Local Government Finance

HC Deb 04 February 1999 vol 324 cc1138-86 4.11 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) 1999–2000 (HC 143), which was laid before this House on 1st February, be approved.

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

With this it will be convenient to discuss the following motions:

That the Local Government Finance (England) Special Grant Report (No. 37) (HC 144), which was laid before this House on 1st February, be approved. That the Local Government Finance Report (England) 1997–98: Amending Report 1999 (HC 145), which was laid before this House on 1st February, be approved. I should remind the House that Madam Speaker has ruled that there will be a limit of 10 minutes on Back-Bench speeches.

Mr. Prescott

As this is to be a shorter debate than last year's, and as many hon. Members will wish to take part, I shall keep my remarks as brief as possible.

This year's settlement is the most generous for seven years, so it should not be too controversial—although I recognise that the settlement is never, ever enough. The House will recall that on 2 December, I set out my local government finance settlement proposals for England in 1999–2000. They included: the total amount of local authority spending to which the Government are prepared to contribute, known as total standard spending, which will increase from £48 billion to more than £50.5 billion, which is a rise of £2.6 billion, or 5.5 per cent.; the amount of Government grant support, which increases from £37.4 billion in 1998–99 to £39.5 billion; and some changes to standard spending assessments—the formulae used to distribute grant.

Two of the reports before the House contain my decisions following formal consultation on those proposals. The third report corrects an error made by the previous Government in 1996. I should like to spell out some facts about the settlement for 1999–2000.

There is more than £1.4 billion more for education, following the £835 million extra provided last year, and more than £500 million more for social services. Total standard spending is up by £2.6 billion—5.5 per cent., as I have said—compared with last year. Let us remind ourselves of the increases since the council tax came into being—just 0.9 per cent. in 1995–96, and 2.5 per cent. in 1997–98.

The average for the years under the previous Government was only 2.4 per cent. This year's increase is more than twice the average for all the years of the previous Administration.

Mr. Robert Sheldon (Ashton-under-Lyne)

I welcome what my right hon. Friend has done, but is he aware of representations by Oldham metropolitan borough, which feels that the changes made do not deal with all the anomalies in the area cost adjustment? The major problem is that SSAs, which were well worked out in the past, will be fixed for three years, creating anomalies during that period. I know that my right hon. Friend is investigating how he can improve matters, but is there no chance of making changes during that three-year period?

Mr. Prescott

My right hon. Friend will recall that I said in a previous debate that one of the three standard assessments that we are dealing with had to do with children's services. We have made a judgment on that and can address ourselves to it. The others deal with education and the area adjustments to which he has referred. It is difficult to reach agreement there, and I shall return to the point later. Something like 41 formulae apply, and quite radical changes and consequences flow. We have decided not to make a decision at the moment, but to continue discussions throughout the three years.

The next round of public expenditure commitments will start early in that period, and discussions on standard spending assessment will take place during that process, so we shall have had to reach some decision. I understand my right hon. Friend's concern, but when he hears hon. Members talking about the effects of the changes we have made to just one area, he will appreciate the difficulties that we must take into account if we want to reach a proper consensus.

Sir Paul Beresford (Mole Valley)

Many hon. Members on both sides are concerned about distribution. Would the Secretary of State comment on the apparent change in definition of SSAs contained in paragraph 3.2 of "The Local Government Finance Report (England) 1999/2000"?

Mr. Prescott

I shall come to the SSAs shortly if the hon. Gentleman will wait a little.

Mr. Patrick McLoughlin (West Derbyshire)

Can the Secretary of State confirm whether what was said by the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) was correct? Is the Secretary of State ruling out any change in the area cost adjustment over the next three years? Is that the implication of his reply to the right hon. Gentleman's question?

Mr. Prescott

Let me be clear about that. We shall continue discussions, and I shall report back to the House each year on settlements. The hon. Gentleman should wait to see how far we get in those discussions. We have settled on the children's support schemes, and I shall deal with that point in a few moments. Every year, I shall come to the House to inform hon. Members on how far we have gone, and on how much further we may be able to progress.

Mr. Andrew Lansley (South Cambridgeshire)

If these matters are so difficult—especially the area cost adjustment—why did the Prime Minister promise three days before the general election that he would change the area cost adjustment for 1998–99? He failed to do so, and now he is trying to set in stone that it should not change for a further three years.

Mr. Prescott

I do not think that the Prime Minister said exactly that. [HON. MEMBERS: "He did."] No, he did not. I do not want to get into a dispute over that. We intend, over our five-year period in Government, to deal with all the commitments in our manifesto, and even with the statements made by my right hon. Friend the Prime Minister. Nearly two thirds of our manifesto commitments are already under way, which shows how good the Government's record is. [HON. MEMBERS: "What about trains?"] I do not think that trains can be blamed on me after the Conservative privatisation. The Tories will blame everyone, having decided that marriage is back in fashion and God knows what else they did not believe before.

Let me repeat what I said before I was rudely interrupted. There is more than £1.4 billion more for education, following the £835 million extra provided last year, and more than £500 million more for social services. Total standard spending is up by £2.6 billion—5.5 per cent.—compared with last year. Let us remind ourselves of how that compares with the 2.4 per cent. increase under the previous Administration. Twice as much is being made available in the most generous settlement given to local authorities for seven years. I see no one contesting that, although the opportunity is there for anyone who wants to jump in.

Mr. Crispin Blunt (Reigate)

rose—

Mr. Prescott

Thank you.

Mr. Blunt

The borough of Reigate and Banstead has had a real cut in its settlement because moneys have been raided out of flood defences. How does that fact square with the imposition of 2,600 homes on the borough in an area that is liable to flood? When it floods, will the Secretary of State return money to the borough to make up for its having been robbed from it now?

Mr. Prescott

The previous Administration held back money, never giving any for flood relief. They offered every reason as to why they could not pay out for that.

Mr. Blunt

indicated dissent.

Mr. Prescott

I do not want to argue about flood relief, which is just one part of expenditure. The hon. Gentleman's authority, like all the others, will receive more than it did last year. That is a basic fact. Does he disagree with it?

Mr. Blunt

indicated assent.

Mr. Prescott

Have a look at the figures and then apologise.

Mr. Richard Allan (Sheffield, Hallam)

rose—

Mr. Prescott

I must get on. There is limited time for the debate. I am trying to give way, but I should like to continue.

Mr. Jim Marshall (Leicester, South)

I apologise for intervening because I know that my right hon. Friend wants to make a short speech. Indeed, I wish to speak myself. I accept what he says, but for local authorities such as Leicester, the social services changes mean a reduction in revenue support of nearly £2.7 million. Does he accept that while we are still getting a real-terms increase, it is substantially below the national average? Can he offer any hope over the next 12 months that that imbalance will be addressed?

Mr. Prescott

My hon. Friend has a fair point about what came out of the changes in standard spending assessment; it is one of the difficulties, and I shall come to it. We have listened to the arguments of hon. Members and found an extra £30 million to try to deal with that.

The settlement is the most generous since the introduction of council tax.

Mr. Ian Bruce (South Dorset)

Will the right hon. Gentleman give way?

Mr. Prescott

No. I must go on.

Most councils will do well out of this year's settlement, and some very well. The Government will put in £2 billion more in grant. That means council taxes need bear only a fair share of the spending increase. I recognise that while all education authorities will get more money, some will be hard pressed because of the SSA changes. As I explained in a written answer on 1 February, I have found extra money to help the most hard-pressed authorities with education and social service responsibilities. No authority will lose in cash terms.

Mr. David Curry (Skipton and Ripon)

The right hon. Gentleman's reply on 1 February says that the additional grant is in respect of losses on the children's services element of the spending assessment. He then said that he would distribute a grant relating to total SSA. As a result, a county such as North Yorkshire will lose £3 million in cash on social services, largely because of a children's indicator, but get nothing at all from the £30 million. There is a dislocation between the reason for the money and its distribution.

Mr. Prescott

The right hon. Gentleman knows the difficulties of damping in dealing with SSA. The previous Administration did little to help on that. [Interruption.] I am reminded that they did nothing. I was trying to be charitable because the right hon. Member for Skipton and Ripon (Mr. Curry) understands the subject more than most of us. There are great difficulties.

I now come to the SSA and the consequential effects mentioned by my hon. Friend the Member for Leicester, South (Mr. Marshall). We cannot satisfy everyone when we begin to make changes. All we can hope for is fair criteria for distributing the money. That is what governed us on the matter.

The right hon. Member for Skipton and Ripon used to go through the yearly discussions with local authorities about the rate support grant and got a difficult ride at some meetings. That did not happen this year. It was quite boring because the authorities thought that the settlement was generous. The right hon. Gentleman's well-known reply was, "We got stuffed by the Treasury." I was not in that situation. We have done a lot better because our Treasury listened to our arguments.

We have announced the totals of SSAs for the next three years. Councils must recognise—I am sure that they do—that they should not expect to be able to deal with the problems of 18 years in one year. This three-year settlement, which the Local Government Association called for, means that councils can plan ahead now that they know there is a three-year period. They should plan for service improvements and for reasonable—not excessive—council tax increases.

We have considered representations about the SSA formula and there were three big issues about which many hon. Members were concerned. They were children's social services, where we proposed changes, additional education need, and the area cost adjustment, for both of which we propose no change. The basic principle of my proposals is to make the grant distribution fairer.

For both additional educational need and the area cost adjustment, we had many reform proposals to choose from. For example, we had 21 detailed options on area cost adjustment, but there was no clear front runner on merit or in terms of support from local government. It would not have been right to take decisions on the area cost adjustment and additional education needs now when it was clear that there were unresolved issues raised by local authorities which needed further work. If there is one area in which we should seek consensus, it is this because it affects so many local authorities and people.

The most significant change that I propose is to adjust the way in which we deal with children's social services. The change is based on extensive research and three years' discussion with local government. Even this change is not without controversy. The new formula for children's social services would not take into account ethnic minority populations. Some questioned whether that was fair and those voices have been heard in the Chamber. It is a matter that deserves the most careful consideration. However, detailed research showed that indicators of deprivation that can apply to all parts of the community are better than those that relate only to ethnic minorities. I have, therefore, confirmed that proposal.

I also confirmed the other proposals that I made on SSA on my 2 December statement to the House. When the SSA formula changes, there are winners and losers. I do not pretend that it is easy for the councils that lose, but I can at least say two things. First, the Government have not and would not adjust the SSA figures to favour councils because of their political leadership. Secondly, we have listened to the authorities that would lose most from their grants because of the change. Their views were expressed in the debate when I made my first announcement on the revenue support grant. I have, therefore, put £30 million more into the settlement and guarantee that all education and social service authorities will receive at least 1.5 per cent. more in grant in 1999–2000 than they did this year. That is an increase. It is an improvement on my original proposal to ensure that no authority loses grant. A little more than £2 million will have to be taken from the revenue support grant to help fund this.

Under the new grant, Brent, for example, will receive £2.4 million more than I proposed in December. West Sussex and Leicester will each get £1.7 million more. Over the next three years, we shall work jointly with local government on a thorough review of revenue grant distribution. We have set ourselves the task of looking for a simpler, more stable, more robust, fairer system. We want to examine the fundamentals of the financial system governing local authorities.

Mr. Allan

The Deputy Prime Minister said that he would be utterly fair and not consider the politics of local councillors. He knows that people in places such as Sheffield felt disadvantaged by political bias under the previous Government. Will he make it absolutely clear that no community will ever lose out because of the local council it elects, and will he be utterly scrupulous in that respect?

Mr. Prescott

I am proposing criteria by which people can judge that. The aim of SSAs is to achieve fairness. If we are not fair and choose to make political decisions that favour one political party, it will be clear so that everyone can make that judgment. Such conduct is not unknown. Many local authority settlements under the previous Administration were geared to their county areas. The trouble is most of them are now Labour.

Mr. James Gray (North Wiltshire)

Is the right hon. Gentleman aware of the public claim of Ruth Coleman, the Liberal Democrat leader of North Wilshire district council, that she received a personal letter from him saying that the comparatively generous settlement for North Wiltshire was a direct result of her bringing in new council policies? Did he write to her saying that he was benefiting North Wiltshire because the Liberal Democrats control it?

Mr. Deputy Speaker

Order. Interventions should be brief, not mini-speeches. I do not appeal to hon. Members to make brief interventions; I instruct them to.

Mr. Prescott

1 have received many thousands of letters, but I assure the hon. Member for North Wiltshire (Mr. Gray) that I have not sent or signed any letter that would give any such political favour. The Liberals have a tendency to say such things.

We considered representations on our proposals for council tax benefit and subsidy limitation. I have concluded that it is right to maintain the simple principle that led us to adopt the policy. Local authorities should not expect to be able to pass all the costs of their tax decisions back to central Government. If councils increase their council taxes above the guidelines, they will have to contribute to the benefit costs.

Mr. Ronnie Campbell (Blyth Valley)

This morning, we had a delegation from Labour-controlled Northumberland county council, which is in a bit of difficulty with the new SSAs. It would like a fairer system. I know that my right hon. Friend will consider that over three years. It was talking about a figure of 10 per cent., and it is a Labour-controlled authority.

Mr. Prescott

Northumberland has received a 5.5 per cent. increase—which is twice as much as it has received before. That is at least a step towards social justice, and we shall continue to review the finances.

We have considered representations on our proposals for council tax benefit subsidy limitation. However, I have concluded that it is right to maintain the simple principle that led us to adopt this measure. Local authorities should not expect to be able to pass on all the costs of their tax decisions to central Government.

Mr. Ian Bruce

rose—

Mr. Prescott

If councils increase—[Interruption.]

Mr. Deputy Speaker

Order. The hon. Member for South Dorset (Mr. Bruce) must behave himself.

Mr. Prescott

To be honest, Mr. Deputy Speaker, he is the only person who is getting excited about this.

If councils increase council taxes above the guideline, they will contribute to the benefit costs. I was not persuaded that it would be right to limit the contributions any further than the taper that I have proposed or to exempt authorities in particular situations. We will protect authorities that have a higher than average proportion of council tax met by benefit, and they will be treated as though they had an average proportion. That strikes a balance that ensures that the poorest authorities are not treated unfairly.

If we announced capping limits in advance, we would lose the point of abolishing crude capping. Each authority must reach a sensible conclusion in the light of local circumstances. I make no secret of my determination to act if authorities behave unreasonably. They should bear in mind that the Government are contributing their fair share—some £39.5 billion; £2 billion more than this year—to support the local expenditure of £50.6 billion.

Dr. Jenny Tonge (Richmond Park)

I am grateful to the Secretary of State for giving way and I am very impressed by his remarks about fairness. I am sure that he believes absolutely in democracy. In that case, why does he not simply remove the cap and allow local people to decide the level of taxes in their area?

