§ 5.8 p.m.
§ Baroness Farrington of Ribbleton
My Lords, with the leave of the House, I should now like to repeat a Statement which my right honourable friend the Deputy Prime Minister has made in another place about the local authority revenue finance settlement for England for 1998/99. The Statement is as follows:
"As you know, Madam Speaker. the Secretary of State comes before the House at about this time each year to make a statement about local authority finance for the following financial year. There will follow a period of consultation with local authorities and others and I will then bring a report to the House which, when approved, will finalise the arrangements.
"My Statement today is important to local authorities since it gives them firm information on which to make progress in setting their budgets.
"This Statement concerns England. My right honourable friend the Secretary of State for Wales will be making an announcement today and my right honourable friend the Secretary of State for Scotland will make an announcement very shortly.
"As this is the first such Statement of the new Parliament, I hope that it will be helpful if I put today's Statement into a wider context. We were elected on a manifesto which pledged us to a renewal of local government. We aim to achieve: re-invigoration of local democracy; a commitment to best value; a prospect of greater fairness and; increased local discretion allied to greater local accountability. We have made good progress so far, though we have still some way to go.
"We have set up a new central local partnership to help local and central government work in harmony. We have signed the Charter of Local Self Government which the previous Administration refused to sign. We have taken legislation to provide for the release of some £800 million in additional capital expenditure in England under our capital receipts initiative. This money will help the unemployed; build and refurbish homes for those in need; and support our wider New Deal objectives. We have put local authority public private partnerships on a clearer footing. We are supporting the Bill of the noble Lord, Lord Hunt, on local authority innovation.
1281 "We are discussing with the Local Government Association ways of renewing local democracy. We are decentralising decision making to the local level. We have introduced a Bill to give London a voice once again. Tomorrow we will publish our White Paper on regional development agencies, setting out how we will work with local government and others to revive the regions of England. And we will very shortly announce the pilot local authorities for our "best value programme". Finally we have started, in co-operation with the Local Government Association, a review of the system of local government finance.
"Each of those items is important in its own right. Taken together, they demonstrate that we really mean it when we talk about a new relationship and partnership with local government. All this in just seven months of government. But our full progress will be judged not in seven months but over a full five years of a Labour government.
"We will be issuing consultation papers starting later this year and, following consultation, a White Paper in the late spring. This new relationship follows many years when the previous government did not listen to local authorities and squeezed their expenditure year after year after year. Despite all this, local government has survived that period, I am glad to say. My aim is to build a strong partnership between central and local government to the advantage of our citizens and our communities.
"The first important element of the local authority settlement is my proposals for the Government's provision for spending by local authorities. In forming my proposals, I have of course considered the pressures which local authorities will face in the coming year—which are considerable—and I have listened carefully to the views of the Local Government Association. In line with these views, we have chosen in this settlement to concentrate on the policy priorities, which we set out in our manifesto and which were endorsed by the electorate—above all, education.
"We were elected on a pledge to stick to the previous government's public expenditure totals for 1998/99. Nevertheless, my right honourable friend the Chancellor of the Exchequer announced in his Budget on 2nd July that by careful consideration of the priorities for public expenditure we had been able to make available an extra £835 million for revenue expenditure in English schools in 1998/99. I can confirm today that we will provide an extra £835 million of revenue support grant for our schools. This means that none of the cost of this extra schools spending will fall on the council tax payer.
"We are also providing £662 million for local authorities for the education of four year-olds, following the abolition of nursery vouchers. I also propose to provide up to £130 million for the transitional costs of local government reorganisation, such as for the unitary authorities. We have also taken into account smaller changes which will take place in local government functions. Taken together, these factors mean that the Government's view is that the 1282 appropriate level of total standard spending (TSS) for local authorities in England in 1998/99 will be £48.2 billion.
"My right honourable friend the Secretary of State for Health will today be making a separate announcement on resources for community care. My right honourable friend the Home Secretary will today be making a separate announcement on resources for the police. Both are included in the figure 1 have just quoted. This £48.2 billion provides for an increase of £1.78 billion (or 3.8 per cent.) in local authority spending year on year. That is expected to he 1 per cent. above inflation, therefore allowing an increase in real terms, to reflect our key policy priorities.
"Education is the top priority for this Government and the nation. Raising standards in schools is not only a benefit to children. It is an investment in our country's future. Altogether we have made extra provision of £1.06 billion, or 5.7 per cent., to go into English schools in 1998/99. It can and should be spent in the classroom, reversing the years of neglect. This meets the pressures identified by the Local Government Association and enables a start to be made on raising educational standards, which we all are determined to see. That is a big step.
