Local Government Finance

HC Deb 27 November 2000 vol 357 cc648-62 4.14 pm

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

With permission, Mr. Speaker, I should like to make a statement about local authority revenue finance for England for 2001–02.

The Government are committed to improving public services, because they make a real difference to peoples' lives. That commitment underlies the proposals that I shall outline for the finance settlement. Taken together with best value and modernised leadership, it will give local government the means to provide effective, efficient services that best meet people's needs.

We know that that presents a challenging agenda for local government. Councils are having to address a backlog of past under-investment, they are modernising decision-making processes, and they need to engage in partnership with a range of local stakeholders and deliver best value across the whole range of their responsibilities. To deliver that agenda, they require adequate financial support from the Government. They also require a reasonable degree of certainty about future funding, so that they can plan ahead with confidence. Erratic and unpredictable funding leads to the stop-go approach that has bedevilled public sector investment and service provision in the past. Today, I shall address those two issues: adequacy of funding and stability of funding.

The Government are delivering a stable economic environment and can therefore provide the resources needed for strong public services. Total support from Government grant and business rates will be £44.4 billion next year—an increase of £2.8 billion or 6.7 per cent., which is three times the underlying rate of inflation. Of that total, £8.3 billion will be specific and special grants available to councils; those will be the subject of separate announcements. My primary concern today is the £36.1 billion of general Government support, made up of £21 billion of revenue support grant and the £15.1 billion of business rates that the Government will redistribute to local authorities next year. That will be 4.4 per cent. more than in 2000–01.

The 4.4 per cent. increase in general grant is a national average figure. It must be allocated between authorities. The current method of allocating grant uses the standard spending assessment formula, but the operation of the SSA formula for 2001–02, if left unchecked, would produce what I regard as an unacceptably wide range of outcomes: some authorities would receive grant increases of nearly 10 per cent., whereas others would have their grant cut in real terms. Many hon. Members will know the facts. There are large changes in the estimated population of local authority areas, and there have been changes in the earnings data used to calculate the area cost adjustment.

In the interests of predictability and stability, we already publish three-year plans for total grant and limit the extent to which the SSA formula will change. From this year, we will go further and provide information on the majority of capital allocations and specific grants on a three-year basis. The population and earnings data changes in the SSA formula threaten to undermine those benefits, and I am particularly concerned about the effect that that would have on the delivery of the Government's

priorities of education and social services. Nevertheless, I have concluded that I should use the new data. I cannot justify ignoring them.

I consider that the best approach is to accelerate the introduction of a reform canvassed in our Green Paper on modernising local government finance. It involves setting floors and ceilings on grant increases. Therefore, in the consultation on the local government finance settlement which I am launching today and which is to run until 9 January, I will make it plain that I am minded to include floors and ceilings in the distribution of revenue support grant for 2001–02 to authorities with education and social services responsibilities. RSG would be distributed so that all such authorities receive at least 3.2 per cent. more Government support in 2001–02 than they did in 2000–01; that is 1 per cent. more than underlying inflation. The ceiling for such authorities would be set at 6.5 per cent.

A floor increase of 3.2 per cent. should be sufficient to allow an authority that is improving its efficiency to maintain and enhance its services. The 6.5 per cent. ceiling represents a good increase in grant for the authorities that receive it, and helps to support the cost of introducing the 3.2 per cent. floor. However, it is not possible to set a ceiling to cover the whole cost, so those authorities that are not at the floor or the ceiling will receive an increase in support that has been marginally scaled back. For example, an authority that would otherwise have received an increase of 5 per cent. will receive 4.8 per cent.

There will be no floors or ceilings for local authorities that do not have education and social service responsibilities. I propose to continue the guarantee provided for the last two years, which ensures that no such authority will receive less central support from the Government in 2001–02 than it did in 2000–01. Some may feel that the Government are jumping the gun if floors and ceilings are implemented before consultation on the Green Paper is complete. However, this year shows conclusively how unwise the Government would be to rely totally on the traditional data-driven formula to distribute grant. Indeed, the current method of distribution by SSA has included the principle of a floor below which increases for authorities would not fall.