Mr. Prescott

The hon. Lady—who, even allowing for modern political movements, is not likely ever to sit on this Bench—must understand that we have to strike a balance between local and national interests. Governments are responsible for raising taxes, setting out public expenditure programmes and taking decisions about the grants that local authorities will receive. Fifty billion pounds is a substantial amount under any circumstances.

We must make a judgment, and we believe that that is a fair amount of money. It is twice as much as previous settlements and is sufficient to meet the fair provision of services. At the end of the day, democracy will count in local authority areas. Councillors must argue their case with the people, who will either support or reject them. As Labour controls more councils than ever before—it is a record number for any political party—we must be on the right track.

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

On the point about local communities supporting council tax levels that are higher than the Government recommend, is my right hon. Friend aware that my authority is conducting a referendum on that issue? If the people vote for higher local council tax, will the Government recognise the validity of that result?

Mr. Prescott

My hon. Friend must be aware that we are proposing legislation that will give such powers to local authorities. We would then take that provision into account. However, I am bound to say that that is not the position this year as we are operating under the law as it presently stands. If an authority says that it wants to do A, B or C, we will take its wishes into account. However, its decisions are not binding upon us. Ultimately, we are bound by the national interest, what we believe to be a fair amount of money for local authorities and what is fair for council tax payers. That is a proper judgment to make, and that is our approach.

I was struck by the time that was spent on formal consultation about the settlement. There has been considerable consultation, and it cannot be right to consume so much of the time of councillors and officers. Ministers have had 72 meetings, each involving several local members and officers—and I am sure that Opposition Members are familiar with the pain of constant meetings. Officers travel to London and often lose a whole day. I do not expect any significant changes to the way in which the grant is distributed next year. As a general rule, I shall expect written representations, which will be considered carefully—particularly when there appear to be errors in our provisional calculations. We shall of course continue to meet the local authority associations.

The next three years will offer stable grants, the opportunity to plan with greater flexibility, and the chance to reinvest efficiency savings and to have a fundamental look at the fairness and clarity of the grant system. We have listened to the representations and we have made an extra £30 million available in order to protect those authorities most affected by change. Authorities will receive an average increase in support of 5.5 per cent. All education authorities will receive at least 1.5 per cent. more in grant and no council will receive less grant next year than it received this year. This is the best settlement for seven years, and I commend it to the House.

4.36 pm

Mrs. Gillian Shephard (South-West Norfolk)

When introducing last year's local government finance settlement in December 1997, the Secretary of State took the opportunity of making several promises regarding his Government's intentions for local government. Among other things, he claimed that he would achieve a prospect of fairness, increased local discretion allied to greater local accountability, the ending of crude and universal capping, and the restoration of new and more positive relations between central and local government. Has the right hon. Gentleman really just announced his intention to see no delegations next year? Maybe he thinks that, if he does not see people, it will contribute to new and more positive relations between him and local government.

Mr. Robert Jackson (Wantage)

As to Labour's promises, Oxfordshire now faces three years of substantial reductions in services and increased council tax. Does my right hon. Friend agree that those people who voted Labour and Liberal at the last general election were sold a false prospectus?

Mrs. Shephard

I agree with my hon. Friend. There are many disappointed groups and areas around the country not only as a result of last year's settlement but because of the prospect of this year's settlement.

Mr. Ian Bruce

The Deputy Prime Minister has demonstrated that he is getting wiser as the years go by. He clearly would not give way to me because he knew that the grant situation in Dorset is so appalling that he could not possibly continue with his speech. He has decided—

Mr. Deputy Speaker

Order. The right hon. Member for South-West Norfolk (Mrs. Shephard) is not responsible for the Secretary of State's speech. I am sure that she cannot reply to that intervention.

Mrs. Shephard

My hon. Friend makes his point very eloquently. We know about the situation in Dorset and in the south of England generally. We shall expect the Minister for Local Government and Housing to reply to those points in detail in her winding-up speech.

We know what last year's settlement delivered. It delivered a record 8.6 per cent. increase in council tax across the board—so much for the right hon. Gentleman's commitment to best value. It achieved a political switch of £50 million away from London authorities and £100 million away from shire areas to the right hon. Gentleman's friends in the north—so much for the prospect of fairness and so much for local discretion allied with local accountability.

Dr. George Turner (North-West Norfolk)

I thank the right hon. Lady for her kindness in giving way. Before she continues, does she not wish to speak on behalf of the people of Norfolk—whom she and I represent—and thank the Government for the best settlement not only in seven years but in 20? Instead of facing the problems that I faced as chair of education when we could not meet the teachers' pay settlement—

Mr. Deputy Speaker

Order. I call Mrs. Shephard.

Mrs. Shephard

Why does the Secretary of State not give the hon. Gentleman a job—it would spare us this sort of thing? I remind the hon. Gentleman that last year Norfolk got the worst settlement in its entire history, and that it is not under a Conservative Administration that Norfolk has had to face the closure of all its youth centres and the sale of all its homes for the elderly.

In the Deputy Prime Minister's statement to the House on 2 December 1998 on this year's revenue support grant settlement, he could—if he had meant what he said the year before—have put right the damage last year's settlement did, but he chose not do so. For all his hype, today's settlement perpetuates the switch of funds away from rural areas and from London, and demonstrates a new trend of a clear disadvantage in funding terms for authorities and their communities in the south of England.

Mr. Prescott

The right hon. Lady told the House that last year's settlement was worse than any under a Tory Administration. In fact, in 1995–96, under a Tory Government, the increase was 0.4 per cent.

Mrs. Shephard

I also said that it was not under a Conservative Administration that Norfolk had to face the loss of all its youth centres and all its homes for the elderly. That happened under a Labour Government and a Lib-Lab council.

This settlement, despite all the right hon. Gentleman's huffing and puffing, will result in council tax rises across the board. He has said little about that. I wonder whether he would like to comment on the fact that the Treasury's assumptions in its pre-Budget report of 3 November 1998 were for a council tax rise of 7.7 per cent., which appears curiously at variance with his predictions.

Mr. Prescott

The right hon. Lady should look up the facts of the case. If she looks carefully, she will see that the Red Book refers to England, Scotland and Wales, whereas our proposal refers only to England. As so often, she is not comparing like with like.

Mrs. Shephard

I can go on. The right hon. Gentleman's view, expressed on 2 December last year, that the settlement was the best deal for years for local people"—[Official Report, 2 December 1998; Vol. 321, c. 886.] is not a view shared by local people throughout the country. Local people in Norfolk face a council tax rise of four times the rate of inflation. Local people in Buckinghamshire will have to pay a council tax rise of more than 9 per cent. Local people in Cambridgeshire face both a £12 million shortfall and the Prime Minister's broken promise about their future status in respect of the area cost adjustment. Local people in Worcestershire, Oxfordshire, Surrey, Essex, Kent, West Sussex and Dorset see that the Government's methodology has robbed them of millions, which will inevitably lead to council tax rises in double figures, according to the Local Government Chronicle.

Mr. Tom King (Bridgwater)

I cannot imagine why my right hon. Friend has excluded Somerset from that litany. I have just come downstairs from dealing with letters of despair from many head teachers in Somerset, who, as a result of the settlement, face the prospect of teacher redundancies and serious problems for their schools.

Mrs. Shephard

It is perhaps because of such views—the views of real people—that the Deputy Prime Minister has announced his intention not to see any delegations next year.

Mr. Eric Illsley (Barnsley, Central)

Barnsley council has this year received its highest settlement for a long time—the fifth highest settlement of any local authority this year. However, even with that 7.2 per cent. increase and assuming a 10 per cent. increase in the council tax, the authority this week faced £10.2 million worth of cuts. Those cuts come not as a consequence of the Labour Government's settlement, but as a consequence of the previous Government's refusing, for nine years, to alter the SSA methodology. The right hon. Member for Skipton and Ripon (Mr. Curry)—

Mr. Deputy Speaker

Order.

Mrs. Shephard

Could what the hon. Gentleman describes have something to do with the way in which Barnsley is run?

Mr. Michael J. Foster (Worcester)

The right hon. Lady mentioned that Worcestershire faced a double-digit increase in council tax. Can she tell the House what proof she has of that? If she has no proof, will she withdraw the remark? If Worcestershire delivers a council tax increase that is less than double digits, will she apologise to the House?

Mrs. Shephard

The hon. Gentleman's remarks have been received with a degree of incredulity by Conservative Members. When I read my list of the worst affected authorities, I made it clear that my source was the Local Government Chronicle. The Local Government Chronicle is equally concerned about the position in London, as is the hon. Member for Brent, East (Mr. Livingstone), who wrote movingly in the Evening Standard of 29 January 1999: How has it all gone so sour so quickly? He continues: The nightmare is that this new scheme is supposed to stay in place unchanged for the next three years.

Miss Julie Kirkbride (Bromsgrove)

I am overexcited by the intervention from the hon. Member for Worcester (Mr. Foster). Had he been doing his duty by his constituents, he would have said that there was a great likelihood of there being a double-digit increase in the council tax in Worcestershire. Even the director of social services in the county has accepted that there is to be a 4 per cent. real-terms cut in the social services budget in this financial year.

Mrs. Shephard

rose—

Mr. Tony Baldry (Banbury)

Will my right hon. Friend give way—[Interruption.]

Mr. Deputy Speaker

Order. I must call on the House to settle down. Hon. Members are being most unruly and there is far too much noise.

Mr. Baldry

I am grateful to my right hon. Friend for giving way. I do not understand why Labour Members are being so shy about the fact that the budget for Oxfordshire county council, which was tabled by the Labour group on that council, clearly shows that the Labour group wants a council tax rise in Oxfordshire of 12.5 per cent.

Mrs. Shephard

Indeed. As my hon. Friend makes clear, we know very well who runs the council in Oxfordshire. My hon. Friend the Member for Bromsgrove (Miss Kirkbride) has caused the hon. Member for Worcester (Mr. Foster) to stand corrected and we hope that it will be he who apologises if the council tax rise turns out as expected.

Sadly, the figures announced by the Government in December and confirmed today by the Deputy Prime Minister have set the seal on a systematic fix to benefit the Labour party's friends in the north at the expense of rural England, London and the south.

Mr. Phil Willis (Harrogate and Knaresborough)

Will the right hon. Lady give way?

Mrs. Shephard

No, I intend to make a little progress now.

Over the past two years, rural areas have lost £250 million of funding, thanks to the Government's changes to the methodology. As we have heard this afternoon, those have been set in stone and it is no good anybody asking to see the Deputy Prime Minister because he will see no one; so rural authorities are set to lose a further £300 million during the two remaining years of this Parliament.

London, too, has been hit. It has lost £140 million during the past two years and will lose a further £180 million during the next two. The hon. Member for Brent, East painted a stark picture in last Friday's Evening Standard when he wrote that Brent faced having to cut education by £2.4 million, to slash provision for old-age pensioners, the disabled and children in care, to close day centres and libraries, to end the youth service, to cut road maintenance—and so on. He pointed out that the picture would be the same in Hackney, Newham, Haringey and Lambeth.

Mr. Prescott

Why is he not here?

Mrs. Shephard

I dare say that the hon. Member is busy canvassing.

The Deputy Prime Minister has attempted to point out that that loss has been adjusted by his use of the special grant system, but as he has also pointed out, that is only transitional. His intention is that the underlying pattern of injustice should continue.

Further disturbing patterns emerge from this year's settlement. Analysis reveals that of the 25 councils that have been the least favourably treated in terms of Government grant, 20 are in the south of England. Their council tax payers have been singled out by the Government for the highest council tax increases.

It is up to Ministers to explain their motivation for those changes, which to the outside world could appear political. Whatever their motivation is, they cannot maintain—not while keeping a straight face, anyway—that the highest increases have been awarded to efficient or well run councils. Time does not permit me to give a full recital of the goings-on in corrupt Labour-controlled councils, but is it not ironic that Labour-controlled Birmingham will get the biggest increase this year? That council accumulated losses of £2.5 million from the super prix. In Birmingham, the question, "How many people does it take to change a light bulb?" gets the answer, "I don't know, but I do know that each one earns £42,000 a year."

Sheffield has done very nicely too.

Mr. David Lock (Wyre Forest)

Having insulted everybody north of Watford by using the expression "friends in the north", will the right hon. Lady tell us whether she includes the people of Birmingham in that category? Does the fact that she has insulted all the people who voted for Labour councils mean that she has given up any hope of making gains for her party in May's elections?

Mrs. Shephard

I find it extraordinary that a Labour Member should think that it an insult to call someone a friend of the Labour party, but that is a problem for the hon. Gentleman.

I suppose that Rotherham council is being rewarded for the fact that its deputy leader has, apparently, been suspended following allegations that money that should have been contributed to the Forum Against Poverty went instead on hotel and prostitution bills.

Mr. David Watts (St. Helens, North)

While the right hon. Lady is naming names concerning the scandalous behaviour of Labour councillors, will she take the opportunity to condemn Lady Porter, who happened to run off with millions of pounds of taxpayers' money?

Mrs. Shephard

The best ones are the old ones and that one, as the hon. Gentleman knows, is sub judice.

We have heard a great deal about education from the Deputy Prime Minister. Conservative Members have consistently welcomed the Government's investment in education, and I do so again today. However, it is ironic that after the Government have organised that investment, gift-wrapped it and kept it in the Department for Education and Employment so that it can be announced and re-announced every time the Secretary of State for Education and Employment or the Prime Minister visits a school, not only is it now unavailable to fund the teachers' pay award but it may even threaten some of the gift-wrapped schemes themselves.

As the Brent primary school head teachers' group said in a letter to my right hon. Friend the Member for Richmond, Yorks (Mr. Hague), the Brent education committee is having to consider not only sacking teachers and cutting school budgets but making reductions on some of the Government's flagship projects such as the national grid for learning, the numeracy strategy and the social exclusion initiative.

As Graham Lane, the chairman of the Local Government Association's education committee, said: We all want to see teachers receiving a fair wage rise but this settlement means being forced to find an extra £70 million unless the Government fully funds the cost". Of course, the Government could do that if some of the £1 billion put aside for restructuring pay were used to avert an unnecessary crisis, as local authority employers have suggested.

We have heard much today from the Deputy Prime Minister about the size of the settlement. We have heard rather less about the council tax rises that he expects. In fact, we have no idea how much of an increase he will tolerate, which is not much comfort for council tax payers throughout the country. Capping is a system with faults—no one denies that. It is no substitute for the clarity and accountability that could be achieved by a thoroughgoing reform of local government, giving councils financial accountability.

