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5.23 pm
Mr. Edward Davey (Kingston and Surbiton) (LD): As the right hon. Member for Skipton and Ripon (Mr. Curry) said, a core issue is the Government's attitude to capping, now that we know the settlement. Despite many years of Labour opposing capping and the Government's new-found attachment to the new localism, they talk of little else. They seem obsessed with capping. Ministers spend their time browsing newspapers and surfing the web for any report on any draft budget from any council, anywhere, just so that they can write a letter threatening capping—talking tough.
As councils throughout the country set their budgets, they need to know what the House feels about the Government's obsession with capping. By voting against the Government today, we can send a signal to councils that they should stop looking to Ministers but look instead to their electorates. We can send a signal to the Government that the House rejects the return to the extreme centralism of the Conservatives and reasserts its belief in local democracy.
The Government's case is based on the claim that this is a generous settlement.
Mr. Davey: By one measure, it is a generous settlement. In terms of absolute figures and percentages, the settlement is far more generous than anything ever proposed by the Conservatives. The right hon. Member for Skipton and Ripon is on the dodgiest of ground. As a Conservative Minister whose settlements led to severe cuts in education and social services, and as a Minister who praised the council tax—as, indeed, an Opposition spokesman who still supports it—he has little to offer.
When referring to Procrustes, the Minister forgot to say what Procrustes did to people who were too short for the bed in his inn. He put them on the rack. That is where the right hon. Member for Skipton and Ripon and his party are when it comes to the council tax.
I am surprised that the Minister is using such a modest comparison to measure his generosity. He should be taking into account not just what Ministers are giving councils, but what Ministers are telling councils to do with the money. He talks continually about the revenue support side, but conveniently forgets the constraints that his Government are imposing on the expenditure side. The truth is that the Government are forcing councils to spend money on things on which they might not choose to spend it.
There is a long list. It includes the costs of unnecessary audit, inspections, comprehensive performance assessment and best value. Then there are the costs of supporting the plethora of central Government initiatives such as the local strategic partnerships, the work force remodelling exercise and the electronic service delivery targets for 2005. There are the national insurance costs, and the higher pension costs caused by the Government's policy.
Many of the costs may be linked to worthy Government objectives, such as the implementation of freedom of information legislation, the Disability
Discrimination Act 1995 and higher care standards. The point is that they should be subtracted from the Government's self-proclaimed generosity before they pat themselves on the back. Those are extra costs that must come out of the settlement. It is like being given a Christmas present that one does not really want: one is happy to have the bright new shiny Chinese wok or the lovely fondue set, but would have preferred the cash. That is the problem that the Government have got themselves into.Our criticism of the Government's claim to generosity does not deny the increase in revenue support, nor does it argue for more. I hope that the Minister will accept from me that Liberal Democrats are not saying that he should have provided more cash. What we are saying is that he should have provided the cash without the massive accumulation of extra costs and responsibilities whose cumulative effect makes this a tight settlement.
Mr. Michael Jabez Foster: Will the hon. Gentleman give way?
Mr. Davey: I want to make some progress, as many Members want to speak.
Above all, the settlement should have been made without strings. It comes with more strings than an orchestra. On ring-fencing, passporting, targets and inspections, the Government have tried to tie down councils' freedom so much that they have ended up tying themselves in knots. The central problem for this settlement is the tangled relationship between capping and the Whitehall controls—or, more specifically, the disastrous collision between education passporting and capping threats. At the centre of that collision are the Office of the Deputy Prime Minister and the Department for Education and Skills.
I genuinely believe that the ODPM would like to give councils more freedom, but it has been told to keep council tax down, so it has offered a generous settlement. Then in charges the DFES, with its demands for all education cash to be passed on. Crash! No freedom.
Mr. Foster: Would or would not the hon. Gentleman's party insist on passporting?
Mr. Davey: We would leave it to the local education authorities. That is called local democracy. It is something in which this Government used to believe when they were in opposition.
What are councils to do, faced with this dilemma? Are they to obey the DFES and passport education cash, while risking the capping of the unavoidable increase in council tax? Or are they to obey the ODPM, keeping back some of the education cash and setting a modest council tax but risking legal action on the part of the DFES?
That is a dilemma for far too many councils. Let us take two, Labour-controlled Telford and Wrekin and Liberal Democrat-run West Berkshire. Telford is supposed to be a flagship Labour authority, judged excellent by the comprehensive performance assessment; yet last year it under-budgeted, set a lowish
council tax and ended up borrowing. Now the day of reckoning has arrived: there is talk in Telford of a 13 per cent. rise. If that happens, will the Minister cap Telford? After all, it is an excellent authority and the Government promised to give excellent authorities freedom from capping—but, of course, they reneged on that. Telford will be a big test for the Minister's logic.Then there is West Berkshire, another well-performing authority. Caught in the pincer of passporting and capping, it is obeying the DFES, and as a result looking at a double-figure council tax rise—simply because it obeyed central Government. For West Berkshire, the situation is even more galling. The ODPM says that it deserves more money, but it lost more than £3 million of what the ODPM said it needed last year, due to the ceilings. This year, the ceiling will cost it the £3.6 million that the ODPM says it is now due. With that cash, its council tax would indeed be in low single figures.
Mr. David Rendel (Newbury) (LD): Does my hon. Friend realise that in a way, the situation is even worse than he suggests? The very fact that the Government have imposed a ceiling on West Berkshire indicates that it was underfunded for many years under the previous formula. So there is now a big backlog of necessary expenditure, towards which not a penny is being offered.
