HC Deb 19 July 2004 vol 424 cc71-98 6.39 pm
The Minister for Local and Regional Government (Mr. Nick Raynsford)

I beg to move,

That the draft Council Tax Limitation (England) (Maximum Amounts) Order 2004, which was laid before this House on 8th July, be approved.

Mr. Deputy Speaker (Sir Michael Lord)

I remind the House that this debate lasts for only one and a half hours, so it would be very helpful if Back Benchers and Front Benchers were mindful of the need to share the time with others.

Mr. Raynsford

I will try to confine my remarks to the minimum necessary to set out our decision in order to allow—as you suggested, Mr. Deputy Speaker—a good opportunity for other hon. Members to contribute to the debate.

The order that I am presenting for the approval of the House today will be made under section 52F(4) of the Local Government Finance Act 1992, which was inserted by the Local Government Act 1999. It sets out the amounts that the 2004–05 budget requirements of the authorities named in the order must not exceed—namely, caps on their budget requirements. In my view, the provisions of the order are compatible with the convention rights.

Six authorities are named in the order: Torbay borough council, Nottingham city council, Herefordshire district council, the Fenland and Shepway district councils and the Hereford and Worcester fire authority.

Mr. Anthony Steen (Totnes) (Con)

Bearing in mind the facts that the Lib Dems have spent 11 out of the past 14 years running Torbay and that it has been rated as a poor performance council, why are the Government making it worse by capping the council from £139.4 million to £138.8 million—only £0.6 million? Why are the Government also causing £100,000 to be spent on sending out letters to all council tax payers, telling them that there is a reduction of about £11 a year? Would it not have been far wiser to give credit of that £11 to council tax payers next year, bearing in mind the Government's—

Mr. Deputy Speaker

Order. The hon. Member is launching on a speech.

Mr. Raynsford

I recall the hon. Gentleman's intervention in the debate on 29 April—I announced then our intention to designate specific authorities, including Torbay council—in which he welcomed our decision. We are simply proceeding with the decision that was announced on that occasion. I will explain the full circumstances in the course of my statement.

Subject to the approval of the House, I shall make the order and issue notices to those authorities advising them of the maximum amounts. They will then be required to recalculate their budget requirements and issue new council tax bills—or, in the case of the Hereford and Worcester fire authority, to issue new precepts. The effect is that the authorities will have had their budgets and council tax capped.

I made a statement in the House on 29 April about authorities that had set excessive budgets for the current year. I welcomed the fact that the average increase in council tax in England this year was 5.9 per cent., which was less than half the previous year's increase and lower than many people had predicted. A large number of authorities set lower council tax increases in 2004–05 than they had originally proposed. That was in no small measure due to the Government's strong message that high council tax increases were both unacceptable and unnecessary.

Some authorities' budgets and council tax increases were still too high, however, and imposed unreasonable burdens on council tax payers. I said then that the Government were designating seven authorities for in-year capping and nominating a further seven authorities with a view to taking action to limit their budget requirement increases in 2005–06. The designated authorities then had 21 days in which to challenge the maximum budget requirements that we said we were proposing to set. Those were the levels at which they would need to calculate their budgets in order for them not to be defined as excessive according to principles determined by the Secretary of State.

As I said in the written statement that I made to the House on 8 July when the order was laid, all the designated authorities challenged the proposed maximum budgets. Ministerial colleagues and I met all seven of them as well as the seven nominated authorities. Having carefully considered the representations that they made, both orally and in writing, and having taken into account all relevant information, we have decided as follows.

We shall set maximum budgets at the levels originally proposed for five authorities—Herefordshire, Nottingham, Torbay, Fenland and Shepway—and set a maximum budget for the Hereford and Worcester fire authority that is £1.044 million higher than we had originally proposed to reflect the savings that we judged the authority can reasonably be required to make. We shall cancel the designation of Telford and Wrekin and nominate it instead. I have proposed a notional budget for the authority this year at the same level as we originally proposed for the maximum budget, had we capped it.

Mr. Eric Pickles (Brentwood and Ongar) (Con)

On Telford and Wrekin, the Minister has made a sensible move from designation to nomination on the grounds that the savings—only 68p—would be insignificant. In respect of Nottingham, given that the cost of re-billing will be more than the amount saved, why not adopt the same procedure there?

Mr. Raynsford

In the case of Telford and Wrekin, the rebate was only 66p for band D property for the full year; in the case of Nottingham, it is £2.48—a significantly higher figure. [Interruption.] Let me tell the hon. Gentleman that when the authorities set excessive budgets, they took the risk of being required to re-bill. We made it absolutely clear that we would use our capping powers and that if authorities were designated they would be required to re-bill for a lesser amount. No authority can say that it acted in ignorance of the position. As the hon. Gentleman will understand, when one sets principles—as we have; we announced them on 29 April—it is right that those principles should be applied, and they have been applied.

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

Would it not be sensible to set the bar at the amount at which it would not cost taxpayers more to re-bill than they would gain by having the rebate, so to speak? In that case, both Telford and Nottingham would easily fall beneath the bar.

Mr. Raynsford

I hear what my hon. Friend says, but one of the difficulties is that the estimates of the cost of re-billing vary quite significantly from authority to authority. In the case of Nottingham, it is quite a significant amount—more than £2 per individual council tax bill. In a Committee debate earlier this year, the Opposition spokesman said that he thought that the cost of re-billing would, on the whole, average between 80p and £1 per household. If that estimate were correct and Nottingham were able to re-bill at that level, the cost of the re-billing would be less than the impact of the cap. One can only try to take account of such information, but as I said earlier, the important point is that the principles be applied in a rigorous and fair way.

Telford and Wrekin was given 21 days in which to challenge its proposed notional budget, because it had been nominated for the first time and was in the same position as the other nominated authorities. Once we finally set the notional budgets, we will use those budgets rather than the authority's actual budgets to measure future budget increases for capping purposes.

Alan Simpson (Nottingham, South) (Lab)

I want to follow up the Minister's comment about principle. Will he confirm that Nottingham does not object at all to the principle that it should adhere to the Government's spending limits? Is not the absurdity of it all putting the council into a position in which it is required not only to adjust this year's spend, but to incur greater costs in re-billing than it would cost to adjust the spend and the bills in subsequent years? Is that not the principle to which we should adhere?

Mr. Raynsford

No. As I pointed out in response to the earlier question of my hon. Friend the Member for Nottingham, North (Mr. Allen), the actual cost of re-billing varies. We have seen significant variations in the estimates that we have had from different authorities and I have to say that Nottingham's is one of the highest. Another factor to which I must draw the attention of my hon. Friend the Member for Nottingham, South (Alan Simpson) is that Nottingham has the sixth worst collection rate of council tax of any authority in the country. It collects less than 90 per cent. of the total council tax due. In those circumstances, I have to say that it is incumbent on the authority to think about how to improve its own efficiency to collect rather more of the council tax owed to it. If it were successful in doing so, there would be less need for large council tax increases, which impose unreasonable pressures on council tax payers.

Final amounts for the notional budgets will be determined once we have carefully considered any representations made by the eight nominated authorities. There is no parliamentary procedure involved in setting notional budgets for nominated authorities. Therefore the draft order before the House today deals only with the maximum budget set for the six designated authorities. In laying the order, we are keeping our promise to act against high council tax increases. The Government have provided all authorities with above-inflation increases in general grant for two years running, and have increased funding to local government by 30 per cent. since 1997. In exchange, we made it clear to authorities that we expected them to budget prudently. There is no justification for excessive tax increases. I hope that the House will support the order.

6.50 pm
Mr. Eric Pickles (Brentwood and Ongar) (Con)

There was a time when capping was necessary; when it was the last line of defence for local residents against extremist councils determined to take on the Government; when Labour councils ordered taxicabs to hand out redundancy notices to staff; and when factory roofs were removed to avoid paying excessive local taxation. But those days have long gone. Such clashes changed local government for ever. There are no real rogue authorities trying to bring down the Government in the bunch arbitrarily selected for capping. They may rank from the excellent to the gorblimey, but they are no threat to the Government's medium-term financial settlement.

Mr. Steen

The Liberal Democrat council in Torbay is certainly a gorblimey council. It has been a disaster and performed poorly. However, is my hon. Friend aware that sending out the council tax revision will cost £100,000? The Liberal Democrats have closed many of the public loos in the Riviera area, but they could open them all again with that money.

Mr. Pickles

That would certainly be a more convenient solution. My hon. Friend is right about the management of Torbay.

Capping these authorities—even Torbay, Shepway and Nottingham—is like breaking butterflies on the wheel. Surely the Minister was right when he talked some years ago of the unfairness and unsatisfactory nature of the process. He was certainly right when he said: We see a sad and sorry picture of the imposition of centralised diktats by Ministers who cannot possibly understand the intricacies and the detailed implications for local communities".—[Official Report, 24 June 1992; Vol. 210, c. 344–46.] How haunted the Minister must feel by his almost youthful words! However, he is not alone in having bitterly to eat his past words.

