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Mr. Andrew Lansley (South Cambridgeshire): I apologise to you and the House, Mr. Deputy Speaker, that I cannot be here for the whole of this debate.

The point that my hon. Friend makes is a good one. Does he recognise that the authorities that underspent on capital in respect of debt interest payments in relation to the SSA, such as mine in Cambridgeshire, were able to use that excess headroom to support service provision elsewhere? Is there not a corollary that those who were spending on debt interest over and above the SSA ought not to be bailed out so that they do not suffer the income detriment?

Mr. Yeo: My hon. Friend has put his finger on an important point which goes to the heart of the matter. I agree with what he says. I am glad that he has drawn attention to the record of his authority. Hon. Members on both sides of the House ought to be aware of the consequences of the change now and in the longer term for their local authorities and the people who live there.

On a number of matters, the Government have been at pains to lay great stress on the importance of consultation. I pay tribute to the volume of consultation papers coming out of the Minister's Department in recent weeks. I believe that we shall be getting some more on such alluring subjects as whether the Minister will honour the Government's election pledge to end crude and universal capping. We await that one with great interest. I hope that it will give some explicit answers, perhaps more explicit than the recent paper on best value, which left unanswered almost as many questions as it dealt with. If the Minister would like to give us any hints of what will be in the paper on capping, it would be riveting information for

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those of us who have troubled to come along for today's debate. Everyone in the House has an intense interest in the financing of local government. It is not a particularly fascinating debate for those who do not have an interest, but we should like a clue about what is coming up on capping.

The Government have laid great stress on consultation. That is why I was surprised to read in the letter from Hampshire county council, to which I have already referred, in paragraph 14.3:

I find it rather shocking that a Government who keep telling us that they want to consult before they make changes have slipped this one through. Perhaps they were afraid of the response that the consultation might produce.

Overall, the effect of the change has been to remove £52 million from the SSAs of shire counties. It has added £33 million to the SSAs of metropolitan districts. Once again, the Government's priorities are clear. When it comes to allocating public money, new Labour always favours the towns and hits the countryside. My hon. Friend the Member for Altrincham and Sale, West drew attention to Trafford council libraries in his constituency. We keep hearing from the Government that they are governing in the interests of all the people and want to respond to the recent impressive demonstration of concern by people from rural areas, yet when it comes to making a hard choice between town and country, they choose to take the money away from the shires.

Out of the 34 shire counties, all but two lose SSA directly as a result of this change in the methodology. Lancashire loses more than £3 million and will have to raise its council tax by 14 per cent. Essex loses close to £3 million and will have to raise its council tax by almost 15 per cent. Lincolnshire loses more than £1.5 million and will have to raise its council tax by more than 13 per cent. The list goes on and on.

Mr. Lansley: The list could go on. Will my hon. Friend reflect that it is not only that a county council such as mine will lose £1.5 million and will have to increase its council tax by 10.2 per cent. but that, as a consequence of capping--Cambridgeshire is capped at a relatively low level of council tax--it will have to cut services? There is a threat to close four old people's homes in Cambridgeshire alone.

Mr. Yeo: My hon. Friend is right. I am glad that he quoted Cambridgeshire. I should have included it on my list if I had realised that he would be present, but it is better that he should do so. He is also right to draw attention to the fact that not only is this about increases in council tax--painful as they will be for people who were told last year that Labour would not increase taxes--but it is a clear example of broken pledges even before we have had what we understand will be further substantial taxes on motoring. My hon. Friend is right to say that this is also about cuts in services. We shall see wholesale cuts in services throughout the country in the next few months, made by Conservative, Labour, Liberal and coalition councils. They all face the same dilemma. That is the direct consequence of the decisions made by the Labour Government since 1 May last year.

Ms Keeble: I thank the hon. Gentleman for giving way again. I appreciate that I have been up and down quite a

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lot in this debate. I do not understand why councils should have to make cuts. If the SSA provides them with an element of spending to service debt and if your argument is that good councils have paid off their debts and do not need the money to service their debts, they should not have to raise revenue to compensate. That is my understanding of your argument.

Mr. Deputy Speaker: Order. The hon. Lady has been here long enough to realise the form of address.

Ms Keeble: That is what I understand the hon. Gentleman's argument to be. He undermines his own argument.

Mr. Yeo: Those authorities could see what the standard spending assessment calculations were last year. As we learn from Hampshire, they did not have a chance to express a view about the changes this year. I see the Minister shake his head. He will be able to respond in due course. I quoted from a letter.

The change clearly has an adverse effect on the authority's SSA. To compensate, it will have to raise tax or cut its services, and many authorities will do both.

Mr. Lansley: My hon. Friend has been generous in giving way to me, as I arrived late. Does he recognise that, last year, for authorities such as mine, a notional debt level was built into their SSA allocation and, because they had extinguished their debt, they could use that SSA for service provision whereas, this year, because of the Government's change in funding, that notional debt has been reduced, the SSA has been reduced, and the money is not available for service provision?

Mr. Yeo: That is exactly the point. I congratulate my hon. Friend on expressing it so succinctly. A change that was not based on an assessment of changing need, but was simply a financial change--made out of pique, I suspect, for political reasons--has reduced the resources available to authorities such as Cambridgeshire county council, which will therefore have to cut services, raise council tax or both. The service cuts will be painful for those who have relied on local authority services hitherto.

The settlement will be expensive for council tax payers throughout the country, especially in the authorities to which I referred. In the shire counties, the average council tax rise is almost 12 per cent.--three times the rate of inflation. Band D taxpayers in shire counties will pay an extra £120 next year. The average council tax rise across the country looks as though it will be about 8.5 per cent. Even in the metropolitan districts, the group most favoured by the Government, the increase will be more than twice the rate of inflation.

Mr. Reed: Does the hon. Gentleman accept that Charnwood borough council hardly represents an urban area, yet our council tax increase this year will be 7 per cent., and the Labour-controlled local authority there, in a shire borough, will raise its spending by 3.4 per cent. again, almost in line with inflation? Does he recognise that the urban-rural myth that he is trying to perpetuate is unacceptable?

Mr. Yeo: It is not a myth, but a fact, and it is unacceptable. It is revealing of the situation that we have

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now reached that the hon. Gentleman gets up and says proudly that, in his area, the council tax will be up by only 7 per cent. If we had had a Conservative Government, that would have been the average for the whole country. A loyal Government Back Bencher would not get up and boast what a wonderful outturn it was for Charnwood that its council tax was up by only double the rate of inflation, and only double the rate at which actual spending has increased. That would have been the case across the country, had the Conservatives still been in government.

I have had rather longer than I expected to explore the subject, and I am grateful for that opportunity and for the contributions of my hon. Friends. There are plenty of questions for the Minister to answer. I hope that he will explain why the change is justified, and confirm that the consequences are as they have been described. I hope that he will give an assurance that, next year, proper account will be taken in good time of the concerns of authorities that are adversely affected by any proposed changes.

We have concentrated this morning on the capital financing adjustment, but, as the Minister knows, there were other changes to the SSA methodology about which we were concerned. It is an important and complicated subject, on which genuine consultation is necessary. I hope that he will give us some assurances about that.

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