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Mr. Jacques Arnold (Gravesham): Will the hon. Gentleman give way?
Mr. Rendel: No. I have already given way enough.
The Government's position no doubt helps to explain why they treat counties and local education authorities in general with such contempt. Even in Buckinghamshire--the last county left in Conservative hands--the council has made it clear that the settlement for 1996-97 is a disaster. It has calculated that it will need to make budget cuts of £12 million to contain expenditure within the capping limit. Yet that limit already assumes an increase in council tax of almost 7 per cent. Any additional Government funding for education will clearly be too little, too late.
In keeping with this evening's theme, what new money there may be will not cover rising costs that are beyond local authority control, such as the £191 million needed for rising pupil numbers or the £131 million required for special needs education. Nor does it take into account the 8 per cent. reduction in schools' capital grants and credit approvals. Vital repairs and maintenance for schools can be delayed for only so long: there comes a time when investment must be made in the infrastructure of our education system.
How can children be expected to learn in damp, decaying classrooms? How can teachers be expected to teach in Dickensian conditions where school buildings are a threat to health and where books are outdated and bedraggled? Conservative Ministers have raised the hopes of parents throughout the country, who thought that at last their children would receive the quality of education that they need, but it is clear already that those hopes were falsely raised.
The Government are guilty of deliberately misleading the public. Their strategy is obvious. They promise new money that will go through to local authorities. When that money does not materialise in schools, Ministers and Conservative Back-Bench Members berate local authorities for not passing it on. How callous can the Government be in toying with parents' concerns for their children's future in that way? How low can their regard for local government be when they seek deliberately to discredit local authorities throughout the country with a campaign that is based on deceit and misinformation?
We are not here merely to talk about what is wrong with local government funding. We must talk also about what we can do to improve it. The solution to the problem of local government funding lies in a change in approach by central Government. The Government must decentralise power. They must allow local authorities to have freedom properly to manage their own affairs. That means giving local authorities greater freedom in raising revenue and in setting spending priorities. It means also raising a larger proportion of funding locally.
At the most recent Conservative party conference, it was decided to end capping. The Conservatives were right to do so. Unfortunately, the Government are now so deaf to good advice that they do not listen to it even when it comes from their supporters. Capping is an unacceptable infringement of the principle of local decision making and local accountability. In addition, the constraints introduced by council tax precepts have had the unfortunate effect of pushing up local authority charges. When leisure facilities and the cost of meals on wheels soar above the rate of inflation, it is obvious who suffers the additional burdens. We know that they are faced by those who can least afford them.
In Northumberland, for example, the exceptionally tight budget will mean that the school uniform allowance will be halved. Voluntary groups will be charged to use school premises when they have never had to face such charges before. Discretionary transport provision will come to an end. A further 120 families in the county will be hit by the introduction of charges for respite care. There will be substantial increases in the cost of home help.
The Minister for Local Government, Housing and Urban Regeneration (Mr. David Curry):
I am anxious to have a clear idea of what the hon. Gentleman's party is proposing. When he says that capping must come to an end, is he proposing not to apply capping, or to repeal the legislation that makes it possible for the Government to cap? There is a great difference between the two.
Mr. Rendel:
In a few moments, I shall be introducing a completely different system, which will not require the Minister's question to be answered.
Releasing capping in isolation presents its own problems, especially if accompanied by a stingy financial settlement which leaves authorities with no choice but substantially to increase council tax. The problem is that council tax was not designed to bear the weight of being a major source of local tax revenue. It is not suitable for that purpose, because it is simply not fair. It is unfair essentially because it has many of the elements of a simple charge rather than being a really progressive tax. There will be great resistance this year to the Government's proposed council tax increases. Whether they like it or not, Labour and Conservative Members alike will have to address that issue.
If local authorities are to raise a larger proportion of their own revenue and if the council tax is inherently unfair, what is the alternative? The Minister will be glad to hear that I am coming to that. The Liberal Democrats have had a policy on that for many years. We have argued consistently that the right way to raise local taxation is not by taxing personal property but by taxing personal income. It is one of the most basic principles of the modern liberal state that people contribute taxes according to their ability to pay. Our support for a local income tax is not new, nor is the idea confined to our party.
The Layfield report in 1976 took the view that a local income tax is the only form of taxation that warrants serious investigation for the raising of substantial extra council revenue. Furthermore, in a comprehensive new report for the Rowntree Foundation, Sir Charles Carter is due to show his support for a local income tax. I cannot see why the other parties are so resistant to this idea. I hope that it is not simply because they did not think of it
first and therefore will not endorse it. Whatever the reason, I suggest that there is now a new impetus for local income tax and that they can no longer avoid giving it serious consideration.
Mr. Malcolm Bruce (Gordon):
Does my hon. Friend recall that, when the Deputy Prime Minister was charged with getting the Government out of the mess of the poll tax, he admitted that local income tax was a viable alternative but that he was not prepared to support it because it was Liberal Democrat policy?
Mr. Rendel:
I thank my hon. Friend for that helpful intervention.
Mr. Robert Key (Salisbury):
Will the hon. Gentleman give way?
Mr. Rendel:
No, I have given way to many Conservative Members.
Other changes to local authority funding are required and some of them can be introduced fairly quickly and easily. It is imperative that central Government release local government capital receipts, which are estimated to be about £5 billion. Those funds should be invested in Britain's infrastructure, and not left languishing in accounts at the behest of Whitehall. That investment is desperately needed. With so many people suffering the indignity of homelessness, how can the Government stand by their line that the money must stay where it is in the banks? When will they learn that homelessness will not be solved by market forces alone?
The area cost adjustment still needs reform and the formulae used to allocate funding according to need have had their shortcomings embarrassingly exposed. One small but important example of that was passed to me recently by the London borough of Kingston. According to central Government estimates that were used to calculate Kingston's grant, Kingston has 224 children in care. In reality, it has 616 children for whom it is statutorily responsible. Making these changes to the funding system will no doubt sharpen the accountability of local government. Local authorities must have the flexibility to respond to local need.
Of course, with the enhanced revenue raising powers goes greater and more transparent responsibility. As a Liberal Democrat, I naturally favour improving the democratic process to match the improvements made to the funding system. There would be no need for capping in any of its forms if people could be made properly accountable through a democratic system of local government.
Mr. Tom King (Bridgwater):
The hon. Gentleman proposes two substantial increases in public expenditure. He proposes a substantial increase in revenue-raising powers. He has said that local income tax would substantially increase the revenue available to local government and that he would remove capping. That would lead to an increase in public expenditure and, as he knows, if substantial capital receipts are released, that would also increase public expenditure. [Interruption.] I
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