However, by introducing a hide-and-seek approach to local government finance, the Government have, instead of tackling the weaknesses of capping, removed its strengths and put nothing in their place. They have taken decisions out of the public eye. Their object is not to expose high-spending authorities to the control of accountable local democracy but to augment the power of the centre.

Mr. Nick Hawkins (Surrey Heath)

Does my right hon. Friend agree that local authority leaders of all parties will be most concerned about the Deputy Prime Minister's refusal to see any delegation next year? Is not that a negation of democracy and an indication that he wants to entrench for ever the favouring of Labour councils outside shire counties? Is not that a complete refusal to do his job?

Mrs. Shephard

I hope that, by the time the Minister for Local Government and Housing concludes the debate, she will have put right the impression that the Deputy Prime Minister may regret having created.

The Deputy Prime Minister's proposals for council tax benefit subsidy compound the problem that he is creating. [Interruption.] The Minister for Local Government and Housing seems to want to make her contribution now. Perhaps, when she concludes the debate, she will explain why the Government have taken no notice whatever in their consultation of the views of the Local Government Association on the changes to subsidy arrangements.

The LGA has opposed the changes, and we agree with it. It has done so because they will impact unfairly on different parts of the country, with the result that council tax payers in the poorest areas will be hit harder than those in better-off areas. In other words, the nearly poor will pay for the really poor. The LGA believes that the Government should meet the cost of welfare benefits, not local authorities or council tax payers. It believes that the scheme is very complex—at least in that it agrees with the Deputy Prime Minister—and that the guidelines seek to reimpose the very capping that the Government said in opposition they wished to end. The LGA opposes the scheme because, perhaps most ludicrously, it will hit authorities that spend below their SSAs—23 such authorities, including eight in London, which is another hit on London.

The Deputy Prime Minister wants the country to believe that this settlement is the best deal for years. Although he may claim to have increased the global amount, he has done so in a way that is unfair, arbitrary and open to political manipulation. It deepens the divide between country and town, disadvantages London and the south of England, and adds nothing to the clarity and accountability in local government that the right hon. Gentleman never tires of telling us he seeks. For those reasons, we shall oppose motion No. 2.

4.57 pm

Mr. Bill O'Brien (Normanton)

I congratulate my right hon. Friend the Deputy Prime Minister and his Ministers on keeping the election promise to local government and on providing this financial settlement. It is the best that has been offered to local government for many years, and is fully appreciated. Due to the time limit on speeches, I shall address my remarks to the single issue of the council tax benefit limitation scheme. I ask my right hon. Friend to give further thought to the issue.

I remind the House of the injury sustained by local government over 18 years of Tory rule—18 years of constant attack by Conservative Ministers cutting grants and resources, which in turn meant cutting services and, year on year, increasing council tax. The Tories used the rate support grant formula to award increases in grants to a few Tory councils—but they cut grants to many Labour-controlled and other councils, which now form the Special Interest Group of Municipal Authorities—SIGOMA—of which my authority, Wakefield, is a member.

Cuts in grants meant council tax increases to help to sustain services—essential services in many areas. As a result, local government aggregate spending rose to £2 billion higher than the standard spending assessment. That disparity still applies. It is one of the anomalies that local authorities have to face. [Interruption.]

Mr. Deputy Speaker

Order. There are too many conversations taking place in the Chamber. That is unfair to the hon. Gentleman who is addressing the House.

Mr. O'Brien

I have raised the matter previously. An analysis should be conducted of the aggregate spending and the standard spending assessment, so that we can level the playing field for local government.

I draw attention to the effects of the Conservatives' policies on local government, which have resulted in councils throughout the country being poorer in resources, still being classed as poor councils, and having a substantial number of low-value properties and a high percentage of people claiming benefit. That is the situation in many parts of the north of England, particularly in the mining communities. Many authorities in SIGOMA have an estimated average of more than 20 per cent. of their total council tax income coming from benefit. As a result of social inequalities, those benefit claimants are the very people who require more services.

If a council in the poorer group of local authorities tried to increase its council tax over its budget requirements to sustain services, the application of the council tax benefit subsidy limitation scheme would be devastating, because of the clawback of the rate support grant.

The council tax benefit is payable to help people who cannot afford to pay their council tax. It is a social benefit and, I believe, it should be the responsibility of the Government to meet the cost. Such direct welfare costs should not be a charge on the resources of local authorities. I emphasise that I am speaking of the poorer council group in local government.

I appeal to my right hon. Friend to look again at capping and to review his decision on the procedures for capping. I also ask for more time for all of us to consider the implications of the Government's proposal. As it is not yet statute, more thought should be given to it. I ask for the introduction of the council tax benefit subsidy scheme to be deferred. Because of its complexity, we need more time to analyse it. Amendments have been suggested for my right hon. Friend to consider. Perhaps he would be willing to meet Back-Bench Members so that we could offer our points of view before the final decisions are made.

I ask for a review of the scheme to localise part of the cost of council tax benefit subsidy. If the proposal were implemented in its current form, it would hit the poorest areas hardest. It is the responsibility of Government, not of local authorities, to meet the cost of welfare benefits. Help given to poor people with their council tax payments is a social benefit.

The guideline increases are widely seen as a direct substitute for crude and universal capping. I supported my right hon. Friend and the policy of the Labour party to abolish the crude capping procedure. As we do not have all the necessary information, we need more time to consider and discuss the Government's proposal.

The capping scheme can apply to local authorities below the SSA. That is a further anomaly that we should consider. The scheme will also obscure the public's understanding of council tax increases. I support the efforts of my right hon. Friend and his Ministers to improve relationships within our communities to generate more interest in local government.

To defer the council tax benefit subsidy limitation scheme would demonstrate my right hon. Friend's fairness. A deferment for a minimum of 12 months would give hon. Members with an interest in local government the opportunity to analyse the system. Again, I reiterate my request for an opportunity to discuss the matter with Ministers.

The application of the rate support grant is widely welcomed, particularly in education and social services. Members of SIGOMA have, on more than one occasion, thanked Ministers for the settlement, which is far in excess of what local government ever received in a single year under the Tories. Because of that background, I hope that we will have an opportunity to discuss the matter so that my right hon. Friend's reputation for fairness remains unspoilt.

5.7 pm

Mr. David Curry (Skipton and Ripon)

My right hon. Friend the Member for Richmond, Yorks (Mr. Hague) and my hon. Friend the Member for Ryedale (Mr. Greenway) have asked to be associated with the remarks that I shall make about North Yorkshire.

I am interested in the Government's recently enunciated concept of open government, which means that they will not meet delegations. I hope that does not have too much of an impact on the January sales in London next year.

Two elements are particularly disappointing. The area cost adjustment is a difficult area, but the Labour Opposition did not give the previous Tory Government the impression that it was an insoluble problem. They said they would crack it pretty quickly. It is difficult and there is a distortion, and the trouble with stability for three years is that those who get the money are pleased with the stability, while those who wish that they had it are displeased with the stability.

I am more concerned about the Government's failure to address additional educational needs. That indicator is now out of date. Too much weight is given to ethnicity. There is no perfect correlation between ethnicity and educational underachievement. A significant amount of educational underachievement in, for example, London, is to be found in disadvantaged white families. It should be possible to move away from that rather mechanistic formula and to target resources where there is a clear need.

Ms Oona King (Bethnal Green and Bow)

In my constituency of Tower Hamlets, 102 languages are spoken in the classrooms, and about two thirds of children have parents who do not speak a second language. That has to affect their chances.

Mr. Curry

My point is that, at the moment, we have a mechanical indicator. Ethnicity plays a heavy part throughout the school scale. I am looking for an indicator which is more sensitive to the identification of real problems in education and which moves away from that rather mechanistic background. I am not predisposed to say that we should give less money to the hon. Lady's constituents or to those of another hon. Member. I want to reflect need more effectively. That is what is important.

The hon. Member for Normanton (Mr. O'Brien) made some sensible remarks about the council tax benefit schemes. I hope that the Secretary of State has listened to them, and I endorse entirely the points that the hon. Gentleman made about the need to look at the schemes much more carefully before they are introduced.

I want to address the particular situation in North Yorkshire, and, first of all, the fiction that there has been a real increase in resources in education. I say that having seen the letter from the Secretary of State for Education and Employment—the usual threatening letter—saying, "This money has all got to go to education." There is a dangerous tendency: more and more, the Government want to hypothecate expenditure to individual services.

Secondly, North Yorkshire has taken a cash hit of £3.1 million on social services. The Secretary of State unveiled £30 million extra at the beginning of the week and I immediately rang North Yorkshire with the glad tidings that that was supposed to compensate local authorities that had taken a hit on social services, but the distribution is not related to the hit on social services. It is related to the overall position on standard spending assessments.

That means that there is a perverse outcome. North Yorkshire has taken a bigger hit than West Sussex, for example, but West Sussex comes out with an extra £2 million while North Yorkshire has nothing. Wandsworth has been given £6 million; Westminster, which has clearly been rehabilitated in the Government's sights, has been given £4 million; and Brent has been given £2.4 million. North Yorkshire, which has taken that severe hit, has been given no additional resources at all.

Social services are in a serious position, and—

Mr. Willis

rose—

Mr. Adrian Sanders (Torbay)

rose—

Mr. Curry

I will not give way, because of the time limit. I am sorry about that. The hon. Member for Harrogate and Knaresborough (Mr. Willis) will agree that, because of way that social services are framed in North Yorkshire, and because of the number of homes in Harrogate and Scarborough, we have suffered particular difficulty. The hon. Member for Scarborough and Whitby (Mr. Quinn) was in the Chamber, but is here no longer.

The education SSA has gone up by nearly £13 million. The county council will make sure that all that money goes to education, but we must look at what comes out of it, if we are to make a sensible assessment. We must take into account the increase in school pupil numbers, the overhang of last year's teachers' pay settlement and this year's pay settlement. The county budgeted for 3.5 per cent., but, because of the particular increase for primary school head teachers—the necessity for which I accept—and because we have 327 primary schools in North Yorkshire, that settlement has been pushed up to almost 4 per cent.

The standards fund, which used to be called GEST—grant for education support and training—and which met the requirements for special educational needs also has to be taken into account. Even if all that money goes to schools, there will be a 1.5 per cent. cut in each school budget. That is under a scheme that the Government keep telling us represents the priority "education, education, education". [Interruption.] There is no point in the Minister for Local Government and Housing muttering from a sedentary position. The fact is that that is a real cut for education in North Yorkshire. She blathers about this matter, as the Government do about so many other things.

In social services, all the voluntary organisations are facing cuts. I could wave the bleeding stumps around the Chamber, as Labour Members used to do when the positions were reversed, and I could throw at the Minister a sheaf of letters from voluntary organisations complaining about the cuts. Voluntary organisations are indispensable to delivering social services—they are not delivered only by the county council. The council depends enormously on the good will and co-operation of voluntary organisations to make sure that services work in practice.

The county will try to bail people out by lending £1 million from the reserves, but it has also taken a hit on the landfill tax and the withdrawal of tax relief on investment dividends will cost the pension funds £500,000. How do we get out of that? The Secretary of State's guideline for council tax increases works out at 4.9 per cent., but the proposal from the Conservative ruling group—which, I think, has the support of all the parties—is for a 9.6 per cent. increase.

The crisis in education and the cuts in social services mean that that increase will not even maintain the level of services, but they mean that North Yorkshire has been badly let down. Every teacher, every child, every social worker, every pupil and every elderly person needing help has been badly let down by the Government.

Is there a margin for manoeuvre? No, because North Yorkshire's working balances are the third lowest in English counties and are already close to the point at which the auditor will get extremely nervous about their low level. However, there is one thing that the Minister could do to help. The county council was awarded nearly £1 million of grant in respect of European schemes last July, but the Treasury still has not paid the money. That is a monstrous failure of administration on the part of a Government who talk constantly about the need for big companies to ensure that their debts to little companies are paid on time. The sooner the money is paid, the better.

This is a scandalous situation and a bad settlement. The Government have funked the major indicators, which will have an impact on everyone. There is a three-year moratorium which freezes the amount, and which, apparently, will not even be subject to discussion. All that has been accompanied by the usual glib and partial presentation. The people of North Yorkshire will know who is to blame, but the taxpayers will be stuffed by a Government who are big on rhetoric, but miserably threadbare when it comes to any form of delivery.

5.16 pm

Mr. Jim Marshall (Leicester, South)

I do not think that it will greatly surprise my hon. Friend the Minister of State for Local Government and Housing to learn that I cannot share all the Secretary of State's enthusiasm for this year's settlement. My hon. Friend will know from her discussions with councillors from my city of Leicester of the difficulties that the city is likely to face as a result of the settlement. She has listened, and she has been very generous to local representatives; she has not been so generous in the additional support that she has announced, but the extra £1.7 million is nevertheless welcome.

May I point out to my hon. Friend a mistake that the Deputy Prime Minister—the Secretary of State—may have made in referring to the £1.7 million which, I think, will go to Leicester as additional benefit? I understand that not all of it is a consequence of "damping" on the reduction in social services, but that £1.3 million arises from that, while the other £0.4 million arises from an update of data. It is not all additional relief, as the Deputy Prime Minister seemed to suggest. While I am referring to my right hon. Friend, let me add that I think he is right to take pride in the settlement that he has achieved on a global scale, although it is unfair in the particular case of Leicester. I think that the right hon. Member for South-West Norfolk (Mrs. Shephard) has a cheek to criticise this Government, who have sought to listen to local representatives, who—notwithstanding what was said from the Dispatch Box—will doubtless continue to listen to them, and who have tried to introduce at least a greater degree of transparency in decision making this year than we saw under her party's Administration.

I am one of those described by the right hon. Member for Skipton and Ripon (Mr. Curry) who used to wave sheaves of letters at him when he was replying at the Dispatch Box. We all know that, under the Conservative Administration, the revenue settlement was manipulated on purely political grounds. That is the only way to explain the benefit that was given to Westminster and other city boroughs, and the way in which inner-city areas outside London were treated.

Let me return to my basic point, which concerns Leicester. Leicester's settlement is very poor. Our standard spending assessment increase is lower than that of any other unitary or metropolitan authority, and it is the third lowest of all SSAs. It is particularly harsh, given that—the House will know this, as I mentioned it in the two preceding years—it follows hard on the heels of difficult years in 1997–98 and 1998–99. Since Leicester became a unitary authority in 1997, it has had lower SSA increases than any similar authority. Over that two-year period, Leicester has been forced to make cuts of some £20 million. To show the perversity of the Tories' crude capping system, which, unfortunately, we inherited last year, at a time of £20 million cuts, in the first year—1997–98—council tax decreased by 13 per cent., but, last year, it increased by 26 per cent.