As recently as 12 months ago, councils that were deemed to be excellent or good by the Audit Commission were promised freedom from capping restraints—a promise that has now been broken. Herefordshire unitary district council was graded "good" in its comprehensive performance assessment of December last year. Telford and the Wrekin UDC was graded "excellent" and Fenland was only two half points away from being graded "good". The Government's White Paper, entitled "Quality Public Services", stated: Decisions on local taxes are a vital part of local democracy and accountability. They should be taken by the local authority, based on the costs it faces and of the local people's willingness to pay. An earlier Labour party document—"New Politics, New Britain: Restoring trust in the way we are governed"—said that reserved powers for capping should be used only "for extreme cases". So what has brought on the Government's blind panic?

The principal architects of this state of affairs are not the councillors, officers or residents of Nottingham, Torbay, Herefordshire, Fenland, Hereford and Worcester and Shepway: they are the Government. For years they have used the council tax for a purpose for which it was never intended—to transfer expenditure from central to local government without sending the necessary income to cover the burdens. The council tax is the Government's favourite stealth tax.

We need only look at the Audit Commission's report, "Council tax increases 2003–04: Why were they so high?" It said: Slightly more than half the total increase is due to national pay and price inflation…The causes of increased spending by councils included…national priorities, such as the requirement to increase funding for schools by an amount determined by government or to meet national waste recycling targets. Above all, the Audit Commission cited grant redistribution: We found a clear association between the size of grant increase a council received and their increase in council tax. With the exception of Shepway and possibly Torbay, those councils have been caught by the change in grant and the increased Government burden.

There is more than a whiff of arbitrariness about the use of the capping criteria and threshold. Six uncapped unitary authorities have higher percentage budget increases than Telford and Wrekin, while five have higher percentage band B and D precept increases. But Telford and Wrekin has been nominated, while other authorities have not. In addition, some of the tiers of council that have been capped have higher increases but not high levels of council tax, while other tiers of council have the dual threshold applied.

Let us take one example. Fenland has a precept increase in cash terms of just £27. In terms of their final bill, Fenland residents pay the lowest average council tax in Cambridgeshire—£904, compared with £973 in Liberal Democrat-run Cambridge. In Fenland, the precept, including the parish precept of £222 in 2004–05, is far less than that in many Labour councils. For example, the Prime Minister's district of Sedgefield levies a precept of £326 a year—the largest district precept in England and £104 more than Fenland. Why has the Prime Minister's district not been capped? I hope that the Minister's judgment in these matters has not been affected because the order coincides with the coming reshuffle, although, of course, we wish the Minister well.

The amount of money that will be returned is not even significant. It is £2.9 million, and the rebilling cost is estimated at between £1.1 million and £1.5 million.

Mr. Raynsford

Perhaps I can set the hon. Gentleman's mind at rest. The reason why Sedgefield council has not been proposed for capping is that the increase in its budget requirement this year was 0 per cent. Is the hon. Gentleman seriously suggesting that an authority that does not increase its budget requirement at all should be capped?

Mr. Pickles

The Minister makes my point for me. Look at the size of the grant that Sedgefield received. I cannot help but feel that the good people of Fenland and Sedgefield will wonder why the Government regard it as acceptable for one authority to make people cough up an extra £104, but unacceptable for another authority to charge considerably less.

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

I have no idea about the background to the Sedgefield grant, but is it not the case that authorities that whacked up their council tax in previous years, when there was no capping, and have imposed small increases this year, have got away scot-free, while authorities that did not whack up their council tax in previous years and which have imposed reasonable increases this year are capped? Where is the logic in that?

Mr. Pickles

There is no logic; my hon. Friend is right. As he suggests, the Government are in an absolute panic. As soon as we have a pensioners' revolt, they get into a blind panic, and they look to the Minister to get them out of the mess. He has cobbled the provisions together to the best of his ability, which will, I hope, be rewarded towards the middle of this week.

Mr. Raynsford

Let me put the minds of the hon. Gentleman and his colleagues at rest. Fenland district council received a 4.8 per cent. increase in grant this year. Sedgefield council received an increase of 3 per cent. So it has nothing to do with the grant increase.

Mr. Pickles

The Minister must understand that he changed the criteria under which grant was distributed. It is pointless looking at the figures on a one-year basis, because he fools no one—not this side of the House, his side of the House or, more importantly, local government.

Most of what the Government want to achieve could have been achieved simply by nominating the authorities for next year. Anyone with a passing experience of local government will tell the Minister that cuts of this size in council budgets so late in the financial year will have a wholly disproportionate effect on council services. By the end of July, much council spending is committed and fixed. Such parts of the budget as can be released will bear a heavy burden indeed. Little wonder that the Local Government Association, on an all-party basis, has described the order as "inconsistent, unnecessary, unworkable" and lacking "a long term solution". For those reasons, we will oppose the motion.

The Government have constantly broken their promises on capping. First, they said that they would not cap good and excellent councils, yet they have done so. Secondly, they said that they would cap only in exceptional circumstances, yet these councils are not exceptional. Thirdly, they promised fairness in the system, yet sadly their capping is both inconsistent and partisan.

The Government may have broken their promises but their actions are consistent. The change in grant distribution was vindictive and fiddled. This year's settlement was vindictive and fiddled. The capping decisions following that grant distribution were vindictive, fiddled, partisan and pointless. The order must be opposed.

7 pm

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

I shall vote against the Deputy Prime Minister's order and in favour of my hard-pressed constituents and a new vision of where local government should go in future.

As Josef K, the victim in Kafka's "The Trial" might have said, someone must have slandered Nottingham council, because one morning, without having done anything wrong, it was rate-capped. I must correct myself slightly. Nottingham council did something wrong: it went over what the Government later revealed to be its budget target by £180,000. On a total budget of £330 million, that represents an error of 0.054 per cent. recurring. There used to be a principle in law: de minimis non curat lex—the law is not concerned with trifles—but a recurring decimal is clearly not to be trifled with.

The council immediately sought to amend its budget. Nottingham's MPs—my hon. Friends the Members for Nottingham, East (Mr. Heppell) and for Nottingham, South (Alan Simpson) and I—urged the Government to allow the council to come back into compliance, which it wanted, but we did not succeed. Instead, the council must now send new bills to all council tax payers—at a cost of £250,000—to save £180,000. At the same time my constituents, who are some of the poorest in the UK, cannot obtain £50,000 to save our drug abuse resistance education—DARE—project. I cannot get £30,000 from the ODPM to fund a study into why Nottingham, North is continually the constituency with the lowest educational attainment in the UK. There are many other small projects where I could find a home for that £250,000, but instead of allowing Nottingham to return to compliance, the Government, at the stroke of a pen, can blow £250,000 of local council tax payers' money—their money—on pointless re-billing.

I fear that Nottingham city council was selected for this financial farce because it is a Labour council, and the Government wanted to add a Labour council to their list of the rate-capped. If so, that is the final touch of Kafka—a Labour Government penalising my constituents because they voted Labour; a Labour Government damaging the reputation of a council because it is Labour.

The episode does not reflect well on any of those involved. The Government did not specify the budget they required from Nottingham until it was too late. They sent no warning letter to Nottingham, whereas they did to the other 65 councils. The Government office for the east midlands was kept informed at every stage, yet flagged up no problems for Nottingham's budget.

None of those involved, including me, could believe that once the errors had been discovered the Government would behave so irrationally. It shows how far the British disease of over-centralisation has gone, and how much our Labour Government have, I am sorry to say, been consumed by it. As Neil Kinnock might have said: "You start with concepts that local electors cannot be trusted, they are then pickled into a rigid dogma—a code; and you go through the years sticking to that, outdated, misplaced, irrelevant to the real needs, and you end up in the grotesque chaos of a Labour Government—a Labour Government—using post office vans to scuttle round a city handing out re-billing notices to its own electors. I am telling you no matter how entertaining, how fulfilling to short-term egos, you can't play national politics with councils' reputations and with local people's services".

The case for a radical reform of the relationship between central and local government has been eloquently made once again by this sad episode; not the tinkering with the council tax that has been trailed this week but allowing the British people what is commonplace in most western democracies—constitutionally independent local government. That local government will be free from begging for the 38 different income streams that come to Nottingham for priorities decided at the centre; free to raise whatever additional amounts it can justify to its electorate; free to respond to local needs with care and sensitivity, instead of the centre's one-size-fits-all mentality; free from the hypocritical rhetoric of "new localism" from those who, never having understood or even served in local government, none the less delight in pulling the levers from the centre; and, above all, free to make local decisions on behalf of local people.

