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The settlement builds on sustained grant increases over the years since 1997. A real-terms increase of 33 per cent. in grants to local government since then compares with a 7 per cent. real-terms cut in the previous four years. We are looking to the future, too, with the introduction of three-year settlements for local government, to be phased in from 200607. That will provide more stability and predictability and enable councils to plan more firmly for service improvements and moderate budget and tax increases. Stability is very valuable, but we should not neglect to re-examine the fundamentals of local government funding. That is why we appointed Sir Michael Lyons, whose inquiry is now under way. In response to what he says, we will carefully consider the detailed case for making changes to the present system of local government funding in England and take note of any recommendations.
Where Government initiatives lead to increased cost burdens on local authorities, we are committed to meet them. Sometimes lengthy discussion is, quite rightly, needed with local government partners to get the details right. I mention, in passing, the implementation of the Freedom of Information Act 2000, where initial estimates from local government implied a potential cost of more £100 million, but after detailed discussion, a figure somewhat less than £20 million was agreed. It is important to bottom out the figures and ensure that they are accurate. The commitment is there to provide the additional funding. That has been done.
Similarly, my right hon. Friend the Secretary of State for Culture, Media and Sport has conducted two rounds of consultation and agreed proposed fee levels with local
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government, which we believe are sufficient to fund average administration, inspection and enforcement costs associated with the discharge of local authority functions under the Licensing Act 2003. I can also confirm the Government's plans, following the revisions made by the Office for National Statistics to its population estimates used in the original calculations for the year, to amend the local government settlement for 200304.
Mr. Lindsay Hoyle (Chorley) (Lab): My right hon. Friend may be aware of six districts in Lancashire for which money is trapped or withheld, according to which term we wish to use. In the case of Chorley, it amounts to £1,324,000. I acknowledge the 6 per cent. increase, which is much higher than ever envisaged by the people of Chorley, but the Minister knows that 1 per cent. brings in just about £50,000not a great amount of money. However, the money trap is very important to the future of Chorley, so when will the Minister, through the adjustment of the floors, enable Chorley and other shire districts to collect the money? It amounts to only £29 million for the whole country. Can the Minister offer us some hope in his answer?
Mr. Raynsford: My hon. Friend raises an interesting point, and I hope that he will bear with me as I explain the importance of the floor mechanism and how it benefits authorities that would otherwise receive an unreasonably small grant increase. In the county of Lancashire, for example, Preston is one of the authorities that is on the floor. Without the floor mechanism, it would not receive the basic grant increase of 2.5 per cent., which is sufficient to match inflation.
For reasons that I have explained, the floor is essential and all hon. Members accept it. The problem is that some people have difficulty in understanding that the floor has to be paid for and the costs have to be met. In the past, we operated a system of ceilings, under which the authorities that received the largest increases had a fairly significant reduction in their grant to meet the costs of the floor. We received very strong representations from local government: authorities did not like the ceiling, which they thought was unfair to the authorities with the largest increases. In response, we introduced an arrangement under which we reduced the grant entitlement for all authorities above the floor by a much more modest amount than would have applied under the ceilings arrangement.
This is the first year of the new system and I obviously want to reflect on how it operates before I consider any further changes. As hon. Members will recognise, I could change the deck chairs every year[Hon. Members: "The Titanic"]. I would never dream of thinking of local government in association with the Titanic, but if I followed the request of my hon. Friend the Member for Chorley (Mr. Hoyle), I could adjust the chairs on a regular basis. I hope that he will understand that Chorley's increase of 5.7 per cent. is a good one, and that most other Lancashire authorities have received good increases too. It is therefore right that there should be some reduction in the overall entitlement to meet the costs in Preston and west Lancashire. Otherwise, those authorities would get less.
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Mr. Pike: Burnley is a very deprived borough, as is Pendle, yet it is losing money. We all understand the concept of the floor and that the new methodby which a little is taken from all those authorities above the floor levelis fairer than a ceiling. However, will my right hon. Friend assure us that the 2007 review will mean that areas such as Burnley, Pendle and Chorley will receive everything to which they are entitled? They have major problems and very small budgets.
Mr. Raynsford: I understand those concerns. I have visited my hon. Friend's constituency and seen the very considerable problems with which the local authority is wrestling in its attempt to ensure that local needs are met. Obviously, we are trying to achieve good budget settlements for authorities such as his, given the real difficulties that they face, and I believe that an increase of 5.9 per cent. is a good settlement for Burnley this year. We are conducting a review of the formula in the coming year, as my hon. Friend knows, but I hope that he will accept that instability is not good for local government. We have changed the mechanism governing floors and ceilings this year, which means that an immediate commitment to reconsider the matter would be somewhat disruptive.
Mr. Prentice: My hon. Friend the Member for Burnley (Mr. Pike) seems to have stolen my script, but will my right hon. Friend say why the Government cannot pay for the Prestons of this world? That would be better than depriving communities such as Burnley, Pendle and Chorley. In addition, I should like to return to the point that he was making before the intervention from my hon. Friend the Member for Chorley (Mr. Hoyle). The population estimates have significantly underestimated the true population of Pendle. My hon. Friend the Member for Chorley said that the Office for National Statistics had recognised that and that changes would be made to the grant paid in 200304 and in subsequent years. Does my right hon. Friend have the figure for Pendle, and what does that mean in terms of additional grant?
My hon. Friend will know that Pendle's grant will increase this year by 6.6 per cent.a very significant amount. He will also know of the dramatic change brought about in Pendle as a result of the return of a Labour Government. According to the figures that I quoted earlier, Pendle got no increase in grant over the last four years of Conservative Government. In fact, its grant was reduced by
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12 per cent. One of the more deprived areas in northern England lost grant as a result of Conservative policies. Under this Government, there has been a per capita increase of 38 per cent. in Pendle, which shows that we are committed to increasing the area's grant. I hope that my hon. Friend will understand that it is not possible for us to add even more money to a settlement that is already pretty generous. That would be the implication of pursuing his request for additional Government money.
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