HC Deb 05 February 2004 vol 417 cc1005-14

Motion made, and Question proposed, That this House do now adjourn.— [Paul Clark.]

6.16 pm
Mrs. Annette L. Brooke (Mid-Dorset and North Poole) (LD)

I am extremely pleased to be able to make points directly to the Under-Secretary of State, Office of the Deputy Prime Minister, the hon. Member for Corby (Phil Hope) on behalf of my constituents. He will no doubt have heard all the previous debate and might be thinking, "Not more of the same." However, week after week, I receive letters from constituents who are extremely worried about future council tax increases; it is certainly the biggest single issue that is raised with me.

The second biggest issue is the provision of services locally, whether people are waiting to be rehoused, need better support from social services, want to know why the revenue funding per school pupil is much lower than in neighbouring Hampshire—about £100 per pupil—or why we do not have a more visible and accessible police force. It an important part of my representative role to tell the Minister about my constituents' deep concerns.

I should like to start by outlining briefly some of the characteristics of my constituency, which includes parts of four principal council areas—Poole unitary authority, East Dorset district council, Purbeck district council and Dorset county council. There are four parish councils and two town councils and area committees within Poole unitary authority, as well as the Dorset police and fire authorities. About two thirds of the population live in the urban area, but two thirds of the land area could be classed as rural.

From afar, my constituency would be judged an affluent area. The current level of unemployment is less than 1 per cent., so why do I stand up every year in the House and argue that my constituents have had a bad deal? In previous debates, I have focused on pensioners and I must make some further points today, bearing in mind that more than 20 per cent. of the population of Mid-Dorset and North Poole are of pensionable age.

The area has the characteristics of a low-wage and high house-price area, as was confirmed last May, when the Joseph Rowntree Foundation published a report entitled "Can Work—Can't Buy" on the affordability of homes in different parts of the country, taking into account the cost of living and wages. The report concluded, according to the press release, that the asking price for modest homes in Purbeck, East Dorset or North Cornwall demands almost as big a share of the typical pay packet for local workers under 40 as higher priced homes in the fashionable London boroughs of Westminster, Camden and Islington. Areas such as Poole and Purbeck feature on the list of the least affordable areas in England, because the relatively low local rates of pay place home ownership beyond the reach of young working households, even though local house prices are lower than those in London and the south-east. Of the 40 authorities with the highest house price to income ratios, seven out of the 40 are in Dorset. Purbeck is sixth on the list.

On Monday this week, I was pleased to be able to attend the opening of Jobcentre Plus in Poole, and I was very impressed by the services on offer. Having been invited to play with the job-search machines, I printed details of a few local jobs: "Branch advisers, 37.5 hours a week, £11,500 to £13,000 per annum"; "Production labourers, £5.50 per hour"; "Sales adviser, £3.87 to £5.22 per hour"; "Waiting staff, up to £5 per hour, depending on experience". Those examples are taken from just a preliminary look through what was on offer. There were plenty of jobs, but the problem was the salaries—although the picture is mixed, because wages are considerably higher in the public sector, IT and financial services.

To put those characteristics in people terms, I should like to quote from some letters that I have received over the past week. Mr. W writes: I understand that the council tax bill for Dorset is likely to be increased by a staggering 7 per cent. I feel that I must put on record my concerns with regard to such an increase, firstly we are told by Government that inflation is running at around 2 per cent. I myself have a fixed income and have no way of increasing it, so that I have to balance my affairs which is increasingly difficult when taking into account massive rises in local taxation. Mrs. D says: Having been to several of the council tax public meetings I can see the County and District Councils have got a really difficult task to set the budget without losing too many services. The government formula does not appear to distribute funding in a fair way throughout the country. Despite being confirmed by the Audit Commission as an excellent authority, Dorset County Council's grant is one of the lowest in the country. How can it keep up its high standards? In addition there is talk of increases being capped at 5 per cent. This would surely terminate important services, I am particularly concerned about proposed cuts in the Outdoor Education Service, young people will be deprived of a valuable and integral part of their education". This is from Mr. C: I wish to add my voice to the many from Dorset who will be encouraging you to speak up for this lovely County. What a good place it is to live in? What a good County for its services. But we urge the Government to reward us with higher grants to encourage our Council and enable our older citizens to pay their Council Tax and live! I shall not read too many letters, because my mailbag is enormous, but I must point out that the letters I receive from pensioners reflect even deeper worries about how they will cope with paying their council tax.

