Local Government Finance

HC Deb 25 November 1999 vol 339 cc769-85 1.17 pm

The Minister for Local Government and the Regions (Ms Hilary Armstrong)

With permission, I should like to make a statement about local authority revenue finance for England in 2000–01.

Local councils throughout the country deliver services that strengthen our communities and are vital to our future economic success. As my right hon. Friend the Chancellor of the Exchequer explained to the House in his pre-Budget statement, the Government's reforms are creating a stable economy and sustainable public finances. That means that we can invest for the future, combining enterprise and fairness. This Government invest for a purpose, to secure better delivery of services. We are investing in nursery provision—there will be 48,000 new nursery places for three-year-olds by next March—and in schools, setting rigorous targets for higher standards in literacy and numeracy. By next April, local authorities will have a new grant of £140 million over the ensuing three years to enable carers to take a break.

That action to secure a platform of economic stability and steady growth has enabled us to give local government a measure of stability that is widely welcomed, and the stability that we have created will enable local government to focus its efforts on delivering better services. While ensuring that local councils receive the funding that they need in order to deliver high-quality local services, the Government are modernising the way in which councils are managed to ensure that local people obtain a better deal. We will shortly publish a local government Bill that will pave the way for people to play a bigger part in shaping their local communities.

The July 1998 comprehensive spending review White Paper set out the spending totals for next year, and the details of revenue funding that I am announcing today confirm those totals with minor adjustments. The comprehensive spending review provides local government with the additional resources needed to deliver better services to local people.

My right hon Friend the Secretary of State for Education and Employment is announcing today the provision of an extra £64 million for education spending—[HON. MEMBERS: "Where is he?"] My right hon. Friend is here today. I am making this announcement, and other announcements will be made in the usual way. The additional £64 million for education spending that my right hon. Friend is announcing brings the total additional revenue provision for education next year to £1.8 billion. He is also announcing that we will reschedule the introduction of increased employer contributions to teachers' pensions, which will ease the pressure on school budgets next year by a further £90 million.

Mr. Eric Forth (Bromley and Chislehurst)

On a point of order, Madam Speaker.

Madam Speaker

The right hon. Gentleman has been in the House a long time and should know that points of order are traditionally taken after Question Time and statements.

Ms Armstrong

These announcements reflect the top priority that the Government continue to give to ensuring that schools have the funds that they need.

The comprehensive spending review gives three years of substantial growth in Government funding for local authorities. It was, and remains, the best settlement for local government since the introduction of the council tax.

We have not only provided significant increases in funding, we have also given local authorities the opportunity to undertake sensible forward planning in a way that was not possible in the past. Local authorities can now broadly predict the grant that they will get from Government, because we do not propose to make changes to the grant distribution formulae over the comprehensive spending review period. Local government has welcomed that greater certainty about future funding levels, and I am sure that the House will endorse that view.

Support from Government grant and business rates will be £41.76 billion next year, an increase of £2.2 billion or 5.5 per cent. That increase is more than twice the underlying rate of inflation. I propose that the revenue support grant should be £19.44 billion, subject to any slight alterations following the consultation that I am launching today, and which runs until 6 January 2000. In addition, some £6.92 billion of specific and special grants will be available to councils. Next year, we will redistribute £15.4 billion of business rates to local authorities and I am publishing the basis for the distribution today.

Hon. Members will be aware that the next revaluation for the purpose of non-domestic rates will take effect from 1 April 2000. I am announcing today the details of the transitional relief scheme to phase in changes in non-domestic rate bills as a result of the revaluation. I am pleased to say that there will be limits on the size of annual increases in rate bills over all five years of the new rating list.

In order to give added protection to small businesses, I shall give additional protection to small properties. That will be offset by limits on the amount by which bills can decrease, which will also be more favourable to enterprises operating from smaller properties. Nearly half of all small properties will see their rate bills fall next year and none will see an increase of more than 5 per cent. in real terms.

Revaluation does not mean that more money will be raised from the rates over the next five years. We propose to reduce the national non-domestic rate multiplier of 41.6p in the pound in 2000–01 to take account of the increase in rateable value across the country. That compares with 48.9p in 1999–2000. The revaluation will ensure that the burden is spread fairly between ratepayers, in line with changes in the property market since the last revaluation.

Following the revaluation, the Government will review the current system. That will not be a fundamental review of the business rate, but it will look for ways of improving the approach to valuation in order to increase stability, certainty and simplicity in the system. We will consider changes to the frequency of valuations. Details of the review will be announced in due course.

Increases in council tax are a matter for individual local authorities to decide. However, before they do so, we expect them to consider how they could be more efficient and effective. They should consider the fact that we have provided substantial increases in grant for most councils and should exercise restraint. In 1999, many councils clearly thought much harder about the increase that was really needed and what local people would be prepared to pay. The average council tax increase came down from 8.6 per cent. to 6.8 per cent., and we did not have to use our capping powers last year. We want all councils to think in that way in future. However, we are willing and able to act to prevent excessive council tax increases.