Mr. David Tredinnick (Bosworth) (Con)

It might help the Minister to know that the hon. Gentleman sought guidance from the Joint Committee on Statutory Instruments, which I have the honour to chair. Indeed, he attempted to appear before the Committee, as he felt that the Government's approach to the order, which we considered last week, went completely beyond their powers. The Committee wanted to deliberate on that very point, but sadly we were unable to act, as it was not a case of law but one of policy. However, the fact that a Member representing Nottingham should have appeared before the Committee gives some indication of the concern in the midlands—I, too, represent a midlands constituency—at the appallingly cavalier way in which the Government have handled the matter.

Mr. Allen

Indeed, I attempted to ensure that the order was not considered until the city of Nottingham had made the fullest possible representations through a memorandum to the hon. Gentleman's Committee.

I am afraid that in this case central Government have again shown themselves to be inflexible, clumsy and bureaucratic. Although, like all on the Labour Benches, I hope for a third term, I hope also for a realisation in Downing street that local decisions are best taken by local government—a free, independent and strong partner to the centre—rather than the hollow sham that we have seen demonstrated again in the order.

I will oppose the order. If the Opposition parties do not oppose it, my hon. Friend the Member for Nottingham, South and I will call a Division, but I hope that all who want to build local democracy will oppose the culture that has permitted this order.

7.8 pm

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

The hon. Member for Nottingham, North (Mr. Allen) made an important and powerful speech. He made the case for local democracy extremely well and argued that the Government, in this measure as in others, are attacking local democracy, which is much to be regretted. Nottingham is my home town and I know that the people of Nottingham will be flabbergasted at the idea that the savings that the ODPM, in Whitehall, is demanding are less than the cost of re-billing.

In responding to interventions on that point, the Minister argued that Nottingham is inefficient, that the billing costs are too high and that the council should improve its collection of council tax. Those points may be valid, but capping Nottingham is not the way to sort out inefficiency or a poor record for council tax collection; it is the wrong way, as the Minister should know.

Unfortunately, the order is yet another attack on local democracy, and there have been quite a few recently. We have seen attacks on local police authorities and local education authorities, and unless there are some big surprises, tomorrow's statement will probably be the final nail in the coffin of new localism.

The Minister has won many friends in local government by what he has said. He goes around councils and visits the LGA, and people feel reassured; but, unfortunately, he has come to the House to defend policy decisions taken by the Government—possibly in No. 10 or the Treasury, perhaps not in the ODPM, but he has collective responsibility for them—that amount to an attack on local government.

The Minister, along with many of his colleagues, used to vote against capping when the Conservatives were doing it year in, year out. As the hon. Member for Brentwood and Ongar (Mr. Pickles) said, the Minister used to argue against capping. I hope that he realises the extent of the hypocrisy tonight. He knows that a lot of the trends that are happening under the Government are bad for local democracy. On the LEA point, he spoke strongly against that in May, so he realises that the Government are going backwards in their attempt to strengthen local democracy.

I gave the example of Nottingham, but the Minister will not be surprised that I want to talk about two other examples. Shepway district council—a small council—is being capped tonight, and rebilling will cost it £93,000. Nottingham's budget is more than £300 million, but Shepway's budget is £15.5 million. Its rebilling costs will be almost £100,000, which is quite astonishing.

The Minister claimed that, in deciding which councils to cap, he would take account of history and look at councils' records. Shepway's council tax is below average for a district council in Kent. In the past 10 years, the average rise in its council tax has been a mere 3 per cent. It is hardly a council with a high council tax. Unfortunately, when the new administration took over and looked at the books, it discovered that not only did Shepway have a low council tax, but that it had no financial reserves. Indeed, there was a black hole: the council was spending more than it was raising or receiving from central Government. It had to take serious action to put the finances in order. That shows the local issue in Shepway, and centralised capping cannot take that into account.

Shepway council must now cut severely. Council staff will be laid off. What effect will that have on the performance indicators and the requirements from Whitehall to improve performance in Shepway? It will undermine them. Shepway will have to remove backing for funding programmes in the local community that were receiving match funding from central Government to hit other performance indicators laid down by Whitehall. Many of the council's economic regeneration ideas, which involve long-term investment to gain benefits, will be hit. In an area of relative poverty, such as Shepway, tourism is very important, yet the cuts that Shepway must make will hit that industry badly.

Torbay's increase was under 10 per cent. We know that that figure is relevant, and we have seen it in the press. Some of the referendums run by the local paper showed that people accepted the 9.9 per cent. increase in council tax because it would still leave Torbay with one of the lowest council taxes in the south-west—but the Minister in Whitehall knew better than the local council, the local paper and the local people: he decided that the council must be capped.

Mr. Adrian Sanders (Torbay) (LD)

Is my hon. Friend aware that, taken over two years, the increase is lower than any of the other councils in the area and that, taken over three years, it is still lower than any of the others? Where is the justice in the proposal?

Mr. Davey

My hon. Friend is absolutely right. Again, the proposal goes against the Minister's assurance that he would take account of recent history. He has clearly failed to do so. We thought that the Government had moved from crude capping, but it is still there. As my hon. Friend has told me in private conversations, Torbay council receives less in grant per capita than the average unitary authority. Indeed, it receives £26 per resident less than the average unitary authority. Not only does it have a recent record of low council tax, but it receives less support from the Government. One can understand why the people of Torbay support the council.

Mr. Steen


Mr. Davey

I shall give way to the hon. Gentleman, but I wonder whether he will be consistent.

Mr. Steen

I have urged the Government to cap Torbay, and I support that—it was the right decision—but I question something else. The Government have capped Torbay, but they will charge £100,000 for the postal distribution to achieve a saving of about £10 per person. I ask the Government to review that position. I have supported the Government's view, but I now think that they should not charge the £100,000, but give a credit next year. That is why I oppose the order. Although I support the capping, I do not support the way that the Government are doing it. That is a different point.

Mr. Davey

I very much regret giving way to the hon. Gentleman. I should have thought that he would say his constituents pay higher council tax than the people of Torbay and that they would therefore love Torbay's council tax. I wondered whether he would be consistent, but we heard from his own lips that he supports capping and worries about the consequences of capping. I know that he likes to have it two ways most of the time, but I am afraid that he cannot do so when we are debating on the Floor of the House.

The hon. Gentleman is right that rebilling will cost a staggering £100,000—10 per cent. of the required savings. There will be cuts in things for which the people of Torbay voted—for example, the flowerbeds. That may not seem important to some hon. Members, but it is very important to tourism in Torbay, in attracting visitors to the area and in ensuring that Torbay is a beautiful town that people want to visit. There will be cuts in the toilets that people want. There will be a lot of cuts that will hit the people of Torbay very seriously. What is the benefit? It is some 25p a week. I do not think that many people from Torbay will write to the Minister to thank him for that extra 25p, when they know that Labour Ministers are responsible for the cuts in the area.

The order is particularly regrettable given that the LGA—a cross-party body of Labour, Conservative, Liberal Democrat and independent councillors—has argued long and hard against capping. It is extremely angry and disappointed about the Government's decision. Anyone who has read the LGA's brief, to which the hon. Member for Brentwood and Ongar referred, will see the extent of that concern. As the hon. Gentleman said, the LGA says that capping is totally inconsistent with what Ministers have said in White Papers, in relation to the CPA process and in their speeches. Capping is inconsistent with stated Government policy.

As the LGA says, one would have thought that capping was unnecessary this year. The Government cajoled, encouraged and bullied councils to reduce their council tax rates. The Minister was right to do so. The Government used the threat of capping for that purpose, and they were successful to an extent. So why do they need to go ahead with capping? Given that the average rise this year is one of the lowest since the council tax was, unfortunately, introduced by the Conservatives, one would have thought that the capping powers were not necessary.

As the LGA also says, the proposal is unworkable. We have talked about the billing costs, but there is a much more fundamental point to make about prudent financial management. Councils must start to think long term. They must plan their council tax rates and budgets for the long term, and the Minister has recognised that. Last week, in the comprehensive spending review, we heard that, at long last, the Minister and the Chancellor will allow local authorities to have three-year settlements because they recognise the importance of long-term planning, but capping goes exactly in the opposite direction. Some of the services that the councils listed for capping will cut represent investment that they wanted to make to provide returns to the public in better services and better value for money in a few years' time. The proposal constitutes exceedingly bad financial practice.

Capping has never been and is not the solution. The solution is local democracy. Let the people vote. Let them vote out councils of whatever party when they do not like the services that they are given at the cost that they are charged. That is the solution.

Tomorrow, we will be promised a solution—we will be given the bait of a solution. However, many of us doubt whether it will be forthcoming and whether the rhetoric that will come tomorrow will match the hyperbole that we heard at the start of the balance of funding review. Tinkering with the council tax will not deal with the underlying unfairnesses and the balance of funding problem. For some people and some councils, what may be on offer tomorrow might make the problem worse. Therefore, the Liberal Democrats will vote against the order to uphold local democracy and to support local people—whether they are in Nottingham, Shepway or Torbay.