On Saturday, I made a home visit to a family with three children living in a two-bedroomed first-floor flat with no garden—an East Dorset Housing Association property. The husband is a fully qualified social worker earning £18,000 per year. It is impossible for the couple to raise a big enough mortgage even to part buy/part rent a three-bedroom house in the area. The housing association has said that rehousing may take five years: the couple are desperate, but what can they do? The combination of the low wage economy, high house prices and a shortage of affordable housing is producing the saddest and most insoluble cases in my constituency. The couple went on to tell me how their standard of living would be further eroded by a big increase in council tax. Many constituents come to my surgery on manufacturing wages of around £13,000, in fear of what is ahead of them.

I believe that my constituents are suffering for the following reasons: there is inadequate funding for services from central Government; the shortfall in funding puts extra pressure on the council tax, which is unrelated to the ability to pay; and the shortage of affordable housing forces young local people to move from the area or, in some cases, be trapped in unsuitable accommodation for long periods. The local councils cannot be judged as inefficient. Last year, Dorset was judged excellent, and Poole only one point less than excellent.

Last year, in line with national trends and because of the implementation of the new formula, council tax increases were in double figures. This year extra windfalls, such as levying the council tax on second homes at 90 per cent., mean that council tax increases will be considerably lower. However, in an ideal world, the bulk of the second home council tax would have been used to support more affordable social housing. Instead, a large proportion is being used to keep the council tax down. In addition, Dorset county council is considering some drastic cuts in services. As well as outdoor education, which I mentioned earlier, a day centre for those with mental disabilities and libraries may be closed. Support for bus services may be reduced and day centres may be closed for one day a week. Any such cuts inevitably hit the most vulnerable residents.

Dorset county council receives both the lowest formula spending share and the lowest revenue support per head of population of all county councils. Council tax payers have to pay for 45 per cent. of spending, compared with 32 per cent. in the average county council. Dorset is the ninth lowest spending county council per head of population this financial year and cannot be judged as a high spender. It faces specific spending pressures in social services as a result of having the highest proportion of older people of all county councils.

Some of the problems that face Purbeck district council include financing the continuing deficits of the superannuation scheme and increasing responsibilities and demands from central Government. The 3 per cent. increase in Government grant is welcome, but it is simply not enough. The council cannot implement its recycling plan because of the additional costs that are likely to take the council into capping. Similar issues arise in East Dorset, including concerns about the cost of the new licensing regime.

The main additional expenditure for East Dorset is recycling, and it has plans for phased implementation. However, as in much of Dorset, recycling facilities are already good and the county therefore starts from a high base of 18 per cent. The Government have set new targets for East Dorset of 40 per cent. The council estimates that it will cost an extra £1 million to extend recycling to 40 per cent. of the district, but there are no additional grants or funds to help attain such a target. At a cost of approximately £30 per household, the district council faces a problem of phasing and spreading costs and implementation over a long period.

Poole is in a better position this year, and I hope that that is partly as a result of my previous representations. The Liberal Democrats ran the council efficiently until May last year. Windfall gains this year mean that the new administration will not face the previous year's tight budgetary constraints. However, the council tax increase is likely to be considerably more than the rate of inflation.

Concern remains about low funding for education. Poole primary school funding is the lowest in the country, despite the fact that there are deprived areas. One ward in my constituency is in the lowest deprivation quartile and there are pockets of deeper deprivation in the area. Earlier this year, a group of Poole head teachers met the Minister for School Standards, and I hope that he is dealing with some of their concerns. The head teachers were pleased with his attention to their anxieties.

Much uncertainty has been created in all councils because they do not know the position on capping. That is unhelpful for budgeting.

The overall increase in central grant of less than £2 million is wholly inadequate even to meet unavoidable costs such as pay and pension changes. It does not tackle the problem that Dorset police, who receive the second smallest amount of central funding per head of the population, remain underfunded in comparison with other forces. Consequently, Dorset's police expenditure is low; it traditionally spends the lowest per head of population of all but five forces. The police element of the council tax may increase by 9.7 per cent. Dorset is an efficient force, but so much more could be done with better funding. Residents expect a better service when they are asked to pay more.

