| Previous Section | Index | Home Page |
30 Jan 2003 : Column 1106—continued
Mr. Christopher Chope (Christchurch): I am grateful to the hon. Lady for giving way. She is to be
congratulated on securing this Adjournment debate in the ballot. Almost every hon. Member representing a Dorset constituency has been trying to secure such an opportunity.Does the hon. Lady share my concern about what happened yesterday when I raised the issue under discussion with the Minister for Local Government and the Regions? He said that the prospect of a 19 or 20 per cent. council tax increase in Dorset had nothing to do with the Government and that it was all the fault of the county council. Was that not absurd? Does she agree that it is a big problem that the Government seem to think that the value of one's house is a proxy for one's ability to pay council tax, when it manifestly is not?
Mrs. Brooke: I thank the hon. Gentleman for his intervention. I heard part of the answer to which he refers, which emphasises the point that I have been making: there is a blame culture, which does nobody any good. It is clear that council tax forms far less than a third of the amount that pays for local services. When there is a shortage of funds, the leverage or gearing effect puts extra pressure on council tax. I repeat that my colleagues way back in Poole are having sleepless nights while deciding whether to cut social services—the most obvious area in which to make cuts because of the amounts that are spent and as there are fewer restrictions than apply to education—or to increase council tax. In both cases, it is the vulnerable who will be hurt, which fills me with great horror. At the end of the day, the decision will result in high council tax increases for pensioners and others.
I shall conclude by drawing those points together, as I want to give the Minister plenty of time to provide a full explanation to me and to the hon. Member for Christchurch (Mr. Chope). I ask him to ensure that we can go back to the people who visit our surgeries and who are writing letters and give them the Government's answer. Will he give serious consideration to the three points that I have made: the formula; something to help pensioners; and, finally, the suggestion that the Government must surely make some changes to this absurd system in the long term?
6.17 pm
The Parliamentary Under-Secretary of State, Office of the Deputy Prime Minister (Mr. Christopher Leslie): May I congratulate the hon. Member for Mid-Dorset and North Poole (Mrs. Brooke) on securing this debate? Her honourable colleague on the Back Benches, the hon. Member for Christchurch (Mr. Chope), was right to say that many Members have been trying hard to secure a debate on the local government finance settlement. We will have more general opportunities for other Members to discuss the matter, but the hon. Lady has done very well to secure this debate.
In my short time as a Minister with responsibility for local government, I have received representations from almost all hon. Members regarding how much grant goes from the Government to local authorities. Very rarely have I ever heard any hon. Member say that they are delighted and ecstatic about the grants that they get, even though, in some circumstances, the increases go
into double figures. Every year, local and national newspapers are full of stories forecasting doom and gloom about high council tax increases. Sadly, this year is no exception. However, I believe that when one considers the settlement that we have managed to put in place and the extra resources that we have found for local government—an issue to which I shall return in a moment—one sees that there can be very few excuses for excessive council tax rises, especially this year.I shall try to address the hon. Lady's three points in particular, but it may be helpful if first I give a quick background to the council tax system and the local government finance arrangements. Decisions rest with the councils and councillors, and it is for the local authorities in Dorset to decide how much council tax local people should pay. The Government do not say at what level council tax should be set or what money should be spent on. Decisions about council tax levels are for individual local authorities, and accountability is the key. Local authorities are answerable to their local electorate about the council tax rate, and we believe that they should take into consideration the views of local taxpayers. Elected councillors—I understand that the hon. Lady is one herself—have a responsibility and accountability in that regard.
Mrs. Brooke: Contributions from central Government form the greatest portion of the money that goes towards local services. Given that the Government require local authorities to provide a good standard of services, how can local councils have total control over the level at which they set the council tax? Dorset was classed as very good in its comprehensive performance assessment, and Poole, a small unitary authority, was classed as good, so we are talking about efficient councils that have scored highly throughout every test. If the majority of funding comes from central Government, how can the local authority be the sole determinant?
Mr. Leslie: I was about to say that it is true that councils' resources come not only from council tax, but from central Government grant that is allocated to them. All elected councillors face a series of difficult decisions, not only in prioritising where that money should go, but in setting the level of council tax year on year, and we carefully consider the representations that we receive. Ultimately, it is not rocket science. We have a finite pot of money, and we have to apply a formula. It is the best and fairest way of distributing grant to all authorities across the country, and that system should continue. We have reformed the formula system, which has led to improvements, but I understand that it affects different authorities in different ways.
