Local Government Finance (Wales)

HC Deb 11 February 1999 vol 325 cc483-517 1.40 pm

The Secretary of State for Wales (Mr. Alun Michael)

I beg to move, That the Local Government Finance Report (Wales) 1999–2000 (HC 203), which was laid before this House on 3rd February, be approved.

Madam Speaker

With this it will be convenient to discuss the following motions: That the Local Government Finance (Amendment) Report (Wales) 1998–1999 (HC 204), which was laid before this House on 3rd February, be approved. That the Special Grant Report (Wales) 1999 (HC 177), which was laid before this House on 28th January, be approved.

Mr. Michael

The local government finance report contains my decisions on the local government revenue settlement for 1999–2000. It has been welcomed widely as the most helpful settlement for local government in Wales for many years. It is more generous than in previous years, but it also reflects our higher expectation of local government, the role of local government in meeting our commitment to improving education and other services, and our determination to achieve best value in the delivery of services and the outcomes we seek.

The special grant report sets out the grant allocations of bus subsidy grant to local authorities for 1999–2000.

Mr. John Smith (Vale of Glamorgan)

I warmly welcome this statement and the record increase in service spending in Wales. I welcome particularly the additional funding for transportation and buses. Will my right hon. Friend confirm that the Government are able to ensure that local authorities spend the additional funding on the additional services that are required? Just this week, my constituent Mr. Howard Done collapsed in Cowbridge. He is in his 80s and was waiting in the freezing cold for a bus that is subsidised by the additional transport subsidy. That bus, run by Shamrock Coaches, did not come and neither did a second bus. Poor Mr. Done collapsed, was taken into someone's home and then transported back to Barry. It is essential that funds go where they are needed.

Mr. Michael

My hon. Friend raises a very important point. We must improve the quality of bus transport in rural areas, and I shall develop that issue in a moment.

In the settlement, the Vale of Glamorgan area will receive an increase in bus grant of 128 per cent—or an additional £108,786—in the coming year, which is designed to address precisely the issues raised by my hon. Friend. I am sure that the local authority will be quick to take up issues concerning specific services and service efficiency. We shall enable the local authority to do more and provide the sorts of services to which my hon. Friend referred.

The £5 million that has been allocated to local authorities in the special grant report is an increase of £2.75 million—or more than 120 per cent.—on the settlement this year, and is designed to provide additional support for bus services. Of that sum, £3 million will be spent in support of rural bus services—an increase of 33 per cent. on the funding made available for such services in 1998–99. However, because the need for public transport is not confined to rural areas, the Under-Secretary of State for Wales, my hon. Friend the Member for Neath (Mr. Hain), and I have allocated a further £2 million and given councils the freedom to decide whether to spend it on urban or rural services.

This funding will make a tremendous difference to bus services in Wales. It will provide up to 16 million additional bus kilometres—or 10 million miles in old money—which represents an increase of more than 60 per cent. in the provision of socially necessary services compared with the position in 1997–98 when no such grants were available from central Government. I expect councils to use this new money imaginatively and effectively.

A related strand of our integrated transport policy concerns concessionary fares. From April, I expect all councils in Wales to operate schemes for pensioners that at least meet the minimum standard of £5 for a bus pass and half fare for bus travel. The increase in net total standard spending includes sufficient funds for that. Over the following two to three years, we intend to provide free concessionary travel for pensioners.

The amendment report for 1998–99, the third of the reports to which I referred, replaces the revised report approved by the House on 11 February 1998. An error in the data on the number of secondary school pupils in Cardiff came to light last summer, and my predecessor decided that it should be corrected. I believe that he promised the House that it would be. Local authorities were consulted and no comments were received. Its correction means that Cardiff county council's entitlement to revenue support grant will be reduced by £171,000 and the entitlement of the other 21 authorities increased by a similar amount.

I turn now to the details of the settlement for 1999–2000. Total standard spending, or TSS, net of specific grants, is general funding for local authority services. I propose to set net TSS for 1999–2000 at £2,986.6 million, an increase of 5.1 per cent. on 1998–99.

Net TSS comprises £180.1 million for Welsh police authorities, £2,804.7 million in standard spending assessments for the 22 councils, and £1.8 million in allocations to specified bodies, such as the improvement and development agency for local government and the local government ombudsman. The increase in total police provision represents a rise of 2.2 per cent. on 1998–99 and includes the amount for police grant to be paid by my right hon. Friend the Home Secretary that was approved by the House on 4 February.

Mr. Richard Livsey (Brecon and Radnorshire)

The Secretary of State knows that the initial allowance for Dyfed-Powys police was 0.8 per cent., which is not enough to sustain the police service there. Has he done anything since the original announcement to improve the situation?

Mr. Michael

I am coming to an aspect of that which lies within the responsibilities of the Welsh Office, but responsibility for police grant lies with the Home Office. The hon. Gentleman may know that when I was Minister of State at the Home Office, I instigated research on the sparsity factor to address precisely that issue, which has been raised consistently by the Dyfed-Powys police. I understand that it is still hoped that the research will be completed in time to inform the next police grant settlement.

I propose to provide £2,570.2 million of aggregate external finance, or AEF, net of specific grants. That is an increase in central Government grant support of 4.8 per cent. on 1998–99. AEF is made up of £1,890.2 million in revenue support grant, £656 million in redistributed non-domestic rates and £22.2 million for council tax reduction grant.

As we promised in the White Paper "Local Voices", we are abolishing crude and universal capping. The Local Government Bill has been introduced and is in Committee. In line with the White Paper, I am not announcing capping principles in advance. I still have reserve powers to cap authorities if they do not budget prudently. I do not want to have to use my powers and will do so only as a last resort to protect tax payers from excessive council tax increases.

The Welsh Local Government Association has agreed that this is a good settlement for local government in Wales, and that council tax increases should be lower this year than in previous years. This positive approach, and the good partnership that exists, should mean that confrontation can be avoided.

Mr. Desmond Swayne (New Forest, West)

Will the Secretary of State help the House by giving at least some indication of the criteria he will use when deciding whether a council should be capped?

Mr. Michael

No, I shall not: the hon. Gentleman has no constituency interest in a reply to that question. I have made it clear that I am working in co-operation with Welsh local authorities and that partnership is the right approach. Local authorities and, I am sure, Members of Parliament who represent Welsh constituencies understand the signal that is being given; which is that, as long as local authorities budget prudently and do not propose unreasonable increases, I do not intend to use the powers available to me.

Mr. Dafydd Wigley (Caernarfon)

The Secretary of State emphasises that he is giving greater flexibility to local authorities, but does he accept that one area of the settlement in which flexibility has been taken away from local authorities is housing renovation? By taking a proportion of those funds into a central pool, the right hon. Gentleman has left local authorities such as mine in an uncertain position, now that they have lost £3.5 million from housing renovation funds. It appears that authorities are not to know until mid-March what their allocation from the fund will be.

Will the Secretary of State consider giving indicative figures some time this month, so that the authorities can go ahead and draw up their budget for housing in good time for the beginning of the next financial year? Without that, their housing renovation funds will be in chaos.

Mr. Michael

Setting priorities as we have done in matters such as education means that there are certain other budgets which, although we would love to increase them, we cannot increase to the extent that we would like. On housing, we are still spending at a higher level than is the case in respect of English local authorities. We shall work with the WLGA to get the best from the money available and to target the money more effectively. Ensuring that outcomes improve is the main target.

Mr. Alan W. Williams (East Carmarthen and Dinefwr)

Did I correctly understand my right hon. Friend to say that we are now getting rid of rate capping? Given that we hope to get objective 1 funding from next year, does that mean that, however much objective 1 funding is available, if the Welsh Office cannot make adequate matching funds available, local authorities will be able set their own rate so that they can provide the 25 per cent. from within their own resources?

Mr. Michael

I said that we are abolishing crude and universal capping. It is in that spirit that I have worked with the WLGA, rather than set levels. That is the reason for my response to the hon. Member for New Forest, West (Mr. Swayne), who appears not to have understood the point. As for objective 1 funding, its financial implications for local authorities, and our working out how best to take advantage of it, I shall be discussing the matter with the WLGA as soon as we are certain of the decision—in respect of which I share my hon. Friend's optimism.

Mr. Swayne

On a point of order, Mr. Deputy Speaker. Is it in order for the Minister to refuse to answer perfectly proper questions asked by hon. Members in the House, and instead to say that it his intention to discuss the matter with the Welsh local authorities?

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

I understand the hon. Gentleman to be talking about his intervention. The Minister's reply to it was perfectly in order.

Mr. Michael

I am grateful, Mr. Deputy Speaker. The hon. Gentleman understood neither his own question nor the answer he received. Other hon. Members here present will understand me when I say that I commend the approach of the WLGA, with local authority leaders arguing their corner robustly, but in a positive atmosphere which contrasts dramatically with relations under the previous Government.

Mr. Chris Ruane (Vale of Clwyd)

May I join in the exchange, in a positive and robust manner, to fight the corner of my county and my constituency? My right hon. Friend will be aware that, for the past two years, I have taken up the issue of Rhuddlan borough debt, specific to my constituency and my county. I am aware that he will not wind up today's debate, so may I take this opportunity to ask what action he has taken in respect of Rhuddlan borough debt?

Mr. Michael

I understand my hon. Friend's point. The problem arises not from the current local authority, but from its predecessor, and is a somewhat complex financial issue. My predecessor gave Denbighshire credit approvals of £2.5 million, repayable over five years, to help it to meet the problems that it inherited from the former Rhuddlan borough council. More recently, I offered to delay the repayment of credit approvals to help the council deal with the repayment of grant to the European Commission. I also offered a supplementary credit approval of £100,000 to enable the council to undertake a review of the former borough council's capital programme—in other words, to establish the facts.

I have heard today that Denbighshire has accepted my offer. I am pleased that the council has also confirmed that the district auditor is content with the proposed arrangements. That enables the council to tackle the immediate problems that it faces, and to identify the scope of any issues which may not previously have been identified. I would be very happy to meet my hon. Friend, and others who have an interest in the matter, in order to get the facts completely clear and to continue working with the council to find a solution to the problems that it faces.

