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Mr. Raynsford: It is difficult to know what sort of settlement we would need to produce to make the Liberal Democrats happy. For years and years, authorities have had above-inflation increases. Again this year, for the seventh time running, local government is receiving an above-inflation settlement across the

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board. All authorities with education and social services responsibilities have well above-inflation increases, and districts have a near-inflation increase, after years under the previous Government when they faced cuts year on year. When we produce such settlements, the Liberal Democrats say how terrible it is. It reveals that they are living in a never-never land where money grows on trees and they can clamour for more and more resources without thinking about how to deliver value for money and cost-effective services.

The hon. Gentleman said that our £300 million extra left a £500 million gap. Of course, he has taken the Local Government Association's estimate of £800 million extra spending pressure. He has ignored the £120 million extra education funding, so he cannot do his figures.

Matthew Green (Ludlow): It is not new money.

Mr. Raynsford: It is new money.

First, we can see that the hon. Member for Kingston and Surbiton (Mr. Davey) has not got his figures right. Secondly, those LGA estimates are the typical position of the LGA. When we are approaching a settlement, there is negotiation, and obviously it wants to put the biggest possible gloss on the figures that it presents, so it offers some very imprecise spending estimates. It said that there was a £300 million schools overhang—although the full figures will not be available for some considerable time—and £300 million of additional social services pressures. Those are all figures plucked out of the air. There may be some substance to them, but they are not precise. However, the thing that is most telling is that there is no reference in any of the LGA figures to any possibility of cost savings or efficiency gains—none whatever. A 0.5 per cent. efficiency saving is all that would be required to fill the gap between the extra funding that we are putting in and the grand total of the LGA's somewhat inflated claim, so it does not wash.

The hon. Gentleman said that the Treasury was assuming an average council tax rise of about 7 per cent., but I make it clear that it is not an assumption. Every year, the Treasury puts in a figure based on past years' trends, thinking about what council tax rises might be. We do not assume that it will be at that level. We sincerely hope that it will be significantly lower, but obviously, for public expenditure purposes, the Treasury has to make some calculation, and that is the basis of it.

On capping, the hon. Gentleman asked why we have changed our mind in relation to excellent authorities. I have spelled it out on many occasions. We are reluctant to cap, but we cannot stand aside when authorities put up council tax by completely disproportionate amounts. The London borough of Wandsworth increased its council tax by 57 per cent. last year after cutting it by 25 per cent. the previous year—an election year. Few people would justify that increase—not even Conservative Members would justify it. However, had we said that excellent authorities would continue to be free from the risk of capping, that kind of excess would not have been considered, while other authorities with lesser increases might have been subject to capping. I hope that the hon. Gentleman will recognise that there must be fairness and consistency across all authorities

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on these matters. I regret the move, but it is inevitable because of the decisions of some irresponsible authorities to up their council tax by more than was necessary.

The hon. Gentleman talks about scrapping the council tax. The Liberal Democrats do so blithely but, as he will know from the questions I have put to him, the implications of introducing a local income tax are far more complex than he and his party suggest, and the administrative costs are likely to be massive. His naive assumption that it can all be done with a saving of £500 million in administration beggars belief.

The hon. Gentleman talks about particular problems of cost pressures on local authorities without talking about the scope for efficiency savings. He talks about more micro-management of schools, but in the past six months we have been working very closely with local government to ensure that effective measures are in place, so that schools get the funding that they want and need, and that local authorities have the means to do that and to fund other services. That is practical work with local government to meet our educational objectives. I am only sorry that he could not welcome that.

Several hon. Members rose—

Madam Deputy Speaker (Sylvia Heal): Order. May I make a plea for single questions and single answers? Many hon. Members are hoping to catch my eye. I would like to please as many as possible.

Andrew Bennett (Denton and Reddish): I thank my right hon. Friend for all the hard work that he has put into the local government settlement and for his courtesy and patience when he meets representatives from local authorities about individual settlements, but can he remind us how we got into the situation of a regressive council tax? It was a panic measure from the Tories' poll tax. As a result, we are going to continue to have unfairness in local finance. Will he tell us what progress is being made on the local funding review and whether he is satisfied that the increases in VAT that were imposed when the poll tax came in are finding their way to local government?

Mr. Raynsford: I thank my hon. Friend for his kind remarks about the preparation of the settlement and our work to build a constructive dialogue and partnership with local government. We will continue to do that. He perfectly properly asked how the council tax has got into the position it has, where there is rising public concern about the level of increases in some areas. As I said earlier, the increases have varied from area to area, and some authorities, particularly Conservative authorities, have a very poor record, introducing large council tax increases in recent years. I hope that they will be much more prudent in the coming year. However, I recognise that there are issues about the council tax. It is precisely for that reason that the Government have initiated the balance of funding review, which he inquired about. That review has been going well. We have held three sessions to date. We have taken a lot of evidence. We

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have invited submissions and we will move on in the next few months to look at a series of options put to us by people who have submitted evidence to the review.

It is too soon to forecast the outcomes of the review. We certainly intend to look closely at a range of options in an open-minded, thorough and rigorous way, but our objective in the long term is to come up with options that will help to inform conclusions by Government on the right way forward to ensure a sustainable basis for local government funding.

Mr. William Hague (Richmond, Yorks): Will the Minister acknowledge that the population estimates on which his allocations are necessarily made are increasingly controversial or even discredited in some parts of the country as a result of serious shortcomings in the 2001 census? In particular, is he aware that the difficulty of estimating the population around the largest Army base in the country at Catterick in North Yorkshire has led the Office for National Statistics seriously to underestimate the population of the district of Richmondshire? Given that the ONS has conceded that it has been in error—it recently made that concession—can he assure me that the figures that he is publishing today take full account of that error, and that if they do not, he will put it right?

Mr. Raynsford: We have been in fairly regular dialogue with local authorities and the ONS about the statistics on which the settlement is based. The ONS has done some further data-matching exercises with both Westminster and Manchester city councils, where particular problems were identified. The right hon. Gentleman referred to some of the conclusions from that. The ONS will do further work. It is satisfied that, in general, the census was conducted in a thorough and rigorous way, and in many respects was the best and most comprehensive census yet, but there were issues and we are keen that they should be looked at carefully.

I have already given an assurance that, if the ONS revises its population projections on which the settlement is based, we will make an amending report to ensure that those authorities that lost out as a result of the previous calculation are compensated. It is too soon to do that, but I have given that commitment, and that applies to any authority.

Joyce Quin (Gateshead, East and Washington, West): I support the broad principles adopted by my right hon. Friend in approaching this issue, but I want to express some frustration that Gateshead, which is an excellent authority, once again seems to have been given the lowest rise of any metropolitan authority in Tyne and Wear. Will he look at the situation, and give a clear explanation of what the problem seems to be?

Mr. Raynsford: My right hon. Friend raised this issue with me last year. She rightly says that Gateshead is an excellent authority with an outstanding reputation for delivering good-value services. I shall certainly take on board her question about why it has a lower provisional settlement than surrounding authorities. I suspect that population factors have a lot to do with that, but I shall look into the matter and write to her.

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