Council Tax Increases

HC Deb 22 March 1999 vol 328 cc38-77

Madam Speaker

We now come to the first debate on the Opposition motions. I have selected the amendment in the name of the Prime Minister.

4.33 pm

Mr. Paul Burstow (Sutton and Cheam)

I beg to move, That this House notes that the prime determinant of council tax levels is the amount of funding allocated by central government to local authorities; further notes that as a consequence of inadequate financial settlements for local government in recent years there has been a substantial real-terms year-on-year increase in council tax; and calls on the Government to improve the funding of local services and abolish budget capping within the lifetime of this Parliament. Shortly before the 1997 general election, the House debated the then Conservative Government's last local government settlement. During the debate, the then shadow Secretary of State for the Environment, now the Secretary of State for Health, declared: The incoming Labour Government will be based on the supposition that democracy depends on the people who take the decisions carrying the can". That is absolutely right. It is what this debate is all about—that those who take the decisions should carry the can for them. As our motion clearly states, the Government's responsibility is plain and clear when it comes to the increases that councils are now having to foist upon their citizens.

In the same debate, the right hon. Gentleman went on to say: We shall not roam around the country blaming local councillors for decisions that we have taken in the House of Commons."—[Official Report, 3 February 1997; Vol. 289, c. 701.] That, too, is absolutely right.

Two years on, is Labour taking responsibility? Last November, the Deputy Prime Minister came to the Dispatch Box to announce Labour's second local government settlement. We were treated to much of the usual display of smoke and mirrors. We were told that council tax need rise by no more than 4.5 per cent., and Ministers spent the day going around television and radio studios underlining the positive message of only a 4.5 per cent. council tax increase. Moreover, we were told that the settlement was the most generous since council tax was introduced.

We know now how wrong those claims were. Council tax bills are rising by 6.8 per cent.—an average increase of £51 on band D in England alone. The Government have to take responsibility; they must stop blaming local authorities and councillors for the consequences of Government decisions taken in the House with the support of Back-Bench Labour Members.

Mr. Gordon Prentice (Pendle)

Why is the average council tax per dwelling so much higher in Liberal Democrat areas than in Labour or Conservative areas?

Mr. Burstow

If this is going to be one of those debates when we trade variations of statistics, we can cite with the band D average, which shows a 6 per cent. increase for Liberal Democrat authorities.

The issue is not what local authorities decide, because more than 75 per cent. of what councils spend comes from central Government. The decisions of central Government overwhelmingly dictate council tax levels. We can all come up with spurious statistics, or even factual ones—I am sure that those referred to by the hon. Member for Pendle (Mr. Prentice) were factual—but we have to recognise that all the statistics are shaped by the decisions of Ministers on the distribution of grants and non-domestic rates.

Mr. John Bercow (Buckingham)

The hon. Gentleman is right to point the finger of responsibility at the Government Front Bench, but I hope that he agrees that it is important that he should approach the debate with clean hands. Will he tell the House the average saving achieved by Liberal Democrat-run authorities from competitive tendering and market testing?

Mr. Burstow

I am grateful to the hon. Gentleman for that intervention and I shall give him a straight answer. I cannot give him the figure today, but I shall happily write to him with it in due course. I shall be interested to hear his speech later, when I am sure that he will try to give us every detail of the savings arising from compulsory competitive tendering by Conservative councils. The figure will be much smaller, because there are so few Conservative councils these days. Compulsory competitive tendering, which is referred to in the Government amendment, has produced inefficiencies because of the way in which it has been delivered. The crude and ineffective mechanism of CCT might have produced artificial savings, but they came at the expense of quality of service. The Conservatives never understood that when they were in government. That is why they lost so many seats in local government throughout the country.

The lion's share of what councils spend is provided by the Government in the form of grants and business rates. That means that small changes in the way in which the Government distribute the cash have large consequences for council tax bills. An essential qualification for being a Minister in the Department of the Environment, Transport and the Regions seems to be a willingness to live in a world of fantasy figures—a fantasy based on the pseudo-science of standard spending assessments. Ministers place great store on the standard spending assessment. Education Ministers seem to believe that it is a true measure of what councils should spend on education.

In reality, the formula is nothing more than a means for delivering and distributing a cash-limited budget. Minor changes in the algebraic formula that underpins the standard spending assessment can have profound effects on the level of council tax, as we are seeing as bills start to be printed and delivered to council tax payers. As the Chartered Institute of Public Finance and Accountancy recently said: Because the financing of local authority spending depends so heavily on central government support, raising relatively small amounts of additional local revenue results in exaggerated increases in council tax levels. Standard spending assessments are only part of the story. The sleight of hand is more subtle than that. The gap between what local authorities are spending and what the Government are funding is growing. It stands at £2.3 billion and is set to widen further. As the Government withdraw support from local spending, the council tax payer has to pay more. During the debate before the election, Labour exposed that as a scandal, but the Labour Government have continued with the same policy. As a consequence, for every pound that the Government fail to fund, council tax goes up by an average of £4.

In the Government's fantasy world, we are told by Ministers that a 4.5 per cent. increase is all that is needed, and that no cuts will be necessary in front-line services. I have been watching closely and listening to Ministers and their advisers, and that is not what is happening on the ground. In the real world of inflation, an ageing population and an increasing number of school children, councils have already endured two years of Labour austerity; two years of Labour sticking to Tory spending plans; two years of cuts and council tax rises.

Labour would like us to think that year zero started with the comprehensive spending review. We are to forget the first two years of a Labour Government, and focus on the next three. "Cash for change" is the cry, but that ignores the cumulative effects of years of inadequate settlements under the previous Government, and now under this Government. In the real world, Labour's spending commitments are being oversold and underfunded. Over the lifetime of this Parliament—not just the last three years—compared with the last full Parliament, current real annual spending growth has halved: 1.4 per cent. versus 2.7 per cent.

On education spending, there is the much-vaunted £19 billion extra. The number of times that this figure, and sub-sets of it, has been launched and relaunched would place the Government well at the top of the Audit Commission's league table on recycling. Apart from being a three-year cumulative figure—rolling up total spending compared with current years—it is conveniently forgotten that the figure includes three years' worth of inflation and all aspects of education funding, including colleges, universities, Ofsted inspectors and special grants.

Nearly half the Government's promised increase is not an increase in funding, but comes in the form of standard spending assessment increases. That is not cash from the Government, but cash from council tax payers. Councils taking up the Government's so-called generous SSA increase will have to cut other budgets or increase council tax—or, in most cases, both. Last year, the Government left councils to find £562 million for local education in that way. The result was that class sizes went up, not down—which was an early Government pledge.

The total increase in central Government funds to local authorities is set to rise by an average of £1.5 billion over each of the next three years, and education's share of that is likely to be no more than £600 million a year. Those figures take no account of the teachers' pay award this year and the Government's failure—again—fully to fund the award leaves councils having to find an extra £68 million in the coming year.

It is not just in education that cuts in other budgets or increases in council tax will be needed to bridge the gap. A closer inspection of figures provided by the Library reveals that the social services standard spending assessment for England will rise by just 1.3 per cent. after changes in the grant and special grant regime that provided for community care in the past have been taken into account.

Even on the Government's own fantasy figures, that will leave a £100 million gap, simply to meet inflation, for social services to pick up. A lower inflation increase for social services will make cuts in current services inevitable. Undermining current social services by underfunding makes no sense at a time when the Government, rightly, are setting targets and directing a host of specific grants at social services to secure change and improvement. Ultimately, that is self-defeating.

To make matters worse this year, local authorities have been left waiting for the Department of Health to publish the conditions for all the new grants, turning the planning and budgeting exercise into a nightmare. Only last Tuesday, the conditions for the three biggest grants were finally published—well after most local authorities will have set their budgets and made their decisions about council tax.

It is not just the levels of council tax funding that make a difference, or the way in which money is distributed; it is also the capping system itself. The Government amendment applauds the abolition of crude and universal capping—and we, too, would applaud that. However, capping is still with us this year. The only difference is that the Deputy Prime Minister is keeping the figures to himself; he is not sharing them with anyone else. As a result, councils are forced to play Russian roulette with school budgets, meals-on-wheels charges and other services.

Just in case councils do not get the capping message from the Government, there is new Labour's own brand of crude and universal capping. Council tax benefit subsidy limitation gives the Government the power to claw back council tax benefit from councils increasing their council tax by more than 4.5 per cent. The result is a further increase in council tax or a budget cut to pay for the loss of council tax benefit subsidy.

The Labour manifesto promised an end to crude and universal capping, but with reserve powers to control council tax rises. The clawing back of council tax benefit is not a reserve power: it is crude and it is universal. A council with an 8 per cent. council tax increase will receive no further funding for council tax benefit for the poorest in its community, so the nearly poor will have to pay for the benefits of the really poor in their communities. So much for ending crude and universal capping.

For Liberal Democrats, local accountability means greater financial independence. As a first step, we would return to local councillors the power to determine local business rates, which would increase the amount raised locally for council expenditure from a quarter to nearly half. That would begin to rebuild financial independence, creating greater transparency and accountability to local people.

The figures are clear—the average council tax increase is 6.8 per cent., which will result in an average band D increase of £51 a year. That is more than the Government claimed, and more than people were led to believe.

Mr. Simon Hughes (Southwark, North and Bermondsey)

My hon. Friend has been very accurate in his general observations, but I want him to answer a particular question which may be of interest to the Minister, who lives in the borough that I represent. When my constituents complain that the Labour council is closing day centres for the elderly and for adults with learning difficulties, and wants to sell off housing estates because it does not have enough money to repair other estates, is that more the local Labour council's fault, or more the Labour Government's fault? Which manifestation of Labour should people blame?

Mr. Burstow

I am grateful to my hon. Friend. Every single council tax payer faces that dilemma because accountability is even more blurred now than under the previous Government. Labour councils implement Labour Government council tax increases and cut services to try to keep council tax down a bit. Of course, individual councils have to set priorities, but in my hon. Friend's area a Labour council is making decisions that cut local services.

I have a final quotation: It is no good the Government complaining that councils blame central Government. Central Government have so constructed the system of local government finance that they tell it how much it can have, what it can spend it on and how to spend it. The country has rumbled that and knows that central Government are taking decisions and deciding how those decisions will impact in every area."—[Official Report, 3 February 1997; Vol. 289, c. 760.] How very true were those words, spoken by the current Minister for Local Government and Housing; and they are truer today than when she first spoke them. The Conservatives may have engineered the local government finance system, but Labour has fine-tuned it to give Ministers even more power to direct what councils can or cannot do. The Government, more than local councils, have taken the decisions that have determined council tax increases, because so much of the money comes from the centre.

The people have indeed rumbled what has happened, and have seen that, as a consequence of decisions taken by the Government, there will be a massive back-door increase in taxation. Labour should carry the can for that.

4.49 pm

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

I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof: notes that the 1999–2000 local government settlement was the most generous since the introduction of the council tax; further notes the Government's commitment of an extra £40 billion for schools and hospitals; and welcomes the introduction of Best Value, the abolition of crude and universal capping, the reform of political management structures and the new ethical framework, set out in the local government White Paper. This debate is interesting. Hon. Members may already know that it is little more than a fig leaf to cover the embarrassment caused by the Liberal Democrats' confused and contradictory local government policies. The hon. Member for Sutton and Cheam (Mr. Burstow) is a prisoner of his own party activists. He knows that the interests of Liberal councillors are not the same as the interests of local people.

Jackie Ballard (Taunton)

He is a party activist.

Ms Armstrong

Perhaps the hon. Lady has given us the truth.

The interests of Liberal Democrat Members are not the same as the interests of the general public. Liberal councillors want higher taxes from local people, while local people want best value for their money. The hon. Member for Sutton and Cheam knows that he cannot take a responsible and grown-up attitude to local government policy and please both—so he has chosen to put party before people. Because the hon. Gentleman cannot reconcile the interests of his councillors with the interests of the electorate, he has this afternoon tried to shift the blame for council tax rises, many of which have been the direct decision of his party, away from councils and on to the Government.