It is clear that the formula used to distribute funding to local government is not perfect. Last summer, the Welsh Office and the Welsh Local Government Association agreed to fund an independent review of the SSA formula. The contract was awarded to the economics department of Swansea university, which will provide a final report this month. The Welsh Consultative Council on Local Government Finance will consider the report at the end of March. In the longer term, it will fall to the National Assembly and local government, through the Partnership Council, to agree which changes are to be implemented for the 2000–01 settlement, and for later years. That is a good example of how partnership between central and local government can bring about change. We all hope that the outcome of the review will be a formula that delivers a fairer and more equitable settlement to local authorities in Wales.

The £22.2 million that I am providing for council tax damping, through the council tax reduction scheme, will protect council tax payers from the continuing mismatch between SSAs and grant allocations. The scheme should ensure that increases for about two thirds of council tax payers in Wales are limited to about £1 a week. The parameters of the damping scheme were agreed by the WLGA, and as a consequence, the amount of damping grant for 1999–2000 has fallen by nearly 30 per cent. compared with this year.

The settlement provides an additional £70.2 million for local authority education services. My hon. Friend the Member for Neath and I will be monitoring budgets to ensure that at least that extra amount is spent on education. The increase supports the Government's commitment to improve standards of education not just in schools, where we expect the bulk of the money to be spent, but more widely, through initiatives such as the one for life long learning.

We are committed to improving the lives of children in public care in Wales. I have therefore made available an additional £5 million to support the introduction of a programme to improve the quality of local authority children's services and the life chances of children who are looked after by the local authority, by ensuring that they have the necessary education, health care and other support to make a successful transition to adulthood and independence.

Mr. Ted Rowlands (Merthyr Tydfil and Rhymney)

The additional £5 million is very welcome. It will be worth between £120,000 and £130,000 to Merthyr Tydfil county borough council. The cost of looking after children in care is rocketing, often as a result of decisions made beyond the local authority's jurisdiction, such as in courts. I gather that a White Paper on the issue is imminent. Will my right hon. Friend review the funding of children in care, because many local authorities will find extreme difficulty with it over coming months and years?

Mr. Michael

I understand the nature of the problem to which my hon. Friend points. As a member of the ministerial group which undertook detailed and serious work in response to the Utting report, I am acutely aware of the need for Wales to address those issues. I have also set aside a further £1 million to provide central support for councils' efforts to improve services for children living away from home. We need to look carefully at services for children, in co-operation with the Welsh Local Government Association and others that have an interest in the welfare of children.

I shall be working with local authorities and others to bring about an holistic approach to the needs of those leaving care. Very often, they have continuing personal difficulties and face problems with housing and employment. We should ensure that we provide joined-up solutions to joined-up problems. Some of the issues of social exclusion and of promoting social inclusion are very relevant to precisely the group of children and young people to which my hon. Friend the Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) referred.

The report of the north Wales child abuse tribunal of inquiry will have lessons to teach us about the need for constant vigilance to ensure that children living away from home are properly looked after and their welfare safeguarded. That, too, addresses the issues raised by my hon. Friend the Member for Merthyr Tydfil and Rhymney. I have undertaken to present the report to the House as soon as possible after I receive it, and the tribunal's findings will inform the development of the programme to which I referred earlier.

During the consultation on the provisional settlement, I received many representations about funding for the police. As I said earlier, the bulk of police funding is allocated by my right hon. Friend the Home Secretary, using a common formula for Wales and England. The concerns that were raised with me related mainly to the method that had been used to calculate capital charges, which inform the only part of the funding received by the police that I decide.

In response to the concerns about the sudden and unexpected results of the application of the Wales formula to capital charges, I decided to change the way in which capital charges are calculated. I stress that nobody had anticipated that the formula would have those unintended and damaging consequences. The final settlement takes account of that point and represents an improvement of £1.8 million over the provisional figures for the police in Wales.

I am pleased to be able to confirm my plans to delegate the strategic development scheme to local authorities. I have worked closely with the Welsh Local Government Association and the Wales Council for Voluntary Action to agree robust arrangements to ensure that the change will not lead to a cut in funding for the voluntary sector, a concern that was widely expressed. Instead, it will lead to more creative, co-operative and productive working between the sector and councils across a broad span of services.

Decisions should be made at a local level, but there must be partnerships between councils and the voluntary sector to ensure that best value is achieved. Meetings with county voluntary councils or their equivalents have taken place or are about to take place in all 22 authority areas in Wales. That is clear evidence that the agreement is working in practice. I am also pleased to say that the WLGA and the WCVA have agreed with me to set a September deadline for agreeing compacts in each part of Wales to reflect at local authority level the Welsh compact between Government and the voluntary sector.

My predecessor and I have made significant progress in building a strong partnership with local government in Wales. The National Assembly for Wales will build on the strong foundation that we have laid.

Partnership can help us to achieve the shared aim of providing the best possible service to the public. Through best value and meaningful consultation we shall be able to ensure that the services provided are meeting the needs of people in Wales. Traditional patterns of service provision have created boundaries, and people at the margins have fallen through the cracks between services. The Government's approach to social inclusion—as we describe it within Welsh policy and the Welsh budget—aims to ensure that those cracks between services are closed and that the most vulnerable in our society are not forgotten.

Following the comprehensive spending review, the Government have been able to provide local government with certainty of funding. The indicative figures that I have published for the two years after 1999–2000 will allow local government to plan more effectively into the future. Service priorities can be planned over a three-year horizon, and local government welcomes that.

This is the last time that the House will be asked by a Secretary of State for Wales to approve spending plans for local government in Wales. From 2000–01, it will fall to the National Assembly for Wales to make those decisions. The people of Wales will benefit from the governance of an Assembly comprising their elected representatives, making decisions that reflect Welsh needs.

My decisions give local government in Wales a good deal that has received the support of the Welsh Local Government Association. They seek to build on the outcome of the Government's comprehensive spending review and balance my responsibilities for local government with those that I have for other public services in Wales. They represent yet another step towards redressing past funding inequalities. I commend them to the House.

2.4 pm

Dr. Liam Fox (Woodspring)

As other hon. Members wish to speak and time is limited because of the private notice question earlier, I shall keep my comments to a minimum.

The Secretary of State said at the outset that he believes that, as a result of the settlement, council tax increases should be lower than in recent years. However, the Government's figure of £1.40 a week would constitute an increase of about £75–that is, 13 per cent. for a band D household, which is more than last year's average 12 per cent. increase across Wales.

Ordinary Welsh families will be paying more than 25 per cent. more in council tax than they paid in 1997–98. Moreover, the figure does not include community council precepts, the cost of discretionary rate relief for businesses and the new arrangements for council tax benefit subsidy.

The Government have heaped new costs on to councils. Pensions contributions have increased because of the Government's decision to abolish advance corporation tax, and councils will be expected to meet the cost of the teachers' pay deal announced last week. The minimum wage will also have implications for local authority spending. When all those factors are taken into consideration, it is likely that ordinary Welsh families will once again face steep tax increases.

Moreover, the Government's decision not to announce in advance the top limits for what councils will be allowed to spend means that there is no guarantee that some councils will not increase tax rates by even more. Although the Secretary of State will continue to have reserve powers to cap council spending after council budgets have been set, he has refused to say what criteria he will use in making that decision.

The answer that the Secretary of State gave my hon. Friend the Member for New Forest, West (Mr. Swayne) was quite unacceptable. He implied that as my hon. Friend did not have a constituency interest, he was not entitled to the same answer as hon. Members who had Welsh constituencies. That shows the contempt with which the Government treat the United Kingdom Parliament.

Perhaps the Secretary of State will now tell us how much pain ordinary taxpayers will have to endure before he acts on capping. The Government claim to be committed to ending what the right hon. Gentleman called "crude and universal" capping. By deciding not to announce provisional cap limits, the Government fail to tell us what will be appropriate or inappropriate, so councils will not know in advance how much they can spend. That gives the Government the opportunity to decide the capping criteria that they eventually use on the basis of which councils they wish to affect, in order to avoid the embarrassment of having to cap a large number of their own authorities.

The Government have replaced "crude and universal" capping with arbitrary and retrospective capping. The changes further blur accountability in local government and reduce transparency.

As the House knows, at present the full bill for council tax benefit is met by central Government. The Government's White Paper, "Modern Local Government: In Touch with the People"—of course, every Government document must contain the words "modern" and "people"—was published in July last year. That proposed transferring some responsibility to local authorities for meeting council tax benefit above a certain threshold.[Interruption.] Yes, "modern" is a great word. I am sure that the people who found themselves on the increased hospital waiting list in December will be happy that those were modern waiting lists, not just old waiting lists.

The provisional settlement in December made it clear that the Government intended to press ahead with their proposal. Despite vigorous opposition from local authorities, the Government have decided to implement the scheme. That would mean that where a local authority increased council tax above a certain level, council taxpayers would have to pay even more to subsidise some of the cost of council tax benefit. The scheme will have a disproportionate impact on council tax payers in less-well-off areas where an above-average proportion of residents are in receipt of CTB. According to the Local Government Association, which the Secretary of State is fond of quoting, that will mean "the nearly poor paying for the really poor".

Following the elections to the National Assembly for Wales in May, the Assembly, as the Secretary of State said, will assume responsibility for matters relating to local government finance in Wales, including the distribution of grant and capping powers. The amount of revenue support grant awarded to a council is not specified by law, and will therefore be totally at the discretion of the Assembly. The Government of Wales Act 1998 provides no protection for councils in the north, east or west from domination by the Labour heartlands. I am sure they will give consideration to that.

Mr. David Hanson (Delyn)

The north is the Labour heartland.

Dr. Fox

Hon. Members from other parties would have a difference of opinion with the hon. Gentleman.

The Assembly will also be able to reduce the total amount of money that it gives to local authorities in Wales. It could give the funds to any other body, such as the Welsh Development Agency, or, more likely, spend the money itself. The Assembly could even introduce its own tax-raising power through the back door. It could deliberately hold back funds from councils, safe in the knowledge that those councils would be forced to raise council tax, which they will be able to do if the Assembly decides to lift capping restrictions.

Business faces a similar threat, as calculation of the national non-domestic rate will pass to the Assembly. At present, the Assembly may increase the rate only in line with inflation—or less, with the consent of the Treasury. The Government are, however, reviewing that system. Even if it is left unchanged, inward investment may suffer in the meantime, as firms choose not to locate in Wales in case they face a much higher business rate in a few years.

