HC Deb 29 April 2004 vol 420 cc1019-35 1.14 pm
The Minister for Local and Regional Government (Mr. Nick Raynsford)

With permission, Mr. Speaker, I wish to make a statement about how the Government propose to handle those local authorities that have set excessive budgets for the current year.

The average increase in council tax in England this year is 5.9 per cent. That is less than half the previous year's increase, and lower than many people predicted. It is also the lowest for the last nine years. A large number of authorities have set lower council tax increases than they originally proposed, following the Government's strong messages to local authorities that high increases were both unacceptable, and unnecessary. They are unacceptable, because people are rightly concerned about increasing council tax bills. They are unnecessary because, for two years running, the Government have provided all local authorities with above-inflation increases in general grant.

Nevertheless, some authorities' budget and council tax increases are still too high and impose unreasonable burdens on council tax payers. The Government therefore intend to take action against those authorities whose budget requirements they consider to be excessive. That is not something that we are doing lightly. The Government attach great importance to local accountability and believe that first and foremost it is for local authorities to set their council tax and justify it to their local electors. However, we also have a duty to protect council tax payers from increases that we believe to be excessive. Many people, including representatives of pensioner interests, have urged us to use our capping powers.

After this Government came to power, we replaced the previous Government's crude and universal capping regime with new reserve powers that are more discriminating and flexible. As well as the option of in-year capping, the Secretary of State now has the power to set a notional budget to be used for future comparisons or to cap the following year's budget. The experience of last year, when council tax rose by an average of 12.9 per cent., showed us that not all local authorities can be relied on to behave responsibly when setting their budgets and council tax.

Of course, it is not just the percentage increase in council tax that is relevant. We have first to decide whether an authority's budget requirement is excessive. In doing so, we have used the following principles. These are described in more detail in a report that is being placed in the Library of the House. In the case of unitary authorities, London boroughs, metropolitan districts, counties, the Greater London authority and the Isles of Scilly, our view is that budget requirements are excessive if they involve an increase of more than 6.5 per cent. over last year's budget and if council tax has increased by more than 8.5 per cent. over the same period.

Shire districts are in a different position, as this year authorities no longer have to contribute 5 per cent. towards the cost of council tax and housing benefit. While that change has also affected some other local authorities, the amount involved represents a relatively insignificant element of their budgets whereas the change to shire district councils' much smaller budgets represents a considerable saving to them. We have therefore judged their budget requirements to be excessive if they are more than 2 per cent. higher than last year and, again, if council tax has increased by more than 8.5 per cent. As those are small authorities, whose increases in council tax may be correspondingly small in absolute terms, we have introduced a further test by applying those principles only to district councils with a band D council tax for 2004–05 greater than the shire district average.

Police and fire authorities also have a duty to be efficient and to act responsibly in setting their precepts. At the same time, we recognise that those services face particular pressures. We have therefore judged their budget requirements to be excessive if their budgets are more than 7 per cent. higher than last year and if their precepts have increased by more than 13 per cent. As those are single-purpose authorities, whose precept increases may be relatively small in absolute terms, we have applied a similar de minimis principle to that for shire districts. The principles have therefore been applied only to police and fire authorities with band D precepts for 2004–05 greater than the average for the relevant category of authority—either metropolitan or shire police, and either metropolitan or combined fire authorities.

Calculations relating to the combined fire authorities and their constituent authorities are based on figures in "The Limitation of Council Tax and Precepts (Alternative Notional Amounts) Report (England) 2004/05", which was approved by the House on Monday. Those figures take account of the fact that combined fire authorities have become major precepting bodies for the first time this year. The alternative notional amounts for 2003–04 allow like-for-like comparisons to be made with this year.

As I have mentioned, the Secretary of State has a number of options for dealing with authorities that have set excessive budgets. He may either designate an authority and proceed to cap it in-year, or he may nominate it and then either set a notional budget requirement to be used for future comparisons or designate it for next year.

According to the principles I have described, four unitary authorities and two shire district councils have set excessive budgets this year. They are Herefordshire, Nottingham, Telford and Wrekin, Torbay, Fenland and Shepway. We are writing to them today informing them that the Secretary of State is designating them for 2004–05 and setting a maximum budget. The authorities have 21 days in which to respond. We will carefully consider the representations that they make and the information that we have required them to send us. We will then either make an order, to be approved by Parliament, designating them at the level of the proposed maximum budget or another level, or we will withdraw the designation and nominate them instead.

Also according to the principles I have described, three police authorities and five fire authorities have set excessive budgets this year. They are the police authorities of Cumbria, Northamptonshire and West Mercia, and the fire authorities of Bedfordshire, Durham, Essex, Hereford and Worcester and Nottinghamshire. We are writing to the police authorities and four of the five fire authorities informing them that the Secretary of State is nominating them. In the light of the information that we have required them to send us and any information that they themselves want to provide, we will then take decisions about whether to set notional budget requirements for 2004–05 against which increases in 2005–06 will be measured, or to designate them in respect of 2005–06.

