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7.34 pm

Mr. Neil Gerrard (Walthamstow): I shall concentrate on two main issues: first, the effect of the Budget on local authorities, particularly education services, which have been mentioned a number of times this evening, and secondly, its effect on housing, and particularly housing capital.

It is quite clear that the Budget will result in increases in council tax. Spending has been shifted, and the cuts in income tax will be balanced by rises in council tax. That is open Government policy; it is no secret that the Government have made a positive decision to shift the burden of spending on to council tax. If the spending plans in the Budget continue unamended, council taxes will probably increase by between 15 and 20 per cent. over a three-year period. It is a significant shift.

Councils will be unable to resolve their financial difficulties by using reserves or making efficiency savings. Many local authorities simply do not have the reserves. District auditors are now telling many local authorities that they should have bigger reserves and that they have run down their reserves too far. Some reserves are required for specific projects that require matched funding. Certain projects require local authorities to have money available in the event of a successful lottery bid, for example.

The right hon. Member for Wells (Mr. Heathcoat-Amory) said that he was in favour of cutting public expenditure. I understand that attitude, although I do not agree with it. At least I know where I stand when someone stands up and says that we should be cutting public expenditure. It is an honest position. The Budget, however, gives us a lot of myth.

It has been repeated again tonight that an extra £633 million will be made available to be spent on education. That sounds as if the Government were providing the money. I looked up the figures from the local authority statement last year. Total Government support to local authorities in revenue support grant and business rates is down by £143 million this year, so where is the extra £633 million? We all know that putting money into the standard spending assessment is different from actually providing the funds.

Let me explain by referring to my local authority. Today, Waltham Forest was told that the education standard spending assessment for next year, after allowing for the nursery vouchers, will be £2 million higher than it is this year. So Waltham Forest has an extra £2 million in its education SSA. That is great, but where will the money come from?

This year Waltham Forest is spending just below the capping limit. Next year, the capping limit will be lower than this year's limit plus inflation. The combination of revenue support grant and national non-domestic business rate next year will provide £1 million less than this year,

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so it appears that Waltham Forest is supposed to spend £2 million extra on education while making an £8 million cut in its overall budget and increasing the council tax by 10 or 11 per cent.

Mr. Don Foster: That is easy.

Mr. Gerrard: It may be easy, but the figures do not make sense.

The only way in which Waltham Forest will be able to spend an extra £2 million on education--it has protected the schools budget every year for the past two or three years--is by cutting £2 million somewhere else. That is not a unique position; it is no different from that of hundreds of local authorities up and down the country.

If the money is not provided in the education budget, we know what the consequences will be for class sizes, and particularly the non-statutory parts of the education service. We have now reached the point at which discretionary grants have virtually disappeared in many local education authorities. Every time the education budget comes under more pressure, non-statutory parts of the budget, such as discretionary grants, adult education services and youth services are the parts that have to go. Such services will be hit even harder again this year.

There is absolutely no pretence at all of growth in housing. Earlier this week, the Secretary of State for the Environment made a statement about what is needed in housing, although he described it in terms of household growth and household projections over the next 10 to 15 years. The Department of the Environment estimates that, by 2016, there may be up to 4.4 million more households in the country than in 1991. It says:

"The projections play an important part in the calculation of the nation's future housing requirements."

Having read that on Monday, it was very strange to see what happened to housing in the Budget on Tuesday. Approved development programmes for housing associations this year are running at just over £1 billion--£1,063 million. In last year's Budget, the approved programmes for 1997-98 were predicted to be £940 million, yet the figure announced yesterday for 1997-98 was £650 million--a cut of £290 million.

What will such a cut do to the housing programmes? The housing associations' first guesstimates are that, instead of starting 40,000 units in 1997-98, they will start 18,400. The programme has been more than halved because, of course, some of the money has to go to finishing off programmes that have already started.

The DOE claims that the numbers will not be quite so bad, but nobody can understand how they will get better unless the housing associations' grant is cut yet again and rents are forced up, or the mix of housing is changed in order to go for less permanent and more temporary housing. At the same time, local authority credit approvals have been cut from £775 million in 1996-97 to £489 million for next year, so there is no possibility that local authorities will be able to make up the shortfall for the housing associations.

I talked today to a housing association that is working jointly with the local authority in my constituency--exactly the sort of thing that the Government say they want. It told me that the programme that it is in the middle of is seriously at risk for next year because it believes--

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probably justifiably--that the Housing Corporation may have no other option than to revise some of its existing commitments in order to meet cuts.