Mr. Davey: My hon. Friend is exactly right. Such councils are having huge problems. The effects of passporting, capping and ring-fencing are combining with that backlog and creating real problems.
We have arrived at a truly bizarre situation. The Government admit that a given council deserves more cash, but they take it away to fund the settlement's floors. When the council tries to adjust its budget by spreading its remaining cash fairly across its services, it is told that it cannot do so, and that much of the cash should go to schools. Then, when it tries to raise its council tax to do what it has been told, it is capped. No wonder the Audit Commission said that the Government's council tax system is fundamentally flawed. Frankly, that was an understatement. What are councils supposed to do if such a dilemma is the fruit of a generous settlement?
The truth is that, although this settlement may be generous when measured against the Conservative record, it is far from generous when measured against the new Labour world of controls and caps. For the Minister's sake, I repeat: we are talking about more generosity not in terms of cash, but in terms of freedom—freedom for councils. Ironically, by granting such freedom he would set himself free—free from the burden of having to cap councils.
Let us look a little more closely at the Minister's dilemma: his stance on capping. He has been talking tough, but he has been sending out totally mixed messages. That is probably because, in reality, he is engaged in a large and complex poker game. First, we are told that the Government want low single figures. What does that mean? Well, 5 per cent. and under would seem to be the obvious message. But then we get the statement about "single figures". What does that mean? Many in local government think that that means 9.9 per cent. or less. Yet when many Labour councils are
struggling to get under 10 per cent., we hear on the local government grapevine that some councils might get away with increases in the mid-teens. What are we to make of all this?What of fire authorities? Many suspect that it is in respect of fire authorities and police authorities that we will see the highest rises, and for a multitude of reasons. There is the pay settlement, which is hitting rural fire authorities, with their retained firefighters, particularly hard. There is also the pension problem, which gets worse every year, the up-front costs of the modernisation agenda, and the cost of the new combined fire authorities building up their reserves. And there is the perhaps most bizarre centrally imposed cost pressure of all: fire authorities being forced to hike the council tax to comply with new accounting rules imposed by the centre, yet if they comply with them, they get capped. That is truly byzantine.
What is the Minister's intention for the fire authorities? He says that he will meet them tomorrow, but it is a shame that he could not share with the House what he is going to tell them. Will he cap them? Will he require districts to re-bill when he has capped them, at a cost probably equal to the "overspend" of the fire authorities? That would mean council tax payers' money going on re-billing, not fire protection. This is bizarre.
When one appreciates how ridiculous this mess has become, it is perhaps possible to understand why Ministers are obsessed with capping. It is the last hiding place of the Whitehall control freak. If Ministers cap, they are capping their own mess. That is why Liberal Democrats say, "Scrap it, don't cap it."
I want to ask the Minister several specific questions about this year's settlement, the first of which relates to the extra cash provided in a panic by the Chancellor in the pre-Budget report: the £340 million sticking plaster. There is some concern that that money has been taken directly from the NHS budget. Will the Minister assure the House that that is not the case, and instead come clean and tell us where the extra cash came from? If he cannot, there is an even greater need to ask my second question about the £340 million. There is a view that that sum has not been built into the baseline budget for next year for the ODPM and for councils. In other words, it is not just a sticking plaster, but one designed to come off in a year. If that is the case, it is a serious charge, for the £340 million is equivalent to 2 per cent. on council tax, and if the cash is effectively time-limited, we are witnessing the stealthiest council tax rise of all. It is in there, but it is being deliberately delayed to get the Government through the June local elections. I thought that they had tried every trick in the book, but it looks like they have invented a new one.
What about licensing? The Government promised that the new responsive licensing would be self-funding and that the Department for Culture, Media and Sport would design a mechanism. Will the Minister confirm that today? We still do not know what the mechanism will be, which is serious. The Minister is urging councils to be prudent, but should a prudent council provide for the contingent liability that the Department for Culture, Media and Sport, when it comes to licensing, might not be able to organise the proverbial in a brewery? When will that other Whitehall silo get its act together for the ever patient, always subservient local government?
I would like the Minister's assurance on a final matter. His excuse tonight might well be that we should all wait for the balance of funding review. He might argue that he sees all the problems and understands the difficulties, but that we should all be patient because the matter is in hand. He is a well-respected, well-liked Minister who listens. He may persuade some of us sometimes, but he needs to provide reassurances—and I seek two tonight.
First, can he give the House a categorical assurance that education funding will not be centralised as a way out of the balance of funding problem? No. 10 advisers have worried about that problem, but will the Minister resign if school funding is taken away from local authorities, which would be a disgrace?
Secondly, we need to know more about the timing and status of the review's conclusions. The Minister said at ODPM questions yesterday that the review would report in the summer. Does that mean before the summer recess, during the recess or when we come back in September? The Minister appears not to know, so we would like some clarification. When we get the report, what status will its recommendations have? Will it lead to the reform of council tax through the legislative powers of the Local Government Act 2003? Will it lead to this Parliament producing more legislation, or will it just be a contribution to the Labour manifesto? We need to know how quickly the Government are going to deal with this appalling problem.
The Minister may not want to be definitive in answering those questions tonight. I understand that, but given that he seeks the House's support tonight, he could at least share some of his current thinking with us. With the council tax system and the current settlement so badly flawed, the Minister should be charting his path out of this quagmire for all to see. Otherwise, we can have no confidence in this policy, no confidence in the settlement and no confidence that the Government have a clue about what they are doing.
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