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Debate Local Government Finance - 5 February 2004 Mr. David Curry (Skipton and Ripon): As far as this debate is concerned, clearly the floor has already hit the ceiling, and there is nothing between the two. It is a matter of some regret that we are discussing the disposal of about 25 per cent. of public expenditure in just two hours. I am afraid that that is a reflection on priorities, and I think that the business managers should get together to ensure that in future we can have proper debates on matters of such importance. The Government's handling of local government finance over the past 12 months has been characterised by incompetence, confusion, panic, and now intimidation: incompetence, because the Government utterly failed to foresee, then to get to grips with the dislocation caused by the application of a new formula—rigged, as it happens, to drag money to Labour metropolitan areas; confusion, because the Government sought desperately to bail themselves out by ordering the passporting of education funding, while all the time the Secretary of State for Education and Skills, whose blundering had caused the problems in the first place, sought to blame everyone except himself for the mess; panic, because the Government threw money at this year's settlement without sorting out the inevitable problems that flow from the Secretary of State's pre-emptive strike by prescribing the distribution of schools funding from Whitehall; and now, intimidation as the Government try a combination of cash and confrontation to bludgeon councils into setting a council tax increase in "low single figures"—or is it a "reasonable" increase accompanied by an increasingly histrionic letter-writing habit that suggests that even the Minister has scant faith that the settlement will stand up as reasonable in its own right? The Government are right to feel panic. Last year's incompetence has led to massive council tax rises because the Government decreed additional spending, but failed to provide for it in grant. The council tax increases were the direct consequence of the Government's miscalculations, as the Audit Commission made clear. So now we are back—with a vengeance—to crude and universal capping. Even the Deputy Prime Minister mocked himself—at least it saved us the trouble—when he talked yesterday about "exercising his sophisticated view" in implementing capping, and could hardly conceal his smile. Capping has an interesting pedigree. The Minister quoted my reference to Procrustes when I was doing my job, as he is doing his. That reference was double-edged, which is why I used it, and it turned out to be right in the end. In June 1993, the now Secretary of State for Foreign Affairs said: "The Labour party is wholly and unequivocally opposed to the capping of a council's budget. It is an abuse of central power, it demeans democracy, it undermines the right of local people to decide what services they are ready and willing to pay for, it is in breach of one promise after another from the Conservative party, it serves no economic purpose, and it has not worked in its own terms."—[Official Report, 9 June 1993; Vol. 226, c. 385.] That statement continues to be true. Everyone learns in retrospect. The Government had 13 years in which to learn, but they failed to do that. Does the Minister remember his perorations about the new freedoms for councils that perform well? Is he aware of the sheer effort and energy that go into preparing for comprehensive performance assessment inspections? Does he remember the praise that he heaped on councils that were rated excellent, while encouraging those that were merely good to make one last heave? Does he know that, of the councils that received threatening letters from him and had a CPA inspection, nine were rated excellent: five Conservative, three Labour and one without overall control—Hartlepool—and 15 were rated good: five Conservative, two Labour, two Liberal Democrat and six without overall control?Does he remember that, in December 2002, the Deputy Prime Minister promised that excellent and good councils would be exempted from reserve capping powers? We are now in the perverse position whereby councils that are rated excellent are awarded freedoms, but may be capped, while poor councils have no freedoms, but might not be capped. That is not the only perversity. On the first day of the new financial year, the Department removed controls on capital but enforced controls on revenue through capping. I understand that it is called the new localism Sir Paul Beresford (Mole Valley) (Con): Does my right hon. Friend agree that it is curious that whenever the Minister mentions capping, he refers to one of his favourite Tory councils? It is an excellent council, which he keeps threatening with capping, but charges the lowest average council tax in the country. It is Wandsworth. Mr. Curry: It will be interesting to note whether the Minister takes into account the absolute level of council tax when he determines his capping criteria. There is a third perversity. The Government have created turbulence and introduced the famous floors and ceilings to control it. However, there are two sets of floors and ceilings. The interaction of floors and ceilings for the general grant and that for education expenditure means that, for some local authorities, the entire grant increase must go to education. Those authorities are: Richmond, East Sussex, West Sussex—which has a princely total