I have already announced that we shall continue the scheme for limiting the benefit subsidy that central Government pay when council tax increases are above a guideline. The guideline for the 2000–01 scheme will be the same as last year: a 4.5 per cent. increase in council tax or the higher increase that is necessary to give the council a budget requirement increase that is equal to its full cash standard spending assessment increase. As suggested last year, the scheme will operate cumulatively. We will use the previous year's council tax of every authority at guideline as the starting point. Today, I am issuing full details and an explanatory note about the scheme for 2000–01.

As we explained in our July 1998 White Paper on local government, we propose to keep the method of grant distribution stable while we consider whether we can devise a system that is more effective in putting money where it is most needed and will do most good. In keeping with that policy, and as I have already explained to the House, I propose to make no new changes this year to the general method of grant distribution.

Although the method of calculation will not change, some of the SSAs to be used next year will change because of the new local government structure in London. There will be two main changes. First, some functions, such as maintenance of specific roads, will transfer from London boroughs to the Greater London Authority; we shall need to transfer SSAs to reflect that. Secondly, the boundaries of the Metropolitan police district will be reduced to cover only the Greater London area, and the police authority areas of Surrey, Hertfordshire and Essex will increase. Again, SSAs will need to be adjusted.

We cannot ignore data changes, such as changes in resident population, as those inevitably mean that some authorities do better than others. However, the effects of data changes are less than the effect of changes that would have resulted from adjustments to the grant distribution formulae. We have also given local authorities as much advance notice of data changes as we can, releasing the figures as they became available.

I also propose similar arrangements to last year's for phasing in grant changes. That means that no authority will receive less central support from the Government in 2000–01 than in 1999–2000, and that every education authority will receive at least a 1.5 per cent. increase in central support. Those comparisons will make allowance for changes connected with the creation of the Greater London Authority.

Today, my Department is writing with details of the settlement to every local authority in England. Copies of that material have been placed in the Vote Office and the Library. In keeping with our promises to modernise government, all the details are also available on the internet. The settlement is another step in the Government's modernising agenda. It provides a good grant increase and a stable financial environment. Together with best value and our other reforms, it will enable councils to plan and deliver better services for their people. I believe that it will be widely welcomed and I commend it to the House.

Mr. Nigel Waterson (Eastbourne)

I thank the Minister for Local Government and the Regions for providing me with a copy of the statement in advance. I appreciate her observing the usual courtesy.

This is a bad week for local democracy. Today's statement has further undermined local government and local choices. Tomorrow, I understand, we shall see the local government Bill, in which the Government will no doubt persist in their attempt to impose structures on local government. It is also apparent that they are trying to downplay the significance of this announcement. A couple of days ago, they had a compliant Back Bencher table a question for written answer. It seems clear that plan A was to avoid making a statement in the House altogether. Indeed, the timing of the statement says it all: it shows, yet again, their contempt for Parliament, even though the statement is significant for millions of council tax payers up and down the country.

The Government talk about "stability"—that word appears about five times in the first few lines of the statement—and seem to think that, because no changes are proposed this year for the methodology of grant distribution, and because a previous announcement gave funding plans for three years, there is no need for any fuss. Surely the Minister can see that it is no consolation for councils, especially rural ones, that are being treated unfairly in year one to be told by Ministers that they will continue to be treated just as unfairly in years two and three. That means a three-year prison term for rural communities, with no escape and no time off for good behaviour.

May I give a cautious welcome to the Minister's announcements about business rate revaluation? We are pleased that there will be transitional relief, especially for smaller businesses, but it remains to be seen how dramatic the shifts in revaluations across the country will be. Why will the Government not embark on a fundamental review of business rates?

I have a number of questions on the specifics. Why does the Minister perpetuate the fiction that capping has been abolished? The Government maintain reserve powers to cap. In former times, at least local authorities knew the criteria in advance and could plan accordingly. Now they can only await the knock on the door in the middle of the night and the invitation to a ritual ticking off from the right hon. Lady. They are also intent on keeping so-called refined capping in the shape of the council tax benefit subsidy scheme. Will she acknowledge that the Local Government Association was right when it described that as the nearly poor paying for the really poor"? In contrast, our policy is to have no capping in the next Parliament. [Interruption.] I am glad that that is as popular with those on the Labour Benches as it is with my hon. Friends, so I shall say it again: our policy is to have no capping in the next Parliament.

Even on the Government's figures, council tax will rise by twice the rate of inflation. An average band D household is paying £100 a year more in council tax than when the Government took office. Does the Minister accept that, as a result of the settlement, council tax payers across the country will face steep council tax rises or cuts in services, or both? Does she also accept that there will be a nominal increase of just under 5 per cent., with some rises in double figures?

Why has £150 million of the extra money for education been stripped out of the budget and recycled as payment for teachers performance-related pay? Why is that not genuinely new money? Is the £64 million announced today really new money? Will the Government meet in full the costs of implementing the teachers Green Paper?

Last year, although we had above-inflation increases for social services, some boroughs social services SSAs decreased. Those included Hackney, Lambeth and Newham—three of Britain's most deprived boroughs.

