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Mr. Ian Bruce (South Dorset): Will the right hon. Gentleman give way?

Mr. Prescott: No. I must go on.

Most councils will do well out of this year's settlement, and some very well. The Government will put in £2 billion more in grant. That means council taxes need bear only a fair share of the spending increase. I recognise that while all education authorities will get more money, some will be hard pressed because of the SSA changes. As I explained in a written answer on 1 February, I have found extra money to help the most hard-pressed authorities with education and social service responsibilities. No authority will lose in cash terms.

Mr. David Curry (Skipton and Ripon): The right hon. Gentleman's reply on 1 February says that the additional grant is in respect of losses on the children's services element of the spending assessment. He then said that he would distribute a grant relating to total SSA. As a result, a county such as North Yorkshire will lose £3 million in cash on social services, largely because of a children's indicator, but get nothing at all from the £30 million. There is a dislocation between the reason for the money and its distribution.

Mr. Prescott: The right hon. Gentleman knows the difficulties of damping in dealing with SSA. The previous Administration did little to help on that. [Interruption.] I am reminded that they did nothing. I was trying to be charitable because the right hon. Member for Skipton and Ripon (Mr. Curry) understands the subject more than most of us. There are great difficulties.

I now come to the SSA and the consequential effects mentioned by my hon. Friend the Member for Leicester, South (Mr. Marshall). We cannot satisfy everyone when we begin to make changes. All we can hope for is fair criteria for distributing the money. That is what governed us on the matter.

The right hon. Member for Skipton and Ripon used to go through the yearly discussions with local authorities about the rate support grant and got a difficult ride at some meetings. That did not happen this year. It was quite boring because the authorities thought that the settlement was generous. The right hon. Gentleman's well-known reply was, "We got stuffed by the Treasury." I was not in that situation. We have done a lot better because our Treasury listened to our arguments.

We have announced the totals of SSAs for the next three years. Councils must recognise--I am sure that they do--that they should not expect to be able to deal with

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the problems of 18 years in one year. This three-year settlement, which the Local Government Association called for, means that councils can plan ahead now that they know there is a three-year period. They should plan for service improvements and for reasonable--not excessive--council tax increases.

We have considered representations about the SSA formula and there were three big issues about which many hon. Members were concerned. They were children's social services, where we proposed changes, additional education need, and the area cost adjustment, for both of which we propose no change. The basic principle of my proposals is to make the grant distribution fairer.

For both additional educational need and the area cost adjustment, we had many reform proposals to choose from. For example, we had 21 detailed options on area cost adjustment, but there was no clear front runner on merit or in terms of support from local government. It would not have been right to take decisions on the area cost adjustment and additional education needs now when it was clear that there were unresolved issues raised by local authorities which needed further work. If there is one area in which we should seek consensus, it is this because it affects so many local authorities and people.

The most significant change that I propose is to adjust the way in which we deal with children's social services. The change is based on extensive research and three years' discussion with local government. Even this change is not without controversy. The new formula for children's social services would not take into account ethnic minority populations. Some questioned whether that was fair and those voices have been heard in the Chamber. It is a matter that deserves the most careful consideration. However, detailed research showed that indicators of deprivation that can apply to all parts of the community are better than those that relate only to ethnic minorities. I have, therefore, confirmed that proposal.

I also confirmed the other proposals that I made on SSA on my 2 December statement to the House. When the SSA formula changes, there are winners and losers. I do not pretend that it is easy for the councils that lose, but I can at least say two things. First, the Government have not and would not adjust the SSA figures to favour councils because of their political leadership. Secondly, we have listened to the authorities that would lose most from their grants because of the change. Their views were expressed in the debate when I made my first announcement on the revenue support grant. I have, therefore, put £30 million more into the settlement and guarantee that all education and social service authorities will receive at least 1.5 per cent. more in grant in 1999-2000 than they did this year. That is an increase. It is an improvement on my original proposal to ensure that no authority loses grant. A little more than £2 million will have to be taken from the revenue support grant to help fund this.

