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Sir Nicholas Winterton (Macclesfield): Is the Minister aware that the Treasury has acknowledged that public sector price inflation is currently at 7.8 per cent? Is he convinced that the allocations that he is making to local government—especially to Cheshire and Macclesfield borough council—take that into account? Cost pressures in Cheshire include private sector charges for residential and nursing home care, which have risen by 14 per cent. In addition, bus contracts, which necessarily are a county council responsibility, have risen by between 50 and 60 per cent. How does he justify the allocation of resources in the face of increases that will pose huge problems for responsibly led councils?

Mr. Raynsford: The hon. Gentleman will accept that Cheshire has received good settlements both last year and this year. This year's settlement gives it 5.7 per cent. extra. That is almost at the ceiling, well above the average for all authorities, and roughly double the rate of inflation. That is a good settlement, and I hope that Cheshire will be able to work within it. Cheshire is also receiving special and specific grants totalling £29.6 million. I hope that it will use those resources to deliver services efficiently to local residents, as I know the hon. Gentleman wants.

Mr. George Stevenson (Stoke-on-Trent, South): I welcome my right hon. Friend's statement on the reduction in the ring-fencing percentage applicable to social services, and urge him to continue that process. Will he have discussions with my right hon. Friend the Secretary of State for Education and Skills to see whether the same principle can be applied to the standards fund? Finally, we heard an interminable rant from the right hon. Member for Skipton and Ripon (Mr. Curry), but I agreed with him on only one point—the issue of gearing. Will my right hon. Friend pay special attention to the local government gearing mechanism? It distorts local priorities and disrupts the financial system.

Mr. Raynsford: I am grateful to my hon. Friend for his kind remarks. We are looking at the question of ring-fencing very carefully. I have announced a significant reduction in the current year and made it clear that we are committed to achieving further reductions next year. We will obviously be talking to colleagues in all Departments. I have made it clear that gearing is one of the factors that we are taking into account in the balance of funding review that is considering issues relating to local authority funding. No conclusions are available yet, but we are giving the matter serious attention.

Sir George Young (North-West Hampshire): Counties such as Hampshire will get only the minimum increase of 3.5 per cent. Will the Minister admit that that is a very tough settlement indeed, and that people in Hampshire know whom to blame for this year's inflation-busting increase—the Government and not the county council? Will he assure the House that the 3.5 per cent. floor increase to which he referred will in every case cover the mandatory increase in education spending that the Government are expecting local authorities to pass through?

Mr. Raynsford: The right hon. Gentleman is normally very punctilious about figures, but Hampshire county

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council will receive an increase of 4.6 per cent., not 3.5 per cent. If he looks at the settlement carefully, he will see that Hampshire county council will get a 4.6 per cent. rise, plus some £52 million in additional specific and special grants. That is a good settlement, and it is in marked contrast to what happened when he was a Minister in the old Department of the Environment. Local authorities then got the level of grants that I set out in my response to the right hon. Member for Skipton and Ripon. An increase of 4.6 per cent.—as opposed to increases of 1 per cent. or less, or even a reduction of 0.6 per cent.—looks like a very good deal. I hope that the right hon. Gentleman will tell his council leader to budget prudently within those limits and to deliver the public services that local residents need.

Ms Karen Buck (Regent's Park and Kensington, North): I welcome the protection for schools in this year's settlement, the continuation of the floor, and the flexibility fund. However, does my right hon. Friend agree that some London authorities face considerable pressure when it comes to providing services, as a result of a rising population, the census undercounting in some areas, the fact that problems with mental health are much more prevalent in London than in other parts of the country, and other difficulties? Will he say how the flexibility fund will be applied? Will he assure me that the pressures and demands of London and of the provision of non-statutory services—such as early-years and youth services—will be given high priority for support?

