Local Government (Independent Funding Commission) (Hansard, 2 April 2003)

§ Tony Baldry (Banbury)

I beg to move, That leave be given to bring in a Bill to establish an Independent Funding Commission to have responsibility for allocating grants and funds to local authorities in England and Wales and replacing the standard spending assessment powers of Ministers; and for connected purposes. A booklet dropping through north Oxfordshire residents' letterboxes this month explains: Around 9 per cent. of Council Tax goes to Cherwell District Council—the rest goes to Oxfordshire County Council and Thames Valley Police Authority as well as Parish and Town Councils". It goes on to outline local government grants and the way in which changes in some of these are imposing serious financial pressures on the Council". It finishes by observing that the council is committed to ensuring that public money is safeguarded, properly accounted for, and spent efficiently and effectively". People have started to notice that since 1997 their council tax bills have increased by more than 80 per cent., which is a huge increase. The need for an independent commission on local government finance is now clear. Local government finance has an impact on far-reaching local issues. I do not believe that the allocation of money to local authorities can be decided fairly by Ministers of any Government—it can be done only by an independent commission. An independent commission was established by the Government to examine the voting system. The terms of reference of that commission allowed it to recommend "any appropriate system" assessed as "fair" and offering "stability". My Bill would allow for an impartial assessment of which system of local government funding would offer fairness and stability.

Thumping council tax increases in Oxfordshire and Cherwell are not the responsibility of local councillors, but are the result of a sleight of hand by Ministers. A few months ago, Ministers at the Office of the Deputy Prime Minister restructured local government finance, creating what they call a fair funding formula. The result is neither a fair formula for Oxfordshire nor for much of the south of England; nor does it provide adequate funding for Oxfordshire.

Put simply, the Government are transferring investment from local authorities in the south of England to councils in the midlands and the north. That is not my judgment; it was the assessment of the Chartered Institute of Public Finance and Accountancy, which found that council tax in southern councils outside London will increase by, for example, 17 per cent. in Cheltenham and 19 per cent. in Guildford. By contrast, council tax is scheduled to rise on average by just 4 per cent. in Scotland, and many local authorities in the north get off lightly, with increases below 10 per cent.

In Manchester, for example, bills will rise by only 5 per cent. Manchester is, of course, a Labour-held council. Indeed, I have discovered that of the 10 lowest 920 council tax rises taking place, seven are in Labour councils. That is a reflection not of their skills at financial management, but of Ministers giving more money to their friends in the north. My Bill would establish an independent commission that is required to find fairness, balance and impartiality in local government financing, in line with the purpose of other independent commissions.

The Bill would bring another benefit. It would offer an opportunity for genuine transparency in local government funding. The Office of the Deputy Prime Minister's recent local government settlement followed an opaque consultation, obfuscated by Ministers, who refused to meet local authorities to listen to their concerns. Such financial gerrymandering would not happen under an independent commission.

The ODPM's consultation was meant to replace the standard spending assessment of grants to local authorities with a fair funding formula, but no one could say whether the settlement was fair when it was announced, because not all the announcements on local authority funding were made at the same time. It is impossible to compare last year with this year. That would not happen under an independent commission.

The changes announced in that ODPM settlement affect every service provided by every local authority, yet the Government have deliberately left councillors compromised by lack of information and explanation. Consider Oxfordshire. Only two things are certain: the first is that council tax will have to rise by at least 12.8 per cent., so band D homeowners in Cherwell will pay £25 more. The second is that local councillors who provide the services on which so many local people depend have no idea what will be the exact amount that they receive from the Government. The imposition of the grants, ceilings, floors and resource equalisations that are now part of local government finance settlements are still being absorbed by local authorities, including Oxfordshire.