We would be wise, therefore, to avail ourselves now of what appears to be the best available solution. For the future, the Government will consider further whether floors and ceilings should be a permanent feature of the grant distribution system, whether they should be extended to all local authorities, and the levels at which they should be pitched. I realise that many councils will have expected proposals on grant distribution to follow a similar pattern to that which we used last year. I am therefore issuing for consultation a proposal that distributes grant without incorporating any rules about floors and ceilings. That proposal, however, includes the same minimum grant guarantees as last year, which means that no authority would receive less Government support in 2001–02 than it did in 2000–01. Support for authorities with education and social services responsibilities would be increased by at least 1.5 per cent. All those comparisons need to be adjusted to allow for changes in the functions of councils or the financing of particular services to permit a fair year-on-year comparison.

I want to touch briefly on three other issues. First, following consultation, we intend to make one adjustment to SSAs. The under-fives education SSA methodology will change, following the transfer of funding for nursery education for four-year-olds. That will improve stability of funding by ensuring that its distribution matches as closely as possible the previous distribution under specific grant.

Secondly, the guideline for the council tax benefit subsidy limitation scheme for the 2001–2002 scheme will be the same as last year, so there will be a 4.5 per cent. increase in council tax or such increase as is necessary to give the council an increase in its budget requirement equal to its full cash SSA increase. The scheme will continue to operate cumulatively. For each authority, we will use the previous year's council tax guideline, after certain adjustments, as the starting point. I am issuing today full details and guidance on the scheme for 2001–02.

Thirdly, the additional resources being provided through the neighbourhood renewal fund will help the most deprived authorities to target services on their most deprived areas. That will contribute to the neighbourhood renewal strategy objective of bringing the outcomes achieved by core spending programmes in those areas up to the average standard of the rest.

Having considered the responses to the recent consultation paper on the neighbourhood renewal fund—most of which welcomed the new funding—I have decided to proceed with the arrangements proposed in the consultation paper and am today confirming the initial allocations to the 88 eligible authorities.

In addition to the sums that I propose to allocate to social services today, I can also tell the House that my right hon. Friend the Secretary of State for Health will shortly announce details of an additional £100 million for personal social services in 2001–02. It will support improved care and rehabilitation services for older people.

My right hon. Friend will also ensure that, as part of the service planning round for 2001–02, health authorities, primary care groups and trusts give local authorities a clear indication of the NHS funds that will be provided to support social and intermediate care services through pooled budgets and other joint initiatives in time to inform the final local government finance settlement.

My Department is today writing with details of the core proposals to every local authority in England. Copies of that material have been placed in the Vote Office and the Library, and are being made available over the internet.

The proposals are another step in the Government's modernising agenda. They provide a solid, substantial grant increase and a stable financial environment. Together with best value and our other reforms, they will enable councils to plan and deliver better services for their citizens. I commend them to the House.

Mr. Nigel Waterson (Eastbourne)

I thank the Minister for her usual courtesy in letting me see the statement in advance. I hope that she did not find the whole affair too tiring. It is unfortunate that the Deputy Prime Minister has left the Chamber when we are discussing a subject that is perhaps of even more immediate concern to many people in this country than global warming.

Will the Minister confirm that she originally intended to sneak the statement out last Friday through a written answer to a parliamentary question that the hon. Member for Stockton, South (Ms Taylor) tabled? Will she confirm that, in the past two years, the average council tax has increased by 6.8 per cent. and 6.1 per cent. respectively, and that over three years, council tax has increased by a staggering 23 per cent., or £150 for band D payers? Today's figures mean yet another sharp rise; in effect, another stealth tax. The average family will pay some £200 more in council tax by the time of the next election. What is the Minister's prediction for increases this year?

Was the right hon. Lady the senior Minister who was quoted extensively in The Sunday Times? Whether she was or not, does she agree with that Minister's comments? He or she said: Publicly, ministers will claim that this is generous. In private they concede that the rise is not big enough to prevent an average council tax increase of more than twice the underlying inflation rate of 2 per cent. He or she continues: Council tax bills will go up by 5 per cent. on average and in some cases it will be double that. Will the Minister also confirm that shire counties and London have already lost £650 million and £250 million respectively during the Parliament due to the Government's fiddling of the funding formula? Does she accept that ignoring up-to-date data in calculating the area cost adjustment would have had a massive effect on some councils in London and the south? Doing that would make nonsense of the right hon. Lady's pretence that there is currently a freeze on SSA methodology. Does the Minister realise that that could have cost East Sussex county council £3 million and Kent £8.7 million?

