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10.46 pm
The Parliamentary Under-Secretary of State, Office of the Deputy Prime Minister (Phil Hope): I congratulate the hon. Member for Southend, West (Mr. Amess) on securing a debate on the provisional local government settlement for Southend in the coming financial year. The overall settlement is, of course, an issue of great interest to local authorities at the moment. We are considering the comments received during consultation on the proposals, which my right hon. Friend the Minister for Local Government, Regional Governance and Fire announced on 19 November, augmented for some authorities in the pre-Budget report by my right hon. Friend the Chancellor of the Exchequer. Consultation closed last Friday, and we expect to announce the final allocations around the end of the month.
On the point about meetings, the hon. Gentleman will know that we are in the second year of a three-year settlement, and Ministers do not meet individual local authorities during the second year and this part of the consultation period. However, we are meeting representatives of bodies such as the Local Government Association that are putting the kind of points to us that he is making this evening.
I am still very confused, however, about the tenor of the hon. Gentleman's contribution. It is one example—we have many of them—where Conservative Members call for increased spending on state services. The hon. Gentleman does not want to increase the council tax, so he must want central Government taxation to increase to pay for that. I find that confusing because the right hon. and learned Member for Folkestone and Hythe (Mr. Howard) recently published his series of "I believe" statements. They have been criticised as meaningless platitudes because they contain no policy detail, but we know what at least one of them might mean in practice. Of course, I am referring to his belief that people should be big and that the state should be small. We know what that means in practice: under the last four years of the previous Conservative Administration, there was a 7 per
cent. real-terms cut in support for local councils, such as Southend. If the Conservatives were ever to regain office, it is their stated aim to cut public spending by £80 billion. Local government would clearly be one of the biggest losers in that financial cull.If belief in a small state—local or national—translated into practice involves a cut in local government funding, I should have thought that the hon. Gentleman would come here tonight to plead for less money for his council, not more, to be entirely consistent with Conservative philosophy. However, given that that is not the case, let me move on to the points that he is making. He made a very angry point at the start about the unfairness of the situation, so I want to spend a little time describing the settlement overall and how we have reached this position.
The main element of support to local government—revenue support grant and redistributed business rates—is set to rise by £2.4 billion or 5.5 per cent. next year, which is more than double the present rate of inflation. Special grants distributed outside the main finance system will rise by a further £1.3 billion or 11.7 per cent. That gives a total increase in grant to local authorities next year of some 7.1 per cent. By any standard, that is a massive increase in investment. It brings the total increase in support to local authorities since Labour took office to 30 per cent. in real terms. This is the clearest possible demonstration of our commitment to local government and the importance that we attach to the services that local government provides to local communities.
For individual local authorities, this year's settlement is largely shaped by the review of formulae that we conducted before the 2003–04 settlement. One of the key outcomes of the review—I stress this point to the hon. Gentleman and to the council whose case he is making—was a change in the way that the top-up for higher staffing costs operates. In the old system, the area cost adjustment was set for crude concentric circles around London, but he and I know that wage and recruitment costs vary much more widely than that. Wages in west London are much higher than the rest of outer London. The M4 corridor in Berkshire, Wiltshire and Avon previously received no top-up, nor did areas outside the south-east such as Cheshire and the old West Midlands county, although all have significantly higher costs than average.
The new area cost adjustment addresses these anomalies by considering wage levels for each county separately. In taking account of higher costs more accurately, some areas inevitably lost out in relative terms. Wage levels to the east of London are noticeably lower than neighbouring areas and, consequently, the authorities concerned receive smaller top-ups than previously.
