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Mr. Eric Illsley (Barnsley, Central): I congratulate my right hon. Friend on his generous settlement. He has recognised the needs of coalfield areas, as he showed in his announcement yesterday in Peterlee. Of the 20 authorities originally capped in 1990 under the current system, 30 per cent. were coalfield authorities. Because of the flawed SSA methodology, those areas have always been behind in revenue support grant settlements. May I urge my right hon. Friend to seek greater fairness in distribution, and ask him to apply a degree of flexibility to council tax benefit rebates?

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The position of the coalfield authorities--particularly Barnsley, my own authority--makes it likely that their council tax increases will be above the guideline figure that my right hon. Friend has announced today, and they will be affected by the loss of rebate. Will my right hon. Friend be flexible in considering areas, such as mine, that will be caught out by that?

Mr. Prescott: I am grateful to my hon. Friend for his remarks, but the target has been set at 4.5 per cent., and the settlement for his area is 7.2 per cent. As he recognised, that is quite generous, and it will deal with some special problems. In making my announcement about the coalfield settlement at Peterlee yesterday, I tried to establish a new fund to deal with coalfield area problems, and the money announced is extra money, £350 million over and above what we are settling today. The same was the case with the new deal housing programme and with education funding. Local authorities will receive not only the money that I am announcing today; many settlements of huge amounts of resources will be used to meet specific problems. The settlement through the SSA on children has meant that the coalfields have been taken more into account, because that had discriminated against them. My hon. Friend appears to be telling me that his council will be spending more, but I ask him to remind the council that there will still be Prescott's sophisticated capping.

Mr. Eric Pickles (Brentwood and Ongar): The right hon. Gentleman has described his settlement as the most generous in history. That certainly is not the case for Essex, which falls £28 million short just of standing still. If the settlement is generous for the rest of the country, that generosity is built on the backs of the elderly who are being taken care of in social services in Essex and of our schoolchildren.

Mr. Prescott: I am having considerable difficulty in taking into account the fact that hon. Members are saying the settlement is not fair or generous. Essex county council will receive a 5.7 per cent. increase this year, and I must make the inevitable comparison with what happened during the final year of the previous Administration in 1995-96 when Essex received only 2.7 per cent. However the assessment is measured--by percentage or in absolute terms--it is a fair one, and we have settled not for one year, but for three. Considerable resources will go to the local authorities.

The hon. Member for Brentwood and Ongar (Mr. Pickles) is an expert in local government, and he spent considerable time in it, but I cannot, by any stretch of the imagination, accept his argument that the authorities are not benefiting. Essex alone will receive £27.6 million for education, an increase of 5.6 per cent., although, as I recall, the council did not spend on education all the money it received for education last time round, but chose instead to spend it on roads. I think that that was the wrong priority, but the authority had the right to do so.

Mr. Dennis Skinner (Bolsover): My right hon. Friend went to Peterlee yesterday to announce the £350 million package for the coalfield areas, and, as my hon. Friend the Member for Barnsley, Central (Mr. Illsley) has said, that will intertwine with changes to the SSA. I have

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listened to some of the figures that my right hon. Friend has trotted out today, and have heard that Norfolk will receive 6 per cent., that the hon. Member for Sutton and Cheam (Mr. Burstow) is getting 5.5 per cent. and that another area represented on the Opposition Benches is also getting 6 per cent. I am beginning to think that Derbyshire might have won the lottery, although probably not.

In order to repair damage to the coalfields, there must be a redistributive element to SSAs, and it must go along with the package that my right hon. Friend announced yesterday in order to ensure--this is the principal thing that he must do--that we do not lose jobs. May I have his assurance that that will be a continuing theme so that we can repair the tremendous damage that the Tories did to the coalfield areas?

Mr. Prescott: I can assure my hon. Friend that many people are employed by local authorities. At a time when the private sector is perhaps thinking of cutting back, thank goodness local authorities still have the resources from the Government to provide local services which, at the same time, provides jobs. That is not an unusual situation between the private and public sectors in the development of a cyclical economy.

