooses to go above that figure, it will face the first penalty—it will not receive the Government support. With the reserve powers under the new legislation, persistent offenders will be faced with a situation where the penalty is made retrospective, and we will take that into account in the settlement of their expenditure over that year. That allows us greater flexibility.

The hon. Gentleman will know from his considerable experience in local government—he has more experience than me—that capping was very much limited to the one year. People had to make the case within that year. In some cases, authorities got into difficulties with public expenditure or Government financial support—as was the case in Derbyshire—and to ask them to try to settle that in one year was absolutely impossible. Councils could face real penalties of cuts, as in Derbyshire. We did not concede everything that Derbyshire wanted, but we thought that there was a case because of the difficulties over the years. This three-year programme will allow us to deal with the matter in a fair and flexible way, and with a great deal more social justice.

Mr. Andrew Dismore (Hendon)

Will my right hon. Friend confirm that under the new scrutiny powers there will be strong powers for back-bench councillors to inquire into the activities of councils—powers sadly lacking under the present system, which so frustrated those of us trying to dig out the Westminster scandal during the 1980s? A condemnation of the Westminster scandal by those on the Opposition Front Bench is sadly lacking. Will my right hon. Friend confirm that there will be powers to take enforcement action where such scandals are detected, and that these can be brought into effect quickly—rather than waiting years and years for, so far, no outcome whatever in the Westminster scandal?

Mr. Prescott

This is an area of some difficulty, but I do not wish to enter the party political exchanges. We can all reel off councils, but the response should not be just to turn round and say, "What about Westminster?" That does not help us. We should all agree that something has to be done. That is the general will of the House. To name councils with problems does not help the House and certainly does not help the councillors.

We need to ensure that councillors have the powers to deal with the problems. We are increasing the powers of scrutiny by introducing a new structure. There will be an executive—it could be a mayor or a leader—for councillors to scrutinise. Council decisions are generally taken in groups. That is the same for any political party. Even when there is power sharing between political parties, agreement has to be reached.

The overwhelming majority of councillors are asked simply to have a little discussion and put up their hands in a committee meeting to endorse a decision that has already been made. Scrutiny is a far better system, and we have endorsed it and put it at the heart of our White Paper. Councillors will be able to check the executive and the chairs—even those of their own party—and scrutinise decisions.

When the citizens listen to councillors putting their case, they often complain to their Member of Parliament that the decision had already been made and that all the councillor could do was say, "I'm sorry, I can't say anything." That does nothing for accountability or for democracy, and it affects turnout at elections. Scrutiny will put greater pressure on the executive, and decision making will be much more open and transparent. The press and everyone else will be able to see an open, public debate on decisions that affect so many people's lives.

Scrutiny is a major step towards dealing with wrong decisions, corruption and other problems. The strengthening of the standards board will mean that there will be a readily accessible body for people to complain to, which will serve democratic accountability in councils.

Mrs. Virginia Bottomley (South-West Surrey)

On the matter of finance, I hope that the Deputy Prime Minister will look sympathetically at the authorities that share the characteristics of urban and rural areas and are represented by the town and country finance issues group.

The White Paper, however, is more about restoring the credibility and integrity of local government, which must be an important task for us all. Is it not therefore all the more deplorable that, when we are seeking to ensure that taxpayers' money is not used for party political purposes, the White Paper should be published on the same day as the most deplorable example of such an abuse that I have seen in 15 years? Page 31 has the caption, "I am still hopeful that Tony Blair will keep his promises." That is no different from a party political document, but it is funded by the taxpayer nationally. That is no example to set local government, and I intend to take the matter up with the Cabinet Secretary.

Mr. Prescott

I am sure that the Cabinet Secretary will be worrying about that. I say that with a certain amount of cynicism, because most of us remember the practice of the previous Administration in their 18 years in office. I do not normally get into slagging off different periods of government, because it is not useful, but I remember that the Government's policies and achievements used to be recorded by asking Ministers what a Department had done since such and such a date, and that that would always happen to be the date of that Government's election.

All we have done is put our achievements in a proper annual report, record what we have done and be accountable for it. I call that democratic accountability. I would have been very happy for the previous Government's achievements to have been in a report that we could have debated in the House. The report makes it easier to have a debate than under the old system, whereby a question had to be put to the relevant Minister.

This is a new form of accountability. Much recent argument in the House has concerned whether the Labour party is keeping its promises. That is constantly asked at Prime Minister's Question Time. The Prime Minister can make a statement here, so why cannot we as a Government make a comprehensive statement in an annual report? I hope that all Governments will follow that practice. Governments can be in favour with the electorate one year and out the other. Good year or bad, Governments will now be accountable for their record: the record of what happened and not of what the Opposition put about.

