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Mr. Philip Hammond (Runnymede and Weybridge) (Con): I am grateful to the Minister for his usual courtesy in making a copy of his statement available in good time.
What we have just heard is the culmination of a sorry story of fiddled figures and broken promises ending in a finale that may make the Deputy Prime Minister feel good, but which will do nothing to address the underlying driver of soaring council taxes—fiddled local funding from Whitehall and the never-ending torrent of new burdens, targets and red tapes from his interfering Department.
In opposition, Labour pledged to end capping and in 1999, it brought in a Bill to create a new capping regime. In 2002, it pledged that no authority rated good or excellent in the comprehensive performance assessment would be subject to capping powers; today two such authorities are in the list that has just been announced, making a mockery of the whole costly CPA process and the billion pounds a year of council tax payers' money that it costs.
While the Office of the Deputy Prime Minister is posturing about keeping council tax down, a senior Treasury official disclosed yesterday to the Housing, Planning and Local Government Committee that the Treasury believes that it could more than double in future. So is it too high already, as the ODPM seems to think, or can it more than double as the Treasury apparently believes? Can the Minister clarify whether the Deputy Prime Minister or the Chancellor is now running council tax policy?
Until recently, the Government's policy was at least coherent, if grossly unfair. It changed the grant formula to channel funding away from the southern part of the country to the north and to the midlands—that is not my assessment, but that of the Audit Commission in its December 2003 report—while, at the same time, it piled on additional cost burdens and responsibilities that local authorities were required to fund. The
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Government made no attempt to conceal the fact that their policy would lead to higher council taxes in areas that Ministers considered could afford to pay them.
So what has changed? Ministers have been galvanised into action of a sort by polling evidence that shows that the public has not been fooled; they know that the responsibility for high council taxes and high council tax increases lies firmly with this Government. However, instead of addressing the real issue of authorities, such as my own in Runnymede, whose budgets have not increased significantly but which have had to increase council tax because of cuts in Government grant, the use of the double threshold—the increase in budget and the increase in tax—in the criteria that the Minister has used for capping means that the Government are ignoring the problems of these councils. The problem is of the Government's, not the councils', making.
After record increases last year that went unchecked, this year the Government have been panicked into a response. Herefordshire, for example—a good authority according to the Audit Commission—has by no means the largest increase over two years in its group. However, the Minister, by focusing on just one year in his criteria, has allowed local authorities such as Southampton and Portsmouth, with larger increases over the two years, to sneak through the net.
The use of arbitrary criteria and the double threshold has had perverse effects. Six uncapped unitaries have higher percentage budget increases than Telford and Wrekin and five have higher percentage band D precept increases. Yet Telford and Wrekin gets capped; others do not—fiddled capping on top of fiddled funding. Can the Minister explain why he did not apply a test of absolute council tax levels to the unitaries—distinguishing high-taxing councils from those with a relatively high single-year increase—as he has done with every other category of authority capped?
For all the authorities designated today for in-year capping, the Minister has carefully avoided detailing the maximum budgets that the Secretary of State will set for those authorities. Can the Minister confirm whether those budgets will be set to bring those authorities to the ceiling increase for their category in each case, or will increases above the ceiling be allowed to avoid drastic service cuts? Will the capping process be arm's length, or will ODPM officials be involved in defining areas for cuts within the budget?
Can the Minister also tell us what the cost of re-billing for those authorities will be in aggregate? My calculation is that well over £1 million will be spent sending out new council tax bills, necessitating further cuts in front-line services. That is just the cost of sending out the bills; there will be further substantial cash-flow and collection failure costs associated with re-billing.
The combined fire authorities, five of which are being capped, find themselves in a particularly difficult situation, facing the pressures of the Government's modernisation programme against a very tight timetable and, at the same time, precepting and building reserves for the first time this year. I can tell the Minister, if he is not already aware, that the costs of the regional structures that he has introduced to the fire service are already spiralling out of control of the fire authorities that constitute them. If he is not careful, he will have his very own Holyrood in the regional control structure. In
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the case of Hereford and Worcester fire authority, whose budget has to be cut in-year as a designated authority, deep cuts in front-line services are certain to be required.
What the Government have done is apply a sticking plaster to a gaping wound. Unless they are prepared to engage realistically with local authorities about the Government's expectations for service delivery and council tax levels in 2005–06 and beyond, and unless the Government are prepared to commit to fully funding all the additional cost pressures imposed by them, as well as changing the formula to reverse the drain of money away from the south and south east, the future for millions of council tax payers will be one of higher taxes or continuous, incremental cuts in services.
