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4 Feb 1999 : Column 1138

Local Government Finance

4.11 pm

The Secretary of State for the Environment, Transport and the Regions (Mr. John Prescott): I beg to move,

Mr. Deputy Speaker (Mr. Michael J. Martin): With this it will be convenient to discuss the following motions:

I should remind the House that Madam Speaker has ruled that there will be a limit of 10 minutes on Back-Bench speeches.

Mr. Prescott: As this is to be a shorter debate than last year's, and as many hon. Members will wish to take part, I shall keep my remarks as brief as possible.

This year's settlement is the most generous for seven years, so it should not be too controversial--although I recognise that the settlement is never, ever enough. The House will recall that on 2 December, I set out my local government finance settlement proposals for England in 1999-2000. They included: the total amount of local authority spending to which the Government are prepared to contribute, known as total standard spending, which will increase from £48 billion to more than £50.5 billion, which is a rise of £2.6 billion, or 5.5 per cent.; the amount of Government grant support, which increases from£37.4 billion in 1998-99 to £39.5 billion; and some changes to standard spending assessments--the formulae used to distribute grant.

Two of the reports before the House contain my decisions following formal consultation on those proposals. The third report corrects an error made by the previous Government in 1996. I should like to spell out some facts about the settlement for 1999-2000.

There is more than £1.4 billion more for education, following the £835 million extra provided last year, and more than £500 million more for social services. Total standard spending is up by £2.6 billion--5.5 per cent., as I have said--compared with last year. Let us remind ourselves of the increases since the council tax came into being--just 0.9 per cent. in 1995-96, and 2.5 per cent. in 1997-98.

The average for the years under the previous Government was only 2.4 per cent. This year's increase is more than twice the average for all the years of the previous Administration.

Mr. Robert Sheldon (Ashton-under-Lyne): I welcome what my right hon. Friend has done, but is he aware of representations by Oldham metropolitan borough, which feels that the changes made do not deal with all the anomalies in the area cost adjustment? The major problem is that SSAs, which were well worked out in the past, will be fixed for three years, creating anomalies during that

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period. I know that my right hon. Friend is investigating how he can improve matters, but is there no chance of making changes during that three-year period?

Mr. Prescott: My right hon. Friend will recall that I said in a previous debate that one of the three standard assessments that we are dealing with had to do with children's services. We have made a judgment on that and can address ourselves to it. The others deal with education and the area adjustments to which he has referred. It is difficult to reach agreement there, and I shall return to the point later. Something like 41 formulae apply, and quite radical changes and consequences flow. We have decided not to make a decision at the moment, but to continue discussions throughout the three years.

The next round of public expenditure commitments will start early in that period, and discussions on standard spending assessment will take place during that process, so we shall have had to reach some decision. I understand my right hon. Friend's concern, but when he hears hon. Members talking about the effects of the changes we have made to just one area, he will appreciate the difficulties that we must take into account if we want to reach a proper consensus.

Sir Paul Beresford (Mole Valley): Many hon. Members on both sides are concerned about distribution. Would the Secretary of State comment on the apparent change in definition of SSAs contained in paragraph 3.2 of "The Local Government Finance Report (England) 1999/2000"?

Mr. Prescott: I shall come to the SSAs shortly if the hon. Gentleman will wait a little.

Mr. Patrick McLoughlin (West Derbyshire): Can the Secretary of State confirm whether what was said by the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) was correct? Is the Secretary of State ruling out any change in the area cost adjustment over the next three years? Is that the implication of his reply to the right hon. Gentleman's question?

Mr. Prescott: Let me be clear about that. We shall continue discussions, and I shall report back to the House each year on settlements. The hon. Gentleman should wait to see how far we get in those discussions. We have settled on the children's support schemes, and I shall deal with that point in a few moments. Every year, I shall come to the House to inform hon. Members on how far we have gone, and on how much further we may be able to progress.

Mr. Andrew Lansley (South Cambridgeshire): If these matters are so difficult--especially the area cost adjustment--why did the Prime Minister promise three days before the general election that he would change the area cost adjustment for 1998-99? He failed to do so, and now he is trying to set in stone that it should not change for a further three years.

Mr. Prescott: I do not think that the Prime Minister said exactly that. [Hon. Members: "He did."] No, he did not. I do not want to get into a dispute over that. We intend, over our five-year period in Government, to deal with all the commitments in our manifesto, and even with

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the statements made by my right hon. Friend the Prime Minister. Nearly two thirds of our manifesto commitments are already under way, which shows how good the Government's record is. [Hon. Members: "What about trains?"] I do not think that trains can be blamed on me after the Conservative privatisation. The Tories will blame everyone, having decided that marriage is back in fashion and God knows what else they did not believe before.

Let me repeat what I said before I was rudely interrupted. There is more than £1.4 billion more for education, following the £835 million extra provided last year, and more than £500 million more for social services. Total standard spending is up by £2.6 billion--5.5 per cent.--compared with last year. Let us remind ourselves of how that compares with the 2.4 per cent. increase under the previous Administration. Twice as much is being made available in the most generous settlement given to local authorities for seven years. I see no one contesting that, although the opportunity is there for anyone who wants to jump in.

Mr. Crispin Blunt (Reigate) rose--

Mr. Prescott: Thank you.

Mr. Blunt: The borough of Reigate and Banstead has had a real cut in its settlement because moneys have been raided out of flood defences. How does that fact square with the imposition of 2,600 homes on the borough in an area that is liable to flood? When it floods, will the Secretary of State return money to the borough to make up for its having been robbed from it now?

Mr. Prescott: The previous Administration held back money, never giving any for flood relief. They offered every reason as to why they could not pay out for that.

Mr. Blunt indicated dissent.

Mr. Prescott: I do not want to argue about flood relief, which is just one part of expenditure. The hon. Gentleman's authority, like all the others, will receive more than it did last year. That is a basic fact. Does he disagree with it?

Mr. Blunt indicated assent.

Mr. Prescott: Have a look at the figures and then apologise.

Mr. Richard Allan (Sheffield, Hallam) rose--

Mr. Prescott: I must get on. There is limited time for the debate. I am trying to give way, but I should like to continue.

Mr. Jim Marshall (Leicester, South): I apologise for intervening because I know that my right hon. Friend wants to make a short speech. Indeed, I wish to speak myself. I accept what he says, but for local authorities such as Leicester, the social services changes mean a reduction in revenue support of nearly £2.7 million. Does he accept that while we are still getting a real-terms

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increase, it is substantially below the national average? Can he offer any hope over the next 12 months that that imbalance will be addressed?

Mr. Prescott: My hon. Friend has a fair point about what came out of the changes in standard spending assessment; it is one of the difficulties, and I shall come to it. We have listened to the arguments of hon. Members and found an extra £30 million to try to deal with that.

The settlement is the most generous since the introduction of council tax.

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