I should like ministerial answers on two specific areas. The first is debt. What is the total council debt in Wales and what is the total cost of servicing the debt? Which are the five councils with the worst record in terms of total debt? Secondly, what is the total amount of uncollected tax in Wales? How much of that relates to the community charge and how much to the council tax? How many councillors still owe tax? How many Labour candidates for the Welsh Assembly still owe either community charge or council tax? When tax is not collected, the honest taxpaying public have to pay extra, which is a burden. They have a right to know if any of their elected representatives are putting a heavier tax burden on taxpayers than on themselves.

There is much that the Welsh Assembly will be able to do. I say to the Secretary of State that I hope that one benefit it will bring will be scrutiny—greater than any that has ever been carried out by this House—of how local government money is spent and how local government is financed in Wales. I wish those who will take part in that scrutiny well, because the Government have a record of which they should not be proud. This House should have scrutinised them better.

2.12 pm

Mr. Win Griffiths (Bridgend)

I should like to say—virtually without qualification and bearing in mind the crowded agenda for change and improvement, which has been necessary after 18 years of Tory government—that the settlement for local government in Wales is good news.

It provides for a record increase and the settlement must be considered in the context of the three-year rolling programme. It will give those in local government—not only officials in their offices, but school head teachers and governors—the ability to plan their budgets three years ahead, and to do so with confidence, in the knowledge that the Government are determined to tackle and keep control of inflation. Each year, people in local government will know that they will get an above-inflation increase in their budgets. That is a fundamental part of this process.

I was not surprised that the Opposition spokesperson—the hon. Member for Woodspring (Dr. Fox)—kept his remarks brief, because he did not have that much to say. He attempted to make something out of the capping issue, although, over the years, the Conservative Government did not have to cap councils in Wales. Those councils have always tried to act responsibly—even in the days when they were being cut to the quick by the previous Government. It is significant that the hon. Gentleman did not bother, either, to compare the Tory record of grants to local government with that of the Government. The two cannot stand comparison. We are streets ahead and, for the first time for a decade or more, local government can begin to plan the development of its services with confidence.

At the end of his speech, the hon. Gentleman was forced to refer to a number of matters that are irrelevant to the debate, such as council debt and council tax and community charge debtors. The record of collecting council tax and community charge in Wales—and certainly in my own authority of Bridgend—is very good, despite the incredible efforts, and the totally wrong-headed policy, of the previous Government. Eventually, they had to give up that policy, even though it cost us all 2.5 per cent. on value added tax.

Mr. Nigel Evans (Ribble Valley)

Will the hon. Gentleman tell the House, and his constituents, what percentage increase band D people in his constituency will pay following this good deal on the settlement?

Mr. Griffiths

As the hon. Gentleman ought to know, it is not my responsibility, nor is it the responsibility of this House, to determine what the council tax and council spending will be next year. The local authority will decide, and I am confident that Bridgend county borough council—given the additional resources made available to it by the Government and its responsible attitude towards council tax increases—will do the right thing for its electorate by making sure that the council tax increase is not excessive and that council services will improve during the coming year.

For example, my right hon. Friend the Secretary of State made an appeal for the additional £70 million specifically to be spent on education, and largely on schools. Quick reference was made to the cost of the teachers' pay settlement and that £70 million will ensure that school governing bodies will have the money to pay their teachers in full. The total additional amount being made available in Wales is more than the estimated cost of the teachers' pay increase. The previous Government could not say that with any confidence about the funding that they provided. They were always asking local government to find some of the money out of savings from somewhere.

Although I believe that there is still scope in local government for more savings to be made, for more efficient services to be provided and for best value to become reality, at least this year local authorities know that the teachers' award can be funded, in full, from the additional money.

I also recognise that despite the fact that the settlement is above inflation, local government could still wish for more money because it wants to provide a better service for children and older people, to do more to repair schools and to renew and modernise council properties. However, we know that there are huge problems in the national health service, such as those connected with modernising and funding it properly. The rural economy is also facing huge problems to which a lot of attention must be paid.

There are so many fronts on which we must fight to recover decent standards of public service, to strengthen the Welsh economy and to make Welsh people more prosperous, that we can never satisfy all demands at once, but the settlement clearly shows that the Government are determined, year on year, to provide more money for local government in Wales.

Over the three-year plan, there will be a 15 per cent. increase in our settlement, provided that we can meet our inflation targets. I have every confidence that my right hon. Friend the Chancellor of the Exchequer and the Bank of England will be able to achieve that. That means that we can have above-inflation increases year on year. There will be £70 million extra for education this year; next year, that sum of money will still be provided, plus another £75 million, and the year after that it will be augmented by another £80 million.

These measures are such a positive step forward that the previous Government must be wondering how they managed—or mismanaged—the economy and public services. They were always rabbiting on about good-quality services, but they lamentably failed to provide a framework and a funding system that enabled such standards to be achieved.

In the last year for which the Conservative Government had responsibility for local government funding, the average spending per pupil in Wales was £2,284, whereas under this year's budget it will be £2,431, which is an increase of more than 6 per cent. In my local authority in Bridgend, the figure increases from £2,236 to £2,402, which is an increase of more than 7 per cent. We have a little catching up to do, because we are below the Welsh average.

There is a determination to achieve such improvements because the Government have a positive view of local government. They believe in working in partnership with local government, and they want the Welsh Office and local government to work together to try to tackle the problems of providing high-quality services. Moreover, that partnership at a local level also spreads through other Government agencies and the private and voluntary sectors.

For example, it is important that the police, local authorities, the probation service and the voluntary sector work together to tackle the problems of law and order and youth justice, so as to make the most of the available money and to provide a comprehensive and integrated service. I am sure that hon. Members from Wales will confirm that the issue of vandalism is raised at every surgery. Young people congregate around community centres, sometimes making it impossible for other people to be confident that it is safe to meet there. That is the legacy of the previous Government's 18 years of neglect of public services in Wales.

I welcome and much appreciate the additional money going into education. However, there are still significant problems with the assessment of the requirements of children with special educational needs. That provision is a constant problem for local authorities across the United Kingdom, because it is demand led. It is difficult to make a budget estimate of what is needed, and to provide the funding to ensure that children with special educational needs receive appropriate help and support. It may be more appropriate for the Assembly to look into this matter, but there is a strong case for examining that provision afresh and deciding whether it requires specific special funding.

Although I welcome the £5 million to ensure that the recommendations of the Utting report on children in care are implemented, there is still a huge agenda of concern that goes beyond the provision of funding for services. It relates to the culture and the attitude to children adopted by the different services—teachers, social workers, probation officers, the police or voluntary sector providers of services for children. Sometimes their views on how children should be dealt with are so different that it causes unholy difficulties.

Part of the problem is the different perceptions held by each service. The Secretary of State for Wales should get all those with relevant responsibilities round the table because they should work much more closely to a common agenda to ensure that children are provided for, whether they are in school, in youth clubs, subject to community service orders or in residential homes.

On the additional funding made available in the significant, ground-setting decision on transport, the £5 concessionary pass card and the 50 per cent. minimum reduction in bus passes for old-age pensioners are to be rolled out into a free service. That was an incredibly important decision. It will give older people new opportunities. The Welsh Office team should be highly commended for that decision.

The Government are also providing free eye tests for pensioners and are making efforts to provide better public services for them. We should also consider what local government and the voluntary sector can do for pensioners to help them live at home, so avoiding the need to take up expensive hospital beds.

On the eve of elections to a Welsh Assembly, the Welsh Office, my right hon. Friend and his fellow Ministers have provided a vision and a pathway for the Assembly to tread which I believe will deliver to Wales and the people of Wales a Government of whom they can be truly proud in the 21st century.

2.28 pm

Mr. Lembit Öpik (Montgomeryshire)

It is such a shame that the Conservatives are no longer in power, because as I listened to the hon. Member for Woodspring (Dr. Fox) I realised that, if only they were in government, we would have happier pensioners, uncapped councils, shorter waiting lists, improved social provision and perhaps even a better form of devolution than the one we have got. Two years in opposition—two years in oblivion in Wales—has clearly had an edifying and regenerating effect on the Conservatives. I feel tingles of anticipation down my spine when I consider the 70 years of preparation that my party has had.

With 18 years of preparation, the Labour party is somewhere in between. Although the overall settlement is much less unreasonable than those we have had in the past, it is hardly overgenerous. Indeed, the treasurer of Powys, which is the area I know best, feels that it is a standstill budget. Council tax will increase by more than 8 per cent., which is more than twice the rate of inflation. That worries my constituents, and it should also concern us. It is, in effect, a form of indirect taxation to raise money that is desperately needed by our local authorities. It would have been nice to have found a more equitable way of doing that than increasing council tax, which harms those who are least able to pay.

It is odd that the Conservatives feel justified in criticising these figures, given that it was a Conservative Secretary of State who, not so long ago, handed back £100 million from Wales to the Treasury in Westminster. That hardly smacks of fighting the people's corner in Wales.

Let me make some specific points about the settlement. It is clear from the figures that our spending on health and education is, to some extent, at the expense of social services, which are, in a sense, a hostage to Labour's political requirements. Having made promises, the Government are now having to juggle between important services in order to fulfil their commitments. The elderly and the mentally ill, who were not blessed with inclusion in the Government's early-trumpeted pledges, may suffer the most.

The problem is the lack of integration between social services and health departments. Many organisations, including the Welsh Local Government Association, believe that Welsh social services are currently being underfunded to the tune of £95 million, and that is likely to continue to exert a pressure in the system. Extra money for health cannot be used most efficiently unless social service provision improves in tandem. Too often, beds are blocked because patients cannot get the home support or the residential home places that they need in order to leave hospital. In Powys, it almost pays for a person to become infirm at the beginning rather than the end of the financial year. The common-sense solution is to integrate social service and health provision, and the Liberal Democrats have long argued for that solution.

Mr. Win Griffiths

Will not local health groups allow that to happen? Have we not something positive to look forward to?

Mr. Öpik

I agree. The establishment of local health groups paves the way for exactly the strategy that we have in mind. I do not want to speak in purely parochial terms, but we have the chance of securing a fully integrated social service and health system in Powys—and, I imagine, in other areas where the relevant professions have a real opportunity, and a real desire, to take part in the experiment. So, I agree with the hon. Member for Bridgend (Mr. Griffiths).

