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Mr. Bill O'Brien (Normanton) (Lab): We have listened to the hon. Member for Kingston and Surbiton (Mr. Davey) make his presentation for 25 minutes. I was waiting to hear what the Liberal Democrat programme would be if that party ever had the chance to introduce a local income tax, because that is what people want to know. Will parish, district and county councils, as well as the metropolitan authorities, levy the local income tax?

In my area, the parish and town councils would raise the tax, as would the police and fire authorities and the district council. Is that what the Liberal Democrats propose as a mechanism for raising local authority revenue? If so, it would cause panic. People would not understand what the Liberal Democrats were trying to achieve. In 25 minutes, we heard nothing about the party's policy in that respect.

Matthew Green : There is plenty of evidence about our policy, if the hon. Gentleman wants to read it. All the bodies to which he referred levy council tax already, and they could therefore also levy a local income tax. That is what happens in America, most of Europe and most industrial countries around the world. The Liberal Democrats did not invent local income tax. Many countries around the world use it already.

Mr. O'Brien: The difference is that it is clearer to use a property tax to raise money for parish and town councils, and for police and fire authorities, and so on. In contrast, a local income tax would mean that local people would be asked for details by all the bodies whose services they use. That approach would not be accepted by the electorate.

Matthew Green: Will the hon. Gentleman give way?

Mr. O'Brien: No, I must move on.
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I pay tribute to my right hon. Friend the Minister for the award that he has made to local government, which builds on what has happened in the past. During 14 years in opposition I served on the Front Bench as spokesman for local government and the environment, and then for Northern Ireland. During that period, we defended local services and local government against the cuts that the Tory Government introduced. My right hon. Friend the Minister and his Department have had to build from a low base to maintain and improve services, and to introduce additional services. The Tories' last measure before the 1997 election was to introduce nursery vouchers, and the Labour Government's first action was to scrap them. That was a wise move, because the vouchers were unfair.

The Tories cut social services and highways maintenance. I served on the Standing Committee that considered the Bill to introduce the poll tax. Mrs. Thatcher declared that she would abolish the rating system and introduce the poll tax. It was implemented for 12 months, but caused great anxiety, so a lot of public money was spent on scrapping it. That is the Tories' record on local government. My right hon. Friend has made local government credible with improved services. People in local government now understand where their resources come from and what they are provided for.

I draw my right hon. Friend's attention to the environmental protection and cultural services block, because more consideration should be given to those services. The EPCS block provides the majority of funding for many local priority services that deal with liveability, antisocial behaviour, street lighting, libraries and waste collection and disposal. Local authorities want to develop those important services. The Government have recognised the importance of those priorities and it is vital that adequate resources are provided to support that agenda. The EPCS block receives the lowest funding, and I plead with my right hon. Friend to reconsider that when the formula is reviewed, because the services involved are important.

I also draw my right hon. Friend's attention to the neighbourhood renewal fund, which, with the co-operation of the Treasury, has provided many resources to help deprived areas. It should continue to contribute to our strategic objectives of improved funding for employment, education, crime prevention, health, housing and environmental matters. In areas such as the former mining community that I represent, where closure of collieries has led to deprivation, the neighbourhood renewal fund needs to continue. It is one way to tackle social exclusion and help deprived areas. We should continue to support deprived communities through the neighbourhood renewal fund.

A further point concerning areas of deprivation is the fact that we are subject to data loss whereby authorities lose resources when people move out of the area. The population is reduced, but the people who are left are usually the most vulnerable and therefore most in need of care and attention. The settlement should take that data loss into consideration, particularly in metropolitan areas, which sustain most of the loss. My right hon. Friend the Minister is aware that SIGOMA has constantly made representations on that issue.
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I draw attention to the "Balance of Funding" report published by my right hon. Friend, who also set up the independent inquiry into local government funding by Sir Michael Lyons. That review's terms of reference are such that local government will benefit when the report is published later this year. One of the problems facing local government, the effects of which we have witnessed in the distribution of resources and grant, is gearing. The Select Committee that considered the "Balance of Funding" report is convinced that gearing has a negative impact on local authorities because it distorts accountability and magnifies any weaknesses in the formula and the grant system, making the entire system less clear.

