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Mr. Deputy Speaker: Order. Perhaps the hon. Gentleman will find another opportunity to discuss those matters, but I must ask him to confine his remarks to local government finance in Wales.
Mr. Dafis: I am sure that you will sympathise with me, Mr. Deputy Speaker, as I was diverted from my speech by interventions.
There is a great deal of spin about what the Government are saying about local government finance. Of course, the present Government are identified with spin, if nothing else. I am sure that the hon. Member for Blaenau Gwent will agree with me about the enormous disparity between the glowing images conveyed by Government statements and the experience of ordinary people in Wales, whether they are employers, employees, unemployed or in education.
Yesterday, for the umpteenth time, the Prime Minister said that he was determined not to return to Tory boom and bust. We have heard that repeated so many times that it is becoming tedious. However, much of Wales is experiencing something akin to economic collapse. Although we do not want to go back to boom and bust, much of the Welsh economy is bust. The Government are not entirely to blame, but their general approach to monetary and fiscal policy and to public expenditure is an exacerbating factor. The disparity between the Government's rhetoric and what is actually happening arouses in my constituency a mixture of wry amusement and anger. People do not understand how the Government's words relate to reality. The same applies to local government finance.
The Government made much of their intention to remove crude and universal capping, which is a good thing. They are giving local authorities greater autonomy while retaining the powerful sanction of cutting their contribution to council tax benefit if councils exceed their spending limits. However, there is another more subtle agenda which was mentioned by the hon. Member for Montgomeryshire.
The Government are proud of having kept their pledges not to raise income tax and not to exceed Tory spending limits in their first two years in office. However, they made those promises for the crudest political reasons. Just before the election, I was asked whether I thought that the Prime Minister would keep his election promises. I said that I certainly hoped not. It would have been good news had the right hon. Gentleman decided to break those promises, but he has kept them, certainly in relation to income tax and spending limits. In order to remain within the spending limits, the Government have had to keep a lid on public expenditure, including the Government's contribution to local authorities.
As a result, local authorities will need to increase council tax in order to maintain services. The new Labour Government are allowing them that freedom, so things are changing. The net result of that approach is that wealth is redistributed--regionally and individually--in favour of the better-off and to the disadvantage of the worse-off.
That is clear from statistics. The pattern has persisted for 20 years, and the present Government are allowing it to continue, except at the margins. Although the Government have altered things here and there, by and large they have pursued the same general agenda. So the present Government are not as bad as the Tories--perhaps that will be their epitaph. I am sorry to be unkind to hon. Members who sit on the same side of the House as I do, but I do not believe that that epitaph would be acceptable to those who expected great things from a change of Government at an historic time.
My own local authority, Ceredigion, is a case in point. The standard spending assessment for Ceredigion has been set at £70.2 million. That is an increase of 5.6 per cent. in real terms and there is a sense of relief about that. The council is permitted to spend up to £75.8 million without suffering clawback of council tax benefit subsidy. Without any kind of wish list, but simply to maintain services and meet new commitments, Ceredigion would certainly need to spend up to that limit, but that would involve a 12 per cent. council tax increase in an area of chronically low incomes where the economy is crashing, in part due to the high value of the pound which is a significant factor in the economy of west Wales.
The Government have allocated extra resources which have been hypothecated for education. Substantially increased resources are being provided on a cumulative basis over the next few years and that is most welcome. This year, however, Ceredigion has estimated that it will require an increase of 7.5 per cent. from the Welsh Office in order to fund the pay awards to teachers and head teachers, so a large proportion of the extra money provided for education this year will go to meet the pay awards. In his letter circulated today, the Under-Secretary of State for Wales, the hon. Member for Neath (Mr. Hain), acknowledged that five sevenths of it would go on that.
Mr. Jon Owen Jones:
Can the hon. Gentleman explain why a pay rise of around 4 per cent. to teachers needs an increase in local authority funding of more than 7 per cent?
Mr. Dafis:
I shall write to the Minister about that. I have received that reply from Ministers before.
Mr. Livsey:
The hon. Gentleman has raised a serious point. Many small schools in rural areas have been closed down and the heads of other small schools will receive a higher than average pay increase. I am not certain whether the Welsh Office took that into consideration in calculating the settlement. Although we welcome the increased expenditure on education, the settlement does not cover the eventuality of higher increases in teachers' pay than were originally anticipated.
Mr. Dafis:
The hon. Gentleman has elaborated my point. The fact of the matter is that five sevenths of the extra money being allocated to schools this year will fund pay awards, so although it is acceptable and useful, it not such a big deal.
As a result, counties such as Ceredigion find themselves between a rock and a hard place. They are acutely aware of the need to maintain services which the public rightly demand, but they are also concerned not to increase the burden on council tax payers, especially those on low pay who are just eligible to pay council tax. For such people, the council tax represents a serious burden.
Ceredigion county council is controlled by a group of independent councillors, supported by the Liberal Democrats--although it is almost a contradiction in terms that a group of independent councillors should behave as a political party. The council has decided to limit the council tax increase to 6 per cent. The hon. Member for Bridgend (Mr. Griffiths) talked about increases that are not excessive, but 6 per cent. is well over double inflation, and people who are already paying high council taxes might call it excessive, although I would say that it is an extremely cautious increase.
Even with such a cautious increase, the band D payment will go up by £47 to £669 a year. That is a lot for people on low incomes to pay. Even after raiding the reserves, the social services budget will be cut by £200,000, which will exacerbate the bed blocking described by the hon. Member for Montgomeryshire. That is bad economics, and means that people with acute medical need cannot get into hospital and that the state has to pay more for the care of the people blocking the beds than if they were in nursing homes or being cared for at home.
Social services, which is protected by top-slicing and special funds, is having a cut of £200,000, so there are concerns about departments that are not so protected. The Plaid Cymru group on Ceredigion county council opposes the strategy of limiting the council tax increase to 6 per cent., and I strongly support it in that. Maintaining services and investment should come first. I recognise the council's dilemma, which is of central Government's making. The Government should do more to help.
There are concerns about the totally inadequate funding for the police in the coming year. Reference has already been made to the unacceptable cuts in the Dyfed-Powys police authority allocation from the Home Office. The Secretary of State said--which is also unacceptable--that local government now had to try to fill a little of the gap, to the tune of £1.8 million for the whole of Wales since the announcement in December. That means a further cut in damping in Ceredigion from £168,000 to £53,000, adding insult to injury.
A review of the funding formula is under way. It is essential that the problems of regions such as Ceredigion, with special service needs and sparse populations, should be recognised, if the gross unfairness is to be rectified. Even that would happen within the straitjacket of a Government apparently hellbent on pursuing their right-wing agenda on taxation, interest rates and public expenditure: an agenda that is profoundly damaging to Wales.
To prove my analysis wrong, the Government could take one simple step on objective 1. Wales's pro rata allocation should be significantly higher than the£200 million a year--equivalent to 2p on the standard rate of taxation in Wales--that is currently claimed, but the Government are not prepared to access what is available. They have an incentive not to do that. We are all aware of the problem of matching funds, and local government's position in relation to the capital budget makes that a most serious matter.
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