Does the Minister accept that, despite some increase in funding this year, many social services departments will remain under great pressure? Does she realise that, across the country, needy people are being turned away by their local social services, which simply cannot cope with rising demand? Did she see the report only yesterday that one in 10 social services departments is already underperforming? Why is the figure for environment and culture below the inflation rate?

The Government are consulting on a "single capital pot", but when will they release councils from their hand-to-mouth existence and let them move away from capital expenditure being dealt with on a year-on-year basis?

Does the Minister accept that, over the course of this entire Parliament, the police will receive a real increase of less than 1 per cent.—with the consequence of falling police numbers and rising crime?

Are the Government wedded to specific grants because they give Ministers more power to impose their own agenda on local government? Should not local councils be left to make up their own minds about local priorities? Why do the Government want to stifle local choice?

How can the Government even begin to try to justify robbing the countryside of more than £500 million and letting London down by grabbing £300 million? Surrey has lost £27.5 million because of the Government's fiddling the funding formula, and Oxfordshire and West Sussex have both lost almost £20 million.

In Kent, in the current year, the SSA increase was 4.8 per cent., but the increase in Government grant was only 1 per cent.—a practice that is not always understood by council tax payers. Kent has also had to increase expenditure by 5.8 per cent. to meet national requirements on. for example, firemen's and teachers' salaries—

Mr. Damian Green (Ashford)

And asylum seekers.

Mr. Waterson

Yes.

This year, Kent expects a council tax increase of 5 per cent.

Finally, will the Minister clear up one mystery? On 29 October, she issued a statement saying that, because the announcement provided figures for three years, she would not receive delegations from local councils. Rather grandly, she said that she would receive submissions in writing or from local government bodies. However, in answer to written questions tabled by me, and in correspondence, it has emerged that the Minister did not stick to that resolution for very long.

Only four or five days later, on 4 November, the Minister met a delegation from Hammersmith and Fulham, which just happens to be a Labour-controlled authority—[Interruption.] It is a serious matter. Initially, the meeting was denied by the Under-Secretary of State for the Environment, Transport and the Regions, the hon. Member for Stretford and Urmston (Ms Hughes), but the right hon. Lady kindly wrote to me very rapidly to put the matter right. I accept that the denial was a genuine error by the Under-Secretary, although I do not necessarily accept that such errors should be allowed to happen within the Department.

Will the Minister clarify the point for us? Will she accept delegations from Labour-controlled authorities? Would she stretch a point and occasionally meet a non-Labour-controlled authority? I call on her to jettison her absurd statement that she will not receive delegations. Surely she accepts that the whole point of a democracy is that Ministers should be available to meet the elected representatives of local people and hear their genuine concerns. Otherwise, why have Ministers at all?

Ms Armstrong

I am concerned about the hon. Gentleman, who seems to have come to this House with amnesia. His statements today show that he has neglected the fact that the previous Tory Government were in power for 18 years and that they introduced the council tax and the uniform business rate. [Interruption.] We are all bored and fed up with it, but it is the reality, none the less.

Much of what the hon. Gentleman berated me about today was begun by the Tory Government. The changes that we are making have been overwhelmingly welcomed by local government, and by those outside who know and do not forget the travesty that the Tories wrought upon local government and local democracy in this country.

There was never any attempt to avoid a statement. I approached both of the main opposition parties early on—as the hon. Gentleman well knows, as I talked to him and to his right hon. Friend the Member for Wokingham (Mr. Redwood), the shadow Secretary of State. I said that we were more than happy to have a statement, but that we would not allow a statement to hold back the normal information that ought to go out to local authorities. We have worked exceptionally hard this year to get the information out earlier, so that local authorities are more in control of their budget processes.

We are having a statement today so that information is not delayed until next week. We want to get the information out as soon as possible so that local authorities have as much ability as possible to plan and develop their budgets. It is a pity that the hon. Gentleman wanted that to be delayed until next week.

Local government has overwhelmingly welcomed the period of stability. Those involved feel more in control of their budgets. They know that being able to plan over a three-year period with a clearly established framework has enabled them to engage more effectively with the public. They will continue to do so, so they can plan their spending and their priorities more effectively. Again, it is a pity that the hon. Gentleman is so out of touch with what is going on.

Opposition Members try to raise the subject of rural areas every year. However, it simply bears no relationship to the facts. We have treated all authorities fairly, whether urban or rural. The most sparsely populated authorities have received average SSA increases this year of 4.7 per cent., compared with an average of 4.4 per cent. for England as a whole. Shire areas have received average SSA increases of 4.7 per cent. Shire counties, which provide most of the services in shire areas, have received average SSA increases of 5 per cent. this year. Once again, reality has escaped Tory Members.

I am grateful for the hon. Gentleman's cautious welcome for our business rate proposals. He asked why there was no fundamental review of the uniform business rate. He seems to have forgotten that we have had a White Paper and consultation, and we announced that we would not change the uniform business rate. What I have announced today is a review of the valuation. The world would think that we were rather peculiar if we had another fundamental review within two years after the first one.