However, one of the fire authorities—Hereford and Worcester—has set very large increases in its budget and council tax precept: a 19.4 per cent. increase in budget and a 29.4 per cent. increase in precept. We are therefore writing to that authority, informing it that the Secretary of State is designating it for 2004–05. The calculation of the maximum amount and the procedure to be followed are the same as for the unitary authorities and the shire districts.

We believe that the actions that we are taking represent a measured response to the increases that we have seen this year. We are pleased that many authorities have heeded our warnings, but some have not. We will listen carefully to the cases put forward by the authorities that I have named where justified, we will use the greater flexibility afforded by our new capping powers. However, authorities should be in no doubt that the Government mean business.

Mr. Philip Hammond (Runnymede and Weybridge) (Con)

I am grateful to the Minister for his usual courtesy in making a copy of his statement available in good time.

What we have just heard is the culmination of a sorry story of fiddled figures and broken promises ending in a finale that may make the Deputy Prime Minister feel good, but which will do nothing to address the underlying driver of soaring council taxes—fiddled local funding from Whitehall and the never-ending torrent of new burdens, targets and red tapes from his interfering Department.

In opposition, Labour pledged to end capping and in 1999, it brought in a Bill to create a new capping regime. In 2002, it pledged that no authority rated good or excellent in the comprehensive performance assessment would be subject to capping powers; today two such authorities are in the list that has Just been announced, making a mockery of the whole costly CPA process and the billion pounds a year of council tax payers' money that it costs.

While the Office of the Deputy Prime Minister is posturing about keeping council tax down, a senior Treasury official disclosed yesterday to the Housing, Planning and Local Government Committee that the Treasury believes that it could more than double in future. So is it too high already, as the ODPM seems to think, or can it more than double as the Treasury apparently believes? Can the Minister clarify whether the Deputy Prime Minister or the Chancellor is now running council tax policy?

Until recently, the Government's policy was at least coherent, if grossly unfair. It changed the grant formula to channel funding away from the southern part of the country to the north and to the midlands—that is not my assessment, but that of the Audit Commission in its December 2003 report—while, at the same time, it piled on additional cost burdens and responsibilities that local authorities were required to fund. The Government made no attempt to conceal the fact that their policy would lead to higher council taxes in areas that Ministers considered could afford to pay them.

So what has changed? Ministers have been galvanised into action of a sort by polling evidence that shows that the public has not been fooled; they know that the responsibility for high council taxes and high council tax increases lies firmly with this Government. However, instead of addressing the real issue of authorities, such as my own in Runnymede, whose budgets have not increased significantly but which have had to increase council tax because of cuts in Government grant, the use of the double threshold—the increase in budget and the increase in tax—in the criteria that the Minister has used for capping means that the Government are ignoring the problems of these councils. The problem is of the Government's, not the councils', making.

After record increases last year that went unchecked, this year the Government have been panicked into a response. Herefordshire, for example—a good authority according to the Audit Commission—has by no means the largest increase over two years in its group. However, the Minister, by focusing on just one year in his criteria, has allowed local authorities such as Southampton and Portsmouth, with larger increases over the two years, to sneak through the net.

The use of arbitrary criteria and the double threshold has had perverse effects. Six uncapped unitaries have higher percentage budget increases than Telford and Wrekin and five have higher percentage band D precept increases. Yet Telford and Wrekin gets capped; others do not—fiddled capping on top of fiddled funding. Can the Minister explain why he did not apply a test of absolute council tax levels to the unitaries—distinguishing high-taxing councils from those with a relatively high single-year increase—as he has done with every other category of authority capped?

For all the authorities designated today for in-year capping, the Minister has carefully avoided detailing the maximum budgets that the Secretary of State will set for those authorities. Can the Minister confirm whether those budgets will be set to bring those authorities to the ceiling increase for their category in each case, or will increases above the ceiling be allowed to avoid drastic service cuts? Will the capping process be arm's length, or will ODPM officials be involved in defining areas for cuts within the budget?

Can the Minister also tell us what the cost of re-billing for those authorities will be in aggregate? My calculation is that well over £1 million will be spent sending out new council tax bills, necessitating further cuts in front-line services. That is just the cost of sending out the bills; there will be further substantial cash-flow and collection failure costs associated with re-billing.

The combined fire authorities, five of which are being capped, find themselves in a particularly difficult situation, facing the pressures of the Government's modernisation programme against a very tight timetable and, at the same time, precepting and building reserves for the first time this year. I can tell the Minister, if he is not already aware, that the costs of the regional structures that he has introduced to the fire service are already spiralling out of control of the fire authorities that constitute them. If he is not careful, he will have his very own Holyrood in the regional control structure. In the case of Hereford and Worcester fire authority, whose budget has to be cut in-year as a designated authority, deep cuts in front-line services are certain to be required.

