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Mr. John Bercow (Buckingham): The hon. Gentleman is right to point the finger of responsibility at the Government Front Bench, but I hope that he agrees that it is important that he should approach the debate with clean hands. Will he tell the House the average saving achieved by Liberal Democrat-run authorities from competitive tendering and market testing?
Mr. Burstow: I am grateful to the hon. Gentleman for that intervention and I shall give him a straight answer. I cannot give him the figure today, but I shall happily write to him with it in due course. I shall be interested to hear his speech later, when I am sure that he will try to give us every detail of the savings arising from compulsory competitive tendering by Conservative councils. The figure will be much smaller, because there are so few Conservative councils these days. Compulsory competitive tendering, which is referred to in the Government amendment, has produced inefficiencies because of the way in which it has been delivered. The crude and ineffective mechanism of CCT might have produced artificial savings, but they came at the expense of quality of service. The Conservatives never understood that when they were in government. That is why they lost so many seats in local government throughout the country.
The lion's share of what councils spend is provided by the Government in the form of grants and business rates. That means that small changes in the way in which the Government distribute the cash have large consequences for council tax bills. An essential qualification for being a Minister in the Department of the Environment, Transport and the Regions seems to be a willingness to live in a world of fantasy figures--a fantasy based on the pseudo-science of standard spending assessments. Ministers place great store on the standard spending assessment. Education Ministers seem to believe that it is a true measure of what councils should spend on education.
In reality, the formula is nothing more than a means for delivering and distributing a cash-limited budget. Minor changes in the algebraic formula that underpins the standard spending assessment can have profound effects on the level of council tax, as we are seeing as bills start to be printed and delivered to council tax payers. As the Chartered Institute of Public Finance and Accountancy recently said:
In the Government's fantasy world, we are told by Ministers that a 4.5 per cent. increase is all that is needed, and that no cuts will be necessary in front-line services. I have been watching closely and listening to Ministers and their advisers, and that is not what is happening on the ground. In the real world of inflation, an ageing population and an increasing number of school children, councils have already endured two years of Labour austerity; two years of Labour sticking to Tory spending plans; two years of cuts and council tax rises.
Labour would like us to think that year zero started with the comprehensive spending review. We are to forget the first two years of a Labour Government, and focus on the next three. "Cash for change" is the cry, but that ignores the cumulative effects of years of inadequate settlements under the previous Government, and now under this Government. In the real world, Labour's spending commitments are being oversold and underfunded. Over the lifetime of this Parliament--not just the last three years--compared with the last full Parliament, current real annual spending growth has halved: 1.4 per cent. versus 2.7 per cent.
On education spending, there is the much-vaunted £19 billion extra. The number of times that this figure, and sub-sets of it, has been launched and relaunched would place the Government well at the top of the Audit Commission's league table on recycling. Apart from being a three-year cumulative figure--rolling up total spending compared with current years--it is conveniently forgotten that the figure includes three years' worth of inflation and all aspects of education funding, including colleges, universities, Ofsted inspectors and special grants.
Nearly half the Government's promised increase is not an increase in funding, but comes in the form of standard spending assessment increases. That is not cash from the Government, but cash from council tax payers. Councils taking up the Government's so-called generous SSA increase will have to cut other budgets or increase council tax--or, in most cases, both. Last year, the Government left councils to find £562 million for local education in that way. The result was that class sizes went up, not down--which was an early Government pledge.
The total increase in central Government funds to local authorities is set to rise by an average of £1.5 billion over each of the next three years, and education's share of that is likely to be no more than £600 million a year. Those figures take no account of the teachers' pay award this year and the Government's failure--again--fully to fund the award leaves councils having to find an extra £68 million in the coming year.
It is not just in education that cuts in other budgets or increases in council tax will be needed to bridge the gap. A closer inspection of figures provided by the Library reveals that the social services standard spending assessment for England will rise by just 1.3 per cent. after
changes in the grant and special grant regime that provided for community care in the past have been taken into account.
Even on the Government's own fantasy figures, that will leave a £100 million gap, simply to meet inflation, for social services to pick up. A lower inflation increase for social services will make cuts in current services inevitable. Undermining current social services by underfunding makes no sense at a time when the Government, rightly, are setting targets and directing a host of specific grants at social services to secure change and improvement. Ultimately, that is self-defeating.
To make matters worse this year, local authorities have been left waiting for the Department of Health to publish the conditions for all the new grants, turning the planning and budgeting exercise into a nightmare. Only last Tuesday, the conditions for the three biggest grants were finally published--well after most local authorities will have set their budgets and made their decisions about council tax.
It is not just the levels of council tax funding that make a difference, or the way in which money is distributed; it is also the capping system itself. The Government amendment applauds the abolition of crude and universal capping--and we, too, would applaud that. However, capping is still with us this year. The only difference is that the Deputy Prime Minister is keeping the figures to himself; he is not sharing them with anyone else. As a result, councils are forced to play Russian roulette with school budgets, meals-on-wheels charges and other services.
Just in case councils do not get the capping message from the Government, there is new Labour's own brand of crude and universal capping. Council tax benefit subsidy limitation gives the Government the power to claw back council tax benefit from councils increasing their council tax by more than 4.5 per cent. The result is a further increase in council tax or a budget cut to pay for the loss of council tax benefit subsidy.
The Labour manifesto promised an end to crude and universal capping, but with reserve powers to control council tax rises. The clawing back of council tax benefit is not a reserve power: it is crude and it is universal. A council with an 8 per cent. council tax increase will receive no further funding for council tax benefit for the poorest in its community, so the nearly poor will have to pay for the benefits of the really poor in their communities. So much for ending crude and universal capping.
For Liberal Democrats, local accountability means greater financial independence. As a first step, we would return to local councillors the power to determine local business rates, which would increase the amount raised locally for council expenditure from a quarter to nearly half. That would begin to rebuild financial independence, creating greater transparency and accountability to local people.
The figures are clear--the average council tax increase is 6.8 per cent., which will result in an average band D increase of £51 a year. That is more than the Government claimed, and more than people were led to believe.
Mr. Simon Hughes (Southwark, North and Bermondsey):
My hon. Friend has been very accurate in his general observations, but I want him to answer a
"Because the financing of local authority spending depends so heavily on central government support, raising relatively small amounts of additional local revenue results in exaggerated increases in council tax levels."
Standard spending assessments are only part of the story. The sleight of hand is more subtle than that. The gap between what local authorities are spending and what
the Government are funding is growing. It stands at £2.3 billion and is set to widen further. As the Government withdraw support from local spending, the council tax payer has to pay more. During the debate before the election, Labour exposed that as a scandal, but the Labour Government have continued with the same policy. As a consequence, for every pound that the Government fail to fund, council tax goes up by an average of £4.
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