I ask Ministers to push the boat out a little in encouraging such experiments, and to see how the ideas work in practice. There will, of course, be a small amount of risk—the experiment may not work—but it will be a good way of making investment in social services and health go a little further. We will get more for our health and social services buck if those two parts of the public sector are allowed to work in the most efficient way possible.

More than one in eight houses in Wales is defined by objective criteria as unfit for human habitation, and the figure rises to one in four in the case of private rented accommodation. That, surely, will have consequences in terms of social services and health, which must be tackled head on. Funds available for private-sector renovation grants were cut by £30 million between 1996–97 and 1997–98, and are likely to be slashed this year, even though bad housing is a key factor in poor health. It is money down the drain: we are trying to cure the symptoms, rather than tackling the cause. The Secretary of State has used the phrase "joined-up thinking". I urge him and his fellow Ministers to do some joined-up thinking about health, and to recognise that the roles of social services and housing are related.

As for pay settlements, local authorities are, to an extent, hostage to central Government's decisions on wage bills. There are welcome pay increases for nurses and for some teachers, but others are far less fortunate. Despite proclamations to the contrary, pay settlements always put severe pressure on local government finance. Pay awards are always the Achilles heel. Incidentally, many nurses will not be fortunate, because they are in the middle tier: those who are not new entrants, and are not thinking of leaving the profession, have received a far less generous settlement. It goes without saying, however, that there is pressure on local authorities to meet the wage bill before doing anything else.

The alternative is to lose jobs, but that puts even more pressure on services that are already under strain. We must consider the consequences carefully before giving unequivocal support to the guidance on wage bills. Naturally we should all like nurses and teachers to be paid more, so I worry that local authorities may not have enough money to pay them more without cutting other services.

The Minister said that he considered the need for an holistic approach to social provision important. I interpret that as tacit support for what I have said about the desirability of collective health and social service planning. The savings achieved by such sensible investment might help to ease the pressures on the wage bill.

Waiting lists continue to be a worry, but it may be possible to reduce them by eliminating them altogether in some areas—preventing people from requiring the health service in the first place—if we invest in primary health care. Again, there is an opportunity for health and social service departments to work together, and to prevent people from ending up in hospital by explaining what they can do to stay healthy.

Mr. Nick Ainger (West Carmarthen and South Pembrokeshire)

Such as giving up paragliding.

Mr. Öpik

I have not the first idea why the hon. Gentleman should suggest that, but I will say that the Liberal Democrats seem to have been far less successful in parachuting politicians into Wales than the Government. I have wanted to say that for a long time.

We need to consider the formulae whereby local government settlements are determined. Rural areas may still be suffering a little more than they should, given the extra cost of services in such areas. Local authorities need more control over how they spend their money. Some of us feel that there is too much guidance from the centre. Such guidance is sensible to some degree, but there must be a balance.

We heard something about transport policy from the Minister. It is welcome that pensioners will have a better deal, but we must bear in mind that public transport is virtually non-existent in some areas, and that we shall need an awful lot of extra money before the enormous damage done by the last Government begins to be rectified. Liberal Democrats are realistic enough not to expect all that to happen overnight, but we feel that we must be constantly attentive. I hope that, co-operatively, we can find solutions, perhaps by focusing on specific issues—for instance, the need for integration of bus and rail services.

Mr. Win Griffiths

As in Powys.

Mr. Öpik

Indeed—there and elsewhere, but I am talking about the need to ensure that the bus does not leave five minutes before the train arrives.

Let me say a little about the general question of funding. There is a case for putting in a little more centrally, perhaps taking it from the contingency fund that the Government appear to be amassing; but most of the funds must result from our acting more smartly rather than simply throwing money at the problems. I hope that the hon. Member for Ceredigion (Mr. Dafis), who will speak on behalf of Plaid Cymru, will explain how his party intends to fund local government at the same level in the event of an independent Wales. I am not here to criticise Plaid Cymru's central separatist agenda, and I do not condemn it for holding a separatist view—such a view is politically legitimate, even if I disagree with it personally—but I hope that its spokesman will explain how, within a separatist agenda for an independent Wales, it intends to come up with the kind of money that the Government have promised and the Liberal Democrats have demanded to maintain services at anything like the present level. Clearly, Europe will not fund our local government requirements, so we tend to assume that the money would come from a massive increase in taxation, but I look forward to hearing what others in the Chamber have to say about that.

The settlement is not unwelcome. It has some reasonable elements, but we still feel that there is a great opportunity to think more smartly, to act more holistically and to allow local authorities to experiment in that way. If the Government are willing to take such a risk, I am sure that many in local government would be eager to take up the cudgels of that approach. We cannot fill potholes with promises, but we can fill them with policies.

Some of those policies might be of interest not just in Wales, but in other parts of Britain. We have said many times that the experiment in devolution in Wales may act as a guide to other parts of the United Kingdom and, indeed, to Europe. If we make breakthroughs through integrating our systems and through, in some measure, trial and error, the benefits may be felt well beyond the borders of our nation.

2.41 pm

Mr. Chris Ruane (Vale of Clwyd)

Thank you, Mr. Deputy Speaker, for the opportunity to participate in the debate.

I start on a positive note. The additional finances that have been given by the Welsh Office have been well received in my constituency, with annual spending going up from £91 million to £97 million in 1999–2000. The additional resources that have already been given to education have been welcomed by parents, teachers and pupils in my constituency. They make a welcome change to the five years of year-on-year cuts in the education budget in Denbighshire under the previous Government.

The additional education funding has meant that, in September, an extra 17 primary or infant school teachers were employed in my constituency. I was a primary school teacher for 15 years. During that time, the biggest complaint that I received from teachers and parents in the urban areas of my constituency was about class sizes. I once taught a class of 39 eight-year-olds and I can personally vouch for the disproportionate effect an additional 10 children can have on the education of the whole class. The £70 million that we will pump into education next year equates to an extra £140 per pupil per year. That is a massive increase on what the Conservatives provided.

The additional money for public transport in Denbighshire is also welcome. It will have a big effect on the poor wards in my constituency, where car ownership is down to about 40 per cent.—60 per cent. of people do not own cars. Cars are a necessity in my area because of the rural-urban mix. They are necessary to get to places of employment. If people do not have a car or access to public transport, they will not have a job.

Perhaps one of the biggest changes under our new Labour Administration is the improved relationship between local government and the Welsh Office. That is reflected by the fact that no capping limits have been set. Under the new spirit of co-operation, that means that existing powers will not have to be used to rein in councils. All those are positive developments in local government finance in Wales. Welsh Office Ministers should be congratulated on securing that additional finance for Wales.

On a more local level, I have concerns about the particular financial circumstances in my constituency and county. My constituency forms the northern part of Denbighshire. The county's finances suffer for several reasons. The first is that Denbighshire is a small county in terms of population: it is just 89,000, compared with approximately 132,000 for Wrexham, 120,000 for Flintshire and 110,000 for Conwy. Therefore, its overheads are much higher than those of most counties.

The second reason why my county suffers is that it is neither urban nor rural—rather, it is both. The northern end of the county contains the towns of Prestatyn and Rhyl, which is the second largest town in north Wales. The southern end of the county is largely rural and characterised by small isolated settlements. The current funding system in Wales does not favour such counties. I ask the Minister to examine that issue.

The third reason for the poor state of Denbighshire's finances is the legacy that was left by the old borough council of Rhuddlan. I should like to outline that issue and its impact on finances in my county.

Rhuddlan borough council existed from 1974 to 1995. In the final years of its existence—from 1990 onwards—it applied for a number of European grants, which were match-funded by the Welsh Office. In the final two years of the council's existence, many applications for funding were made by the council and granted by Europe and the Welsh Office.

When the new council of Denbighshire was established in 1995, evidence started to emerge that those applications were not made in accordance with the rules. As a result, the new county of Denbighshire has been saddled with debt of nearly £8 million. That debt could rise significantly as a result of further investigations. It has to be serviced by the county. The impact of a small population base, the rural-urban split and servicing that massive debt is having a dire effect on the level of services in Denbighshire.

For the past four years, local people, including me, have sought answers as to how all that came about. I have used an array of parliamentary procedures to try to get the truth. When first elected, I sought a meeting with the then Secretary of State for Wales, my right hon. Friend the Member for Caerphilly (Mr. Davies), to explain the situation and to ask for financial help and an inquiry.

I wrote to the Public Accounts Committee and it said that it was not their responsibility, but the responsibility of the Audit Commission. I wrote to the Audit Commission; it said that it was not its responsibility. I wrote to the National Audit Office; it said that it was not its responsibility. I have drafted numerous written parliamentary questions and asked for advice from the House of Commons Library.

I have had meetings with the former Welsh Office Minister, my hon. Friend the Member for Bridgend (Mr. Griffiths), the Under-Secretary of State for Wales, my hon. Friend the Member for Cardiff, Central (Mr. Jones), and the current Secretary of State for Wales, who is prepared to help. Indeed, he has already given Denbighshire an additional supplementary credit approval for the current financial year of £100,000, and has decided not to offset Denbighshire's credit approval for 1999–2001 by £1 million, to assist Denbighshire to repay the grant to the European Conrunission. However, that is not enough.

The Welsh Office under the last Conservative Administration must bear some of the blame and some, if not all, of the cost. It had the ability and the responsibility to audit those accounts regularly. Over £1 million of Welsh Office, or should I say public, money was used in Rhuddlan borough. Those grants were not properly monitored. Therefore, I am asking the Secretary of State to do two things: to increase the rate support grant for Denbighshire over the next few years, so that the debt can be settled; and to set up a full inquiry into the Rhuddlan borough debt. That will be of benefit to my constituents and the people of Denbighshire in general.

Mr. Martyn Jones (Clwyd, South)

As my hon. Friend knows, I represent part of Denbighshire. I endorse all his statements about the problems that it faces. I add my request to the Secretary of State for an inquiry into that matter because it causes great problems to my constituents.

Mr. Ruane

I thank my hon. Friend for that intervention.

A full inquiry would be of benefit not only to my constituents, but to the people of Wales. We must learn the lessons of what happened in Rhuddlan borough council, so that we do not repeat the mistakes when Wales receives, I hope, its £2 billion-worth of objective I funding from Europe, starting in January.