The change to precepting status for Dorset fire authority, as for the other combined fire authorities, brings new responsibilities and duties, about which we have heard this afternoon, such as the need to provide for reserves and balances. To meet an increase of no more than 5 per cent. in the precept, Dorset fire authority would be able to set a budget only on the basis of present policies, while making a contribution to setting up a general reserve. It would have to bring to a halt progress on the Government's modernisation agenda and, after taking account of transitional funding, would still need to make further cuts of £1.25 million. Those cuts are equivalent to 50 whole-time posts, which is 16 per cent. of the whole-time establishment, or 167 retained posts, which is 50 per cent. of the retained establishment. The limited transitional funding does little to meet that agenda or the pay award, and it is totally unrealistic to expect rural authorities such as Dorset to find evidence-based savings to repay the transitional funding in the time suggested.

Dorset fire authority has asked me to represent its serious concerns to the Minister and the Deputy Prime Minister. It recognises the need to limit the burden on council tax payers, but believes that it is unrealistic to expect combined fire authorities to deliver a modernised fire service, and move to precepting status, with the limited funds allocated in this year's grant settlement. My residents are faced with a grim prospect: either a hefty increase in one part of their council tax or unacceptable cuts in services, with implications for safety and lives. I am pleased to hear that there is a meeting tomorrow, and I hope that my representations on behalf of Dorset fire authority are therefore timely.

We have unfair funding and an unfair tax. The Government could address the formula by revisiting the idea of resource equalisation, or by revisiting area cost adjustment to take on board high house prices and low wages. The forthcoming year will be the second year of the new formula, and I should like the Minister to look at those important possibilities for following years. It would make an enormous difference to my constituency if the area cost adjustment could take into account high house prices, and be applied to my councils.

I am sure that the Minister can predict that, before I sit down, I shall suggest amendments to the council tax system. Council tax should be scrapped and replaced with a tax related to the ability to pay. Local income tax was recommended for this country in 1974 by the Layfield committee. Baroness Thatcher, aided by the right hon. and learned Member for Folkestone and Hythe (Mr. Howard), chose to introduce the poll tax. The people revolted over that, as they are now doing over council tax. Even a 5 per cent. increase is unacceptable to those on low or fixed incomes. It is still more than twice the rate of inflation, and will mean the erosion of living standards.

Nationally, the poorest 10 per cent. pay more than four times more in council tax than the richest 10 per cent. as a proportion of their income. The poorest 20 per cent. of pensioners pay nearly six times more than the richest 20 per cent. of non-pensioners, as a proportion of income. The time has come to axe that tax. Local income tax operates successfully in the United States, Sweden, Switzerland, Norway, Japan, Finland and Denmark. Why should it not do so here?

6.33 pm
The Parliamentary Under-Secretary of State, Office of the Deputy Prime Minister (Phil Hope)

I begin by congratulating the hon. Member for Mid-Dorset and North Poole (Mrs. Brooke) on securing this Adjournment debate and giving us the opportunity to consider further—perhaps in a slightly calmer atmosphere—the impact of the local government finance settlement on her area. She mentioned her concerns over Leeson house outdoor education centre at Prime Minister's questions this week. As the Prime Minister said then, although we recognise the value of outdoor education, it is for each local authority to decide its priorities and make its allocations.

The hon. Lady finished her contribution this evening by mentioning the Liberal Democrat policy of a local income tax. There are serious questions to be asked over the idea of replacing the council tax, which is a good, workable tax, with a local income tax. Although the council tax is perhaps beginning to reach the end of its life as a tax on its own, to sweep it away with one alternative would be to miss out on the opportunity of considering a range of ways of improving the funding of local government and the balance of funding review. Some Liberal Democrat leaders in the Local Government Association who take part in the balance of funding review are looking at a range of measures to improve the balance of funding for local government. The hon. Lady can visit the Department's website to see the kind of options that are being explored.

The hon. Lady will know that, earlier today, the House approved the local government finance settlement for the next financial year, and that we have increased the grant to local government by some 30 per cent. overall in real terms—that is, above inflations— since 1997. This is the seventh successive settlement to give an above-inflation increase to councils. In this case, it gives an overall increase for next year of no less than 7.3 per cent. We have also reduced ring-fenced grant from some 13 per cent. to 11 per cent., reversing the trend on the ring-fencing of grants to local authorities.