7.20 pm
Alan Simpson (Nottingham, South) (Lab)

There are times in any Parliament when Members of the House have to come into the Chamber to make genuine and difficult decisions about issues of principle—issues of war and peace and the testing of their conscience. I do not pretend that we can expect to be here without having to address such issues. However, this is not an issue of enormous political principle. I shall vote against the order, along with my hon. Friend the Member for Nottingham, North (Mr. Allen), but more out of embarrassment than anything else.

This issue should be consigned to the cock-up theory of history. My hon. Friend came up with a quotation that was used by Neil Kinnock at the time that the local authority in Liverpool challenged the Government of the day over its democratic right to make decisions in defiance of the Government. It was perfectly possible then, and it is possible now, to argue that, in principle, once a Government have determined what they will fund in local government services, what then constrains local democracy should be located between the polling station and the police station. It is for the police to be able to charge councillors when they misspend public money and for the voters to be able to sack councils when they feel that their priorities are wrong.

In the current situation, we do not have a local authority that set out to defy central Government. We do not have a Nottingham authority that sought to provoke a head-on collision with Government policy. In fact, we have exactly the opposite. Nottingham has the 29th lowest average council tax in the country, and it set out to try to second-guess what the Government would do in setting a spending limit. It looked with considerable caution and interest at the early warning signs that were given. It was not one of the initial 65 authorities that received warning letters in respect of the budgets that they issued. It was not one of the 40 authorities that was then invited to come down to London to meet the Minister and his officials to have their budget adjusted.

In addition to that, the local authority approached all the local MPs and asked us, "Are we likely to be on the list? We do not want to be on anyone's hit list. Are we within the framework and unlikely to be capped?" Every one of us took soundings from Ministers and not one of us received an indication that Nottingham was anywhere near being on the capping list. It therefore came as an enormous surprise and disappointment to the authority to find that, somehow, it mysteriously appeared as a rogue authority.

Following that, we then attempted to comply with the requirements that the Minister set out. On 13 May, Nottingham MPs set up a meeting with the Minister and his officials to try to say, "Okay; if we have to find a way of removing the £180,000 overspend on a £331 million budget, let us talk about the practical ways in which we can do that." Not a shred of the conversation at that meeting was about defiance. Everything in it was about compliance. The authority said to the Minister and his officials, "Just tell us which of the following ways we can adjust the spend this year and accommodate that formally within the budget for the year that follows." It was a practical and constructive response to a line that the Government had drawn.

I do not want to go into too much detail about where the initial confusion lay. It is fair to say that a whole series of percentage increase figures were bandied about. I am prepared to accept that Nottingham, as a local authority, should accept some of the responsibility for the confusion. I also think that the Office of the Deputy Prime Minister should take a degree of the responsibility, because it would have been helpful if the submission sent to the office had been opened on the file. It was not; such is life.

The response to the problem is to find a practical way out that does not breach the principle that the Government set out, which was a line of spending. We should look to construct relationships between central and local government that are constructive rather than punitive. The decision that is embodied in this order is nothing other than punitive.

I cannot explain rationally why Nottingham should have been reincluded on the list when all the indications that we received in respect of every single representation made were that the city would not be on it. My only explanation is that the city was nobbled. I do think that it was necessarily nobbled by the Minister, but by Downing street. I think it was nobbled because, pragmatically, there was a feeling that a Labour authority was needed on the list to give a spurious sense of fairness and balance. So, in pursuit of the spurious, we now have the absurd position in which, for council tax payers in Nottingham to receive a rebate of what the city calculates to be an average of £1.83 per household per year, we will have to spend £250,000 to rebate £180,000, giving a grand total of £430,000 of spending for nothing. This is the politics of the absurd.

I ask the Minister to consider the three options that face him and the House tonight. The first is to remove Nottingham from the order altogether. The second is simply to remove the requirement for rebilling. If there is a principle at stake and Nottingham's name should remain on the list, at least allow us to act in a way that incurs least cost and leaves most resources to be deployed in the interests of the council tax payers of Nottingham. Those are two constructive ways out and the city council would happily comply with them. That is the way to embody both principle and pragmatism to address a solution to the line that the Government have defined.

There is, however, a third way out, and it is one that have never raised in the House before. I have never questioned the tenure of office of anyone. However, I know that if such a decision had been taken by a local authority and had been raised in the House, Members of both sides would say, "We have to question the competence of this local authority and we ought to call on its members to resign or be sacked. We have to ask them to defend their right to occupy their positions in the face of decisions that are monumentally absurd." If we cannot go for either of the two initial options, the same questions have to be asked of the Minister.

7.28 pm
Mr. Malcolm Moss (North-East Cambridgeshire) (Con)

It is always a pleasure to follow the hon. Member for Nottingham, South (Alan Simpson). He made an excellent speech in which he exposed the illogicality of the Government's position and their complete lack of principle in what they seek to achieve through the order. I speak on behalf of the district of Fenland in my constituency, and I have to say that, initially, I thought that we had been badly done by until I heard the stories this evening, particularly the story from Nottingham, which defies all logic and description.

The Minister said only in April: The Government therefore intend to take action against those authorities whose budget requirements they consider to be excessive."—[Official Report, 29 April 2004; Vol. 420, c. 1019.] The key word is "excessive" but nobody, not least the Minister or the Government, have actually defined what they mean by it. It can mean one thing in Nottingham and another in Fenland, Shepway or Torbay. No one to whom I have talked in the Local Government Association or who has any experience of local government finance can find a common thread of logic in what the Government are trying to do. Like the hon. Member for Nottingham, South, I have concluded that they decided that they had to make an example of some councils and that they needed a spread of councils. When the Wrekin dropped out, they had to find a scapegoat Labour council, so Nottingham entered the frame. I think that Fenland is the scapegoat Conservative council.

Let us consider what "excessive" might mean, to try to understand why the councils have suddenly been caught in the net. Perhaps the percentage increase was thought to be excessive—I thought that the Minister indicated earlier that that was his main criterion. However, Huntingdonshire district council, which is also in Cambridgeshire, increased its council tax by a larger percentage than Fenland this year, so that cannot be the criterion. Perhaps the Government considered whether there was an excessive increase in band D council tax levels, but the evidence shows that Fenland does not meet that criterion either. Perhaps it was thought that the spending per head in Fenland was out of control or too high, but it has the lowest such spending in Cambridgeshire and one of the lowest of any shire district in the country. A further factor considered might have been the finite size of the budget, but as we can see from the order, Fenland's budget of £12.22 million is the lowest of any council in the list. Fenland does not meet any of those criteria, so we must find another explanation.

As my hon. Friend the Member for Brentwood and Ongar (Mr. Pickles) said, it has been obvious for some time that the Government have used council tax over the past five, six or seven years as a stealth tax to draw more money out of tax payers to fund other things. They have kept grants low, and although they boast of a year-on-year increase, they do not explain that some 15 per cent. of the total grant money is kept on one side and ring-fenced for specific grants. The Government and the Minister decide where to spend that money and—surprise, surprise—it is targeted not at my constituency, that of the hon. Member for Torbay (Mr. Sanders) or even those of Nottingham Members, but elsewhere. However, the top-slicing of 15 per cent. of the money for those specific grants means that there is less available to fund the basic services that we all want in our constituencies.

Statistics show that the average total council tax bill in Fenland is the lowest in Cambridgeshire. The total bill is on average £83 a year per dwelling lower than the county average. The bill in Fenland is £60 lower than the average English bill and more than £130 lower than the shire district average. Fenland has a low tax base, with 85 per cent. of properties in bands A, B and C. That will come as a major surprise to many hon. Members in the Chamber because although those statistics smack of inner-city property values, my seat has been held by the Conservatives for the past 17 years—it was Liberal for a brief period before that. That means that every pound that Fenland adds to its council tax raises only £28,000, whereas every pound that neighbouring Huntingdonshire puts on its council tax bill raises double that amount—£56,000. An equalising measure should be built into any sensible formula calculation to compensate the parts of the country—mine is not the only one—with low tax bases because of their low property values. Fenland is penalised principally by its low tax base. It must increase its council tax at double the rate of its neighbouring council to provide the services that the Government demand of it, but that cannot be right.

Mr. Bill Wiggin (Leominster) (Con)

I agree with my hon. Friend and I am fascinated by his speech because, as he will know, Herefordshire suffers a similar social distribution and has received equally unfair treatment from the Government. Perhaps I am being cynical, but does he agree that the measure has been exclusively designed to score political points and that it has nothing to do with any impact on local people?