We believe that council tax benefit subsidy limitation operated in a more straightforward way than people anticipated at this time last year. We believe in the principle that, where there are excessive increases, the burden of those should not be placed wholly on the tax payer.

It would be cruel to say too much to the hon. Gentleman about capping. We are seeking to establish an effective partnership with local government where we enable it to make decisions about its council tax. However, we reserve the right to intervene when council tax payers are suffering. That has been clearly accepted by local government and, as I say, it meant that last year we did not have to impose any capping. The hon. Member for Eastbourne also made spurious points about council tax rises. Council tax rises declined last year from 8.6 per cent. to 6.8 per cent. and I look for the continued exercise of such restraint from local government.

The hon. Member for Eastbourne obviously wanted to make a point about the £150 million loss of education funding before he had read the statement—but he then tried to recover. Money has been announced today that was not originally in the settlement but which will cover that sum, and the teachers Green Paper arrangements will be funded in full. Some £1 billion has been made available in the comprehensive spending review for that purpose.

I was amazed to hear the hon. Gentleman talk about needy people being turned away, because—as he knows—this settlement is far more generous than any his Government managed to give local government. What is more, he fell into the trap that the Tories fall into again and again—of confusing performance with the level of funding. If the hon. Gentleman had looked carefully at the figures announced yesterday, he would have seen that they demonstrated that half the authorities named yesterday by the Minister of State, Department of Health, my hon. Friend the Member for Barrow and Furness (Mr. Hutton), had gained from the changes made in funding last year, and half had lost. The relationship that the hon. Member for Eastbourne tried to describe does not exist. We are trying to improve performance and give councils the framework to do so through best value, so that they can ensure they get the best performance for the money spent.

The hon. Gentleman mentioned delegations. Some Opposition Members will know that over the years I have met them and their delegations. It has always been my practice and policy, whenever hon. Members request a meeting, to seek to agree to such requests. I do not hold all the meetings in the Department, because the visits frequently take place outside the formal consultation period and the Department could make very little response. I see the delegations in the House so that I do not take up civil servants' time and cost the taxpayer additional money.

I seek to hear from all hon. Members about their concerns and anxieties. As the hon. Member for Eastbourne knows, I met representatives from Hammersmith and Fulham at the request of their Members of Parliament, and it just so happened that that was entered in my diary as a meeting with those hon. Members. That is why the problem arose in the Department; it had nothing to do with the Department.

It is true that I am keen to have a proper relationship with local government. I am also always happy to meet Members of Parliament and listen to their concerns. But it is also right that local government, the Department and Ministers should use their time effectively. Of those issues on which authorities are able to make representations, virtually none has changed this year. On that basis, it is fairer to them—and in the interests of the best use of Ministers' time—that I see the associations and hear from them about the interests of their members. To see every individual authority would not be a good use of my time or of theirs.

Several hon. Members

rose—

Mr. Deputy Speaker (Mr. Michael Lord)

Order. Before I call the next speaker, I must tell the House that very many hon. Members are seeking to catch my eye, and unless we have short questions and reasonably short answers, an awful lot of them will be disappointed.

Mr. Harry Barnes (North-East Derbyshire)

I cannot believe what I have just heard from the Opposition. Either they have been converted to a completely new position or they are talking through the backs of their heads—I assume the latter. They created our present problems in local government finance.

Is it not disappointing, however, that despite what was said earlier about the three-year provision, there is no change in the standard spending assessment methodology, so the evils introduced to the system by the previous Government through the Local Government Finance Act 1988 have not yet been fully tackled? The effects are bad in Derbyshire, especially in north-east Derbyshire, where the weighting in the area cost adjustment system needs changing, and the enhanced population figures need to be taken into account. For my area, that would be like the relief of Mafeking. Is there any hope that it will happen?

Ms Armstrong

I have announced that we are undertaking a fundamental review of the distribution method for revenue support grant. I hope that north-east Derbyshire, and my hon. Friend, will take an interest in that. A questionnaire was sent to every authority, and the overwhelming response was that they did not like the SSA system and would like to consider an alternative.

Other interesting alternatives are being suggested by some of the groupings within the Local Government Association and the Association of London Government, and I look forward to finding out over the coming year whether it will be possible to change to a system that does not rely on the extremely complex SSA settlement system, which local authorities often feel is perverse.

Mr. Adrian Sanders (Torbay)

I thank the Minister for having made a copy of her statement available in advance. However, is it not a statement designed to ensure that the Chancellor gets a pat on the back while councillors get it in the neck? Does it not confirm the shift in taxation from central Government to the council tax payer and the users of services?

Do not some of the Government's figures show council tax rising at twice the rate of inflation, while the Treasury forecasts an even higher figure of 7 per cent? Despite the £64 million announced today, is there not still a danger that taking money out of the general education budget to cover performance-related pay will mean that one teacher's pay bonus is another's P45?

