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Local Government Finance
4.8 pm
The Minister for Local Government, Regional Governance and Fire (Mr. Nick Raynsford): I beg to move,
- That the Local Government Finance Report (England) 2004–05, HC 276, a copy of which was laid before this House on 29th January, be approved.
This is not, of course, a one-off increase; it is part of a programme of sustained growth in investment in the vital public services delivered by local government. Overall, Government funding for English local authorities is up by 30 per cent. on that of the last seven years in real terms. That is in stark contrast with the previous four years, in which year-on-year cuts were the norm, resulting in a 7 per cent. real-terms funding cut during that period.
Opposition Members, who are now showing clear evidence of selective amnesia, may wish to forget their responsibility for the realities of life in that era, when real-terms cuts were the order of the day. But those involved in local government do not have such short memories. They know the change that has occurred. They know that in 2004–05, for the second year running, all local authorities will receive a real-terms increase in formula grant on a like-for-like basis.
Mr. John Burnett (Torridge and West Devon) (LD): I am grateful to the Minister for giving way. I faxed his colleague the Under-Secretary, the hon. Member for Corby (Phil Hope), on 22 January to arrange a meeting with the Minister, the hon. Member for South-West Devon (Mr. Streeter)—for whose support I am extremely grateful—and officials from West Devon borough council and Torridge district council. This contribution to floor has knocked a massive hole in the budgets of both councils. In effect, to stand still the ratepayers of West Devon borough council will have to pay an additional 6.75 per cent. How can the Minister justify that?
Mr. Raynsford: I am sorry, but the hon. Gentleman simply has not given the House the full facts. He should recognise—perhaps he should tell his local authorities this—that Torridge is receiving a 3.6 per cent. increase, West Devon a 4.3 per cent. increase and Devon county council a 4.5 per cent. increase.
Mr. Raynsford: Those are real-terms increases that are well above the rate of inflation, and we expect local authorities to work within the finance available to them, and to look for economies in order to deliver value for money and quality services to their residents.
Mr. Barry Gardiner (Brent, North) (Lab): As my right hon. Friend knows, I have argued vehemently with him
on many occasions at this time of year about the settlement for my own local authority. This year, I want simply to say two words to him: the first is "thank" and the second is "you".
Mr. Raynsford: I am very grateful to my hon. Friend for his remarks. As he knows, his authority received an increase of 7.5 per cent., which is a realistic and very good settlement. I sincerely hope that the people of Brent will see good value for money from their local authority.
Mr. Raynsford: I understand that all Members want to intervene and I shall try to provide opportunities for them, but first I need to make some progress.
Mr. Anthony Steen (Totnes) (Con): Is this such an opportunity?
Mr. Raynsford: No, it is not, but I have no doubt that we will hear from South Hams in due course.
Some councils have queried what is meant by a real-terms increase in formula grant on a like-for-like basis. The basic principle is clear enough. From one year to the next, the responsibilities of local authorities or the way in which they are financed may change. If we were to compare grant paid to an authority from one year to another without taking account of that—for example, councils are no longer responsible for funding part of the cost of certain benefits—we would be making a misleading comparison. So for the purposes of a like-for-like comparison, we recalculate the previous year's settlement as if the change had already happened. The following year's grant is then calculated on that basis. That is the only proper and fair way. I shall now give way to the hon. Member for Surrey Heath (Mr. Hawkins).
Mr. Nick Hawkins (Surrey Heath) (Con): I am grateful to the right hon. Gentleman for giving way. Does he not accept that ever since this Government came to power, they have consistently loaded yet greater burdens on small borough councils in particular—Surrey Heath is an example—and that the funding to perform their functions has simply not followed? So the Government are not dealing with the situation fairly; they are loading on burdens and not providing the money. Whenever the director of finance for my borough council checks the figures announced by the Government, it is discovered that the money is not as much as the Government pretend through the Minister's statements.
Mr. Raynsford: For the second year running, every local authority in the country—including the hon. Gentleman's two district councils and Surrey county council—has received above-inflation increases. A county council receiving a 7.7 per cent. increase would have been completely unthinkable when his party was in power, so I would have expected to hear a little more realism and a little less complaint.
I owe an apology to the hon. Member for Torridge and West Devon (Mr. Burnett), because I gave him a slightly incorrect answer. The figures that I gave were
the average increases in formula grant over the past seven years, but of course, this year's settlement is even better. Let me now put the record straight by giving him the figures for this year: for Torridge an increase of 4.9 per cent.; for West Devon an increase of 5.3 per cent.; and for Devon county council an increase of 5.5 per cent. I hope that he will take those good figures back to his local authorities and tell them that he expects them to budget prudently and deliver efficient services without the need for large council tax increases.
Mr. Raynsford: I recognise that we are in Devon territory, so I give way to the hon. Member for Totnes (Mr. Steen).
Mr. Steen: My concern is less with how much extra moneys the Government are providing, though no one is against that; what I am against is asking council tax payers to pay more and more every year. In Devon last year, it was about 18 per cent., with the rate of inflation at around 2 per cent. On the settlement for Devon and Torbay, is the Minister telling me that the local authority should not increase its council tax more than the rate of inflation?
Mr. Raynsford: What I am saying to councils throughout the country, and I am sure that the hon. Gentleman has heard it, is that we are giving good increases. I remind the hon. Gentleman of the increases in his authorities: South Hams has an increase of 3.9 per cent.; Teignbridge of 3.9 per cent.; Torbay of 6.9 per cent.; and Devon county council, as we have already mentioned, 5.5 per cent. Those are all good increases, all above inflation. What I am saying is that, with those increases, we expect councils to budget for low single figure increases.
On the question of pressures on councils to increase the level of council tax, let me remind the hon. Member for Totnes—it would be wise of him and Conservative Front Benchers to be aware of it—of what happened when the Conservatives were in power. When the right hon. Member for Suffolk, Coastal (Mr. Gummer) was the Secretary of State and doing a similar job to mine in 1996—I am a mere Minister of State, rather than Secretary of State, but I am doing the same job of announcing the settlement—he said: "The increase in AEF"—
aggregate external finance, not the grant, which was a lot less—
- "is 2.8 per cent.—less than the increase in TSS—because we take the view, which I believe the Opposition share, that council tax payers should properly fund a slightly larger proportion of the costs of their local services."—[Official Report, 31 January 1996; Vol. 270, c. 1021.]
- "The increase in aggregate external finance is less than the increase in total standard spending, reflecting the Government's belief"—
- "that local taxpayers could meet slightly more of the cost of local services."—[Official Report, 3 February 1997; Vol. 289, c. 680.]
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