To turn specifically to the settlement for Southend, the Government recognise, of course, that any move from the old unfair system to the new fairer formula will require a period of transition. In recognition of this, Southend, like some other authorities, directly benefits significantly from our floors and ceilings system, which gives a minimum increase in grant to each authority. The floor for all authorities was set above inflation for the first time last year, 2003–04, and, with the additional
£340 million announced in the pre-Budget report, we have been able to repeat this level of protection for 2004–05. The updated provisional settlement gives Southend a like-for-like increase in formula grant of 4.4 per cent.—a real-terms increase of almost 2 per cent. This follows increases in the seven years of this Government, ranging from 3.9 per cent. to, in one year, a 7.5 per cent. increase in grant to Southend borough council. These figures mean that Southend has received a real-terms increase every single year. That is in marked contrast to the decisions of the previous Administration who, we know, produced year after year of cuts for local authorities amounting to an actual cut of 7 per cent. in the last four years of the Conservative Government.In addition to the 4.4 per cent. like-for-like grant increase, Southend has also benefited from the range of additional special grants that we are providing to local authorities, including up to £1.4 million of extra help for schools and more than £600,000 of the new money that we announced for social services specifically to deal with services for children.
The hon. Gentleman also referred to passporting to schools. Local government services are part funded by central Government and part funded through council tax. Schools are no exception. Although we have expressed the new guarantee for schools funding arithmetically in terms of the passporting target, it is misleading to suggest that increases for schools are fully funded while other services see no increase. In fact, Southend, like other councils, has other sources of income that can be spent on its services. They include the reasonable low single-figures increase in council tax that we expect, other special grants—I have mentioned some already; others are to be announced—efficiency savings through things such as better procurement and new powers in the Local Government Act 2003 to borrow and to levy charges and fees. So it should not be implied from this that, in the passporting of funds to schools, Southend has been discriminated against in some way.
Last year, 12 authorities were asked to increase spending on their schools by more than their increase in formula grant. This year, with even more importance attached to full passporting to schools, the Government decided that it would not be reasonable to ask authorities to do this. When we announced the consultation in November, 13 authorities, including Southend, received additional grant to ensure that they received at least as large an increase in formula grant as their target for passporting to schools. Southend is in this position because we have provided a high floor for the schools formula spending share of 5 per cent. per pupil. Combined with an increase in pupil numbers, the authority is being asked to increase its schools budget by more than 6 per cent.
The extra money from the pre-Budget report that the hon. Gentleman mentioned increased the raw grant entitlement of all 150 upper-tier authorities, but we had to make a choice on the floors and ceilings to determine how much they should actually receive. We concluded that it would be appropriate to increase the floor to 4 per cent. and the ceiling to 7.5 per cent. His authority received extra money in November and, in the pre-Budget report, we made a change and more money went in, which was reflected in the ceilings and floors. However, we kept the guarantee—[Interruption.] The
hon. Gentleman does not understand that because of the formula grant, we are ensuring that the money can be passported.We are keeping the guarantee that every authority should have a grant increase that is sufficient to meet its passporting target. Even when we recalculated the settlement with the extra £340 million, Southend and five other authorities required extra top-up to enable passporting. That amount was relatively small in some authorities and relatively large in others. Southend is still receiving more funding in cash terms than the formulae say that it should.
There are arguments that Southend and other authorities should receive more money than the minimum necessary to passport to schools—I am apparently hearing that from the hon. Gentleman. However, there are even stronger arguments that the extra money that we have provided through the new guarantee is fair. Indeed, we have received representations from several authorities saying that the level of protection that we have provided is far too generous—other hon. Members have made that point fiercely.
With that in mind, I turn to the council tax and the possibility of capping. I must say that I was completely surprised to hear that the hon. Gentleman is still in favour of the poll tax, or the community charge. There cannot be too many of his like left on the Opposition Benches. I think that that was probably the single reason why the then Prime Minister Margaret Thatcher lost her job, and it is interesting that the current Leader of the Opposition was the Minister responsible for putting the poll tax legislation through Parliament—I do not suppose that he likes to be reminded of that too often. Still, I have no doubt that he is grateful for his supporters such as the hon. Gentleman reminding the House of that track record.
Let us consider the council tax and the possibility of capping. Last year, Southend borough council made the choice to increase its budget by 7 per cent., which was much more than double the rate of inflation. [Interruption.] As a consequence, its council tax increased by 15.7 per cent., which was substantially above the average and no less than six times the rate of inflation. I must say to the hon. Gentleman that we made it quite clear that such an increase was completely unacceptable. Hon. Members should be in no doubt
that we want to see percentage increases restrained to low single figures next year, and we are prepared to use our capping powers—[Interruption.]
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