"Community care is another important area in which local authorities are facing up to the difficulties involved. Local authorities provide a vital service by looking after elderly and disabled citizens. We have maintained previous plans to make resources available in this area. We expect to see a reduction in the net costs of financing outstanding debt. So we have been able to make a larger than average increase in provision for some services, including a further £70 million for children's social services—the first substantial increase for three years. Fire services provide an essential and much appreciated service to the community. So I am pleased to announce that we have increased provision for the fire service by 4.8 per cent., within an overall increase for other services of 1.4 per cent. These other services include highways, libraries and the Probation Service.
"Now I want to turn to how much assistance local authorities will get from the business rates and the national tax payer which together give a total of £37.51 billion. That includes the £835 million extra to ensure that the cost of our extra provision for schools does not fall on council tax payers. It also includes £20 million extra to make possible the development of £200 million worth of local authority private finance projects. The business rate will be increased to 47.4 pence in the pound, as provided by the legislation, following the 3.6 per cent. increase in the September retail prices index. This means that we can distribute £12.52 billion of business rates to local authorities in 1998/99. I am today publishing the detailed basis for that distribution to local authorities.
"I propose that the revenue support grant should be £19.5 billion. In addition, some £5.49 billion of specific and special grants will be available. The total of revenue support grant for England on which I am consulting may need to be altered slightly as a result 1283 of consultation. The total may be increased, if it appears that less provision is needed for the transitional costs of local government reorganisation.
"I turn now, to the means of distributing revenue support grant. At its heart is the standard spending assessment for each authority. An authority's SSA is its share of the total provision for all authorities, taking account of its local circumstances. It is not a spending target.
"We were elected on a pledge to remove the unfairnesses which have dogged standard spending assessments since they were first introduced. We have discussed with local government during the summer a wide range of ideas for improving fairness. I am today announcing changes which are well founded in research evidence which respond to long-standing concerns of many local authorities and which remove the more blatant cases of unfairness.
"I first propose a new basis for assessing spending needs for the education of under-fives. The nursery voucher scheme was a wasteful and bureaucratic paper chase. The money released by its abolition will assist in our programme to make universal provision for 4 to 5 year-olds. The new distribution will recognise the number of pupils for whom local authorities currently provide. Authorities which need to expand their nursery education, and put forward sound plans for doing so, will be able to get an additional grant from the Department for Education and Employment. This is just one element of the national childcare strategy, of which after school clubs form another part.
"Secondly, I propose to tackle a piece of nonsense in the present formula. Currently some authorities have an incredible ranking on the measures of neediness. It is hard to believe that leafy Kingston upon Thames is as needy as beleaguered Barnsley. We have carried out with the Local Government Association a very thorough re-examination. We have at last applied explicit principles to these calculations. I believe the new measures of neediness which we are proposing are a clear improvement on what went before.
"Thirdly, I propose a new basis for the allocations for elderly residential social services. The formula has had a thorough overhaul using research commissioned by the Department of Health from the University of Kent. For the first time, it takes proper account of the changes in social services in the past five years following the introduction of community care.
"Fourthly, I propose a new treatment of debt incurred by local authorities before the current system was established in 1990. During the 1980s local authorities had a choice. They could either use capital receipts to pay off debt or they could use them to finance new capital expenditure. But in 1990 the previous government decided to penalise those who had chosen new capital expenditure during the previous decade. They treated everyone as if they had chosen to repay debt, whether they had done so or 1284 not. I am proposing to put right that wrong. I propose that we should reflect in the standard spending assessment each authority's actual debt as at 1990, if that improves its position.
"Finally, I have given priority to tackling the great unfairness whereby visitors and commuters were assumed to have the same economic and social characteristics as the residents of the authority they were visiting. This was an anomaly exposed time after time in this House. The previous government's formula treated people staying in the Ritz in London as if they were as deprived as the average local resident. Even the research on this commissioned by the central London authorities themselves, which were the greatest beneficiaries, did not recommend keeping the existing approach. So from next year we will get rid of this glaring injustice. We shall take account of visitors and commuters; but only fair account.
"I will mention only one of the many other proposals for changes which were pressed on me but which I have not taken up. It concerns the area cost adjustment. That is the means by which higher employment costs, particularly in London and the south east, are recognised in standard spending assessments. I do not believe the evidence is yet sufficiently clear enough to warrant a change this year. However, I am commissioning further research to see whether there is a sound basis upon which to consider changes for this time next year.
"The changes which I have outlined, with some smaller technical changes, are a big step towards making the grant system fairer, as we promised. These changes would have a large impact on council tax levels in some authorities, if the authorities do not adjust their spending accordingly. I accept that authorities and their council tax payers may need a period in which to adjust to these changes. So I propose to phase in changes in the way that standard spending assessments are calculated.
"I propose that "damping" or "phasing-in" of the larger corrections we have introduced should be limited to the equivalent of half the SSA reduction. This strikes a reasonable balance between the need for time to adjust and the need to get more fairness into the system. There will again be separate "phasing-in" schemes for police and non-police authorities.