I should like to pick up on the issues that relate particularly to Mid-Dorset and North Poole. Of the local authorities in the hon. Lady's constituency, Dorset county council will receive an increase of 6.3 per cent. on its £185 million grant next year—an increase of £11 million—and Poole borough unitary authority will receive an extra £3 million, an increase of some 4.3 per cent. East Dorset district council will receive £3 million in grant, an increase of 3 per cent., while Purbeck district council will receive £2.7 million in grant, also a 3 per cent. increase. All those figures have been adjusted to take account of the changes in responsibilities, and so on, between the two years, so they are on a like-for-like basis. They represent significant increases above the rate of inflation that will enable the councils to improve the quality of their services and to keep the council tax down.

The hon. Lady read out some very clear messages from her constituents, and I think that most hon. Members will have received similar letters telling us that the public are unhappy with the unreasonably large council tax increases of recent years. We share her concern about that, as those increases hit those on fixed low incomes particularly hard. We were very disappointed that the average council tax increase for this year was 12.9 per cent. In our view, that is unsustainable.

Mrs. Brooke

Would the Minister accept that the Audit Commission said that the reason for the large increases in council tax last year, particularly in the south-west region, was the implementation of the new formula?

Phil Hope

I regret that I cannot accept that entirely. The Audit Commission gave a very balanced view of the reasons for this year's council tax increases, which included the turbulence that has taken place in relation to this year's funding and the fact that some local authorities took the opportunity to put up the council tax because we had not given as clear an indication as we are now doing that unreasonably large increases would be capped if they continued. We have said that continued year-on-year increases in council tax on the scale that we have seen will be unacceptable to voters—including the people who have written to the hon. Lady and to me—and, frankly, to t he Government.

We know that the electors will make their views clear through the ballot box, but the Government will, if necessary, use their capping powers. We do not threaten capping lightly. We would infer councils to answer directly to their electorate for their decisions, but we cannot stand aside if they continue to impose unreasonable increases. That includes all local authorities, including those categorised as excellent or good in current or future comprehensive performance assessments. Everyone is on notice that we will consider capping excessive council tax increases.

Given the generous grant settlement for next year, and the scope for efficiency improvements, our view is that local authorities can and should deliver council tax increases in low single figures next year. We are looking at proposed council tax rises very closely. I am pleased that initial indications suggest that many local authorities have listened and are planning increases in low single figures. However, some have not listened, so we remain prepared to use the capping powers if necessary.

The hon. Member for Kingston and Surbiton (Mr. Davey), who speaks for the Liberal Democrats on these issues, seemed to make it clear in the debate this afternoon that he does not support capping. If the hon. Lady is as concerned as I am, from the letters that she has received, about what councils might do if they do not behave reasonably, she might like to have a word with her Front-Bench spokesperson and to try to convince him of the wisdom of the Government's approach.

We understand the concerns of the people of Mid-Dorset and North Poole, particularly the pensioners and others on low incomes. We believe that those on low incomes should be helped, and we have a system of council tax benefit. However, the problem is that so few people on low incomes—particularly pensioners—are aware of their right to this money. Many seem to be put off by the stigma of claiming a benefit or by the length of the form. Some 1.4 million pensioners are not claiming the council tax benefit to which they rightly have a claim. Central and local government need to work together to do more to ensure a higher take-up of that benefit. We shall see whether any other improvements can be made to the system.

The hon. Lady raised the question of education. I know that there is concern in Poole and Dorset that the authorities are among the lowest funded on a per-pupil basis, but the new formula funding system is based on evidence suggesting that authorities with significant deprivation and additional costs of recruiting and retaining staff need to spend significantly more to make proper provision for their children.

The new formula uses up-to-date data, and strikes a proper balance between the basic amount of funding per pupil, which is the same everywhere, and top-ups for pupils with additional educational needs and top-ups for areas with high costs for salaries, recruitment and retention. The needs of sparsely populated areas are also properly reflected in the formula. This concerns a point that the hon. Lady made, because Dorset is a rural area.