If the extra costs have been incurred, the grant should reflect them. What calculations has the Minister made of the effect of introducing floors and ceilings on grant increases? Will not that have a distorting effect on some councils, especially those in London and the south-east?

May I at least commend the Minister on changing her practice in previous years of refusing to have face-to-face meetings with local authorities? Does she agree with the NHS Confederation, which spoke of bed blocking due to cuts in social services funding in areas as diverse as East Sussex, Hertfordshire, west Surrey, west Kent, Cheshire and parts of the south-west? I wonder whether she agrees with its conclusion: The NHS Confederation is concerned that the NHS is not seen as an alternative to properly funded local government. Why did she not heed my warning on that issue a year ago? [Interruption.] I am sorry that the Minister finds this funny. We naturally welcome the additional £100 million that is said to be available for social services, but will that sum be genuinely new money, not re-announced old money? May it not already be too late to tackle the problems that I have described? Has she seen the survey by the Association of Directors of Social Services, which showed an average projected overspend on social services of £200 million, which is double the amount she announced today?

Is the Minister aware that some councils are already nervous about having to increase council tax to cover the costs of recent severe flooding, despite the Bellwin formula? Has she calculated the likely rise in council tax in affected areas that will be attributable solely to flooding?

On education, can the Minister confirm that much of the so-called increase involves ring-fenced funding, includes the transfer of existing grants into SSA or is previously announced money for the new sixth form curriculum?

Many local authorities are reporting very high extra costs in implementing the best value regime. The Local Government Association recently asked for £175 million extra funding to cover so-called modernisation. Will the Minister today announce extra grants to cover that?

Finally, when can local government expect action on some of the less controversial aspects of the local government finance Green Paper, including the ability of councils to charge for the discretionary services they provide? Does the Minister accept the criticism that all the Green Paper does is kick into the long grass difficult long-term decisions on local government finance—in particular, whether we have a plan-based or a formula-based system and whether, in the long run, central Government should give more power back to local councils and the communities that they represent?

Ms Armstrong

Mr. Speaker, you must forgive my slight smile at the hon. Gentleman's speech.

There was never an intention to make the announcement in a written parliamentary answer last Friday. I do not know where the hon. Gentleman gets his leaks from, but they are not very reliable. As ever, he believes what he reads in the paper, which is clearly how he gets all his information, but it is never accurate.

I make no predictions about council tax, other than to say that I am confident that council tax rises for next year will be lower than in the current year; the rises in the current year are lower than they were last year. In other words, we are, in the words of the hon. Member for Tunbridge Wells (Mr. Norman), in a period of unprecedented prosperity. The Government are delivering a stable economy and, year on year, councils are bringing down council tax. [HON. MEMBERS: "What? Where?"] They are bringing down the increases in council tax; of course they are. Opposition Members seem to have had an exciting weekend, but they should get on with realities.

I may have disappointed the hon. Member for Eastbourne (Mr. Waterson), whose main point was that we are not implementing data changes by implementing an area cost adjustment. I hate to disappoint him—we have done that; we have done as we promised. We committed ourselves to data changes and we have upheld that promise, but we mitigated the excesses of that through the floors and ceilings mechanism. That mechanism is an advance on what previous Governments did to dampen the changes for some authorities year on year. We took that further by introducing ceilings as well as a floor. We introduced a floor that means that all authorities will get an increase above inflation, and they should be able to tackle the challenges that they inevitably face year on year.

I thank the hon. Gentleman for what he said about consultation. The Under-Secretary, my hon. Friend the Member for Stretford and Urmston (Ms Hughes), and I will be seeing authorities that are affected by the ceiling.

The hon. Gentleman spoke about bed blocking. I hate to tell him this, but bed blocking is being reduced.

Hon. Members

Where?

Mr. Waterson

No, it is not.

Ms Armstrong

Yes, it is. The hon. Gentleman can have those arguments elsewhere. According to my information, bed blocking is being reduced over the current year.

We are committed to putting substantially increased amounts into social services. Nearly £400.43 million is already going in, and there is also the additional £100 million that I announced today. I believe that local authorities throughout the country—and, indeed, the ADSS—will welcome that.