"I also propose to repeat this year's scheme to phase in those council tax increases which are directly due to reorganisation. The scheme would "damp" such council tax increases which are above a threshold of £52 a year at band D, for authorities which are subject to reorganisation from April 1998. It would also provide continued damping for authorities reorganised in earlier years where they exceed a threshold of £104 a year at band D.
"Let me now turn to council taxes. We are examining in the local government finance review ways in which the fairness of the council tax might be improved. I do not propose to make any changes ahead of the results of that review. I expect that for 1285 the foreseeable future the council tax will remain the prime means by which local residents contribute to the cost of local services.
"Each year the Government identify a notional tax level for each valuation band. This is known as the council tax for standard spending. We do this to calculate a distribution of grants which would enable all authorities to provide a standard level of service for a similar council tax level, for a similarly valued property, whatever the differences in needs and resources. My proposals set this figure at £635 for a band D property. That reflects the previous government's plans to increase council tax by 7 per cent. This increase was built into the previous Administration's spending plans. That is not a prediction of the average level of council tax nor of the band D bills for individual authorities.
"The actual council taxes in individual authorities will vary considerably depending on their own spending decisions; their financing decisions; their collection performance; and their efficiency. No Secretary of State could predict those factors with a high degree of accuracy for individual authorities.
"This pressure on council tax is inherent in the public expenditure totals set by the previous government. We have sought to relieve pressures by a number of means, in particular by fully funding the £835 million extra for education. This extra funding for schools is worth £50 a year to the typical tax payer. But, as I made clear earlier, local authorities must give full weight to the burden on their tax payers when they come to set their budgets.
"We remain committed to the ending of crude and universal capping. But in the light of our public expenditure plans, as both the Chancellor and I made clear to the Local Government Association conference in July, capping will remain in place for 1998/99. We have provided extra money for schools. We cannot risk that being undermined by unplanned increases in spending.
"I am today announcing my provisional capping principles for 1998/99. I am also issuing proposals for the calculation of notional amounts for those authorities whose boundaries or functions will change from 1st April 1998. These include reorganised authorities and local education authorities affected by the abolition of the nursery voucher scheme. The notional amount is the base level from which I will measure the increase in budget in determining whether that increase is excessive. My provisional capping principles themselves make allowance for expenditure on community care which is being met in 1997/98 by the special transitional grant; and changing funding arrangements for the National Criminal Intelligence Service. Those adjustments are necessary to make a fair year-on-year comparison of budgets.
"I am making a number of changes to provisional capping principles this year. These will give local authorities more room to exercise local discretion and will help them to direct the additional provision for education to the schools for which it is intended.
1286 "Subject to the allowances I have already mentioned and other technical adjustments affecting individual authorities my proposals for capping are as follows. As in previous years, authorities whose base budgets are more than 12½ per cent. above their standard spending assessment will not be permitted any increase over their 1997/98 base budget. Nor will any other authority be allowed an increase which would take it beyond 12½ per cent. above its SSA. However, I propose to allow each class of authority to increase its base budget more than in recent years. That will be helped by changes to so-called "passporting" about which I shall tell the House. Let me just explain this term "passporting". In the past, the Government recognised increased spending needs on a particular service, but prevented councils from spending that money—through the capping system. That was a ridiculous situation. "Passporting" is designed to deal with that problem.
"Where an authority's standard spending assessment increases, that will follow through into its capping limit so the money can really be spent. The permitted increases I propose for classes of authority are as follows: for inner London boroughs, the City of London and shire districts, I propose that the year-on-year increase should be limited to 1½ per cent.; for outer London boroughs, metropolitan districts, county councils, unitary authorities and the Isles of Scilly, I propose that the increase should be limited to 3 per cent.; for police authorities outside London, I propose that the increase should be limited to 3.2 per cent.; for the London and metropolitan fire and civil defence authorities, I propose that the increase should be limited to 4½ per cent. For all classes of authority other than police, these year-on-year permitted increases are substantially greater than last year, particularly reflecting the extra provision we have made for schools.
"Shire districts have been treated especially harshly in recent years. So for shire districts I am permitting an increase in 1998/99 which will be three times more than in previous years. But I am going further than that.
"I can announce today that for all authorities (other than police authorities) budgeting up to 12½ per cent. above their standard spending assessment, I intend to "passport" the increases for all service blocks within the spending assessments. This will extend the benefits of passporting to shire districts for the first time. It will also be the first time that increases in highway maintenance, other services and capital financing blocks have been passported.
"These are important changes in the capping regime. They give greater discretion to local authorities. I do, however, expect local authorities to look carefully at their permitted increases, including passporting, and make a careful judgement about whether they need to make those increases in budget and whether their council tax payers can afford them. Many authorities have budgeted below their capping limit in the past. I have given local authorities extra room within which to exercise their discretion. I expect them to do just that.
1287 "These principles are necessarily provisional. I cannot take my firm decision on capping until authorities have set their budgets for 1998/99. When I come to take those decisions, I shall of course, take into account all relevant considerations.