What the Government have done is apply a sticking plaster to a gaping wound. Unless they are prepared to engage realistically with local authorities about the Government's expectations for service delivery and council tax levels in 2005–06 and beyond, and unless the Government are prepared to commit to fully funding all the additional cost pressures imposed by them, as well as changing the formula to reverse the drain of money away from the south and south east, the future for millions of council tax payers will be one of higher taxes or continuous, incremental cuts in services.

The capping process, which the Government promised would be a lifeboat for pensioners and those on fixed incomes, has ended up as a shipwreck of a policy—unfair, untransparent and ineffective, and designed to distract public attention from the real underlying problem that is wholly of the Government's making. For all the bluster and all the macho posturing, at the end of the process, council tax payers, councils and local authority service users have once again been let down by Labour.

Mr. Raynsford

I was particularly interested in the use of the words "macho posturing" by the hon. Member for Runnymede and Weybridge (Mr. Hammond). The House will have noticed that there was no indication from the official Opposition about whether they would use capping powers or not. We know very well that when they were in government, they capped—indeed, they capped repeatedly, in a crude and unfair way—but now that they are in opposition, they are trying to give a different impression, so they go and speak to local government, saying, "We're your friends. We won't cap." [Interruption.] Yes, indeed. They give clear indications to local government that they will not use capping powers, but in the House they do not dare say that because they know very well what the public reaction would be.

The Opposition's policy is non-credible, first because they do not come clean about their attitude towards capping, and secondly because their policy is to freeze local government—

Mr. Speaker

Order. The Minister must answer the questions. The statement is not about the Opposition's policy.

Mr. Raynsford

I will certainly respond to the questions, Mr. Speaker. I was simply pointing out the inconsistency of the position adopted by the Opposition.

The hon. Member for Runnymede and Weybridge referred to fiddled figures. The figures are not fiddled. They show generous grant increases to every authority in the country. Every single local authority had an above-inflation grant increase. That never happened when his party was in power. He referred to the capping of good and excellent authorities. Because we had given the pledge last year that we would not cap good and excellent authorities although some of them had very large increases, including Conservative Wandsworth, which led the field with the largest council tax increase last year, we did not cap those authorities. We had given a pledge and we honoured it, but we made it clear this year that, because of the irresponsible behaviour of a small number of authorities that had no regard for prudence, that pledge would no longer apply.

The hon. Gentleman spoke about posturing to keep council tax down. The Government have acted to get council tax down from the very high levels last year. It is Labour councils that have led the way, with the lowest increases, averaging 4.7 per cent., compared with increases of 5.4 per cent. from Conservative authorities. The hon. Gentleman spoke about the shift of resources. Yes, we accept that resources have been shifted to give a greater reward for deprivation, and it is right that we should do so—[Interruption]—but they have not been shifted in favour of one political party.

The hon. Member for South-East Cambridgeshire (Mr. Paice) would do well to look at the figures, because he will see that Conservative authorities received an average 6.1 per cent. grant increase this year, compared with only 5.9 per cent. for Labour authorities. I hope he will withdraw the entirely unjustified comment that he made from a sedentary position, implying political bias.

The hon. Member for Runnymede and Weybridge drew a veil over Runnymede's own council tax increase—more than 17 per cent. He will know that because of the criteria that we have adopted, we are not proposing to nominate or designate Runnymede, but I remind him that Runnymede got a very good grant increase from the Government and we expect it to budget prudently with that grant increase.

The hon. Gentlemen asked about the decisions to cap some authorities and not others, and asked why some with ostensibly higher council tax increases were not capped. He will know from the statement, which he has seen in advance, that there are two or three criteria, and only where all the criteria apply will we exercise our powers. That is why some authorities—Runnymede is a good example, as it has a large headline council tax increase, but not a large budget increase—are not within the capping frame. That is the logic of the principles that I outlined.

The hon. Gentleman said that there would be costs associated with re-billing. There will be costs where re-billing is required, but he will recognise that there will not be re-billing in all cases. In the case of the three police authorities and four of the five fire authorities, we have not suggested re-billing because we are proposing only to nominate.

Finally, with regard to fire authorities, the Government have invested substantially and will go on investing in the fire service to ensure that it is capable of doing all the tasks that it must perform and saving more lives. That is our objective. We expect authorities to use the extra money that we are providing and to do so prudently, but we also expect them, as Sir George Bain said in his report, to make the most of the available opportunities for achieving economies. That is why we are applying exactly the same principles to fire authorities as we are to police authorities, and we cannot exempt them from capping.

The hon. Gentleman will recognise that only in the case of Hereford and Worcester, an authority that has gone for an enormously high increase both in budget and in council tax, have we proposed that it should be subject to in-year capping. I hope he will recognise that his party's position is non-credible, and that the Government are acting prudently to defend the interest of council tax payers from irresponsible decisions by some authorities.

Mr. Edward Davey (Kingston and Surbiton)(LD)

I thank the Minister for his statement and for advance notice of it. I am surprised that as he read it, he did not choke on some of the words he was using.