The hon. Gentleman mentioned the Bellwin scheme, also introduced by the last Government. Perhaps he has not noticed that this Government have increased the payment under Bellwin to 100 per cent. We are also considering various other changes in flood defence policy, to ensure that we get the problems under control. The Ministry of Agriculture, Fisheries and Food, my Department and the Treasury are undertaking a review, and will report next year. Moreover, we are consulting the LGA and the Environment Agency to ensure that local authorities, along with the agency, can play a full part in both increasing flood defences and properly addressing the problems that arise following floods.

I reject the hon. Gentleman's allegation that costs are soaring in best value. There are some soaring costs, but there are also some substantial savings. Authorities are already recording significant savings: I invite the hon. Gentleman to go and talk to them.

The hon. Gentleman had some interesting things to say about the local government Green Paper, and about when we would implement other aspects of it. As the consultation period has not yet ended, I am not in a position to say exactly how we will implement all aspects of the Green Paper. I like to think that we are engaged in more than just a technical consultation process, and that we will consider the responses seriously.

The hon. Gentleman asked me to put more money into the settlement. He seems to forget how much his party took out of the settlement year on year, and how much this Government have put into it since the general election. There have been substantial increases. Opposition Front Benchers really must make up their minds. Are they Portillo-ites who believe that there is currently a splurge in public spending and that there should be no more of it, or are they developing a new line—that there should be more public spending, and that they are prepared to go back to boom and bust and lose the good, prosperous, stable economy that this Government are delivering?

Mr. Brian Sedgemore (Hackney, South and Shoreditch)

Bearing in mind that the current financial crisis in Hackney has been caused by a combination of political instability and the gross negligence of senior officers over the past five years—led by the former chief executive, Tony Elliston—will the Minister tell us what she can do to help? If she cannot tell us today, will she write to me?

Ms Armstrong

My hon. Friend knows that the Government have been in close contact with Hackney, where there are serious problems. It is, of course, up to the council to sort out its finances, and it is now getting on top of the problems caused by the amount that has been lost—the amount for which it was unable to account. I hope that, with the support that the council is now receiving, it will be able to turn things around, for it is in all our interests for the people of Hackney to be better served than they have been. I shall certainly keep in close touch with my hon. Friend about developments.

Mr. Adrian Sanders (Torbay)

I also thank the Minister for letting me have a copy of her statement in advance.

Is not the message of the statement that £8.3 billion of local government expenditure is now devoted to special and specific grants? Does that not mean greater centralisation? The decision about what those grants will be spent on rests with central Government, rather than with the local councils, which in the past have received the money in their normal block grant.

Does not the increase in special and specific grants heighten the unpredictability for local government? When local authorities wish to plan their budgets, they will be unsure about whether they will have access to those grants. Does not such a bidding process have a cost implication, with many council officers devoting much of their time to bidding on behalf of their authority, in the knowledge that they may not succeed and that their time will have been wasted if they do not?

Overall, will the statement meet the rising costs, some of which have been imposed by the Government? In particular, there is no mention in the statement of how local government will fund the bus concessionary fare scheme from next April. There is no mention of the increased costs from best value. No decision has yet been reached on the cost of nursing care and how that impacts on social services budgets throughout the country. There is no mention of the costs of climate change, the impact of which falls on local councils that suffer from flooding, coastal erosion and other natural disasters.

The Government talk a lot about giving local government more power over decision making. In effect, all they have done is allowed the dog out for more walks, but they have kept it on an ever tighter leash.

Ms Armstrong

I was waiting for another line from the hon. Gentleman. I think that this is the first time that he has ever spoken in a settlement debate without predicting a double-digit increase in council taxes—I was waiting for him to perform his normal role. He has got it wrong every year and I was looking forward to being able to point that out.

I referred to the issue of specific grants in the statement. This year, we will set out the three-year programme for local government. I think that local authorities will welcome that. They will be given information before they set their budgets, for example, they will know what they can expect from special grants. Therefore, the issue that the hon. Gentleman raises will not arise.

There are some special grants that local government has asked us to set up: for example, revenue support for public finance initiative projects. It was not considered fair that that should be in the general settlement; it was felt that PFI should be the subject of a specific grant. Therefore, if an authority gets a specific PFI project, we specifically allocate the revenue support to it. I am sure that, as the hon. Gentleman looks at the detail, he will begin to see the logic of what I have announced in relation to special grants.

