Local Government Finance White Paper (Hansard, 12 February 2001)

§ The Parliamentary Under-Secretary of State, Department of the Environment, Transport and the Regions (Lord Whitty)
My Lords, we are currently considering over 16,000 responses to the local government finance Green Paper. We shall announce our decisions on the reform of local government finance in a White Paper to be published later this year.

Lord Bowness
My Lords, I thank the Minister for his Answer. I note that he mentioned "later this year". A similar reply was given previously by his noble friend Lady Farrington. Does the Minister agree that any changes, whether to council tax bands or in the nature of a revaluation, will give rise to large numbers of winners and losers—indeed, considerable losers in London and in the South East? In the interests of householders, does the Minister agree that the sooner the Government's intentions are known the better?

§ Lord Whitty
My Lords, bearing in mind that local government finance is an extremely complicated area and the fact that, whatever you do, there will almost certainly be winners and losers, noble Lords will understand why we are taking our time over this consultation. Indeed, 16,000 people have bothered to respond, so there is much interest in the matter. 2 We shall assess that response in relation to council tax banding. Although that aspect was not specifically covered in the consultation, we have received responses in that respect and in relation to the other strategic issues outlined in the Green Paper.

§ Lord Taylor of Blackburn
My Lords, does not my noble friend the Minister think it worth while to take some time over this consultation rather than rushing into a process and introducing something like the poll tax that the previous Conservative government introduced some time ago?

§ Lord Whitty
My Lords, as happens so frequently with my noble friend, he has left me with the feeling that I wish I had said that. My noble friend is correct in what he says. This is an extremely complicated area; indeed, the poll tax saga was an indication of the difficulties involved. I believe that we are right to take our time to get the matter right.

§ Baroness Hanham
My Lords, can the Minister tell the House why the concept of floors and ceilings, which I understand is part of the Green Paper, has been introduced as part of this year's settlement process before any adequate assessment could he made of the consultation replies?

§ Lord Whitty
My Lords, the Government's responsibilities in the matter are clear under local government finance provisions. In order to avoid major changes that would impact on council tax payers, we felt it necessary to introduce floors and ceilings in relation to this year's settlement. This has been done in the interests of stability and in order to avoid sudden changes to council tax payers.

§ Baroness Hamwee
My Lords, in the interests of clarity, as well as the fairness to which the noble Lord, Lord Bowness, referred, does the Minister agree that it is important to ensure that local authorities have the right degree of independence and the opportunity to take decisions about their communities? If the 3 Minister so agrees, does he also agree that for the Government to increase a specific grant at the expense of general funding—in other words, ring-fencing and reducing local discretion—is not the right direction in which to move?

§ Lord Whitty
My Lords, one of the themes of the Green Paper is to look at ways in which local authorities should be able to extend their flexibility and make choices for themselves on how they spend the money available to them. In general, I agree with the noble Baroness's first point. However, there are particular areas of government policy where clear objectives are needed and where ring-fenced grants may continue to be appropriate—that is as well as, and not instead of, providing increased flexibility to local authorities.

§ Baroness Hamwee
My Lords, is the Minister aware that the rise in specific grants in the last settlement is higher than the rise in revenue support funding? Does that support what the noble Lord is now saying?

§ Lord Whitty
My Lords, in my naivety, I thought that the noble Baroness was addressing the subject matter of the Question—namely, the forward pattern of local authority finance. If the noble Baroness is addressing history, then clearly there are parts of government policy under the present system where it is best to achieve objectives through ring-fenced financing; for example, on nursery education, which would not have been possible had we not extended the ring-fenced facilities over the past year and, indeed, during this current year. However, in the longer run, my previous answer stands.

§ Lord Skelmersdale
My Lords, should not government grants to local authorities always be ring fenced? Surely that would leave the raising of money from community charges to be dealt with as local authorities decided.

§ Lord Whitty
My Lords, that seems to me to indicate a degree of centralisation in the approach to local government finance, such as was endemic at various times during the term of the previous administration and from which we wish to move away. We do not wish to see the rigidity applied whereby central government lay down specifically and precisely how local government should spend its money. As I said, there are specific objectives in respect of which we must do so, but, in general, we believe that local authorities are responsible for making their own decisions within the allocation given to them by the Government and as regards the money raised through their own resources.

§ Lord Campbell of Alloway
My Lords, as a matter of clarification, is the Minister saying that the ring-fenced grant is always separate from, and additional to, the general grant so that it in no way detracts from the general grant? I am not quite sure on that point.

§ Lord Whitty
My Lords, under past policies elements within the general grant have been ring-fenced. The intention is to move to a broader, pooled budget under the general grant to which future ring-fenced finances would be separately allocated.

§ Lord Elton
My Lords, when the noble Lord says "ring fence", does he mean what I mean when I say "hypothecated"?

§ Lord Whitty
My Lords, I am not sure what the noble Lord means when he says "hypothecated". When I say "hypothecated" I tend to refer to central taxation which the Treasury on occasion—very rarely—allows individual departments to allocate for specific purposes. Ring-fencing relates to the control or otherwise which central government have over local government allocations.