My hon. Friend said that some local authorities have received a settlement of 5.5 per cent. I doubt whether he would describe Derbyshire's settlement as a lottery, but it did get 6.1 per cent. It is a good example of the extra resources announced yesterday in our coalfield community policy, which involves an extra £345 million to deal with the damage brought about by the savage attack on those communities by the previous Administration. We are now trying to deal with that by increasing housing and jobs and by improving the environment in those areas, particularly in Derbyshire.

I am aware of the call that Derbyshire's local authority made at the conference yesterday for a connection to the M1 motorway. That is being considered and, as the local authority pointed out, that is important for the development of jobs in Derbyshire. We are happy to do all that we can to help meet the criteria that my hon. Friend has laid out.

Sir Paul Beresford (Mole Valley): This year's announcement, together with last year's, hides a large redistribution of funds to crony councils. Some of the councils that are not receiving this shift in funding will have some difficulties. They will be looking at their council tax and at what the Secretary of State calls Prescott's sophisticated capping. Perhaps we could rename that Prescott's subjective capping. What sort of percentage increase would make the Secretary of State think of looking at subjective capping?

Mr. Prescott: It works to a formula. It is not a question of whether or not I like a council. The House would not allow me to exercise such a prejudice. Although that happened under the previous Administration, we would not want to do it because it would not be fair. We must have fair criteria. For every half percentage point over 4.5 per cent., there will be a loss of Government grant for local services, equivalent to about one eighth. One can calculate that, if it went over by 4 per cent., there would be a full penalty and all the grants could be lost. By that

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stage, I would have intervened because the local authority would have to consult me. I would then exercise a judgment about whether to move to Prescott capping.

There may be a real and justified reason for moving from 4.5 to 5 per cent.--that was mentioned earlier by my hon. Friend the Member for Bolsover (Mr. Skinner). From the figure of 4.5 per cent. up to the total cap, we are prepared to let the local authority spend as it wishes, but we are not prepared to give grant for any expenditure over that amount. I think that that is fair. Local authorities can make their own judgment about what to spend--crude capping prevented that, but this system does not--and that can continue until it reaches a stage that I believe is excessive. That is what I have just announced.

Surrey county council has a 4.6 per cent. increase whereas, under the Conservative Government, it received 1.7 per cent. Obviously, I have a little slip of paper for every hon. Member who stands up pointing out what happened to their local authority under the Conservative Government. It is a fair point to make and most criticism from Opposition Members can be judged on that alone. There is a change when one moves from Government to Opposition and from Opposition to Government and it is far better for us to be on the Government Benches.

Mr. Paddy Tipping (Sherwood): My right hon. Friend has been clear and determined in his support for coalfield communities and his aspirations to help coalfield local authorities such as Nottinghamshire. Can he confirm that this is a good settlement for coalfield communities but, at the same time, accept a degree of regret that the big issues such as area cost adjustment and additional educational need have not yet been resolved? If my right hon. Friend waits for consensus on this issue among local authorities, he will be waiting for a long time. I hope that he will take a determined approach to resolve these issues.

Mr. Prescott: I accept that it will be difficult to achieve absolute consensus on any of those problems. The example of agreement that I gave to the House was not agreed by everybody. There is a time when one has to make a judgment. However, it is better to have a formula that does not involve open warfare, which, as my hon. Friend knows, is what we have seen in the House and in other places from time to time.

We can make advances, but we have not had sufficient time to do so. Over the next three years we shall make calculations and further extend discussions to find out how we might achieve that.

As I said--I still feel strongly about this--the solution may well be to try to find a better form of local government financing, but that is never an easy proposition, any more than standard spending assessments are easy--as anyone who observed the development of the poll tax will know. We shall continue to try. We have had some success and we shall continue to work on the more difficult problems.

On the settlement for the coalfield communities, Nottinghamshire got a 5.5 per cent. increase, which it will view as an improvement. The coalfield communities settlement will benefit several areas, but it is very specific to those communities. The settlement was regarded as a welcome contribution in Peterlee. The change in the

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SSA relating to children's services has also benefited the coalfield areas because the old criteria tended to discriminate against them.

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