Finally, when will the Government get their tanks off town hall lawns and allow local communities to set their own priorities without the fear of capping?

Ms Armstrong

I had hoped that if I gave the hon. Gentleman the statement in advance, he would be able to work out that we were not taking the money for teachers pay out of the settlement for schools. Teachers have to be paid, and we must ensure that the money is there, but I am sure that when the hon. Gentleman reads again what I have said, he will understand that the money is additional and that the same sums will go to schools as we promised last year, so there is a substantial increase.

The hon. Gentleman complained about council tax going up by twice the rate of inflation. I hope that authorities will do everything possible to hold council tax down because they are getting a substantial settlement this year. They also have the best value system, which is already demonstrating that authorities using it can make significant efficiency savings which cannot be described as straightforward cuts. We look to the rest of local government to do the same.

I think that the council tax payer will soon recognise that the Government's contribution will amount to an increase of more than double that required to keep place with inflation, and that that is a good deal for local government.

Mr. Ronnie Campbell (Blyth Valley)

We need take no lessons from the Tories on local government finance, given that they introduced the poll tax, which cost the tax payer £6 billion.

I welcome the Minister's statement that she will look at the formula for standing spending assessments, which we have been trying to change for years. My hon. Friend will be aware of the problems encountered in Northumberland since it was introduced. For example, it is remarkable that the formula gives a greater population sparsity element to the city of Bradford than to the county of Northumberland. Does she accept that we need a correct formula that is fair for everyone?

Ms Armstrong

I thank my hon. Friend. I know the problems in Northumberland, which I visit often. County councillors regularly lobby me. I assure my hon. Friend that Northumberland will continue to receive the highest SSA per head of population of any shire county.

Sir Peter Emery (East Devon)

I realise that one must examine the Minister's statement carefully, but does she accept that there is little doubt that overall it is bad news for local government? It contains nothing to correct the particularly bad treatment meted out over the past two years to rural local authorities, which it appears will have to continue to suffer.

Will the Minister look specifically at the guarantees given by the Under-Secretary of State for the Environment, Transport and the Regions, the hon. Member for Sunderland, South (Mr. Mullin), on the negative housing subsidy arising out of the housing revenue account? We were promised that that matter would be attended to, but the Minister's quite long statement today did not refer to it.

The Minister talked of performance being reflected in levels of funding, but most of the 23 councils so affected have been among those performing best. In my own district of East Devon, the cost is likely to be something approaching £1 million. That cannot be fair, and what will she do about it?

Ms Armstrong

I have already made it clear that rural counties are doing better than average this year, and I invite the right hon. Gentleman to look more closely at the figures later. I know that many figures have been given out today and that it is difficult for hon. Members to grasp them immediately.

On the housing matter, I can tell the right hon. Gentleman that it has been the subject of a consultation that I started when I had responsibility for housing. That consultation continues, and we do not expect to make a decision in the short term.

Mr. Gerry Steinberg (City of Durham)

I welcome the increase in education spending provided by the Government in recent years. Schools in my constituency have benefited from more computers, new buildings and major repairs. My right hon. Friend's constituency is also in Durham, so is she aware that many small schools there are still struggling because of the formula used for local management of schools? The formula means that, as pupil numbers increase and decrease, small schools sometimes do not have enough money to pay teachers salaries or to retain staff numbers. That is a major problem in my constituency, and I suspect in my right hon. Friend's. Will she contact my right hon. Friend the Secretary of State and her departmental colleagues to see what can be done to support small schools? Those schools do an excellent job but, because pupil numbers fluctuate, they suffer because they cannot make plans.

Ms Armstrong

I am well aware of the problem. I suspect that the small schools in my constituency are even smaller than those in my hon. Friend's, and it is certainly true that some schools in the north Pennines have very small pupil populations.

I have discussed the matter with my right hon. Friend the Secretary of State and with my right hon. Friend the Minister for School Standards. She has already announced additional help for small schools, but is also keeping the matter under review. We want to ensure that all pupils, regardless of the size of their schools, get the opportunities that they need and deserve.

Mr. David Curry (Skipton and Ripon)

Will the Minister reaffirm the essential principle of non-hypothecation—that is, the Government provide funding but local authorities are free to decide where best to spend it? To that end, would the right hon. Lady ask the Secretary of State for Education and Employment—before he begins his habitual tirade—not to start telling local authorities that they must spend their money in any particular direction?

If last year's increase in council tax was 6.8 per cent., against the predicted 4.5 per cent., why should it be less than 6.5 to 7 per cent. again this year, as against the Government's predicted amount? Police funding will be particularly sensitive, given the need to spend money on new communications equipment and on early retirement, which is still a tremendous burden on the police.

Finally, do the Welsh intend to apply the council tax benefit limitation principle?

Ms Armstrong

Of course councils make decisions about their budgets, but the Government have the right to let councils know of their priorities, which has led to extra funding being added to the settlement. This issue has always been debated, and will, quite rightly, continue to be debated.

I am afraid that I have forgotten the right hon. Gentleman's next point.

Mr. Curry

It was about council tax.