As I have already said, this year's settlement compounds the difficulties that Leicester faces. As the Minister knows, one of the big problems is the methodology changes to the funding of children's social services. Previously, funding was determined largely by ethnicity. As Leicester has a large ethnic population, this year's change has a profound effect on its allocation. As a consequence purely of those methodology changes, it will lose £2.7 million.

The second big item is the continuing fall in school rolls; that trend has been apparent in Leicester for a number of years. In previous years, I have urged the Government to introduce a damping factor, but they have failed to do so. I hope that they will consider it in the overall review. As a consequence of falling student numbers, Leicester loses £1.7 million for education alone. We have one of the lowest increases in the SSA for education of any local authority.

The Deputy Prime Minister is absolutely correct. We are not suffering a reduction, but the increase that we are being given is hardly sufficient for the service to stand still. Just because pupil numbers are falling does not mean—

Mr. Sanders

Surely, given the fact that the head count is 18 months out of date, if a local authority has falling pupil rolls, it is quids in. It is when it has rising pupil numbers that it has the problem because there is a delay in the money reaching the schools.

Mr. Marshall

I do not really understand the point that the hon. Gentleman seeks to make, but, if he studied the relevant factors, he would know that the numbers are always 18 months to two years out of date. As a consequence, nearly all local authorities receive more educational expenditure than they would if the actual figures were known. Leicester is losing £1.7 million as a result of falling pupil rolls.

The two major changes that I have described, together with other changes that the Government have announced, mean that, this year, Leicester again faces substantial cuts: we have to seek to reduce the budget by some £5.5 million.

My understanding is that the controlling Labour group is meeting this evening to consider a package of cuts totalling about £5.5 million. 1 understand that it has pledged that that will not affect the level of front-line services, but, inevitably, with that order of cuts, non-front-line services will be severely adversely affected. It is also clear that jobs will inevitably be at risk. Assistance to the voluntary sector will be severely restricted. I understand that the amount of money that the city council gives to the Haymarket and Phoenix theatres in Leicester is likely to be reduced in the coming financial year, which will affect theatre lovers and theatre goers in Leicester. The Minister may argue that the proposed cuts do not affect front-line services, but, as a package, it will severely affect the overall services that Leicester is able provide.

To sum up, this settlement means another abysmal year for Leicester. Although I welcome the additional funding provided by the Government, I remind the House and the Minister that the extra £1.7 million is a one-off figure. Unless the Government find some additional means of providing assistance for Leicester in the next 12 months, the situation we will face next year will be just as difficult as that we are facing this year.

I have a final plea for my hon. Friend the Minister. When my hon. Friend is looking at the specific grants, particularly for social services, I accept that she must be fair to all local authorities, but I hope that she will bend over backwards to be ultra fair to Leicester.

5.26 pm

Mr. Paul Burstow (Sutton and Cheam)

Local government settlements always bring out a touch of the showman—perhaps I should say the magician—in the Secretary of State. This settlement is no different from any previous settlement in that there is smoke and mirrors and plenty of spin.

Mrs. Louise Ellman (Liverpool, Riverside)

Will the hon. Gentleman give way?

Mr. Burstow

I think I should make a little more progress before taking interventions. I will be happy to take the hon. Lady's intervention later.

This year we are told that council tax need rise by only 4.5 per cent. and that this is the most generous settlement for seven years. Neither claim should be taken at face value. Both are based on the pseudo-science of standard spending assessments and I accept the Secretary of State's comment that it is important to have a thorough review in that respect.

Mr. Sanders

Will my hon. Friend give way? [Interruption.]

Mr. Burstow

I will give way to my hon. Friend and then to the hon. Member for Liverpool, Riverside (Mrs. Ellman)

Mr. Sanders

The review is important. If we analyse the areas which have done well and those which have done badly, some common themes will emerge. It is clear that the areas that have done badly this year tend to have large numbers of elderly people in care and rising pupil numbers and, demographically, those areas tend to be in the south and south-west. Those two factors must be looked at.

Mr. Burstow

That is a good point and I hope that the Minister is listening. I hope that such points will be taken into account in the review that she is undertaking.

Mrs. Ellman

Is the hon. Gentleman aware that, including the increase in SSA for social services of 11.3 per cent., this settlement means that Liverpool city council could freeze council tax very shortly if it wished to do so? Does he intend to advise the Liberal Democrats currently running Liverpool to congratulate the Labour Government on this settlement and the opportunity that it affords them?

Mr. Burstow

I am grateful to the hon. Lady for her intervention because it enables me to say that, unlike the Labour party, we do not believe in prescribing from the centre. I shall certainly not be telling my colleagues on Liverpool city council what to do, which is in stark contrast to the Labour party's approach.

Mr. Barry Gardiner (Brent, North)

Will the hon. Gentleman give way?

Mr. Burstow

I should utter a few more sentences and then I will give way.

It is important to examine a little more closely the idea that there will be a low level of council tax increase and a generous settlement. Last year, the Local Government Association surveyed local authorities to get a picture of the real pressures on budgets and services, some of which we have heard from Labour Members already. The association found that local authorities need a total of £3,188 million of additional revenue just to sustain current levels of service. Taking into account the Government's generous settlement, local government is still left staring into a £1.7 million black hole.

Mr. Gardiner

The hon. Gentleman was talking about the distribution of grant and the patterns that can be seen. Is the hon. Gentleman aware that 50 per cent. of all the losses sustained in children's personal social services in London have been sustained by councils with very high multi-ethnicity? That includes, Brent, Camden, Haringey, Hackney and Lambeth. Tower Hamlets is one of the exceptions because of the large number of tower blocks in the area. Over 50 per cent. of the ethnic population in those boroughs has borne 75 per cent. of all the losses in London.

Mr. Burstow

The hon. Gentleman makes a very fair point—with which the Minister will not agree, although it is borne out in our constituencies, where services are undoubtedly under severe pressure because of decisions made by the Secretary of State and his Ministers about how they will carve up the money available this year to local government.

The funding gap will be bridged in much the same way as it has been for years and years—by increased and new charges, tighter eligibility criteria, higher council tax increases and, of course, service cuts.

So how will this year's settlement be different? Crude and universal capping will remain. The Secretary of State told the House that last year would be the last year in which crude capping would operate. Closer examination of the figures reveals that there is still serious pressure on key services. Moreover, capping will not only remain but have two new added twists.

First, budget setting will become a game of Russian roulette, as the Secretary of State refuses to declare his capping principles in advance.

Secondly, council tax benefit limitation will add belt and braces to the capping system, leaving some of the poorest communities footing the bill for the poorest of their neighbours. I very much welcome the comments of the hon. Member for Normanton (Mr. O'Brien). I hope that Ministers will meet him and other Labour Members, listen to their arguments and decide to abandon that unacceptable and dishonest policy.

When in opposition, Labour Members condemned the previous Government's introduction of the same principle, in proposals to claw back housing benefit. Indeed, 98 Labour Members signed an early-day motion condemning the previous Government on clawing back housing benefit. They should condemn also the proposed council tax benefit clawback.

The problem is that hon. Members will not be able to debate the clawback on the Floor of the House, as it will be dealt with in Committee, as secondary legislation. Legislation passed by the previous Government will therefore enable the current Government to introduce a regime of council tax benefit clawback.

We believe that there should have been a proper debate on the proposal on the Floor of the House, so that it could be amended and debated properly. Instead, the proposal will be rushed through in Committee by a few hon. Members and will not receive proper parliamentary scrutiny. The Government should be condemned for that. They should include the proposal in a local government Bill, so that we may have a proper debate on it.

Closer inspection of the figures provided by the Library reveals that the social services standard spending assessment for England will rise by 1.3 per cent., after adjusting for the current year's special transitional grant for community care. Even on the Government's own figures, that will leave a £100 million gap simply to meet inflation in social services.

A lower than inflation increase for social services will make cuts in current services inevitable. Moreover, the 1.3 per cent. increase disguises considerable variations between classes of authority. Undermining current services by underfunding makes no sense at a time when the Government are setting targets and directing a whole host of specific grants at social services to secure change and improvement. Ultimately, it will be self-defeating.

In a report to Worcestershire's social services committee, the department's director, in describing the effect of the loss of grant for community care, said: There will now effectively be no demographic fund to cope with the increasing demands of an ageing society and the particular pressures of people with disabilities living longer and needing a proper quality of life. He went on to say: The likelihood therefore is new spend on new initiatives in some cases, and at the same time deep cuts in other parts of the service. The problem is that the Government are focused on delivering a change agenda, but are blind to the need to maintain existing core services. Consequently, for example, Leicestershire faces the prospect of rationing admissions to homes for elderly people so that it might bridge the funding gap. Although such rationing is not allowed in law, authorities are working out ways of trying to achieve it. It is another savage cut that will impact on the lives of elderly people.

The same pressures apply to education. We have learnt that Ministers are saying that education funding in the settlement is sufficient to fund the pay award in full. Yet the Secretary of State for Education is writing letters left, right and centre—to governors, head teachers and everyone else—to promise that that money will be given to schools to fund class-size reductions and all of the Government's other initiatives.

Mr. David Heath (Somerton and Frome)

I should like to draw to my hon. Friend's attention the remarks of the Minister for School Standards in last night's Adjournment debate. She said: I certainly accept the argument that it"— Somerset county council— is receiving less SSA than he and his constituents have a right to expect"—[Official Report, 3 February 1999; Vol. 324, c. 1055.] If that is the case, why are the Government not doing something about it?

Mr. Burstow

That is one reason why we shall vote against this inadequate settlement. Last night's Adjournment debate showed that the Government accept that it is inadequate for Somerset.

Where will the £68 million needed to meet the teachers' pay award come from? It will come from the budget for classroom books and materials and from cuts to other services. My right hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith) tells me that, according to the Government's standard spending assessment figures, Northumberland county council is expected to spend only £2,807 per pupil, compared with a figure of £4,553 for Kensington and Chelsea. There may well be differences between those areas. That is not under dispute. However, it is impossible for a council such as Northumberland to maintain the same education standards when the gap is so wide. We learn today that there is to be a 10 per cent. increase in council tax in Northumberland as a consequence of the settlement that the Government are dishing out.

I have heard recently from my hon. Friend the Member for Harrogate and Knaresborough (Mr. Willis) that North Yorkshire has lost a further £500,000 from its funding this week. On Wednesday, the council agreed to passport all £12.9 million of the education SSA through to education, but that does not meet the extra costs of the standards fund, transport and special educational needs, so it has had to write to tell the head teachers to expect a 1.5 per cent. cut in their budgets and be prepared to sack teachers and support workers.

Jackie Ballard (Taunton)

My hon. Friend will be aware that many councils will have large council tax rises and service cuts. Does he agree that the system of local government finance is so opaque that electors do not know whether they have an inefficient council or a mean Government?

Mr. Burstow

The pseudo-science of SSAs and the capping regime, under which councils do not know on what basis they are to be capped, mean that accountability is blurred and it is difficult for people to know whether they should write an angry letter to the Minister or try to vote their county councillor out of office.

North Yorkshire estimates that its council tax will have to rise by 9.7 per cent. Try explaining to people there why their council tax is going up by 9.7 per cent. while services are being cut and teachers are being sacked.

Dr. Alan Whitehead (Southampton, Test)

Does not the hon. Gentleman's argument mean that he should support the Government's moratorium on changes for three years while a more equitable system is worked out and agreed by all concerned?

Mr. Burstow

Part of my argument is that the settlement and the distribution methodology are still unsound. That is why we shall vote against the settlement. Stability in an unsound distribution system is not stability for those councils that will have to make cuts. Many hon. Members on both sides have clearly shown today that they face serious cuts to local services. However, Ministers say that there will be no cuts to front-line services. That is demonstrably untrue. Ministers must come out of the fantasy world of their fantasy figures and come into the real world, where cuts are being made to local services.

Mr. Gardiner

Will the hon. Gentleman give way?

Mr. Burstow

I am sorry, but I have already given way and I must make progress.

Ministers spent settlement day last December promising that council taxes would rise by just 4.5 per cent. That estimate was based on the national control totals rather than on local reality. Ministers tell us that they have to take an interest in controlling local spending because it is part of Government expenditure. As Lord Hunt's committee on relations between central and local government said, that is a Humpty Dumpty argument. International experience shows that the control of local government's self-financed expenditure is not critical to the success of the economy. Even in the UK, self-financed expenditure has been in and out of the control totals. As long as it remains part of the control totals, Whitehall will be calling the shots rather than the town hall, at the expense of local democracy.

As hon. Members have said, this year's settlement cannot be considered in isolation. The cumulative effect of years of inadequate settlement have taken their toll. In education, for example, the settlement announced in December 1997 left a £562 million funding gap between what had been passported to education and the cash provided by the Government. That left many councils struggling to balance their books and as a result, instead of falling, primary class sizes continued to increase.

The pressure to spend all the money that had been passported to education on education increased pressures on other services, so social services were in the front line for further cuts. It has been estimated that in the current financial year each social services department faced an average of £2.1 million in cuts. Nearly two out of three authorities increased charges, raising an additional £45 million and new charges were introduced raising a further £17 million. That money came out of the pockets of people who could not afford to pay, but as they needed the care, they had no choice. No Government ever acknowledge the cumulative effect of cuts, but it needs to be addressed otherwise core services will continue to be damaged.

It is not a good settlement for local government and nor is it a generous one, as Ministers would have us believe. It leaves community care for the elderly and disabled underfunded. It leaves councils to raid school budgets to fund the teachers' pay award. It leaves council tax payers bemused with bigger bills and poorer services and that is why we shall vote against it tonight.

5.41 pm

Mr. David Watts (St. Helens, North)

I congratulate my right hon. Friend the Secretary of State for the Environment, Transport and the Regions and my hon. Friend the Minister for Local Government and Housing on securing what is undoubtedly an excellent settlement for local government expenditure. I did not expect Opposition Members to support it. We all know that local elections are pending and we can all envisage the manifestos being rehearsed in today's speeches. However, I recognise that there are problems. Certainly 18 years of Tory Government have left local authorities with reduced powers, little financial self-control and low morale. Local authorities are now unable to respond to local community needs and as a result the number of people taking part in local elections has declined. This year's settlement will maintain services, will allow for some slight increases in expenditure on key services and will lead to some improvements.

On the crucial issue of fairness I do not believe that the settlement makes much progress on changing the grant system to make it fairer on local authorities such as St. Helens. However, before Opposition Members support that sentiment, I would point out that the Government inherited the present inadequate grant system from the previous Administration. It is very unfair and has undoubtedly reduced the powers and independence of local government. It has increased central control over council budgets and has massively increased local council taxes so it is hardly surprising that the Government face major problems in dealing with the legacy of 18 years of Tory Government.

The present system crammed more council resources into areas such as Westminster. There is no doubt about that. After two years, no Opposition Member has yet come to the Dispatch Box and apologised to the House and to the country for the corruption in Westminster council.

