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Roger Casale: Will the hon. Gentleman give way?

Mr. Hammond: In a moment. We will abolish the bloated comprehensive performance assessment and axe the so-called best value system. We believe that the whole inspection regime should be scaled back to a light-touch approach appropriate to the risk. That means leaving competent councils to get on with the job, with only occasional inspection, while focusing attention on the small number of failing, mainly Labour and Liberal
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Democrat-run councils. The cost of the audit inspection process and the diversion of officer time and attention from the delivery of front-line services add to the sense of frustration and disempowerment in local government, and must be stopped.

On schools passporting, even after the £340 million of additional money that the Government found this year to avoid another fiasco in schools, there are still six education authorities with education spending above the formula spending share, for which passporting has been a trap that led to their entire grant increase from central Government being passported to schools. Clearly, for those councils the Minister's insistence that all authorities have had an above-inflation grant increase has a particularly hollow ring.

They have no choice but to cut services elsewhere and raise council taxes. A regime that penalises those who were voluntarily spending above their formula spending share on schools has to be wrong, and clearly sets perverse incentives for the future.

As if there were not enough central Government burdens already, local authorities face myriad new responsibilities. High among them is the waste management agenda. The European Union's landfill directive, which requires a significant reduction in landfill, and the Government's waste recycling targets, which they have introduced in an attempt to achieve that objective, impose huge additional burdens on local authorities.

Mr. Raynsford: No.

Mr. Hammond: The Minister says "No", but the LGA estimates that local government will need half a billion pounds over each of the next three years to achieve the targets that the Government have set.

Mr. Raynsford: Does the hon. Gentleman not recall that when the Chancellor announced the changes to the landfill escalator in his pre-Budget report, he made it clear that arrangements were being made to ensure that the impact on local authorities would be cost-neutral?

Mr. Hammond: This is the point of today's debate. We hear it all the time: "The impact will be cost-neutral". If the Minister talks to the LGA, he will find that it is a recurrent theme. In discussions with Departments and agencies, local government is told that the impact will be cost-neutral—and what local government invariably finds is that the regulatory impact assessments are inadequate. They underestimate the cost, and local government and council tax payers ultimately pick up the tab. That is part of the reason for Labour's soaring council taxes.

Andrew Selous (South-West Bedfordshire) (Con): My hon. Friend mentioned the costs of litigation to local authorities. Does he agree that it is shameful that authorities such as mine, South Bedfordshire district council, are forced to spend huge amounts of council tax payers' money to fight the planning system, when the Government could very simply apply stop and enforcement orders to unauthorised Traveller developments? That is unacceptable to council tax payers.

Mr. Hammond: My hon. Friend is right to draw attention to the large amount of unplanned expenditure
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that local planning authorities often incur in dealing with unexpected major planning inquiries. He knows that I am very sympathetic about the particular case he mentions. I am glad to see that the Under-Secretary of State, Office of the Deputy Prime Minister, the hon. Member for Pontefract and Castleford (Yvette Cooper), is present, as she is aware of our concern.

Only last week my hon. Friend the Member for Witney (Mr. Cameron) told the House that his council's effort to meet the Government's waste recycling targets had led it initially to propose a 30 per cent. increase in its council tax, just to fund that initiative. That is only one of many examples of good local authorities' diligently seeking to comply with the guidance and directives of central Government, as they are bound to do, without the funding to do it. The end-of-life vehicle directive will in the short term increase the number of abandoned cars, and in the medium term substantially increase local authorities' disposal costs.

Quite rightly, all local authorities have stepped up their emergency planning in the wake of 11 September—including district authorities, which receive no funds at all for that activity. Upper-tier and unitary authorities are estimated to be spending £17 million above the funded level on emergency planning. Following the Licensing Act 2003, there will be an increase of between 500 and 1,000 per cent. in the number of premises that local authorities are expected to license. Fees will be set centrally. That is something over which local authorities have no control, and there are real fears that year-on-year revenue costs will exceed the fee revenue generated. The immediate concern, however, is that there is no provision anywhere for the start-up costs. Authorities are estimating first-year deficits of anything between £40,000 and £700,000, depending on the size of the authority. Those deficits will have to be met by council tax payers.

Compliance with the Freedom of Information Act 2000 will impose substantial direct and indirect costs on authorities. Many are recruiting full-time compliance officers, and anyone who understands how institutions respond to freedom of information will be aware of the huge additional indirect cost that is incurred as working practices change and sensitive material is handled differently in response to freedom of information pressures.

Roger Casale rose—

Mr. Hammond: I will give way to the hon. Gentleman, as he has been very persistent.

