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Norman Baker: Let me try once more, just five minutes before Third Reading finishes. The point is that the implementation of the landfill directive will move somewhere else more than half of the waste currently in

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landfill sites. The criticism is that the Government have not planned where it is going. That is the main issue: where is that waste going? The Government should incentivise the waste hierarchy to ensure that it goes to the right place, but they have not done so.

Mr. Morley: The waste hierarchy is incentivised to a certain extent. We can argue about the level of those incentives and whether we need further ones. I am not averse to that. I have acknowledged that our approach is dynamic. We do not expect the measures that we are taking now to stand still. We expect them, including the targets for waste and recycling, to be reviewed. We shall examine them again in due course.

We have not disagreed about where incineration is in the waste hierarchy. The Government are not advocating incineration or any particular approach, apart from stressing the importance of minimisation and recycling in the hierarchy, which is where we are putting resources. All I am saying is that we sometimes have to opt for the best environmental solution on environmental grounds, but the best environmental solution may not always be the most popular one. That is an issue for organisations such as Friends of the Earth to take into account if they are serious about environmental issues, minimising the impact on the environment and finding the best solution. As I say, it may not always be the most popular, but people should argue for what they believe is the right solution in the circumstances. The hon. Member for Mid-Bedfordshire made a similar good point about how particular issues should be judged.

I think that we have had a useful and good debate. Obviously, the Government cannot accept all the amendments, but we have made a big effort to deal with the points that hon. Members have raised. I have already said that not all of them are appropriately dealt with by this particular Bill, but they remain important issues. We are addressing them through such means as the packaging directive, implementation of various EU directives, recycling landfill credits and the waste and resources action programme. We are investing millions of pounds of support through the challenge fund for local authorities. We have made a significant increase of more than £1 billion, I believe, for the application of that fund. All those important measures demonstrate that the Government take environmental issues seriously.

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We have freely acknowledged that waste and recycling in this country starts from a very low base—we have no argument about that—but I genuinely believe that we have made more progress in the last few years than in the previous decade. We have seen heightened awareness from all parties and all sides in the debate of how to apply environmental measures.

I repeat my thanks to hon. Members for their constructive contributions. The Bill will make a difference. I do not believe for a moment that it represents the only measure that we can put in place. I have demonstrated to the House the various other work streams that are in progress. We will have a continuing debate and I do not disagree with many of the points that have been made during the debate.

Question put and agreed to.

Bill accordingly read the Third time, and passed, with amendments.


Motion made, and Question put forthwith, pursuant to Standing Order No. 18 (1)(a)(Standing Committees on Delegated Legislation),

Regulatory Reform

Question agreed to.


Motion made, and Question put forthwith, pursuant to Standing Order No. 100 (Scottish Grand Committee (sittings)),

Question agreed to.



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Council Tax (Worcestershire)

Motion made, and Question proposed, That this House do now adjourn.—[Jim Fitzpatrick.]

7 pm

Mr. Peter Luff (Mid-Worcestershire): I am very grateful to you, Mr. Speaker, for the opportunity to discuss this matter of great importance to my constituents in Mid-Worcestershire and to those of my hon. Friend the Member for Bromsgrove (Miss Kirkbride), whom I am glad to see in her place, and of my hon. Friend the Member for Leominster (Mr. Wiggin), who still has a significant footprint in Worcestershire in the area of Tenbury Wells.

Local government taxation has always been a controversial matter, but recent increases have made it much more so. This debate need not be a matter of party politics. I will say some fairly firm things to the Minister, because, although the problems I am describing began when my party was in power, they have become worse under this Government—we are both guilty men in that sense—and the matter is now becoming increasingly urgent.

Pensioners and low-income householders in Worcestershire simply cannot afford any more significant above-inflation increases. I know that my hon. Friend the Member for West Worcestershire (Sir Michael Spicer) agrees with that. He was always going to be detained somewhere else tonight—he had a long-standing engagement. I suspect that something else may have overtaken that long-standing engagement, but he is still elsewhere tonight, so he has asked me to say that he associates himself with the arguments that I am putting to the Minister and the House this evening.

The county precept in Worcestershire has gone up by nearly 80 per cent. in cash terms since 1997. Again, that is not a matter of party controversy, because the recent large increases—nearly 13 per cent. in the current year—were supported by councillors of all parties, albeit with some reluctance, because they recognised that it is the only way they can protect services in the county. The police precept has risen by about 50 per cent. in the last two years alone—another very significant increase. These increases have been made until the pips squeak, but sadly it is not the pips of the rich but the pips of the poor that are squeaking, and that is the problem.