I am sad that we have not made more progress on fairness. The decision to kick the issue into the long grass for three years is most disturbing. I had honestly hoped that we could have made more progress and I am disappointed, as is my local authority. However, I am aware of the difficulties. I watched my hon. Friend the Minister for Local Government and Housing on television recently. First she was criticised for not making enough changes to the system and then she was told that the changes that she had made were too severe. I understand that it is difficult to make changes. Obviously, people are concerned about the effects of this year's settlement on their local councils.

Many people in areas such as Barnsley and St. Helens want the Government to recognise that the unfairness has lasted, not for one year, but for 18 years. The massive differences in grant between authorities must be dealt with.

Moreover, the London lobby has been very strong. The Evening Standard has mounted a massive campaign about proposed changes to the education standard spending assessments. There is growing discontent in the north-west and Yorkshire about the weight thrown by the London press behind the lobby to maintain the status quo. The Government must understand that many people want and expect substantial changes to be made in the near future.

My local council in St. Helens is run well. It is praised by the district auditor, has fewer chief officers than most local authorities, and is an efficient and effective organisation. However, its council tax is high and there is a shortage of resources. That is not due to the way in which the council is run but to the grant system with which we have to live.

The Government want local government to make efficiency savings of 2 per cent. That will be exceedingly difficult for authorities such as St. Helens and Barnsley. It will not be so difficult for areas such as Westminster: I would rather make annual cuts of 10 per cent. in Westminster's expenditure than of 2 per cent. in St. Helens. Certain councils are awash with money, while others have very limited resources.

It is unfair to assert that, under the present grants system, each local authority should be treated the same. It will be virtually impossible for areas such as Barnsley to achieve the Government target. We have heard already that, despite this year's good settlement, there is likely to be an increase of 10 per cent. in Barnsley's council tax, and further cuts in provision are also probable. Given Barnsley council's massive efficiency savings over the past few years, that is not appropriate.

I shall briefly describe the problems that we face. How can it be fair for Westminster to be considered to be in greater need than Liverpool? How can Wandsworth be in greater need than Barnsley? How can Westminster get £1,000 more per child than St. Helens for the provision of education, and £150 per person more for cultural events? How can leafy Kensington and Chelsea get £150 more than St. Helens in SSAs?

The facts speak for themselves. The present system is corrupt and needs to be radically reviewed. Local government spending should be based first on the standard cost of service provision, then on the spending needs of each local authority. For example, if a school has lots of pupils who speak languages other than English, the amount of money devoted to that school should be based on the actual costs incurred, rather than on some theory put together by the Department of the Environment, Transport and the Regions.

Mr. Gardiner

Will my hon. Friend give way?

Mr. Watts

I hope that my hon. Friend will forgive me if I say no.

The introduction of factors such as poverty, unemployment and health into the equation is long overdue. One of the worst things that the previous Government did was to ignore unemployment and poverty. I hope that this Government's review will take such factors on board.

The present system means that many councils have high levels of council tax and poor levels of service, for no other reason than that the SSA system does not work in their favour. I hope that my hon. Friend the Minister for Local Government and Housing will consider three requests. The first—which I was pleased to hear has already been conceded today—is that the Government come back every year to report on the progress achieved in the reviews that have been set up. The second request is for an assurance that the review will be completed and implemented in three years. I am aware that there will be an election coming up around that time, and that it is probable that the issue will be left until afterwards: I should be grateful for an assurance to the contrary.

My final request has to do with housing benefit subsidy. My hon. Friend the Member for Wentworth (Mr. Healey) asked how many people supported the Government's proposal on housing benefit subsidy, and how many opposed it. The answer to the first question was none, and to the second that all the letters would be placed in the Library. I believe that there is a substantial number.

Mr. Simon Burns (West Chelmsford)

How many?

Mr. Watts

I do not know exactly how many; perhaps the Minister can enlighten us.

Some assurances would give authorities such as St. Helens some confidence that we will make progress. I do not underestimate the problems that any Government would have in trying to clear up the legacy left by the previous Government. However, I hope that my suggestions can be taken on board, and that there will be substantial progress as quickly as possible. I certainly hope to see changes within the next few months.

5.50 pm

Sir Paul Beresford (Mole Valley)

I always enjoy the Secretary of State's presentations on local government finance. He is bluff, and he raises a smile. He also tries to cover up the underlying trends. The hon. Member for St. Helens, North (Mr. Watts) picked out one of those trends, and my right hon. Friend the Member for South-West Norfolk (Mrs. Shephard) noted it too. That trend is the tendency to move money out of London and the south-east in spite of difficulties there.

Last year, that movement was pretty blatant, and I was intrigued to find in this year's small print that it is even more blatant this time. Standard spending assessment was defined until this year as representing an appropriate level of budget requirement to provide a standard level of service". However, paragraph 3.2 of "The Local Government Finance Report (England) 1999/2000" refers to the SSA calculation as follows: The calculation makes use of information reflecting demographic, physical and social characteristics of each area. In other words, SSA means whatever Ministers want it to mean in the month in which they set the assessment. I should, of course, have expected that. The same subjective approach has been taken towards capping.

When the draft reports were announced, the Secretary of State took great pleasure in informing me that there would be an above-inflation increase for Surrey. By that, he meant Surrey county council, not the districts, and he neglected to point out a few disturbing factors. Almost all the increase went into the education SSA, and we have had letters pushing for effective hypothecation of that grant.

The Secretary of State did not say that the social services grant in Surrey has been severely damaged, and other hon. Members have noted the same for their areas. The community care grant has been cut by £6.5 million this year, a cut that entirely fails to recognise projects set in train this year that have continuing commitments into next year, and possibly beyond.

The grant changes have been offset to some degree. The means by which the Government are covering the trend is by a one-off, larger-than-usual distribution from the business rate pool for the district councils. That offset is a just one-off, however.

Even given the SSA for education, authorities will have to find money for such matters as class size increases. The Government want class sizes to reduce, but the school population increase counters that. Money will also be needed for the pay increase for teachers.

Surrey county council is a major preceptor on the districts that collect the council tax. Despite Surrey's enormous effort to find efficiency savings, the county's precept looks likely to rise by 8 to 9 per cent. That precept will be loaded on to districts in Surrey that have already been clobbered with a dramatic loss in real terms. Mole Valley district council's revenue support grant has gone down by 28 per cent. That reduction is covered this once by the increase in the business rate grant, but the prospects are bleak for the years after the one-off offset.

Surrey county council is not the only preceptor: Surrey police take a precept too.

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

Will the hon. Gentleman give way?

Sir Paul Beresford

I will not. I hope that the Minister does not mind, but I have only 10 minutes.

Surrey police have been hit quite severely. They got a nil cash increase. The increase that they got resulted from boundary changes in respect of the Metropolitan police authority's introduction. However, they have had to continue facing the pressures that were placed on them previously. The precept increase for the police alone is likely to be 13 to 14 per cent.

The Surrey police suffer from a unique and topical addition to those pressures. If the House of Lords decision goes the way that the Government appear to want in respect of a certain guest in this country—General Pinochet—Surrey may have to find an extra £1 million for his guest residency there. Perhaps we could move him somewhere further north. Pleas to the Home Office fell on deaf ears.

It is London where the particularly inspired activities have been going on. Underneath, London has been hit hard on the draft grant. As the hon. Member for St. Helens, North said, there were screams; that is an understatement. As a consequence, we got a special grant but it appears to be for only one year. The long-term prospect is grim.

Again we have difficulty in respect of precept. This goes back to the Metropolitan police. The Metropolitan Police Committee, now expanded by the Home Secretary's addition of Labour Councillors, got a report from the official receiver to the Metropolitan police on the Met's financial affairs. To keep a tight budget, the Met is introducing efficiency changes; I understand that there will be between 400 and 500 fewer policemen in the next financial year, including reductions in the special constabulary. As a result, the committee recommended a precept increase of between 0 and 4 per cent. That did not appeal to the Home Secretary who, through the official receiver, requested a 9 per cent. increase.

The Metropolitan police has in many ways run a tight budget, particularly in respect of its balances, which it has successfully kept low. Now the official receiver tells us that the precept needs to be increased by 9 per cent. to put another £40 million into the balances. The excuse is that it is suddenly possible that a large number of middle-aged policemen—out of the blue if hon. Members will excuse the pun—will rush to retire. That is not reality. The probable reality is that this is the last opportunity for the Home Secretary to use a precept on the home counties, including Surrey, before the boundary change. It is also an opportunity for him to stuff the balances so that the mayor and the Greater London authority will have large funds sitting there at the expense of the people of London.

Time is short but the accusations against the Government of manoeuvring figures to suit themselves seem to be corroborated by the report before us, which I will emphatically oppose.

5.58 pm

Mr. Hilton Dawson (Lancaster and Wyre)

It is with some reluctance that I join this debate, which is essentially a debate with good friends. I would rather be applauding, but it is important to bring to the House's attention the serious situation in Lancashire county council and to welcome the opportunity for review that lies ahead.

I confess an interest in that I worked for Lancashire county council for 15 years. I am pleased that my hon. Friend the extremely honourable Member for Liverpool, Riverside (Mrs. Ellman) is in her place. For some 16 years, she led Lancashire county council magnificently during—and this context is important—the most terrible times for local government. Local government was under sustained assault and public services were under threat. Lancashire county council held up a shield and strove to preserve decent standards, using balances and all sorts of devices, wit and ingenuity to support places of education and inspiration. It regenerated rundown industrial sites and paid for bus services to rural villages where no private company would go. It sheltered vulnerable people from the contemptible policies of the Conservative party.

Lancashire county council paid dearly for its actions. It was hammered with regular above-average reductions in grant-related expenditure assessments and SSAs, and then suffered an act of calculated malice. The worst of all possible reorganisations removed Blackpool and Blackburn, and left behind 11 districts and an incoherent structure that lacked any real identity. The reorganisation left the remnants of a shire county that was far removed from the typical profile, with large areas of real urban deprivation, as well as extensive rural areas with problems of neglect and sparsity. The county was forged in the industrial revolution and has an aging communications network, and bridges and moss roads that require fundamental reconstruction.

Lancashire has had long-standing financial problems in the past 10 years. It saw increases in SSA and grant-related expenditure assessment of 53 per cent., compared with 61 per cent. for the average county and 72 per cent. for England as a whole. Despite having a social profile more akin to that of metropolitan boroughs, the shire county had an SSA of £764 per head of population rather than the £862 of metropolitan districts. That is a long-winded way of saying that, despite last year's above average increase, the increase of £25 million in this year's education SSA and this year's increase of 4.5 per cent. against the shire county average of 5.2 per cent., we do not have enough funds to do what we desperately want to do. It is not enough to make up for the loss of grant and the previous use of balances, which are now completely depleted. The county, which was hammered during years of Tory Government, is in a desperate financial situation.

I would like the review to address the ways in which the calculation of SSAs seriously disadvantages Lancashire. For example, we would like to see education SSAs calculated and weighted according to pupil and school numbers. The educational needs index should take more account of low attainment and reduced variation between pupils. We would like to see interest receipts SSAs based on actual past interest receipts, rather than on the size of SSAs, because balances are so low.

I agree with many hon. Members: we would like to see a fairer resolution of area cost adjustments. I think that there is a real danger that the current methodology overstates the actual burden facing authorities in areas with higher labour costs. Without some changes, we will have a council tax of some £730 at band D—which is 37 per cent. higher than council tax for standard spending—and a council tax increase of 8.5 per cent., which means that we could lose £1 million in council tax benefit subsidy. I ask the Government to re-examine that issue.

We have seen cuts in the number of fire engines, and in resources and support for statemented pupils. There have been cuts in highway maintenance—road gritting was reduced this winter. We face possible cuts in the youth service and a consultation document contemplates breaking the long-standing principle that even the smallest rural schools should have at least two teachers. I deplore such proposals, as I deplored the cuts this financial year in the number of homes for older people.

That does not provide best value for local people, as taxpayers or customers, and it is not the quality of service provision that we should achieve under a Labour Government and a Labour county council. At a time when education in this country is being afforded the most wonderful opportunities in decades, I deplore the fact that a letter is circulating in Lancashire schools offering only the prospect of no change. Thanks to years of Conservative depredation, people working in the public services are desperate for change. I ask the Government to do more for Lancashire.

I also want Lancashire to do more for itself. There is an urgent need to modernise, to reduce bureaucracy, to decentralise decision making and trust some of the excellent people working at the coal face in public services, to listen to people and to respond to the real needs of the community. Lancashire needs the scrutiny that a great reforming Government, committed to improving standards, will bring. The task of modernising Lancashire and improving public services would be far easier, the crucial message about the Government's commitment to education, social services and other public services would be far clearer, and the great opportunity that the Labour Government present would be seized far more readily if the people of Lancashire had a little more help now.

6.6 pm

Mr. Patrick McLoughlin (West Derbyshire)

As far as Derbyshire is concerned, today's debate is held against a background of the capping imposed on Derbyshire county council earlier this year. The Government make great play of their getting rid of what they call crude and universal capping, but they are replacing crude and universal capping with a system that they are not prepared to define. The new system is to be fairer, nicer, lovey-dovey and more feely—no doubt, it will also be more understanding. However, they are the very Government who this year imposed the smallest cap ever on a local authority: £1 million off a budget of £470 million. The new Labour Government put that cap on Derbyshire.

So small is the cap that, for some authorities, rebilling cost almost as much again as the reduction set on those local authorities. In Amber Valley, rebilling council tax cost £85,000, whereas the reduction secured by that process was a mere £175,000. Those figures were confirmed to me today by the chief executive. In Derbyshire Dales, rebilling cost £29,000, whereas the overall reduction was £130,000. That is the background against which I see the Government's latest settlement.

I see the hon. Member for North-East Derbyshire (Mr. Barnes) in his place. He was unable to participate in the capping debate because of illness, so I am glad to see him back here today. At the last general election, numerous Labour Members of Parliament and candidates went up and down the county saying how different everything would be under a Labour Government. The area cost adjustment would be sorted out—evened out—so that there was fairness across the land. No more was the money to go to areas that benefited from the area cost adjustment and were supposedly being feather-bedded by the Tories.

It is interesting to look at what has happened in respect of the area cost adjustment, especially in primary schools. It is no good Labour Members blaming everything on the previous Conservative Government. I know they find it hard to understand, but I well understand that we have had a Labour Government for two years now, and the figures we are discussing are not Conservative figures. The figures are not the Conservatives' recommendations, but new Labour's recommendations to the House, which they will no doubt force through the House tonight.