In formulating the overall amount, we have taken account of all the pressures on local government. The settlement reflects a substantial commitment to investment in public services because public services are so important.

On concessionary fares, clearly, the financial implications will vary widely from one local authority to another, according to whether a scheme is being operated and what that scheme provides. Our estimate of the total cost of the scheme nationally is £54 million, and we have provided for that sum in the settlement.

I am confident that, despite the hon. Gentleman's doom and gloom, the settlement is good news for local government. I look forward to working with him and with others to ensure that, next year, local government is able to perform the tasks that its citizens expect to be done.

Mr. Bill O'Brien (Normanton)

I welcome my right hon. Friend's statement on the commitment to public services, and I believe that she is genuine in that commitment. However, I must draw attention to the fact that the difference between actual local government spending and the standard spending assessment is about £4 billion. The gap began to emerge when service cuts were imposed by the previous Government, and it is still causing problems because it has to be compensated for in charges for services and in local taxes.

I draw my right hon. Friend's attention to the area cost adjustment, which is estimated to be equivalent to a £51 million reduction. With a data estimate of a reduction of £72 million, it is thought that the special interest group of municipal authorities—SIGOMA—will suffer a £123 million loss. As that loss is almost twice the sum that has been allocated to SIGOMA for neighbourhood renewal, some thought should be given to that problem.

Will my right hon. Friend also clarify how specific grants will work? Will the £219 million for care leavers or the —127 million for learning and skills councils count against SSAs?

Could we also have full details of all funding—

Mr. Speaker

Order. I think that the hon. Gentleman has given the Minister enough to go on with.

Mr. O'Brien

May I also just ask the Minister if she will give us a breakdown of all the special grants made to local government?

Mr. Speaker

Order. I must appeal for shorter questions and, of course, shorter replies. Many hon. Members are seeking to ask questions, but some will be disappointed.

Ms Armstrong

I am sure that my hon. Friend will welcome the fact that Wakefield is receiving a 3.2 per cent. increase. I can confirm that the money for adult education has been transferred out of the SSA settlement and into learning and skills councils. I can also assure him that special grant information will be presented to the House for approval.

Mr. David Curry (Skipton and Ripon)

Does the Minister recall that, two years ago, she said that Labour would make the local authority settlement more simple? Now, however, the settlement is massively complicated by her floors and ceilings. Does she recall saying that she would make the settlement more fair? However, by abandoning the incorporation of objective data, the Government have made the settlement more unfair. Does she remember saying that the Government would make local government more independent? However, the increasing amount of direct grant has made local government more dependent. Does she agree that when the Labour Government talk about modernising local government, they mean making it more complex, more unfair and more dependent?

Ms Armstrong

No. I have not abandoned objective data, but used them. I also believe that the situation is now very simple: no authority will receive an increase of less than 3.2 per cent. or more than 6.5 per cent. I think that that is very simple and straightforward and that folk will understand it.

Mrs. Anne Campbell (Cambridge)

I welcome my right hon. Friend's commitment to floors and ceilings, to dampen the percentage increases that are caused by data changes. However, has she considered the proposal made by the all-party fair funding group that there should be a floor on the education funding allocation per child?

Ms Armstrong

Of course we have considered that; I have met the group, and I frequently meet group members. Every authority has a different idea of what will be fair. The area cost adjustment, about which I know my hon. Friend is very concerned, has been an attempt—a flawed attempt, I think—to reflect differential costs across the country. My right hon. Friend the Secretary of State for Education and Employment is still pursuing a basic entitlement per pupil approach, as outlined in the local government Green Paper. I am not at this stage able to say where that will end up, but whatever system is adopted, we will still have to reflect need as well as the differing costs. That is always a problem. Simply dividing up the cake equally, as it appears, does not really end up being fair to anyone.

Sir Paul Beresford (Mole Valley)

As my right hon. Friend the Member for Skipton and Ripon (Mr. Curry) said, the Minister seems to have made a complicated system even more complicated and introduced the potential for political bias. We will certainly have to watch that. Is she aware that, for many local authorities, if their grant was set at average, about 25 or 50 per cent. of it, or, if it was set at floor, perhaps all of it, would go in the increased bureaucratic costs of the two systems of which she is, mistakenly, so proud—best value and the new scrutiny system? She should recognise that any competent authority—and there are some—could produce the savings that she talks about without those additional costs.