How can the Minister impose random and heavy cuts on local services for pensioners and children when the independent Audit Commission said that it is the Government's council tax system that is "fundamentally flawed"? How can the Minister pretend to be the friend of local government and local democracy when he is reverting to the old Tory tricks that he used to vote against?

The absurdity of capping can be revealed by looking at any of the councils affected, but let us take Shepway. Will the right hon. Gentleman admit, for the record, that the 29 per cent. rise this year comes after a 10-year average rise of just 3 per cent.? Will he acknowledge that whereas the average band D council tax in England has gone up in the past 10 years by 94 per cent., in Shepway it has risen by only 37.4 per cent." Will he admit that when the Liberal Democrats took over Shepway council from the Conservatives last May, they inherited a council that had suffered years of poor financial management and was spending more than it was raising, with no financial reserves? Why, then, has the Minister not taken account of local circumstances and given local politicians the chance to do what they were elected for, to put right the Tory mess?

My hon. Friend the Member for Torbay (Mr. Sanders) is with a parliamentary delegation meeting His Royal Highness the Prince of Wales. My hon. Friend has explained to me that Torbay has the second lowest council tax in Devon, yet is being penalised for a social services overspend from last year's budget set by a Conservative administration. Torbay's rise, whether over the past two or past three years, is still lower than that of Devon or Plymouth, which are not capped. Where is the consistency and fairness in that? Can the right hon. Gentleman explain the principles behind that decision?

Why is the Minister capping Telford and Wrekin when it was deemed an excellent council, and he previously promised "freedoms and flexibilities" to such councils? Ministers are capping councils such as Shepway, Torbay and Telford not because it makes sense for local people, as they will now be hit by Labour cuts, but because capping will get a desperate Government some short-term friendly newspaper headlines.

As for fire and police authorities, the Minister has again gone for the wrong solution. Surely he should make them more accountable to local people, not less. What discussions did he have with the Home Secretary before deciding on cuts to the police?

The Government are spinning today that they are the great white knights riding to the defence of local people. In reality, they are the ignorant classroom bully attacking the vulnerable. The Government should not be capping council tax. They should be scrapping it altogether.

Mr. Raynsford

There was nothing random about the decisions that we announced to the House today. We have made clear the principles on which we are applying the caps. The people of Shepway will not be terribly impressed by the hon. Gentleman's comments that it is absurd—that was his word—to stop that council imposing a 28.4 per cent. increase in council tax, the highest by any shire district council in the country. The people of Torbay will not think it is absurd for us to take action to save them from the largest increase proposed by any unitary authority in the country.

The Liberal Democrats do not have a good record on this. The average increase in council tax this year is 4.7 per cent. for Labour authorities, 5.4 per cent. for Tory authorities and 6 per cent. for Liberal Democrat authorities. No wonder the Liberal Democrats are trying to defend their high-spending friends. They are clearly a high-tax party. There is no justification for the hon. Gentleman's criticisms.

The hon. Gentleman is not right to claim that the Audit Commission identified the Government's policies as the largest single source of blame for council tax increases. On the contrary—James Strachan, the chair of the Audit Commission, has made it very clear that there is no single source of blame, so speaking in those terms is not helpful. I hope the hon. Gentleman will do his homework more thoroughly in future.

Mr. Gerry Steinberg (City of Durham) (Lab)

Is the Minister aware that Durham fire authority has one of the best records in the whole country, but has now been one of the worst-resourced authorities for many years? Is he also aware that, on a number of occasions, my colleagues and I have met Ministers who agree that Durham has a problem, mainly because of pension payments that come from the revenue fund? We now have a situation in which the Government will not adequately fund the service in Durham and will not allow the fire authority to fund itself. If there is an unforeseen problem because of underfunding in Durham, who will take the blame? Who will be responsible—an efficient fire authority that has done its best in difficult circumstances, or Ministers who won't damn well listen?

Mr. Raynsford

The Government are funding fire authorities, including Durham, which received a 3.5 per cent. increase in grant this year. Like other fire authorities, Durham is also benefiting from the substantial investment that the Government are putting into the new dimension programme to equip fire brigades far more effectively to cope with the new dimension of terrorist threats. The fire authority has been put forward for nomination, which means that it will not be required to cut its budget in the current year. We are proposing to nominate the authority, and depending on what evidence it gives to us in the next 21 days—as I have made it clear, we are open to representations from authorities in that period—we will decide how to take things forward.

I assure my hon. Friend that we are committed to enabling all fire authorities to deliver their service effectively, and in a cost-effective way that does not impose unreasonable burdens on council tax payers.

Mr. Tim Collins (Westmorland and Lonsdale) (Con)

Does the Minister accept that his decision to cap Cumbria police authority has been greeted with concern and alarm by many in the county, including senior police officers? Is he aware that Cumbria has succeeded in recruiting an extra 87 police officers in the past three years, but that if it had received all those paid for in additional council tax, it would have had another 165 officers? In other words, if we had been reliant on Home Office funding, we would have seen a cut of 78 police officers. A MORI poll showed that 79 per cent. of people in Cumbria support extra council tax to pay for extra police officers, which is also supported by all three main parties in the county. The result of his decision, on a day on which violent crime in Cumbria has been confirmed to have risen by 19 per cent. in the past year, is that there will be fewer police officers than everyone in the county believes to be necessary. Will he meet a cross-party delegation of MPs from the county, plus the police authority, in the next 21 days, so that it can explain to him why he has got this matter badly wrong?