Ms Armstrong

We make no prediction on council tax increases. As for the 4.5 per cent. for council tax benefit subsidy limitation, we are not saying that authorities should set council tax at that level. That would kick in only if their increase in standard spending assessment were 4.5 per cent. or less; it is not a prediction of council tax levels. Indeed, Conservative and Liberal Democrat Members predicted last year that the figure would be substantially higher than 6.8 per cent. We do not predict—they do, and they got it wrong.

My right hon. Friend the Home Secretary will be dealing with police budgets, and I am sure that the right hon. Gentleman will put his point to him. As for the right hon. Gentleman's third point, that is a matter for the Welsh Assembly.

Mr. Jeremy Corbyn (Islington, North)

The Minister will be aware that last year a number of Members representing inner-London constituencies—including me—made strong representations to her about the level of Government support for inner-London local authority services, owing to the very high cost of service delivery and the acute social problems arising from transient communities and a high population turnover. She will also be aware that over the past year the situation has become much worse, given the problems caused by the rapid rise in house prices.

Is my right hon. Friend prepared to receive any further representations, part way through this comprehensive spending review and in advance of any other grants that she might give, on the very high costs of inner-London services? Is she aware that, two years after the Government came to power, substantial cuts are still being made to services in my borough because of the local authority's funding problems? That impacts badly on other Government efforts made through welcome measures such as the single regeneration budget, which affects part of my constituency.

Ms Armstrong

I have already said that there is a review of the method of distribution. My hon. Friend's concern for London areas and the Conservatives' concern for rural areas must both be accommodated in the review. The Association of London Government—along, I am sure, with my hon. Friend's authority—is already thinking hard about the options and about how future funding will be taken forward. I will be having discussions with it over the next few months, after which we shall issue a consultation paper to consider how to proceed.

This year's increase in SSA for education in my hon. Friend's borough is 5.1 per cent. That compares with a national increase of 4.5 per cent. for education authorities. I know that there are budget problems, though not all of them have arisen simply because of funding. Some have related to management, and the authority is trying to sort out that problem so that people in Islington will know that they will receive decent services for the amount that they are able to pay.

Mr. Patrick McLoughlin (West Derbyshire)

Can the Minister assure us that no person aged over 65 will pay more than a 75p increase in council tax?

Ms Armstrong

Council tax is not a matter for me. The hon. Member for Eastbourne (Mr. Waterson) has asked me not to interfere in councils, but the hon. Member for West Derbyshire (Mr. McLoughlin) asks me to tell him what the council tax increase should be. Perhaps he should collaborate with his Front-Bench colleague.

Mr. David Kidney (Stafford)

It must be a novelty for the Opposition to see a Government who both promise real-terms increases year after year and keep those promises. Councillors and residents in Staffordshire will certainly appreciate the extra money in this three-year settlement. May I tackle my right hon. Friend on a technical point about the operation of the formula for distributing money from central to local government? Has she given any thought to—or will the consultation consider—raising funding for councils at the bottom of the Government's funding table?

Ms Armstrong

My hon. Friend has taken particular interest in that idea. Authorities whose education funding is below average held a meeting in Staffordshire last week. The problem with averages is that some authorities are bound to be below while others are above. That is the nature of things. We are searching for fairer funding for all, but it is difficult. Overcoming past problems has led us to make significant funding injections, but some authorities and residents still feel sore. I hope that our review will come up with something that local people will find more rational and easier to understand.

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

Does the Minister recognise that the settlement cannot allay the concerns of the many children, parents and teachers who have written to her about the situation in Northumberland? Children there receive education that costs perhaps £500 or £1,000 less than is spent in other parts of the country. That results from settlements under both the previous Government and the present one that the local Labour council leaders have described as unfair. Does the Minister realise that while we wait for the review process to be completed, some children will have completed most of their years in education with inadequate funds?

Ms Armstrong

I understand that point. I have met members of Northumberland county council several times. My constituency abuts Northumberland, and I regularly meet folk from the county in my normal constituency activities. It is difficult for local people to understand what is happening.

The formula tries to take account of need and, to reflect the additional sparsity factor, Northumberland receives the highest amount per head of population for any shire county. Every authority feels that it should receive more, and we shall probably never reach a position in which everyone feels fairly treated. We are trying to put more money into education and to ensure that it is distributed so that every child receives the opportunity that he or she needs.

Judy Mallaber (Amber Valley)

May I warmly welcome the review of local government finance and ask my right hon. Friend what input local authorities will have in that review? In particular, will she consider representations from authorities such as Amber Valley, which is implementing the Government's modernising agenda, but suffers under the over-complex revenue support grant formula, to which she referred, from being a mixture of urban and rural authorities?

May I also reiterate the comments of my hon. Friends the Members for North-East Derbyshire (Mr. Barnes) and for Stafford (Mr. Kidney) about the position of a number of education authorities as a result of the system introduced by the Conservatives? For example, a secondary school in my constituency gains several hundred thousand pounds less than an equivalent school in a southern county.