In 1997–98, in Hertfordshire the SSA was £2,135 per pupil, whereas in Derbyshire it was £1,952: a difference—one that is largely owed to the area cost adjustment—of £183 per pupil. What do the latest figures show? Do they show that figure going down, or the area cost adjustment going down so that there is more equal distribution across the country? No. They reveal that the area cost adjustment is rising.

For several years, Derbyshire county council issued leaflets with its rates bills saying how awfully it was treated by the previous Conservative Government, how terrible was the difference in area cost adjustment and how the world would change when new Labour came into office: the universe would be nicer; the Derwent would flow with milk and honey and we would all go around smiling.

Mr. David Taylor (North-West Leicestershire)

Not you.

Mr. McLoughlin

The hon. Gentleman is quite right—I am not smiling. That is because my constituents have been sold a false prospectus and they do not think that the Derwent flows with milk and honey because the area cost adjustment has increased instead of decreased.

Mr. Taylor

Will the hon. Gentleman give way?

Mr. McLoughlin

No, I will not because of the 10-minute rule on speeches. Under the previous Government, there was a full day's debate on the local government finance motion, and I should have liked such a debate today.

When the Conservative Government were responsible for primary schools, the area cost adjustment was £183 per pupil and now it is £197. That increase has nothing to do with the previous Government and everything to do with the new Labour Government. The same is true for the area cost adjustment for secondary schools because in the last year for which the Conservatives were responsible for that, Hertfordshire's advantage over Derbyshire amounted to £224 per pupil. The latest figure, for 1999–2000, is £234 per pupil.

I am not the only person who feels disappointed about that. I received a letter that the headmaster of Queen Elizabeth's grammar school in Ashbourne sent to parents. HON. MEMBERS: "Grammar school?"] Yes, a grammar school. I suggest that hon. Members come to Ashbourne because they would find that Queen Elizabeth's is a grammar school in name because of its foundation, but that it is a comprehensive school that takes pupils from every background. I dislike the way in which the words "grammar school" are regarded by Labour Members as swear words. It is true that the school is not in a catchment area to which the Prime Minister could send his children.

The headmaster said: The present Government pledged whilst in opposition to change the system of financing schools to make it more equitable. They have not done so. As a result my professional association, the Secondary Heads Association, has decided to join in a national campaign to secure a fair distribution of educational resources for all children. If you agree with me that it is wrong to deny your sons and daughters resources which are given to others, you may wish to join in this campaign. It is estimated that if that school was funded on the same basis as schools in Hertfordshire, it would receive £278,000 more than it does at present. That is why I am annoyed and I cannot accept the proposals before the House today.

The Government tried to build up expectations and there is no point in anyone saying that they did not. I shall wait with great interest to read the leaflet issued with Derbyshire county council's rates demand to find out whether it will point out, as it did under the previous Government, how unfairly Derbyshire is being treated by the Government, although that would require the council to be consistent.

There has been a disturbing admission by the Deputy Prime Minister and the Minister for Local Government and Housing—the hon. Lady has not yet made a speech, but she did intervene earlier—that no meetings would be held this year because the Government had no intention of changing the methodology. She is nodding.

Ms Armstrong

I announced that in December.

Mr. McLoughlin

I want to be absolutely clear on this. Perhaps the Minister can help me. Does that mean that we will see no change over the next three years in the area cost adjustment? That is a very important question, to which we all want an answer.

Ms Armstrong

rose—

Mr. McLoughlin

I cannot give way due to time.

For many years, Derbyshire county council has blamed Conservative Governments for school financing problems. I have always maintained—and still maintain—that school funding is much more complicated than that. It is far too complex and opaque. The result, which everybody can see, is that schools and parents are caught in a web of statistics, on which everyone involved puts their own interpretation. I urge the Government to do something about that.

6.16 pm

Mr. Derek Twigg (Halton)

I have a somewhat different perspective on this debate, which I shall elucidate.

We must recognise the importance of local government and the crucial, pivotal role that it plays in delivering many of our election pledges. Local authorities' important role in bringing about the improvements that we want—a better society and better local government—cannot be underestimated.

My council, Halton, is one of the new unitary authorities, which are very much in the front line for raising standards in schools and providing better services for young and old alike. Like many councils, Halton plays a pivotal role in other issues, such as introducing the new deal and the partnership within it. Many demands are therefore placed on its time and resources. It has responded positively, flexibly and innovatively to initiatives that the Government have launched. I want to explain why the local government grant settlement is a good one, and show by way of the example of Halton how the Government's approach to local government finance is making a positive difference in my constituency.

My authority is one of the 50 most socially deprived local authority areas in England and Wales. The need to provide better services, especially by raising educational standards and helping children via social services, is vital. My right hon. Friend the Deputy Prime Minister said that this is one of the most generous local government settlements since the introduction of the council tax. I have no hesitation in supporting the Government's view. The settlement was good for Halton this year, and will be good for it in the corning year, too. We cannot separate the two.

The approach to local government finance, certainly for Halton, has been good. There is clear and tangible evidence that the Government are making a positive difference to the lives of my constituents. More resources have been—and are being—made available. There is clear water between the previous Government's negative approach and the positive approach of this Government. For instance, under the previous Government, the settlement increased in 1995–96 by only 0.5 per cent. But for 1999–2000, the increase will be 5.5 per cent. The message from this settlement is that the Government want to support local government in improving the quality of services.

In Halton, we have seen an increase in standard spending assessment of 5.9 per cent. It will be spending above its SSA on education—spending £2 million extra on schools. School budgets will be increased and youth services will be better funded, as will adult education. That cannot be separated from other Government initiatives on education. My authority has received more than £2 million in successful standards fund bids. We have seen an increase in the allocation for professional development, and new classrooms. The effect of that on head teachers was fantastic. They have been after the extra money for many years, and it has made a positive difference.

There were five literacy and numeracy schemes in my constituency over the summer. One of them was the very first to integrate special needs children and children from mainstream schools. To see the determination of children on those schemes to achieve something and better themselves was fantastic. The council has also run several projects on social exclusion, and much more.

There has also been a good increase in annual capital guidelines. The need for more school places is recognised, especially in Widnes, the largest area in my constituency.

I am pleased that we have had a large increase in personal social services this year. The increase of 24 per cent. for children's social services is particularly important and recognises the inequalities under the previous system. Areas like mine have a high degree of social deprivation and difficulties in terms of the number of single parents, children living in poverty, and overcrowding. That has been a major determining factor in the allocation of extra resources, which are very welcome in my constituency.

I shall refer briefly to another respect in which the settlement shows the difference between the previous Government and the present one. People who know the north-west know that one of the great landmarks is the Widnes-Runcorn bridge. It is regularly jammed with traffic, because it was not built for the amount of traffic that uses it—we need a new bridge. The existing bridge needs extra maintenance and support. The previous Government and the previous county council did not fund that, but this Government have recognised the problem and have increased the transport programmes from £1 million to £3 million, which will go a long way towards dealing with the problems associated with the bridge. That is another example of the difference that the Government are making.

We cannot separate this year's announcement from last year's or from the other initiatives that the Government have taken. One of those involves capital receipts. For the first time, there has been a relaxation on capital receipts. The previous Government would not do that. Housing Ministers used to blame the Treasury. In Halton, the relaxation on capital receipts has meant an extra £2.2 million, much of which has been spent on modernising houses, which had stopped under the previous Government, and on central heating programmes.

The settlement is good for council tax payers in Halton, where the council tax increase this year will be in line with the Government's guidelines. The council tax will also probably be, as it was last year, the second or third lowest in the north-west.

When I was the chair of finance on my borough council, and previously the chair of housing, it used to frustrate me no end—and every other councillor—that we could not plan for future years. We had no idea from one year to the next what settlement we would get. That was difficult not just for us as councillors, but for the people whom we served. Numerous minor changes would be made from one year to the next, which could not be explained away and caused even more problems. Now we have stability for the next three years and the ability to plan, which is a massive step forward and one of the most welcome aspects of the Government's approach to local government finance.

There have been important changes to capping. Universal capping has been removed. The Government are retaining some powers in that regard, which is sensible. I support their position. The previous Government would not countenance any change in capping, whereas this Government have listened and moved a fair way down the road.

Many hon. Members who have spoken in the debate have mentioned problems in their areas. Clearly, the system must be fairer. It will never be fairer to everyone—that would be impossible to achieve—but much progress has been made. There are many issues relating to housing benefit, for example, that affect my constituents, because there are so many housing association houses in the Halton area.

Change takes time, and it is not unreasonable to expect us to be patient. There is some way to go yet. The Government have made a clear commitment to examine the issues, and they have made a good start. I welcome the local government settlement. Local government must modernise itself, give best value and ensure that its services are best directed at those whom it serves, at a price that they are willing to pay.

Mr. Lansley

Will the hon. Gentleman give way?

Mr. Twigg

I am sorry—I have finished.

6.24 pm

Mr. Tony Baldry (Banbury)

The hon. Member for Halton (Mr. Twigg) says that this is a good settlement. He might like to come and explain that to people in Oxfordshire where, as a consequence of this year's settlement, families on income support who have children with learning difficulties will have to pay for day-care provision.

At the last general election, I predicted that if there were a Labour Government, counties such as Oxfordshire would be hard hit. If one examines this year's settlement, one sees that local authorities in the south have been hit, shire counties have been hit, and rural areas have been hit; so a shire county in the south that is predominantly rural, like Oxfordshire, is triply hit. The proof is there. Even the shire county SSA average increase is 5.2 per cent. this year. Oxfordshire simply has 3.8 per cent.—one of the lowest awards in the country.

This year, social services have £1 million more, but last year they had £1 million less. So in cash terms this coming year Oxfordshire will have to cope with what it had way back in 1997. In Oxfordshire, we face the possible closure of a number of day centres for the elderly and respite care centres for those with learning difficulties, and massive reductions in social service provision. The social service provision will be decimated.

Immediately after the settlement, the Minister for Local Government and Housing said on Radio 4 that no council should have to raise its council tax by more than 4.5 per cent. The Labour budget proposed for Oxfordshire county council would see a council tax rise of 12.5 per cent. Even that would not enable Oxfordshire county council to spend its SSA on education, and there would still be substantial cuts in social services. The Labour budget would see a council tax increase of some £285.

The Conservatives have sought to table an indicative budget, which they branded Blair's budget, which the county council would have to introduce if it tried to stick as close as possible to the Government's pronouncement of a council tax increase of 4.5 per cent. That would mean that spending on education was still below SSA, but social services provision would be decimated, like other budgets.

In Oxfordshire, families on income support now have to pay for basic services and the county surveyor has told parish councils that the budget cuts effectively mean that the minor road network will not be resurfaced for at least 50 years. A number of villages are now surrounded by failed road signs. The village of Piddington outside Bicester now has a number of failed road signs.

As a consequence of this year's settlement, hundreds of the most vulnerable people in Oxfordshire will suffer, and throughout the county the infrastructure will increasingly crumble. Most people will find it difficult to understand how the Minister for Employment, Welfare to Work and Equal Opportunities could say, the day after the settlement, that the people in Oxford and the rest of the county could expect steadily improving services. They clearly will not be able to.

When I intervened on the Deputy Prime Minister on the day that the announcement was made, he said that this year's settlement represented the best deal that Oxfordshire has had for years. I suspect that that will be emblazoned above the door of every closed day and respite care centre and every failing old people's home. Never before in the history of Oxfordshire county council has that come about.

This settlement for shire counties such as Oxfordshire means higher taxes and fewer services. It is a unique combination of the tax and the axe. Labour's settlement is an attack on the most vulnerable people in Oxfordshire. We shall see a substantial hike in our council tax bills and at the same time basic services in Oxfordshire will be decimated.

The settlement is a disgrace to the Government. I suspect that many people in Oxfordshire who voted Labour at the last general election will now be regretting it; that will be clearly demonstrated in the local government elections later this year. There can be no justification for this settlement, and no justification for its impact on Oxfordshire. I therefore hope that hon. Members, and many people, will vote against this monstrous settlement.

6.30 pm

Mr. Tony Clarke (Northampton, South)

I will be brief, not because of the time limit, but because I would not be making such a contribution were I as satisfied as some of my hon. Friends in respect of their settlements. I also believe that, the longer I am on my feet, the greater the chance of my saying something that I might regret at a later date. The Minister would expect a certain amount of criticism. It has been, is and always will be the case that those who receive the lowest settlements will plead their case, but I will try to be constructive and balanced in that criticism.

I of course recognise that this is probably one of the best settlements for a long time—for seven years, the Deputy Prime Minister said—and that the 5.5 per cent. average increase is to be welcomed. However, those at the lower end of that average—the losers—start to feel a little like someone at a party who is stone cold sober, and wondering what all the fun is about, when everyone else is drunk.

Northampton borough council, whose area is in my constituency, has been treated particularly badly and has a paltry 1.1 per cent. increase. The Department of the Environment, Transport and the Regions says that the average council tax increase should be 4.5 per cent., if councils were spending to the average increase in their standard spending assessment. There would be a doubling effect in Northampton. Not only do we have one of the lowest settlements, but we would probably have had to levy a higher council tax because of the problem of continual cutback over a number of years and our inability to deliver to the people of Northampton the services that they expect.

I acknowledge that Northamptonshire county council and South Northamptonshire council, whose areas are in my constituency, have done a little bit better, but that makes it even harder to accept that Northampton borough council has been left in such a position. Northampton has been badly treated for four reasons; two are directly related to the formula and the way that the figures have been calculated, and two are broader, but equally significant.

I have told the Minister on a number of occasions that I believe that Northampton continues to suffer, as the largest non-unitary district council in England. A population of 200,000 means that we are simply in the wrong club, and we should not be there with our district council colleagues. Northampton should have achieved unitary status when its neighbours—Milton Keynes, Leicester, Derby and Nottingham—achieved it; because of that, the town aspires to unitary status but has to accept, at the moment, that its budget of £19.1 million is not enough to meet the aspirations of its people.

Some may say that economies of scale could be made, but that would not work in Northampton because the population data used by the Department is not only outdated, but continually out of date. Northampton is still the third-fastest growing town in Europe. The DETR figure for the population is 194,000. The council accepts the figure of 198,000, but the population is already probably more than 200,000.

Each year, between 2,000 and 2,500 homes are constructed in Northampton. Each year, they bring with them additional burdens for the council, which has to provide additional services. I give an example of that effect. On this year's settlement, we will be paid only for the 194,000 people who the Department recognise as living in the town, but we will have to provide services for the 198,000 or more people who live there. We will also have to find, in the next 12 months, an additional £135,000, simply for refuse collection and street cleaning, for the 3,000 people who will move on to new estates and into new areas between now and next year's settlement.

