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11 Apr 2003 : Column 591—continued

2.46 pm

The Parliamentary Under-Secretary of State, Office of the Deputy Prime Minister (Mr. Christopher Leslie): I congratulate the hon. Member for Lewes (Norman Baker) on securing the debate. I was also interested in what was said by the hon. Member for Bexhill and Battle (Gregory Barker) about representations from his constituents.

A couple of simple, obvious points need to be made. Although they are simple and obvious, I will make them none the less. The first is a defence of local democracy. Decisions on council tax are ultimately local decisions: it is for councillors elected by local people, and accountable to them, to make their own decisions about local budgeting and hence about the council tax rate.

The Government believe in giving local authorities more freedom and flexibility. That is why we have tried to dispense with some ring-fenced grants that have sometimes meant the binding of pots of money. We still give a significant amount of grant to local authorities, but we have been able to increase overall grant levels, allowing local democracy to thrive as much as possible to maintain accountability.

Although there have been the average council tax levels cited by the hon. Gentleman, it is not true that every council has increased its tax significantly. Some, of course have chosen to do so: Wandsworth, famously, has increased its tax by about 50 per cent., and there have been other increases in single figures. Each authority has its own circumstances, and makes its own choice about its council tax rate.

The second simple and obvious point is often made, but I want to make it again. The Government have put significant amounts into local government services. There has been one of the most generous local government settlements ever—a 5.9 per cent. direct grant increase across the country. Taken along with other specific grants, that becomes about 8 per cent. extra, or £3.8 billion. For the first time we have been able to ensure that all authorities receive an increase in central Government support above the rate of inflation. The value of that should not be questioned. Real-terms increases in local government funding since 1997, when the Labour party came to power, amount to 25 per cent. The last Administration had a much more dubious record.

Norman Baker: I ask this genuinely and with puzzlement. If those figures are correct—I am sure that

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the Minister is an honest chap, and is telling me the facts—why is the average council tax increase 12.6 per cent.? If the Minister is giving councils money above the inflation rate, why are councils under every kind of political control imposing such huge rises?

Mr. Leslie: It is not quite as simple as "councils under every kind of political control". I did not want to be overtly partisan, but the typical Conservative authority is increasing its council tax by around 16 per cent. Labour councils are raising theirs by significantly less, and Liberal councils by somewhat less. We have a new formula grant system in place following an extensive review. The system has changed significantly. I suspect that some local authorities, not all, may have used that as a cover for increasing council taxes significantly but, as I say, the generous extra grants going in mean that there are no good excuses for excessive rises in council tax.

Gregory Barker: If what the Minister says is the case, why do the chief executive—not the political leader—and the other treasury officers of East Sussex county council clearly specify and spell out that in underlying real terms the council is losing £29.9 million? They have not invented that sum. It is a real sum based on factual calculations.

Mr. Leslie: There is no truth in the suggestion that East Sussex county council is losing any Government grant. On the contrary, it is getting an increase in grant from central Government of 3.8 per cent., which is above the rate of inflation. It is not the same as other councils have received. I think that Hastings borough council has received a 5.8 per cent. increase, and Lewes district council an 8.1 per cent. increase. The interesting thing about East Sussex county council is the budget decisions that it has taken. Its councillors decided to increase the budget by, I think, 9.3 per cent.. Not all councils have chosen to increase their budget by that amount. There may be perfectly good legitimate local reasons for that or there may not: it is not for me as a Minister to intervene. That is a local decision, but local people need to ask searching questions about why the decision was taken to increase the aggregate budget by 9.3 per cent.

The hon. Member for Lewes suggested that there had not been very good grant increases, particularly for Lewes district council. He is wrong to compare the raw cash figures in 1997 with the amount of grant now. They do not provide a like-for- like comparison of the services that have been provided by that specific grant. There have been a number of changes in function. For example, council tax benefit administration and housing benefit administration have gone from being funded from a general grant to being funded from specific grants. In the past three years, overall grants to Lewes district council have increased by about 5 per cent. year on year on a like-for-like basis. That is a reasonable and generous settlement.

As I say, in looking at some of the different figures, the budget decisions of those local authorities need to be taken into account. Other factors have come into play in determining whether they have had more or less of an increase. The area cost adjustment has been an issue for

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East Sussex county council—I will come to that if time permits—but in Eastbourne, Rother and Wealden, population loss has been a significant factor.