Liberal policy is muddled: the Liberal Democrats say that they want the Government to grant more money to local councils, but councils to raise more of their money for themselves. The Liberal Democrats say they want lower council tax rises, but want to abandon all controls on local government spending. They say they support public services, but want to do nothing to ensure best value for local people. Much of local government has moved on from the old politics of spend and blame; it seems that the Liberals have not. They have become apologists for old-style municipal tax and spend, high taxation and low efficiency.

Jackie Ballard

If the Minister thinks that Liberal Democrat councillors and activists are so out of touch with the wishes of local people, will she explain why the Labour party—especially in the north-west of England—has lost council seat after council seat to the Liberal Democrats over the past year or two?

Ms Armstrong

If the hon. Lady revealed the turnout at those by-elections, she might not be so gung-ho. The Tories craved too much control over councils, but the Liberals propose out-of-control councils—with taxes as high as they like, spending as much as they want, service standards as low as they get—with the Government taking no responsibility for improving public services or protecting local taxpayers. The Government reject both those approaches.

Mr. Burstow

The Minister asserts that our policy is to release local government from central Government control, and she is right. However, much of what Liberal Democrats have said for many years is also the policy of the Local Government Association, including returning business rate control to local councils and a local income tax. The LGA has long campaigned for those policies.

Ms Armstrong

The hon. Gentleman will wish to retract that statement, because I have never known the LGA to propose a local income tax. I hope that the hon. Gentleman's enthusiasm will take him down the right road. The LGA has argued for the return of business rates to local control, but it also accepts that redistribution would be needed if that were to happen, from those authorities—

Mr. Burstow

indicated assent.

Ms Armstrong

The hon. Gentleman did not make that point clear. Such redistribution moves away from the relationship between central and local funding. We believe that central Government should work alongside local councils to get the best for the local taxpayer and encourage local democracy. Central government should not seek to control too much or to abandon responsibility for what happens.

It is in the national interest that local communities should take more decisions for themselves; that local councils should be more responsible to local people than to central Government; and that responsible councils should set their own levels of taxation. It is also in the national interest that central Government should ensure that national standards of public service are set and met, and major failures in service delivery are halted and reversed. It is the responsibility of central Government to make resources available to local councils to provide and enable the provision of modern public services, at a price people are prepared to pay, and it is right for the Government to ensure that those resources are spent wisely and well.

The hon. Member for Sutton and Cheam tried to pretend in his peroration that the Government had not been generous to local government. In fact, in the five years of the previous Parliament, standard spending assessments fell by 3 per cent. in real terms, while the Labour Government have already increased SSAs by 2.6 per cent. During the first four years of the Government, SSAs will increase by 6.9 per cent.

When the Conservatives exercised central control through crude and universal council tax capping and pre-announced spending limits for every council in the country, it could fairly be claimed that they took responsibility for every council tax rise. The capping threshold ceased to be a maximum spending limit and increasingly became the norm. Conservative Governments enjoyed the right to limit every budget increase, and they must therefore take responsibility for every council tax rise. As we said we would in our manifesto, we have ended crude and universal council tax capping. This year, there have been no pre-announced capping limits.

Mr. Simon Burns (West Chelmsford)

The hon. Lady said during her flight of fantasy that it was the responsibility of central Government to provide money for local authorities to provide local services. [Interruption.] She now says that she did not say that, but that was certainly the impression that she gave in her speech. How, then, would she respond to the hon. Member for Brent, East (Mr. Livingstone), who said that, as a result of the Government's settlement, £2.4 million would have to be cut from education in Brent? In addition, the hon. Gentleman said that provision of care for the elderly would be cut, that libraries would close and that children and the disabled in care would suffer. What would the hon. Lady say to her hon. Friend?

Ms Armstrong

It is not my job to account for the meanderings of my hon. Friend the Member for Brent, East. I am not responding to his electioneering; I am here to deal with the electioneering of the Liberal Democrats, and with the feeble attempts of the Tories.

Councils have set their tax and spending levels for themselves this year. They are responsible to their electorates for them, and they must now account for their decisions. Such decisions include that in Torbay—I am pleased to see the hon. Member for Torbay (Mr. Sanders) in the Chamber—where responsibility for the council tax increase of 17 per cent. lies with the Liberal Democrat council. Those decisions include that taken in Herefordshire, where responsibility for the council tax increase of 10.8 per cent. lies with the Liberal Democrat council. The biggest council tax rises among unitary councils are by Liberal Democrat councils. The Liberal Democrats can duck and dive, but they cannot escape their own responsibilities for council tax rises. It is little wonder that the average council tax bill per dwelling in Liberal Democrat areas is higher than in Labour areas.

Mr. Adrian Sanders (Torbay)

Which Government were responsible for reducing the formula for bed nights, which has affected tourist areas; which Government reduced weighting for elderly people; and which Government have caused problems for areas with rising numbers of school pupils because of the time lag in the head count in standard spending assessments? Can the Minister name a council affected by all three of those factors? I can give her an answer: Torbay, where those characteristics account for a large proportion of the tax rise.

Ms Armstrong

I wish that that were true. However, the truth is that Torbay is raising the council tax, not because it has taken SSA changes into account, but because it is raising its budget by 6.7 per cent., which is somewhat above inflation. That is why there is a council tax rise of 17 per cent. The Liberal Democrats are responsible for the rise in that budget and they are responsible for the consequent council tax rise.

The Conservatives are no better. Conservative councils have higher than average increases in council tax at 7.6 per cent. In shire districts, Conservative councils have higher average rises than Labour councils.

Mr. Sanders

rose—

Ms Armstrong

The hon. Gentleman will have a chance to put his point in his speech.

In the 1980s, the Conservatives were proud of Wandsworth—their flagship borough. Last year, ahead of the local government elections in London, which may have been incidental, Wandsworth cut its council tax substantially. This year, when there are no elections, Wandsworth has the highest increase of any council in London, with a massive tax hike of 21.5 per cent. Compare that record with the rest of inner London

All inner-London authorities were treated similarly in this year's settlement. There are only three Conservative councils in inner London. The top three increases in council tax in inner London are in those same three Conservative councils. In Conservative Kensington and Chelsea, council tax is up 7.5 per cent.; in Conservative Westminster, it is up 8.7 per cent.; and in Conservative Wandsworth, it is up 21.5 per cent.

By contrast, other councils—Islington, Greenwich, Hackney and Lambeth—are cutting council tax this year. In the London borough of Redbridge, the Conservatives and the Liberal Democrats combined to vote through a total council tax rise of 11.3 per cent. in the face of opposition from the minority, but ruling, Labour group. It is little wonder that, across London, councils run by Conservatives and Liberal Democrats have higher average council tax rises than Labour councils.

Mr. Sanders

The Minister attacked Torbay council for a 16.4 per cent. rise, which she blamed on the Liberal Democrats. Will she explain why the Labour group on Torbay council wanted a 20 per cent. tax rise?

Ms Armstrong

I am not responsible for Labour group decisions and I do not support all of them, as I will make clear in my speech.

I do not make these points for partisan reasons. While it is the case that Labour councils have lower than average increases in council tax, I readily acknowledge that, in some Labour councils, council tax rises are higher than I would have argued for had I been a councillor. Those rises and the increases by Conservative councils—which are higher than average—are the responsibility not of the Government but of local decisions taken by local councilors.

It is the Government's responsibility to ensure that those decisions do not bear too harshly on the public purse, either locally or centrally. To protect the local taxpayer, we will shortly announce whether and how we propose to use existing capping powers for 1999–2000. To protect the national taxpayer, we have made local councils responsible for the extra costs of council tax benefit caused by large council tax increases.

The national interest demands that, where councils are proving irresponsible, the Government should have the power to intervene. The Local Government Bill, which is before Parliament, creates a reserve power for the Secretary of State, so that excessive council tax decisions can be judged over time, measured against expressions of support by local people and, if necessary, restrained. The Liberals oppose any restraining powers on local government. So, while they are prepared unfairly to blame the Government for higher council tax bills, the Liberals would stand back and let those tax bills rocket out of control.

Mr. Simon Hughes

Given what the Minister has said, will she explain, for the benefit of our constituents, the answer to the question that I put to my hon. Friend the Member for Sutton and Cheam (Mr. Burstow). If our local council, which is Labour run—for the first time in its history, Labour now has control only through the vote of the mayor—cannot raise the money that it wants because it is capped and the Government are setting a limit, and if the Government do not give it the money that it is asking for, whom should the council blame? It has been told that its day centres are to close—some have closed and the day centres for adults with learning difficulties are to close in the next few days. It has also been told that some of the council estates will have to be sold because there is not the money to repair them. Whom should the council blame?

Ms Armstrong

The hon. Gentleman's problem is that he does not understand local government finance; it has nothing to do with the housing account. The Government have put substantial new money into housing and that is a separate matter from this debate. As I understand it, that is not the argument that Southwark council is putting about its estates.

In respect of the other issues raised by the hon. Gentleman, he said that the Government were capping councils. The Government are not capping councils. Councils have the opportunity to set their council tax at a level that they believe will deliver the quality of services for which people are prepared to pay. It is important that councils take responsibility for those decisions, and that they discuss them and argue them through with local people. Under current legislation, they are not supposed to do that; that is why we are changing the legislation in the way that will be announced tomorrow.

The Tories, who for years were hooked on centralisation, are today reformed "capoholics", slowly emerging from their blue haze, trying desperately to come to terms with the reality of their past, not quite certain whether to control their addiction by an occasional fix or to give up the cap for good. In contrast to the Conservatives and the Liberal Democrats, the Government recognise our responsibility to ensure that local services are well resourced and well delivered.

Best value will sweep away the outdated over-regulation of compulsory competitive tendering and usher in a new era of rising standards of public service, greater involvement by local people in setting and monitoring standards and an emphasis on year-on-year improvement, innovation and public-private partnership. Best value provides the best means for keeping council tax rises down over the medium term. It is a fact that this year's local government settlement has been the most generous since the introduction of the council tax, with substantial extra money for education and social services.

As we have said, if council tax had increased in line with the increase in SSAs, bills need not have risen by more than 4.5 per cent. However, councils have decided to increase their spending by more than that, so council tax bills will rise on average by 6.8 per cent.—less than £1 a week, and a lot less than the double digit increases predicted by the Conservatives and the Liberal Democrats. [Interruption.] We made no predictions, but said that, if council taxes rose in line with the increase in SSAs, the rise would be 4.5 per cent. Those council tax rises have occurred despite the extra resources we have committed this year: an extra £2 billion of Government grant, which is an increase of 5.5 per cent., well above the rate of inflation. No local authority has received less grant this year than last year, and all education and social services authorities have received more grant this year than last.

Of course, the Liberal Democrats have today repeated their usual mantra: tax more, spend more. However, it is based on a false boast. The Liberals say that the Government have not put enough money into health and social services. At the election, they promised an extra £3.5 billion; we have put in an extra £21 billion. They say that we have not put enough money into education. They promised £9.5 billion; we are putting in £19 billion. This debate has been called by Liberal Democrat Front Benchers for no other reason than to curry favour with the Association of Liberal Democrat Councillors—one might almost imagine that a leadership contest was in the offing.

The debate has not been called to hold the Government to account, because we know that this year's settlement is the most generous for seven years and more generous than anything offered by the Liberals or the Conservatives at the election. The Liberals keep telling me, and Paddy Ashdown reaffirmed it—

Mr. Deputy Speaker (Mr. Michael Lord)

Order. The Minister must refer to parliamentary colleagues in the correct form.

Ms Armstrong

I am sorry, Mr. Deputy Speaker. The right hon. Member for Yeovil (Mr. Ashdown), who is still a Member of Parliament, reaffirmed last September that the Liberals would have stuck with the financial memorandum that accompanied their election manifesto throughout this Parliament. The figures I am using are drawn from that document and, if hon. Members do not like it, I am sorry for them.

Mr. Paul Tyler (North Cornwall)

Can the Minister be objective and non-partisan, just for a moment? From her remarks, it appears that she regards as irresponsible any local authority, whatever the colour of its controlling group, that has exceeded the 4.5 per cent. increase. Is that really what she is saying to the Local Government Association and to a large number of Labour-controlled local authorities?