Service delivery is also very vulnerable in the county. For example, the gap is growing between Worcestershire's schools and those in neighbouring authorities—Birmingham spends an average of about £700 more per pupil—and head teachers in Worcestershire are at their wits' end. Forty-one schools currently face deficits, and unless something is done the situation will be worse next year as balances put by for projects, or prudently for contingencies, are exhausted. We are grateful to the Minister for School Standards for the attention that he has given to the situation in Worcestershire, but, as he knows, head teachers in the county are dignified in their protests but increasingly convinced that something must be done to correct this growing divide.

The problem that we have in debating this subject is that local government finance is notoriously complex, and that complexity has enabled the Government, I

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think, to hide a huge increase in taxation—or to hide it until recently. The problem I have in talking to constituents is trying to explain gearing in less than two or three sides of A4. It is a difficult problem, and the result—I think the Minister will admit this, and of course it happened under the previous Government, too—is quite often that county councils get it in the neck from central Government's policies.

I still fondly cling to the hope that everything, when properly understood, is simple, so I think there are three simple truths about Worcestershire's council tax. The first, a very important one, is compound interest. That means that discrepancies increase over time. The rules of compound interest are clear. If the same percentage increase is applied to a small sum and a larger sum, the gap between the two sums widens over time. The trouble is that Worcestershire has seen an increase in central Government education spend per pupil of only 39 per cent. since 1997, compared with a national average of 47 per cent., so that 8 per cent. discrepancy has magnified an already large gap and made the rules of compound increase even more cruel.

The second truth is that if the Government reduce the share of local expenditure that they finance, council tax must rise to fill the gap. That has also been happening in Worcestershire.

The third truth—and it is a matter to which I shall return at the end of my remarks—is that if the Government keep the promises implied in the public expenditure White Paper and elsewhere, the county's council tax increase next year need "only" be around 6.5 per cent., although that is still a large sum. As it is, the average Worcestershire council tax payer—that is, a band D council tax payer—is already paying more than the average Birmingham council tax payer, and more than people in Dudley, Solihull and Walsall. The amount paid in Worcestershire is about the same as the average paid by the English council tax payer, but it is more than what is paid by the average unitary authority tax payer. To be fair, the amount paid in Worcestershire is very slightly less that than the amount paid by the average county council tax payer.

In other words, it would be wrong to look to Worcestershire council tax payers to put right the discrimination against schools and other local services by paying more in council tax. I qualify that assertion in one way: if the Government agreed to give us a fairer deal, to narrow the gap between us and similar authorities and to make a bigger contribution themselves to council services in Worcestershire, I would consider supporting a matching increase in council tax. However, I cannot argue that council tax payers in Worcestershire should bear all the pain for central Government's failure to fund those services.

Council tax in my constituency is divided into four elements, and there will be five next year. The county council takes 75 per cent. of the total, and the district councils—in my case, that is Wychavon—account for about 12 per cent. The police account for some 11 per cent., and the parishes for around 2 per cent. When the fire authority becomes a precepting authority in the coming financial year, it will receive a separate precept.

A brief look at the police shows that there are 300 more officers, but that is no thanks to the Government. We in West Mercia now pay more for police—£119.80

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on average—than people in Birmingham, who pay £71.16. The Home Secretary cannot rightly boast of any achievement in that respect. The local council tax payer has paid for those officers through the massive increase in police precept—50 per cent. over the past two years.

The prospects for the coming year are very bad, as the Association of Police Authorities confirmed in a briefing yesterday to all hon. Members. West Mercia faces cost pressures of 5.8 per cent. to maintain current levels of policing—that is, to meet pension and pay requirements under the Police Reform Act 2002, and to cover other variables imposed by the Government, such as DNA testing, and so on.

If the Government grant increases by 3 per cent., as they did last year, gearing—the proportion raised by local council tax payers—would mean that the police precept would have to rise by 11.5 per cent. just to stand still. Is the Minister able to assure me that the increase in Government grant will at least match the extra costs imposed on West Mercia under the Government's reform programme? There is also speculation that a 2.5 per cent. floor in the Government grant would apply to West Mercia. That would have a disastrous impact on council tax and service levels.

I shall make a few brief remarks about the district council. Wychavon district council is a very well-run administration. It has more flexibility than others, as there are no large budgets for fixed costs such as education and social services. That means that it has managed to keep its council tax increase in line with inflation and the retail prices index, while maintaining and improving services. The planning department, in particular, has received a pat on the back from the Office of the Deputy Prime Minister, the Minister's own Department, for spectacular improvement in output over the past year.