Ms Armstrong

Of course, local authorities will be involved as much as they wish in the review. Officials from the Department have already been travelling around the country holding regional briefings to encourage authorities to think how things could be done differently. If we cannot find a way forward, we will have to revert to standard spending assessments. I hope that we can find a way. The LGA is very much part of the present discussions at official level. We will lay all the suggestions before the House and local government so that every authority will be able to have an input.

Mr. Christopher Chope (Christchurch)

Will the Minister withdraw her earlier irresponsible statement to the effect that increases of 4.5 per cent. would not cause any hardship to council tax payers? Does she realise that for Dorset pensioners such as increase would be far in excess of 75p a week? Why will the right hon. Lady not speak out now and say that she will condemn any council that increases its tax by more than the rate of inflation; or does she realise that that aspiration is totally unrealistic given this mean and vicious settlement?

Ms Armstrong

Of all Tory Members, the hon. Gentleman should know better. He was a Minister in the Department and presided over very vicious settlements—much more vicious—for local government. He was there when the poll tax was introduced and, I suspect, lost his seat because of it, so we will take no lectures from him. Let me make it absolutely clear that I did not say that any level of increase was all right. I said that the Government do not set the guidelines—that is a matter for councils.

Mr. Tony Colman (Putney)

As an honorary member of the board of the London First Centre, the inward investment agency for London, I have for about eight months been pressing my right hon. Friend the Minister to ensure that there is full transitional relief for the revaluation of the base for the uniform business rate. On behalf of the business community in London—both current and future—may I thank her for the full phasing that she announced and in particular for the additional cherry, which is the additional help for small and medium-sized enterprises? Will she comment on the variability of the change in the base for the business rate throughout London? Some areas have, perhaps, overheated in the past five years and others have not—I realise that advantages may accrue to Putney in my constituency, where rates may be zero or falling.

Ms Armstrong

This is one of the real anomalies. The revaluations throughout the country have resulted in extremely variable changes. That is partly due to the fact that the previous revaluation for 1995 was actually undertaken in 1993, when there was a severe slump in parts of London. The Government are seeking to ensure that they do not repeat the problems caused by the previous Government with boom and bust, and that we have more sustainable growth throughout the country. The variations are one of the reasons why I announced a review of the revaluation process, to find out whether we can get more fairness and stability and fewer of the excessive moves that were evident in the latest revaluation.

Mr. John Wilkinson (Ruislip-Northwood)

My constituents in outer London will have little to thank the Minister for in this settlement. First, is it not the case that owners of businesses are facing an increase in the business rate of up to 5 per cent. per annum in spite of transitional relief, on top of the fact that if they go to work by car they may have to pay car-user charges and, if they own the business, they may have to tax parking space for their employees? When they get home to Hillingdon, they will find that their local authority is not getting adequate compensation for the additional cost of housing asylum seekers. Is it not true also that their quality of life is deteriorating because the police settlement—1 per cent. in real terms—is far below the necessary figure of about 3.5 per cent. in real terms that is required to maintain the same level of service?

Ms Armstrong

I do not agree with the hon. Gentleman. His constituents in Hillingdon will see a 5.2 per cent. increase in their SSA this year and that is more than double the increase in inflation. The hon. Gentleman's residents in Hillingdon will recognise that the Government are fulfilling their promises to ensure that public services are funded so that opportunities for local people are better.

Mr. Michael Jabez Foster (Hastings and Rye)

May I welcome my right hon. Friend's proposals to review commercial rate values yet again, to create more fairness? In certain parts of the south coast—my constituency in particular—flats on the domestic market have gone down in value since the last valuation, whereas houses have gone up. As a consequence, many of my lower paid constituents who have purchased cheap properties are paying as much as or more than those with houses. In those circumstances, will my right hon. Friend review as soon as possible the domestic rate values which affect the council tax for those constituents?

Ms Armstrong

There was a review of council tax banding and we announced that we were not changing it at this stage. We said that we would return to the matter, but I cannot promise my hon. Friend that that will be done in this Parliament. As there is a banding system, flats are likely to be in a lower band than houses. I hope that we can ensure that his constituents do not suffer because of changes in property prices.

Mr. Robert Syms (Poole)

This statement will be greeted with disappointment in Poole simply because the area cost adjustment, which makes a tremendous difference to the amount of money that we have, is not being altered. I have no doubt that the local authority and local Members of Parliament would want to meet Ministers to discuss that matter further. The Minister seemed a little confused. At first she said that she would not see any delegations, but then she said she was meeting one from Hammersmith and Fulham at the request of their Members of Parliament. If the Member of Parliament for Poole and the borough council request a meeting, is she saying that she will refuse to see us: yes or no?

Ms Armstrong

As the hon. Gentleman knows, I have spoken with him about Poole and met his councillors. We are entering a formal consultation period, which is different from the discussions on which I embark during the rest of the year. Had Poole wanted to make representations about the area cost adjustment, it knew that the time to do so was during last year's formal consultation period. We said that we would not move on area cost adjustments this year because we were introducing three-year stability. The authority had the opportunity to make representations on that matter last year.