The capping process, which the Government promised would be a lifeboat for pensioners and those on fixed incomes, has ended up as a shipwreck of a policy—unfair, untransparent and ineffective, and designed to distract public attention from the real underlying problem that is wholly of the Government's making. For all the bluster and all the macho posturing, at the end of the process, council tax payers, councils and local authority service users have once again been let down by Labour.
Mr. Raynsford: I was particularly interested in the use of the words "macho posturing" by the hon. Member for Runnymede and Weybridge (Mr. Hammond). The House will have noticed that there was no indication from the official Opposition about whether they would use capping powers or not. We know very well that when they were in government, they capped—indeed, they capped repeatedly, in a crude and unfair way—but now that they are in opposition, they are trying to give a different impression, so they go and speak to local government, saying, "We're your friends. We won't cap." [Interruption.] Yes, indeed. They give clear indications to local government that they will not use capping powers, but in the House they do not dare say that because they know very well what the public reaction would be.
The Opposition's policy is non-credible, first because they do not come clean about their attitude towards capping, and secondly because their policy is to freeze local government—
Mr. Speaker: Order. The Minister must answer the questions. The statement is not about the Opposition's policy.
Mr. Raynsford: I will certainly respond to the questions, Mr. Speaker. I was simply pointing out the inconsistency of the position adopted by the Opposition.
The hon. Member for Runnymede and Weybridge referred to fiddled figures. The figures are not fiddled. They show generous grant increases to every authority in the country. Every single local authority had an above-inflation grant increase. That never happened when his party was in power. He referred to the capping of good and excellent authorities. Because we had given the pledge last year that we would not cap good and
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excellent authorities although some of them had very large increases, including Conservative Wandsworth, which led the field with the largest council tax increase last year, we did not cap those authorities. We had given a pledge and we honoured it, but we made it clear this year that, because of the irresponsible behaviour of a small number of authorities that had no regard for prudence, that pledge would no longer apply.
The hon. Gentleman spoke about posturing to keep council tax down. The Government have acted to get council tax down from the very high levels last year. It is Labour councils that have led the way, with the lowest increases, averaging 4.7 per cent., compared with increases of 5.4 per cent. from Conservative authorities. The hon. Gentleman spoke about the shift of resources. Yes, we accept that resources have been shifted to give a greater reward for deprivation, and it is right that we should do so—[Interruption]—but they have not been shifted in favour of one political party.
The hon. Member for South-East Cambridgeshire (Mr. Paice) would do well to look at the figures, because he will see that Conservative authorities received an average 6.1 per cent. grant increase this year, compared with only 5.9 per cent. for Labour authorities. I hope he will withdraw the entirely unjustified comment that he made from a sedentary position, implying political bias.
The hon. Member for Runnymede and Weybridge drew a veil over Runnymede's own council tax increase—more than 17 per cent. He will know that because of the criteria that we have adopted, we are not proposing to nominate or designate Runnymede, but I remind him that Runnymede got a very good grant increase from the Government and we expect it to budget prudently with that grant increase.
The hon. Gentleman asked about the decisions to cap some authorities and not others, and asked why some with ostensibly higher council tax increases were not capped. He will know from the statement, which he has seen in advance, that there are two or three criteria, and only where all the criteria apply will we exercise our powers. That is why some authorities—Runnymede is a good example, as it has a large headline council tax increase, but not a large budget increase—are not within the capping frame. That is the logic of the principles that I outlined.
The hon. Gentleman said that there would be costs associated with re-billing. There will be costs where re-billing is required, but he will recognise that there will not be re-billing in all cases. In the case of the three police authorities and four of the five fire authorities, we have not suggested re-billing because we are proposing only to nominate.
Finally, with regard to fire authorities, the Government have invested substantially and will go on investing in the fire service to ensure that it is capable of doing all the tasks that it must perform and saving more lives. That is our objective. We expect authorities to use the extra money that we are providing and to do so prudently, but we also expect them, as Sir George Bain said in his report, to make the most of the available opportunities for achieving economies. That is why we are applying exactly the same principles to fire authorities as we are to police authorities, and we cannot exempt them from capping.
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The hon. Gentleman will recognise that only in the case of Hereford and Worcester, an authority that has gone for an enormously high increase both in budget and in council tax, have we proposed that it should be subject to in-year capping. I hope he will recognise that his party's position is non-credible, and that the Government are acting prudently to defend the interest of council tax payers from irresponsible decisions by some authorities.
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