Mr. Raynsford

Of course we will accept representations. I do not know whether it will be possible to arrange for a delegation to see us, but we will certainly accept representations from the Cumbria police authority, as from all affected authorities. The hon. Gentleman's own figures, however, demonstrated the success of the Government's policy. The substantial increase in the number of police officers in Cumbria has been the result of substantial additional investment.

It is proposed that Cumbria's council tax will increase by 15 per cent. this year. At £150, the amount will be 24 per cent. higher than the average for shire police authorities. The authority's budget has increased by 7.3 per cent., which, along with that of West Mercia police authority, is the highest increase for any police authority. Clearly, it behoves all authorities, whether they are police, fire or other authorities, to look at their costs in comparison with those of other authorities and to try to operate in the most cost-effective way. I hope that the authority will do that, but as I said, we will be happy to receive representations from it.

Mr. Eric Martlew (Carlisle) (Lab)

The hon. Member for Westmorland and Lonsdale (Mr. Collins) failed to tell us that in 1996, the last year of Conservative Government, there were 1,115 police officers in Cumbria, while at the end of this year, there will be 1,231—an increase of 116.

The Minister has fallen into the trap of imposing a universal cap, whereas local people should be able to take the decision. As has been pointed out, a MORI poll says that the vast majority of people in Cumbria were in favour of increasing tax for the police. To some extent, the police authority was misled by indications that, if the increase was less than 15 per cent., it would not be capped. I should be grateful if the Minister agreed to receive an all-party delegation to discuss this matter. I do not think that what has been announced is particularly drastic for Cumbria police, but it will create a problem for us.

Mr. Raynsford

My hon. Friend is absolutely right about the increased investment to which I referred in responding to the hon. Member for Westmorland and Lonsdale (Mr. Collins). There has been a substantial increase in police numbers, and those numbers are not affected by our proposal this year. We are not proposing to cap Cumbria police authority this year; we are proposing a nomination. We will obviously listen to representations, and I shall take on board my hon. Friend's request for an all-party delegation to put forward whatever concerns it wishes to express on behalf of Cumbria police authority. When we have received the representations and considered any points that are put to us, we will reach final decisions, but I can assure him that this is not a universal cap, because it is proposed only to nominate Cumbria police authority, and not to designate it, so there would be no reduction in this year's budget.

Several hon. Members


Mr. Deputy Speaker (Sir Alan Haselhurst)

Order. I shall try to call every hon. Member who has been standing, but I hope that forthcoming contributions will be briefer than those that we have heard on behalf of Cumbria. That would be extremely helpful.

Mr. Kevan Jones (North Durham)(Lab)

When I was in local government, I always thought that capping was both a crude and a crass way of controlling local government finance. My position has not changed, unlike that of the Minister, whose statement reinforces the reasons why. Durham fire authority has worked responsibly over the past 12 months with ODPM officials to strip out £1.3 million from the budget. As the authority is only 1.6 per cent. over the cap, why did that discussion and work not continue? Having been added to the list, Durham could face re-billing, which would cost £700,000 and do nothing to improve fire safety or good relations between local government and Whitehall in Durham.

Mr. Raynsford

My hon. Friend may have misunderstood the statement, as there is no question of Durham fire authority being required to re-bill. We are not proposing to designate Durham fire authority; we are simply proposing to nominate it. That indicates that we will either set a maximum budget for 2005–06, or make a notional budget for 2004–05 and take that into account when considering next year's budget and council tax increases. There is no question of re-billing in the current year.

My hon. Friend referred to the work that we have been doing with Durham, along with other fire authorities, to help to modernise the fire service, improve the service that is delivered to local people and save lives. We will go on doing that, but it is not possible to have individual discussions with individual authorities when dealing with an issue about using capping powers that must be applied across the board in a fair and impartial way to all authorities, according to set principles. That is what we have done.

Mr. Anthony Steen (Totnes) (Con)

I congratulate the Minister on capping Torbay, a third of which is in my constituency. Does he agree that the Torbay Liberals have been cocking a snook at the Government by increasing council tax by more than five times the rate of inflation and promising £100 cashback to every council tax payer if they got into office? Is he aware that, rather than cutting out waste, the Torbay Liberal Democrats favour surveys on tombstones, which they say it is their statutory duty to carry out on health and safety grounds, but have closed the loos in Torbay because they say that it is not their statutory duty to maintain them? What can he do to prevent Torbay council, which is facing capping, from causing council tax payers further inconvenience?