We do not know what will happen with fire, for which there will be a precept for the first time in the coming year. I assume that the precept will be relatively modest, but it is a matter for concern, given that Worcestershire always spends significantly more than the standard spending assessment or the formula spending share. The parish precept of 2 per cent. is ungeared and no large increase is expected, so it is not really an issue.

The big precept is the one for the county council, which accounts for 75 per cent. of the total. I want to dispose of two myths about the county. First, there is little room for efficiency savings. Worcestershire is an efficient council. Central costs at county hall are about 75 per cent. of the national average, and efficiency savings have recently exceeded all Government targets. The Audit Commission has said that no other council in the west midlands offers a better quality of service. The commission went on to say that the council needs more money to improve further.

The second myth that I want to dispel has to do with money passported to schools. Worcestershire county council has not sat on money that it should have passported to schools. It spends 2 per cent. more than the Government formula suggests it should, and it passported 103.5 per cent. of last year's increase.

There are two reasons for the massive increases in Worcestershire's council tax in recent years. First, Government policy is to reduce the amount of expenditure obligations funded centrally—out of

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general taxation—and to shift the burden to the council tax. That policy was in place before 1997, but it has accelerated since. The second reason is the continuing and increasing discrimination against Worcestershire in all the funding formulae.

The first reason to which I have referred is Government policy for all of local government. However, we should not blame councils for increases in council tax that flow directly from central Government policy. The second matter is more specific to Worcestershire, and is an accident of history that urgently needs to be corrected. The Government claimed to have changed the funding formula this year, but they merely seemed to rig the criteria so that the new formulae mirrored the outcome of the old ones. There were remarkably few changes.

I have a practical suggestion for when the Government reconsider the issue. Sadly, I think that it will be two years before they do so; I wish it could be sooner. We should learn a lesson from the health service. It, too, has complicated means of distributing resources throughout the country, but I have never heard the criticism that Worcestershire receives an unfair share of health service funding. The formulae are complicated—had I more time, I might have expounded them at length to the House—but I hope that the Minister might consider them as an alternative funding mechanism for local government.

That brings me inevitably to the question of area cost adjustment. I am grateful to the Minister for the time that he spent recently with a delegation from Worcestershire. The delegation was so large that the numbers had to be rationed and I could not join it myself, although I should have liked to take part. I pay tribute to the hon. Member for Worcester (Mr. Foster) who initiated an interesting debate on area cost adjustment, a highly technical subject, earlier this year. However, the debate missed a vital point: national pay scales and national teaching costs mean that there is no intellectual justification for applying the area cost adjustment to education at all, and it should be phased out.

If we have to keep the area cost adjustment—I hope that we do not—Worcestershire deserves it. The vice-chancellor of Birmingham university, the chief executive of South Worcestershire primary care trust, the artistic and musical director of the English symphony orchestra, all the county's councillors and MPs, and even the Bishop of Worcester, all agree. God, the arts, industry and education are all on our side: area cost adjustment is needed for the county. Adrian Hardman, the cabinet member for resources said:

I shall not rehearse the arguments at length because the Minister is familiar with them, but most of Worcestershire falls in the travel-to-work area of towns and cities in other authorities that receive the ACA. Teachers live in Worcestershire, but work in Birmingham, Warwickshire or Gloucestershire; they live in a local education authority area that does not get ACA, but work in one that receives it.

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We compete in the same labour markets. Strangely, despite the high costs of living in Worcestershire, which count against us on resource equalisation, we are second from bottom of a table for county council funding per resident. We are almost unique in not receiving area cost adjustment, but we are penalised by resource equalisation.

House prices in Worcestershire are relatively strong, so Ministers judge that the council tax base can support a higher proportion of spending, which means that Worcestershire receives less than its fair share of grant aid from the national Exchequer. Ministers have decided that grant can be switched from Worcestershire through the resource equalisation formula. At £13 million, that is quite a switch.

Set against that, Ministers judge that Worcestershire has low wage costs and so should not be allowed area cost adjustment. That decision by Ministers is worth £10 million in lost income to the county. Ministerial decisions seem to defy mathematical gravity: high house prices supported by low wages—an economic miracle. It is no miracle, however; the statistics are wrong. It is wrong-headed to unhinge Worcestershire from the greater west midlands labour market. Ministerial decisions to do so cause real damage to those relying on services and those who pay for them. The result is that my county is out of pocket to the tune of £23 million.

Indeed, only 64 per cent. of our costs are met by central Government, down from 67 per cent. last year and compared to a national average of 73 per cent; that old friend, gearing, comes back to make up the difference—painfully—for my constituents.

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