The 2001 census has come out. In some district council areas, there was an over-estimate of how many people resided in those areas. Those changes, as they fed into the formula—we give money to local government on a per capita basis and then have top-ups for deprivation and other factors—have meant that those authorities have not gained as much as they may have expected.

In Eastbourne there was a 3 per cent. population loss. In Rother there was a 7.1 per cent. population loss and in Wealden a 2.2 per cent. population loss. That means that their grant increases have been around 3 per cent. In Lewes, which is of particular concern to the hon. Member who secured the debate, there has been a recorded population gain of 5.4 per cent., which in some ways has been the prime driver behind the 8.1 increase in grant for the district council.

The hon. Member for Bexhill and Battle mentioned council tax perhaps being particularly burdensome for pensioners, the elderly and others who have difficulties with paying. I am always concerned about those people who find great difficulty in paying their council tax. That is why people on low incomes have help available to them through the council tax benefit system, which can meet some or even all the council tax liability, depending on the income that individuals have. Obviously, I urge anybody who has not applied to contact their local authority and take up that benefit if they think they are eligible.

I am sad to say that the hon. Member for Lewes rehearsed the oft-repeated myth about the council tax grant moving from the south to the north. There are many good examples of authorities in the south getting very significant increases in grant support. As I have said, Lewes district council received 8.1 per cent., which by any measure is a very generous increase in local authority grant. Many other authorities in the south have received well above average increases: Buckinghamshire has received 6.4 per cent., Bedfordshire has received 7.1 per cent., Cambridgeshire has received 8.5 per cent. and Wiltshire has received 8.9 per cent. Those increases are well above the rate of inflation—in some cases, three or even four times above it.

Norman Baker: Can the Minister therefore explain why authorities in the south-east have average council tax increases of 15.7 per cent. this year, whereas local authorities in the north-east, for example, have increases of 8.7 per cent.? Are people in the south-east who run councils twice as profligate?

Mr. Leslie: No, but there are other factors that certain commentators might want to look at, such as the absence of county council elections or London borough elections this year. It is interesting to note that Wandsworth cut its council tax the year before the London borough elections; now, a year later, there is a 50 per cent. increase. It is noticeable that, in terms of decisions taken by some counties and London

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boroughs, there tends to be a correlation between when elections occur and council tax figures. However, as has been pointed out, it would not be proper for me to suggest a causal connection between those factors.

The grant levels have been extremely significant, and some very important changes were made to the formula. The area cost adjustment is now much more sensitive to local needs. I suspect that some concern has been expressed in East Sussex about some of those changes. The ACA used to be calculated at a crude level, involving concentric circles around London. It did not really compensate areas outside the south-east for some of the high wage costs that they face. The new system uses local wage evidence in a much more sophisticated way. In replacing the old system, it recognises that the south-east is still the most expensive region, after London, in which to recruit and retain staff. On East Sussex's claim that we have not reflected its wage pressures, the ACA is based on local labour market evidence and statistics, so ACA top-up does take into account local labour market pressures. Other local employers face very similar recruitment, retention and wage demand issues.

The hon. Member for Lewes also mentioned the Liberal Democrats' pledges on ways to reduce the council tax burden. He talked about their being able to make a £100 reduction in the council tax system. I am not sure that the sums add up, and I would be very worried about such a claim, given their past record. The Government have, however, decided to examine the council tax issue a little more thoroughly, and particularly the question of the amount raised locally, compared with that raised through central Government grant. We want to look at that connection in terms of accountability. A "balance of funding" review will commence shortly, under the chairmanship of my right hon. Friend the Minister for Local Government and the Regions. So we are looking at the current financing arrangements across the piece.

The Liberal Democrat proposal that worries me a little more—there are advantages and disadvantages to all systems—is that of an income-based local tax. I want to put on the record my worry that such a system could lead to different tiers of local government each setting their own income tax. That might weaken local accountability, particularly if the tax were collected centrally. It could also disadvantage inner-city and more deprived areas that, for example, have a predominance of poor households. Such areas might not have the income generation capability to support significant spend. Those are issues that the Liberal Democrats must address.

East Sussex county council and East Sussex's district councils are all getting above-inflation grant increases, so attention must turn to the budgeting decisions of locally elected councillors, who must explain their council tax figures. Nationally, the Government are investing record sums—billions extra—in local government services, and we have consistently increased grants to local government since taking office. As I said, some 25 per cent. extra—

The motion having been made at half past Two o'clock, and the debate having continued for half an hour, Mr. Deputy Speaker adjourned the House without Question put, pursuant to the Standing Order.

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