Ms Armstrong

I have certainly not said that. That is why I have emphasised that we never set 4.5 per cent. as a figure above which councils should not go. We said that, if they went above that figure, they would have to share with Government the burden in terms of council tax benefit—

Mr. Tyler

The Government penalise them.

Ms Armstrong

The hon. Gentleman does not appear to understand that it is the taxpayer who funds council tax benefit, so the penalty is paid by the taxpayer. The Government are concerned about that, even if the hon. Gentleman is not.

Today's debate has not been called to highlight how responsible Liberal councils are. The hon. Member for Sutton and Cheam appeared almost embarrassed to mention Liberal councils.

Mr. Burns

She wrote that before the hon. Gentleman had even spoken.

Ms Armstrong

It is not written down here, so there you go.

We know that the average council tax per dwelling in Liberal areas is higher than in Labour areas, just as the average increase in Labour councils is lower than in Conservative councils. The debate has not been called to draw attention to the shires, because average council tax per dwelling in shire areas is lower in Labour areas than in either Liberal or Conservative areas. The debate has not been called to demonstrate how responsible Liberal Front Benchers are, because we know that they would let council tax rise faster and further without trying to protect the taxpayer, while their hare-brained local income tax scheme would cost millions to introduce and lead to a massive increased burden on business in implementing it.

Local councils such as Wandsworth, Torbay and Herefordshire are responsible for pushing council taxes up, just as local councils such as Bristol, Lambeth and Greenwich are responsible for keeping average rises down.

Jackie Ballard

Liverpool.

Ms Armstrong

Liverpool, I grant the hon. Lady.

The Government are responsible for putting in place the necessary resources for local services, and we have done just that; the Liberals would have done even less. The Government are responsible for protecting the taxpayer, and we shall do so through our new reserve powers; the Liberals would do nothing. The Government are responsible for driving the modernisation of local government, just as we are doing through the introduction of elected mayors and a new ethical framework—the Liberals and the Conservatives simply do not know what to do.

It would do the House some good and do local government a great deal of good if we moved away from the yah-boo politics of spend and blame. It is time for a grown-up relationship, where councils take responsibility for their decisions and central Government intervene only in the national interest. Today's debate has been called by the Opposition, but they would do better to join the Government in taking a mature approach to the politics of local government. That is the Government's approach, but it is clearly not shared by the Opposition. I hope that, over the next few years, we can foster such an approach and demonstrate that there can be a fruitful relationship between the centre and the localities, in which both accept their responsibilities and work to ensure that local people get the best for their money.

5.15 pm

Mr. Simon Burns (West Chelmsford)

I congratulate the Minister on her Alice-in-Wonderland speech. The only thing that I can say in her defence is that at least she could not keep a straight face for most of it.

I listened to Labour spokesmen making speeches from the Opposition Dispatch Box during the previous Government. They would have been horrified to think that, only two years after its return to Government, Labour's approach to local government spending would be turned on its head and changed so dramatically. I thought for a moment that it was a Conservative rather than a Labour Minister speaking—let alone an old Labour Minister from an old Labour Department.

Mr. Simon Hughes

The hon. Gentleman makes a perfectly valid point: it sounded more like a right-wing Conservative speech than a new Labour speech. Will the hon. Gentleman explain why no more than three Tories have been present for the debate so far? At one stage, only one Conservative Member was present. If they are so concerned about local government elections and council tax rises, where are the massed ranks of the Tories?

Mr. Burns

There is a simple answer to that question. I will go down the same road as the Minister and say that I suspect that the Liberal Democrats called today's debate not simply to discuss local government finance. I think that several Liberal Members have other agendas. It is sad to see that three prospective leadership candidates have now left the Chamber. No doubt, when more electors are present, they will return to their rightful places—as they now do every morning in the Tea Room at breakfast.

The first sentence of the Liberal Democrats motion reads: That this House notes that the prime determinant of council tax levels is the amount of funding allocated by central government to local authorities". That is such a truism that I suspect that no hon. Member disagrees with it. In fact, it is almost as straightforward and simplistic as the statement that the battle of Hastings was in 1066—as every schoolboy knows.

When announcing the local government finance settlement last December, the Deputy Prime Minister declared, in his normal rumbustious way, that he expected council tax to increase by an average of 4.5 per cent this year. In a flight of hyperbole, he described it as the best deal for years for local people."—[Official Report, 2 December 1998; Vol. 321, c. 886.] In the cold light of day, with council tax levels set for next year, the Deputy Prime Minister's view is not shared by most people around the country who are receiving their council tax benefits on their doormats.

Ms Armstrong

Council tax bills.

Mr. Burns

Many people will receive benefits as well—I shall come to that later.

If the Deputy Prime Minister's comments had been included in a prospectus designed to sell a commercial product or service, I suspect that the Serious Fraud Office would want to interview him. The situation that he described is far removed from reality. As my hon. Friend the Member for Croydon, South (Mr. Ottaway) rightly said, the Deputy Prime Minister is a bit like a used car salesman. As we know from the figures released by the Government this morning, the average council tax increase in England is 6.8 per cent.—which is significantly more than his overly optimistic forecast. On band D precepts, Buckinghamshire faces an increase of 9.8 per cent.; Oxfordshire, 11.8 per cent.; Worcestershire, Nottinghamshire and Cambridgeshire, 9.9 per cent.; Hertfordshire and Norfolk, 9.8 per cent.; Shropshire, 9.7 per cent.; North Yorkshire, 9.6 per cent.; and Northumberland, 9.5 per cent. Even my county of Essex faces an increase of just under 7 per cent. Those figures do not include council tax increases for borough and district councils, which will have to be added to them, or certainly amalgamated into them.

Unitary authorities, especially in London, face horrific rises. Brent will experience an increase of 15.2 per cent.; Kingston, 12.7 per cent.; Redbridge, 10.9 per cent.; and Bromley, 9.9 per cent. Wandsworth, which the Minister mentioned, faces a increase, when the figure is rounded up, of 16 per cent. Outside London, to mention only a few, Torbay faces a rise of 16.5 per cent.; Rutland, 9.4 per cent.; Milton Keynes, 10.7 per cent.; and Telford and Wrekin, 9.5 per cent. So much for the Deputy Prime Minister's statement last December and his forecasting skills. It is no wonder that no one outside Millbank and Blair's on-message babes thinks that this is the best deal for local people for years.

Will the settlement, which the Government claim is so wonderful, enhance local services? Sadly, the evidence from budget setting throughout the country is that it will not. All over the country, there are cuts in crucial services, such as the police, due to budgetary pressures. In Essex, the mounted police section is to close down. [Interruption.] The Minister may laugh, but that is not funny for the people of Essex, who want a decent police force to combat crime.

Ms Armstrong

The hon. Gentleman should know that Durham had to close its mounted police section some time ago, but such policing is necessary only in certain areas and at certain times, and that is frequently an operational, rather than a budgetary, decision.

Mr. Burns

I suspect that the right hon. Lady is, to coin a phrase, speaking on the hoof. The police authority in Essex has made it clear that, due to the lack of £7 million for funding the police this year, it is having to close down the mounted police for budgetary, not operational, reasons. The same is true of cuts in the motor cycle section of the Essex police and the closure of several rural police stations.

Mr. David Watts (St. Helens, North)

Does the hon. Gentleman think that his speech has any credibility, when the previous Government slashed public services for 18 years and, at the same time, jacked up the council tax and the poll tax to unheard-of levels? St. Helens council faces a 1.9 per cent. increase in council tax this year, which is in stark contrast to the cuts that it experienced under the previous Administration.

Mr. Burns

The answer to the first part of the hon. Gentleman's intervention is yes, but I am sure that his Whip has noted his remark and that, when the reshuffle occurs, his bid will be fully considered. In answer to his second remark, I shall deal later with areas such as St. Helens and the fiddling that has occurred this year in the setting of the amount of money that local authorities have received. If he would care to wait a little, I will explain why certain parts of the north have done considerably better than certain parts of the south, due to the Government's allocation of funding.

As I was saying, the effect of the settlement in Essex has been particularly difficult for the police and has resulted in 36 fewer bobbies on the beat compared with two years ago. The pledge "tough on crime and tough on the causes of crime" seems to be rather hollow in my county because, despite the tremendous work that the police are doing, they have found themselves financially squeezed, with their resources and equipment reduced year on year and fewer bobbies on the beat.

The settlement has had a similar effect in Barnsley. In an earlier debate, the hon. Member for Barnsley, Central (Mr. Illsley) told the House about the £2 million-worth of cuts in services there. There have been redundancies among teachers in Somerset, cuts in social services in Oxfordshire and education cuts in Brent. If the Deputy Prime Minister wants to join the real world to discover what is really going on as a result of his settlement which he thinks is so wonderful, I can recommend no better person for him to talk to than his hon. Friend the Member for Brent, East (Mr. Livingstone), who wrote in the Evening Standard on 29 January: How has it all gone so sour so quickly? I asked the Minister during her remarks what her answer to that question would have been if she had had the pleasure of meeting her hon. Friend. I am not sure whether it was out of nervousness because she did not know the answer or the result of in-fighting within the Labour party, but she dismissed her hon. Friend in fairly rude terms. I hope for her sake that the hon. Member for Brent, East does not read Hansard every day.

Ms Armstrong

Does the hon. Gentleman accept that Brent still has the 18th highest standard spending assessment in the country?

Mr. Burns

If the right hon. Lady were to go to the main street in Brent to give that message to pensioners who are facing cuts in provision for their care, if she were to meet children in children's homes who are facing cuts in services and if teachers in Brent who are facing redundancies and cuts were to hear what she has said, I think that—to put it politely—they would laugh her out of court.

It is not the SSA that is of interest to the people of Brent. They are interested in the services that are provided and whether there is enough money for an effective, efficient service, and the hon. Member for Brent, East does not believe that that is the case. He has made it clear in the Evening Standard that he is appalled.

I am trying to tell the right hon. Lady—this is only one example—that the wonderful financial statement that has been spun round every studio in the country is not quite so wonderful in the real world with real people who are receiving real council tax bills and who have to pay them.

One of the well-rehearsed arguments about the current settlement is that the Government have penalised the south of England, and possibly London, to the benefit of the north. The hon. Member for St. Helens, North (Mr. Watts), in an intervention that was designed to be helpful to the Government, referred to the wonderful situation in St. Helens. As St. Helens is a beneficiary of the settlement, I shall deal with the hon. Gentleman's intervention as I promised.

Given that shire counties and district councils increasingly have to raise more of their revenue themselves, it is fair to ask whether all such councils are treated equitably by the Government or whether there is a geographical bias in favour of one part of the country over another. To my mind, that can best be considered by examining which councils face the best and the worst changes in their total external support and percentage of SSA between 1998–99 and 1999–2000.

Of the 10 shire counties with the most favourable change in TES relative to SSA, six are in the north-east or the midlands, while, of the 10 with the least favourable, change, nine are in the south-east. If, on the same basis, we consider what is happening to the shire districts, we find that, of the 25 districts with the most favourable change, 15 are in the north of England and two are in the midlands. Out of the 25 districts that have done least favourably, 10 are in the south-east, eight are in the south-west and one is in East Anglia. Only three are in the east midlands, with only three in the west midlands.

Interestingly, there are no shire districts from the north of England in those figures. That analysis shows categorically that, of both shire counties and shire districts, there is a geographical bias in the 1999–2000 settlement against councils in the south of England. The logical conclusion to be drawn is that that area of England has fared particularly badly compared with the rest of the country in this year's settlement.

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

Will the hon. Gentleman give way?

Mr. Burns

No, I shall not for the moment.

Consequently, the pressures on council tax increases and service cuts will be the greatest in this area—hence the litany of examples that I gave earlier.

In total, over the past two years, shire counties have lost about £250 million and London £140 million, while metropolitan areas have gained about £365 million. I am sure that any hon. Member, particularly from a constituency in the south, south-west or south-east, will recognise how skewed the settlement has been.