Mr. Moss

I agree entirely with my hon. Friend. I tried to make that point earlier in my speech and concurred with the hon. Member for Nottingham. South that that was what the Government were attempting to do. They needed scapegoats and decided that they had to give the impression of being tough by bearing down on councils in which council tax was increasing above a certain level. However, they are being dishonest because council taxes throughout the country have been going up by double the rate of inflation or more over the past six or seven years. Everyone's council tax has gone up because the Government have depressed the level of grant as a proportion of what they expect councils to do.

Mr. Raynsford

indicated dissent.

Mr. Moss

The Minister shakes his head, but my point is true. The fact that 15 per cent. of the total money is taken out for specific grants means that there is less money to go around for the provision of basic services.

The situation gets worse for Fenland. For as long as I can remember—certainly this was true when I was a councillor 17 years ago—we have been asking for the same area cost adjustment for Cambridgeshire as that enjoyed by Essex, Hertfordshire and the south-east planning region as a whole. We had the incongruous situation of a school in Royston, Hertfordshire, getting almost double the per capita spend for education as a commensurate school just over the border in Cambridgeshire. That made no sense, so we tried for some 20 years to get fairness and equalisation in the system. To give the Government credit, they finally examined the formula about two years ago and decided to revamp the system by giving a form of area cost adjustment, albeit probably with a different name, to councils throughout the country. The county of Cambridgeshire and its shire districts were included in the revaluation of the amount of grant needed to deliver the right level of services.

Instead of getting the money, however, we now find that the crazy policy of floors and ceilings has come into play. Last year, Fenland was short-changed by more than £500,000, while £420,000 was not given in grant this year, despite the fact that it was calculated under the new formula. Fenland is supposed to find £300,000 under the capping arrangement, but that is less money than we should be getting under the new formula. Where is the logic in that? I wish that the Minister would intervene to put me right because I cannot understand the situation at all.

Mr. Ronnie Campbell (Blyth Valley) (Lab)

Nor can anyone else.

Mr. Moss

I thank the hon. Member for Blyth Valley (Mr. Campbell) for his interjection.

Some £420,000 has been withheld from Fenland this year to provide the level of services that it wants, but the Government have also come in with a pincer movement. They have set up the comprehensive performance assessment, but it probably costs our councils a large amount to pay for that because people come in and take up officer time for weeks on end, and councils have to jump through hoops set by the Government to get a comprehensive performance assessment grading. There are four grades: failing, poor, good and excellent.

What does my poor Conservative council do? Foolishly, in my opinion, it decides to strive for excellence. I do not know why, but it decided to do that. It was a poor council two years ago, so the incoming Conservative group, under fairly able and aggressive leadership, cleaned out the old guard and brought in new ideas. Within two years it is two half-points away from being assessed as "good". On a different day it would have scored those half-points, got 41 instead of 40 and been categorised as a good council. Why are the Government setting up these systems for councils to measure themselves and then kicking them where it hurts most for other sorts of reasons? Here is a council striving to measure up to the Government's standards, almost getting into the "good" category, and being carved up by an illogical decision by the Government.

I do not think the Minister is responsible for that. I have clashed with him on many occasions and I have always had him down as an extremely sensible, practical, pragmatic Minister, but not for one minute can he justify what he is proposing tonight.

Mr. Pickles

I did not want to let my hon. Friend's speech to go by without confirming what he said about floors and ceilings. Fenland, according to the Government, should be spending more. It has moved to a position where the Government say it should pay and it is being penalised for following Government guidelines.

Mr. Moss

That is right. If one adds the £300,000 that the council now has to save to the £420,000 that it did not get, that is £720,000 out of a budget of £12 million. It is an enormous amount of money.

The council has attempted to jump through the Government's hoops. It has even started on the Government's pet projects, such as recycling. That is not yet mandatory but it will be eventually, and we all agree that it is probably a good thing. So what is Fenland doing? It is spending £204,000 setting up a recycling scheme. The Government are also keen on e-government. The council is spending £100,000 on that. That is £300,000 on those two features alone, in which the Government are encouraging councils to become involved. That sum matches the saving that the council must produce.

I am not usually spiteful, but I have said to my council, "Ditch at a stroke all these Government requirements. Just ditch them. Why should we play the Government's game and then find that we get kneecapped for doing it? It is ridiculous."

The hon. Member for Nottingham, South made three proposals to the Minister. I am not sure I could endorse the third option. It comes more powerful from the Government Benches than from ours. We ask for it all the time and get nowhere. However, the two other options are important. What is proposed is illogical. It makes no sense to anybody. It is a spiteful action. The case has not been made tonight or on a previous occasion, and no one to whom I speak who has any understanding of these matters understands why the Government are doing it.

If the Government want to set a few councils apart and appear to be disciplining them, fine, but we will be two thirds of the way through the year when the new bills go out. There is only a 10-month direct debit system and the bills cannot be prepared and sent out until October, which will be about the sixth month of the 10. People will already have paid, so what is the point? Figures have been mentioned tonight—in the case of Nottingham, £250,000—for the re-billing. We think that in Fenland the figure will be about £80,000. That is an extra cost that the council tax payer will have to bear.

Why penalise people in low-value properties? We should be looking to support them, rather than adding further burdens to their council tax payments. If the Minister wants to make his point and rap a few knuckles, that is fine, but instead of going through the irresponsible and stupid procedure of re-billing, why do we not say to the councils, "Next year you will rebate the amount we calculate that you should save, or just have a zero rate increase in your council tax." That is not a problem. While he is at it, why does the Minister not pay Fenland the money that his Government, by their own formula, deem that it needs to deliver a standard service?

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

I always find it easier to attack a Government policy, or anything for that matter, if I understand the logic that lies behind it. I cannot begin to comprehend the logic that lies behind the order that we are considering tonight. I genuinely do not understand it. The Library has produced a helpful summary of the capping order and points out that the savings are tiny in relation to the budgets of the authorities being capped. Without doubt, Nottingham is the most bizarre case, with a projected saving of £180,000 out of a budget of £131 million. It literally defies description. I cannot understand why that is even being considered.

I shall speak particularly of the Hereford and Worcester fire authority, which has one of the larger percentage savings, but even then, it is less than 4 per cent. of the budget. That is hardly the stuff of the heady days of capping under the last Conservative Administration, when real sums of money were being discussed. Whatever the merits of capping, real sums were then being discussed. One can make the case, and I made it at the time in private, that capping is a bad thing, because the folly of local authorities should be exposed. But there is no justification for such extraordinarily small percentage savings.

On top of that, as the debate has so clearly highlighted, there is the folly of the costs of re-billing. Again, Nottingham is the most bizarre case, with the cost of re-billing being about one and a half times the money saved. My authority, the Hereford and Worcester fire authority, is the second most bizarre. The cost of re-billing will be half the sum saved, and that cost falls back on the authority and has to be found from its resources, magnifying the effect of the cap. I heard nothing from the Minister tonight that helped me understand the logic underpinning the order.

The Minister alluded briefly to future issues that will arise, should maximum budgets for next year be imposed. Both my fire authority and my police authority are extremely well run. The police authority has led the way in civilianisation. It has been an outstanding authority, but we now hear of the possibility that it will be capped in future years. The Minister will shortly receive a letter from the police authority that tells him that, were that to happen, it could not deliver the Government's declared aims for law and order. That is the consequence of the other, unspoken part of tonight's debate.

It is true that we have seen massive increases in the portion of the council tax bill for West Mercia constabulary to meet the Government's objectives. I heard the Home Secretary today boasting from the Dispatch Box about the increased number of police officers. The only reason that we have increased numbers of police officers in Herefordshire, Worcestershire and Shropshire—the West Mercia authority—is that the council tax payer has to pay for them. The Government would not. No credit attaches to the Government for any of those officers.

Mr. Raynsford

indicated dissent.

Mr. Luff

There is no point in the Minister shaking his head. It is true. Both the police and the fire authorities are monstrously funded. What world is the Minister living in? [Interruption.] The real world, he says. I invite him to come and see the Hereford and Worcester fire authority for himself, and not to rely on the representations that he receives. He has reduced the amount of money that we have to save, so it is clear that he realised he had made a mistake. He went halfway to meet it but he could not go all the way. Again, saving face is the order of the day for the Government. Had he listened properly to those representations from the fire authority, he would have abandoned that ridiculous idea.

The fire authority is required to cut about £1 million from its budget of £25 million. This is its first year as a precepting authority. It is worth recalling that the problem of the underfunding of the fire service in Herefordshire and Worcestershire has gone on for years—and I say this to be bipartisan—under Governments of both political persuasions. The response of Hereford and Worcester, which once formed a combined council but are now separate councils, has consistently been to spend above the standard spending assessment, year in, year out. When I was a young boy in this place in 1992 and 1993, representations were made to the then Conservative Government urging them to provide better funding for the fire authority, but it has not happened.

