§ Motion made, and Question proposed, That this House do now adjourn.—[Margaret Moran.]10.44 pm
§ Gregory Barker (Bexhill and Battle) (Con)
I am grateful for the opportunity to address hon. Members and highlight yet another blatant example of Labour's covert agenda to underfund local authorities in the south-east to divert taxpayers' money to their heartlands. Sadly, that has become a familiar story throughout our front-line public services in East Sussex. If we examine the funding for the county council, the fire authority, the police authority or even our local hospitals, all tell the same story of fiddled formulae and chronic underfunding.
My constituents have seen their taxes rise and rise again under the Government, with precious little in return. Tonight, I want to focus especially on the plight of Rother district council. Rother is a responsible and prudent authority, where performance has improved in leaps in bounds since the Conservatives regained majority control five years ago. However, that prudent and fiscally astute authority, which managed to keep its council tax at the lowest rate of any district council in the county and operates efficiently with the lowest employee-to-resident ratio in Sussex, faces the prospect of savage cuts in jobs and front-line services because of the Government's policy systematically to underfund areas such as ours.
The Minister for Local Government, Regional Governance and Fire has described the average 6.5 per cent. increase that local authorities will receive in grant next year as a good settlement. Indeed, that would be true if it were a 6.5 per cent. rise on a like-for-like basis compared with last year and distributed fairly throughout the country. However, it is not. The Minister also said that the current trend in council tax rises was unsustainable. At least we can agree about that.
Bexhill and Battle has one of the highest levels of pensioner households in the country. The overwhelming majority depend on fixed incomes and savings, the returns on which have gone down and down in real terms in recent years. For all its relative prosperity, it has pockets of genuine deprivation. Year after year, Government-induced tax rises cripple my constituents, young families and old folks alike. Many people who come to my surgery tell me that, overall, the council tax bill is the largest single item in their household budget, which directly cuts into the amount that they can afford to spend on food and heating. The relentless rise in council tax cannot go on; something has got to give.
The Minister for Local Government, Regional Governance and Fire has told Rother that he will not hesitate to use the Government's capping powers if the council tax is increased by more than 5 per cent. I shall outline the way in which the abysmal support that the Government have given Rother will mean a dramatic cut in front-line services—that would be the only option if the council were capped. Perhaps when the Under-Secretary replies, he will map out in detail where he believes that the knife should fall. Which services would he like to be axed? How many essential public employees would he like to be thrown on the dole?
1241 The treasurer of Rother district council has assessed that the increased grant settlement will not go anywhere near repairing the damage that last year's reassessment caused. Last year, Rother lost a massive £1.2 million in Government aid—a huge 10 per cent. of its budget. We could quibble about percentage points here and there, but the figures speak for themselves.
If we consider the funding for 1994 to 2001, we see that the grant as a percentage of the local budget ranged from 67 per cent. to 63 per cent. Since 2001, that figure has dropped to only 50 per cent.—a massive fall and a massive increase in the amount of council tax as a percentage of the budget. Rother district council has been left in the position of having to recover from the decrease while trying to maintain its essential services for its residents and cope with new demands from Government to take on even more financial responsibilities. Talk of the above-inflation settlement may be borne out by national statistics and UK averages, but specific councils such as Rother have been left much worse off.
Since 1997–98, the Government grant compared with their assessment of Rother's need to spend through the standard spending assessment formula spending share has fallen from 66 per cent. to below 50 per cent. During that time, the council restricted its increase in spending to less than 4.5 per cent. on average, despite taking on numerous new responsibilities such as a progressive recycling regime, which is expected to cost the taxpayer an additional 10 per cent. per annum.
Rother is a frugal, well run council that charges the lowest council tax of all the East Sussex boroughs and districts. Only 10 per cent. of the local tax that it collects goes directly to pay for Rother services because 81 per cent. goes straight to the county council and 9 per cent. to Sussex police.
The recent comprehensive performance assessment inspection highlighted the strong financial control exercised by the council in managing its finances, and awarded the council the maximum score of four. Therefore, it would be wrong to cite poor financial management as a reason for any council tax rise.
