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12.56 am

The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Mr. Nick Raynsford): The hon. Member for Christchurch (Mr. Chope) has secured a useful opportunity to discuss our proposals for the financing of local authorities' revenue expenditure in the coming financial year. He has rightly focused on matters of concern to his area of Dorset, which is the subject of the debate. He ranged rather widely, and we got as far as Cambridge; none the less, I shall focus specifically on the Dorset area.

I can tell the hon. Gentleman at the outset that his allegations of a vendetta against any particular area are totally unfounded. Charges of pork barrel politics come ill from a party that was renowned for rigging the standard spending assessment arrangements to ensure such curious results as the fact that leafy Kingston upon Thames was deemed as deprived as Barnsley. That was the previous Government's record, and it is not surprising that it provoked considerable criticism.

We have committed ourselves to a fair distribution of Government grant to local authorities, and the provisional settlement announced last week is a start in achieving that goal. It is better, in cash terms, than many authorities must have expected on the basis of last year's plans. It is also fairer in its distribution, and reinforces local accountability by giving local authorities more discretion over local spending decisions.

There will, of course, be some authorities that are disappointed with the measures we have taken to ensure a fairer distribution of grant, and I can understand the concerns of the authorities mentioned by the hon. Gentleman that have had a reduction in their standard spending assessments. As the hon. Gentleman has pointed out, the authorities in the Dorset area around his constituency have been adversely affected by the changes. I do not seek to hide from that fact in any way, and I shall return to some of the reasons for it in a moment. We inherited tight spending plans, which meant that we had to make tough decisions if we intended to ensure a fairer settlement.

As you know, Mr. Deputy Speaker, education is the top priority for the Government and for the nation. That is where we have concentrated the new money for local authorities. Schools faced real problems after years of cuts and retrenchment, and we therefore made available an extra £835 million for revenue expenditure in English schools in 1998-99. There will also be £662 million of provision for local authorities for the education of children under five years old, following the abolition of the nursery vouchers scheme.

Adjusted for changes in funding mechanisms and in local government functions, that means an increase over 1997-98 in total standard spending of £1.78 billion, or 3.8 per cent. That is expected to be 1 per cent. above inflation, thereby allowing an increase in real terms to reflect our key policy priorities. It also allows

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£1.06 billion, or 5.7 per cent., more to go into English schools in 1998-99. That enables a start to be made on raising educational standards, which we are determined to see. It also allows £350 million for community care and£70 million more for children's social services, as well as a 4.8 per cent. increase in provision for fire services and other, smaller increases for the remaining services.

We have inherited extremely tight spending plans, and we are committed to living within those plans. I acknowledge that we have not been able, within those constraints, to meet all the pressures that local government has identified. However, I am sure that councils will wish to review critically all the tasks that they undertake and to continue to improve efficiency and effectiveness wherever possible.

There has already been a good deal of comment on how the increase is to be funded. The settlement led immediately to suggestions in the local press in Dorset that average band D council tax levels will rise by more than £90 for the coming financial year. The Government are fully funding, with extra grant, the £835 million of new provision for schools. We are also providing a new special grant to cover the revenue costs of local authority private finance initiative projects. Including these, aggregate external finance will be £37.51 billion, an increase of 2.7 per cent. compared with 1997-98.

That is not as big an increase as that for total standard spending. Although we have backed our new spending provision with grant, there was a gap in grant funding built into the spending plans that we inherited from the previous Government. That explains the difference between the total of aggregate external finance and the total standard spending.

The gap in grant funding implies a pressure on council taxes equivalent to a 7 per cent. increase. We have sought to release pressures that might otherwise have led to further tax increases, by a number of means, especially by fully funding the extra provision for education. That extra funding for education is worth £50 a year to the typical taxpayer. However, I will not be drawn into predicting actual tax levels. On that note, I must say that the unfounded and speculative claims that have been made about the effect of the settlement on council taxes are generally unhelpful and worrying to many local taxpayers.

The Government do not have targets for council taxes in 1998-99. The actual council tax in individual authorities is properly a matter for local discretion and local decisions on spending and financing. Tax rates will be affected by a range of factors, such as collection performance and collection fund surplus or deficit. I will say, however, that we expect local authorities to give proper consideration to the burden on their taxpayers when they come to set their budgets.

I will briefly discuss capping. Hon. Members will know that we remain committed to the ending of crude and universal capping. To achieve that, we announced in July a review of local government finance which will look at the matter, as well as a range of other issues. A sequence of consultation papers will be published over the next few months, with the intention of publishing a White Paper in the spring. The Local Government Association has been fully involved in these discussions.

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In the meantime--and in the light of our public expenditure plans--capping will remain in place for 1998-99. My right hon. Friend the Secretary of State for the Environment, Transport and the Regions announced provisional capping principles for 1998-99 to the House on 2 December. Those are subject to a number of changes this year. They will give local authorities more room to exercise local discretion and will help them to direct the additional provision for education to the schools, for which it is intended.

We recognise that there is the potential for increases in council taxes as a result of those changes in the capping principles. However, we expect local authorities to look carefully at their permitted increases, including passporting, and to make a careful judgment about whether they need to make those increases in budget and whether their council tax payers can afford them. Many authorities have budgeted below their capping limit in the past. We have given local authorities extra room within which to exercise their discretion and we expect them to use this greater flexibility responsibly.

Those principles are necessarily provisional. Firm decisions on capping cannot be made until authorities have set their budgets for 1998-99. When those decisions are made, the Government will of course take into account all relevant considerations.

Mr. Robert Walter (North Dorset): Will the Minister give way?

Mr. Raynsford: I regret that I cannot, because I have been left very little time to reply, and the hon. Gentleman did not ask in advance for permission to intervene in the debate.

The hon. Member for Christchurch has raised several issues relating to the way in which standard spending assessments apply in Dorset. SSAs play an important part in the overall financial system for local authorities. The Deputy Prime Minister's statement outlined our proposals for local government finance for the coming year. I should like to remind hon. Members of what we are seeking to achieve and of some of the main changes for SSAs, since they put in context those affecting Dorset.

Our election pledge to tackle the issue of fairness remains a priority and the provisional settlement announcement has begun to overcome the injustices of the system. We are prepared to do whatever is necessary to reach that situation. As a result, the way in which SSAs are determined and how they might be improved is an important part of our review of local government finance. We are also ready to consider new evidence for changes in SSAs to bring about improvements.

The changes that we propose, like many of our other priorities, begin with education. The education formula assessing the spending needs for under-fives will be changed to reflect the abolition of the nursery vouchers scheme. The formula will be based on the number of pupils for whom local authorities provide nursery education, rather than on the total population of four-year-old children, regardless of whether they receive

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pre-school education. Where local authorities have increased provision beyond the level in spring 1997, they will be able to apply to the Department for Education and Employment for transitional specific grant.

Mr. Chope: I raised some specific, narrow issues relating to my constituents and some particular matters concerning the settlement in Dorset. The Minister is responding with banalities and generalities. Will he confine his remarks in the remaining time to the specific issues affecting Dorset? If council tax goes up by more than 7 per cent. in Dorset, will it be the councils in Dorset that are failing in their duty, or will it be the Government's responsibility?

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