Mr. Raynsford

I cannot say that I will visit Torbay to see the local facilities, but Torbay council should operate prudently and cautiously. It received a generous 6.9 per cent. grant increase from the Government this year, and the proposed 9.9 per cent. council tax increase is excessive. This is not, however, the first time that it has made large council tax increases, because it also made them when it was under Conservative control.

Mr. Peter Luff (Mid-Worcestershire) (Con)

On balance, I welcome the Minister's comments about Hereford and Worcester fire authority and West Mercia constabulary, but 1 am not sure whether the Labour chairman of the fire authority will see it that way. Does he understand that the consequences could be serious, because those authorities can no longer impose the Chancellor's stealth tax to make up the gap between what the Government expect them to provide and what they can provide under the rigged funding formula, which monstrously discriminates against Herefordshire and Worcestershire?

Mr. Raynsford

I welcome the hon. Gentleman's comments. He will recognise that we are trying to proceed in a measured, cautious and responsible way to ensure that authorities budget prudently. However, the figures show that the Government have given substantial additional grant to all authorities: for the past two years, every authority in England has received an above-inflation grant increase, which did not happen when the Conservative party was in power.

Alan Simpson (Nottingham, South)(Lab)

Will the Minister urgently meet the local authority in Nottingham to discuss his capping proposals? The city is affected by a degree of consternation, because, prior to the authority's inclusion in The Sunday Times lists this week, there had been no indication either at a national level or through the Government office for the region that the budget in any way fell foul of Government guidelines on capping. If the cap is a result of a misunderstanding about the apportionment of costs previously attributable to the fire authority, will the Minister discuss the matter with the local authority and the three local Members of Parliament, which will hopefully resolve the confusion and disagreement on an amicable and constructive basis?

Mr. Raynsford

We will certainly listen to representations from Nottingham, as with any other authority, but the local authority should not be confused. My right hon. Friend the Deputy Prime Minister, the Under-Secretary of State, my hon. Friend the Member for Corby (Phil Hope), and I repeatedly said in this House that we expected authorities to budget prudently this year, and that we would use our council tax powers if authorities did not do so.

In mid to late-February, an evening paper in Nottingham carried an article speculating whether the council tax increase would actually be much higher than that suggested by the authority. Because the authority's figures implied that the increase would be low, we did not to invite it in for a meeting. The evening paper carried a comment from an ODPM spokesperson, who said that if Nottingham proceeded with its 7.8 per cent. increase, which was the figure quoted at that time, it would be in the danger zone for capping, so the evidence that Nottingham would be open to capping if it did not moderate its budget is clear. However, I am happy to receive representations from Nottingham, and I hear my hon. Friend's request for a delegation.

Mr. Paul Keetch (Hereford)(LD)

As the only hon. Member from Herefordshire who is present in the Chamber, I tell the Minister that the people of Herefordshire will be triply affected by today's announcements that Herefordshire council is being capped, that the fire authority is being capped and that the police authority is being nominated. Is he aware of the attitude of the leader of Herefordshire council, who tries to blame almost everybody else for the council tax rise? The council blames the Government, the previous Administration and the police and fire authority. Indeed, the deputy leader of the council blames me for the cap because I wrote to the Deputy Prime Minister about my constituents. Will the Minister tell the House that the only people who are to blame for today's announcement are the Conservative and independent leaders of Herefordshire council? Will he assure the council and my constituents that projects that we have worked for in Herefordshire for a very long time, such as flood defence for the city of Hereford and the Rotherwas relief road, will not be affected by our council's poor management, and that the Government will listen on the campaigns that we have worked so hard for?

Mr. Raynsford

I am grateful to the hon. Gentleman for his comments, and note that his tone is rather different from that of his Front Benchers. He did not describe as "absurd" our approach to Herefordshire council, West Mercia police authority or Hereford and Worcester fire authority. Herefordshire council received an excellent 7.5 per cent. grant increase, and, given those circumstances, it is difficult to understand why it is trying to proceed with a very large council tax increase. We will obviously listen to representations from Herefordshire council and other interested parties, but the Government's action is a measured response to unreasonable pressure, which will cause considerable hardship and anger among council tax payers in the hon. Gentleman's county if it is not dealt with.

Mr. Graham Allen (Nottingham, North)(Lab)

Members of Parliament from Nottingham, including my hon. Friend the Member for Nottingham, East (Mr. Heppell), who sits on the Front Bench, are surprised by the announcement. The excellent and improving Nottingham City council has worked closely with the Government to tackle chronic problems with education and law and order. The surprise stems from the fact that we had no letter of warning, unlike other authorities, and that we were not called in to meet Ministers or officials, unlike other authorities.

We cannot make policy on the back of what may or may not appear in the local paper. We were assured by departmental officials at the Government office for the region level that we were on course for a reasonable settlement. I hope that the Minister will concede that there has been a communications breakdown, to put it charitably, and that he will reinforce the point, which he has already expressed, that he will meet the leader of the council and the chief executive to allow Nottingham to do what it wants to do and come into compliance immediately.

