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Mr. John Gummer (Suffolk, Coastal): We are discussing Derbyshire local government. Would the Minister have supported the previous Government in capping at the lowest level ever, as she is proposing, or will she come to that in her speech?
Ms Armstrong: I shall explain why the Government have made these decisions.
The Government will retain a reserved power to control excessive increases in local council spending. However, with a more accountable system of local government in place, we hope that reserved powers to intervene in local budgetary decisions will be used rarely, if at all.
We are committed to a fair distribution of Government grant to local authorities. This year's settlement was a start in achieving that goal. It is better in cash terms than
many authorities expected based on last year's plans. We have allowed a 3.8 per cent. increase in provision for local government revenue spending nationally, which is double what the previous Government planned.
The amount available for local authorities includes an additional £835 million for education nationally, which has been fully funded by matching grant to authorities. That shows our commitment to improving standards. We have been able to increase resources for social services nationally by £447 million, which is almost £100 million more than was envisaged by the previous Government. We have also provided an extra £70 million for children's services, which is the first substantial increase for three years.
Mr. Eric Pickles (Brentwood and Ongar):
If the hon. Lady has given extra resources--figures supplied by the Library show that an extra £1 million was provided for education in Derbyshire schools--why is she proposing to take away £1 million?
Ms Armstrong:
The hon. Gentleman has got his figures confused. I am dealing with the local government settlement, whereas he is referring to education money under the new deal, which is for capital spending outside the local government settlement. I am sorry that the hon. Gentleman does not understand that.
The capping principles for 1998-99 allowed all authorities budgeting up to 12.5 per cent. above their standard spending assessment to passport the increases for all non-police service blocks in the spending assessments. If an authority's SSA increased by more than its class permitted increase, its cap reflected that greater amount--so the money could be spent.
Mr. Deputy Speaker (Mr. Michael J. Martin):
Order. We are discussing Derbyshire. The hon. Lady is entitled to a lead-in, but she must restrict her comments to the issue of Derbyshire.
Ms Armstrong:
I am aware of that, which is why I have been hesitant about taking interventions. I know that you want me to deal with the Derbyshire issue, Mr. Deputy Speaker. However, it is important to put the Derbyshire decision in context.
It is the first time that increases in highway maintenance, other services and capital financing blocks have been passported. Those were important changes in the capping regime, and they gave greater discretion to local authorities.
In the past seven years of crude and universal capping, 49 authorities exceeded their caps. This year, only one authority--Derbyshire--has set a budget above its capping limit. As a result, when we announced our decision on the capping principles on 7 April, we designated Derbyshire for council tax capping. It challenged its cap--as the legislation allows it to do--and proposed that it should be permitted to budget at the level that it originally set.
In reaching a view on the final capping limit for Derbyshire, we had to take account of its specific circumstances. We have considered those carefully, and I have met a delegation from Derbyshire to hear its case in
detail. I am sure that, during this debate, we shall hear of the efficiencies that Derbyshire has achieved. It is extremely important that authorities pursue efficiency gains, as that will help and enable them to provide the best services at lowest cost.
Capping is about whether the cap proposed for that authority is reasonable, achievable and appropriate. The fact that an authority claims to be efficient is not, of itself, a justification for it to take a larger slice of the cake of general Government expenditure. The demands of individual authorities must be examined in the context of the demands of all authorities, and those of the economy as a whole. That is why I felt it appropriate to explain the background of the debate.
Derbyshire county council has set a budget of nearly £473 million, £3.9 million above its proposed cap. As I said, I met members of the council, and a number of Derbyshire Members of Parliament, so that they could explain their reasons. Among the Members of Parliament was my hon. Friend the Member for North-East Derbyshire (Mr. Barnes). I am delighted to hear that he is now out of hospital. I pay tribute to his diligent attention to the needs of his constituents, and to the fact that he has put their case so strongly. Several of my other hon. Friends have been to see me, and have also pursued the interests of their constituents with incredible diligence.
The Deputy Prime Minister and I have carefully considered all the relevant information available to us, and have decided that we should permit Derbyshire to increase its budget relative to its provisional cap by £2.9 million, rather than the full £3.9 million proposed by the authority. There are a number of factors which I believe make Derbyshire a special case, and which therefore warrant the increase.