The Select Committee report accepted that gearing was a major factor in the grant system, making a difference of, on average, a 12.9 per cent. increase in council tax bills in 2003–04. Questioning of the Office of the Deputy Prime Minister has confirmed that there is no evidence that gearing has any positive effects on efficiency. I am pleased to note that in the ODPM report, the Government accept that gearing can cloud the accountability and transparency of local spending decisions. The possibility of abolishing gearing is to be welcomed, and I ask the Minister to ensure that there is no repetition of gearing in future.

There is also the question of the three-year rolling programme of grant for local authorities. The Select Committee made it clear that that would enable authorities to publish at least indicative budgets and associated local taxes for the same period. The Government are to be commended for that programme because it helps local government to plan the provision of its services.

Hon. Members on both sides of the House have referred to council tax. The Select Committee reported that council tax should be retained, provided that it and council tax benefits are reformed in line with other recommendations in its report. In addition, local authorities need greater freedom in the use of their other resources and the revenue that is collected at local level, to ensure that council tax payers are not exposed, as at present, to a large increase in annual bills. The Minister gave an assurance today that there would be a cap on large council tax bills. From the point of view of metropolitan authorities, SIGOMA considers that the award outlined by my right hon. Friend is a good award, from which the majority of local authorities throughout the country will benefit. I therefore commend the award to the House.

6.45 pm

Mr. David Curry (Skipton and Ripon) (Con): Listening to the debate, I am reminded of the dramatic monologue, "Albert and the Lion". Finding

everybody has been

so we had a nostalgic trip down the tunnel of love that is represented by Mrs. Thatcher, and one or two rollercoaster rides on futuristic rebanding and revaluation. I thought I might be rather eccentric and speak about the settlement.
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The first thing to say is that it is all a phoney war. There is not going to be a war this year about the settlement. Local authorities will come in uncannily at 4.9999 per cent., they will be able to get in under the threshold, and they will wave the tattered banner of Gershon in order to do so. It is a pretty unconvincing banner because it is a rather unconvincing piece of work. I shall be surprised if the Minister has to do more than utter the occasional mildly blood-curdling threat. The settlement is relatively generous and the reason for that is obvious. Both a national election and local elections are approaching, and the one thing that unites councillors and Members of Parliament is an anxiety to be able to continue in their current employment.

There is none the less a series of wrinkles about the settlement, which it is worthwhile examining. The Minister made a wonderfully Kafkaesque remark about the census: the Government would not apply the census because that might lead to redistribution. I thought the purpose of the census was precisely in order to decide how to distribute and redistribute funding. I can see the arguments for stability, but the Minister omitted to say that stability has a price as well, in the non-gain as well as the non-loss. As a result of not applying the new census data for the service-specific formulas, North Yorkshire county council has a loss of £3.4 million. The council may well appreciate the stability, but there is a cost because of the data not being applied.

There is also a wonderful underpayment for Westminster and Manchester. I served on the Standing Committee that considered the Identity Cards Bill. The Government told us about the potential individual cost of identity cards, based on the number of people who would come forward for them. I wondered whether that would be based on the same data as had led the Office for National Statistics to lose a significant part of Manchester and to miscount quite a large area of Westminster, in which case the cost might be actuarially somewhat different from that predicted by the Government.

The Government are obliged to pay the money due, but in order to do so they are taking back money that councils have already spent. In 2005–06, North Yorkshire will have to pay back £1 million from its 2003–04 spend, and in 2006–07 it will pay £1 million from its 2004–05 spend. That can come from only one place. If North Yorkshire were to post a council tax increase of 4.9 per cent., 0.6 per cent. of that would be to raise the funds to give to the Government to distribute to Westminster and Manchester because of the faults in the distribution system. It is curious that this rebate, as it were—this recapturing—has been applied only to the upper-tier authorities in two-tier areas, and the districts have got away scot-free.