"My department is today writing with the details of the settlement to every local authority in England. That package includes a consultation paper setting out how we propose to distribute central government support between authorities, including my proposals on standard spending assessments and damping. It sets out my provisional capping criteria, and includes my proposals for notional amounts. Copies of this package have been placed in the Vote Office and the Library.
"The package is large and some elements are very complex and precise. That is possibly unavoidable for a system which distributes huge sums of money among more than 400 local authorities with different needs and resources. The basis of the calculations has to be set out in detail to assure the House and local authorities that each authority is being treated in exactly the same way as others. We are reviewing how we might simplify the process in the longer term, while retaining that reassurance. I know that if we can make this whole exercise simpler, it will be much appreciated by Members of the House, local authorities and the general public. For the immediate future I plan to provide for the House before the Revenue Support Grant Report is debated in the New Year, a plain English guide to these aspects of local government finance.
"The proposals I have outlined today represent a substantial improvement on the settlement that local government could have expected, following the Budget of the last administration a year ago: there is £835 million extra provision for education; standard spending assessments will be made fairer; and local authorities will have more scope to exercise their discretion on budgets. This is a better and a fairer settlement than in previous years.
"Too often in the past two decades, central Government in Whitehall seemed to be waging war on local government in the town halls. When Labour was elected on 1st May, we declared it was time to bury the hatchet. Whatever the considerable difficulties we found—financial, social, or environmental—we would face them together, with local government, regardless of the party in charge in any particular town hall. In just seven months, we have taken the first steps in developing this new partnership. We will be judged on our full five-year programme; but the direction is right—the priorities are different.
"The Government believe in local democracy. This year and next will he tough financially. But we are firmly on the road to reinvigorate local democracy and restore a new and more positive relationship between central and local government".
§ My Lords, that concludes the Statement.
My Lords, first, I thank the noble Baroness, Lady Farrington of Ribbleton, for repeating the Statement made in another place earlier this afternoon. I should declare an interest as a member of a local authority. There is one aspect of this Statement which I support unequivocally and which cannot come too soon for me; that is the promised plain English guide to the system.
I believe that this is a Statement which will be greeted on reflection with some dismay by both council tax payers and local authorities. What we have heard this afternoon is a formula for reduced services at increased cost, particularly in view of the more relaxed approach to capping which is envisaged in this Statement and because of the extra costs which must be met by local government.
For Band D taxpayers, who are always taken as a guide, it is a Statement which envisages increases in some local authorities of up to 10 per cent. of council tax or £60 at Band D. I do not believe that Her Majesty's Government can seek to avoid taking responsibility for that by claiming that they are adhering to the expenditure plans of the previous administration. First, they are not; and secondly, it is indeed their responsibility.
What have this Government done for local government since May? They have imposed an additional burden on local government which is estimated at some £1 billion. How is that made up? Principally, price levels are higher. They will have risen by nearly 1.5 per cent. over this year and as estimated over next year, costing local government as a whole £0.5 billion. There have been five interest rate rises since May. Rates are up from 6 per cent. to 7.25 per cent. And the changes in the treatment of advanced corporation tax for pension funds is costing local government an extra £300 million per year. That is not my figure but a figure provided by the Local Government Association, which has a very firm and solid Labour majority. It is no good members of the Government saying that this provision will not take effect until 1999. Councils will want to take action now to deal with the deficit with which many are faced. To leave matters until 1999 will only make the situation worse.
The consequences are that council tax will rise as I have suggested. The claim that the Government have increased funds for education by £835 million is not precisely as it seems. It is money taken from reserves left by the previous government, which would have been applied to education as part of the annual spending round. The effect of higher inflation rates has reduced this to a worth of only £480 million.
I believe that a number of questions arise out of the Statement. For example, how are the Government going to ensure that the money is applied to education? Will the Minister call on her colleagues in Labour-controlled councils to ensure that the money is indeed spent on that? Last year it did not. Is it not the case that the Secretary of State has no existing powers to ensure that 1289 that happens? Is there not a risk that councils put under severe pressure by the settlement may spend the money elsewhere, especially as the Local Government Association has predicted that there will be a significant shortfall in the total standard spending for non-education services?
The £662 million for educating four year-olds is not new money for education; it is merely recycling money from the nursery vouchers scheme. I ask the Minister what information she can give the House regarding the changes to the methods of distribution. We need to know what the effect of those changes will be. Where will the gains and losses be felt? Is there a shift from the south and the south-east to the north? Is there a shift from rural areas to urban areas? I believe that the House will want to know the answers to those questions. Changes of this nature in the formulae never affect only one authority, were that ever to be the intention of governments. The system is not that sophisticated or sensitive.