It is important that the inquiry has the power to summon witnesses. The key players in the affair have been very reluctant to supply the information that is required to answer the questions that are being put by the public. I understand the Welsh Office's reluctance to grant a full-blown public inquiry—there have been only 24 such inquiries since 1921. They can be expensive. The cheapest was Lord Cullen's inquiry into the Dunblane massacre, which cost £1 million. The dearest, I think, was the inquiry into child abuse in north Wales, which cost £15 million. I realise that Rhuddlan's debt is not in the same league as Dunblane or the north Wales child abuse issue, but it has left a considerable legacy for the finances and body politic of Denbighshire, which will be eradicated only if there is a full inquiry into what went wrong.

I look forward to the full co-operation of my right hon. Friend the Secretary of State and the Welsh Office in settling this long-running issue and await with interest the comments of my hon. Friend the Minister.

The Parliamentary Under-Secretary of State for Wales (Mr. Jon Owen Jones)

I understand my hon. Friend's strong feelings about the injustice of the situation that his local authority finds itself in. He explained the great cost of a public inquiry, but then said that holding one would solve the problem of Rhuddlan's debt. In what way would a public inquiry alleviate his authority's debt problem?

Mr. Ruane

I am asking for two things. The way for the problem of the £8 million debt to be alleviated—

Mr. Martyn Jones

—is for the Welsh Office to pay up.

Mr. Ruane

Indeed, is for the Welsh Office to pay up, mate. A population of 89,000 people cannot repay the debt. We are looking to the Welsh Office—which should have been monitoring the situation over seven years—to help us out. The inquiry is a separate issue, but we must have one. The issue has been going on for four years. The public clamour for an inquiry has not abated. It is getting worse and I agree with the demands. We must have a proper inquiry to ensure that we learn the lessons. That is in the interests of the Welsh Office for possible future European grants and it is in the interests of my constituents. I thank the Welsh Office for the help that it has given, even though it has been a long time coming.

2.52 pm

Mr. Cynog Dafis (Ceredigion)

I shall start by slightly modifying my speech to respond to the rather puerile attack—if it can be called an attack; it was more of a sniping exercise—from the hon. Member for Montgomeryshire (Mr. Opik) on Plaid Cymru. We have been expecting it for some time and were wondering when it would come. We were aware that the Labour party was too engaged in its affairs to turn its guns in our direction. We expect that to happen in the next month or so. We shall be ready, having prepared our policy in considerable detail. It will be interesting to see the detailed policy development of the other parties in preparation for the Assembly. The Liberal Democrats have at last got round to sniping at Plaid Cymru, because of their desperation about their awful position in the opinion polls. I am sorry, but that is the reality.

The hon. Member for Montgomeryshire invited me to imagine a Welsh local government budget in what he described as an independent Wales. It is possible to construct such a budget. It would be a difficult budget, bearing in mind the current condition of the Welsh economy, but it could be done. However, it would be an academic exercise, because a so-called independent Wales—the hon. Gentleman is still using the language of the 19th century—is not on any agenda for the next five, 10 or even 15 years. Plaid Cymru's agenda is to make the existing constitutional settlement—the National Assembly for Wales—work well for Wales. We shall also be pushing for parity with Scotland, which has been given a far better settlement, as soon as possible. I trust that we shall have the support of the Liberal Democrats. I am confident that we shall also have the support of many Labour Members.

The eventual constitutional outcome for Wales is, to a large extent, in the lap of the gods. It depends a great deal on what happens to the European Union and the enterprise for European federalism. It also depends on the democratic will of the people of Wales. Let us leave it to them. Plaid Cymru aspires to full national status for Wales, but full national status could be significantly different in 10 or 15 years from what it is today for the Republic of Ireland, Denmark or any other so-called independent European country. There will be a convergence between the constitutional status of the Basque country or Catalonia and that of Ireland, Denmark and other states. The terror of independence and separatism—the bogey that the hon. Gentleman is trying to raise—will disappear over the horizon.

Mr. Öpik

I did not mean the hon. Gentleman to feel that I was sniping. I was attempting to make a serious political point. The first sentence in Plaid Cymru's general election manifesto said: Plaid Cymru is the only party which places a self-governing Wales in a European Union at the forefront of its political agenda. Is that right?

Mr. Dafis

I am happy to confirm that that is our position, but it is not relevant to the hon. Gentleman's point. The implication of his comments seemed to be that Wales was inherently incapable of getting into the position of being able to pay its way. The suggestion was that Plaid Cymru could never get such a local government settlement in an independent Wales. He is saying that Wales could never ensure a generous settlement for its local government. If that is what he means, he has a dismal view of the potential of Wales. We reject that.

I agree with much of what the hon. Gentleman said about the settlement. I can be more generous to him than he was to me.

Mr. Jon Owen Jones

Before the hon. Gentleman leaves the subject on which he was having an interesting debate with the hon. Gentleman from the other side of the Cambrian mountains from him, I hope that his comments about the present settlement will reflect the fact that Wales's tax base—its GDP—is 83 per cent. of that of the rest of the United Kingdom. His aspirations have to reflect the reality of that low tax base.

Mr. Dafis

I could not agree more. That is a reality that would make it very difficult to come up with a robust Welsh budget at the moment. Does the Minister agree that there must be reasons why the Welsh tax base is in such a parlous condition and the Welsh economy is in such a state? It has something to do with the construction of the British state, the way budgets have been handled and how taxation, public expenditure and regional development—or its absence—have been dealt with over the past 20 years. The problem can be traced back to Wales's ridiculous over-dependence on heavy industry, the failure to introduce a more varied industrial base and other matters.

The situation is recoverable within the European framework that we would like—which is not necessarily the framework that we shall have—if Wales has appropriate policies instead of the inappropriate policies that we have constantly had to suffer from. Wales can hope to achieve a GDP level comparable to the best in Europe. I hope that the Minister also has such faith in the future of Wales.

Mr. Llew Smith (Blaenau Gwent)

I accept that in a separatist Wales, the budget would not be determined by the British state. However, the hon. Gentleman's vision involves a federal Europe. Does he accept that in such circumstances, the budget would be determined by the unelected and unaccountable European central bank, which would determine the budget level and interest levels? It would be illegal under article 107–

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

Order. We must not get into a debate on European banking. We should be considering the Welsh financial matters that are before us.

Mr. Dafis

I shall address those matters directly, but of course they have to be considered in the light of the framework mentioned by the hon. Member for Blaenau Gwent (Mr. Smith). Power is shifting from London to Europe, so the big question relates to democratic accountability, and what should determine interest rates and European monetary policy. Power is also shifting to Wales, Scotland and Northern Ireland, so the really big constitutional question relates to the future of this place.

What significant powers will remain here? We need to get our heads round those issues and build a Welsh future on that basis.

Mr. Deputy Speaker

Order. Perhaps the hon. Gentleman will find another opportunity to discuss those matters, but I must ask him to confine his remarks to local government finance in Wales.

Mr. Dafis

I am sure that you will sympathise with me, Mr. Deputy Speaker, as I was diverted from my speech by interventions.

There is a great deal of spin about what the Government are saying about local government finance. Of course, the present Government are identified with spin, if nothing else. I am sure that the hon. Member for Blaenau Gwent will agree with me about the enormous disparity between the glowing images conveyed by Government statements and the experience of ordinary people in Wales, whether they are employers, employees, unemployed or in education.

Yesterday, for the umpteenth time, the Prime Minister said that he was determined not to return to Tory boom and bust. We have heard that repeated so many times that it is becoming tedious. However, much of Wales is experiencing something akin to economic collapse. Although we do not want to go back to boom and bust, much of the Welsh economy is bust. The Government are not entirely to blame, but their general approach to monetary and fiscal policy and to public expenditure is an exacerbating factor. The disparity between the Government's rhetoric and what is actually happening arouses in my constituency a mixture of wry amusement and anger. People do not understand how the Government's words relate to reality. The same applies to local government finance.

The Government made much of their intention to remove crude and universal capping, which is a good thing. They are giving local authorities greater autonomy while retaining the powerful sanction of cutting their contribution to council tax benefit if councils exceed their spending limits. However, there is another more subtle agenda which was mentioned by the hon. Member for Montgomeryshire.

The Government are proud of having kept their pledges not to raise income tax and not to exceed Tory spending limits in their first two years in office. However, they made those promises for the crudest political reasons. Just before the election, I was asked whether I thought that the Prime Minister would keep his election promises. I said that I certainly hoped not. It would have been good news had the right hon. Gentleman decided to break those promises, but he has kept them, certainly in relation to income tax and spending limits. In order to remain within the spending limits, the Government have had to keep a lid on public expenditure, including the Government's contribution to local authorities.

As a result, local authorities will need to increase council tax in order to maintain services. The new Labour Government are allowing them that freedom, so things are changing. The net result of that approach is that wealth is redistributed—regionally and individually—in favour of the better-off and to the disadvantage of the worse-off. That is clear from statistics. The pattern has persisted for 20 years, and the present Government are allowing it to continue, except at the margins. Although the Government have altered things here and there, by and large they have pursued the same general agenda. So the present Government are not as bad as the Tories—perhaps that will be their epitaph. I am sorry to be unkind to hon. Members who sit on the same side of the House as I do, but I do not believe that that epitaph would be acceptable to those who expected great things from a change of Government at an historic time.

My own local authority, Ceredigion, is a case in point. The standard spending assessment for Ceredigion has been set at £70.2 million. That is an increase of 5.6 per cent. in real terms and there is a sense of relief about that. The council is permitted to spend up to £75.8 million without suffering clawback of council tax benefit subsidy. Without any kind of wish list, but simply to maintain services and meet new commitments, Ceredigion would certainly need to spend up to that limit, but that would involve a 12 per cent. council tax increase in an area of chronically low incomes where the economy is crashing, in part due to the high value of the pound which is a significant factor in the economy of west Wales.

The Government have allocated extra resources which have been hypothecated for education. Substantially increased resources are being provided on a cumulative basis over the next few years and that is most welcome. This year, however, Ceredigion has estimated that it will require an increase of 7.5 per cent. from the Welsh Office in order to fund the pay awards to teachers and head teachers, so a large proportion of the extra money provided for education this year will go to meet the pay awards. In his letter circulated today, the Under-Secretary of State for Wales, the hon. Member for Neath (Mr. Hain), acknowledged that five sevenths of it would go on that.