I am delighted to see that there are three Liberal Democrat Members in—

Mr. Andrew Stunell (Hazel Grove)

Four.

Mr. Burns

I apologise to the hon. Gentleman. I thought that he was a Scottish nationalist. He has obviously made a great impression since he entered the House.

I am pleased to see four Liberal Democrat Members in the Chamber, especially as their hon. Friend the Member for Southwark, North and Bermondsey (Mr. Hughes) commented earlier in the debate about the number of hon. Members present.

Mr. Stunell

rose—

Mr. Burns

I will give way, as I was wrong about the hon. Gentleman's party.

Mr. Stunell

I am a Liberal Democrat and I do not come from Scotland, although I am called Andrew. Perhaps that explains the link in the hon. Gentleman's mind. May I point out to him that there are in the Chamber at present more Liberal Democrats than Conservatives, as there are in local government in the country?

Mr. Burns

I accept that there are more Liberal Democrats in the Chamber, but the hon. Gentleman is wrong about local government. Following the local elections last May and by-elections since, the Liberal Democrats are no longer the second party of local government. They are the third party, and no doubt they will be even more so in about eight weeks.

I shall deal briefly with council tax benefit. The full bill for council tax benefit is met by central Government. However, despite vigorous opposition from local authorities, the Government have decided to proceed with the reforms that they outlined in their White Paper "Modernising Local Government" which will transfer to local authorities some of the responsibility for meeting the cost of council tax benefit above a certain threshold from the beginning of the next financial year. That is the wrong way to proceed, as it will have a disproportionate impact on council tax payers in areas where an above-average proportion of residents receive council tax benefit. As the Local Government Association rightly said, that will mean that the nearly poor are paying for the really poor. That is an extraordinary philosophy for any Government, let alone a Labour Government, to adopt unashamedly.

Mr. Burstow

Will the hon. Gentleman give way?

Mr. Burns

No, I am not giving way.

That is an arbitrary and unfair system. I urge the Government to think again and to take account of the effect on people just above benefit level.

Finally, I shall deal with capping. In their manifesto at the last election, the Government promised to end what they described as "crude and universal" capping. However, they have not lived up to their promise or the expectations that they raised before the general election. The changes that they have made for the coming year could best be described as arbitrary and retrospective capping, especially as the changes further blur accountability in local government and reduce transparency.

By deciding not to announce provisional capping limits, but retaining the power to cap budgets if they exceed what they deem appropriate, the Government have given themselves the opportunity to decide the capping criteria that they eventually use on the basis of which councils they wish to affect. That is a ridiculous and unfair way to proceed. It is clear that the Government have no intention of changing their policy at this late date, but I warn them that there will be severe repercussions in the coming year, which they will find it extremely difficult to justify to the people who will be so badly penalised as a result of that policy. It is unfair to have left local authorities effectively in limbo without laying down some criteria in advance of then setting their budgets.

I can only reiterate that the Deputy Prime Minister's expectation that the average council tax increase would be 4.5 per cent. has turned out to be a hollow sham. As council tax bills land on people's doormats, they will see clearly that the claim that the settlement is the best deal for local people is patently false—a myth which cannot be justified—and, in the coming six to eight weeks, Labour candidates up and down the country will rue the day in December last year when expectations were raised so high. The bills that council tax payers will have to pay in April will not live up to what they were led to believe would happen.

5.36 pm

Mrs. Louise Ellman (Liverpool, Riverside)

I support the Government amendment to the motion. I am a strong supporter of local government and am absolutely convinced that local government working at its best can respond to local needs and wishes in a way that no other layer of government can. Local government working properly meets the needs of its communities; acts as a community leader; shows imagination, flexibility and initiative; and looks ahead as well as reacting to immediate difficulties.

I also understand the enormous damage that was inflicted on local government and on our communities in the 18 years before the Government came to power. Attacks were made on local government's financing and powers and on the whole principle of local government and local accountability itself. A start has been made on changing that in the two years since the Government came to power, but it is not feasible to imagine that those 18 long years of consistent attacks, consistent cuts and consistent denigration can somehow be ignored.

I consider what the Government have delivered to be the beginning of a new start for local government. Although I want a great deal more progress to be made in future years, that necessary beginning has been achieved, in the face of great difficulty and against that record of cuts and denigration.

The motion has been tabled by the Liberal Democrats, who are nothing if not opportunistic; indeed, they are everything to everyone. They are all in favour of public spending, as long as others are responsible for the bills. They hide away from responsibility, claiming that they want to spend public money, but blaming others if they are concerned that the public will not like the cost of meeting those bills.

Liverpool, the city that I represent, will benefit from next year's local government settlement; it is the most generous for many years and, at long last, recognises the needs of the city, which is in an objective 1 area—one of the poorest areas in Europe. The city has acute needs and tops the list of areas of urban deprivation in this country. For the first time, the real needs of the city are being addressed—by this Government; indeed, the settlement that they have delivered for next year has made it possible for a council tax freeze to be imposed.

Meanwhile, what are the Liberal Democrats doing in Liverpool? When the Government are delivering a revenue support grant settlement that starts to meet the needs of the people of Liverpool, the Liberal Democrats are mounting a major assault on pre-school services, on the youth service and on the voluntary sector. They are cutting funds for Lark Lane play association, and at Lodge Lane East residents association. They are cutting funds provided for children's services—after-school and pre-school services. They have threatened to close youth clubs, including Dehon youth club in Dingle, which is much used and much needed, and they are cutting funds for the pre-school education resource centre. While the Government are delivering money to Liverpool, the Liberal Democrats are mounting an assault on the voluntary sector and youth and pre-school services. That is what the Liberal Democrats mean, in practice.

Mr. Sanders

I feel rather confused. The Minister blames councillors for council tax rises, but the hon. Lady is giving the Government credit for a council tax freeze in Liverpool. Can she explain?

Mrs. Ellman

Certainly, I give the Government credit for increasing Liverpool's standard spending assessment for next year by 5.1 per cent.; increasing its education SSA by 3.7 per cent.; and increasing its social services SSA by as much as 11.3 per cent. It is right for the Government to be given credit for that, and for the Liberal Democrats to be deplored for cutting spending on the voluntary sector, the youth centre and pre-school services. That is a disgrace, and shows the hypocrisy of the Liberal Democrats.

The Liberal Democrats say a great deal in the Chamber about their support for public spending. I agree that public spending is critical to the existence of a civilised society which can attempt to achieve equity, but what we hear from the Liberal Democrats is simply a call for more spending on education. That, too, is important, but only infrequently do we hear about the need to spend on the health service, social services and transport.

Incredibly, only a few days ago, the Liberal Democrats voted against the introduction of working families tax credit, which will put an extra £22 a week or so into the pockets of the families who need it most. Their pragmatism allowed them to vote with the Conservatives against a measure that will benefit people. I bear that in mind when I hear them criticise what the Government are trying to do, and I shall always remember that they found it painless to vote with the Conservatives against a credit designed specifically to deliver extra cash to those in the greatest need. That may eventually be their epitaph.

At the beginning of my speech, I spoke of the legacy inherited by the Government—a legacy of local government cuts in particular, but of cuts across the range of public services. I do not pretend that, in their second Budget, the Government redressed the wrongs of 18 long years; indeed, I do not think that it is possible to do that. The Government have, however, delivered an extra £2.6 billion directly to local government for next year, on top of more than £42 billion extra for, in the main, education and health. That is a creditable beginning, although it is only a beginning.

One of the deficiencies and inequalities of what we have inherited from the last Government is the inequity of local government settlements, which we have now begun to address in Liverpool and elsewhere. The Government have also imposed a three-year freeze while there is proper study and consideration of how to put right those inequities. At long last, we are having a pause, so that a proper assessment can be made of the needs of various local authorities throughout the country.

That is an important initiative—indeed, I urge everyone with a view to make representations during the three years. I hope that, at the end of that time, we will do something to right the inequitable gearing effect, which was inherited and means that the poorer a local authority is, the harder it is for it to raise additional money to support local services. In Liverpool, where 67 per cent. of properties are in band A, compared with about 24 per cent. nationally, the gearing effect is drastic. I hope that the Government will use the three-year freeze to examine gearing, the area cost adjustment, equity, differing needs and a poverty index, so that we can have a fairer settlement at the end of that time.

Mr. White

Does my hon. Friend agree that, in examining the area cost adjustment, we should meet the legitimate aspiration of councils such as Liverpool, yet not penalise councils such as mine in the south-east of England that would lose up to £7 million if the area cost adjustment were taken away just like that? There must be a way in which to satisfy the needs of both.

Mrs. Ellman

I thank my hon. Friend for his comments. The purpose of having the three-year freeze is to allow proper consideration of the point that he has raised. That is the purpose of having time for assessment—for consideration of various points that have been made and of new points that are being made.

The hon. Member for Sutton and Cheam (Mr. Burstow) condemned the Government for what he described as a period of austerity. The Government's first two years in power have been not about austerity but about bringing stability to the inherently unstable situation that they inherited. That has allowed public sector deficits to be turned into surpluses. It has meant that we have the lowest long-term interest rates—and the lowest long-term mortgage rates—for more than 30 years. It means that we can look forward to a period of stability, where we can start to grow and move further on righting the wrongs of the past. In that economic climate, we will be able to continue to make progress and to look at the needs of varying communities throughout the country.

We must strike a balance between the need to spend more to protect public services and to promote higher standards, ensuring that there is efficient spending, and the problem of raising funds to pay those bills. I support public service. I have supported it for many years. When I was the leader of a major local authority, I took great pride in public spending—efficient public spending to promote high standards of service—working with the private sector to promote economic growth and economic development to support the needs of the community that I represented.

The Government are at a new beginning. Eighteen years of decline is a difficult basis from which to start, but, in the two years for which the Government have been in power, they have shown good faith and made a significant start in righting the wrongs of the past. They should be praised for that. They should be encouraged to do much more. That is why I support the Government amendment.

5.49 pm

Mr. Adrian Sanders (Torbay)

As hon. Members will know, the history of council tax is really the history of the 1980s income tax cutting agenda. An unfair rating system—which people increasingly thought to be unfair, and which was certainly spotted by a previous Prime Minister as being particularly unfair—led to the introduction of the poll tax. However, the poll tax had a different consequence, enabling Chancellors in the 1980s to shift the taxation burden on to local government.

The poll tax proved to be unwelcome to many people. I think that probably all Labour Members—certainly all Liberal Democrat Members—fought long and hard to get rid of that tax. The Government of the day decided that they would get rid of it, but replaced it with another regressive tax—the council tax. Granted, that tax was slightly more fair. Nevertheless, it was a regressive tax and was not related to ability to pay.

With the council tax came two other things: the uniform business rate, and the standard spending assessment—with which I shall deal in a moment. Before and during the period for which the poll tax operated, about 40 per cent. of local government finance came from local taxpayers and about 60 per cent. came from central Government. After the poll tax was ended, there was a shift, when about 80 per cent. of finance came from central Government and only about 20 per cent. came from local sources.

Mr. Burns

I do not want to spoil the hon. Gentleman's train of thought, but I should like to correct him on his facts—in case it might make a difference to the conclusions that he is about to reach. The uniform business rate was introduced with the community charge, not the council tax.

Mr. Sanders

I thank the hon. Gentleman for correcting me, but the uniform business rate was operated with the council tax. It was a part of the shift, which was not reversed, of the taxation burden from central Government to local taxpayers. The consequence has been that local authorities are now more dependent for financing on central Government than they were, and the tax burden has been shifted from central Government to local taxpayers.

My hon. Friend the Member for Sutton and Cheam (Mr. Burstow) said that the most recent local government settlement was a "smoke and mirrors" settlement. I should describe the most recent Budget as a "smoke and MIRAS" Budget. The Red Book for this year—and the one for last year, if one was sensible enough to keep it, as I did—shows the problem with the Budget, by showing the amounts that the Government expected to receive in council tax receipts from 1996 to 1999.