Mr. Wiggin

My hon. Friend will be aware not only that my constituents will be rebilled for their council tax and police and fire authorities, but that a specific problem arises with regard to the Worcester fire authority. Although it is in an urban area, it is responsible for huge areas of countryside, so its cost base is very different. It is an extremely cost-effective authority and it did not need the order.

Mr. Luff

My hon. Friend is absolutely right. He might have added that there is a Labour chairman. If people are looking for a scapegoat, why pick on Nottingham? Why not just settle for Hereford and Worcester fire brigade and kill two birds with one stone?

Let me refer to the detail of the cuts necessary in the Hereford and Worcester combined fire authority. Support budgets are down £372,000, the vehicle budget is down £164,000, there is a delay in an important new headquarters project, saving £81,000 and other minor capital projects are down £10,000. With regard to the integrated risk management plan, to which I understand the Government attach great importance, there will be a saving of £475,000. The modernisation project, a declared objective of the Office of the Deputy Prime Minister that it regularly boasts about, has been abandoned with a saving of £151,000, and the various service delivery reductions amount to £245,000.

To meet the cost of rebilling, £1.498 million must be saved. There will be no action on modernisation, deferral of the 2004–05 capital budget and no action on dealing with the comprehensive performance assessment recommendations. The authority now predicts a high probability of failure to meet performance standards. There will be no action on best-value programmes—another pet enthusiasm of the Government—and an increased failure to meet statutory requirements. There will also be a weaker support mechanism across the whole patch, including finance, member support, procurement and personnel and no replacement vehicles or equipment at all this year. There will be no action on equalities work—another Government issue—including necessary improvements to buildings, which I assume means that the Disability Discrimination Act 1995 will be ignored, or on building replacement and improvement programmes. There will also be a withdrawal from various local partnerships, a significant reduction in safety education programmes and no action on fire safety initiatives,. The list goes on and on.

All those things will save the average band D council tax payer 7p a week, or £3.73 for the year. That is what all this turmoil will save. It is literally—this is a word that we often abuse—incredible. Like Victor Meldrew, I really do not believe it. It is not as if the fire authority's spending or council tax levels are out of line with shire county averages. The authority is in line with or just above or below all of them. There is nothing outrageous about the council tax requirements imposed by the Hereford and Worcester combined fire authority. A very important point is that its level of grant per citizen is the second lowest in the country; it is beaten only by Wiltshire. It is incredible that so many good and important things should be put at risk.

The Minister may well say, if he gets the chance to do so in this very short debate, that I welcomed the announcement when he originally made it. I did so for the following reason, which he knows is on the record: I thought that the detailed representations that he would receive from a small number of authorities would force him to recognise that the root problem was the monstrous underfunding that the police and fire authorities receive. I hoped that they would force a realisation of that fact.

Bob Russell (Colchester) (LD)

That is naive.

Mr. Luff

I hear what the hon. Gentleman says, although I prefer the words "trusting" and "rational". Indeed, I prefer all kinds of other words, but perhaps I was naive after all. There has been a partial and grudging acceptance of part of the fire authority's case, but there is still the lunacy of £500,000 in re-billing costs. It is literally incredible.

I urge the Minister, even at this late hour, not to proceed. He does not have to proceed to a vote on this foolish order. He can say that he has listened to the arguments, including the excellent speeches of his hon. Friends the Members for Nottingham, North (Mr. Allen) and for Nottingham, South (Alan Simpson), and that he will not proceed with the order. That option still exists.

I rushed out of the Chamber a few minutes ago because a thought came to my mind about a word that is defined thus in the "The Concise Oxford Dictionary":

amusingly eccentric…crazy or reckless. n. an eccentric person. The word is, of course, "madcap", and it is a word that we apply to the Minister for Local and Regional Government.

7.55 pm
Mr. Adrian Sanders (Torbay) (LD)

I have the good fortune to represent one of the main holiday and hospitality destinations in the United Kingdom. As tourism is the area's main industry, its local authority, whether as a district council or as a unitary authority, as it is now, has always been presented with big problems.

The problem with local government in this country is that local councils are over-dependent on central Government for their income. The ratio in my area is 70:30, while the national average is 75:25. If an authority is that dependent on a paymaster, it is limited in how much it can do in its area. The calculation by the Local Government Association is that, to meet a 1 per cent. increase in costs locally, council tax has to be increased by 4 per cent.

That gearing lies at the heart of the difficulties that all local authorities have in setting their budgets, but the authorities that we are discussing tonight have had particular difficulties this year. That is the basic unfairness about the order. It is this year on which the authorities are being judged, and not their performance over a number of years or over a given set of time in relation to the actual council taxes that they have set or to the increases. Of course, no account is necessarily taken of the amount of Government funding that they receive in any year, which itself can be different year on year, depending on the changes that central Government make to the formula.

The problem of representing a fabulous constituency that so many people wish to visit and to live and work in, if they can find a job, is that we have to spend money to maintain that which attracts people. What we spend money on—illuminations, parks, gardens and toilets—is not statutory. For a unitary authority that depends on central Government for 70 per cent. of its expenditure, all the rules, regulations and targets that come down from above mean that very little is left for the non-statutory services, so they are the first things to be cut.

Another problem with which many authorities have to cope, especially seaside resort authorities, is a transient population. Such populations tend to bring with them a number of social problems. We have a high level of educational statements—the authority of Torbay has more statemented children under the age of 10 than the entire city of Bristol. That is a cost that the local authority has to meet. We have rising numbers of kids in care. For a small unitary authority, the bill for one child, which can be almost £100,000 a year for 24- hour care, can completely skew the social services budget. Torbay has a large number of people who have moved in from inner-city areas and an abnormal number of children in full-time care. We also have an ageing population. When those people present themselves to the social services, councillors cannot say, "We cannot offer you anything as we are making cuts." They have to pay that bill.

Therein lies Torbay's problem. Some £1 million has been overspent in social services. There are also the costs of all the Government programmes that have been imposed, including audit costs and comprehensive performance assessment costs of some £2.5 million. In Torbay's case, the actual grant formula is £26 per head less than in the average unitary authority, which accounts for another £1.1 million. Torbay starts £4.6 million down, and the Government say, "You must spend another £100,000 on rebilling."

There is no justice in the order for any of the authorities. Tonight, hon. Members on both sides of the House have made good cases for every area, but the Government have made the case for neither the justice nor the logic of the order.

8 pm

Mr. Raynsford

The debate has been interesting and I shall try to respond to the hon. Members who have spoken.

The hon. Member for Brentwood and Ongar (Mr. Pickles) began by saying that capping is not necessary at this time, although he accepts that it is necessary on other occasions. Against the background of last year's 12.9 per cent. average increase in council tax, it is difficult not to see the need for capping. A number of other hon. Members recognised that the significant reduction in this year's council tax increases is because the Government made it clear that we would use our capping powers.

The hon. Gentleman said that we have reneged on a pledge not to cap excellent and good authorities, but that pledge stood in the year in which it was made—we did not cap excellent authorities last year, despite the large increases. The hon. Member for Brentwood and Ongar should be ashamed of Wandsworth council, which had the largest increase—55 per cent.—in the country, but we did not cap it because we had made a pledge. In the autumn, the Government put all authorities on notice that we would use our capping powers.

Mr. Pickles

Will the Minister give way?

Mr. Raynsford

No, I do not have time. The hon. Gentleman should pass the message back to Wandsworth. I have less than 10 minutes and a number of hon. Members made points to which I want to respond.

The hon. Gentleman also said that capping should be used only in extreme cases. When he was in government, it was not a question of using capping occasionally, because it was used crudely and universally year after year. We have taken reserve powers, but we did not cap in any of the previous five years and we capped for the first time because high council tax increases made it absolutely necessary.

Mr. Moss

Will the Minister give way?

Mr. Raynsford

No, I will not give way. I made it clear that I will respond to the hon. Gentleman's point. If he intervenes, I shall have no chance to respond to points made earlier.

My hon. Friends the Members for Nottingham, North (Mr. Allen) and for Nottingham, South (Alan Simpson) made sensible and fair representations on behalf of their authority. I am not endorsing the comments made by my hon. Friend the Member for Nottingham, South, but my hon. Friends made perfectly proper representations on behalf of their authority.

My hon. Friend the Member for Nottingham, North argued that the increase in council tax above the excess level was only marginal in the case of Nottingham. However, a 9.8 per cent. increase, one of the largest in the country for unitary authorities, is not in my view marginal. [Interruption.] Perhaps it was 9.6 per cent., but it was certainly more than 9 per cent. [Interruption.] We have dealt with the issue of re-billing costs and the saving in earlier exchanges.

My hon. Friend the Member for Nottingham, North made the point that Nottingham had not been given advanced warning of being capped. When we sent out letters to individual authorities, the figures quoted by Nottingham city council did not put it in the danger zone. As soon as it became clear that Nottingham city council was considering an increase of the order of 7 to 8 per cent., a spokesman for my Department was quoted in the local newspaper as saying, "If the increase is of that order, it is in the danger zone." Nottingham received a clear warning.