The main reason why Poole and Dorset have a lower level of funding for pupils than many other authorities is that they do not attract as much funding as other authorities through the additional funding for deprivation and area costs. On the measures for deprivation, both Poole and Dorset have well below the national average numbers of children of families in receipt of income support, which is the most heavily weighted deprivation factor. They also have a below-average number of children with English as a second language and those from low-achieving ethnic groups.

The hon. Lady pointed out, and I appreciate, that Poole and Dorset do have some deprived areas. It is for the local education authorities, through the local funding formula that they use, to ensure that the additional funding that they receive to reflect that reaches those schools in their areas that most need it.

I turn to social services, where we think there has been a good settlement this year, demonstrating the Government's commitment to helping councils to care for the more vulnerable and needy members of their local population. Both authorities are two-star social service authorities, with the structure in place to improve further. The extra resources and the funding spending shares should enable them to do just that.

The hon. Lady also raised the question of funding for recycling and waste management. In the last two spending reviews we have substantially increased the environmental, protective and cultural services, known as the EPCS, block of finance, which includes waste management services. We increased that provision in the block by £1.1 billion over the three years in the strategic spending review 2000, and in the spending review 2002 we increased it by a further £671 million over the then three years.

There has been extra funding for East Dorset and Purbeck. The national waste minimisation and recycling fund in round two meant that Purbeck district council received a grant of £104,560 for this financial year, 2003–04. East Dorset district council received a grant of £492,760.

Mrs. Brooke

If Purbeck has been granted some extra money, would you expect the recycling scheme to start this year?

Mr. Deputy Speaker (Sir Alan Haselhurst)

Order. I am sure that the hon. Lady does not expect me to deal with those matters. She should use the right parliamentary language by now.

Phil Hope

It will, of course, be a matter for the authority itself to use wisely and sensibly the money that the Government are providing, to get on and get it spent to make the schemes happen. The extra money has gone to those local councils in addition to the formula grant that they receive. It is one of a number of extra grants that put extra cash into a local authority, relieving the burden on the mainstream funding and providing the extra funding needed to provide those new services, and to achieve the new targets that I think everybody believes should be achieved in the delivery of better services.

East Dorset district council will also benefit from Dorset county council's partnership bid, which was awarded £2,196,380 for this financial year. These are substantial sums of money provided by the Government to assist local authorities to achieve the sorts of targets and improvements that we wish to see. The hon. Lady has rightly raised the question of recycling and waste management, and I hope that she does not find it unreasonable for me to point out the extra resources that have been provided for those local authorities.

The hon. Lady also mentioned the fire service and the meeting that will happen tomorrow, during which I am sure her comments will be taken into account. We recognise some of the difficulties, and we have written to all the fire authorities. One of the particular problems has been that of creating reserves in the new, separately precepted, combined fire authorities. We have explained in writing that those authorities do not need to create those kinds of reserves in year one, all in one go. If their precept is designed to do that, it is not necessary—it can be spread over a period of three years, thereby relieving the pressure in relation to such a high fire precept.

Finally, the area cost adjustment was mentioned. Before, a crude system was used, in which London was shown with a series of a concentric circles, and the areas further away from London received a bit of extra help in their grant. We have scrapped that, and we now have a new system of area cost adjustment, which is more sensitive to local circumstances. It recognises that high-cost areas can exist outside the south-east, and that variations exist within London and the south-east. As the hon. Lady was explaining, the difficulty in her area is that wage levels, which are the issue, are low. The point about the area cost adjustment is that it is designed to help local authorities to deal with their problems of recruiting and retaining teachers and the extra costs that they face as a result: the cost of supply cover for vacant Posts, which is generally higher, the cost of employing a permanent member of staff, or the costs of recruiting and advertising for staff.

The problem for the hon. Lady is that in refining the area cost adjustment, we have targeted the allowance at those authorities with the greatest recruitment and retention difficulties, which do not include Poole and Dorset. Her authority does not therefore benefit from the area cost allowance, which is more refined but which will benefit others. The result of that is that the coverage of the adjustment for area costs has been extended so that it now includes 99 authorities, as opposed to 59. I appreciate that it does not help her solve her problem, but it has made life better for those authorities—

The motion having been made after Six o'clock, and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at thirteen minutes to Seven o'clock.