In 1996–97, council tax receipts were expected to be £10.2 billion. In 1997–98, they were expected to be £11.3 billion. The next year, they were expected to be £11.8 billion. This year's Red Book—under the chart explaining "where taxes come from"—shows that council tax is expected to be £13 billion. In the past two years, therefore, there has been a shift in the taxation burden of approximately 20 per cent. from central Government to council tax payers.

The 20 per cent. increase is equivalent to 1p on income tax—which would have been a progressive tax, related to ability to pay. Council tax is not a progressive tax; it is a regressive tax. However, the Chancellor will be able to blame local councillors for any increase, rather than accounting for it in the Budget.

Although all councils are affected by those Budget changes and by the shift in taxation from the centre to council tax payers, some councils are more affected than others by the changes to the grant formulae.

The standard spending assessment is a guideline and is not necessarily the sum that will be paid to councils. A table listing the assessment of needs for 82 similar councils—both metropolitan and unitary councils—across Britain places my own local authority's SSA assessment of need at 34. Therefore, the Government's own SSA totals show that we are the 34th most needy local authority. However, in grants, my local authority is 50th out of 82 councils. Had we been treated as 34th in both tables, my local authority would have received £44 more per person, or a total of £5.4 million. It is no wonder that our council tax will have to rise this year.

A number of factors in the grant formulae adversely affect—or benefit—local authorities. The factors are essentially political decisions about which formula changes to allow.

There is within the formula a calculation of the assets sold by councils. However, the calculation is based on the interest that councils derive from investments—which presupposes that councils have investments. Moreover, it is based on an average, not on a council's actual investments. Therefore, a local authority that has sold off its assets will be quids in, whereas a local council in which people have said, "No, we don't want to sell off our assets," will be penalised. My local authority is in the latter position.

The grant formula for tourist areas is vital. In previous grant formulae, it was recognised that local authorities with many visitors have to provide facilities 52 weeks of the year, although the facilities may be used for only a short summer season. Such authorities may have to spend money on cleaning the beaches and streets, for example, or on providing more public conveniences for a population that rockets at some times of the year. Those are all big expenses for such local authorities. However, last year, the Government reduced the weighting for tourist nights. The reduction not only affected us last year but will affect us again this year.

The minimum wage will affect my local authority. The effects of the minimum wage will be greater in low-income areas than in other areas. This year, because of the minimum wage, contracts previously agreed with private sector contractors will have to ratchet up much more quickly in low-income areas than they will in other areas with higher incomes.

Mr. Burns

Did the Liberal Democrats not support it?

Mr. Sanders

We did not vote for a national minimum wage; we are in favour of a regional minimum wage.

Torbay, Plymouth and Devon, which are low-wage areas, have been hit particularly hard by the minimum wage, particularly in social services.

Mr. Andrew George (St. Ives)

Cornwall has been hit, too.

Mr. Sanders

Yes, Cornwall also.

Weighting for elderly people has been reduced. Areas with a high percentage of elderly people will lose out from that part of the formulae, too. Moreover, as I said in an earlier intervention, rising pupil numbers are another important factor, as the head count in the education SSA is 18 months behind current pupil numbers. Although councils have to provide money to schools for current pupils, the money councils receive lags 18 months behind. If pupil numbers are declining, one will be quids in in current cash flow, although one will lose out in future years. However, the effect of the changes on councils with rising pupil numbers will be a greatly increased education bill and, with £2,300 for primary school pupils and £3,000 for secondary school pupils, it does not take many new pupils to cause a significant percentage increase.

Until 1 April, my local authority had the lowest council tax in the south-west. After the rise, only two of the 10 local authorities in Devon will have a lower council tax than Torbay. Torbay's council tax will still be £100 below the national band D average. However—in an area with some of the lowest incomes in the United Kingdom, and with GDP per capita equal to that in Cornwall—we face a massive 16.4 per cent. increase.

I know that councillors of all parties were concerned when setting the council's budget. The Labour group thought that a 20 per cent. increase was required to protect services and to fill the gaps created by changes to the formulae and the overall grant settlement for local government. I saw a councillor in tears at having to make a choice between cutting social services, care for elderly people and care for people with disabilities, or increasing council tax by 16.4 per cent. That percentage on the lowest council tax is not as great as a smaller percentage rise on a larger initial council tax, but in an area that has such low wages and is so economically disadvantaged as a result of 18 years of Conservative government, it is more than many will be able to bear. Coming on top of a 10 per cent. rise in water charges—the highest water charges in the country—it is causing great difficulty.

One could say that things were worse when we had the poll tax. We had the highest poll tax in the south-west when the Conservatives ran the council. The poll tax was significantly higher, even without adjusting for inflation, than the council tax is today for a two-adult household in a band A or band B property.

There are three factors involved. First, we have an unfair tax. The Government should be looking for a fairer system of taxation for local services. It should be truly related to ability to pay and should bring in accountability and transparency. It should be clear to people who is to blame for tax rises or poor services. Secondly, there is Treasury chicanery. The burden of tax has been shifted on to council tax payers. Thirdly, the shift in formulae has made a difference, hitting councils in the south-east and the south-west and those with particular circumstances hard, while those in other parts of the country have gained. The hon. Member for Liverpool, Riverside (Mrs. Ellman) said that it was wrong of the previous Government to fiddle the figures to benefit councils in London and the south—the flagship authorities to which the Conservatives used to refer—but that it was all right for this Government to tweak the formulae in a similar fashion and for the Chancellor to play around with the budget and the overall settlement.

I should like to hear a recognition from the Government that council tax is an unfair tax. They should look at the areas that have suffered particularly from the changes in the formulae—areas whose local circumstances resulted in their being hit by a big stick. The Government should look sympathetically on such councils and work with them to do something about the problem. I should like to hear less from Ministers about league tables. It is funny that, when the Conservatives are in government, Conservative councils normally deliver the lowest rises in local taxes, whereas when we have a Labour Government, it seems to be Labour councils. The people of this country are not fooled by that. They know that Governments use the local government system for political ends.

6.3 pm

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

When I read the first sentence of the Liberal Democrat motion about the prime determinant of council tax levels", I thought, "Yes, I am happy to agree with that." When I read the words about the inadequate financial settlements of recent years and the substantial rise in council tax, I thought, "Yes, I am quite happy to agree with that." The motion then calls on the Government to improve the funding of local services and abolish budget capping". If this were 1997, I would say that that was entirely fair, but the motion fails to recognise what the Government have done in the past two years.

Failing to take account of the context is typical of the Liberal Democrats. They carry on making the same statements after the reality has changed. They asked for a penny on income tax, and they are still demanding it even after more money than they would have dreamed of has gone to public services. It is unacceptable to table such a motion without recognising the fact that the context has changed over the past two years. The Local Government Bill, which will receive its Third Reading tomorrow, will abolish crude and universal capping. That is a key manifesto commitment which we shall deliver on in this Session, never mind this Parliament.

Many people talk about local government finance, but I have yet to find anyone who can truly say that they understand it.

Dr. Alan Whitehead (Southampton, Test)

indicated dissent.

Mr. White

My hon. Friend is the exception.

The Liberal Democrats did not compare like with like, but quoted meaningless statistics for different councils. For example, they took no account of the fact that some councils deliver nursery services and others do not.

It is important to recognise that the Government have introduced stability in the system. For many years, in the Local Government Association and previously in the Association of District Councils, I argued strongly that one problem with the system was that we did not know what was happening from one year to the next. The settlement provides stability for three years. Councils know what will happen. They can plan for three years because the formula has been set and they have stability. The comprehensive spending review has put billions of pounds into public services. Education services will get massively increased sums. That can be seen coming through into schools now.

I accept that this year's settlement does not rectify the legacy of 18 years of under-investment and a lack of decent settlements. One good settlement will not solve all the problems of local government, but ignoring the fact that there has been a good settlement, as the Liberal Democrats have, misses the point.

The Liberal Democrats are like Oliver, always asking for more, but they are not prepared to put in place the modernisations that are required to improve services. The Government have rightly said that the extra money is for improvements to services. The White Paper on modernisation of local government, the extra money, the best value pilots throughout the country and other schemes will stand local government in good stead. As a supporter of local government, I think that it is important to recognise what is good. One reason why I do not support the Liberal Democrat motion is that it does not recognise what is going on in local government.

My local authority has been going through a series of modernisations. The most recent was a referendum. I shall not go into details, but, if it had been left to the Liberal Democrats on the council, we would not have had a referendum and we would probably have had a 15 per cent. council tax rise.

The hon. Member for West Chelmsford (Mr. Burns) talked about fiddling. I suppose that the Tories know all about fiddling. He said that money was going to Labour councils, and then complained that Brent, a Labour council, was not getting it. He cannot have it both ways.

My hon. Friend the Member for Liverpool, Riverside (Mrs. Ellman) talked about the changes to the area cost adjustment over the next three years. It is important that those changes should start early. Negotiations and discussions with the Local Government Association should take place as early as possible to ensure the best chance of securing a consensus. If we get a consensus, there will be an opportunity to move forward. The worst thing for local government would be to waste the three years of stability and have a row at the end of it. We should use the opportunity that the Government have given with the three-year plan to get the right benefits for local government.

I was interested in the ability of the hon. Member for Sutton and Cheam (Mr. Burstow) to rewrite history. He seemed to blame this Government for the nationalisation of business rates, for the switch from council tax to VAT and for centralisation. To cap it all, he said that, even if there were a shift back to council tax, that would be wrong as well. Yet again, the Liberal Democrats are trying to have it both ways, condemning centralisation and condemning giving local authorities a greater say over larger amounts of money. I am a great supporter of the view that we should increase the amount that local government can decide, including returning business rates to local control. The Liberal Democrats fail to realise that it is not as simple as just wishing it to happen—their normal policy. It does not work that way.

How many Liberal Democrats have talked to their local business community to get them onside in a campaign for the return of business rates to local authorities? Merely saying it will not achieve it—nor will it tackle the difficult issues involved in the redistribution of business rates.

Mr. Ronnie Fearn (Southport)

Does the hon. Gentleman realise that the Local Government Association is pressing for business rates to alter because, in seaside resorts, it is an unfair tax which needs to be changed? The British Resorts Association has said that the tax is not progressive, but vies against the homelessness and the elderly people in seaside resorts. The LGA feels that that is wrong.

Mr. White

I am a strong supporter of the return of business rates to local authorities. However, Liberal Democrats must recognise that it is not as simple as that—they must get businesses to go along with that policy. It is important that we achieve a consensus. Many businesses want the business rate returned to local authorities, not least because there are large numbers of economic partnerships up and down the country where businesses and local authorities work closely together. It would be an incentive to have the business rate set locally, where it could result in changes in parking and other policies in which businesses, the voluntary sector and local authorities have a vested interest.

Jackie Ballard

The hon. Gentleman is arguing that the Government need to get businesses onside before changing the business rate. Does he agree, therefore, that the Government should get local authorities onside before introducing council tax benefit subsidy limitation, as all 189 responses to the consultation were opposed to that? Is there one law for business and another for local councils?

Mr. White

The hon. Lady will know that that matter has been discussed in previous debates. Liberal Democrats simply want to turn on the taps, and they have learned nothing. We want to make sure that the extra money starts to improve local services.

In my local authority, we have received the best ever settlement of 6.4 per cent. To counter the hon. Member for West Chelmsford, I should like to say that my authority is in the south-east of England and we received our best ever settlement.

The Government are right to put the case for modernisation. One of the problems with the motion is that the Liberal Democrats do not accept the massive changes that have been made by the Government. I find the opportunism of this debate rather depressing, but I should not be surprised by that. The Liberal Democrats say one thing to one person and another thing to someone else.

When my local unitary authority was created, the Liberal Democrats from the county were used to working with Labour, whereas the Liberal Democrats from the district were used to attacking Labour. The Liberal Democrat group meetings could not agree on whether to attack or support Labour—and they ended up doing both.

This debate shows the difference between the Liberal Democrats and Labour. Labour is about taking issues seriously and delivering services—it is not about protest votes, wishful thinking or whingeing from the sidelines. Labour is about delivering, and I commend the amendment to the House.

