HC Deb 09 June 1998 vol 313 cc856-8
3. Mr. Simon Hughes (Southwark, North and Bermondsey)

What proposals he has for removing the cap on local authority budgets. [43227]

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

Our proposals are set out in the consultation document "Modernising Local Government—Improving Local Financial Accountability".

Mr. Hughes

That is helpful. When the Minister has considered the responses, will the Government hold firm to the principle that one cannot have proper local democracy unless local councils can raise the money that they think fit for the services that they are obliged to carry out'? Does she accept that, unless boroughs such as Southwark, the one in which she lives when she is in London and which I represent, can do that, the social services, housing and other needs of a community with deprivation such as ours just will not be met—unless the Government give them the money if they cannot raise it themselves?

Ms Armstrong

The hon. Gentleman seems to be putting forward contradictory arguments. In the beginning, he argued that local government should be able to raise the money that it wished and in the second part of his question, he suggested that it was up to central Government to ensure that it got sufficient, which could then be supplemented locally. The consultation on local government finance is precisely about how we get a fair proportion from central and from local taxation. We have received good representations from a wide variety of bodies on that matter, and I shall look at the initial responses with the working group from the Local Government Association tomorrow.

Mr. Dennis Skinner (Bolsover)

Can I add my voice to those that are calling for an end to the capping mechanism? Does the Minister, with whom we have been dealing about Derbyshire county council's capping experiment, accept that one of the sad features about that settlement, which cannot be ignored—I lay the blame at the door of the Chancellor of the Exchequer rather than the Department of the Environment, Transport and the Regions, but I will not take that any further—is that we have to pay about £500,000 in re-billing? Can I make a plea that when Derbyshire's settlement is arrived at for the forthcoming year, and we have this bright new dawn with no capping, that extra £500,000 will be taken into account?

Ms Armstrong

My hon. Friend is right to draw attention to the Government's commitment to getting rid of crude and universal capping. We have said that this is the last year that that will take place. It is part of our commitment, through the local government finance review, to find our way forward into a new regime, in which local and central Government can be clear about what their responsibilities are and we can work together in partnership to ensure that we get the most efficient and effective response to local people's expectations and needs.

Mrs. Gillian Shephard (South-West Norfolk)

I note that the Minister used a phrase about capping that she used when in opposition, saying that she would abolish this "crude and universal" mechanism. Could she perhaps share with the House a little more of her thinking on the timetable for that abolition?

Ms Armstrong

I have told the House that the current year's settlement will be the last to include the crude and universal capping introduced by the previous Administration. We will pursue a different route next year, and we are discussing that in the light of responses to our consultation document.

Mrs. Shephard

I thank the Minister for that helpful reply. Will she guarantee that she will not use changes in the capping mechanism as the excuse to shift millions of pounds away from shire areas for the second year running? Does she accept that that shift of funding, which was the idea of her Government, not of the previous one, has imposed an average 10 per cent. rise in council tax in shires, a rise entirely of her Government's making?

Ms Armstrong

The right hon. Lady chooses her statistics selectively. The amount going to shire areas has not decreased by anything like that amount. Her predecessor used to complain that we had removed money from London. The difference between council taxes in London and in shire counties was remarkable, but the real difference was that London faced the electorate this year, whereas the shires did not.

Mr. Bill O'Brien (Normanton)

I thank my hon. Friend for working to help local government. When she is reducing the cap on local government, will she have regard to the tremendous problems of local government, which the Treasury must do a great deal to ease? The shadow Minister, the right hon. Member for South-West Norfolk (Mrs. Shephard), referred to a 10 per cent. increase in shire counties, but my authority, Wakefield, had an 11 per cent. increase, showing that there has not been a transfer of resources to our district from the shires. We are suffering in many ways because of 18 years of Tory Government attacks on local government. Will my hon. Friend speed the reduction of pressure on local government finance, which is doing injury to our services?

Ms Armstrong

My hon. Friend knows that we are determined to get a fair settlement for all authorities in the United Kingdom. There must be a balance between central and local government funding. One of the problems is that the previous Administration dug themselves into the deep hole that we all called the poll tax. Getting out of that hole has been damaging to local government, and we are still trying to deal with the consequences. Our local government finance review will take us to the next stage, but it will still take time to achieve real fairness in the system after the appalling damage done by the previous Government.