Mr. Raynsford

I agree with my hon. Friend's final view, but I must say that our position was not based on newspaper reports—it was based on the figures in the council's own press releases of 3 March and 9 March, both of which referred to a 4.5 per cent. increase in council tax. If he is saying that the ODPM should have invited in the authority for a warning meeting, all I can say is that we would have done so if the authority had produced the figures. We did not receive any figures, even via the Government office for the region, indicating that a warning meeting was necessary; instead, the evidence suggested that the council was considering a much lower increase.

Mr. Mark Francois (Rayleigh) (Con)

Understandably, today's announcement has caused considerable concern in Essex. In the conclusion to his statement, the Minister said, "We will listen carefully to the cases put forward by the authorities that I have named." May I take him entirely at his word? Is he prepared to accept a delegation, including the chief fire officer, from the Essex combined fire authority—I would also like to be involved—so that we can put our case to him in person? He knows that the situation is complex and that there are a number of nuances, not least the fact that, in this one-off situation, the fire authority has had to establish a sizeable reserve for a service that deals with a county containing more than 1.5 million people. Will he listen to us and allow us to put our case to him face to face, because we would be grateful?

Mr. Raynsford

I say to the hon. Gentleman, as I have said to all hon. Members who have made similar requests, that we will certainly listen carefully to any representations, and I will certainly consider his request to receive a delegation. He knows that the process must be completed within 21 days because of the statutory obligation. I do not want to fail to consider everyone simply because it is not possible to programme all meetings into that period, but I will do my best.

Ms Sally Keeble (Northampton, North) (Lab)

Is my right hon. Friend aware that law and order is one of my constituents' biggest concerns? My local police authority has caused some problems, which were recently highlighted in a critical inspection report. Will he therefore carefully examine the information from Northamptonshire police on how grant decisions have impacted disproportionately on it? Will he also consider next year's position and examine the particular service difficulty problems, so that my constituents experience both reasonable council tax bills and a steady improvement in policing that is consistent with the Government's increased investment?

Mr. Raynsford

I hear my hon. Friend's comments. She is right that concerns have been expressed about Northamptonshire police authority, and my colleagues in the Home Office drew my attention to them. We will do all that we can to help the police authority improve its performance and meet the needs and expectations of the people whom it is there to serve. It has received a large budget increase—the third highest for a police authority in the country—and under the principles that I set out, it is not possible to exempt it. My hon. Friend knows that we do not propose to cap it this year, and simply propose to nominate it. I hope that that gives her some comfort, and we will certainly listen to representations from her and anyone else affected by its work.

Mr. John Maples (Stratford-on-Avon) (Con)

It will come as a great disappointment to people in my constituency that he has not capped Warwickshire county council and Warwickshire police authority. The county council precept has risen by 6.5 per cent. this year on top of 8 per cent. last year and 12 per cent. the year before; and the police authority precept has gone up by 8 per cent. this year on top of 15 per cent. last year and 20 per cent. the year before. People simply cannot afford those inflation-busting increases. Surely, those authorities are either setting responsible budgets, in which case the Government are not giving them enough grant, or setting irresponsible budgets, in which case the Government should cap them.

Mr. Raynsford

I hear what the hon. Gentleman says, and I wish that he would speak more often to his Front-Bench colleagues, who take a rather different view on capping. We looked carefully at all relevant authorities, including Warwickshire county council and Warwickshire police authority. The hon. Gentleman will have heard the principles that I set out, and he will know that neither the county council nor the police authority fell within those criteria. We want all authorities to budget prudently—that is the message that the Deputy Prime Minister and I have given repeatedly in this House, and which I gave again today—and we expect them to look very carefully at reducing even further the increases that they have made in the current year. The capping principles are measured and are designed, unlike the old capping regime, not to penalise crudely all authorities. Neither Warwickshire council nor Warwickshire police authority came under those measures this year, but they should certainly keep a close watch on their budgets.

Phil Sawford (Kettering) (Lab)

Is my right hon. Friend aware that Northamptonshire is currently funded below the formula funding level and that as a result it has a shortfall of some £2.2 million? To bridge that funding gap, the police authority has introduced a precept that is perhaps higher than it otherwise would have wished. In those circumstances, does my right hon. Friend believe it reasonable or fair to penalise the police authority?

Mr. Raynsford

We are not penalising the police authority, but nominating it because its budget increase was the third highest of any in the country and involved a significant increase in the precept imposed on council taxpayers. I have to say to my hon. Friend that the record shows that Northamptonshire police authority has received above-inflation grant increases in each of the past two years. Funding will continue to go into Northamptonshire. We want to work with the police authority to meet the needs of its people and to provide the high-quality service that they expect.

Richard Younger-Ross (Teignbridge) (LD)

Surely today's statement represents a failure of Government policy with regard to fire authorities. After all, the Minister was advised by fire authorities that trouble would be caused by the modernisation process and transitions to combined authorities. Under his proposals, 20 per cent. of fire authorities are to be capped. When he talks to those aurthorities, will he ensure that fire safety comes first, not his accountant's slide rule? As for what he said to my hon. Friend the Member for Kingston and Surbiton (Mr. Davey), I think that he is suffering from selective memory and using selective statistics. This is clearly a case of selective authorities.