The changes in the treatment of debt will, I believe, be a matter of rewarding councils which have run up debts and penalising those which have paid them off. That is on top of the local authorities' supplementary credit Act which has already given a new capacity to borrow rather than releasing the actual moneys, as stated yet again in the Statement this afternoon. The encouragement to increase debt can only be to the detriment of council tax payers in future years. Will not the changes in the "damping" mechanisms, which have been changed themselves, not lead to unacceptably high levels of council tax in many local authorities?
In opposition, the Government made much play of how they would encourage and support local authorities and local services. By this settlement, and in particular their own actions, they have put at risk social services and other local authority services, reduced the value of the benefits claimed to have been given to education and placed another burden on council tax payers, many of whom are just coming to terms with the succession of interest rate rises that they have suffered on their mortgages. It is extra taxation—I know that it is because this time last year the then Shadow Chancellor of the Exchequer described his estimate of council tax rises as "locally-driven tax rises", as did the then Leader of the Opposition. But in the "People's Britain" there were supposed to be no plans to increase tax at all. I say to the Minister that the council tax payers who will pay for the settlement will see it as another tax on the people.
§ Baroness Hamwee
My Lords, I, too, thank the Minister for repeating the Statement. She must feel something of a poacher turned gamekeeper, or perhaps I have that the wrong way round. Like the noble Lord, Lord Bowness, I must declare an interest as a serving member of a London borough. I have never seen the play "The Mousetrap", but I believe that it must be a little like the Statement—the script remains much the same year after year, despite the new cast. Therefore, it is inevitable that the response from these Benches will not be very different from that given to previous Tory 1290 settlements; namely, disappointment, verging on despair, combined with anger borne of frustration and pain at what is happening to local services.
The new Government have undoubtedly written a better prologue to the play, but they have stitched it on to rather the same substance. Indeed, the noble Baroness referred quite directly to the previous government's plans which, it appears, this Government may be applying even more toughly. Reference was made to the European Charter for Local Self-Government, but the combination of the grant system and capping envisaged in the Statement does not seem to me to amount to the autonomy envisaged by the charter. I take the opportunity to ask, as I have done previously in this House, when the Government intend to ratify the charter? I am sure that that is very close to the noble Baroness's heart.
The noble Baroness referred to capital receipts and used the word "release". I cannot help but respond that it is not a release; indeed, it is a new borrowing arrangement and local authorities understand that fact. Reference was also made to the recently ratified concordat, the framework for partnership between local and central government. I hope that the consultation referred to in the Statement will mean that, in the future, if real consensus is not reached between the two sides—because that may not be possible—then very constructive dialogue will be organised with both sides listening extremely carefully.
In the run-up to today's announcement, the Government will have been told of local authority concern for education. We have been told about the funding for education. I have to say that I contest the view that it is good news. The Local Government Association estimated in June that LEA spending next year needs to rise by £529 million to meet inevitable costs and to restore pupil-teacher ratios only to 1995 levels.
Pupil numbers are rising and we now have just under 500,000 five to seven year-olds in classes of over 30. If one adds to that approximately £515 million for inflation and the teachers' pay award, education spending needs to rise by £1,044 million just to maintain current standards, the allocation for which we have heard is £835 million from reserves. Local education authorities will be more than £200 million short of what they need to meet basic educational needs in 1998-99. I hope that the Minister will accept that a shortfall of that order means that local government aspirations for education cannot be met.
With regard to the under-fives, the proposals are not entirely easy to follow. My own authority has already declared an interest and I know that it is seriously concerned. It believes that it would lose over £1 million of under-five SSA with a change in the basis for distributing the majority of funding—that is, 30 per cent. of this sub-block. That seems an impossible shift of resources in a single year. It also seems to indicate that the cardinal rule of the SSA system—namely, that an authority's own policies should not influence the SSA—is one which may be on the way to being breached. In other words, it seems not to be the unalloyed joy and benefit suggested by the noble Baroness.
1291 Reference has also been made to community care. I am sure that the noble Baroness will accept that the previous government underfunded community care. That led to local authorities considering rationing, grasping the nettle and being open about it in a way we have not yet seen in the health service, although I believe the issues are rather similar. It appears that in this area six out of 10 authorities will have to increase their charges at a rate above inflation; four out of 10 will have to introduce charges for services which were previously free, which means restriction on access; and seven out of 10 will have to tighten eligibility criteria. That, too, means restriction of access. The police and fire services and those who provide a whole raft of environmental and protective services still believe that there are considerable shortfalls.
Many noble Lords will have received representations from local residents as well as from local authorities as to the effect on their services. Only last weekend I received a letter from a resident of Oxfordshire, an authority which has suffered substantially under the capping regime. The letter referred to library closures. I am sure that your Lordships, with your respect for language, the written word and information, will understand the impact these proposals will have on a lower order service such as libraries not falling within the "headline" topics of education and social services. Only today a report was published by the Rural Development Commission on the loss of services in rural communities. When I read about the loss of bus services, I could not help thinking that this is just the kind of service which local government, in partnership with other providers, would want to ensure is available for their communities. It seems to me that that kind of partnership is now even further restricted.