In respect of the changes to the methodology on capital financing, I also believe that Northampton has been particularly hard hit: 5 per cent. of our £19.1 million budget—£545,000—has disappeared, because of that one change. We pleaded with the Minister that a council such as Northampton, which has been hit so badly by one factor, should be able to phase the change in. We should be able to manage that transition over a longer period, so that it will not have such devastating effect on the budget.

I make no excuse for mentioning the impact that the Easter floods of last year had on Northampton. Even after the money provided by the Bellwin scheme and the insurance costs that were paid, the council faces £300,000 in costs that it knows it cannot recover. Because 2,500 homes were flooded, it was impossible to collect council tax from homes that were uninhabitable. That alone has cost us £500,000.

Given the time, I must cut short my comments. Let me simply ask my hon. Friend the Minister to understand Northampton's difficulties better, and to understand my continuing disquiet, both as a constituency MP and as one who is still a member of Northampton borough council, about the fact that, given that paltry 1.1 per cent., we may be unable to deliver the services that she would want us to deliver. I am sure that, if she understands that, she will understand why I cannot support the settlement until I feel that it is fairer to Northampton and its council tax payers.

Mr. Lansley

rose—

Mr. Gardiner

On a point of order, Mr. Deputy Speaker. Can it be right that, of the three hours available for discussion of the local government settlement, an hour and 25 minutes will have been taken up by the opening and closing speeches from the two Front Benches, and—

Mr. Deputy Speaker (Mr. Michael Lord)

Order. I am sorry to interrupt the hon. Gentleman, and I entirely understand the point that he is trying to make, but this is the way the House always conducts business of this kind. The time that hon. Members take for their speeches is largely a matter for them, and time is now being taken from the time that is left for debate.

6.36 pm

Mr. Andrew Lansley (South Cambridgeshire)

If the hon. Member for Brent, North (Mr. Gardiner) has an objection, he should raise it with his Front Bench. Last year, five hours and two minutes were allowed for this debate, and in the preceding nine years never was less than five hours and 20 minutes allowed. This year, the time has been reduced to two hours and 49 minutes.

It is clear from the three speeches that we have just heard why the Government do not want a long debate on this subject. The hon. Member for Halton (Mr. Twigg) is in a minority of one on the Labour Benches in applauding the settlement. Why does he applaud it?

Mrs. Ellman

Will the hon. Gentleman give way?

Mr. Lansley

No; I have no time.

I will tell the House why the hon. Member for Halton applauds the settlement. The hon. Member for Northampton, South (Mr. Clarke), for example, spoke of methodology changes, and the Government's political fix which meant shifting money from shire areas and London to metropolitan areas: 2.9 per cent. has been lost in Northampton in methodology changes. My hon. Friend the Member for Banbury (Mr. Baldry) spoke of Oxfordshire, where a 4.8 per cent. increase in the control total was reduced to 3.8 per cent., simply because of the SSA methodology changes. The hon. Member for Halton is happy, however. Why is he happy? Because the control total increase of 4.1 per cent. was increased to 5.9 per cent. by the changes in SSA methodology. That proves the point that my right hon. Friend the Member for South-West Norfolk (Mrs. Shephard) was making about the shift from the shires and London to the metropolitan districts.

Mr. Andrew Love (Edmonton)

Will the hon. Gentleman give way?

Mr. Lansley

No.

That is why the hon. Member for Halton is happy, and others are not.

Mr. Love

rose—

Mr. Eric Pickles (Brentwood and Ongar)

Will my hon. Friend give way?

Mr. Lansley

I shall give way to the hon. Member for Edmonton (Mr. Love), because it would be discourteous not to do so.

Mr. Love

I thank the hon. Gentleman for giving way. I am not sure whether it is premature to welcome him to the Front Bench, but I do so in any case.

The right hon. Member for South-West Norfolk (Mrs. Shephard) welcomed the 7.2 per cent. increase for education. Will the hon. Gentleman now take the opportunity to welcome the 5.5 per cent. overall increase in spending on local government in the coming year?

Mr. Lansley

In the few minutes left to me, I shall make it clear that although the Government have increased spending for local authorities, they have not kept in touch with the current changes in spending pressures. Let me give an example. There has been a £2 billion increase in aggregate external finance in England, but an extra £130 million must be spent by local government because of the change in advance corporation tax. It would have been £230 million but for the changes in actuarial calculations. At least £100 million, probably more, will have to be spent on the millennium bug, and £80 million will have to be spent on landfill tax. Anyone who knows about waste will know that will be compounded by the increased cost of waste charges. The working time directive and the minimum wage will cost £200 million. Then there is the overhang of teachers' pay settlements, and the £70 million extra that is unfunded. If we add all that together, we realise that at least £600 million is being taken out of the £2 billion.

Mr. Pickles

In his brief speech so far, my hon. Friend has explained where the £33 million by which Essex county council is short to fund its services adequately, has gone.

Mr. Lansley

Absolutely. Essex has exactly the same experience as Cambridgeshire. Although we have an increase, spending pressures are such that we will end up with a 10 per cent. increase in council tax. The Government's policies will lead to a higher council tax and a loss of services.

My hon. Friends the Members for Wantage (Mr. Jackson) and for Banbury instanced that in relation to Oxfordshire. My hon. Friend the Member for South Dorset (Mr. Bruce) spoke of Dorset and my right hon. Friend the Member for Bridgwater (Mr. King) spoke strongly of the impact on schools in Somerset. The hon. Member for Leicester, South (Mr. Marshall) perhaps put it best when he described it as another abysmal year.

The impact is on council tax in the first instance. Last year, the average increase was 8.6 per cent.; this year, the Treasury estimates a 7.5 per cent. increase. If we put the two together, in the two years to 2000 the Government will preside over increases in council tax that are three times the rate of inflation. The Government are again introducing stealth taxes through local government taxation. Within the settlement, much has not been done, and that deserves our criticism. The Government have significantly failed to grasp important nettles. My right hon. Friend the Member for Skipton and Ripon (Mr. Curry) spoke strongly of the failure to remedy unreasonable deficits and disparities in funding for local education authorities. Work should be done on the additional educational needs index and on pupil weighting.

Likewise, my hon. Friend the Member for West Derbyshire (Mr. McLoughlin), the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) and the hon. Member for Lancaster and Wyre (Mr. Dawson) spoke strongly about the need to do something about the area cost adjustment. I understand that, because Cambridgeshire is one of those councils that is beyond the cliff edge in terms of the adjustment. The Deputy Prime Minister says that it is difficult. Three days before the last general election, the Prime Minister, when asked the question, "What are you going to do about it?" did not say, "It is difficult"; he said, "I am going to review it and change it for the year 1998–99."

The Prime Minister did not change it for the year 1998–99. He is not changing it for 1999–2000—he is freezing an unfair distribution system for a further three years. To compound the error of his ways, the Deputy Prime Minister says that Ministers will not take deputations on the subject—they will not listen to the arguments. All the material is being presented through examination of the area cost adjustment, but they will not deal with it.

Through the settlement, the Government have brought further errors into the system. Crude and universal capping is the subject of debate in relation to the Local Government Bill; I suspect that crude and universal capping is precisely what will arise from the powers that the Government are taking through the Bill. However, through the council tax benefit subsidy limitation we have something that is equally crude and universal.

The criticism by the hon. Members for Normanton (Mr. O'Brien) and for Sutton and Cheam (Mr. Burstow) was right. As a consequence of the settlement, some of the poorer councils will have to raise council taxes by more than 4.5 per cent. A significant part of that money will be raised from poor people in their areas. In fact, money will be taken away to subsidise council tax benefit for those who are unable to pay council tax. It is an iniquitous clawback system.

Within that, there is a further iniquity. Councils that spend below SSA—and South Cambridgeshire spends 23 per cent. below it—will be penalised in the same way, although its budget is well below that which the Government regard as necessary for providing services.

Time is short. By keeping the debate so short, the Government have limited the opportunities for hon. Members on both sides of the House to draw out the problems with the settlement.

The size of the settlement hides a reality. Over two years, council tax rises will be three times the rate of inflation. There has been no response to spending pressures. Service improvements that might otherwise have been achieved will be bled away in the cost pressures that are being placed on local government, principally through Government changes: a political fix that shifts money out of shire areas and London into metropolitan areas will damage services in many important regions in a way that is iniquitous and at odds with Deputy Prime Minister's initial statement that the settlement was nothing to do with councils' political complexion. Well, perhaps not—yet the damage that will be caused to certain areas of the country by the Government's methodological changes makes clear their intention.

We are looking at a system which is taking money and piling it into some of the councils that are the most likely to waste it rather than to spend it successfully on good services. It is the traditional Labour policy of increasing taxes and piling it into the waste. It is as though the Government have come to the House saying, "Look how wonderful we are. We have turned on the taps and the water is pouring out." Unfortunately, they have left out the plug. It is our responsibility, in the short time available, to tell the Government where the settlement has gone wrong and to oppose it.

6.45 pm

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

We have had an interesting debate about a settlement which, despite what hon. Members have said, is the best overall for seven years. It is the most generous settlement since the introduction of council tax and it is fair to all councils, not fixed in the interests of one or two. We have learnt quickly that, however much the settlement is, there will always be arguments about why it should be more and why different areas have different priorities. Of course, we must continue to look at that and we will be doing so.

Conservative Members need to remember the miserable local government settlements that they heaped on all of local government before they venture into criticism this year. Education and social services authorities, whether in rural areas or urban England, have done well as we honour our pledges to raise standards in education and improve health and social services. We have made some changes to the way the formula is calculated so that it better reflects the findings from research into local need and patterns of service delivery.

Sir Peter Emery (East Devon)

The hon. Lady is talking about fairness. East Devon district council has no debt. It is so efficiently run that there is no long-term indebtedness. Despite that, its grant was cut last year, and this year it has not been restored to the level that existed before the Labour party took office. How can that be fair?

Ms Armstrong

The right hon. Gentleman will admit that Devon county council has an increased award this year, which represents the Government's commitment to putting money into education and social services.

In any formula-based system, change means winners and losers—of course it does. This year, to make sure that those changes can be phased in, we have made special provision to ensure that no council will lose grant next year compared to this year. That applies to East Devon too.

Every education and social services authority will receive at least 1.5 per cent. extra in grant next year. As my right hon. Friend the Deputy Prime Minister made clear, the settlement provides for £2.6 billion of extra spending—an increase of 5.5 per cent. on last year. That extra money comes with strings attached. It is money for modernisation and for improving the quality of services provided by local councils to their public. Some councils—we have heard this today—may be tempted to use the extra money to restore past cuts and to deal with past problems. I urge them to think again and to use the new resources to look forwards, not backwards. They should plan for new patterns of service to meet the needs of local people today and tomorrow.

Councils now have three years of financial stability to plan and deliver the modernisation of their services. They can use them creatively to restructure services over the medium term and to achieve best value, safe in the knowledge that, for the first time, the Government have set out a three-year funding package.

The Government have made it clear that there will be no methodology changes in the next three years—during which we want to examine the current methodology to determine whether it can be improved. Simultaneously, we want to determine whether there is a system for distributing grant that is much fairer than the standard spending assessment methodology.

I should tell my hon. Friend the Member for St. Helens, North (Mr. Watts) that he would have an opportunity to contribute properly not only to such a review but to his authority. We should think not only about additional educational needs and area cost adjustment, but about whether we can introduce a fairer system of redistribution.

Jackie Ballard

In the next three years, councils will face the council tax benefit subsidy limitation. The Minister received no letters in support of that proposal, and 119 letters opposed to it, including one from her own Labour-controlled Durham county council. How will she respond to them?

Ms Armstrong

In the same way as I have responded to the House today—[Interruption.] We disagree with them. Consultation does not entail agreeing with everyone. I should not have expected any council to say that it was in favour of—[Interruption.] Perhaps the hon. Member for Taunton (Jackie Ballard) does not want to hear the answer.

I should not expect any council to say that it was in favour of the limitation, as it raises the issue of balancing funding from central taxation and from local taxation. Council tax benefit is currently funded from central taxation. We believe that there should be a balance and are giving local councils responsibility for a small element of it.

I reject entirely any suggestion that the settlement is biased in favour of one type of authority or another. I was staggered at the comments on rural areas made by the right hon. Member for South-West Norfolk (Mrs. Shephard). Her county is in a rural area. This year, it received a 6.2 per cent. increase in addition to other specific grants for rural areas, for transport and other rural services. She knows that that is true, and that she was simply being disingenuous.

The hon. Member for South Cambridgeshire (Mr. Lansley) complained about Essex, which received the largest cash increase.

Mrs. Shephard

Will the hon. Lady give way?

Ms Armstrong

I shall give way in a moment. First, I should like to say some things to the right hon. Lady, who was plainly out of her depth.

The right hon. Lady said that Norfolk received the worst settlement in its history, which—as she knows—was plain wrong. She said that Birmingham received the biggest increase, which also was wrong. Although Birmingham is the largest authority, it received an overall 4 per cent. increase, which hon. Members will know was not the biggest in the country.

The right hon. Member for South-West Norfolk is prepared to throw mud in the hope that it sticks. The Government will deal with the facts, which she has not quite caught up with yet.

Mrs. Shephard

Does the hon. Lady deny the contents of her own table, which shows the reductions for shire areas?

Ms Armstrong

There are not reductions but increases for shire areas—including hers—of 6.2 per cent. Conversely—when was it?—in 1995 or 1996, when the right hon. Lady was in the Cabinet, her Government gave Norfolk county council 0.5 per cent. less than it had received the year before. This year, Norfolk may not have received the increase that the right hon. Lady wanted, but it certainly received a big increase over last year.

Mr. Lansley

Will the hon. Lady simply recognise the fact that, in the coming year—purely because of methodological changes, on top of last year's similar changes—£43 million will be taken from shire areas, £39 million will be taken from London, and £83 million extra will go to metropolitan areas?

Ms Armstrong

The hon. Gentleman does not understand. The overall amount going in is greater. It may be less than if we had made no changes, but it is still a huge increase. How much would you have given?

Mr. Deputy Speaker

Order. The hon. Lady must remember that she is addressing the Chair.

Ms Armstrong

How much would the Conservatives have given? We are talking about the distribution of the biggest grant since the introduction of council tax. That is not a reduction; it is an increase.

Brent has had a difficult settlement, but we said that we had to re-order matters to achieve greater fairness. Brent tells me that it is the 20th poorest borough in the country. It is, but it has the 18th highest SSA per head in the country.

Mr. Gardiner

My hon. Friend has listened carefully to Brent's representations over the past weeks and I thank her for that. I also thank her for the extra £2.5 million that she has put in. Will the Government consider rescheduling the debt repayments on the £8.4 million of housing revenue account subsidy that was overpaid under the Conservatives between 1992 and 1995, to give Brent some desperately needed breathing space?