grant increase of £6,000—Windsor and Maidenhead, Southend and Bromley, which last year had to increase education spending by more than the increase in the entire grant for all purposes. Mr. Raynsford: I am sure that the right hon. Gentleman would like to correct the impression that he gave that West Sussex received a total grant increase of only £6,000. That is not the case. He is referring to the supplement as a result of the Chancellor's pre-Budget report. The increase to West Sussex is much larger. Mr. Curry: The bonus that West Sussex received was, for the reasons explained, a princely £6,000. The distribution is skewed. London faces a £247 band D precept from Mr. Livingstone. After the distribution of £340 million in central grant, the increases after passporting are 6.6 per cent. for Labour councils, 6 per cent. for Liberal Democrat councils and 2.5 per cent. for Conservative councils. Labour councils have got nine out of 10 of the highest settlements and Conservative councils have got seven out of 10 of the lowest settlements. We do not even know how capping will work. Is reasonableness a criterion? Are low single figures a criterion? Yesterday, the Minister said that he had written to 54 authorities that were rumoured to be planning increases of more than 5 per cent. He also said: "That is not necessarily an indication of the level at which we will cap".—[Official Report, 4 February 2004; Vol. 417, c. 746.] What is the level? The word on the street is 7 per cent. There is a host
of questions to be asked. The Minister said that he will cap police authorities,
but at what level? It is all very well saying that the Chartered Institute
of Public Finance and Accountancy has given advice on the reserves to
be constituted by fire authorities, but the wonderfully magic word "prudent"
is attached. What is a prudent level of reserves for fire authorities?
Andrew Bennett: On the question of the cap, I accept all the problems that the right hon. Gentleman has outlined for the Government, but where does his party stand? Would it have a cap if it were ever in government? If not, would he go round the country to justify the council tax increases of 9 per cent., 10 per cent. or higher in most local authorities? Mr. Curry: If we were in government, we would not have got into this mess in the first place. We would not have rigged the formula, we would not have betrayed the excellent councils and we would not have imposed the burdens on local government that this Government have. Does the Minister recall that the figure for Kent to which he objected was in a council document that reproduced the Treasury's estimate of the increase in council tax as a yield of 7.3 per cent.? In fact, that was wrong because the Treasury's figure for the assumed yield from council tax is an 8.2 per cent. increase, which is rather higher than low single figures. Now we hear, at last, that the Minister might be going to cap Ken. We look forward to seeing the Livingstone letter. The planned increase is still 9.9 per cent., as the Minister said, so perhaps the Government have overcome their fear that the Mayor of London's pledge of allegiance to the Labour party is so qualified that he has to be handled like cut glass. It should not be a difficult letter to write, just a standard draft. The Deputy Prime Minister could even top and tail it, and could perhaps finish with a few words saying what personal pleasure it gives him to see Mr. Livingstone once more embraced in the bosom of the Labour party. The settlement is much better than last year's, and of course councils should budget as tightly as possible and constantly seek to eliminate waste and duplication. However, there is a problem with local authority inflation and the constant demand for the delivery of new services, without the assurance of the long-term funding to support them. Public service pay is rising at a rate of some 5 per cent. a year, and 60 to 70 per cent. of local authority costs are on pay. For example, we have seen pay increases in the fire and rescue services. We also know that demand is increasing. There is not an hon. Member in this House who has not seen people at his surgery concerned about problems in social services relating to care of the elderly, threats to places in residential homes and local authorities' difficulties in funding those care home places, particularly with the new standards that are being applied. That is a major constituency issue for all of us. A home has closed near Skipton in my constituency, and the only alternatives offered are miles away in Bradford and Lancashire, too far for any relatives to visit. People in their 80s, towards the end of their lives, have been displaced into a completely alien environment. Mr. Michael Jabez Foster: The right hon. Gentleman clearly states that increased pay is an issue for local authorities, but fair pay for local government workers is important. Would he find the answer in restricting that pay, and not providing fair pair to people who work in the public sector? Mr. Curry: The hon. Gentleman has entirely missed the point. Local authorities depend substantially on Government grant—we know that, although we all wish that it were otherwise and are trying to work to alter the situation. But while that is the case, and while local authorities are therefore subject to national pay negotiations, the money has to be raised somehow. If it is not raised by grant, it comes from council tax. That is the point. It is a matter of record that public