Mr. Chope: The Minister is being a bit disingenuous. The Government make assumptions about the presumed level of council tax that will flow as a result of the settlement. Is it not correct that the assumed council tax is rising from £769 this year to £1,001 next year—an increase of 30 per cent. on the Government's own assumptions?
Mr. Leslie: There are various statistical assumptions about council tax. I shall come to that when we discuss the part of the formula known as resource equalisation.
We believe that we have put in place a formula for distributing grant that will ensure a fair distribution between authorities. It is necessarily detailed, but we have been able to simplify the structure, which is now based on a basic level of funding per head, with top-ups for various factors such as deprivation, high labour costs and scarcity.The settlement across the country is a good one. We have been able to ensure that every single authority is getting more money—not only that, but an increase above the cost of living and above inflation. It is important to put that on the record. Since this Administration came to power, there has been a 25 per cent. real-terms increase in money to local authorities. That compares very favourably with the cuts that took place under the previous Administration.
We have set up the system known as floors and ceilings to temper some of the excessive data changes in some authorities—lost population, for example. For some local authorities that have responsibility for providing education and social services, such as Dorset and Poole, the floor is 3.5 per cent. and the ceiling is 8 per cent. For all other authorities, the floor guarantee is 3 per cent.
We shall announce the final settlement figures next week. Dorset county council is provisionally due to receive £181.1 million in grant—an increase of £66.7 million, or 3.7 per cent.—and Poole borough unitary authority is due to receive £74.5 million, an increase of £2.7 million, or 3.9 per cent. Of the two district councils in the hon. Lady's constituency, East Dorset district council is pencilled in to receive £3.5 million in grant—an increase of £100,000, or 3.6 per cent.—and Purbeck district council receives £3 million in grant, an increase of £800,000, or 3 per cent.
I can say for the benefit of authorities in Dorset that we intend to keep the system of guaranteeing a certain level of grant for the foreseeable future. We do not, however, believe that it is appropriate to set the level of the floor guarantee for future years, because factors such as data on pupil numbers can vary considerably each year, making it difficult to make a firm decision now on the level of floors and ceilings.
The hon. Lady asked me to consider what she called the Dorset anomaly—the interplay between the area cost adjustment, which is the top-up system that covers higher labour costs, and the complex but important part of the formula known as resource equalisation.
The area cost adjustment is now more sensitive to local circumstances. It recognises high costs on a consistent basis nationally, rather than being arbitrarily confined to London and the south-east. We consulted about a house price approach to the area cost adjustment, but that received little support from local government and the local government community.
We concluded that wages—what is paid to people in each area—are a more robust basis for the area cost adjustment than house prices. That does not imply that house prices do not matter. If they are sustained at a high level in an area, they may lead employers to increase wages to tackle recruitment and retention problems. The area cost adjustment will be updated every year to incorporate the latest wages data.
Authorities that receive the area cost adjustment are determined directly by wages data. After adjusting the average wage figures to make like-for-like comparisons, we set a threshold. Authorities with relative wages above the threshold receive the area cost adjustment.
Average wages in Dorset are currently 1.7 per cent. below the cut-off. However, the new methodology protects lower wage areas by bringing those authorities that are below the threshold up to its value. That benefits Dorset and recognises national pay scales for staff such as teachers that do not vary with local wage pressures.
The hon. Lady asked about resource equalisation. It aims to reflect fairly authorities' relative ability to raise income from their tax base. For grant distribution purposes, we assume that all authorities set a council tax that is the same for every authority in the same class. The hon. Member for Christchurch (Mr. Chope) made that point. We do not assume that some authorities can set a higher council tax than others. The number of band D equivalent properties varies between authorities.
Resource equalisation is the means whereby we recognise that authorities can raise differing amounts from a given level of council tax. That is because some authorities have higher tax bases than others. Resource equalisation is not new; it was a key part of the old standard spending assessment system. We have brought it up to date so that it reflects more recent information on the national average level of council tax. That clearly improves the fairness of the grant distribution system.
The hon. Lady mentioned fairness and asked me to consider the underlying principles of the council tax and whether it was fair for house prices—rather than, for example, local incomes—to determine council tax. That has more to do with whether a local property tax is fair in principle than with grant distribution. The council tax system uses house valuation to establish the relative value of all dwellings in an area. That means that the system can operate effectively and that the burden of taxation is distributed fairly and reasonably.
The hon. Lady favours a local income tax, but I am curious to ascertain how that would work. Would it be levied according to the person's place of work or residence? Would it disadvantage city areas over suburban areas? Many local authorities, such as Liberal Democrat-controlled Liverpool city council, would not necessarily be happy with such a system.
| Next Section
| Index | Home Page |