Ms Armstrong

I am sure that Brent will want to come to us and ask for that. I cannot answer that today because it is not an issue for the settlement.

My hon. Friend the Member for Normanton (Mr. O'Brien) was right to say how generous the settlement is. The council tax benefit subsidy limitation scheme does not hit poorer areas harder. It protects the poorest areas by treating them the same as the average areas.

The right hon. Member for Skipton and Ripon (Mr. Curry) takes the biscuit. He complains that North Yorkshire did not receive damping grant to bring its grant up to the 1.5 per cent. increase. We used the same principles as his Government, damping on the overall settlement and not on individual methodological changes. North Yorkshire has got 4.7 per cent.

I appreciate the comments of my hon. Friend the Member for Leicester, South (Mr. Marshall) about the difficulties that his authority faces. It is working hard to overcome them.

Let me turn to the Liberal Democrats. I remind them—[Interruption.] They do not want to hear it. In their manifesto, they said that they would spend £1.8 billion per year to a total of £5 billion over three years. Just for the next three years, the Government have committed £19 billion. We have already spent more than they committed for the whole Parliament. They said that they would spend an extra £700 million on health to a total of £2 billion over three years. The Government have committed £21 billion. Either they were not telling us the truth then or they are not telling us the truth today. The Liberal Democrats said today that the gap was £1.7 billion. The Guardian says that few independent local government analysts agreed that the gap would be that big. The Liberal Democrats need to do some work.

In 1994–95, when the hon. Member for Banbury (Mr. Baldry) was in government, Oxfordshire county council got 0.5 per cent. less than it had the previous year. Maybe that is why it has problems this year.

The settlement is the most generous since the introduction of the council tax. There is more money for modernising services, new protection for the council tax payer, better services—

It being Seven o'clock, MR. DEPUTY SPEAKER put the Question, pursuant to Order [1 February].

Question put:—

The House divided: Ayes 272, Noes 140.

Division No. 58]	[7 pm
AYES
Abbott, Ms Diane	Cook, Rt Hon Robin (Livingston)
Adams, Mrs Irene (Paisley N)	Corbett, Robin
Ainger, Nick	Corbyn, Jeremy
Ainsworth, Robert (Cov'try NE)	Corston, Ms Jean
Anderson, Donald (Swansea E)	Cousins, Jim
Anderson, Janet (Rossendale)	Cranston, Ross
Armstrong, Ms Hilary	Cunliffe, Lawrence
Atherton, Ms Candy	Cunningham, Rt Hon Dr Jack (Copeland)
Atkins, Charlotte
Austin, John	Cunningham, Jim (Cov'try S)
Banks, Tony	Curtis-Thomas, Mrs Claire
Barnes, Harry	Darling, Rt Hon Alistair
Barron, Kevin	Darvill, Keith
Bayley, Hugh	Davies, Rt Hon Denzil (Llanelli)
Beard, Nigel	Davies, Geraint (Croydon C)
Beckett, Rt Hon Mrs Margaret	Dawson, Hilton
Bennett, Andrew F	Dean, Mrs Janet
Benton, Joe	Denham, John
Bermingham, Gerald	Dismore, Andrew
Berry, Roger	Dobbin, Jim
Best, Harold	Dobson, Rt Hon Frank
Betts, Clive	Donohoe, Brian H
Blackman, Liz	Dowd, Jim
Blears, Ms Hazel	Drew, David
Blizzard, Bob	Drown, Ms Julia
Boateng, Paul	Dunwoody, Mrs Gwyneth
Borrow, David	Eagle, Angela (Wallasey)
Bradley, Keith (Withington)	Eagle, Maria (L'pool Garston)
Bradley, Peter (The Wrekin)	Efford, Clive
Brown, Rt Hon Nick (Newcastle E)	Ellman, Mrs Louise
Buck, Ms Karen	Ennis, Jeff
Burden, Richard	Fatchett, Derek
Burgon, Colin	Field, Rt Hon Frank
Butler, Mrs Christine	Fitzpatrick, Jim
Byers, Rt Hon Stephen	Fitzsimons, Lorna
Campbell, Mrs Anne (C'bridge)	Flint, Caroline
Campbell, Ronnie (Blyth V)	Flynn, Paul
Cann, Jamie	Foster, Michael J (Worcester)
Caplin, Ivor	Foulkes, George
Casale, Roger	Fyfe, Maria
Cawsey, Ian	Galloway, George
Chapman, Ben (Wirral S)	Gapes, Mike
Clark, Rt Hon Dr David (S Shields)	George, Bruce (Walsall S)
Clark, Dr Lynda (Edinburgh Pentlands)	Gerard, Neil
	Gibson, Dr Ian
Clarke, Rt Hon Tom (Coatbridge)	Godman, Dr Norman A
Clwyd, Ann	Godsiff, Roger
Coaker, Vemon	Goggins, Paul
Coffey, Ms Ann	Gordon, Mrs Eileen
Cohen, Harry	Griffiths, Jane (Reading E)
Coleman, Iain	Griffiths, Win (Bridgend)
Colman, Tony	Hall, Mike (Weaver Vale)
Connarty, Michael	Hanson, David

Harman, Rt Hon Ms Harriet	Morley, Elliot
Heal, Mrs Sylvia	Morris, Rt Hon John (Aberavon)
Healey, John	Mountford, Kali
Henderson, Ivan (Harwich)	Mullin, Chris
Heppell, John	Murphy, Paul (Torfaen)
Hesford, Stephen	Naysmith, Dr Doug
Hill, Keith	Norris, Dan
Hinchliffe, David	O'Brien, Bill (Normanton)
Hoey, Kate	O'Brien, Mike (N Warks)
Home Robertson, John	Olner, Bill
Hoon, Geoffrey	O'Neill, Martin
Hope, Phil	Osborne, Ms Sandra
Hopkins, Kelvin	Palmer, Dr Nick
Howarth, Alan (Newport E)	Pearson, Ian
Howells, Dr Kim	Perham, Ms Linda
Hoyle, Lindsay	Pickthall, Colin
Hughes, Ms Beverley (Stretford)	Pike, Peter L
Hughes, Kevin (Doncaster N)	Plaskitt, James
Humble, Mrs Joan	Pollard, Kerry
Hurst, Alan	Pond, Chris
Hutton, John	Pope, Greg
Iddon, Dr Brian	Pound, Stephen
Illsley, Eric	Powell, Sir Raymond
Jackson, Ms Glenda (Hampstead)	Prentice, Ms Bridget (Lewisham E)
Jamieson, David	Prentice, Gordon (Pendle)
Jenkins, Brian	Primarolo, Dawn
Johnson, Alan (Hull W & Hessle)	Prosser, Gwyn
Johnson, Miss Melanie (Welwyn HaUeld)	Quinn, Lawrie
	Radice, Giles
Jones, Helen (Warrington N)	Rammell, Bill
Jones, Dr Lynne (Selly Oak)	Rapson, Syd
Keen, Alan (Feltham & Heston)	Raynsford, Nick
Keen, Ann (Brentford & Isleworth)	Reed, Andrew (Loughborough)
Kelly, Ms Ruth	Reid, Rt Hon Dr John (Hamilton N)
Khabra, Piara S	Rooker, Jeff
Kilfoyle, Peter	Rooney, Terry
King, Andy (Rugby & Kenilworth)	Ross, Ernie (Dundee W)
King, Ms Oona (Bethnal Green)	Rowlands, Ted
Kingham, Ms Tess	Ruddock, Ms Joan
Ladyman, Dr Stephen	Ryan, Ms Joan
Laxton, Bob	Salter, Martin
Lepper, David	Sawford, Phil
Leslie, Christopher	Shaw, Jonathan
Levitt, Tom	Sheerman, Barry
Lewis, Ivan (Bury S)	Sheldon, Rt Hon Robert
Linton, Martin	Shipley, Ms Debra
Lloyd, Tony (Manchester C)	Short, Rt Hon Clare
Lock, David	Simpson, Alan (Nottingham S)
Love, Andrew	Singh, Marsha
McAvoy, Thomas	Skinner, Dennis
McCabe, Steve	Smith, Angela (Basildon)
McDonagh, Siobhain	Smith, Rt Hon Chris (Islington S)
McDonnell, John	Smith, Miss Geraldine (Morecambe & Lunesdale)
McFall, John
McIsaac, Shona	Smith, Jacqui (Redditch)
McKenna, Mrs Rosemary	Smith, Llew (Blaenau Gwent)
Mackinlay, Andrew	Snape, Peter
McNulty, Tony	Soley, Clive
MacShane, Denis	Spellar, John
Mactaggart, Fiona	Starkey, Dr Phyllis
McWalter, Tony	Stevenson, George
McWilliam, John	Stewart, Ian (Eccles)
Mahon, Mrs Alice	Stinchcombe, Paul
Mallaber, Judy	Stoate, Dr Howard
Marsden, Gordon (Blackpool S)	Stringer, Graham
Marsden, Paul (Shrewsbury)	Stuart, Ms Gisela
Marshall, David (Shettleston)	Sutcliffe, Gerry
Marshall-Andrews, Robert	Taylor, Rt Hon Mrs Ann (Dewsbury)
Marttew, Eric
Maxton, John	Taylor, David (NW Leics)
Meale, Alan	Temple-Morris, Peter
Michie, Bill (Shef'ld Heeley)	Thomas, Gareth R (Harrow W)
Milburn, Alan	Touhig, Don
Miller, Andrew	Trickett, Jon
Moffatt, Laura	Truswell, Paul
Moran, Ms Margaret	Turner, Dr Desmond (Kemptown)

Twigg, Derek (Halton)	Wills, Michael
Vaz, Keith	Wilson, Brian
Vis, Dr Rudi	Winnick, David
Walley, Ms Joan	Winterton, Ms Rosie (Doncaster C)
Wareing, Robert N	Wise, Audrey
Watts, David	Worthington, Tony
White, Brian	Wright, Anthony D (Gt Yarmouth)
Whitehead, Dr Alan	Wyatt, Derek
Wicks, Malcolm
Williams, Rt Hon Alan (Swansea W)	Tellers for the Ayes:
	Mr. Graham Allen and
Williams, Alan W (E Carmarthen)	Mrs. Anne McGuire.

NOES
Ainsworth, Peter (E Surrey)	Harris, Dr Evan
Allan, Richard	Hawkins, Nick
Amess, David	Heath, David (Somerton & Frome)
Arbuthnot, Rt Hon James	Horam, John
Atkinson, Peter (Hexham)	Howard, Rt Hon Michael
Baldry, Tony	Howarth, Gerald (Aldershot)
Ballard, Jackie	Hughes, Simon (Southwark N)
Bercow, John	Hunter, Andrew
Beresford, Sir Paul	Jack, Rt Hon Michael
Blunt, Crispin	Jackson, Robert (Wantage)
Boswell, Tim	Jenkin, Bernard
Brady, Graham	Jones, Nigel (Cheltenham)
Brake, Tom	Keetch, Paul
Brazier, Julian	Key, Robert
Brooke, Rt Hon Peter	King, Rt Hon Tom (Bridgwater)
Browning, Mrs Angela	Kirkbride, Miss Julie
Bruce, Ian (S Dorset)	Lait, Mrs Jacqui
Burnett, John	Lansley, Andrew
Burns, Simon	Leigh, Edward
Burstow, Paul	Letwin, Oliver
Butterfill, John	Lidington, David
Chapman, Sir Sydney (Chipping Barnet)	Lloyd, Rt Hon Sir Peter (Fareham)
	McIntosh, Miss Anne
Chidgey, David	MacKay, Rt Hon Andrew
Chope, Christopher	Maclean, Rt Hon David
Clappison, James	McLoughlin, Patrick
Clark, Rt Hon Alan (Kensington)	Madel, Sir David
Clarke, Rt Hon Kenneth (Rushcliffe)	Malins, Humtrey
	Maples, John
Clifton-Brown, Geoffrey	Mates, Michael
Colvin, Michael	Mawhinney, Rt Hon Sir Brian
Cormack, Sir Patrick	May, Mrs Theresa
Cotter, Brian	Moss, Malcolm
Curry, Rt Hon David	Nicholls, Patrick
Davey, Edward (Kingston)	Norman, Archie
Davies, Quentin (Grantham)	Oaten, Mark
Day, Stephen	Öpik, Lembit
Dorrell, Rt Hon Stephen	Page, Richard
Duncan, Alan	Paice, James
Duncan Smith, Iain	Paterson, Owen
Emery, Rt Hon Sir Peter	Pickles, Eric
Evans, Nigel	Prior, David
Faber, David	Randall, John
Fabricant, Michael	Redwood, Rt Hon John
Fallon, Michael	Rendel, David
Fearn, Ronnie	Robathan, Andrew
Forth, Rt Hon Eric	Robertson, Laurence (Tewk'b'ry)
Foster, Don (Bath)	Roe, Mrs Marion (Broxbourne)
Fowler, Rt Hon Sir Norman	Ruffley, David
Fox, Dr Liam	Russell, Bob (Colchester)
Fraser, Christopher	Sanders, Adrian
Gale, Roger	Shephard, Rt Hon Mrs Gillian
Garnier, Edward	Simpson, Keith (Mid-Norfolk)
Gillan, Mrs Cheryl	Spicer, Sir Michael
Gorman, Mrs Teresa	Spring, Richard
Gorrie, Donald	Stanley, Rt Hon Sir John
Gray, James	Steen, Anthony
Green, Damian	Streeter, Gary
Greenway, John	Swayne, Desmond
Grieve, Dominic	Syms, Robert
Hamilton, Rt Hon Sir Archie	Taylor, John M (Solihull)
Hammond, Philip	Taylor, Matthew (Truro)

Taylor, Sir Teddy	Whitney, Sir Raymond
Tonge, Dr Jenny	Whittingdale, John
Townend, John	Widdecombe, Rt Hon Miss Ann
Trend, Michael	Wilkinson, John
Tyler, Paul	Willetts, David
Viggers, Peter	Willis, Phil
Walter, Robert	Young, Rt Hon Sir George
Wardle, Charles
Waterson, Nigel	Tellers for the Noes:
Webb, Steve	Mr. Oliver Heald and
Wells, Bowen	Mr. Tim Collins.

Question accordingly agreed to.

Resolved, That the Local Government Finance Report (England) 1999–2000 (HC 143), which was laid before this House on 1st February, be approved.

MR. DEPUTY SPEAKER then put the remaining Questions required to be put at that hour.

Resolved, That the Local Government Finance (England) Special Grant Report (No. 37) (HC 144), which was laid before this House on 1st February, be approved. That the Local Government Finance Report (England) 1997–98: Amending Report 1999 (HC 145), which was laid before this House on 1st February, be approved.—[Mr. Betts.]