Mr. Raynsford: The authority that my hon. Friend represents is one of those affected by census figures. Much discussion has taken place between the ONS and Westminster city council about those figures, but Westminster city council benefited from the floor last year. That protected the authority against a serious loss that would otherwise have been incurred, as result of the census figures. I am pleased that this year's figure for Westminster is, at 3.7 per cent., a little above the floor level. The authority is therefore being protected and has received a slight increase this year.

The average increase for London authorities as a whole is 4.7 per cent., exactly in line with the national average. There is no question that London is being treated less favourably than the country as a whole.

Sir Brian Mawhinney (North-West Cambridgeshire): The right hon. Gentleman's competence in this area of public policy is obvious and well-established, but I hope that he understands that his heavy reliance this afternoon on political spin emphasises the worrying nature of the settlement that he has announced. In the past six years, average council taxes in the real world have been two or three times higher than the percentage resource increases announced by Ministers at that Box. When council tax increases of between 9 and 12 per cent. are announced this year, will he consider them reasonable?

Mr. Raynsford: The right hon. Gentleman was another Minister in a Government that used to announce rather low increases in the local authority settlement of around 1 per cent. in a good year. I am sure that he will accept that that contrasts markedly with

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Cambridgeshire's grant increase this year of 6.2 per cent., following a record 8.5 per cent. last year. Those are very good increases, which most local authorities would regard as a sound basis for budgeting.

The right hon. Gentleman asked about council tax. We expect all councils to budget prudently and to restrict council tax demands to the lowest possible level. The levels that he is talking about seem to me to be high. We want authorities to provide good-value services in a cost-effective way, and not to impose unreasonable costs on council tax payers.

Mr. Harry Barnes (North-East Derbyshire): The previous Government's Local Government Finance Act 1988 put local government finance in a mess for a decade. It caused deprivation in some areas while others had money stuffed down their throats. The redistribution under this Government was slow to start with, but it has accelerated more recently. However, does my right hon. Friend agree that it is seriously inhibited by the floors and ceilings arrangement? Some authorities do not get resources from other sources, so is it not understandable that they feel obliged to charge high levels of council tax to rectify matters? Should not something be done to overcome the financial problems created by the previous Administration? In that way, authorities that have suffered can begin to put things right.

Finally, can we have a full debate on this topic in future, as 39 minutes of this statement were taken up by Front-Bench spokesmen, before Back-Bench Members were able to contribute?

Mr. Raynsford: My hon. Friend accepts that the settlements, both last year and this, have been good for Derbyshire. This year's increase of 6 per cent. follows last year's ceiling settlement of 7.8 per cent.

I hope that my hon. Friend recognises that it is sensible to give local authorities the opportunity to budget with a degree of certainty, and not to make them subject to short-term fluctuations that can be difficult to cope with. That is why we operate floors and ceilings. Floors to protect authorities from steep reductions in their grant entitlement have to be paid for, which is why the ceiling is needed.

We recognise that there is deprivation and other problems that my hon. Friend is well aware of in his area. The changes to the grant distribution formula were designed to reflect some of those needs more accurately. The Government are determined to continue in that way, not only through the grant distribution formula but through special grants. In the current year, Derbyshire is receiving £34 million for special needs, many of which are specifically to do with deprivation. We will continue to do all that we can to ensure that such authorities receive decent settlements that enable them to budget prudently and to deliver high-quality services without the need for steep increases in council tax.

Mr. A. J. Beith (Berwick-upon-Tweed): Does the Minister recognise that under this settlement it will be even more difficult to maintain services in districts of large area and small population, particularly in those

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that last year—for reasons that have still not been explained—got very low settlements of the order of 3 and 4 per cent., such as Alnwick, Berwick and Castle Morpeth? Is he willing to look again at the position of those three districts in Northumberland, the pattern for which was contrary to that of the rest of the county, and to see whether any further help is needed? Castle Morpeth has just had to turn around a major financial difficulty, but it is recognised to be doing so.

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