Ms Armstrong

The hon. Gentleman should know all about political bias in local government settlements.

We are seeking to get rid of it. We believe that best value and modernising the political structures are a means of ensuring that councils can respond more effectively to the needs and aspirations of local people.

Mr. Barry Gardiner (Brent, North)

My right hon. Friend and I have formed the habit of crossing swords at this time of year over the past three years. I welcome the announcement of a 4.4 per cent. increase this year and the inclusion of the data changes in this year's settlement. I would also welcome the floor of 3.2 per cent., were it not that, last year, my local authority, the London borough of Brent, found itself not on the floor but in the basement. I would welcome this year's announcement even more if she could assure me that this year Brent will be found closer to the ceiling, in which case she may have to scrape me off it.

Ms Armstrong

I am happy to tell my hon. Friend that Brent will receive a 4.5 per cent. increase this year. It will also benefit from the neighbourhood renewal fund allocation.

Mr. Michael Howard (Folkestone and Hythe)

What evidence does the Minister have that bed blocking is coming down in east Kent? What effect will the imposition of a ceiling on the formula have on the amount of grant made available to Kent county council to allow it to fund its social services department in a way that would put an end to bed blocking in Kent?

Ms Armstrong

Recent evidence submitted by the Department of Health to the Health Select Committee in the summer showed that bed blocking is coming down. We set further targets to reduce it in the national priorities guidance. Clearly, there are particular pressures in different parts of the country, and that is precisely why my right hon. Friend the Secretary of State for Health is putting an additional £100 million into this year's settlement and is examining other national health service budgets. When the right hon. Gentleman was in charge, nothing like that happened.

Mr. David Watts (St. Helens, North)

I welcome the overall statement, but many of us are bitterly disappointed that the system has not been completely reviewed after three years of a Labour Government. When does my right hon. Friend believe that the full review will have taken place, and when are the changes likely to be implemented?

Ms Armstrong

We are still in the middle of consultation on the local government finance Green Paper. I share my hon. Friend's frustration at its not having been possible to have a more root-and-branch reform. I have tried to move so as to take as many people with us as possible. There are sharply differing views on this matter from authority to authority, so trying to find a way forward that does not leave one authority feeling that it is being discriminated against is not easy. We are working with authorities to find an effective way forward. The Green Paper has been well received. I have yet to receive the written responses, but that is the impression that I get from talking to people. In the early months of the next Parliament, we ought to be able to make the full reform.

Mr. Steve Webb (Northavon)

My local authority of South Gloucestershire, as the Minister knows, fares badly under the existing standard spending assessment formula. Will the Minister confirm that the decision to take account of wage pressures in London and the south-east but not elsewhere in the country is particularly unfair on fast-growing authorities with tight labour markets such as South Gloucestershire?

Ms Armstrong

I know that the hon. Gentleman has an oral question on this tomorrow. I simply remind him, however, that all the Liberal Democrat authorities, as I understand it, asked us on Friday to implement the ACA changes. I understand that he may be making a separate point for South Gloucestershire. We have sought to be as fair as possible to everyone and that is the reason for the floors and the ceilings.

Ms Karen Buck (Regent's Park and Kensington, North)

I welcome my right hon. Friend's decision not to make methodological changes this year that affect the area cost adjustment in respect of London authorities. Is she aware, none the less, of the extreme pressures on London local authorities because of factors such as population growth and homelessness, with some 40,000 families currently in temporary accommodation in London? I agree with the need to put a floor under authorities suffering the consequences of population loss, but will my right hon. Friend address sympathetically the needs of local authorities that have reached the ceiling through no fault of their own?

Ms Armstrong

Of course I understand the difficulties faced by authorities in London for the reasons outlined by my hon. Friend, and the problems faced by authorities in other parts of the country for other reasons. We are acutely aware of the costs of homelessness in London, and I understand the points made by the Association of London Government about that. The part of the settlement dealing with that is the best for many years, with a 1.8 per cent. real-terms increase in each year and 2.7 per cent. more in 2001–02. However, my hon. Friend the Minister for Housing and Planning and I are discussing how we will continue to keep a close eye on this and make sure that people do not suffer.