It is entirely right to refer to local taxation in the context of taxation overall. One has to mention council tax along with other taxes, especially income tax. In many ways council tax is less fair and less transparent than income tax. That makes it all the more important to admit that this settlement means that people will pay more for less and that, because of the capping and the decision to stick with Tory spending plans, the responsibility for cuts and for council tax rises rests squarely with central government and Whitehall and not with town halls.
Your Lordships will have detected a reaction from these Benches when leafy Kingston was mentioned. The noble Lord, Lord Tope, and I are its neighbours on either side. We have noticed that other boroughs, including, for instance, Wandsworth, have leafy bits too. I am not surprised by this reference. Perhaps Barnsley is to become the new Westminster! If I have understood correctly, I think I welcome the announcement about the change in the approach to debt. The noble Lord, Lord Bowness, took a rather more moralistic view on that than I might have done. In the light of the financial constraints of the past few years, one cannot look at the question of debt entirely as a moral issue aside from an economic one. I am not entirely surprised that the area 1292 cost adjustment has been postponed. I am beginning to think that that needs a mediator rather than a researcher to settle it.
I note, too, the references to damping. I think that that gives something away. Of course there will be losers through the settlement and that is admitted by the Government. They are leaving in place capping for the next year. I have some difficulty in understanding the passporting rules but they seem to indicate that there may be more ring fencing and more central control. If that is the case, I cannot welcome them.
In the Government's review of all this, and their proposal to issue a plain English guide, might now not be the time also to consider whether this Statement is an appropriate presentation? I believe that the Statement comprises 54 pages, although some of the pages contain only a few sentences. No one would deny that the procedure provides a superb platform for the Government. However, some noble Lords will have collected the Statement only minutes before it was made. It is an enormous package. The noble Baroness referred to the precision and complexity of the settlement. There is, of course, obscurity too in some of its elements, if I may dare to say so. Real consultation in the future might be better served through a different form of announcement.
§ Baroness Farrington of Ribbleton
My Lords, I hope that my noble friend will understand that the procedure is that I reply to the two Front Bench speakers and that there is then an opportunity for questions from other noble Lords. Certainly, the noble Baroness, Lady Hamwee, would find it not at all difficult to convince me, while I am at the Dispatch Box, that there is a better way to proceed. I am sure that, during the course of the review of local government finance, questions of presentation and the manner in which decisions are announced will form part of the discussion.
I begin with the points made by the noble Lord, Lord Bowness. I find it strange that he feels able to express dismay at an average increase which was definitely built into the published expenditure plans of the previous government as part of their commitment that a greater share of the cost of local services ought to be borne by the council tax payer rather than through central taxation which is then re-distributed through grant. He expressed concern about council tax payers having to pay even more because of extra spending. I remind the noble Lord that the Government are backing pound for pound the £835 million increase in education expenditure with extra grants.
The noble Lord asked how we would ensure that the additional money intended for education was spent on education. That is one of those catch-22 questions. If we were to say that it was being rigidly controlled from the centre, that would provide grist to the mill of the noble Baroness, Lady Hamwee, who sees even passporting as a dangerous extension of central control. Budget decisions are for local authorities, and that is as it should be. Both I and my right honourable friend the Secretary of State will want to draw the attention of local 1293 authorities to education and to the priority that it will be given by parents. I declare a former interest as one-time chair of an education authority in Lancashire. In my experience the first people to be aware of the additional money for education will be the many parents and parent governors who are not prepared quietly to sit back.
The noble Baroness, Lady Hamwee, referred to the increased money for education. I believe that she failed to note that the total year on year increase in the education budget is £1.06 billion, and that the £835 million was additional expenditure within that amount and therefore should be adequate to meet the needs she identified. The noble Lord, Lord Bowness, claimed that the nursery money was merely a question of recycling. What we are doing is returning money—so that it can be spent directly, without incurring unnecessary bureaucratic hoops and costs—to the people who ought to provide the service for all four year-olds whose parents wish them to have that education. Therefore it is not recycling money.
The noble Baroness, Lady Hamwee, asked whether the distribution of money would be in a manner that was fair to individual local authorities. I am sure that individual local authorities will check that aspect during the consultation period. The noble Baroness expressed concern, if I understood her correctly, about the degree to which there would be central control over bids for additional money to spend on the education service. We do not intend to allow local authorities, as they did under old local government finance systems, to claim money within their expenditure totals and central government grant for the provision of pre-school nursery education, and not use the money for that.
The noble Lord, Lord Bowness, asked about distribution. I refer him to the detail of the Statement. I believe that it clearly answers his question.