service pay is rising by some 5 per cent. a year, and that that is a significant burden on local authorities. There are also the rising costs of child protection—after the Climbié case—the mounting cost of adoption and fostering, and the rising cost of domiciliary care. I am sure that all hon. Members find that that is another persistent issue in their surgeries. Social services are almost always the main sufferer where education pre-empts other spending in circumstances in which the total grant is inadequate. Mr. Dennis Turner (Wolverhampton, South-East) (Lab/Co-op): What does the right hon. Gentleman have to say about the excellent revenue support grant settlement that Wolverhampton has had? It will delight the council tax payers, who will be asked to pay only a very reasonable increase. One can think back to the years of the Conservative Government, when council tax increases were much higher. The right hon. Gentleman was partly responsible for that. Mr. Curry: Some cities have benefited substantially from the reallocation of the formula, and Wolverhampton is perhaps one of them, but many others have not, and still face real difficulties. That is my point. I am not making a crude and universal condemnation. This is a very sophisticated condemnation of the way in which the Government have distributed the funds. Mr. Raynsford: Given the right hon. Gentleman's very sophisticated analysis of the pressures on local government and the costs, will he now tell the House whether he agrees with the settlement that we propose or whether he would increase it? Mr. Curry: I have made it absolutely clear that we shall oppose the settlement because of the mess that the Government have got themselves into, the way in which the formula has been applied, the betrayal of the excellent councils, despite a pledge given by the right hon. Gentleman's own boss, and the additional burdens imposed upon local authorities. I have spelt that out for the second time. I would do it again, but I do not think that it is necessary. We also have the increase in environmental services, in waste collection— Mr. Steen: I am sorry to stop my right hon. Friend in mid-flow, because we are much enjoying his speech. His colleagues on the Conservative Benches thoroughly agree with what he is saying. My concern, and that of my hon. Friends in Devon, is the actual cash amount that Devon people have to pay in council tax. They are running out of money, and cannot pay it. Does my right hon. Friend agree that one of the problems is that because council tax has been allowed to run away with itself, and has increased and increased, people can no longer afford the services that the county council says they have to pay for? Does my right hon. Friend also agree that what is important now is to reduce the staffing levels in councils right across Devon? In this way, council tax could be reduced at a stroke. Mr. Curry: I agree that if there is clear evidence of waste it should be eliminated, but I do not agree that the council tax has run away with itself. The Government have imposed the increases in council taxes. This is not a self-induced mechanism. The Government have failed to match their requirements by grant. We have the increases in environmental services, and we are all in favour; we want to see the landfill directive implemented. We want to see the UK get over its catastrophic record in recycling, for example. There is also simply the business of being in business: pensions, insurance, utility bills, the implementation of single status. Those are all new, major burdens on government. They are not invented. There is a remorseless pressure because of increased demand, compounded by inflation. District councils often get the thin edge of the wedge, because the increase is below or near the level of inflation pretty well across the board, so the services that are often most visible to local people—street cleaning, lighting, local roads—are likely to suffer. They have also been the ones hit by the council tax benefit difficulties. Sir Paul Beresford: Does my right hon. Friend anticipate that in the winding-up speech the Minister's response will be that every local authority has an inflation increase? But, of course, that is an inflation increase on last year, when many local authorities, particularly in the south and south-east, were savaged, unlike Wolverhampton and other urban Labour boroughs in the north. Mr. Curry: I do not know what the Minister will say, but clearly we do not have long to wait, so we shall soon discover. What will happen next year? Is the £340 million extra a one-off or is it a recurrent payment? If it is not a recurrent payment, if it is not in the base for next year—and the Government keep warning of the tight spending round—it must be found locally, and that looks like 2 per cent. on the council tax simply to start from the same place. So the problem is that this is a dishonest settlement. It pretends to
be much better than it is. It is distorted by the ordering of the distribution
of school funding by the Government. It will have an inevitable consequence
of tightening the squeeze on social services. It is disfigured by the
threat of crude and universal capping, because this is a Government back
to their bullying, hectoring, prescribing, dictating worst. This settlement
must be opposed. |
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David Curry MP | House of Commons, London SW1A 0AA | tel: 020 7219 6202 |
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