The interesting thing about the settlement is that it is marooned between the Raynsford report and the Lyons report. I hope that it is the last in quite a long line of settlements promoted by the Minister, but for which in many ways I think he is not responsible. He is a very able Minister, but he works in a difficult environment. The settlements have been improvised, they are hole-plugging, and panic stations is written all over them. He has been talking about stability, but there has been absolute panic quite a large part of the time.
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When the Minister says that the settlement is not manipulated to help Labour-controlled councils, of course he is dead right—it does not need to be. The previous settlements are the ones that were manipulated. This is based on the previous ones, for 2003 and 2004, and it follows the same arithmetic. He will recall the wonderful rumpus over education expenditure to which that miscalculation gave rise. The sad thing about that in many ways is that the much-vaunted stability has meant that the Government are now too petrified to change anything at all. The Government have offered a minimum education funding guarantee. They will centralise school funding, and given that the Home Secretary was previously the Secretary of State for Education and Skills, I wonder how long it will be before we have pupils under house arrest in order to secure the efficiency of the settlement.

I recognise that the Government have tried to help education and social services, but I agree with the hon. Member for Normanton (Mr. O'Brien) when he said that yet again the services that will experience the greatest stress fall under what is now called environmental and protective services, which do tend to be closest to the citizen. Ironically, it is just those sort of areas that the Deputy Prime Minister has been talking about in Manchester this week when he talked about clean, green, safe cities. The money to deliver that comes specifically out of the blocks that are under the greatest pressure in the settlement.

I am tempted to say that this settlement is as good as it gets. It might well be the best settlement of the decade. I say that because from now on the skies will be dark with the chickens of the Government's spending splurge coming home to roost. I suspect that whichever party wins the general election, the next settlements will not be as welcome as this one. The Minister said clearly that he did not expect to increase the yield from a rebanding and revaluation. I happily accept that, but of course it will be significantly redistributive as well. If, as he hinted, there is not merely an increase in the bands at the top, but there might well be a new lower band, and given the large number of properties that fall under that bottom band A threshold, particularly in, for example, the towns that have had quite a vocal representation here today, and which are part of the pathfinder projects, then the redistribution will be quite significant. I would not exclude the possibility that the Government might decide that they need to find some cash to throw at stabilisation at the upper ends of the bands to prevent too great a disruption in the system.

My hon. Friend the Member for Brentwood and Ongar (Mr. Pickles) was right to say that if we do have a regional banding there will be areas that outperform the region and where individual householders could find that they are moving up bands. As we all know, those who benefit tend not to indicate their gratitude, while those who are penalised tend to be vocal in their discontent.

I echo what my hon. Friend said about stability. We will get the Lyons report. I agree with the hon. Member for Sheffield, Attercliffe (Mr. Betts) about the business rate. There has been an inversion in the proportions of business rate and council tax towards local government funding. The structural reorientation of the business rate solved part of the balance, but it does not solve any part of the funding. We need to solve the funding as well
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as the balance. However, I do think that local government will look for stability. I understand that the Minister has said that the Government's latest wheeze is that the structures of local government will be voluntary ones, and that there will be no central prescription. I hope that that is the case. A facultative system where local government could decide whether it is in its interests to move to one system or another would be sensible. What matters most of all is having a predictable and clear funding flow that delivers accountability more realistically locally, and means that local government looks rather less as if it has been occupied by an army of occupation that is occasionally enabled to operate a form of token democracy.

I hope that this is the last of a line of improvised settlements. Once we have been batted about because of particular pressures, there will be an opportunity with the Lyons report to establish a basis for stability in the system. I hope that whoever wins the general election will regard that as their most urgent priority.

6.54 pm

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