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Michael Fabricant (Lichfield): Will the Secretary of State expand on the issue of performance profiles that he mentioned in his statement? He said that he would classify councils into the categories of

He then said that he would "intervene decisively". What precisely did he mean by that? How will he intervene? Will he intervene both on coasting councils and on poor-performing councils? Will that involve putting them into administration?

Mr. Byers: When the hon. Gentleman has the chance, he will see that, of the four categories, coasting councils are those that are

while poor-performing councils are those

In the latter category, there may well be grounds on which intervention is appropriate. However, that intervention would not be unilaterally decided by Ministers. Such action would be taken in the light of recommendations by the Audit Commission, which is the appropriate way to ensure that there is no question of party political manipulation or of certain types of council being attacked because of some political prejudice. It will be the Audit Commission that makes those recommendations.

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An intervention could take a variety of forms. It could involve a new provider coming in, or it could involve taking a council into administration, then taking it out again, perhaps with a different form of leadership. That is certainly one of the options in the White Paper.

As for coasting authorities, there will be opportunities to try and help them improve their performance—less through intervention than by working with them by means of local agreements. It is a question not of standing aside, but of working co-operatively through local government itself to support authorities with particular difficulties.

Mr. Clive Betts (Sheffield, Attercliffe): I warmly welcome my right hon. Friend's commitment to changing the capital control rules. The present rules are nonsense: they are completely out of step with arrangements in the rest of the European Union. Some of us with backgrounds in local government have been fighting for this for many years.

My right hon. Friend did not mention one issue that I regard as a real problem for local government. Until we change the current system whereby 75 per cent. of its funds come from central Government and only 25 per cent. from voters, have we any chance of achieving true local accountability and reinvigorating local democracy—and local government itself? Does my right hon. Friend envisage a solution in the longer term, involving returning more responsibility for raising money to local authorities?

Mr. Byers: My hon. Friend makes an important point about capital controls, which do not fit in with any prudential regime of local authority spending. The present arrangement, in which credit approvals in minute detail are given by central Government is unacceptable: it restricts the innovation that we, certainly, would like to see.

As my hon. Friend says, 75 per cent. of funds currently come from central Government while 25 per cent. is raised locally. It is worth reminding the House how we ended up with that balance. In a rather shoddy, sordid quick fix to escape the difficulties caused by the poll tax, the Conservative Government shifted money into increasing VAT.

The Government are considering the issue seriously. A review of the balance of funding is currently under way to establish whether changes should be made, and what sort of changes would be appropriate. It would be premature to forecast the outcome, but the fact that we have set up a group to look at the matter carefully is an indication of the Government's concern about the balance between central and local contributions.

Sir George Young (North-West Hampshire): If, as the Secretary of State just asserted, his White Paper marks a step away from centralisation and is truly about local government, can he assure us that no services currently provided by county councils will be transferred to more remote regional assemblies?

Mr. Byers: That is not an issue for the White Paper. As the right hon. Gentleman probably knows, a White Paper on the question of regional government will be produced in the new year. No doubt it will consider, among other issues, functions and responsibilities that might apply at regional level. Without giving away too

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much of its content, let me reassure the right hon. Gentleman by reiterating that there will be no imposition of elected regional government on regions. It will be for local people to vote for it if they want to: this will be a local decision.

Most important, the effectiveness of regional government is not about taking powers from local authorities—county, district or unitary. It must be about Secretaries of State and others in Westminster and Whitehall giving up their powers. It is about devolving down, not taking up powers from any kind of local authority.

Mr. David Clelland (Tyne Bridge): Does my right hon. Friend agree that all that was missing from the comments of the hon. Member for Maidenhead (Mrs. May) was a candid recognition that the need to restore local government is due entirely to the damage done to it by her party during its too many years in office?

I welcome my right hon. Friend's statement, and his commitment to re-empower local authorities. I look forward to further debate on the detail in due course. Does my right hon. Friend accept that there are many examples of good local government throughout the country, not least on Tyneside? The Gateshead and Newcastle authorities have jointly launched a Newcastle-Gateshead initiative, which will work for the revitalisation of the area to the benefit—and with the support—of local people. Following the completion of his duties here, will my right hon. Friend join me downstairs in Terrace Dining Room B, where the two authorities are launching their joint bid to become European capital of culture in 2008?

Mr. Byers: I receive a number of attractive invitations from my hon. Friend, of which that is one, but I cannot say too much about the European capital of culture, as I will be involved in deciding who might be successful. My hon. Friend makes an important point. We have spoken about local councils' limited freedoms, but Members should consider what has been achieved not only on Tyneside, particularly in Gateshead, but by Gateshead and Newcastle working closely together.

The massive improvements along the river have been achieved because we have a good example of local authorities supporting innovation, being adventurous and being ambitious for their communities. What has been achieved on the banks of the Tyne, particularly, if I may say so, in recent times on the south bank and in Gateshead, has made a real difference, and the authorities are to be congratulated on what they have been able to do.

Through the White Paper, I want greater freedoms to be given to good local councils such as Newcastle, Gateshead and many others up and down the country, so that the improvements taking place on Tyneside can be reflected in many other parts of the country.

Mr. Charles Hendry (Wealden): The Secretary of State is aware that Wealden district council runs the most effective waste recycling scheme in the country, which involves up to 48 per cent. of waste collected in the district. [Interruption.] Labour Members should be aware that the Secretary of State has a personal interest in recycling rubbish, given the way his career is going.

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Is the Secretary of State aware that that scheme is on hold because of the settlement announced last week? Figures from his Department show that council tax in Wealden will have to rise by 8 per cent. simply to stand still. He says that the burden of a high council tax increase falls on the councils, but is he not aware that his Department's decisions force them to choose between delivering good services and imposing whacking great council tax increases?

Mr. Byers: I do not accept that position, but we are in a consultation period, which will last six weeks or so, and if Wealden council has particular concerns—I know that those exist among some district councils—they can be considered. We shall do precisely that, because the consultation is genuine. This period always throws up difficulties—it was the same under the Conservative Government—but we shall use it genuinely to reflect on the consequences of individual decisions by authorities. There is the possibility of change in the final outcome.

Jim Knight (South Dorset): I congratulate my right hon. Friend on his statement, particularly his long-term commitment to abolish capping. Parish and town councils are not subject to the cap, so I wonder what place they have in his White Paper. On Monday, I was at Swanage town council, which costs the local council tax payer £50 a year, although it has a budget of more than £500,000. It is clearly an important part of local government, yet my right hon. Friend's Department has no jurisdiction over town and parish councils. How do they fit into the statement?

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