Mr. Allen

Will the Minister give way?

Mr. Raynsford

No, because I must respond to other hon. Members. [Interruption.]

Madam Deputy Speaker (Sylvia Heal)

Order. The Minister is responding to the debate; let us have order.

Mr. Raynsford

The hon. Member for Kingston and Surbiton (Mr. Davey) considered our proposals an attack on democracy, but democracy depends on responsibility. He is only too happy to defend a Liberal Democrat council that had the largest single council tax increase of any authority in the country this year. He did not say that 28.4 per cent. is an unreasonable increase, and he will not say that. It is an indication of the Liberal Democrats' departure from reality that they cannot bring themselves to condemn increases of that order, which are clearly excessive. Shepway council's 28.4 per cent. increase was the highest in the country, and, contrary to what he said, it was 50 per cent. above the average increase for district councils. He should know that that authority cannot be treated as a marginal case, because the increase was substantial.

The hon. Gentleman asked why we should cap when, in his words, Government threats were successful in reducing council tax to the lowest level for several years. Those threats were successful, and it is a pity that he did not welcome them, but some authorities did not reduce their council tax. Had we not used our capping powers, people would not have believed that we were serious.

The hon. Member for North-East Cambridgeshire (Mr. Moss) asked about our definition of "excessive" and claimed that we had not issued one. I issued that definition on 29 April when I made a statement about capping, and I shall repeat it to him now. The definition in the case of a district council is a budget increase of more than 2 per cent., a council tax increase of more than 8.5 per cent. and a band D council tax above the average for district councils. Fenland district council is being capped because its budget increase, council tax increase and band D council tax are above those thresholds—its band D council tax is about 50 per cent. more than the average for district councils.

The hon. Gentleman mentioned Huntingdonshire, but he has obviously not been doing his homework. Huntingdonshire's average band D council tax is £95 and Fenland's is £206, which is why Fenland district council is in that particular position.

The hon. Gentleman discussed Fenland having its grant withheld. He had the good grace to acknowledge that we reviewed the area cost adjustment and that Fenland, like Cambridgeshire, benefited from significant grant increases as a result. He knows that the operation of the floors and ceilings system is designed to protect authorities against unreasonable short-term fluctuations in their entitlement, but one cannot have floors without supporting the ceilings.

The hon. Member for Mid-Worcestershire (Mr. Luff) had the good grace to recognise that his remarks were inconsistent with his comments on 29 April, when he said: On balance, I welcome the Minister's comments about Hereford and Worcester fire authority and West Mercia constabulary".—[0fficial Report, 29 April 2004; Vol. 420, c. 1029.] He does not understand the logic of capping. A budget increase of 19 per cent. and a council tax precept increase of 29 per cent. are massively above the figures for any other fire authority in the country, which is why Hereford and Worcester fire authority is in that position. He acknowledged that we have listened to the representations and made changes.

The hon. Member for Torbay (Mr. Sanders) discussed his authority's dependence on Government grant. His authority received a good grant increase of 6.9 per cent. and we expect all authorities with good grant increases to budget accordingly.

I recognise that hon. Members have considerable concerns about the issues, and we listened carefully to the representations from the authorities concerned and made changes to the original proposals. The action proposed in the draft order and the separate action that we are taking on nominated authorities is a measured and proportionate response to excessive increases. Our approach makes use of the new, more flexible capping powers, which we introduced in 1997. Although I understand the concerns expressed by hon. Members, the truth of the matter is that the arguments advanced on behalf of individual authorities are, by and large, not unique—other authorities in similar positions did not set budgets that led to excessive increases.

Question put:

The House divided: Ayes 278, Noes 175.