6.14 pm

Mr. Andrew Stunell (Hazel Grove)

This has been an interesting debate. One of the key points of the hon. Member for Liverpool, Riverside (Mrs. Ellman)—who is no longer here—was that the Government have introduced stability. I was reminded of the political phrase "in the long run, we are all dead". When we are screwed down in the coffins, we have stability—and that is exactly what the Government have introduced for local government this year.

Before this year, Liverpool had the highest council tax in the country. Even after its freezing, under Liberal Democratic control—for the first time—it will still be the highest in the country. The hon. Member for Riverside did not make it clear whether she thought that the council tax should go even higher in Liverpool, or whether she had another solution—perhaps a more generous grant from the Government, which is, after all, the thrust of what is said today. There has been a tendency in the debate for Members to try to have their cake and eat it.

Stockport metropolitan borough council has had a 5.2 per cent. increase in its council tax, which is modest in comparison with the national statistics. However, it is faced also with cutting services by £4 million. It is a paradox that, in the year when the Government claim to have been so generous with their funding—with a three-year, long-term bonanza of money showering on us from the Treasury—Stockport is unable to set council tax at the rate that the Government predict unless there are massive and fundamental cuts to services.

Even in an attempt to reach the Government's guideline figure, the council is faced with cuts of £4 million. I am a serving member of Stockport borough council and, therefore, familiar with the financial problems there.

Ms Armstrong

Does the hon. Gentleman agree that the actual budget increase for Stockport is 4.7 per cent.—which is not a cut of £4 million? The £4 million is what Stockport would have liked to spend.

Mr. Stunell

We could have an interesting rerun of the budget debate in Stockport, where Labour Members claimed that we should be increasing spending to a greater extent to protect education. There are so many funny figures and phoney funds that Ministers often confuse themselves about the situation that they are imposing on councils.

Historically, Stockport has, year after year, spent significantly more on education than the SSA allocated by the Government for education. In other words, we have been spending more on our schools, pupils, books and education services than the Government have felt we should. This year, we have had the paradox of the £20 billion injected into education, which has resulted in an above-average percentage increase in our education SSA. However, that increase has not even brought the current SSA figure up to the level of spending on education last year. In our case, the £20 billion is illusory; it is a phoney increase, which nearly catches up with the spending that the council was already making.

To make the situation more difficult to comprehend for the council, the Government have made strong play of the need to passport all the extra money into education. We have been asked to demonstrate that we have transferred all the extra money into our education service. The paradox is that we have had the money allocated, almost bringing the notional figure up to the actual figure, but we have had to raise the actual figure to demonstrate passporting, so the gap between what the Government say we should be spending and what the council is actually spending has been increased, not reduced.

The overall allocation to the council is insufficient to meet the needs created by inflation and by factors such as the increased number of pupils and elderly persons. We have indeed put extra money into education, but just by cutting £2.8 million in social services. The Government ask us to spend more on supporting and developing children's potential, but force us to make cuts in children's services.

There are such astonishing discrepancies between adjacent authorities with similar needs that it is hard to take seriously what Ministers say. For instance, the education SSA for Stockport is £260 a pupil, but for the adjacent authority of Manchester it is more than £600. For certain neighbouring schools serving the two boroughs, the discrepancy is more than £1,000 a pupil. That is difficult to justify or to understand.

Unfortunately, there is also now a prospect of Stockport social services contributing to the problem of bed blocking in local hospitals as well, which an excellent partnership between the health authority and social services has up to now prevented.

The problem is not solely a matter for individual councils. In the metropolitan areas, various residual bodies and authorities have the power to levy a precept on the metropolitan councils. The Greater Manchester waste disposal levy, which covers 10 metropolitan authorities, has caused a great deal of grief in Stockport this year. The unfairness of the system was so fully recognised that the Government announced the intention of changing it this year, and the draft budgets in Stockport were drawn up in that expectation.

It might be thought that the most obvious way of imposing a levy for the disposal of waste would be in relation to the volume or tonnage of material removed, and we hope that the levy will eventually move to that basis. Alternatively, one might levy a certain amount per head. In reality, the levy in Greater Manchester is imposed in relation to council tax values, which are completely irrelevant. There is a major disincentive to any of the borough councils to pursue a vigorous recycling policy.

Stockport's recycling rate is just a little above the national average of about 8 per cent., and we find it irksome that other—Labour—local authorities in Greater Manchester that have managed rates of only about 2 per cent., or a quarter of the national average, are getting away with it because the levy has not been adjusted.

We discovered in December, after the draft budgets had been drawn up and were being discussed by committees, that the levy would not, after all, be changed for the next financial year. An additional burden of £1.5 million was imposed on Stockport by the simple failure of central Government to implement a decision that they had already notified to the authorities concerned. There are therefore detailed, practical reasons why I am sceptical about what Ministers say.

The Greater Manchester police authority can also raise a precept on the boroughs, and properly so. Last autumn, the chief constable of Greater Manchester police announced that, on his forecast of what he would receive from the Government and the budget that he thought he could set, there would have to be a cut of £15 million for the coming year. He said that, were that cut to be implemented, 400 jobs would be lost in the police service.

Things have not turned out to be quite as dire as those first predictions suggested. The cut was £12 million, not £15 million. The chief constable has written a detailed brief confirming that the result will be 123 fewer police officers serving at the end of the coming financial year than at present, despite a levy on the boroughs of about 12 per cent. Councillors may be criticised for failing to take the right decisions or to be brave—Labour Members have a tendency to criticise Liberal Democrats in those terms—but they could do nothing about that. The police committee in Greater Manchester consists of nine Labour-controlled authorities, plus Liberal Democrat Stockport.

That cut comes on top of a drop of 34 police officers since the general election, so there will be 150 fewer police officers available in Greater Manchester next April than when Labour came to power in May 1997. I regard that as absolutely unacceptable. The basis of financing the police is clearly wrong. Conservative Members should not be cheered up by that news, because almost exactly the same number of police officers were lost between the 1992 and 1997 general elections. Greater Manchester will have lost 300 serving officers since 1992, under both Tories and Labour.

Stockport has the lowest SSA of all the metropolitan boroughs. The formula is wrong, and the leverage is wrong. For every £1 supplied locally, £9 is supplied by the national non-domestic rate and Government grant. The Government have made a rod for their own back. As my hon. Friend the Member for Sutton and Cheam (Mr. Burstow) said, we want to return the non-domestic rate to local control and, in the long term, to make the council tax a local income tax.

Mr. Watts

Does the hon. Gentleman believe that returning the business rate to local councils will automatically increase budgets? That may not be the case. The way in which the Government set up the redistribution network would determine whether local councils receive more cash to provide services.

Mr. Stunell

I thank the hon. Gentleman for his contribution, which brings me neatly to my next point. The Liberal Democrats believe that the proper role of central Government financing for local government is to achieve equalisation of resources, not to support the fundamental service. A significant fraction of the non-domestic rate is generated in the City of London and the fundamental task of central Government is to arrange an appropriate redistributive formula. In another life, I wrote a paper on how that redistribution should be organised.

Jackie Ballard

It makes good reading.

Mr. Stunell

I thank my hon. Friend for that remark, and I would be happy to forward a copy to the Minister, if she would undertake to read it.

Dr. Whitehead

Will the hon. Gentleman send me a copy?

Mr. Stunell

I am happy to put a copy in the Library, if that would suit hon. Members.

I have been critical of the Government because, while they have said the right words, they have done the wrong things. It is possible to make a speech from the Dispatch Box that sounds plausible and looks good in Hansard, but unfortunately bears no relationship to reality. Councils of every political persuasion face further reductions in the services they can provide and higher rises in council tax than the level nominated by the Government. The problem is not incompetence on the part of local councils, as I have demonstrated. It is not that local government cannot manage; it is that Government are bungling and fudging.

Mr. Andrew George (St. Ives)

Does my hon. Friend agree that not only is the council tax regressive, but so are the powers associated with it? In my constituency, council tax payers in mobile homes have to pay sums well above their ability to pay, while wealthy second-home owners get a 50 per cent. reduction in their council tax. If the system is to reflect ability to pay, that issue must be addressed.

Mr. Stunell

I agree with my hon. Friend. If the council tax is to be retained, it needs major surgery, including the introduction of a band below A that deals with the situation that he mentioned. Some of us would also argue that we also need another upper band to deal with some of the discrepancies at the top end. However, in the long term, the council tax should be replaced by a fair and progressive tax, based on ability to pay.

The brave words of the hon. Member for West Chelmsford (Mr. Burns) should not be taken at face value. His party introduced the current financial regime under which we suffer. His party swore blind that the regime would not lead to capping, but subsequently introduced universal, brutal and ridiculous capping for many local authorities. His Government planned to make the system more transparent, but introduced standard spending assessments whose complexity and folly concern anyone who considers the system. His Government enforced, in some cases with considerable glee, cuts on many services provided by local government, year after year. In the police service, as I mentioned, in education—which I could have mentioned—in social services and in many other services provided by local government, standards are worse than before the Conservatives began their attack on local government. The hon. Member for West Chelmsford pretends that, somewhere along the road to Damascus, something amazing has happened to the Conservative party. To me, it sounds less like Damascus and more like deceit. On the streets, many people know the truth about the Tories' legacy in local government, and they will show what they think of it on 6 May.

6.36 pm

Dr. Alan Whitehead (Southampton, Test)

I apologise for not being present for the beginning of the debate. I wish to point out the apparent contradiction in the motion. The Liberal Democrats claim that they want more financial autonomy for councils, but the motion also calls for more money from the centre for councils, which logically means a higher gearing ratio when councils come to set their council taxes and, therefore, possibly less financial autonomy for councils.

I understand why the Liberal Democrats have advanced that position today. As a result of the collapse of the Tory vote in the shires, several authorities are under Liberal Democrat control, especially in the south of England. The Liberal Democrats find life difficult being in control, because they are more familiar with holding the balance of power. When they have to make the budget all by themselves, it can be a difficult process for them. It is also more difficult to write "Focus" leaflets when in control than when in opposition.

I can see the "Focus" leaflets being ground out as we speak. They will say that the Liberal Democrats raised the iniquity of the local government settlement with the Government in Parliament and did not get a satisfactory answer. However, I have some sympathy with the Liberal Democrats. The SSA system has been manipulated in the past by Government. It is also true that the conjoining of the SSA system to the idea of universal capping has meant that, increasingly, councils have spent up to their SSA limits. That has meant a decreasing amount of discretion on spending available to local government.

In recent years, local councils have invested large sums of money in commissioning reports and lobbying Government to tweak various measures in the SSA to the councils' advantage, possibly at the expense of examining the services they provide. In the past, we have seen outrages, such as the time when the Conservative Government tweaked the indicator on tourist bed nights to assist a particular local authority, which shall remain nameless. Its name begins with "W", which gives hon. Members a choice. Local councils believe that it can be worth their while undertaking complicated exercises to petition Government about the SSA system.

For various reasons, the SSA system does not achieve a transparent and fair distribution of money to local government. The Government have introduced a three-year freeze on the methodology of SSAs, so that the basis of the distribution can be considered. However, it is difficult to introduce a system of local government funding that does not produce winners and losers.

Not everyone can be a winner all the time. Our standard spending assessment system is the most complex system of evaluating the distribution of local government funding anywhere in the world, except the state of Victoria, Australia. One may regard that fact as good or bad: a system perceived to be fair is likely to be complex, and a system that is simple and transparent is likely to lose out on perceived fairness of equalisation. We have, however, an immensely complex system that is also not perceived to be terribly fair. We must consider distribution.

I favour putting a greater proportion of local government spending at the discretion of local authorities. Among other things, that would lower the gearing effect, creating a more genuine relationship between what local government says it raises from local taxpayers and the outcomes of local taxation. I hope that the review will consider that point.

I, too, have written a paper on the subject; I will swap it with the hon. Member for Hazel Grove (Mr. Stunell). The system is devilishly complex, and there is no easy, fairies-at-the-bottom-of-the-garden solution, as the Liberal Democrats sometimes pretend. We must take the matter seriously and spend time getting the system right. I hope that the Government can come up with a solution that the Local Government Association and local authorities will agree provides fair distribution.