Mr. Peter L. Pike (Burnley)

My right hon. Friend will know that only a minority of the country still has two-tier local government. Does his White Paper give such authorities the option to become unitary authorities? If that is not possible in the short term, does not the fact that the authority that spends the least—less than 20 per cent. of the total—has to collect the money go against the accountability that he seeks? Should not county councils have to collect their own money so that there is direct accountability, and so that people know where the money is being spent?

Mr. Prescott

I said at the beginning of my statement that much legislation over the past couple of decades, has been about organisational structure rather than services. Unitary authorities exist, and the general opinion on both sides of the House is supportive of them. Unitary authorities have increased during the past few years. Two-tier government remains in metropolitan areas and in county areas where there are district authorities.

Mr. Jenkin

Three-tier.

Mr. Prescott

In the background, there is also regional government, which I have always supported, which may shock the hon. Member for North Essex. There are questions about the structure of local government, but it would take two Parliaments to be able to deal with them. Anyone who considers organisational change in local government will know that there must first be a consultation document, then legislation that will take time to pass. I am an advocate of regional government, but for now there exist local authority structures that are both unitary and two-tier. We will seek to make authorities work as best they can. Where there are injustices, particularly as regards finance, as my hon. Friend the Member for Burnley (Mr. Pike) said, we shall seek to make matters fairer.

Mr. Christopher Chope (Christchurch)

Does the Deputy Prime Minister accept that the consequence of today's announcement will be that people up and down the country will pay a lot more in council tax without any improvement in quality of service? His White Paper is entitled "In Touch with the People", but does he accept that he is out of touch with the people if he cannot tell us that people will get better quality services for the same or less council tax?

Mr. Prescott

Some of our changes to local authorities will make for better value, greater efficiency and improved provision of services. If we can do that, we can get more services for the same money. That is what efficiency and effectiveness are about. We have made changes to local authority financing regarding Treasury rules with which I was in considerable disagreement. Trading corporations in local authorities, such as airports—Manchester was a classic example—found themselves in difficulties because they had to borrow against the requirements of local government, instead of the requirements of a profitable company with considerable assets.

Changes to those rules will relieve local authorities of some expenditures and difficulties, and will enable them to put resources into providing better services. That will not cost the taxpayer one penny. We are making more intelligent use of the financial framework in which local authorities operate. Along with our best value system, that will mean better services. That belief lies at the heart of the White Paper, and we will be able to judge it over the next couple of years.

Judy Mallaber (Amber Valley)

I welcome the Secretary of State's reaffirmation of the value of public service, and the measures for greater local accountability and local scrutiny that must go with it. Would he say more about the criteria that will be used to assess progress by local councils in considering political structures to meet that aim, and the aim of being closer to the people? Who will decide, and how, which councils are beacon authorities?

Mr. Prescott

The final point is highly relevant, and the White Paper contains a considerable section about beacon authorities. We use the term to identify centres of excellence. Some authorities, as we know, can build houses or provide services more efficiently than others. We want to highlight those authorities as offering the standards that we want for local authorities.

Mr. John Bercow (Buckingham)

Like Wandsworth.

Mr. Prescott

It might be Wandsworth, or it might be a Labour authority. I do not seek to make any ideological point about it. Where best practice exists, we should try to use it. Where good practices do not exist, we should act to say so. The White Paper says that they will be unacceptable, and that we are quite prepared to take action in areas that do not improve.

Local democracy is not about having the worst, inefficient services; it is about being proud of running local services. Most citizens have no chance of determining a council one way or the other, and we are obliged to do something about services. Beacon councils meet that argument. On setting targets, whether for housing, or for provision of services, the Audit Commission has already done some work.

We should like to talk more about the outputs than about the inputs. The Audit Commission is largely concerned about getting value for money. That is quite proper, but the services that emerge are equally important. That is where we draw the distinction between compulsory competitive tendering and best value. We shall negotiate those targets with the local government associations and we shall take that matter into account. Governments always come under a certain amount of pressure when dealing with public expenditure to bring about the best practice. We stand for better quality services and best practices. That is what the White Paper is about.

Mr. Mike Hancock (Portsmouth, South)

I am delighted with much of what the Secretary of State has had to say this afternoon. When the White Paper materialises into a Bill, I hope that he will not give up completely on the idea of having a change in the voting system for local government. Some of us think that that exercise would bring more accountability.

Can he explain how the options for change in the way in which a local authority is organised and run will be put to the people? I know from my experience of over 30 years in local government, some 20-odd elections and four changes in local government organisation that the party in power at the time decides on how the options are put to the people. The end result is nearly always geared to support the continuation of power rather than to give more democracy to the people.

