Local Government Finance (Hansard, 29 January 2001)

§ Ms Armstrong

I have today laid before the House the Local Government Finance Report (England) 2001–02 and the Special Grant Report (No. 72). These reports establish the amounts of revenue support grant (RSG) and non-domestic rates (NDR) to be paid to local authorities

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in 2001–02, and the basis of their distribution; and provide for Standard Spending Assessment (SSA) Reduction Grant and Central Support Protection Grant to be paid to certain authorities for 2001–02. Drafts of these reports were issued for consultation on 27 November 2000, and updated information on grant allocations was published on 15 December. The Department received a total of 315 written representations within the consultation deadlines from the Local Government Association and the Association of London Government, as well as from 224 local authorities, local authority groups and hon. Members.

Having considered the views of the local authority associations and others who have commented on my initial proposals, I have decided to confirm in virtually all respects my original proposals on grant distribution. The final figures published today may be slightly different from those issued on 15 December, generally reflecting more accurate data that have become available since then. I am therefore confirming my proposal to set a floor of 3.2 per cent. and a ceiling of 6.5 per cent., on general grant increases for authorities with responsibilities for education and social services. This will set limits on what would otherwise be a very wide range of grant increases, which would have made service planning very difficult for authorities. A 6.5 per cent. increase in general grant should be sufficient for most ceiling authorities, even after allowing for the fact that they have growing populations to cater for. And a 3.2 per cent. increase is reasonable for floor authorities, taking into account the fact that most of them face reductions in population. In each case, these increases will be accompanied by substantial increases in ring-fenced grant.

The ceiling will help support the cost of introducing the floor, but cannot cover the whole cost. I therefore also confirm my proposal to scale back marginally the grant increases of authorities who are neither at the ceiling or the floor.

Following careful consideration, I propose to make one exception to the ceiling rule. Quite exceptional circumstances apply to the Isles of Scilly Council. Their annual budget is extremely small, and they cannot avoid substantial capital expenditure to maintain essential waste disposal services. I shall therefore not limit their grant increase this year.

This year's settlement provides an increase of 7.2 per cent. in total Government grant and a 4.9 per cent. increase in general grant. This is on top of substantial increases each year since 1997–98: in the four years since then, Government grant to local government has gone up by 14 per cent. in real terms, compared with a 7 per cent. cut in the previous four years.

Given these good increases in grant, I would therefore expect the majority of local authorities to be setting a lower Council Tax increase this year than last year, when the increase was 6.1 per cent.

Local authorities also made representations on council tax benefit subsidy limitation. I have considered these carefully but decided to make no change to the scheme I proposed on 27 November, as amended on 15 December.

I shall be sending copies of these reports and the Plain English guide to all authorities, together with tables showing each authority's Standard Spending Assessment 20W and its entitlement to RSG, NDR and special grant. I have placed copies of the reports in the Journal Office; and copies of the reports, tables, and the guide in the Vote Office and the Library.

However, the local government finance settlement should not be seen in isolation. The Government have identified four specific problem cases, and have responded to these.

We have looked again at the funding position of authorities in areas with the most serious deprivation problems. My right hon. Friend the Deputy Prime Minister announced on 24 January a doubling of the provision for the Neighbourhood Renewal Fund in 2001–02, from £100 million to £200 million. These additional resources will help local authorities improve services in the most deprived neighbourhoods and therefore to improve the outcomes that are achieved in these areas.

In some areas where there have been serious floods this year, authorities faced the prospect of an increased levy from the Environment Agency to cover the costs that it had incurred in dealing with this year's floods. My hon. Friend the Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food announced on 26 January that he will provide an additional £11.6 million for the Agency to limit the burden falling on local authorities.

My right hon. Friend the Parliamentary Undersecretary of State for Social Security is today announcing additional funding of £25 million to help local authorities facing significant increases in the cost of housing homeless households in temporary accommodation.

Finally, my right hon Friend the Secretary of State for Education and Employment is today announcing a new £52 million grant to help some education authorities manage funding changes and deal with particular education spending pressures.