Every year, some people will believe that they have not got the best deal, and they will complain about it. I doubt that we can create a system that will entirely rid us of that, but we must have a system that is transparent and fair. A combination of that intention and of this year's local government settlement—a good one by any reckoning—will pave the way towards such a system.

6.42 pm

Jackie Ballard (Taunton)

I spoke earlier with some visitors from the United States of America who are examining the United Kingdom system of government on a Hansard Society scheme. Those visitors expressed surprise at the level of centralisation in our structures of government. They had noticed that local government did not have the freedom to do whatever it thought was in the best interests of local communities. They had noticed, too, local government's lack of financial freedom either to determine local taxation or to introduce different methods of taxation, such as the sales taxes or tourist taxes applied by many states of the USA.

Mr. Sanders

We don't want a tourist tax.

Jackie Ballard

We may not want those particular taxes, as my hon. Friend says, but the point is that local government in other countries has freedom to decide on the taxes appropriate in local areas. What may not be appropriate to Torbay may be suitable in some other part of the country. Local authorities should be able to decide, as happens in many other countries, including European states that would not recognise our system, as the best example of a pluralist democracy.

Pluralism is not only about having the choice of which political party to vote for. It is also about having many centres of power within a democracy. Clearly, the Government are not particularly familiar with that concept.

Tomorrow, we shall debate the Bill that introduces best value. The Local Government Bill gives an extra 23 or 24 powers to the Secretary of State—I lost count of the exact number because one power was removed during the Bill's previous proceedings, a fact for which we are incredibly grateful. The Labour Government are continuing the process begun by the Conservatives of weakening local democracy and bringing more power to the centre.

The Minister has said, however, that she wants local government to be more accountable to local people. How can it be, when the local government funding system is so opaque? Is it thanks to Liberal Democrat councillors, for example, that Liverpool has had a 0 per cent. council tax rise this year? Or was that thanks to the Government's settlement? Is council tax above average in Buckinghamshire because of Conservative failure, or is that the fault of the mean Government settlement?

Who is to blame for service cuts in many local authority areas across the country? Is it the Secretary of State for Education and Employment, who says that all increased funding should be passported to schools? Or is it the fault of local councillors, of whatever political persuasion? How can a local citizen know whom to thank or to blame? [HON. MEMBERS: "Blame the Liberal Democrats."]

It is incredibly easy for each of us to say, "If in doubt, blame this party or that party." My hon. Friend the Member for Southwark, North and Bermondsey (Mr. Hughes) asked earlier whether the Labour council or the Labour Government were to blame for service cuts in his area. He is lucky: in his area, the answer is obviously Labour. Voting decisions for people in his constituency are easy, but the answer is not so easy for people in other constituencies.

The hon. Member for Liverpool, Riverside (Mrs. Ellman) gave credit for the freeze in council tax in Liverpool to the Government, but she blamed service cuts on Liberal Democrat councillors. Of course, Liberal Democrat Members will say exactly the opposite, which makes my point precisely. [Interruption.] If the Minister wants to intervene, I should be happy to allow her to, but as she keeps mumbling from a sedentary position, I find it difficult to understand her.

The Minister said that central Government were responsible for preventing excessive rises in council tax, and for ensuring delivery of local services. What is the point of local elections if central Government are to take all responsibility away from local government? She said, too, that the Tories had responsibility for every council tax rise because of universal capping. However, capping remains crude and universal. The only difference is that it is not preannounced. Local authorities have to guess what the Government will allow them to spend.

Ms Armstrong

Is the hon. Lady saying that there is no national interest for central Government in what local government does?

Jackie Ballard

The Minister will know my answer to that because we have had that debate many times during our happy hours on the Local Government Bill. Liberal Democrats believe that local authorities have their own electoral mandates and that they should be able to carry them out without being clobbered by national Government.

The Minister, and Labour Back-Bench Members who have spoken, may bandy about statistics. We have heard them repeat words about the same pot of funding over and over in the hope of fooling people into believing that they are generous to local government. However, local people will see the real impact on their services, not the fantasy figures put out by the Government. For example, in a survey conducted by Liberal Democrats in Brecon and Radnorshire—

Mr. Burns

Oh, yes.

Jackie Ballard

It is a very good survey, and surveys are one of the many ways in which we keep in touch with local people. In that survey, 90 per cent. of schools said that they were struggling with a standstill budget this year. They said that that was putting strain on staff, and that schools were having to cut back on books, equipment and staffing.

Mr. Richard Livsey (Brecon and Radnorshire)

I am very pleased that my hon. Friend has mentioned my constituency. One factor there is that the Government and the Welsh Office failed to take account of the number of small schools. They did not calculate the impact that the number of head teachers would have on a standstill budget for education in the county. It is a classic example of centralised control.

Jackie Ballard

I thank my hon. Friend for that intervention. In the survey, 70 per cent. of schools said that they had to rely on fund raising by parent-teacher associations to finance delivery of the curriculum. We are talking not about extras, but about the basic curriculum. [Interruption.] I should tell the hon. Member for Milton Keynes, North-East (Mr. White) that that is the reality on the ground. Nothing has changed with the change of Government.

Mr. White

The reality in many schools up and down the country is extra money for books. In my constituency, a secondary school that has campaigned for years for a library finally has one. That is the reality: schools are getting the extra services and capital investment that they need.

Jackie Ballard

Is the hon. Gentleman telling my hon. Friend the Member for Brecon and Radnorshire (Mr. Livsey) that the 90 per cent. of schools that responded to our survey by telling us their reality did not know what they were talking about?

The hon. Member for West Chelmsford (Mr. Burns) attacked the council tax benefits subsidy limitation, as did Conservative members of the Standing Committee on the Local Government Bill, but they forget that their 1992 legislation enabled the Government to introduce the scheme. Indeed, the Conservatives thought up the housing benefit subsidy clawback, which was opposed by Labour Members when in opposition, but now that they are in government they have done nothing to end it.

In her opening speech, the Minister queried why we had called this debate. We did so to call the Government to account. That is one of the main purposes of opposition. The debate has been called to demonstrate that this Government are as centralising as the previous Government, that they do not believe in local democracy and that the local government finance system does not help to make local authorities accountable to their electorate. It has also been called to persuade the Government to reject new Labour dogma and to get back in touch with their local activists and local people who want their locally elected representatives to decide on the priorities of their communities.

We Liberal Democrats are optimists. We had hoped that the Minister would listen to the debate and take note of it. We still hope that she will take the shackles off local government and reverse the years of Conservative centralisation. If she does not do so, she knows that her party will suffer in the ballot box in May and she also knows that, as the hon. Member for Southampton, Test (Dr. Whitehead) said, Liberal Democrats will continue to expose the difference between what the Government say and what they do.

6.52 pm

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

Contrary to what the hon. Member for Taunton (Jackie Ballard) said, my right hon. Friend and I have listened carefully to the points raised in the debate. My colleagues and I sometimes wonder whether Opposition Members, in particular the Liberal Democrats, have taken any notice whatsoever of the facts.

First, on the 1999–2000 settlement for local government, I repeat what my right hon. Friend the Minister for Local Government and Housing said—this is the most generous settlement for years. I commend the speech by my hon. Friend the Member for Liverpool, Riverside (Mrs. Ellman), who used the example of Liverpool to illustrate that point.

I agree with Liberal Democrat Members who say that, to some extent, local services have been underfunded for years, but that was not the fault of this Government—it was due to 18 years of misrule by the previous Administration. Total standard spending for 1999–2000 is up by 5.5 per cent. That is more than twice the average increase under the previous Government. Last year, we put an extra £835 million into education, over and above the spending planned by the previous Government.

Until the hon. Member for Taunton referred to education, the whole debate had been lacking any mention of that important subject—perhaps one of her hon. Friends referred to it briefly. As right hon. and hon. Members know, the Government have made education a priority. We want to improve the education of all children in the country. Funding is one important strand in achieving that aim. We have increased local government funding for education. Every council with responsibility for education will receive at least 1.5 per cent. more grant than last year—most will receive much more.

Furthermore, we are working closely with local government, so that it can improve and deliver best value to local people. As my hon. Friend the Member for Milton Keynes, North-East (Mr. White) stressed so avidly, that must be a continuing process. He said that the discussions, the debate and the help must continue. We are working closely with local government because we realise that local authorities want best value to work and they know that they can deliver better services. We are providing the funding that they need to do just that.

However, it is not merely about funding, but about improvements to local services. Throwing money at services will not improve them—indeed, it can and often does encourage waste. As my right hon. Friend the Minister and my hon. Friend the Member for Milton Keynes, North-East said, the Government considered carefully how much the country could afford to spend on local services when we carried out our comprehensive spending review last year. We will provide real increases in funding in the next three years, as well as stability in council funding to help local authorities to plan their spending.

Therefore, we do not accept that local services are underfunded.

Mr. Tony Baldry (Banbury)

When will counties such as Oxfordshire know whether they will be capped this year?

Mr. Meale

My right hon. Friend the Minister referred to that matter and said that we had only just received all the various calculations today. I can only advise the hon. Gentleman that it will be in due course. I know that he will not appreciate that answer, but it is the only one that he will get at the moment.

We do not accept that local services are underfunded and that there is any need for large increases in council tax. Furthermore, the figures that were published this morning bear that out. Indeed, the average increase is 6.8 per cent., which is down from last year. We gave local authorities the freedom to decide their budgets and we asked them to behave responsibly—most of them have done so. Most authorities will be considering how to use the increased funding to improve the services that they provide to local people—the people to whom they are accountable.

For those authorities that do not behave responsibly, we have said that we will take action. By that, I do not simply mean capping. We will certainly consider this year and in future whether we need to use our capping powers. However, contrary to what Opposition Members seem to think, we do not want to cap councils. We believe in local responsibility. Hon. Members must recognise that the Government also have a responsibility to the taxpayer. There is even more to it than that, as my right hon. Friend the Minster stated. Under best value, councils will have to review their performance and publish their plans to improve. Those plans will be audited and, where local authorities are not delivering best value, the Secretary of State will have the power to take the appropriate action. That combination of measures will ensure the best use of the additional resources that we are providing to deliver high-quality services. I was asked for a direct answer about building on the settlement to achieve future consensus. I can assure the House that that work will continue.

Opposition Members raised a number of queries. First, the hon. Member for West Chelmsford (Mr. Burns) said that the shire areas had done badly out of the settlement. We have treated all authorities fairly, whether urban or rural and in whatever part of the country. I cannot accept that we are biased against shire areas. In fact, they have had an overall increase in SSA of 4.9 per cent. compared with 4.8 per cent. in England as a whole. Shire counties did better than the average—they had a bigger than average increase in both SSA and Government grant. Their SSAs were increased by 5.2 per cent. Therefore, I cannot understand the hon. Gentleman's argument that they needed particularly large council tax increases. They have taken decisions locally and come up with an 8.3 per cent. average increase, which is well above the English average. I also find it hard to reconcile the good settlement for shire counties with the large increase in council tax there. I realise that they do not have any elections this year, but I am sure that the electorate will give their resounding response if the counties carry on in that way.

In response to the hon. Member for West Chelmsford, I should like to say that we promised to end crude and universal capping, and we have done so. Even the hon. Gentleman has admitted that we have not pre-announced capping limits. That is not arbitrary and retrospective. It has given councils an opportunity to consider carefully their local needs and resources when setting their budgets.

The hon. Member for Torbay (Mr. Sanders) illustrated all too clearly the Liberal Democrats spend-and-blame mentality. As he knows, most councils have disposed of surplus assets to the benefit of the people and of local taxpayers. Torbay council decided not to sell assets and has forgone the income that that would have generated in the belief that Ministers would increase grant distribution for the higher taxes that someone would pay in Torbay. We have not agreed to that at all.