Mr. John Wilkinson (Ruislip-Northwood)

Is it not the case that residents of most London boroughs will face seriously increased council taxes next year and, of course, the supplemental charge of a precept for the Greater London Authority? Why has the Minister not mentioned the additional costs of refugees and asylum seekers for London boroughs? Is she not aware that my borough of Hillingdon, which covers Heathrow airport—through which a quarter of asylum seekers to the United Kingdom come—has submitted to the Minister of State, Department of Health, the hon. Member for Barrow and Furness (Mr. Hutton), a memorandum pointing out that unaccompanied refugee children will cost the borough £3.15 billion a year above grant. [Interruption.] I mean £3.15 million—forgive me. I exaggerate. It is easy to get worked up because homelessness and the additional costs are serious burdens on local people, and they feel extremely strongly about it.

Ms Armstrong

I understand that. The costs of asylum seekers are not met through the settlement. That is the result of a special grant from the Home Office. I am in constant touch with my Home Office colleagues to discuss this and to ensure that we do whatever possible to alleviate the problem, not just in London, but particularly in London. We recognise that there are serious problems in London, but the dispersal programme means that other authorities are also involved.

Ms Claire Ward (Watford)

I welcome my right hon. Friend's decision to include the new earnings survey. Hertfordshire will need to look at the ceilings and floors to see where we benefit.

May I take it from the Government's decision that they accept the principle that it is more costly for schools in Hertfordshire in particular and in the south-east in general to be able to do the job that they need to do, and that that must continue to be reflected in the finance that becomes available from central Government to local government?

Ms Armstrong

The House now knows why this statement is always difficult: some of my hon. Friends hold one view and others another. We recognise the need for some acknowledgement of costs. We are not convinced that the current ACA is the most effective method of achieving that, which is why the matter is under review. We recognise, and the alternative methods demonstrate, that this factor cannot be ignored.

Mr. Christopher Fraser (Mid-Dorset and North Poole)

The Minister will be aware of a letter to the Secretary of State from Purbeck district council regarding statutory mandatory travel concessions. She will also be aware that, for a predominantly rural council such as Purbeck, even a prudent approach to the scheme, including essential cross-boundary travel, will, on the basis of the figures available so far, require an increase in council tax of £5, or 6.5 per cent.

The Minister's answers have been less than clear so far. Will she confirm that all additional costs faced by councils such as Purbeck will be completely covered by the Government when they introduce the scheme?

Ms Armstrong

The hon. Gentleman seems to want me to say that there will be no council tax increases. Of course, local authorities and local citizens will contribute through council tax. I do not know how he can tell us the exact amount of council tax that will be needed to cover whatever decisions are taken in future, given that he has not yet read the figures, and nor, I suspect, has the council. I am confident that councils will be able to implement reasonable council tax increases, lower than last year's, because the statement has covered all the pressures on local government, and there is a substantial increase this year in the amount that the Government are giving.

Mr. Jeff Ennis (Barnsley, East and Mexborough)

I welcome my right hon. Friend's statement, especially on additional SSA help for the worst-funded local authorities, such as Barnsley and Doncaster, which serve my constituency. There is no doubt that, under this Government, the increases in block grant have been exponential compared with those introduced by the previous Government. Will the Minister also comment on the increase in the other services block grant for next year?

Ms Armstrong

I thank my hon. Friend. I have already said that the increase in that block grant is greater than it has been of late. I recognise that that grant has been starved for many years. Over the past couple of years, we have tried gradually to increase it, and it will increase further over the next three years. I understand that some local authorities have had real problems, and that is one of the reasons for implementing the floor.

Sir Teddy Taylor (Rochford and Southend, East)

The Minister said, and obviously believes, that spending for local councils had increased under this Government, but not under the previous one. Will she review the huge injustice done to Rochford council, to which the Government's allocation of money has been exactly £3.21 million for each of the past three years, with no increase for inflation. That compares with £4 million allocated by the previous Government. Is there not a case for a special procedure by which the Government could investigate cases of great injustice in relation to councils such as Rochford, which have obviously had a rotten deal and been unfairly treated, and whose special needs and demands have not been taken into account?