It was estimated last month that without a fairer settlement from central Government, Rother council tax will have to rise by approximately 13 per cent. to maintain current services, and to rise by about 21 per cent. to allow for additional new financial burdens being placed directly on the council by the Government. This year alone, further cash must be found to fund the new Government requirements for liquor licensing, which transfer responsibility for local licensing from magistrates courts to Rother. There are also dramatic increases in the cost of Government inspections, new statutory obligations in respect of local homelessness, and the hefty cost of mandatory participation in the e-government programme, which alone accounts for a 4 per cent. rise in the council tax. I shall deal with each of those items in more detail later.
The Government's main defence on this issue to date has been to fall back on generalisations and to quote the national increases in Government support, as the Minister for Local Government, Regional Governance and Fire has done in all his correspondence with Rother 1242 authorities. It is meaningless, however, in relation to the individual authority level. I hope that when the Minister responds he will present the House with more accurate figures than those deployed by his right hon. Friend, as Rother is one of the district councils that has received the absolute minimum increase in Government support, and not the 5.5 per cent. as his colleague wrongly claimed in his letter to the leader of Rother district council, Councillor Graham Gubby.
On 10 December last year, the Chancellor announced in his pre-Budget report that a further £340 million would be contributed towards local government support for 2004–05. Even taking into account the Chancellor's much-vaunted increase, for the people of Rother the overall increase amounted to less than £1 per head. Just before Christmas, Rother's director of resources, Dr. Pay Ramewal, was told that Rother would receive just an extra £34,000—an increase of less than 0.5 per cent., taking the overall increase in Government support to a paltry £77,000. Yet in November, when the Government announced their 2004–05 grant figures, they had guaranteed a floor of an increase of 2.2 per cent—£143,000 in Rother's case. With the extra £340 million announced by the Chancellor on 10 December, the Office of the Deputy Prime Minister released a further revised grant settlement and an even higher floor of 3 per cent. Based on this new floor, Rother district council should be entitled to an extra £194,000. Even with the revised increase, however, the actual additional settlement for Rother is just £77,000. That means a shortfall even in the Government's floor of £117,000. On a like for like basis, that represents an increase of 2.9 per cent to be shouldered by the Rother council tax payer.
As a result of Rother district council's overall unfair treatment in the settlement, Rother residents are staring at an increase of more than 20 per cent. in their council tax bill this year, unless cuts are made in services. Rother's budget has been prepared in line with the council's medium-term strategy of modestly increasing its resource base annually, through moderate phased council tax increases to secure and maintain a prudent and sound financial future. This year's figures, however, have been prepared on a standstill basis. The 2.9 per cent increase on a like for like basis that Rother is receiving takes into account the transfer of benefit funding to the Department for Work and Pensions. The original £34,000 increase, as already mentioned, represents 0.5 per cent. in cash for the council compared with the increase of £143,000 that the council would have rightly expected to see under the floors mechanism. The injustice to Rother in the settlement is plain to see, and the council rightly made representations to the Office of the Deputy Prime Minister. It would appear that a number of district councils across the country have feared a similar outcome.
Nationally, the Treasury has assumed an average increase in council tax levels for 2004–05 of 7 per cent. but if Rother district council were to spend at the Government's assumed level, it would need to raise nearly £5.5 million locally. That would have a shocking effect on band D council tax charges, pushing them up by 30 per cent. The Government appear to be on a totally different planet. The assumptions do not take into account the impact of the latest raft of obligations, which will force up the council tax.
1243 The Government are continuing to pile additional costs on to local government, while taking no account of the real costs when it comes to handing out funds for the next year.
It is clear that the Government's mean and divisive grant settlement has been disappointing to the council and residents of Rother. Until two weeks ago the full implications of the transfer of the housing and council tax benefit subsidy had not been announced, owing to the apparent wrong-footing of the Department for Work and Pensions by the Office of the Deputy Prime Minister. Concrete advice and information have been noticeably absent.
As I have said, Rother is a prudent, financially efficient and cautious council, as is clear from the recent comprehensive performance assessment review and confirmed in this year's district audit letter. Initial budget estimates predicted that the council would lose approximately £150,000 through the transfer of grant to the DWP. Owing to the transitional arrangements announced in the DWP circular, that is now expected to be largely repaid, thereby reducing the council tax by about £4, or 3.4 per cent. However, even that cannot be confirmed until the final 2004—04 subsidy claim is approved by external auditors in 2006. Even if the reduction does eventually occur, the effect of the meagre settlement on the district council's ability to continue to deliver high-quality, affordable service is still potentially very damaging to residents of the district. At the very least, the Government should ensure that they honour the spirit of the floor mechanism agreement, and guarantee a minimum cash increase of £143,000 for the next year.