The hon. Gentleman asked us to reconsider grant distribution. We made it clear from the outset that we do not intend to alter the distribution formula over the next three years, and that decision will stand. Although I am more than willing to accept the hon. Gentleman's invitation to visit Torbay and meet local representatives, I am not prepared to discuss that subject. He referred to changes in the standard spending assessments; those changes were justified by extensive research—some of which was tested and refined over three years—and will give fairer distribution. I hope that the hon. Gentleman will take that point into account.

The hon. Member for Hazel Grove (Mr. Stunell) implied that there would be cuts in policing and that the numbers of bobbies on the beat would be reduced. That is not the case. I have been given local information by the chief constable of Greater Manchester, who assures me that those numbers will not be cut.

As the Liberal Democrats took up so much time in the debate, I have gone slightly beyond the allotted time, and I formally close the debate.

Question put, That the original words stand part of the Question:—

The House divided: Ayes 40, Noes 309.

Division No. 123]	[7.1 pm
AYES
Allan, Richard	Jones, Nigel (Cheltenham)
Baker, Norman	Keetch, Paul
Ballard, Jackie	Kennedy, Charles (Ross Skye)
Beith, Rt Hon A J	Kirkwood, Archy
Brake, Tom	Livsey, Richard
Brand, Dr Peter	Maclennan, Rt Hon Robert
Breed, Colin	Michie, Mrs Ray (Argyll & Bute)
Burnett, John	Moore, Michael
Burstow, Paul	Oaten, Mark
Cable, Dr Vincent	Öpik, Lembit
Chidgey, David	Rendel, David
	Russell, Bob (Colchester)
Cotter Brian	Smith, Sir Robert (W Ab'd'ns)
Cunningham, Ms Roseanna(Perth)	Taylor, Matthew (Truro)
	Tonge, Dr Jenny
Davey, Edward (Kingston)	Tyler, Paul
Feam, Ronnie	Wallace, James
Foster, Don (Bath)	Webb, Steve
George, Andrew (St Ives)	Willis, Phil
Hancock, Mike
Harris, Dr Evan	Tellers for the Ayes:
Harvey, Nick	Mr. Andrew Stunell and Mr. Adrian Sanders.
Hughes, Simon (Southwark N)

NOES
Abbott, Ms Diane	Clarke, Rt Hon Tom (Coatbridge)
Ainger, Nick	Clarke, Tony (Northampton S)
Ainsworth, Robert (Cov'try NE)	Clwyd, Ann
Alexander, Douglas	Coaker, Vernon
Anderson, Donald (Swansea E)	Coffey, Ms Ann
Armstrong, Ms Hilary	Coleman, Iain
Austin, John	Colman, Tony
Barnes, Harry	Connarty, Michael
Battle, John	Cook, Frank (Stockton N)
Bayley, Hugh	Cooper, Yvette
Beard, Nigel	Corbett, Robin
Beckett, Rt Hon Mrs Margaret	Corbyn, Jeremy
Begg, Miss Anne	Cousins, Jim
Bell, Stuart (Middlesbrough)	Cox, Tom
Bennett, Andrew F	Crausby, David
Benton, Joe	Cryer, Mrs Ann (Keighley)
Bermingham, Gerald	Cryer, John (Hornchurch)
Berry, Roger	Cunliffe, Lawrence
Best, Harold	Cunningham, Jim (Cov'try S)
Betts, Clive	Curtis-Thomas, Mrs Claire
Blair, Rt Hon Tony	Dalyell, Tam
Blizzard, Bob	Darling, Rt Hon Alistair
Boateng, Paul	Darvill, Keith
Borrow, David	Davidson, Ian
Bradley, Keith (Withington)	Davies, Rt Hon Denzil (Llanelli)
Bradley, Peter (The Wrekin)	Davis, Terry (B'ham Hodge H)
Bradshaw, Ben	Dean, Mrs Janet
Brown, Rt Hon Gordon(Dunfermline E)	Denham, John
	Dismore, Andrew
Brown, Rt Hon Nick (Newcastle E)	Dobbin, Jim
Browne, Desmond	Donohoe, Brian H
Buck, Ms Karen	Doran, Frank
Burden, Richard	Dowd, Jim
Burgon, Colin	Dunwoody, Mrs Gwyneth
Butler, Mrs Christine	Eagle, Angela (Wallasey)
Cabom, Richard	Efford, Clive
Campbell, Alan (Tynemouth)	Ellman, Mrs Louise
Campbell, Mrs Anne (C'bridge)	Ennis, Jeff
Campbell, Ronnie (Blyth V)	Etherington, Bill
Campbell-Savours, Dale	Fisher, Mark
Cann. Jamie	Fitzpatrick, Jim
Caplin, Ivor	Fitzsimons, Loma
Caton, Martin	Flint, Caroline
Chapman, Ben (Wirral S)	Flynn, Paul
Clark, Rt Hon Dr David (S Shields)	Follett, Barbara
Clark, Dr Lynda(Edinburgh Pentlands)	Foster, Rt Hon Derek
	Foster, Michael Jabez (Hastings)
Clarke, Eric (Midlothian)	Foulkes, George

Fyfe, Maria	Kumar, Dr Ashok
Gapes, Mike	Ladyman, Dr Stephen
George, Bruce (Walsall S)	Lepper, David
Gerrard, Neil	Leslie, Christopher
Gibson, Dr Ian	Levitt, Tom
Gilroy, Mrs Linda	Lewis, Ivan (Bury S)
Godman, Dr Norman A	Lewis, Terry (Worsley)
Godsiff, Roger	Liddell, Rt Hon Mrs Helen
Golding, Mrs Llin	Linton, Martin
Gordon, Mrs Eileen	Lloyd, Tony (Manchester C)
Griffiths, Jane (Reading E)	Lock, David
Griffiths, Nigel (Edinburgh S)	Love, Andrew
Griffiths, Win (Bridgend)	McAvoy, Thomas
Grocott, Bruce	McCabe, Steve
Grogan, John	McCafferty, Ms Chris
Hall, Mike (Weaver Vale)	McDonagh, Siobhain
Hall, Patrick (Bedford)	McDonnell, John
Hamilton, Fabian (Leeds NE)	McGuire, Mrs Anne
Hanson, David	Mclsaac, Shona
Harman, Rt Hon Ms Harriet	McKenna, Mrs Rosemary
Heal, Mrs Sylvia	Mackinlay, Andrew
Healey, John	McLeish, Henry
Henderson, Doug (Newcastle N)	McNamara, Kevin
Henderson, Ivan (Harwich)	McNulty, Tony
Hepburn, Stephen	MacShane, Denis
Heppell, John	Mactaggart, Fiona
Hesford, Stephen	McWalter, Tony
Hill, Keith	McWilliam, John
Hinchliffe, David	Mahon, Mrs Alice
Hoey, Kate	Mandelson, Rt Hon Peter
Home Robertson, John	Marsden, Gordon (Blackpool S)
Hood, Jimmy	Marshall, David (Shettleston)
Hoon, Geoffrey	Marshall-Andrews, Robert
Hope, Phil	Martlew, Eric
Hopkins, Kelvin	Maxton, John
Howarth, George (Knowsley N)	Meale, Alan
Howells, Dr Kim	Merron, Gillian
Hoyle, Lindsay	Milburn, Rt Hon Alan
Hughes, Ms Beverley (Stretford)	Miller, Andrew
Hughes, Kevin (Doncaster N)	Mitchell, Austin
Humble, Mrs Joan	Moffatt, Laura
Hutton, John	Moonie, Dr Lewis
Iddon. Dr Brian	Moran, Ms Margaret
Illsley, Eric	Morgan, Rhodri (Cardiff W)
Jackson, Ms Glenda (Hampstead)	Morley, Elliot
Jackson, Helen (Hillsborough)	Morris, Rt Hon John (Aberavon)
Johnson, Alan (Hull W & Hessle)	Mountford, Kali
Johnson, Miss Melanie(Welwyn Hatfield)	Mullin, Chris
	Naysmith, Dr Doug
Jones, Barry (Alyn & Deeside)	O'Brien, Bill (Normanton)
Jones, Helen (Warrington N)	O'Brien, Mike (N Warks)
Jones, Ms Jenny(Wolverh'ton SW)	O'Hara, Eddie
	Olner, Bill
Jones, Jon Owen (Cardiff C)	O'Neill, Martin
Jones, Dr Lynne (Selly Oak)	Osborne, Ms Sandra
Jowell, Rt Hon Ms Tessa	Palmer, Dr Nick
Keeble, Ms Sally	Pearson, Ian
Keen, Alan (Feltham & Heston)	Pendry, Tom
Keen, Ann (Brenfford & Isleworth)	Perham. Ms Linda
Kemp, Fraser	Pickthall, Colin
Khabra, Piara S	Pike, Peter L
Kidney, David	Plaskitt, James
King, Andy (Rugby & Kenilworth)	Pollard, Kerry
King, Ms Oona (Bethnal Green)	Pond, Chris
Kingham, Ms Tess	Pope, Greg

Pound, Stephen	Stewart, Ian (Eccles)
Powell, Sir Raymond	Stinchcombe, Paul
Prentice, Ms Bridget (Lewisham E)	Stoate, Dr Howard
Prentice, Gordon (Pendle)	Stott, Roger
Prescott, Rt Hon John	Straw, Rt Hon Jack
Primarolo, Dawn	Stringer, Graham
Prosser, Gwyn	Stuart, Ms Gisela
Purchase, Ken	Sutcliffe, Gerry
Quinn, Lawrie	Taylor, Rt Hon Mrs Ann(Dewsbury)
Radice, Giles
Rapson, Syd	Taylor, Ms Dari (Stockton S)
Raynsford, Nick	Taylor, David (NW Leics)
Reid, Rt Hon Dr John (Hamilton N)	Temple-Morris, Peter
Robinson, Geoffrey (Cov'try NW)	Timms, Stephen
Roche, Mrs Barbara	Tipping, Paddy
Rogers, Allan	Todd, Mark
Rooker, Jeff	Touhig, Don
Rooney, Terry	Trickett, Jon
Ross, Ernie (Dundee W)	Truswell, Paul
Rowlands, Ted	Turner, Dennis (Wolverh'ton SE)
Roy Frank	Turner, Dr Desmond (Kemptown)
Ruddock Joan	Turner, Dr George (NW Norfolk)
Russell, Ms Christine (Chester)	Twigg, Derek (Halton)
Ryan Ms, Joan	Twigg, Stephen (Enfield)
Salter, Martin	Vaz, Keith
Savidge, Malcolm	Ward, Ms Claire
Sawford, Phil	Wareing, Robert N
Sedgemore, Brian	Watts, David
Shaw, Jonathan	White, Brian
Sheldon, Rt Hon Robert	Whitehead, Dr Alan
Shipley, Ms Debra	Wicks, Malcolm
Simpson, Alan (Nottingham S)	Williams, Rt Hon Alan(Swansea W)
Singh, Marsha	Williams, Alan W (E Carmarthen)
Skinner, Dennis	Wills. Michael
Smith, Angela (Basildon)	Wilson, Brian
Smith, Rt Hon Chris (Islington S)	Winnick, David
Smith, Jacqui (Redditch)	Winterton, Ms Rosie (Doncaster C)
Smith, John (Glamorgan)	Wood, Mike
Smith, Llew (Blaenau Gwent)	Woolas, Phil
Soley, Clive	Wright, Anthony D (Gt Yarmouth)
Southworth, Ms Helen	Wright, Dr Tony (Cannock)
Spellar, John	Wyatt, Derek
Squire, Ms Rachel
Starkey, Dr Phyllis	Tellers for the Noes:
Steinberg, Gerry	Mr. David Clelland and Jane Kennedy.
Stewart, David (Inverness E)

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith, pursuant to Standing Order No. 31 (Questions on amendments), and agreed to.

MR. DEPUTY SPEAKER forthwith declared the main Question, as amended, to be agreed to.

Resolved, That this House notes that the 1999–2000 local government settlement was the most generous since the introduction of the council tax; further notes the Government's commitment of an extra £40 billion for schools and hospitals; and welcomes the introduction of Best Value, the abolition of crude and universal capping, the reform of political management structures and the new ethical framework, set out in the local government White Paper.