Mr. Jon Owen Jones

Can the hon. Gentleman explain why a pay rise of around 4 per cent. to teachers needs an increase in local authority funding of more than 7 per cent?

Mr. Dafis

I shall write to the Minister about that. I have received that reply from Ministers before.

Mr. Livsey

The hon. Gentleman has raised a serious point. Many small schools in rural areas have been closed down and the heads of other small schools will receive a higher than average pay increase. I am not certain whether the Welsh Office took that into consideration in calculating the settlement. Although we welcome the increased expenditure on education, the settlement does not cover the eventuality of higher increases in teachers' pay than were originally anticipated.

Mr. Dafis

The hon. Gentleman has elaborated my point. The fact of the matter is that five sevenths of the extra money being allocated to schools this year will fund pay awards, so although it is acceptable and useful, it not such a big deal.

As a result, counties such as Ceredigion find themselves between a rock and a hard place. They are acutely aware of the need to maintain services which the public rightly demand, but they are also concerned not to increase the burden on council tax payers, especially those on low pay who are just eligible to pay council tax. For such people, the council tax represents a serious burden.

Ceredigion county council is controlled by a group of independent councillors, supported by the Liberal Democrats—although it is almost a contradiction in terms that a group of independent councillors should behave as a political party. The council has decided to limit the council tax increase to 6 per cent. The hon. Member for Bridgend (Mr. Griffiths) talked about increases that are not excessive, but 6 per cent. is well over double inflation, and people who are already paying high council taxes might call it excessive, although I would say that it is an extremely cautious increase.

Even with such a cautious increase, the band D payment will go up by £47 to £669 a year. That is a lot for people on low incomes to pay. Even after raiding the reserves, the social services budget will be cut by £200,000, which will exacerbate the bed blocking described by the hon. Member for Montgomeryshire. That is bad economics, and means that people with acute medical need cannot get into hospital and that the state has to pay more for the care of the people blocking the beds than if they were in nursing homes or being cared for at home.

Social services, which is protected by top-slicing and special funds, is having a cut of £200,000, so there are concerns about departments that are not so protected. The Plaid Cymru group on Ceredigion county council opposes the strategy of limiting the council tax increase to 6 per cent., and I strongly support it in that. Maintaining services and investment should come first. I recognise the council's dilemma, which is of central Government's making. The Government should do more to help.

There are concerns about the totally inadequate funding for the police in the coming year. Reference has already been made to the unacceptable cuts in the Dyfed-Powys police authority allocation from the Home Office. The Secretary of State said—which is also unacceptable—that local government now had to try to fill a little of the gap, to the tune of £1.8 million for the whole of Wales since the announcement in December. That means a further cut in damping in Ceredigion from £168,000 to £53,000, adding insult to injury.

A review of the funding formula is under way. It is essential that the problems of regions such as Ceredigion, with special service needs and sparse populations, should be recognised, if the gross unfairness is to be rectified. Even that would happen within the straitjacket of a Government apparently hellbent on pursuing their right-wing agenda on taxation, interest rates and public expenditure: an agenda that is profoundly damaging to Wales.

To prove my analysis wrong, the Government could take one simple step on objective 1. Wales's pro rata allocation should be significantly higher than the £200 million a year—equivalent to 2p on the standard rate of taxation in Wales—that is currently claimed, but the Government are not prepared to access what is available. They have an incentive not to do that. We are all aware of the problem of matching funds, and local government's position in relation to the capital budget makes that a most serious matter.

The hon. Member for East Carmarthen and Dinefwr (Mr. Williams) suggested that we should cope with the problem by raising council tax. If it were to come to that, and we had to increase council tax to get matching funding to enable us to spend £200 million of European money to revitalise the Welsh economy, it would be very important for everybody to understand that we had to do that because the UK Government failed to accept their core responsibility to redistribute resources within the state to allow regional development to occur.

I invite the Government to do what they should and ensure that we get central Government resources to match the European money. If we get that, it will be good news, and it will be after the election, so I will take my cap off to them. They must commit themselves to that if they are to retain any credibility.

3.15 pm

Ms Jackie Lawrence (Preseli Pembrokeshire)

I was somewhat surprised to hear the hon. Member for Ceredigion (Mr. Dafis) saying that it would be good news if the Government did not keep their pledges to the British people. There is a tremendous amount of disillusion with politics in my constituency because people have been led to believe over recent years that Governments do not keep their pledges, and that is precisely why it is absolutely vital that the Government do so. This is a debate of only two hours, and the hon. Gentleman took 25 minutes of that. Perhaps because he is the only Plaid Cymru Member present, he has taken all his party's share. In a true spirit of egalitarianism, I shall be as quick as I can.

Because this is the last time that it will be the task of the House to consider this settlement, I am especially pleased that it is so generous. I was stunned to hear the few and limited comments of the hon. Member for Woodspring (Dr. Fox) on behalf of the Conservative party. Those comments demonstrate to those of us with Welsh constituencies how out of touch that party continues to be.

It was suggested that gross domestic product per head in Wales was 83 per cent. of the national average, but, in my constituency, the figure is about 72 per cent. My area is desperate for investment, which it was starved of during the 18 Tory years.

The settlement contrasts with the actions of the former Secretary of State, the right hon. Member for Wokingham (Mr. Redwood), who, at a conservative estimate, returned £100 million that could have been invested in Wales. People in my constituency who were desperate for dualling of the A40 and improved infrastructure remember that well, but the hon. Member for Woodspring seems to have some selective amnesia.

In my past life as leader of the Labour group on Pembrokeshire county council and a member of the former Dyfed county council, I saw at first hand the damage done by the previous Government as they squeezed local government funding in pursuance of their market forces dogma. They could not control local government in Wales, even with well-known Tories standing as so-called independent councillors to try to fool the public. Their ploy was to squeeze local government funding to force cuts in services, coupled with compulsory competitive tendering to privatise the remaining services.

That cynical ploy took no account of the effect on the lives of ordinary people who depended on those services for a decent quality of life. The new settlement is further progress in correcting the damage caused by those years of Tory dogma.

Our schools were starved of cash for two decades. I well recall when the parent-teacher association of the school attended by my two youngest children had to raise funds to purchase books for an essential maths scheme so that the children would not be disadvantaged. Capital finance for schools and local education authorities was practically non-existent.

In one school in Neyland in my constituency, a classroom ceiling fell down. Fortunately, no one was hurt. Leaking roofs, crumbling plaster and flaking paintwork were a common sight in Pembrokeshire schools in the Tory years. That shows the human consequences of Tory neglect of our education service in pursuance of dogma.

We should not be surprised. Unlike Labour Members—one must say at this point that that includes my right hon. Friend the Prime Minister—Tory Members do not have a history of using state education for their children. The previous Government shed services through squeezing finances, forcing councils to privatise remaining services so that local authorities would exist simply to award contracts, and little else.

Government policy means nothing if it does not improve people's day-to-day lives. The Government's belief in supporting local government in providing services in partnership with communities, together with the settlement, will improve the lives of people in Wales; but I want to reinforce concerns about the capital allocation for 1999–2000 and the need to give ample notice of the results of bids for housing grants. That is an issue of concern in my area.

The extra funding for education provided by the Government has already filtered down to schools in my constituency. For the first time in decades, there are plans to build new schools and to repair old ones. I welcome the £70 million for education and the fact that it is to be monitored to ensure that local authorities do indeed spend it on education. It is a scandal that, in this day and age, there are still schools in my constituency that have outside toilets with no heating or lighting in winter. The overall settlement for Pembrokeshire—which, at 5.3 per cent., is twice the rate of inflation and the best that it has ever received—will enable the county council to tackle the backlog and to build for the future if there is the political will in the authority to do so.

I welcome the announcement by the Secretary of State that he will not set capping criteria for 1999–2000. The crude across-the-board mechanism of capping was another central Government sledgehammer employed indiscriminately by the previous Government. Local authorities should be allowed to determine the needs of their particular area in partnership and consultation with local communities in a responsible way, and without undue diktat from central Government.

If there are increases where local councils behave irresponsibly, powers can be used selectively to protect the public from the undue burden of cost resulting from such irresponsible behaviour. We must not forget that it was the previous Government who changed the system by which local government funding was apportioned between Government and the council tax payer. The Conservatives' system, with its increased gearing effect on council tax payers, is driving up council tax bills throughout the United Kingdom even now.

The settlement is good news for Wales. It means record increases in spending on essential services, such as education and social services. I particularly welcome the announcement of £5 million in the settlement to modernise and improve children's services, as proposed in the Government's response to the report by Sir William Utting. Our children are our future, and we must ensure that their needs are met, whatever their circumstances. Before becoming a councillor and then a Member of Parliament, I fostered children for Dyfed county council. Undertaking that work opened my eyes to the need to support children who do not have the security that many take for granted.

On a different note—and as a former member of Dyfed-Powys police authority—I was initially concerned by the level of the settlement for this efficient and forward-looking force. In last week's debate on the police grant, I pursued the issue of sparsity—which I am aware my right hon. Friend the Secretary of State initiated during his time at the Home Office. Rural police forces such as Dyfed-Powys await the publication of research with interest, as they believe that it will support their claims that there are significant extra costs in policing rural areas. However, I am pleased to note that having heard the general concerns of police forces in Wales, my right hon. Friend has decided to alter the capital charges element of the formula for the police, which will mean an increase of £1.8 million for police authorities in Wales.

The settlement provides a solid foundation on which the new Assembly for Wales can build. The new National Assembly, in partnership with local government in Wales, will in future take over responsibility for the funding of everyday services for the people of Wales. This is a new opportunity for consensus politics in Wales, rather than the confrontational style that we see so often here in Westminster. It is a new opportunity for a shared vision of the way forward for Wales by the people of Wales. It will prevent a repeat of the incident under the previous Government, when £100 million was returned to the Treasury to support one individual's right-wing credentials—hardly an action in the best interests of the people of Wales.

