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5 Mar 2003 : Column 915—continued
Mr. Luff: I have considerable sympathy with much of what the hon. Member for Kingston and Surbiton (Mr. Davey) said when he moved the new clause. Local government functions are effectively controlled from Whitehall and three-quarters funded by it. To meet the targets effectively imposed on it by the Government, my county council is obliged to increase council tax by 14 per cent. or so just to stand still. West Mercia constabulary, one of the precepting authorities, gave a demonstration to hon. Members from Worcestershire, Shropshire and Herefordshire of the impact of the Government's grant, which the hon. Member for Ludlow (Matthew Green) attended. He and I heard a convincing reasons why a 12.9 per cent. increase in the precept was necessary just to stand still.
I am therefore worried about the capping powers available to the Government. Worcestershire county council could be in an invidious position if the Government used those powers, and might have to cut services, including social services inspection and teachers in schools. Yet it has to impose a monstrously high council tax increase because of the Government's treatment. Quite outrageously, it is between a rock and a hard place.
Mr. Clifton-Brown: My hon. Friend is making an important case. His police authority is in exactly the same position as mine in Gloucestershire. It has had to impose a double-digit precept for the past three years because of the funding that it has received from the Government. Had it not done so, the only alternative was to cut the number of police officers in Gloucestershire.
Mr. Luff: I entirely share my hon. Friend's concern, and am glad that he made that point. Last year, West Mercia constabulary increased its precept by 33 per cent. to enable it to have a useful increase in the number of police officers on the streets and in the villages of my constituency, but I imagine the Government were tempted to use their capping powers. Large increases are
being forced on local authorities, police authorities, county councils and district councils by the Government's funding arrangements, which have skewed money away from "leafy" shires to northern Labour strongholds. No wonder we see that council tax increases are typically highest in a line south of the Severn and lower north of the Severn. If the Government used their capping powers on authorities such as Worcestershire county council, it would be an outrage.Although I have sympathy with the comments of the hon. Member for Kingston and Surbiton, I recognise that there is a need for the Government to have reserve powers to use against outrageously profligate authorities, but not authorities like Worcestershire, which is put in an invidious position by the Government's own policies. If the Minister can reassure us about the use of capping powers this year at least, that would provide some comfort while more careful, calm consideration is given to the long-term future of the powers.
6.30 pm
Mr. Raynsford: We have had an interesting debate. I can say that as there have now been three speakers. The hon. Member for Cotswold (Mr. Clifton-Brown) described it as an interesting debate after we had heard just one speaker. That raises the interesting intellectual question of whether a debate can take the form of a monologue.
The fact that the hon. Member for Kingston and Surbiton introduced the new clause today strikes me as bizarre. It is surely a strange sense of timing to choose to make the case for the abolition of capping powers on the day when the Chartered Institute of Public Finance and Accountancy has published provisional figures suggesting that council tax demands from local authorities will be up by some 12.9 per cent. next year.
At a time when many people all over the country are naturally worried about the prospect of large council tax bills landing on their doormat, it shows an extraordinary degree of insensitivity on the part of the Liberal Democrats to suggest the abolition of capping. That sends a message that anything goes, and indicates that their priority is not the poor council tax payer, but the local authority—the producer interest, rather than the public. That, I am afraid, is all too often characteristic of the Liberal Democrats.
Mr. Edward Davey: Can the Minister tell us how he intends to use the powers this year? Which councils will he cap?
Mr. Raynsford: If the hon. Gentleman is patient, I will take him through the policy and its implications. We made our position on council tax capping clear in our 2001 local government White Paper. That built on the Local Government Act 1999, which abolished the crude and universal capping provisions introduced by the Conservatives when they were in government, about which they now clearly feel a little guilty. The hon. Member for Cotswold could not quite bring himself to admit the errors of the Thatcher period, but he clearly indicated a shift in the Conservatives' position.
We have done away with those provisions and accepted that it was wrong to have those blanket powers, which were used in an insensitive and
inappropriate way. However, we retained more selective reserve powers that can be used, if necessary, in cases where local authorities impose an unreasonably high council tax demand. We can cap a budget increase in-year; we can pre-set a maximum budget which an authority can set in subsequent years; or we can set a notional budget requirement against which future years' capping decisions can be taken.The hon. Member for Kingston and Surbiton suggested that the Government were being inconsistent in our approach. We are not. We do not wish to use capping powers, but we believe, as any responsible Government should, that it is right to have reserve powers against circumstances where a local authority has behaved in a dubious way and imposed an excessive council tax increase for no good reason. That is the right policy stance to protect the interests of the public.
As regards this year, we are still waiting for all the information on council tax rises. The CIPFA figures to which I referred are based on approximately two thirds of local authorities. It will be a while yet before we have received all the data for all local authorities. It would be wrong to make any decision on the use of the powers just yet. We do not rule out their use, but we have no current plans to apply the capping powers. We do not wish to use the powers, but we recognise that in certain circumstances that may be necessary. The retention of the powers is important to send a message that local authorities should always act responsibly and should have proper regard for their council tax payers—for ordinary people who have to pay the cost and who would see a bill increasing by rather large amounts, as some, I am afraid, will do this year, as a very serious imposition and a cause of deep concern.
Looking at the figures for the current year, it is clear that there are some very wide variations in the council tax demanded in different areas. For example, the west midlands has a number of metropolitan authorities that are of roughly similar size and are getting roughly similar levels of Government grant. However, their council tax demands range from 4.4 per cent. in Coventry and Birmingham and 5.8 per cent. in Sandwell and Dudley to 14.4 per cent. in Conservative Solihull. I do not know why Solihull finds it impossible to budget for a modest council tax increase just as Birmingham and Coventry do, given that its grant increase was in line with those received by other west midlands authorities.
The Tory party has tried to pretend that the Government grant is responsible for council tax increases this year. That is an outrageous suggestion, because this is the first year ever when every local authority in the country has received an above-inflation grant increase. That has never happened before. During the years when the Tory party was in government, councils more often than not saw a reduction in their grants in real terms and sometimes in actual terms. This year, every council in the country has had an increase. The overall increase has averaged 5.9 per cent. in general grant. When special and specific grants are added, the average is 8 per cent. That is a good settlement that is substantially ahead of inflation.
Mr. Clifton-Brown: I have heard the Minister repeat that assertion several times on the radio, but it is simply
not true. Out of the average increase of 5.9 per cent., at least 3 per cent. has been taken up by Government-imposed taxes—increased pension contributions in respect of advance corporation tax changes, increased national insurance and non-funded increases for public sector employees. Those increases take up 3 per cent. of the 5.9 per cent. average. In addition, many councils have received an increase of only 3.5 per cent. under this Government's settlement. How are they supposed to maintain services with such a grant increase and such increased costs?
Mr. Raynsford: I am surprised that the hon. Gentleman can bring himself to say that with a straight face. When his Government were in power, councils got cuts in the grant. They saw reductions and cuts, but while this Government have in been in power local authorities have seen year-on-year grant increases. This year, they are getting an increase averaging 5.9 per cent. in general grant and 8 per cent. when specific grants are taken into account—a total of £3.8 billion. Let me deal with one or two of the points that he raised about that. Does he know how much is taken up by national insurance?
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