I am refreshed to hear that the matter of regional government remains high on the Secretary of State's agenda, as it is on mine. As his White Paper passes through its consultation exercise I should welcome him adding weight to the idea that regional government is an option to which we should look forward.

Mr. Prescott

I thank the hon. Gentleman for his contribution, particularly for his words about regional government. As we all know, these major constitutional changes or, at least, boundary changes, are extremely controversial. There great heat generated by whether the area we live in is called one thing or another. I shall not pick an example because these matters get particularly hot. I believe in these changes and I shall take every opportunity to push in that direction.

As the hon. Gentleman knows, we have set up the Jenkins commission to look into types of political representation and voting systems. We have a manifesto commitment to have a referendum on the issue also. Those are some steps towards what he is asking for. We are trying different electoral systems for the Scottish Parliament, the Welsh Assembly and, indeed, the London mayor. The system of election for the mayor is different from that for the assemblies. It tries to encourage the maximisation of the vote.

The election of mayor requires a candidate to achieve 50 per cent. support. We will use a system of voting that will encourage that. If there are more than two or three candidates, it will allow for it to be judged which of the last two candidates gets more than 50 per cent. of the vote. The maximisation of the vote is designed to encourage support for the mayor. Indeed, the additional member system allows for a combination of the system of direct election of a member to a constituency and the top-up principle.

Given our proposals for these elections, it is fair to say that this is a radical agenda and a major change in our electoral process. It is right for us to claim that, even if we do not go as far as the hon. Gentleman wants us to do.

Mr. Gordon Prentice (Pendle)

These are innovative proposals which will transform the face of local government and will be widely welcomed. My right hon. Friend said that local authorities could trigger referendums. Given that we want local authorities to speak on behalf of their entire community, will there be any restriction on the types of issue and question that can be put to the voters in a referendum? Is there any provision for the voters themselves to trigger a referendum?

Mr. Prescott

Our White Paper may not go as far as my hon. Friend wants in regard to questions in referendums. We have chosen to suggest ways forward. For example, with regard to the mayor, the local authority is required to put its proposal forward and have a vote on it. If citizens are to initiate a referendum they must produce a petition signed by 10 per cent. of those involved. That is not a unique idea. It is used for parish councils—where a certain area calls for a parish area. In Hull, either Beverley or East Yorkshire—I think it was Beverley—was campaigning hard for that. My hon. Friend has granted Beverley the right to have a parish area because 10 per cent. of the people involved produced a petition.

We are prepared to consider a number of suggestions and one could be a proposal for an authority that wants either the mayor, the chief executive or the change in structure. We should also bear it in mind—I have said this once, but think that I should repeat it, particularly for those councils that might not like the idea of changing those structures—that, if the existing structure is found to be acceptable, that option can be put to the electorate, who can say, "We don't want a change. We're happy to accept the council's verdict." In many cases, the referendums will not be decision-making referendums but will merely offer advice.

Mr. Patrick McLoughlin (West Derbyshire)

Will the Deputy Prime Minister go into more detail about his conclusions on page 40 of the White Paper regarding more frequent elections? What will be the position for councils affected by the Local Government Commission's ward redistribution, whose cases are before his Department and which have not taken into account the possibility of yearly elections? Will he take it from me that such elections are not necessarily the answer that he seems to think they will be?

Derbyshire Dales district council is elected every four years, whereas Amber Valley district council has yearly elections, but the turnout in Derbyshire Dales is, in the main, higher than that in Amber Valley. Therefore, annual elections will not necessarily result in a great increase in turnout. There is a difference between district councils, which do not spend much money, and county councils, which provide the majority of services in the shire county areas. The White Paper states that the counties will have elections every two years. However, as the wards will be much larger, that policy is worrying, particularly in large rural areas such as mine.

Mr. Prescott

We made it clear in our manifesto that we wanted more regular elections and we are taking into account the different election cycles. For example, some unitary authorities are elected by thirds, with elections each year for three years and the fourth year fallow. That will also be the case in London, where we propose to hold the elections for the mayor and the assembly in the fallow year; so we will have elections there every year.

There are real difficulties in having multi-member arrangements for the counties, so we have decided to allow elections for half the seats every two years—so all the seats will be covered in four years—with a district holding its elections every two years. That will allow more regular and frequent elections, but will also take into account the fact that whereas towns and highly populated areas can have multi-member constituencies, that is not the case in the county areas and so we have to provide a proper balance for them. That is why we have arrived at that conclusion and why we have received a certain amount of criticism about the fact that there will not always be yearly elections. I hope that we have found the best way to make elections more frequent and will achieve that.