Lack of information creates uncertainty, and uncertainty leads to instability. Such uncertainty would not occur under an independent commission. The extent of existing instability can be gauged from a letter to ODPM officials in December 2002, in which Oxfordshire county council explained that the proposed settlement is extremely complicated and it has been difficult for us to understand the implications of the proposals. Some changes interrelate, making it very difficult to understand what is causing the change in our grant. Late release of information … has particularly caused problems in terms of providing speedy responses both internally and to media interest". I would go further. The deliberate late release of information by Ministers has made it practically impossible for Oxfordshire county council and Cherwell district council to stabilise existing services. What do they decide to put out to tender if they do not know what stage their budget is at? How can they properly decide what represents best value under the Government's own criteria, if they do not know which bit of their budget is doing what? Such Government action undermines accountability, and accountability is central to democracy.

Under an independent commission, local government and local people could clearly see what funds were being allocated to which councils on a clear and transparent 921 basis. An independent commission would also allow us to move away from a situation where, in the Government's own words, the local government funding formula cannot reflect all possible circumstances, so there will inevitably be an element of rough justice". Council tax payers and business tax payers in Oxfordshire and elsewhere are experiencing the Government's rough justice. That is particularly rough justice when the Audit Commission reports that the 21 councils judged to be excellent, most of which are in the south, will on average receive fewer financial resources from central Government than the 13 councils, most of which are in the north, that were judged to be poor performers.

I have referred to the council tax, but there will be no less an impact on business rates in Oxfordshire. The business rate rise there is bad news for smaller businesses in Oxfordshire and elsewhere in the country. The council tax rise is bad news for everyone living in Oxfordshire. We are told that the Government grant floors will delay the impact of the changes to grant in Oxfordshire, but that is not a solution. Floors do not produce fairness, and delay does not enhance stability. It is therefore imperative that an impartial public body be given the opportunity to say whether—after all the ministerial talk of floors, ceilings, resource equalisation, and area cost adjustment—it is fair that 21 competent councils have to redistribute their resources to the 13 worst-performing local authorities. My Bill would also allow an independent commission to look at local government finance in the round.

I do not want to bombard the House with statistics, but to help me to explain what is happening in Oxfordshire county council's budget, it is well worth looking at the following facts. The council's spending is set to increase this year by £42 million. Of that, only £14 million is due to the normal effect of inflation. Most of the rest is made up of demands placed on the council by the Government. Some £2.5 million will be consumed by paying the increased national insurance contributions of the council's staff and contractors when the Chancellor's 2002 Budget comes into effect this month. Another £300,000 is needed to pay the Government's landfill tax. A nationally agreed above-inflation pay 922 increase for white collar workers will account for £1.7 million. A further £1.9 million is required to satisfy the Government's diktat on fair pay for low pay workers.

It will also cost Oxfordshire county council £600,000 to store redundant fridges, which at present can be neither dumped nor recycled because the Government have been unable to satisfy EC directives. In addition, Oxfordshire council tax payers will have to stump up a £500,000 fine to the NHS if legislation goes through on local authorities blocking beds by failing to provide enough care home places for elderly people. Yet the reason why the council cannot find enough places is that it does not have the funding from central Government to invest in increasingly stretched local social services, which brings us full circle to the reason for the increase in council tax bills.

No one in a vulnerable group that depends on the support of social services provided by counties such as Oxfordshire can feel reassured that their life will be made more stable or secure by the seemingly far from impartial local government funding formulae. Let us consider their impact on pensioners in Oxfordshire. The council tax increases prompted one elderly couple to put it to me in a recent letter that Our own situation deserves better from the Government. Indeed, everyone in Oxfordshire and the south of England deserves better from the Government. We have seen some disgraceful gerrymandering of local government finance this year. If the Government and their Ministers cannot do this job properly, it must be done by an independent commission, and that is what my Bill proposes.

Question put and agreed to.

Bill ordered to be brought in by Tony Baldry, Mr. John Bercow, Mr. David Cameron, Mr. Boris Johnson, Mr. Robert Jackson, Richard Ottaway and Mr. Ian Taylor.