The noble Baroness, Lady Hamwee, referred to the issue of grants, capping and ratification of the charter. The Government will ratify the charter for local government when it is appropriate to do so. In their new partnership deal with local government the Government recognise that there need to be radical changes as the result of a thorough investigation of local government finance. It is because we intend to do that that the capping regime stays in place at present. But we shall give priority to ensuring that there is a proper, thorough review. We seek to achieve agreement between ourselves and local government in order to improve matters.
As regards the education budget, there is a 5.7 per cent. increase year on year. The noble Baroness, Lady Hamwee, sought to reintroduce a proposal which I understand was put to the electorate in the general election by her party: that the public should pay higher rates and that the money should be spent on education. This RSG settlement provides nearly £2 billion in total including the additional money for school buildings over and above the expenditure totals which we inherited. In that sense we have met an objective but have done so with the backing of the electorate who voted not to have such an increase in income tax.
1294 We do not deny that this is a difficult budget. That is inevitable. The Government wish to see firm and solid management of the economy at this stage so that at the end of five years we are able to consider the funding of local government services and the new relationship in the context of a sound economy.
From my experience, Barnsley, being the other side of the Pennines, would be happy to have the visitors and commuters who are present in some of the authorities in the south. My experience of people in Yorkshire is that they would happily say, "Yes, and we do not expect unfair additional treatment if we are doing so well."
§ 6.5 p.m.
§ Lord Hardy of Wath
My Lords, does my noble friend accept that it is cause for considerable pleasure to hear that the Government seek to develop a new, fresh and much needed relationship with local government and that the blatant unfairnesses are being tackled? In that regard, and as a Yorkshireman from the best side of the Pennines, I wish to ask my noble friend whether Barnsley and the other Webber-Craig authorities—the smaller metropolitan areas of the north of England—have cause for a little relief after more than a decade of the unfairness and hardship they have experienced? That hardship and unfairness did not extend to the City of Westminster. Is there some satisfaction for those and other authorities which have experienced that unfairness? Has the difference between the City of Westminster authority and the remaining authorities substantially narrowed?
§ Baroness Farrington of Ribbleton
My Lords, I agree with my noble friend. It is a good position to be in. As an initial step in reviewing the way in which local authority SSAs and funding are calculated, we are looking at some of the more blatant examples of the system used by the previous government which was unfair to some authorities and excessively unfair to others.
§ Baroness Gardner of Parkes
My Lords, I believe it appropriate to ask my question in view of the previous Statement with which I cannot agree. Is the noble Baroness aware of the lengthy debate in this House when the national non-domestic rate was introduced? It now seems to be called the business rate. On that occasion it was pointed out that the City of London, the City of Westminster, Camden, and Kensington and Chelsea, each made a huge contribution because the total business rate which they had collected in the past had gone in its entirety directly to the Treasury. That was the reason for a degree of compensation to those inner London boroughs. The City of London was excluded and treated differently. The other boroughs received differential treatment to compensate them to some minor degree for the great amount that they had lost. I do not know whether the noble Baroness is aware of that debate. I participated in it at the time.
Is the noble Baroness aware that since 1991–92 the SSA per head in the City of Westminster has increased by less than the average for inner London boroughs? Is she also aware that within the City of Westminster there are significant areas of deprivation, and a much higher 1295 proportion of elderly aged over 85 and elderly living alone than in Hackney, Islington, Lambeth or Southwark? Can the noble Baroness confirm that some element of the SSA will continue to cover tourism? The noble Baroness mentioned areas fortunate enough to have tourists. Does she agree that there are costs in terms of additional street cleaning and provision of amenities associated with tourism? Tourists are not entirely a source of joy either to the local residents or to the council tax payers.
I have one further question which applies to any borough—in London or outside. Will the Government consider the need to recognise that special expenditure for refugees falls unfairly on certain areas and should be treated as a national expense? Can some help be given, either retrospectively or in advance, to those boroughs and areas involved in the high costs which apply to refugees?
§ Baroness Farrington of Ribbleton
My Lords, on asylum seekers, the Government recognise the difficulties of local authorities. In the short term the asylum seekers will be eligible for non-contributory social security benefits, where they have applied on arrival at the port of entry for asylum, and for assistance under the homelessness legislation. In the longer term, the Government are conducting a wide ranging review of asylum policy considering all aspects of the asylum process including the provision of accommodation and support. The aim is to identify need.
Behind the point raised by the noble Baroness is the question of whether SSA should apply in full to the cost of asylum seekers. It is not possible to reflect specifically asylum seekers in the framework of broad indicators used for SSAs, but numbers of asylum seekers are included in SSAs to the extent that they are reflected in the population estimate used in their calculation. In deriving the estimates for 1998–99 SSAs, the Registrar General changed the method of calculation to reflect more accurately the numbers of asylum seekers in the London area.