On top of that quite dreadful support from the Government there came news in December that East Sussex county council would receive an extraordinary £4,000 from the emergency Government fund to help keep council tax bills down. When that figure was first announced, there was widely thought to have been a mistake with the decimal point in the press release. Sadly, however—rubbing salt into the wounds—it proved to be accurate; but the situation was not replicated across the south-east as a whole. Other counties in the region fared quite well. Kent received an extra £8 million, Essex £7.7 million and Hampshire £7 million. Yet again, East Sussex—inexplicably, for it is the poorest county in the south-east—received next to nothing. Ministers in London seem continually to ignore the plight of cash-strapped young families and many hard-up pensioners in my constituency. To make matters worse, the Government refused to meet a cross-party delegation from East Sussex county council to discuss the minuscule amount it had received to limit council tax rises.
In his correspondence with our district council, the Minister for Local Government, Regional Governance and Fire also failed to acknowledge the effect of gearing on council taxpayers. If the council's spending next year rises by only about 5 per cent., Rother's council tax will still increase by 9.8 per cent. That is without the imposition of the additional new burdens.
When the transfer of grant to the DWP is added back, Rother's net budget requirement for 2004–05 has increased by 5.4 per cent., excluding essential growth items. As a matter of necessity the council has frozen all 1244 non-salary and contractual budgets for the last three years. That will have an impact on a number of key contracts.
So why is it necessary for Rother to increase its council tax even further? Once again we return to the new, extra, unfunded demands that the Government are continually making on district councils. First, there is the new licensing regime for liquor. Although the Government intended responsibility for it to be self-financing, finance officers at Rother have done the real sums, and prudently estimate that, at least in the first year, the district council's costs will rise by more than £50,000, or 1.4 per cent. on the council tax bill.
What else have the Government saddled Rother with? Well, there are inspection costs. No one loves to audit the auditors and inspect the inspectors like new Labour. Over the past few years the council has seen a significant increase in Government inspection costs, particularly those of the Audit Commission, which now amount to more than £150,000 per annum. Until now the council was able to avoid passing all those costs on to the council taxpayer. Unfortunately it now has no alternative but to pass them on, which means increasing the inspection budget by £40,000, or 1 per cent. on the council tax.
The next point is homelessness. The council has noticed a significant increase in the number of people presenting themselves as homeless over the past two years. Undoubtedly, the change in legislation has accounted for some of the increase, but the real-terms increase is over and above the results of any change in the law and actually reflects the increased cost of housing in what remains a low-wage area. Housing difficulties are on the increase, often exacerbated by people new to the area, and are a real problem, as I regularly see at my surgeries—as, I am sure, does the hon. Member for Hastings and Rye (Mr. Foster) who is in the Chamber—yet the council receives no additional help despite the fact that the cost of bed and breakfast has risen by £58,000 in the last year, an increase of 1.6 per cent. in council tax.
The Government's drive to modernise and to transfer to e-government is another substantial factor in increased spending. Although the council acknowledges the financial support given by the Government to meet the one-off capital costs of the e-agenda, it comes with a substantial revenue implication for the council. Like many local authorities, Rother is undertaking an extensive programme to replace its legacy of mainframe systems with modern systems capable of delivering services through electronic means.
I welcome e-government; it gives the public an alternative way to access services but it does not generally replace traditional methods of service delivery. For the time being at least, those extra ongoing costs represent another unfunded burden on local authorities. In 2004—05, an additional £150,000 has been identified to meet the ongoing revenue costs of replacing the council's revenues and benefits system to conform with Government guidelines; that equates to an increase of 4 per cent. in council tax. All other revenue implications of e-government have been funded for efficiency savings. Again, Rother is trying to do its best, in difficult circumstances, to meet Government targets, 1245 but as with everything else, that comes at a cost. It must be recognised that Rother is a low-spending efficient council, which is being forced into tax increases primarily due to Government willingness to impose new burdens while refusing to supply the cash to pay for them.