Division No. 232] [8:09 pm
Ainger, Nick David, Wayne
Ainsworth, Bob (Cov'try NE) Davidson, Ian
Anderson, rh Donald (Swansea E) Davies, rh Denzil (Llanelli)
Anderson, Janet (Rossendale & Davies, Geraint (Croydon C)
Darwen) Dawson, Hilton
Atherton, Ms Candy Dean, Mrs Janet
Atkins, Charlotte Denham, rh John
Austin, John Dhanda, Parmjit
Bailey, Adrian Dobbin, Jim (Heywood)
Baird, Vera Dodds, Nigel
Barnes, Harry Dowd, Jim (Lewisham W)
Barron, rh Kevin Eagle, Angela (Wallasey)
Bayley, Hugh Eagle, Maria (L'pool Garston)
Begg, Miss Anne Efford, Clive
Benn, rh Hilary Ellman, Mrs Louise
Bennett, Andrew Etherington, Bill
Benton, Joe (Bootle) Farrelly, Paul
Berry, Roger Field, rh Frank (Birkenhead)
Best, Harold Fitzpatrick, Jim
Blackman, Liz Fitzsimons, Mrs Lorna
Blears, Ms Hazel Flint, Caroline
Borrow, David Flynn, Paul (Newport W)
Bradley, Peter (The Wrekin) Follett, Barbara
Brennan, Kevin Foster, Michael (Worcester)
Brown, rh Nicholas (Newcastle E Foster, Michael Jabez (Hastings
Wallsend) & Rye)
Brown, Russell (Dumfries) Foulkes, rh George
Browne, Desmond Gapes, Mike (Ilford S)
Buck, Ms Karen George, rh Bruce (Walsall S)
Burden, Richard Gerrard, Neil
Burgon, Colin Gilroy, Linda
Byers, rh Stephen Goggins, Paul
Cairns, David Griffiths, Jane (Reading E)
Campbell, Alan (Tynemouth) Griffiths, Nigel (Edinburgh S)
Campbell, Mrs Anne (C'bridge) Griffiths, Win (Bridgend)
Campbell, Ronnie (Blyth V) Grogan, John
Caplin, Ivor Hain, rh Peter
Caton, Martin Hall, Mike (Weaver Vale)
Cawsey, Ian (Brigg) Hall, Patrick (Bedford)
Challen, Colin Hamilton, David (Midlothian)
Clapham, Michael Hamilton, Fabian (Leeds NE)
Clark, Mrs Helen (Peterborough) Hanson, David
Clark, Dr. Lynda (Edinburgh Healey, John
Pentlands) Henderson, Ivan (Harwich)
Clark, Paul (Gillingham) Hendrick, Mark
Clarke, rh Charles (Norwich S) Hepburn, Stephen
Clarke, rh Tom (Coatbridge & Hesford, Stephen
Chryston) Heyes, David
Clarke, Tony (Northampton S) Hill, Keith (Streatham)
Clelland, David Hinchliffe, David
Clwyd, Ann (Cynon V) Hodge, Margaret
Cohen, Harry Hope, Phil (Corby)
Cook, rh Robin (Livingston) Hopkins, Kelvin
Corston, Jean Howarth, rh Alan (Newport E)
Cousins, Jim Howarth, George (Knowsley N &
Cox, Tom (Tooting) Sefton E)
Crausby, David Howells, Dr. Kim
Cruddas, Jon Hoyle, Lindsay
Cummings, John Hughes, Beverley (Stretford &
Cunningham, Jim (Coventry S) Urmston)
Cunningham, Tony (Workington) Hughes, Kevin (Doncaster N)
Dalyell, Tam Iddon, Dr. Brian
Davey, Valerie (Bristol W) Illsley, Eric
Irranca-Davies, Huw Picking, Anne
Jackson, Helen (Hillsborough) Pickthall, Colin
Jamieson, David Pike, Peter (Burnley)
Jenkins, Brian Plaskitt, James
Johnson, Alan (Hull W) Pollard, Kerry
Jones, Helen (Warrington N) Pond, Chris (Gravesham)
Jones, Jon Owen (Cardiff C) Pope, Greg (Hyndburn)
Jones, Kevan (N Durham) Prentice, Ms Bridget (Lewisham
Jones, Lynne (Selly Oak) E)
Jones, Martyn (Clwyd S) Prentice, Gordon (Pendle)
Joyce, Eric (Falkirk W) Prescott, rh John
Keeble, Ms Sally Primarolo, rh Dawn
Keen, Ann (Brentford) Prosser, Gwyn
Kemp, Fraser Purchase, Ken
Kennedy, Jane (Wavertree) Purnell, James
Kidney, David Quin, rh Joyce
Kilfoyle, Peter Quinn, Lawrie
King, Andy (Rugby) Rammell, Bill
Knight, Jim (S Dorset) Rapson, Syd (Portsmouth N)
Kumar, Dr. Ashok Raynsford, rh Nick
Ladyman, Dr. Stephen Reed, Andy (Loughborough)
Lammy, David Robertson, John (Glasgow
Laxton, Bob (Derby N) Anniesland)
Lazarowicz, Mark Robinson, Geoffrey (Coventry
Lepper, David NW)
Leslie, Christopher Roche, Mrs Barbara
Levitt, Tom (High Peak) Rooney, Terry
Lewis, Ivan (Bury S) Ross, Ernie (Dundee W)
Lewis, Terry (Worsley) Roy, Frank (Motherwell)
Linton, Martin Ruane, Chris
Lloyd, Tony (Manchester C) Ruddock, Joan
Lucas, Ian (Wrexham) Russell, Ms Christine (City of
Luke, Iain (Dundee E) Chester)
Lyons, John (Strathkelvin) Ryan, Joan (Enfield N)
McAvoy, Thomas Salter, Martin
McCabe, Stephen Savidge, Malcolm
McCafferty, Chris Sawford, Phil
McDonagh, Siobhain Sedgemore, Brian
MacDonald, Calum Sheerman, Barry
MacDougall, John Sheridan, Jim
McFall, rh John Short, rh Clare
McGuire, Mrs Anne Singh, Marsha
McIsaac, Shona Smith, rh Andrew (Oxford E)
McKechin, Ann Smith, Angela (Basildon)
McNamara, Kevin Smith, rh Chris (Islington S &
Mactaggart, Fiona Finsbury)
McWalter, Tony Smith, Geraldine (Morecambe &
Mahon, Mrs Alice Lunesdale)
Mallaber, Judy Smith, Llew (Blaenau Gwent)
Mandelson, rh Peter Soley, Clive
Mann, John (Bassetlaw) Southworth, Helen
Marris, Rob (Wolverh'ton SW) Squire, Rachel
Marsden, Gordon (Blackpool S) Stewart, David (Inverness E &
Martlew, Eric Lochaber)
Meacher, rh Michael Stewart, Ian (Eccles)
Meale, Alan (Mansfield) Stoate, Dr. Howard
Merron, Gillian Strang, rh Dr. Gavin
Michael, rh Alun Stuart, Ms Gisela
Miliband, David Sutcliffe, Gerry
Miller, Andrew Tami, Mark (Alyn)
Moffatt, Laura Taylor, Dari (Stockton S)
Mole, Chris Taylor, David (NW Leics)
Moran, Margaret Thomas, Gareth (Harrow W)
Morley, Elliot Tipping, Paddy
Mountford, Kali Todd, Mark (S Derbyshire)
Mullin, Chris Touhig, Don (Islwyn)
Munn, Ms Meg Trickett, Jon
Murphy, Denis (Wansbeck) Truswell, Paul
Murphy, Jim (Eastwood) Turner, Dennis (Wolverh'ton SE)
Naysmith, Dr. Doug Turner, Dr. Desmond (Brighton
O'Brien, Bill (Normanton) Kemptown)
O'Hara, Edward Twigg, Derek (Halton)
Olner, Bill Twigg, Stephen (Enfield)
Organ, Diana Tynan, Bill (Hamilton S)
Owen, Albert Vaz, Keith (Leicester E)
Perham, Linda Vis, Dr. Rudi
Ward, Claire Woolas, Phil
Wareing, Robert N. Worthington, Tony
Watson, Tom (W Bromwich E) Wray, James (Glasgow
Watts, David Baillieston)
White, Brian Wright, Anthony D. (Gt
Whitehead, Dr. Alan Yarmouth)
Williams, Betty (Conwy) Wright, Tony (Cannock)
Winnick, David
Winterton, Ms Rosie (Doncaster Tellers for the Ayes:
C) Mr. John Heppell and
Woodward, Shaun Vernon Coaker
Ainsworth, Peter (E Surrey) Clifton-Brown, Geoffrey
Allan, Richard Collins, Tim
Allen, Graham Corbyn, Jeremy
Amess, David Cotter, Brian
Ancram, rh Michael Cran, James (Beverley)
Arbuthnot, rh James Cryer, John (Hornchurch)
Atkinson, David (Bour'mth E) Curry, rh David
Bacon, Richard Davey, Edward (Kingston)
Baker, Norman Davies, Quentin (Grantham &
Barker, Gregory Stamford)
Baron, John (Billericay) Djanogly, Jonathan
Barrett, John Doughty, Sue
Beith, rh A. J. Duncan, Alan (Rutland)
Bellingham, Henry Duncan Smith, rh Iain
Bercow, John Evans, Nigel
Beresford, Sir Paul Fallon, Michael
Blunt, Crispin Field, Mark (Cities of London &
Boswell, Tim Westminster)
Bottomley, Peter (Worthing W) Flight, Howard
Bottomley, rh Virginia (SW Forth, rh Eric
Surrey) Foster, Don (Bath)
Brady, Graham Gale, Roger (N Thanet)
Brazier, Julian Garnier, Edward
Breed, Colin Gibb, Nick (Bognor Regis)
Brooke, Mrs Annette L. Gidley, Sandra
Browning, Mrs Angela Goodman, Paul
Bruce, Malcolm Gray, James (N Wilts)
Burns, Simon Grayling, Chris
Burnside, David Green, Damian (Ashford)
Burstow, Paul Green, Matthew (Ludlow)
Burt, Alistair Grieve, Dominic
Cable, Dr. Vincent Gummer, rh John
Calton, Mrs Patsy Hague, rh William
Cameron, David Hammond, Philip
Campbell, rh Sir Menzies (NE Hancock, Mike
Fife) Heald, Oliver
Carmichael, Alistair Heath, David
Cash, William Heathcoat-Amory, rh David
Chapman, Sir Sydney (Chipping Hoban, Mark (Fareham)
Barnet) Hogg, rh Douglas
Chidgey, David Horam, John (Orpington)
Chope, Christopher Jack, rh Michael
Clappison, James Jackson, Robert (Wantage)
Clarke, rh Kenneth (Rushcliffe) Jones, Nigel (Cheltenham)
Kennedy, rh Charles (Ross Skye & Russell, Bob (Colchester)
Inverness) Sanders, Adrian
Key, Robert (Salisbury) Sayeed, Jonathan
Kirkbride, Miss Julie Selous, Andrew
Knight, rh Greg (E Yorkshire) Shephard, rh Mrs Gillian
Lait, Mrs Jacqui Shepherd, Richard
Lamb, Norman Simmonds, Mark
Lansley, Andrew Simpson, Alan (Nottingham S)
Laws, David (Yeovil) Simpson, Keith (M-Norfolk)
Letwin, rh Oliver Smith, Sir Robert (W Ab'd'ns &
Lewis, Dr. Julian (New Forest E) Kincardine)
Liddell-Grainger, Ian Soames, Nicholas
Lidington, David Spelman, Mrs Caroline
Loughton, Tim Spicer, Sir Michael
Luff, Peter (M-Worcs) Spink, Bob (Castle Point)
McDonnell, John Spring, Richard
McIntosh, Miss Anne Stanley, rh Sir John
Mackay, rh Andrew Streeter, Gary
Maclean, rh David Stunell, Andrew
McLoughlin, Patrick Swayne, Desmond
Malins, Humfrey Swire, Hugo (E Devon)
Maples, John Syms, Robert
Marsden, Paul (Shrewsbury & Taylor, Ian (Esher)
Atcham) Taylor, John (Solihull)
Mawhinney, rh Sir Brian Taylor, Dr. Richard (Wyre F)
May, Mrs Theresa Taylor, Sir Teddy
Mercer, Patrick Teather, Sarah
Mitchell, Andrew (Sutton Tonge, Dr. Jenny
Coldfield) Tredinnick, David
Moss, Malcolm Turner, Andrew (Isle of Wight)
Murrison, Dr. Andrew Tyler, Paul (N Cornwall)
Norman, Archie Tyrie, Andrew
O'Brien, Stephen (Eddisbury) Viggers, Peter
Öpik, Lembit Walter, Robert
Osborne, George (Tatton) Watkinson, Angela
Ottaway, Richard Webb, Steve (Northavon)
Page, Richard Whittingdale, John
Paice, James Wiggin, Bill
Paterson, Owen Willetts, David
Pickles, Eric Williams, Roger (Brecon)
Price, Adam (E Carmarthen & Willis, Phil
Dinefwr) Winterton, Ann (Congleton)
Prisk, Mark (Hertford) Winterton, Sir Nicholas
Randall, John (Macclesfield)
Redwood, rh John Yeo, Tim (S Suffolk)
Rendel, David Young, rh Sir George
Robathan, Andrew Younger-Ross, Richard
Robertson, Laurence (Tewk'b'ry)
Roe, Dame Marion Tellers for the Noes:
Rosindell, Andrew Hugh Robertson and
Ruffley, David Mr. Peter Atkinson

Question accordingly agreed to.


That the draft Council Tax Limitation (England) (Maximum Amounts) Order 2004, which was laid before this House on 8th July, be approved.