Ms Armstrong

I am sure that, when the hon. Gentleman looks at the figures for Rochford this year, he will be pleased to see that it has been given a reasonable increase for a district council, which does not have to bear the expense of major services such as education and social services. The Government's priorities—and local government's priorities—lie in those areas, and that is where the bulk of the investment has gone. However, the overall allocation for the other services block, from which shire districts largely benefit, has increased. I have also referred to the substantial increases that local government as a whole has received during this Parliament.

Mr. Jeremy Corbyn (Islington, North)

Will the Minister comment on her discussions with my hon. Friend the Minister for Housing and Planning on the cost of homelessness, especially in London? She seemed to suggest that there would be an increase of 2.7 per cent. in the forthcoming year, which is rather less than the floor increases that she has announced for other services.

Will she also give an indication as to when the Government expect to make an announcement on future housing investment? Does she concede that the terrible housing crisis faced by many in inner London can be adequately solved only by a large public investment in good-quality homes for many of the poorest and most dispossessed people in this country?

Ms Armstrong

As I have already said, I am in discussion with my hon. Friend the Minister about homelessness costs in London so I shall not repeat my answer to my hon. Friend the Member for Regent's Park and Kensington, North (Ms Buck).

This year, in the spending review 2000, a substantial increase was announced by the Government in capital spending for housing. That is the largest increase for many

years and builds on the £5 billion that the Government are spending as a result of the capital receipts initiative. We understand the particular problems in London; that is reflected in our handling of the settlement.

Mr. Paul Burstow (Sutton and Cheam)

Can the Minister confirm that the introduction of floors and ceilings of the type announced today will mean that my authority, which would have benefited this year from an extra £1.5 million as a result of the data changes, will receive less than that? As a consequence, it will be faced with an even bigger funding gap, resulting in higher council tax increases but more cuts in local services.

Ms Armstrong

I have made it clear that, in order to ensure that some authorities do not suffer excessive loss in grant, every other authority must contribute. Although there is a small contribution from the hon. Gentleman's authority, it will none the less receive a 6.1 per cent. increase—even with the floors and ceilings. In any settlement, I suspect that there would have been a damping mechanism—so the overall amount allocated to his authority would have been less. The redistribution on which we are engaged means that those who do well from the settlement have to contribute a little to those who do not do so well.

Mr. David Kidney (Stafford)

I congratulate my right hon. Friend on her good sense in agreeing to set a funding floor and ceiling. Is that a recognition of the logic of the position taken by the Government in their Green Paper—to reduce disparities between local authority settlements? Is it also an acknowledgement that applying the existing formula untrammelled would have added further injustice to those who have suffered for the longest period?

My right hon. Friend said that she will hold consultations on a permanent system of floors and ceilings. I understand that, but is it her intention that floors and ceilings will continue temporarily until the new settlement is finalised?

Ms Armstrong

I have announced floors and ceilings for this year's settlement as a consultation exercise. I cannot predict what will happen in future years. Consultations on the Green Paper continue. Obviously, I think the proposals offer a sensible way forward, otherwise I should not have made them today, but that does not mean that I am pre-empting the long-term solutions, or indeed what we shall do next year.

Mr. Andrew Lansley (South Cambridgeshire)

Does the Minister recall that the Leader of the then Opposition, just days before the last general election, told the Cambridge Evening News that a Labour Government would review the area cost adjustment with a view to implementation in 1998ဣ99? Will she therefore confirm that this is the fourth successive year in which the Government have failed to keep that promise? How much longer will the Government continue to do that? In this context, stability means continuing unfairness, especially for an authority such as South Cambridgeshire district council, whose labour costs and population are high and rising. The unfairness will grow if data are incorporated in the area cost adjustment for those authorities that benefit from it as compared to those that do not.

Ms Armstrong

The hon. Gentleman is somewhat disingenuous. He knows that we announced three-year stability in methodology changes and we are keeping our word. Perhaps he finds it unusual when a Government are prepared to keep their word.

Cambridgeshire county council is receiving a 3.9 per cent. increase this year. We have reviewed the ACA, but we are unable to achieve consensus on any of the 21 options proposed. Through the local government finance Green Paper, we are considering other changes. I look forward to the hon. Gentleman's constructive contributions.

Several hon. Members

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Mr. Speaker

Order. We must move on.