One other very nasty, vicious little change in the housing benefit regulations was announced in yesterday's Budget. At the moment, somebody under the age of 25 who lives in the private rented sector is eligible only for housing benefit up to the equivalent of a single rented room in shared accommodation. That eligibility is to be extended to everyone under the age of 60.

Let us imagine the consequences of that for someone in their 40s or 50s, for example, who may have lived in the same private rented flat for a number of years and happens to lose their job. How will they pay the rent when, suddenly, they do not receive the housing benefit that they have been getting for years?

I had a telephone call today from a constituent who had seen the change in the press, who asked: "What will happen to me when I lose my job?" The person has the type of job that is likely to be transient. Plenty of people, such as those in the building trade or actors in the theatre, are in work for a period and then out of it.

Those periods out of work may well be long enough to justify making a new claim for housing benefit. They will be told that they cannot have housing benefit any more for the flat in which they have been living, and that they will have to find a single rented room in shared accommodation. What sort of country are we living in when people up to the age of 60 have to get out of the place where they live?

I have absolutely no doubt about what is going on in the Budget. The income tax cuts are window dressing. Underneath, some very nasty cuts will be implemented, especially in local government. I am beginning to despair of what has happened to local government over the past 15 or 17 years. There is nothing new in this Budget in that respect.

I spent 17 years serving on a local authority from 1973 to 1990, and I cannot imagine anybody who has started serving on a local authority in the past three or four years wanting to do that. People have had enough after three or four years; they do not want to be councillors any more. It is more and more difficult for all parties to find enough people willing to fight some of these seats. People are being ground down, which is bad for the services and the whole system of local government. The one penny off income tax will be of very little consequence to people who next year will not have homes to live in as a result of some parts of the Budget.

7.46 pm

Sir Irvine Patnick (Sheffield, Hallam): I do not propose to travel the route taken by the hon. Member for Walthamstow (Mr. Gerrard). I consider that yesterday's Budget--commentators admit it--was one of the most balanced for the creation of prosperity, growth and higher living standards. In particular, it is a helpful Budget; it helps business. The rate of corporation tax on small business was reduced to 23 per cent. In conjunction with the rural rate relief currently going through the House, business rates will be frozen for small businesses, which will be of enormous benefit to them. The Budget will help keep them competitive, and many of them in business.

The value added tax registration threshold has been increased to £48,000, the employers' national insurance contribution has been reduced, and I am delighted that my

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right hon. and learned Friend resisted the temptation to impose--as some of the pundits inform us he will every year--VAT on newspapers. That will be of enormous benefit to all our newsagents and their customers. The reduction of duty on spirits, together with the extra 100 Customs and Excise officers, will greatly help our licensed retailers--mainly small businesses--by helping to counter cross-border smuggling.

The Budget also helps taxpayers by reducing the basic rate of income tax to 23p--another step towards a 20p basic rate of tax. Personal allowances have been raised, tax margins have been increased, the married couple's allowance has been increased, and the benefit position of lone parents and couples with children has been equalised.

The Budget helps not only families but taxpayers, and has been welcomed by the Conservative Family campaign. It delivers a balanced tax package that has cut the basic rate of tax to its lowest level for six years. There has been more spending on the public services that people care about; and, what is more, the national health service will be able to spend an extra £1.6 billion next year. The police will have extra spending of £450 million next year, and education will have extra spending of £875 million.

I raised with my right hon. Friend the Secretary of State for the Environment the fact that I could not see a mechanism for ensuring that money given to councils for education is spent on education. My hon. Friend the Economic Secretary and myself were members of Sheffield city council, and we well know the skulduggery that has gone on in Sheffield. The council has kept cash allocated for education from the local education authority, and then blamed the Government for not giving it more. Last year, we gave the council more, and still it held back.

There will also be a reduction in spending overall, and lower public spending. As a result of those measures, the loss of revenue will be only £735 million in 1997-98, despite an impressive reduction in income tax worth £3.4 billion in a full year. The Budget will actually produce a net increase of nearly £1 billion and it is tighter than all the pundits would have us believe. [Interruption.] Does any hon. Member wish to intervene? That is an old Whip's trick.

The Budget would allow interest rates to remain about the same and could even prevent any further significant increases. [Interruption.] I will give way if hon. Members--even one of the Whips--wish to intervene.

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