3.24 pm

Ms Julie Morgan (Cardiff, North)

Time is short, so I will quickly cover some aspects of the settlement for my authority, Cardiff. I will then speak specifically about the grant for traveller education in Wales. The settlement is welcomed in Cardiff, where we see it as a real sign of the advent of a Labour Government. It will make a significant difference. The growth in population in the Cardiff area has increased the SSA for Cardiff and the council tax will now be one of the lowest in Wales. During the final two years that the Tories were in control, the council tax went up by 25 per cent in the first year and 15 per cent in the second. Last year, it went up by 12 per cent. and this year it will be 3.6 per cent.

The settlement shows that the Labour Government are committed to working in partnership with local authorities and are committed to local authorities in a way that we have not seen for the past 18 years. The extra money for education is strongly welcomed and is filtering down to schools. However, we have a huge task in the Cardiff area, because the old South Glamorgan authority—made up of Cardiff and the vale—was the lowest spender on education in Wales. The local authority is planning to try to bring up its spending gradually to the level of authorities such as Swansea, Newport and others. This year, the authority is putting in an extra £500,000 and is trying to reach the general spending level.

The local authority's tremendous drive to increase the number of nursery places and nursery units is a result of our pledge to provide a nursery place for all four-year-olds. That is causing a problem in my area of Cardiff, North. I strongly welcome the commitment to nursery education, and I fought hard for it when I was a local councillor. However, due to the lack of education provision in Cardiff, North, a whole network of local voluntary playgroups and nurseries were started by parents—usually the mothers.

It has been a great struggle to keep the playgroups going, and they often represent the best in child care—parental involvement and support for children with special needs. The Welsh language playgroups are involved. However, because of our commitment to state education, some four-year-olds are taking up places in the local authority nurseries and are leaving those groups floundering. Last year, the Welsh Office gave £60,000 to the playgroups to see them through this period of transition—because it is only a period of transition.

We are committed to working in partnership, and we want to make sure that LEA nurseries and the nurseries in the voluntary sector—which, on the whole, are not run for profit—can work together in a true partnership to make sure that every child has a place in good-quality child care. That is an issue in my constituency, and throughout Wales. We must save the pre-school playgroup movement because those playgroups provide some of the best child care.

I am concerned at the slight reduction in the three-year capital allocation, as it will cause problems in relation to unfit housing. I am worried also at the length of time that residents in my area—and in others, I am sure—have to wait for disabled facilities grants. It is unacceptable that disabled people or the elderly must struggle when we know that, sometimes, a small amount of money can make their lives easier. Cardiff is bidding for an extra £15 million to tackle unfit houses and disabled facilities grants, and I hope that that bid is successful. That is why we are here—those are the issues that the Labour Government must tackle.

I welcome the fact that the Welsh Office has increased the grant for the traveller education service in Wales from £150,000 to £300,000 for next year. That is a tremendous step forward. However, I wish to draw the attention of Ministers to certain issues regarding traveller education. A Welsh Office-funded report by Laura Morgan of Save the Children Fund in December 1998 showed that the number of traveller children in Wales was twice the number estimated by the gipsy count which used to be carried out by the Department of the Environment. There are about 2,000 traveller children in Wales. Although the grant has been doubled, we are really keeping the status quo because the original grant was based on a lower number of children.

The grant is for only one year, and I am sure that that is because the National Assembly will take over funding for traveller education. However, a one-year grant is not enough it is causing havoc in planning and in recruiting pupils and teachers. I hope that the Welsh Office will pass on the message to the National Assembly that the project needs to be funded for another two years.

The development of traveller education in Wales is patchy. Cardiff has the only established and comprehensive traveller education service, and has more traveller children—270–in mainstream schools than anywhere else in Wales, although hardly any of them are in secondary school. The problem is huge and more money and resources are needed to tackle it.

Traveller children are a vulnerable and marginal group. There are few old people in the traveller population, because most travellers die relatively young. They suffer from discrimination, and the adult literacy rate is only 35 per cent. Extra resources are needed to help the children of that socially excluded group. The Government have made a commitment to, and a priority of, children who are socially excluded, and the problem of traveller children must be tackled head on.

I very much welcome the funding increase announced today, and I hope that the National Assembly will produce a more cohesive society in Wales, in which travellers and their children will be allowed to play a full role.

3.31 pm

Mr. Llew Smith (Blaenau Gwent)

At Prime Minister's Question Time yesterday, my right hon. Friend the Prime Minister responded to a question by saying that he was in favour not only of wealth creation but of the redistribution of wealth. That statement had the support of all Labour Members and it is something on which we, as a trade union and labour movement, can build on. Redistribution can happen in various ways, one of which is by means of settlements such as we are debating today. When we judge the settlement, we must take into account how much redistribution it has brought about between individuals and communities throughout Wales.

By any measure, Blaenau Gwent is one of the poorest communities in Wales. We have some of the worst health problems in the United Kingdom, and the area is pretty well at the top of the list for heart disease, respiratory diseases and cancers. With some colleagues, I did some research into the number of sick and disabled in the area, and we published a book some years back. We found that 43 per cent. of families had one member who suffered from long-term illness or was disabled.

Our income levels are among the lowest in the United Kingdom. Much of our housing stock is old and badly in need of repair. Blaenau Gwent probably has one of the lowest levels of car ownership in the south Wales valleys. Unfortunately, the examples of deprivation and poverty seem endless.

The local authority has to deal with those problems, but does the settlement begin to respond to them? Will it bring about the necessary redistribution of wealth? Does it stem from a socialist philosophy that believes that investment should go where the need is greatest?

The uplift in committed expenditure is 5.9 per cent. That is to be welcomed and it is far in excess of the level of increases experienced under the previous Conservative Administration. However, excluding the education component, the figure is 4.6 per cent. Initially, especially given present levels of inflation, that appears very generous, but I want to take this opportunity to present the local authority's views.

It has stressed to me that the settlement is subject to additional commitments that render it less favourable. Furthermore, local authorities across the country are suffering from the increase in landfill tax from £7 to £10 per tonne. Further cost pressures arise from the need to restore past deficits on superannuation funds, to meet new duties imposed on environmental health departments in respect of the inspection of contaminated land and new regulations on the inspection of animal food stuffs.

Those last duties are referred to in the statement and it is made clear that resources are provided, in the overall total, to enable authorities to carry out the new duties. Further cost pressures arise from the implementation of Government proposals for best value and the implementation of the single-status agreement achieved as part of a previous settlement for local authority employees. Many local authorities also face increased demands from precepting bodies for sums that exceed the additional resources provided by the settlement.

We are running out of time, but I want to raise a couple of matters with the Minister, and I hope that he will be able to respond. First, the local authority standard spending assessment in Blaenau Gwent is to rise by 3.4 per cent. Given that the area is one of the poorest in Wales, I hope that my hon. Friend the Minister will explain why some other local authorities are to receive rises of as much as 6.2 per cent., while the average throughout Wales is 5.2 per cent.

Secondly, will my hon. Friend explain why some local authorities, including Blaenau Gwent, will have to put up council tax by between 12 and 14 per cent., while others will raise their council tax by only 3 to 8 per cent? I am sure that my hon. Friend will want to respond to those questions.

3.37 pm

Mr. Martin Caton (Gower)

I shall be brief, but I guess that it is almost impossible, when debating the local government settlement, not to become very parochial. That has been evident this afternoon.

I have talked to councillors, trade unionists and officers in my local council, and I have to say that the phrases "best settlement ever" or "more than we could have hoped for" have not crossed their lips. I suppose that that is not surprising, but the words "realistic" and "responsible" have been heard, and they are appropriate. The settlement is not hugely generous, but it is realistic and responsible, and it allows our local authorities to get on with delivering public services in a way that has not been possible for many a year.

Yet, in talking to people, I encountered some disappointment and anxiety for the future. As my hon. Friend the Member for Blaenau Gwent (Mr. Smith) mentioned, there is concern in some of our communities about the way in which the standard spending assessment is arrived at. I applaud the partnership approach between the Welsh Local Government Association and the Welsh Office that produced the settlement, but the levels of poverty are still being underestimated. Not enough weight is being given to tackling the problem, and that is why the poorer communities in Swansea, Blaenau Gwent, Rhondda Cynon Taf and Merthyr Tydfil still do not get the deal that they deserve.

The other main issue that people raised with me is their concern about social services. Commendably, the Government have given priority to education and to health, which were mismanaged and underfunded in the period of Conservative Government. However, social services are tied closely to decent service provision in education and health, and they are very stretched at present. They need to be given the same sort of priority very soon, if we are to achieve a comprehensive, joined-up approach to the provision of decent public services.

I know that I will not be allowed to speak any longer, so I shall sit down.

3.39 pm

Mr. Nigel Evans (Ribble Valley)

It is now my opportunity to say a few words about joined-up thinking. I speak as one born in Swansea, who lived there for 33 years. [HON. MEMBERS: "Yes, yes."] I have to get the background in; my family still live there, and the family business is still there. I was a West Glamorgan county councillor for six years, too, so I speak with authority.

When my hon. Friend the Member for New Forest, West (Mr. Swayne) asked a legitimate question of the Secretary of State, I was disappointed to see him fobbed off simply because he has no constituency interest. That may be so, but my hon. Friend has a countrywide interest.

Mr. Swayne

The fact that I was treated rather discourteously is of no consequence. Although the Secretary of State might have used marginally more charm had he been asked the same question from his own Benches, the point is that he would have given the same answer. He will not tell us what criteria he will use in making any decision on capping.

Mr. Evans

My hon. Friend is wounded, and it takes a lot to wound him. His point is serious, and I hope that it will be answered in the wind-up.

Beyond the opening speeches from both sides, eight Back-Bench Members have spoken in an interesting debate. We have heard mainly new Labour speeches from the Government side—and, indeed, a new Labour speech from the Liberal Democrats, too. There will be another debate on 25 February—traditionally known as the St. David's day debate—when many hon. Members who might have wanted to speak today may be able to do so. I hope that it will not be the last St. David's day debate in the House of Commons, as those debates allow us to raise matters of concern. This year's debate will follow the result of the Labour leadership debate, and we shall be able to speak with authority on the impact that that result will have on our deliberations. Will it be a victory for the people of Wales, or for the fudged system introduced to help the Secretary of State to become leader of the Labour party in Wales? We need not wait long now to know.

