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Mrs. Gillian Shephard (South-West Norfolk): I thank the right hon. Gentleman for making available copies of his statement and the supporting documents. He is always scrupulous about that, and I am grateful to him.

Last year, the right hon. Gentleman's settlement for local government delivered a record 8.6 per cent. increase in council tax across the nation and an extraordinary political switch of £50 million away from London and £100 million away from shire areas towards his friends in the north. So much for his party's pre-election promise that new Labour was not about high taxes on ordinary families and so much for his so-called commitment to a fair distribution of Government grant.

The right hon. Gentleman also promised increased clarity and fairness in local government finance last year. It is strange that he should have chosen to make his statement the day after publishing a Bill--one of the few allowed him by the business managers--that, by abolishing compulsory competitive tendering, will certainly put up council taxes. By introducing a new crude and arbitrary form of capping, the criteria of which will be a secret known only to Ministers, the Bill will render local government less accountable, less transparent and less fair.

This year, the right hon. Gentleman had the chance to put right last year's damage, but he has chosen not to do so. Today's settlement is for no change. Taxes for ordinary families will continue to be put up across the board, the funding fiddle for his political friends will be perpetuated and nothing will be done to provide the increased clarity and simplicity in local government that he promised.

We welcome the extra money that the right hon. Gentleman has provided for education. I have two detailed questions on the distribution of the grant. Will he confirm that the settlement does not include any provision to compensate authorities for the £130 million cost of the Government's pension tax? Does he accept that the increase that he has announced for the fire service is not enough even to meet the costs of this year's 5.6 per cent. pay award to firemen? Will he admit that that will mean cuts in the fire service across the country? What does he suppose will be the likely reaction of the fire service unions?

On methodology, will the right hon. Gentleman explain how much of the £100 million that was taken last year from rural areas will be restored to them through the sparsity allowance that he has announced for domiciliary social services for the elderly? Which sparsity indicators will he use? Does his announcement mean that the county councils network was right all along?

Will the right hon. Gentleman explain how his proposals for capping will contribute to transparency, accountability and fairness in council finances? How will removing capping criteria from the public domain achieve that? What does he think is an acceptable council tax

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increase, given that last year's increase was nearly 9 per cent? Perhaps he can tell the House what he means by "self-restraint".

Does the right hon. Gentleman understand that his proposals for council tax benefit will have the same effect as capping? Will they not transfer the cost of social security benefits from the Chancellor of the Exchequer to the council tax payer? Will he give a figure to show by how much he expects the change will lead to an increase in council tax? The Deputy Prime Minister has today promised jam tomorrow. Ordinary families, as he describes them, know that the bills will arrive next year.

Mr. Prescott: I thank the right hon. Lady for her opening remarks. Her history and her comparisons between this Government and the previous Administration seem to be at variance with the facts. In her area, Norfolk council will receive from the settlement 6.2 per cent., which is 6.2 per cent. more than it received last year, whereas, in the final year of the Tory Administration, it received an increase of 1.2 per cent. King's Lynn and West Norfolk district council will receive 3.6 per cent. more this year. When she was in the Cabinet, it received 1 per cent. less. The record should be made clear.

The Department of Transport, Environment and the Regions has almost 20 per cent. of the Government's legislative burden. We have at least three Bills on local authorities. Given what is going on, we may have more time in the programme for even more legislation. The Department's heavy legislative burden is about modernising local authorities and making the distribution of resources fairer. My statement has shown that the changes in the SSAs, which make some adjustments in the calculations for individual county areas, will create a fairer means of distribution and fairer criteria for the children's services. The changes has been generally welcomed--

Mrs. Shephard: I welcomed it, too.

Mr. Prescott: I am glad that the right hon. Lady welcomes it; that is a step forward. I readily accept, as I am sure she does, that it is extremely difficult to progress further on education and cost adjustments and to find solutions to those problems. We shall continue to work on those problems; the period of stability under the three-year programme will, I believe, help us in that.

The right hon. Lady mentioned resources in rural areas and the sparsity principle. When her local council recently made representations to me, I was not able to say that we had accepted the principle, but I am glad to confirm today that we have. That has made for fairer adjustment in some of the changes that we have made to last year's settlement. That means that rural areas will get more. I do not know the exact amounts, but I will write to the right hon. Lady to give the figures to her. Some of the details of the consultation paper are in the Library, and I am sure that she will try to make some assessment of them.

The fire service settlement takes account of the pressures facing local government services, including pay and prices, as well as the opportunities to make savings. There is plenty of room for improvement in efficiency, which best value will be able to identify. I am sure that Opposition Members will want to reinforce that point.

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With regard to pensions and whether the settlement deals with the provision of an estimated £130 million to take into account the Chancellor's changes on pensions, I can tell the right hon. Lady that that figure is included in the settlement.

Mr. Giles Radice (North Durham): I thank my right hon. Friend for his settlement, and for the sympathetic way in which he has listened to my colleagues and me when we have described the problems of the hardest-hit areas. Will he take it from me that the settlement for Durham is fair and takes account of the level of need?

Mr. Prescott: Yes, that is at the heart of what we are doing--although we have not completed our work--and it is what the SSAs are about. In developing new criteria, there will be many changes from one area to another, and there will be many challenges in this House from those who are affected by those changes. The question from the right hon. Member for South-West Norfolk (Mrs. Shephard) about rural areas and urban areas is a classic example of that. There is an overall increase of 5.1 per cent. for the more sparsely populated areas, compared to 4.8 per cent. for England as a whole.

Clearly, we have a lot to do, and we shall take into account--as promised in our manifesto--fairer ways of dealing with the local government settlement. I must give notice that, although I am quite prepared to look at how we might find a proper solution to the criteria problem--indeed, I am doing so--a reform of local government financing is a far better way of dealing with it.

Mr. Paul Burstow (Sutton and Cheam): I thank the Secretary of State for his statement, and for the opportunity to see it in advance.

Liberal Democrats believe that the current system leaves council tax payers unclear about whom to blame when their council tax bills go up and when their services are cut. Is it not the case that the settlement continues a long tradition of smoke-and-mirror tactics so that local people are, once again, paying more but getting less for it? Is the right hon. Gentleman aware that there is a £1.6 billion gap in his plans--as estimated by the Local Government Association--which councils can bridge only by council tax rises and cuts in services?

Last year's settlement left social services struggling to balance their budgets, with two out of three councils increasing charges and restricting access to care services. Does not this settlement mean that children, the elderly and disabled people will face a real-terms cut in care services? Is it not the case that the number of primary school classes with more than 30 pupils rose as a result of last year's settlement? Will class sizes go up or down as a result of the settlement?

Is not the Secretary of State's plan to claw back council tax benefit nothing more than capping by another name, but a cruder form of capping than the crude and universal form of capping that he says that he wishes to replace? Does he accept also that his decision not to pre-signal his capping plans has left councils in a position where they will have to play Russian roulette with people's services?

In our view, this is a bad settlement. It represents a victory for the control-freak tendency in the Government and another defeat for local democracy.

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