As to the range of questions put by the noble Baroness, I do not recollect the particular debate to which she refers with regard to national non-domestic rate, but I can reassure her that the levels of real deprivation among the population in authorities such as the City of Westminster will continue to be given fair treatment. What has changed as a result of the more blatant flaws in the previous system is the assumption not that there should not be account taken of those coming into such authorities in terms of commuters and tourists—those needs are taken into account—but to ensure that no assumption is made that if, for example (I use a figure for illustration) 20 per cent. of the City of Westminster's permanent population were deprived, 1296 that would be no reason for assuming that 20 per cent. of the commuting or tourist population were deprived. That is the adjustment that has been made.
§ Lord Evans of Parkside rose—
§ Baroness Gardner of Parkes
My Lords, I am sorry but I should like to come back and ask a supplementary question?
§ Baroness Gardner of Parkes
We do have 20 minutes and I would like to ask a supplementary. Is the noble Baroness saying that no consideration is being given to the fact that this huge business rate, non-domestic rate, is going entirely to the Treasury? Is the City of Westminster to get no benefit for its council tax payers from that?
§ Baroness Farrington of Ribbleton
My Lords, all local authorities get benefit from the Treasury because the previous government nationalised the business rate. They nationalised it and ensured that it was then distributed by central government. We have said that we want to look at the situation and the circumstances in which it would be possible to consider returning that to local authorities and to local discretion. I have given an indication of the sorts of things that would have to be in place as part of that total change. I feel it is a little unfair to hold me to account for all the actions of the noble Baroness's party in government.
§ Lord Evans of Parkside
My Lords, will my noble friend accept my sincere congratulations on the way she presented the Statement to the House and answered questions? Local government finance is notoriously an appallingly difficult subject, surrounded by its own jargon. Frankly, the overwhelming majority of the population can make neither head nor tail of it. Is my noble friend aware that over the last five or six of my 23 years' representing St. Helens in the other place,I always spent a full day with the borough treasurer after he had devoted a whole weekend to going through masses of documents like those confronting us today to arrive at what the final settlement would mean to the borough of St. Helens? Is my noble friend aware that I am astonished when I still hear representatives of the Conservative Party get up and proclaim the unfair treatment that Westminster has received over the years?
Is my noble friend aware that if the borough of St. Helens had received precisely the same standard spending assessment and support grant as Westminster, not only would we have been able to provide the services entirely free of any charge but we would also have been able to send every single council tax payer a cheque for £750? That is a measure of the appalling unfairness in the circumstances. Is my noble friend also aware that much of the non-domestic rate of the borough of St. Helens was wiped out by successive Tory governments closing factories, collieries and other places that once employed thousands of people?
1297 Finally, can I say to my noble friend that I think that the Government have done a magnificent job in a short space of time in a notoriously difficult area. But will she ask her right honourable friend the Deputy Prime Minister to ensure that when the rate support grant settlement comes to us next year the Government will then have 12 months behind them and there will have been much more consultation with local authorities, so that next time round we will get a fair settlement which means that impoverished boroughs like St. Helens and others in the north of England will finally start to get a fair and honest deal from central government?
§ Baroness Farrington of Ribbleton
My Lords, as the noble Baroness, Lady Hamwee, referred to me as a poacher turned gamekeeper, my long experience in local government makes me hesitate to give a definite and categoric assurance of a particular date for ending a process of consultation between central and local government on the basis of future financial arrangements. We are fully committed to ensuring that a proper, fair and mutually respectful system is brought in as quickly as possible, in line with its being effective.
I understand the emotions. As I said earlier, I declare an interest, as a former Lancashire county councillor. None of us can doubt that there are high needs in areas in parts of local authorities such as the City of Westminster. We walk home at night past some of those needs. All that this settlement seeks to do is to ensure that those needs are recognised and met on a fair and equal footing, matching the percentage of needs existing in leafy Kingston with the percentage of needs in St. Helens. Fairness and equity is the hallmark of what we seek to do.
§ Lord Bridges
My Lords, may I, from these Benches, support the suggestion made by the noble Baroness, Lady Hamwee, that the extremely complicated nature of these statements makes their content rather difficult to digest, particularly if one does not have the benefit of a text. It seems to me, given the very complex gobbledegook language used, that it is difficult for those of us who are not versed in local government finance to understand fully. There might be some advantage in considering a different way of dealing with important Statements like this, for example, by the circulation of a printed text a day or so in advance so that we might have a rather more considered debate. I am aware that in this House a number of Members have expert knowledge of local government finance but I think we would be able to make a more considered and valuable contribution if we were given the opportunity to consider the matter shortly before speaking about it.
§ Baroness Farrington of Ribbleton
My Lords, I do take the point. Certainly, as I said in reply to an earlier question. I personally, at this moment, would like to see a different system in place. I am sure that particularly those Members of your Lordships' House who are still actively and individually involved in local government will ensure that the system of announcement and debate of the announcement will be considered. I understand 1298 that, apart from one year, this the first time for several years that the RSG settlement statement has actually been given in your Lordships' House.