Kali Mountford (Colne Valley)

I am very pleased to hear that there is to be a review of local government finance, which is much needed. My right hon. Friend was so right to say that previous settlements have brought about some perverse results. If we are to have some fairness, objectivity and genuine assessment of need and of the anomalies that arise—not merely between north and south but within regions and local authority areas—is it not essential not only to encourage authorities to take part but to sell the review as something on which they must embark? Can she also tell us how soon the review will be completed? It is essential for many of us who want fair settlements in the future.

Ms Armstrong

My hon. Friend is right; the matter needs to be fully discussed throughout the country. I assure her that we are doing whatever we can to ensure that that is done, so that authorities have the opportunity to put forward their ideas. I am keen to get on with the review, but I do so with a sense of realism because we are unlikely to find a system that suits the needs of everyone. However, there are other ways in which we can proceed, and I am anxious to find a method that is easier for everyone to understand. I defy anyone to have a close understanding of how every SSA works; it is the most complex of systems. For the electors, to whom it matters most, the system is virtually impenetrable. We have a responsibility to try to find something better for them.

We are getting on with the matter. I hope that, certainly by the middle of next year, we may at least be clear about the options and will be able to hold consultations on them.

Mr. Owen Paterson (North Shropshire)

The previous regime that ran Shropshire county council—the Liberal and Labour parties—increased council tax by 24 per cent. during the past two years. As a result, the Minister asked senior representatives of the council to come to London during the summer. Mr. Malcolm Pate, whom my hon. Friend the Member for Ludlow (Mr. Gill) and I met last week, is now the leader of the Conservative controlling group on the council. He was told, and reported to me, that the Minister had promised a 6.1 per cent. increase for the next three years, in the interests of stability. The council has now received information that the increase will be 5.4 per cent.—

Mr. Deputy Speaker

Order. I trust that the hon. Gentleman will put a question.

Mr. Paterson

Were those representatives deliberately deceived by the Minister? If not, will she confirm today that the increase stands at 6.1 per cent., as she promised them?

Ms Armstrong

I promised no one the exact amount that would be received this year. The Government announced, throughout the comprehensive spending review, the amounts that would be available as a whole to councils each year, and that we would not be changing any of the methodology. We said that the only changes would reflect data changes in each area. I certainly did not tell any authority that it would receive a specific amount every year. I said that their treasurers would have an idea as to what was happening, because they knew the overall figures and they would know about the data changes and other changes in their areas. That is absolutely true.

Mr. Barry Gardiner (Brent, North)

My right hon. Friend will recall from last year that my local authority of Brent received the worst settlement in the country, despite being the 20th most disadvantaged. None the less, I hope that she will be pleased to learn that even Brent council is grateful for a period of stability this year, so that it can plan its budget.

I welcome the review of the basis of local government funding. I urge my right hon. Friend to take serious note of the problems faced by boroughs such as Brent, where over 106 languages are spoken in our schools and where the loss of ethnicity criteria in children's social services last year had the most devastating effect. I trust that she will take that into account.

Finally, on behalf of my business community—for small businesses in Brent—will she tell me what the business rate change is likely to be for them in the coming year?

Ms Armstrong

We will, of course, look at the needs of all authorities in the review, although, as I said, the more I hear today, the less confident I am that we shall find something that everyone is happy about. However, my hon. Friend will be aware that because we have ensured that no authority will receive less grant than last year, some protection has been provided for Brent. I know that that will be welcome.

There are huge differences in business rates throughout the country—even within London. For inner-London authorities, the revaluation has produced an increase of about 21 per cent. for large properties and 34 per cent. For—

Mr. Gardiner

Brent is in outer London.

Ms Armstrong

Yes. In outer London, rate bills will fall for 48 per cent. of large business properties as a result of revaluation. The liability will fall for 56 per cent. of small properties. In relation to small businesses, I assure my hon. Friend that no business will receive an increase of more than 5 per cent. next year.

Mr. Graham Brady (Altrincham and Sale, West)

The Minister will be aware that, since 1996, when Labour took control of the borough of Trafford, council tax there has repeatedly increased above the rate of inflation. If she does not know that, her hon. Friend the Member for Stretford and Urmston (Ms Hughes) will tell her. What advice would the Minister give to Trafford pensioners, whose income is to be pegged to the rate of inflation? How can they deal with a council tax that continuously rises by more than the rate of inflation?

Ms Armstrong

I wonder why the hon. Gentleman never put that question to the Conservative Government.

Mr. Steve Webb (Northavon)

Is the Minister aware that in rapidly growing authorities such as my own, South Gloucestershire, schools have to educate children for free, because the data on which funding is based are so out of date? What progress is she making on using information based on the number of children in our schools now, rather than months, if not years, ago?

Ms Armstrong

We have to use reliable data, collected in a way in which everyone can have confidence. That is as true for authorities that are gaining population as for those that are losing it. The hon. Gentleman will be pleased to know that this year's settlement will reflect changes in data.