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Mr. Prescott: Liberals always amaze me--that is why I never sit down with them. Never mind the smoke and

2 Dec 1998 : Column 889

mirrors--let us see what the hon. Gentleman's authority is getting, and people can then make the judgment. Sutton council is getting a 5.5 per cent. increase this year. That is certainly above the average that we have mentioned. Sutton is to get an extra £4.3 million for education--an increase of 5.9 per cent. Even the most inefficient local authority should be able to provide a better education system on that. It is receiving an extra £2.1 million for social services--a real and substantial increase of almost 8 per cent.

The settlement represents the best deal that Sutton has had for at least seven years. That is a matter of fact. To give me all the rubbish that the hon. Gentleman gave me about the settlement may be all right as Liberal propaganda and rhetoric, but it has little to do with the facts and does not address the real problems involved in providing good services.

The hon. Gentleman was concerned about real-terms costs. He should take into account the change from compulsory competitive tendering to best value. We believe--time will tell--that best value will bring increased efficiencies, and many business men have come to the same conclusion in their negotiations with local authorities. The hon. Gentleman has not taken those benefits into account.

Class sizes are falling, and we shall continue with that policy, giving more resources to education than ever before. What is more, that level of resources has been guaranteed for three years--something that no Government have done before.

I have made the distinction before between crude capping and the sophisticated Prescott version. Hon. Members may object to the term "sophisticated". I am trying to make the point that Governments cannot be indifferent to the level of expenditure by local authorities. We have given a fair and generous settlement--the best that local authorities have had for many years--but, if an authority is prepared to ignore that fact and say that it will spend more, we have a system under which it is allowed to raise the money--as was not the case under crude capping--but it will not receive all the public grant that would otherwise have come from Government.

Authorities can make that choice, but if their spending reaches a level that is totally unacceptable, I have a responsibility to intervene to protect the council tax payer. At that point, I can instigate a form of crude capping, but I do not have to limit it to one year. I can review the expenditure in the year that has gone--which I could not do before--and consider the phasing over the next few years. I can take those factors into account, so it is indeed a more sophisticated approach.

Mr. Frank Field (Birkenhead): I thank my right hon. Friend for both the command that he shows of an immensely complicated brief and the sensitive way in which he is going about the reform of a major area of our public finances. Is he aware that most local authorities will now be considering in detail how the settlement will affect them individually? If some find that their settlement is way out of line with the generality, will they be able at some stage to come to him, or to my hon. Friend the Minister for Local Government and Housing, to make a plea for transitional arrangements over and above what he has announced this afternoon?

Mr. Prescott: I thank my right hon. Friend for his comments. I do not believe that councils should be

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encouraged in any way to spend more than we have allowed for in the settlement--we think that the 5.5 per cent. is a very good settlement and that the allocations have been fair--but I am always ready to accept that there are sometimes exceptional circumstances, and we must take those into account in the process. My hon. Friend the Minister for Local Government and Housing will hold discussions with the local authorities in the consultation process. I recognise that there may be exceptional--and I mean exceptional--circumstances, and I am taking extra powers to be able to deal with them as I have suggested.

Mr. Peter Brooke (Cities of London and Westminster): Has the Deputy Prime Minister revisited his decisions of last year about day visitors and tourists in inner London, the consequences of which have already provoked criticisms from the Government office for London?

Mr. Prescott: No, we have not done so at this stage. I am aware of the criticisms that have been made. I would like to reflect on the matter and give the right hon. Gentleman a fuller response in a letter.

Mr. Bill O'Brien (Normanton): I thank my right hon. Friend for his support for local government. At least we now have Ministers who believe in local government, as the statement shows. The abolition of compulsive competitive tendering is welcome. A great deal of time was spent by local government officers working out the framework for CCT, and in many instances that was a waste of resources. I feel sure that efficiency savings will be made.

Will my right hon. Friend accept that my local authority of Wakefield suffered for many years under the Tories? We were deprived of finance for education, when it cost £1,000 less to teach a child in my constituency than it did to teach a child in some Tory London boroughs. I hope that we will see an adjustment, and the members of the Special Interest Group of Metropolitan Authorities will welcome the statement. We hope that we will have the opportunity in the next three years to build on the relationship that has been developed in the past 18 months between my right hon. Friend and his colleagues to ensure that the progress in local government that he has outlined today is maintained.

Mr. Prescott: I thank my hon. Friend for his remarks. On CCT, the evidence is overwhelming that least cost does not necessarily mean best value or the most efficient way to do things, and that is why we are implementing best value. We have been grateful for the support of many local businesses which have also come to that conclusion. Many difficult problems are associated with the education criteria for SSAs and we should not underestimate that. The problem is often seen as a north-south one, but that is not entirely the case. The difficulties faced in some London areas are very real, but people do not always understand that problems faced in the northern areas are also very real. I readily accept that any formula will affect both north and south, and, if anybody has come to a different conclusion, they are wrong. It is a difficult process, but perhaps the best solution is the one that we are working on with the local government associations for a radical reform of local government financing.

Mr. David Curry (Skipton and Ripon): Does the right hon. Gentleman remember with what violence his

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colleagues lambasted the previous Government over the area cost adjustment and what were regarded as the inequalities in the formula? Does he now accept that his failure to address either additional educational needs or the area cost adjustment, which are the two most disfiguring elements of the formula, means that we are stuck with the problem for the next three years, not just the next year? Will he confirm that the additional money for health and education is not hypothecated and, according to the tradition of local government expenditure, it is at the discretion of local authorities how they spend the additional money?

Mr. Prescott: Yes, it is not hypothecated and it is up to the discretion of local authorities. That concern was expressed about the extra education funds announced last year, which were funded by Government and were not an extra burden on the rate support grant. I am glad to say that more than 80 per cent. of local authorities agreed that the money should go to education. Some did not, and I regret that, but most local authorities recognised the priority even though we had no statutory enforcement or hypothecation. That approach was successful.

On area cost adjustments, the right hon. Gentleman's criticisms would have had more conviction if he had attempted to make changes during his period of office in government. He may have been sympathetic to change, but the Government were not. I do not know whether the right hon. Member for South-West Norfolk has any further thoughts on the matter, but she nodded her head when the difficulties were mentioned. I do not doubt that the difficulties are real. When people examine the balance between local authorities in the settlement on children's services, they will see changes in the distribution between north and south. Criticisms can be made, but it is not easy to make the distribution and it is not a simple matter of north-south.

As we said in our manifesto, the settlement must be fairer. We have achieved that in one area, but not in the other two. That is not because we have not done anything--my hon. Friend the Minister for Local Government and Housing has had many discussions on the issue and 21 detailed formulas for the area cost adjustment have been put before us. Many hon. Members have expressed their fears about changes to the area cost adjustment, but we will not funk it. We must have a fairer distribution and Ministers can defend their actions only on the basis that they are fair. What we have at the moment is not fair, but I want to achieve a consensus on the changes and that will take a little longer. I have already told the House that it will take at least three years, not one.

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