It is a shame that the Liberal Democrats have used the debate to have a go at Plaid Cymru. This dreadful political spat between the two minor parties in Wales is shameful. [HON. MEMBERS: "What about the Tories?"] If anyone is suggesting that the Conservatives are in oblivion in Wales, I should say that the Liberal Democrats should recognise oblivion. Let me remind the hon. Member for Montgomeryshire (Mr. Öpik) that 100,000 more people voted Conservative in Wales than voted Liberal Democrat. We look forward to the local elections.

Mr. Deputy Speaker (Sir Alan Haselhurst)

Order. May I remind the hon. Gentleman that we are discussing the finance order? He should return to that.

Mr. Evans

I am sorry, Mr. Deputy Speaker, but I felt under an onus to respond to the dreadful attacks made on the Conservatives during our two-hour debate.

Speaker after speaker has told us what a wonderful settlement the settlement is. The real judges of that will be the people of Wales, either at the local elections in May or at the elections to the Welsh Assembly. The people will know how good the settlement is because of the level of service that they will receive and because of the council tax that they will pay.

Expectations of the Government have risen because they told the people of Wales that things can only get better. Of course, the people were not told that things can only get dearer. As the council tax letters drop through their letter boxes, they will see that that is the case. There are expectations of smaller class sizes and investments in partnership with local authorities, and there is a price to be paid for those things.

In several areas, there will be increased demands on the services that people receive in Wales. For example, the millennium bug problem has required investment, but no extra resources were made available, so local authorities, and the police, have had to invest extra resources there. The minimum wage and other local pay settlements also require to be funded. We have heard of good pay settlements, but there is a price to be paid, and some of the charge will be passed on to the local taxpayer.

The Government's pension fund grab, just after they were elected, has left local authorities needing to find extra resources to ensure that pension fund money is made up. Local authorities will have to pass those charges on. Equipment and new technology also require funds, and the police have made representations in the belief that the police settlement was not sufficient to meet pay demands and the costs of new technology and other equipment needed to provide a service.

I shall congratulate the Government on one matter, because it is right to recognise good news where it exists. It is the extra £5 million being made available for local transport—£3 million for rural areas, and £2 million for urban areas, although some of the latter may be diverted to rural areas too. Vast tracts of Wales are rural, and people live in remote communities in which, if there is no bus service and they cannot drive, there is no hope of getting around. I hope that the money will be targeted as effectively and imaginatively as possible to help aging populations and those who live in remote areas to live a fuller life in the parts of Wales where they want to live. I congratulate the Government on making those extra resources available.

There is a payback, however. In the past two Budgets, petrol taxes have increased, so the money has come from motorists, many of whom live in rural areas. When will the Government learn that the use of a car is not a luxury for people in rural areas, but a necessity? Those people are clobbered time and time again.

Extra demands are being placed on local authorities, but a lot of money is being ring-fenced for education. We accept that the Government believe the money ought to go to education, but if their other pledges are to be fulfilled, and if expectations in local government are to be met, the money must come either from efficiency savings or from services being cut. There simply will not be sufficient funds from the resources made available.

My hon. Friend the Member for Woodspring (Dr. Fox) has mentioned council tax benefit. We simply do not know which areas will be hardest hit when money is clawed back. Currently, the benefit is dealt with solely by central Government, but when local authorities have to pick up the bills, the poorest sectors and the nearly poor will be clobbered. It is they who will have to pay for the settlement.

My hon. Friend the Member for Woodspring also mentioned capping. Everyone thinks it wonderful that there is now no official capping. When I was in Wales, I thought capping an excellent idea as it brought a focus and rigidity to the system that protected those people who were clobbered time and time again. The new capping arrangement means that local authorities will not know when the capping will come about. Crude and universal capping is to go, we are told, but that will leave crude and unknown capping, entirely at the disposal of the Secretary of State.

Mr. Michael

Wrong.

Mr. Evans

The right hon. Gentleman may say I am wrong; we shall see if that is so when the Under-Secretary of State for Wales winds up. I only hope that his performance today is better than the one he gave earlier this week on the private notice question. [HON. MEMBERS: "Shame."] His statement was shameful. I hope that today he will answer some of the questions put, even though he was not able to do so then.

Devolution will be upon us after May, and it will have an enormous impact. Today's revenue support grant settlement debate will be the last that we shall have in the House of Commons. Will the Minister say something about the Barnett formula, and about the confidence of local authorities in both the three-year settlements and their prospects for the future?

Will the Minister take the opportunity in his winding-up speech to comment on the debts of Welsh local authorities? How much money remains outstanding? To what extent are council taxes in arrears? What are the debt charges? I hope that the Minister will explain how local authorities will be able to deliver services in the light of the settlement that he has announced today.

3.50 pm

The Parliamentary Under-Secretary of State for Wales (Mr. Jon Owen Jones)

This has been an interesting and wide-ranging debate on the local government finance report for Wales. Next year, the decisions that we have been discussing will fall to the National Assembly for Wales. Today, hon. Members have raised various points about the funding of local services for their constituents.

The local government settlement for 1999–2000 builds upon the comprehensive spending review and, for the second year, we have addressed the funding deficit that we inherited from the previous Administration. There are undoubtedly still spending pressures on local authorities, but in the spirit of the partnership that we have fostered in Wales, the most acute pressures have been alleviated. In particular, the additional £70.2 million for education will enable local authorities to meet the teachers' pay settlement and have money left to spend on education. I am sure that when the hon. Member for Ceredigion (Mr. Dafis) does his sums, he will find that that is the case. We estimate that the teachers' pay settlement for 1999–2000 and the hang-over from the last pay settlement will cost about £50 million. Some £20 million is available for local authorities to target at local education priorities.

Several hon. Members—my hon. Friends the Members for Bridgend (Mr. Griffiths), for Vale of Clwyd (Mr. Ruane), for Cardiff, North (Ms Morgan) and for Preseli Pembrokeshire (Ms Lawrence)—related their experiences of looking after children or of teaching. They expressed their strong support for the Government's policies, which will achieve a reduction in class sizes and an increase in nursery education.

My hon. Friend the Member for Cardiff, North expressed her anxiety that we should safeguard playgroups in the voluntary sector. I endorse her views, and I know that my hon. Friend the Member for Neath (Mr. Hain) will take them into account. My hon. Friend the Member for Bridgend spoke about the need to secure social services—particularly when dealing with children in care. That is very much a Government priority. By allocating money to our sure start programme, we hope to be able to tackle some of the problems before they become insurmountable. I know that my hon. Friend will support the Government's actions in that area.

Sure start is also a way of trying to co-ordinate Government policy to bring about joined-up central and local government. The hon. Member for Montgomeryshire (Mr. Öpik) talked about trying to integrate services. He referred to integrating health and social services in order to achieve better value for money and increased service provision from the same funding. I hope that the hon. Gentleman will support the Government's efforts in trying to pool budgets as a way of utilising the same amount of money to best effect within different departments and areas of local government.

The settlement for 1999–2000 is a good settlement for local government in Wales.

Mr. Barry Jones (Alyn and Deeside)

Will the Minister give way?

Mr. Jones

Yes, but only this once.

Mr. Jones

I am very grateful. The documents refer to job creation and the moneys for that. Since April, my constituency has lost 1,250 jobs and we are very concerned that we may lose assisted area status. How might the Welsh Office help my constituency in north-east Wales to retain assisted area status?

Mr. Jones

My hon. Friend is always assiduous in promoting his constituency—we could all learn from him. No decisions have been taken about which areas will qualify for deregulation on the assisted area map. Flintshire will be considered for inclusion, along with the rest of the United Kingdom.

We have delivered on our commitment to minimise ear-marked resources. We agree that all local councils are best placed to identify local funding priorities. The settlement for 1999–2000 also includes indicative figures for the following two years. This forward-looking approach will allow local government to plan local priorities over a three-year horizon. In each of the three years, we will deliver an increase of more than 2 per cent. in real terms, which will enable local government to respond better to local service pressures.

As part of the consultation on the provisional settlement, the police authorities and their representatives have asked my right hon. Friend to look again at the way that capital charges have been calculated. He has responded to their concerns, and this has resulted in an increase of £1.8 million over the provisional figures announced in December. We are prepared to listen and are committed to developing meaningful partnerships. The National Assembly for Wales will be able to begin its work on the basis of sound partnership.

I know that not all local authorities are happy with the council tax reduction, or damping, scheme. We agreed the parameters of the scheme for 1999–2000 with the Welsh Consultative Council on Local Government Finance. It decided on a scheme that it considered best met the needs of local government in Wales, knowing that there would be winners and losers. The damping scheme is an excellent example of how well local government in Wales can work together, with some authorities contributing to the damping top slice so that poor authorities can receive the benefits.

As my right hon. Friend said at the beginning of the debate, the standard spending assessment formula is not perfect. The independent study commissioned jointly by the Welsh Office and Welsh local government associations will be available later this month. My hon. Friends the Members for Blaenau Gwent (Mr. Smith) and for Gower (Mr. Caton) have asked us to address their concerns about poorer authorities apparently not receiving as many resources as they should. We shall re-examine the funding formula, but there are reasons why local authorities receive different sums—not least, demographic changes. Population movements in south Wales in particular have led to some local authorities receiving an increased allocation as a result of population growth.

I acknowledge that earmarking £70.2 million of the increase for education and £5 million for Utting means that there will be pressures on other services. However, if councils increase their education budgets by £70.2 million and their other budgets by the balance of the increase in net total standard spending, spending will increase by 4.9 per cent. for social services—because of the £5 million support and the introduction of a Quality Protects Wales initiative—and by 4 per cent. for other services. That takes no account of local decisions on council tax and resources released by efficiency savings. We expect that, when best value comes in, local authorities will be able to deliver greater efficiency savings, and thus release greater resources.

This settlement represents a good deal for Wales and provides a sound foundation on which the National Assembly can build relations with local government. We have a challenging agenda of modernisation ahead, but with the support of our partners in local government and others, we believe that we can meet that challenge. Welsh local government will receive a record funding increase of £878 million over the next three years. That is nearly £300 per person in Wales. In the circumstances, it is a very good settlement for the people of Wales, and I commend the reports to the House.

Question put and agreed to.

Resolved, That the Local Government Finance Report (Wales) 1999–2000 (HC 203), which was laid before this House on 3rd February, be approved.