Under the new grant, Brent, for example, will receive £2.4 million more than I proposed in December. West Sussex and Leicester will each get £1.7 million more. Over the next three years, we shall work jointly with local government on a thorough review of revenue grant distribution. We have set ourselves the task of looking for

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a simpler, more stable, more robust, fairer system. We want to examine the fundamentals of the financial system governing local authorities.

Mr. Allan: The Deputy Prime Minister said that he would be utterly fair and not consider the politics of local councillors. He knows that people in places such as Sheffield felt disadvantaged by political bias under the previous Government. Will he make it absolutely clear that no community will ever lose out because of the local council it elects, and will he be utterly scrupulous in that respect?

Mr. Prescott: I am proposing criteria by which people can judge that. The aim of SSAs is to achieve fairness. If we are not fair and choose to make political decisions that favour one political party, it will be clear so that everyone can make that judgment. Such conduct is not unknown. Many local authority settlements under the previous Administration were geared to their county areas. The trouble is most of them are now Labour.

Mr. James Gray (North Wiltshire): Is the right hon. Gentleman aware of the public claim of Ruth Coleman, the Liberal Democrat leader of North Wilshire district council, that she received a personal letter from him saying that the comparatively generous settlement for North Wiltshire was a direct result of her bringing in new council policies? Did he write to her saying that he was benefiting North Wiltshire because the Liberal Democrats control it?

Mr. Deputy Speaker: Order. Interventions should be brief, not mini-speeches. I do not appeal to hon. Members to make brief interventions; I instruct them to.

Mr. Prescott: I have received many thousands of letters, but I assure the hon. Member for North Wiltshire (Mr. Gray) that I have not sent or signed any letter that would give any such political favour. The Liberals have a tendency to say such things.

We considered representations on our proposals for council tax benefit and subsidy limitation. I have concluded that it is right to maintain the simple principle that led us to adopt the policy. Local authorities should not expect to be able to pass all the costs of their tax decisions back to central Government. If councils increase their council taxes above the guidelines, they will have to contribute to the benefit costs.

Mr. Ronnie Campbell (Blyth Valley): This morning, we had a delegation from Labour-controlled Northumberland county council, which is in a bit of difficulty with the new SSAs. It would like a fairer system. I know that my right hon. Friend will consider that over three years. It was talking about a figure of 10 per cent., and it is a Labour-controlled authority.

Mr. Prescott: Northumberland has received a 5.5 per cent. increase--which is twice as much as it has received before. That is at least a step towards social justice, and we shall continue to review the finances.

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We have considered representations on our proposals for council tax benefit subsidy limitation. However, I have concluded that it is right to maintain the simple principle that led us to adopt this measure. Local authorities should not expect to be able to pass on all the costs of their tax decisions to central Government.

Mr. Ian Bruce rose--

Mr. Prescott: If councils increase--[Interruption.]

Mr. Deputy Speaker: Order. The hon. Member for South Dorset (Mr. Bruce) must behave himself.

Mr. Prescott: To be honest, Mr. Deputy Speaker, he is the only person who is getting excited about this.

If councils increase council taxes above the guideline, they will contribute to the benefit costs. I was not persuaded that it would be right to limit the contributions any further than the taper that I have proposed or to exempt authorities in particular situations. We will protect authorities that have a higher than average proportion of council tax met by benefit, and they will be treated as though they had an average proportion. That strikes a balance that ensures that the poorest authorities are not treated unfairly.

If we announced capping limits in advance, we would lose the point of abolishing crude capping. Each authority must reach a sensible conclusion in the light of local circumstances. I make no secret of my determination to act if authorities behave unreasonably. They should bear in mind that the Government are contributing their fair share--some £39.5 billion; £2 billion more than this year--to support the local expenditure of £50.6 billion.

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