Roger Casale: The hon. Gentleman is giving a very detailed exposition of local government finances, but what seems to be completely absent from it—I do not know whether he has a blind spot, or is conveniently leaving this out—is any mention of areas in which costs have actually gone down. I am thinking of, for instance, the lower costs of servicing local government debt when interest rates are as low as 4 or 5 per cent. rather than 14 or 15 per cent., as they were under the last Government; or, indeed, the costs of collecting council tax. I wonder what the costs of collecting council tax would be if the Conservatives ever returned to power and reintroduced a poll tax, as they seem to be planning to do.

Mr. Hammond: There is no reason to suppose that the costs of collecting council tax would change as a result
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of a change of Government. But the hon. Gentleman is right: of course costs have fallen in some areas. Those step changes have occurred in the past and have been absorbed into the baseline, like many additional costs incurred over the past seven years that I have not mentioned today. We are now talking about the current pressures on councils—new duties under the Homelessness Act 2002, the burdens associated with the shambles of our asylum system, and the recurring investment costs necessary to meet the Government's e-government targets for local government.

Time constrains me from straying into, and discussing in any depth, issues of fire service modernisation and the new burdens on the police. Both represent partially unfunded central Government burdens, and will become a charge on local council tax payers.

Sadly there is no light at the end of this particular tunnel, or if there is it is coming from a train approaching from the opposite direction. Legislation, directives and regulations currently in the pipeline, both domestic and European, will add billions of pounds of additional costs to local government's baseline over the next few years. In a submission to the 2004 spending review, the LGA identified literally dozens of sources of additional cost pressures. They are too numerous for me to list them. As I mentioned earlier, if the Government succeeded in their ambition of establishing elected regional assemblies in any region, there would be the additional huge cost of local government reorganisation.

Local government is buckling under the torrent of legislation, regulations, red tape and bureaucracy. For most authorities it is no longer about exercising community leadership, choice and local discretion. Budget pressures resulting from these burdens mean that central Government's agenda squeezes out local priorities, while council taxes spiral upwards and disillusion with the local democratic process multiplies.

In theory the burdens of new legislation on local government are supposed to be met by the relevant central Government Department, and in fairness to the Minister I believe he has reiterated to his colleagues in Government that that is the rule. The practice, however, is very different. Departments faced with a charge on their existing budgets for additional costs to local government have consistently underestimated the impact of change.

I have here a memo of a meeting between the Local Authorities Coordinators of Regulatory Services and the Food Safety Agency. Typically—I am told—the FSA's initial position was that the implementation of a dozen food safety directives would have a negligible or zero cost implication for local government. There is no realism about the cost of change to local government, and there is no effective system of post-implementation review of regulatory impact assessments.

The end result of all these central Government burdens on local government will be soaring council taxes. Ministers can stand at the Dispatch Box and wring their hands, but, as one of my hon. Friends said earlier, the outcome is not an accident. This Labour Government have, until recently, made no attempt to conceal the fact that their policy of shifting grant to authorities in the north and the midlands would lead to higher council taxes in areas that Ministers
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considered could afford to pay. It is a deliberate shift of burdens on to local council tax payers. But the extent of central Government's underfunding of cost pressure and the scale of imposition of new responsibilities mean that it is not just the authorities that Ministers intended to target that have had to post massive council tax rises. The proportion of local government revenue spending funded from the council tax has risen from 20.5 per cent. in 1996–97 to 25.3 per cent. in 2004–05. That is a clear and unequivocal measure of the degree of underfunding of the burdens imposed on local authorities by central Government.

Not surprisingly, the public has reacted to the soaring level of council tax. The talk is of capping, reviews and alternatives, but there were no demonstrators and no martyrs in court when the band D council tax was £689. It is not the tax that prompted the public backlash, but Labour's turning of council tax into another stealth tax—increasing it by the equivalent of 3 per cent. on income tax.

Alongside the additional pressures next year, we have hanging over us like the sword of Damocles the £340 million extra provided this year, which the Government have said that they will not consolidate into the baseline for 2005–06. That is the equivalent of an £18.70 band D increase in council tax next year—more than 1.5 per cent. before anyone has spent a single extra penny.

To conclude, and as we approach the local elections, perhaps the worst aspect of all this is the undermining of the transparency and accountability of local government. It is the so-called environmental protection and cultural services block—it has no single Minister to defend it, but has many local discretionary services within it—that always takes the hit and absorbs the cuts in local services, as local priorities have to give way to the central Government's agenda.

The council tax payer sees soaring bills, but at the same time experiences cuts in the services that are most important to him and his family. With the deluge of new responsibilities and burdens set to continue, with ring-fencing remaining a significant factor and with a capping regime in place, there is simply nothing that he can do about it, other than go to the ballot box on 10 June and send a clear and unequivocal message that local council tax payers have had enough of the torrent of burdens and bureaucracy that this meddling, interfering, bureaucratic Government are imposing on our local authorities.

1.11 pm

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