Mr. Raynsford

I have to say to the hon. Gentleman, who served on the Committee that considered the Fire and Rescue Services Bill earlier this year, that the Government are absolutely committed to saving lives and to reducing the number of deaths, and we have put in place many measures to help to improve the efficiency of fire authorities all over the country. That is compatible, as the Bain report said, with making significant efficiency savings, for which there is considerable scope. I am surprised that the hon. Gentleman and his party have not been more assiduous in looking for ways in which rather outdated and expensive practices can be reformed to ensure that fire authorities provide a high-quality service that saves lives and meets the needs of their communities. That is what we are committed to doing, and nothing in today's statement is incompatible with it. All that we are doing, unlike the hon. Gentleman's party, is protecting council tax payers from unreasonable rises in council tax.

Peter Bradley (The Wrekin)(Lab)

I cannot say that I welcome the statement. I am sure that my right hon. Friend shares my disappointment that such a well-regarded authority as Telford and Wrekin faces capping. There cannot be a better example of the tension between simultaneously delivering high-quality services and low council tax increases.

I welcome the opportunity for representations. Will my right hon. Friend acknowledge that Telford and Wrekin faces particular difficulties, including its historically low council tax, its low asset base, and the implications for its funding of the population undercount? Does he agree that capping for 0.1 per cent. above the limit may not be the most appropriate, constructive or proportionate way forward; and that the best outcome for the council and the community would be to avoid capping and protect services this year, while working constructively with the council towards a more sustainable council tax increase next year?

Mr. Raynsford

I welcome the constructive approach that my hon. Friend has adopted. I certainly share his disappointment, but I note that Telford and Wrekin received very generous grant increases of not only 8 per cent. this year, but 8.7 per cent. last year and 7.4 per cent. the year before that. The Government are making substantial grant increases, and we expect authorities to budget prudently to ensure that they do not impose unreasonably large council tax increases.

I take my hon. Friend's point, but he will know that in the case of any set of principles, some authorities will be just above and some will be just below. That poses questions about whether it would be appropriate to require re-billing. We will certainly listen carefully to any representations that he or Telford and Wrekin council wish to make.

David Wright (Telford) (Lab)

I associate myself with the remarks of my hon. Friend the Member for The Wrekin (Peter Bradley) and express my disappointment that West Mercia police authority has been capped. It is a large, rural police authority area that is spending its additional council tax income on recruiting new police officers and community support officers. Indeed, in the past year we have seen 38 new police officers and 21 new community support officers in the constituencies of Telford and the Wrekin. Can my right hon. Friend assure me that the nomination process will not place those officers under threat and that the budget will be protected to ensure that police services for the community throughout West Mercia continue to improve?

Mr. Raynsford

My hon. Friend has taken a great interest, as has his hon. Friend the Member for The Wrekin (Peter Bradley), in the position in Telford and Wrekin. On the West Mercia police authority, he will be aware that the budget increase that it proposes is the largest, along with that of Cumbria, of any police authority. It would therefore be wrong of the Government not to consider taking action. As he will know, we are proposing to nominate West Mercia not to cap in-year. I therefore assure him that there is no reason why any changes should be made this year to what the police authority plans to do to meet the needs of the people of West Mercia.

Dr. Alan Whitehead (Southampton, Test) (Lab)

Does my right hon. Friend agree that in the light of the generous increases in council tax funding that the Government have recently supplied and the abatement of council tax increases among local authorities in the past year, it is particularly disappointing that it should be necessary to introduce capping? That is a sad day for the durable nature of central-local relations in future, irrespective of whether the capping is sophisticated and selective or crude and universal.

Is my right hon. Friend satisfied with the progress of the balance of funding review that he set up a little while ago? Will he ensure that when it reaches its conclusions its report will be published? Does he agree that the genuine difficulties with several issues relating to council tax, including gearing and the balance of funding, should be given a wide airing to assist with longer-term policy considerations about a durable settlement on local government taxation and the balance of funding between central and local?

Mr. Raynsford

My hon. Friend is a great expert on these subjects and he raises some pertinent points. I agree that it is a sad day when capping becomes necessary, but he will recognise that following the substantial increases in Government grant it is unacceptable for large increases again to be imposed on council tax payers. We made it very clear that last year's increases were unacceptable, and we therefore had no option but to take action.

We are making good progress on the balance of funding review. We had a further meeting this week, and we are looking carefully at all the relevant issues. As my hon. Friend knows, local government finance is a minefield, and those who promise quick and easy solutions, as the Liberal Democrats keep doing with their promise of a problem-free local income tax, are no more than snake oil salesmen offering an entirely illusory promise. We are considering all the issues carefully and thoroughly, and I hope that we shall produce our report this summer.