Inadequate and unfair distribution of Government funding and the imposition of additional unfunded Government requirements is not a defence dreamt up simply by Conservative-controlled councils. As the Minister knows, it was one of the key concerns raised by the Audit Commission in its recent publication, "Council Tax Increases 2003/4—Why were they so high?". Councillors in Rother have called on officers to try to suggest £300,000 of budget savings in a bid to cut the threatened 20 per cent. council tax rise, and are engaged in a highly charged round of public consultation.
The stark fact is that in the last four years council tax in Rother has risen by 81 per cent. The argument is always made that Rother starts from a low base, and continues to make the lowest charge in East Sussex, but that must be seen in the context that I mapped out earlier. Demographically, we have one of the oldest districts in Britain. It has the highest percentage of residents in the country aged over 85 and the second highest percentage of over-65s, the vast majority of whom are on fixed incomes. Eighty per cent. of the district is an area of outstanding natural beauty and the rural premium means that services cost 30 per cent. more to deliver than in urban areas.
Any quick analysis of East Sussex authorities demonstrates that the proportionality of funding between council tax and Government support favours the borough urban—councils. For Rother district council, the grant as a percentage of formula spending share was just under 50 per cent., whereas for the boroughs of Eastbourne and Labour-controlled Hastings, it is more than 60 per cent.
Both borough councils in East Sussex spend above the Government's assumed need to spend. The Government grant allocation system thus appears to favour the more urban councils and fails to recognise rural issues and the additional cost of delivering services to remote areas. On every count, it appears that the people of Rother are short-changed by the Government, and the council is left with the dilemma of either cutting services or increasing council tax.
My constituents are angry; many of them are desperate. The problem will not go away and no amount of political gloss or statistical spin will change the hard reality that council tax payers in my constituency face this year: yet another huge hike in their bill or devastating service cuts. I appeal to the Minister in good faith to recognise that we have a real problem. Rother's dilemma may not be unique, but that is of little comfort to those affected, so I ask him to take a short time out from his busy schedule to meet the leader and treasurer of Rother district council at the earliest opportunity, to sit down with them and work through the reality of the pressures that they face, which are not of their own making, and to look again at the chronic lack of Government funding for my area.
§ The Parliamentary Under-Secretary of State, Office of the Deputy Prime Minister (Phil Hope)
I congratulate the hon. Member for Bexhill and Battle (Gregory Barker) on securing this debate on local government funding for Rother district council. It gives us a useful opportunity to discuss issues relating to this year's local government finance settlement, and to look at the particular circumstances of Rother.
Let me start by commenting on our decisions relating to the funding of local government revenue expenditure for next year, which were made following full consultation on our proposals. The hon. Gentleman asked whether I would be prepared to meet a delegation from his authority. The Government have not met representatives from any individual councils or local authorities during this year's consultation process, because we are in the second year of a three-year spending round. Last year was the first year in which we changed the formulae throughout, and we took a number of representations from individual councils. However, this year we did meet representatives of the main types of authorities, including those such as Rother district council, through their representation on the Local Government Association.
Consultation on the draft settlement ended in January, and up to that point many councils had made written representations. However, the hon. Gentleman should know that Rother district council did not make a representation at any stage in the consultation process. As he knows, Parliament approved the local government finance settlement last week, so the consultation and decision-making processes are now complete.
The 2002 spending review provided very good news for local authorities, with continued increases in grant over the three-year period of the review. Our priority is, of course, education and personal social services. Shire districts such as Rother depend principally on the environmental, protective and cultural services funding. The settlement for 2004–05 provides a cash increase of 3.8 per cent., in terms of spending on those services. Through the settlements made since we took office in 1997, we have been able to increase the amount of government grant given in total to local authorities by £19.1 billion—a 30 per cent. real-terms increase. I should point out to the hon. Gentleman that that compares with the 7 per cent. cut that occurred in the previous four years, under a Conservative Administration.
So there can be little argument that we have provided greater levels of investment since 1997–98, and there is general agreement that this settlement provides welcome improvements in the money going to local authorities. We have decided to allow local authorities to reduce council tax discount on second homes and long-term empty homes if they wish, which will provide them with additional revenue-raising powers. They will be able to use the money raised through reducing the second homes discount for the benefit of local communities by providing, for example, affordable housing or transport.
§ Gregory Barker
Surely the Minister does not dispute the fact that the grant, as a percentage of the budget, has fallen dramatically—from 63 per cent. in 2001, to 50.23 per cent. in 2004–05.