Derbyshire has had the eighth smallest capping increase of any county in 1998-99, at 3.1 per cent.--compared with the average of 3.7 per cent. Since 1989-90, it has had a smaller cumulative increase in its cap than any other county. The increase in Derbyshire's education standard spending assessment represents nearly all its total capping head room. In short, if it passported all its increase in education SSA through to schools, it would have only a 0.25 per cent. increase for all other services. Derbyshire has no significant reserves with which to support its budget.
I stress that it is the combination of those factors, rather than any one in isolation, that makes Derbyshire's position unique. We decided against allowing the county to increase its budget against its provisional cap by the full amount of its actual budget. Among other things, its budget is above SSA by more than the county average. That suggests that there is scope for the council, within existing resources, to give more to education by reordering its priorities. The overall effect should be to allow Derbyshire to passport the full increase in its education SSA, and to increase its take-up of the education standards fund. We have carefully considered the points raised by Derbyshire in the capping process to ensure that the cap that we have proposed is reasonable, appropriate and achievable.
Mr. Patrick McLoughlin (West Derbyshire):
Will the Minister tell us when she first learned that the estimated
Ms Armstrong:
I do not know when the Department was first made aware of it, but I will write to the hon. Gentleman to let him know.
I have highlighted the particular combination of factors that, in our view, make Derbyshire a special case this year. We believe that those factors justify this treatment. However, it is clear to the Government that Derbyshire now needs to take more determined steps to address its budget. Over the coming months, we expect it to put in place a firm medium-term strategy to manage its finances in a way that will avoid excessive council tax increases in the future. That will clearly mean making some tough decisions to reorder priorities, as well as setting challenging targets for efficiency gains. The county will need to do more to manage its expenditure from year to year if its council tax payers are not to face unreasonable increases. Were that the case, the Government would step in to limit increases in budgets that were, in their view, excessive. We will also want to consider whether to use our powers to treat authorities that were designated in the preceding year differently from other authorities within the same class.
More generally, the Government will continue to take a rigorous approach to all sectors of public spending, including local authority expenditure. It will be essential that local authorities also take a responsible approach to their spending budgets. Next year, the Secretary of State will have in reserve powers to limit council tax within the current legislation. He will not hesitate to use those powers where he believes that authorities have set excessive budgets.
Mr. David Curry (Skipton and Ripon):
I am sure that we would all wish to join the Minister in wishing the hon. Member for North-East Derbyshire (Mr. Barnes) a rapid recovery.
It was with some nostalgia that I listened to those marvellous words "reasonable", "appropriate" and "achievable", having used them so often and knowing that they have a ritualistic character in this debate; they save the Minister from judicial challenge at a later stage. I was interested that she began with a debate on the six, I think, Green Papers on local government as, up to now, we have been denied a debate on those in the House, despite their enormous importance. Not one was introduced by a statement in the House, but I hope that her words are in earnest of the good intention to give us a proper opportunity in Government time to debate crucial proposals affecting local government. I note simply that the largest Green Paper was on ethical behaviour in local government, which was six times the size of the paper on capital finance and a future financing system.
The Minister gave the particular reasons why she thought that Derbyshire is a special case, but, with all due respect to her, those were mechanical reasons that flow
from her decisions on standard spending assessments; there was nothing unusual about them. Had she taken different decisions on SSAs and made different changes to them, that would have affected Derbyshire's position. It is not an exceptional condition. It flows automatically from the decisions that she has taken.
Of course, I do not ideologically object to capping; that would be somewhat curious as I have, as it were, been there and got the tee-shirt for doing it myself. The arguments about public expenditure are real enough. The chapter on it in the relevant Green Paper has a familiar ring. Indeed, I suspect that I frequently said the same words. Even in the little document that is snappily called "A Plain English Guide to the Local Government Finance Settlement", under the heading "Capping" we find the words:
Therefore, when Labour says that it will end crude and universal capping, one wonders where the sophisticated and particular capping will arise. When the Minister talks about the cap relating to excessive spending, we wonder whether this is excessive spending. Is £1 million in a budget of £471.7 million an excessive increase? It seems curious for the people of Derbyshire to be told that there are particular circumstances--with which I do not agree, but which she has adumbrated--and that this is peculiar to Derbyshire.