§ Phil Hope
As the hon. Gentleman knows, Rother will receive £5.524 million in general grant in 2004–05—an increase of £202,000, or 3.8 per cent., on a like-for-like basis, compared with 2003–04. That is comparable to the average increase for shire districts of 4 per cent. The new grant distribution system was introduced in 2003–04 following a full-scale review and consultation. The floors and ceilings arrangements that feature in the new system help to provide stability for local government. In 2004–05, Rother will benefit from the protection offered by the floor: it will receive £1.2 million more in grant than it would receive without the support of the floor. In the past seven years, we have been able to provide Rother with an average—I repeat, an average—annual increase in general grant of 4 per cent. There can be no doubt that Rother has benefited from the additional money that we have invested in local government in the past seven years.
The hon. Gentleman also mentioned the case of East Sussex county council. I have to say that East Sussex is set to receive an increase in formula grants of 4.5 per cent. next year. That is after having received a 5.5 per cent. increase in 2002–03; and a 3.8 per cent. increase in 2003–04.
I can understand the concerns of the people of Rother, particularly those of pensioners on fixed incomes and others on low incomes, that the settlement will lead the council to impose another large increase in the level of council tax for 2004–05. I have to say to the hon. Gentleman that there is no need for the council to do so. Given the grant increases that Rother district council has received since 1997, which I have just spelled out, residents are right to express dismay at the persistently high levels of council tax increase imposed on them and at the proposed level for the forthcoming year.
In 2002–03 there was a 20.7 per cent. increase for band D tax in Rother; in 2003–04, a 10.1 per cent. increase; and next year, there will be a reported 9.8 per cent. increase. That is simply unacceptable. Given the Government's significant extra investment in public services and the scope for efficiency improvements, it is unacceptable for local authorities to set large increases in council tax. Local authorities, including Rother, can and should deliver council tax increases in low single figures in 2004–05. We have made it clear that we are prepared to use our powers to cap any excessive council tax increases proposed by local authorities for 2004–05. Let there be no doubt that we will use those powers if we have to.
I have to tell the hon. Gentleman that we are also keen to ensure that all pensioners entitled to help with their council tax bills are claiming council tax benefit. I hope that we can agree on that. If we have to disagree on the funding issues, surely we can agree about the 1248 importance of ensuring that pensioners, particularly those on low incomes and fixed incomes, gain from the council tax benefit facilities that are available. We want to ensure that the 1.9 million pensioners who will gain, or gain more, council tax benefit on the introduction of pension credit get the extra help to which they are entitled. The Department for Work and Pensions is therefore actively pursuing ways of supporting local authorities in their statutory duty to promote council tax benefit take-up.
The hon. Gentleman has not left me much time to tackle some of the detailed points that he made. He voiced concern about the transfer of responsibility for housing benefit and council tax benefit to the Department for Work and Pensions. However, it was local authorities that pressed the Government to make that change. As a result, the Department for Work and Pensions will implement fairer and simpler benefit subsidy rules from next April, which have been devised in full consultation with the local authority associations. Local authorities have been advised how potential impacts should be assessed and there will be a transitional protection scheme for the first three years. We have listened to local government concerns about the initial proposals and have now decided to limit any losses during the first year of the scheme to 0.5 per cent. I hope that that demonstrates to the hon. Gentleman and the people of Rother that we have listened to some of the concerns and responded actively to them.
The hon. Gentleman mentioned the Licensing Act 2003, fee levels and the potential burdens that may be created. After a long period of consultation, we have enabled the Local Government Association to build its case and we are grateful for its assistance. When the final fee levels are published shortly, we expect to revise our estimates of the overall income generated.
The timetable for reform is dictated by the date on which Parliament approves the guidance on the fees, which will be announced by the Secretary of State for Culture, Media and Sport, who expects to table the draft guidance for the House's consideration very shortly. The period of transition will commence six months after Parliament approves the guidance and then last for about nine months.
The hon. Gentleman mentioned inspection costs. We understand his concerns, but I have to say that the comprehensive performance assessment has driven many improvements in local government performance and there is widespread support across local government for the benefits that it brings.
We know that e-government is bringing about new ways of delivering services. It is bringing cost-efficiency savings into local government and we expect to see that happen. I might add—
§ The motion having been made after Ten 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 fourteen minutes past Eleven o'clock.