Derbyshire is now permitted to spend £2.9 million over the budget that Ministers initially thought was necessary for it to meet its statutory obligations. However, its budget is being capped to prevent a mere £1 million of £471 million of expenditure. In other words, if my calculations are correct--I was never in the Treasury, so I may be corrected on them--its budget will be cut by 0.21 per cent., which is the smallest amount that has ever been caught by a cap.
As my hon. Friend the Member for Brentwood and Ongar (Mr. Pickles) said, a couple of months ago, Derbyshire received an extra £1.1 million to reduce class sizes. Although of course that was part of the education budget, and of course it was capital, verily it is said that "the Lord giveth and the Lord taketh away".
So what happens now? There will be rebilling, which is done by the districts--which, initially, send out the bills. I am told that, by some mysterious alchemy, the cost of rebilling will be reduced from £500,000 to £300,000. That £300,000 would have paid many teachers' salaries, and paid for many local authority activities, school meals and many other things that are probably regarded as important by the people of Derbyshire.
Nevertheless, there will be a bonus: local people will have money handed back to them. Undoubtedly, they will rejoice mightily at that bonus.
The county of Derbyshire has many band A properties. According to my research, 66 per cent. of properties in Bolsover are band A, as are 56.7 per cent. of properties in Chesterfield, 43.7 per cent. in North-East Derbyshire and 40.4 per cent. in Amber Valley. Even in the Derbyshire dales--which I suppose must be regarded as the most propertied part of Derbyshire, as it has the fewest properties at the bottom end--bands A to C still account comfortably for more than 50 per cent. of properties. It is therefore worth asking quite what will be the big bonus that is handed back.
My calculations--on which, again, I stand to be corrected--show that the consequence of the Government's action for band A property holders in Bolsover--where, we have agreed, two thirds of property holders hold band A properties--will be the great bonus of a £2.87 rebate. I have been told that that sum will buy an inexpensive packet of 20 cigarettes. In the House of Commons Bar, one can buy two pints of beer for that sum--but, as we all know, beer is relatively cheap in the House of Commons Bar.
The objective of all that paraphernalia and rigamarole--£300,000 or £500,000 will be spent on rebilling--is to rebate £2.87 to the citizens of Bolsover, Chesterfield and the other districts. That is the cost of financial probity, and the reward for the Government's actions.
The capping order is not the important issue. The Government could have changed the system--they have been in power now for well over a year. Although they have made perhaps only one local authority settlement in their own right, they are now on their second settlement. The Government have had control of the standard spending assessment system. Local government is almost universally under Labour control, and, for the moment, the Local Government Association does not say boo to a goose. Ministers could have altered the system, but they have stayed with it.
In the future, we will have the "brand new system". However, anyone who reads the Government's documents on the matter will wonder where the new dawn is, and when it will arrive. We have heard that the Chief Secretary to the Treasury has rejected the idea of changing the definitions of public expenditure. Now we have old-fashioned rigorous capping, although I suspect that it is only a gesture, as Ministers could not allow anyone to get away with it completely. The cap is the iron Chancellor's little gesture towards local government, warning it about what might come. He is perhaps thinking, "Gosh, £1 million off Derbyshire's budget of £471 million won't half make them wonder. That will really get them bothered."
The cap is only a precursor of what is to come. The Minister for Local Government and Housing talked about the new system which we will be getting, and about getting away from all that terrible old capping problem and entering a new world. If one reads about what that new world will comprise, it quickly becomes clear that it will not include repatriation of business rates, as that would of course have implications for public expenditure.
Nor will it include giving everyone--lock, stock and barrel--the power to raise taxation locally, as that, too, would have implications for public expenditure.
"Local government spending is part of the total of general Government expenditure, so the Government need to limit how much local authorities spend."
Local authorities will be interested in the Minister's words. The last few pages of her speech were devoted to a fairly fearsome warning about how the Government intend to apply capping if local governments do not behave according to her definition. Of course, she would use the legislation that the previous Government put in place to do that because capping is not a duty; it is facultative. The legislation remains on the statute book. The Government have the option simply of not applying it--of not setting capping criteria--but, of course, if they really wished to send a signal to local government that they want to get away from the old system, they would repeal our legislation. They clearly do not intend to do so.
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