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The Parliamentary Under-Secretary of State, Office of the Deputy Prime Minister (Phil Hope): Let me begin by congratulating the hon. Member for Southend, West (Mr. Amess) on securing this debate. It gives me another good opportunity to clarify the Government's view on what he has said this evening and similar points that he raised in the local government settlement debate in the House on 2 February. He, the hon. Member for Rochford and Southend, East (Sir Teddy Taylor), who is also present in the Chamber this evening, and Councillor Howard Briggs, the leader of Southend council, to whom the hon. Member for Southend, West referred, have engaged in lengthy correspondence with the Office of the Deputy Prime Minister about Southend's budget position. They will all know our responses.
Let us establish some facts. Southend has received generous grant settlements from this Government. It will receive a 4 per cent. grant increase from Government in 200506. This is the third year in a row in which Southend has had an above-inflation increase. Southend has also received specific grants for particular purposesnext year estimated to be some £26,627 millionon top of the 4 per cent. basic grant increase. Moreover, additional funds through innovations such as e-government, from which all councils have benefited, will also benefit Southend. Southend cannot possibly reconcile the 4 per cent. grant increase, nearly £27 million of specific grants and other grants that it receives, with claims that it has been underfunded.
Southend keeps raising its council tax by more than the rate of inflation. I understand that it has set a 5.25 per cent. council tax increase for 200506. I am sure that it has not gone unnoticed among the council tax payers of Southend that the Chartered Institute of Public Finance and Accountancy estimates an average council tax increase for England of 4 per cent. next year. Therefore, Southend is setting a council tax increase of 5.25 per cent., whereas the average council tax increase for the rest of the country is 4 per cent. Many Southend residents might want to ask why their council tax increases are consistently above the average when the council has consistently had above-inflation grant increases in the past and will do so in future.
The council tax increase of 5.25 per cent. next year comes on top of increases of 6.8 per cent. in this financial year, when the average increase across the country was 5.9 per cent. andthese figures are extraordinaryan increase of 15.7 per cent. in 200304 when the average
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was 12.9 per cent. Do the hon. Members for Southend, West and for Rochford and Southend, East believe that council tax increases of 15.7 per cent., 6.8 per cent. and 5.25 per cent., which are all above the national average for each year, are justified? We have detected a pattern. Southend keeps setting council tax increases that are not only well above inflation, but well above the average increase in the country.
The hon. Gentleman should note that Southend benefits from the floor system that the Government have introduced to the local government grant formula. He mentioned the scroll presented at Downing street in which Southend asked to be lifted from the grant floor. In fact, the floor protects Southend's grant to the tune of some £3 million. If the Government had not imposed a floor on the increases that councils are receiving, Southend would be £3 million less well off next year. As a result of our calculation, Southend will receive not only what is due to it but £3 million more, because we wanted to ensure that no council received an increase amounting to less than the inflation rate.
We have given Southend generous grant settlements and it has benefited from the floor system. But it has set high council tax increases, and if that proves anything it is that Southend has no case for its claim that it is poorly funded. Consistently good settlements from the Government ensure that all properly run authorities can provide a good service without making excessive demands on the council tax payer.
The hon. Gentleman said at the end of his speech that he did not want to make this into a debate on party politics, but he began by saying that he looked forward to his right hon. and learned Friend the Member for Folkestone and Hythe (Mr. Howard) taking on the job of Prime Minister following the general election, whenever that comes. I think that, as a member of the Conservative party, he should be a bit more honest with his electorate about the impact on the people on Southend were his party ever to gain power. The Conservatives have pledged to make a £35 billion-a-year cut in public spending, which includes a cash freeze on the money that local authorities would receivenot the 5.4 per cent. increase promised by the Government, but the equivalent of a 4 per cent. cut in next year's budget. The impact on council tax, on services and on all the individuals and organisations that signed the scroll would be devastating.
The hon. Gentleman has regularly come to the House demanding more money for his council, and as he rightly said that is an entirely legitimate and appropriate role for a constituency Member. He must, however, ask himself whether his request for more money bears examination, given that his partywhich he hopes will become the Governmentwould cut his authority's grants significantly.
The hon. Gentleman made a specific point about the population estimates. He said that the estimate for Southend by the Office for National Statistics was inaccurate. When calculating formula grant applications, the Government use the best and most up-to-date data available on a consistent basis, across all authorities. In the case of population, they are the 2003 mid-year estimates produced by the ONS. The calculation involved in population estimates is a matter for the ONS, and queries about their derivation and accuracy should be raised directly with it.
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We have always been clear about the fact that we would issue an amending report for the 200304 and 200405 settlements if the ONS revised the population estimates. It is only fair that authorities receive the correct amount of grant relative to the updated population estimates. Indeed, we consulted on options for the amending reports last summer. Revised population estimates were published by the ONS in September 2004 following the completion of its 2001 census-based local authority population studies. Southend is one of the authorities that the ONS investigated as part of that work. After consideration of all the analysis, the ONS concluded that no adjustment should be made for Southend.
Amending reports must be made by the end of the financial year following the year of the report. As hon. Members will know, the 200304 amending report has now been made. We have decided to postpone the issuing of the amending report for 200405 until next year to ensure that all possible revisions to the data used in the 200405 settlement are included.
Using new census data in the funding formula is not a simple task. It is technically incorrect to update the census data, for example, in the police formula. In other areas, the changes needed to incorporate the 2001 census data would break the formula freeze and could cause large changes to the distribution of formula spending share.
We will look to incorporate 2001 census data into the funding formula once the formula freeze has ended. That formula freeze is designed to give stability over a three- year period. We are in the final year of that freeze. We will look at the formula, now that the three-year period is coming to an end, when we come to the next three-year period, but to say that the population statistics are inaccurate is a matter, as I say, for the ONS. However, we have used the most up-to-date statistics that are available to us.
The hon. Gentleman read at length from the speech of Councillor Howard Briggs, who is intending to resign. Indeed, he wrote to me on 8 December telling me that Southend was considering setting a council tax increase not of 5.8 per cent. but of 9 per cent., and he asked for an assurance that his authority would not be capped.
Would the hon. Gentleman have supported a 9 per cent. increase in council tax for next year, given that there is an above-inflation increase of 4 per cent. in the grant, plus all the specific grants I have mentioned, which Southend council is to receive? I suspect that he would not support that, but I do not know. Running a large council is a difficult job that many would shirk from given the demands. However, given the extra funding that the Government have provided for local government, it is a task that can be undertaken with purpose and confidence.
I have mentioned the budget increase of 5.25 per cent. that is planned by the council for next year. I was asked by Councillor Briggs whether we would consider not capping the council tax increase. No decisions on capping have been taken, but we have made it clear that we expect to see an average council tax increase of less than 5 per cent. and will take even tougher capping
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action next year if that proves necessary. The Deputy Prime Minister will take decisions on capping after authorities have set their budgets for 200506.
I have talked about the statistics and the extra money available. I have talked about how we do not want to see council tax increases being consistently above the national average or, indeed, above inflation, as we have seen in Southend. There is one other big important agenda, which will free resources for local government to deploy on the front line: our proposals on greater efficiency in delivering services in local government.
We recognise that local government is efficient in many ways and want to support existing efforts to develop and to apply best practice across all local authorities. We believe that there is scope for achieving efficiency gains of at least 2.5 per cent. per annum in local government to deliver efficiencies of at least £6.45 billion by 200708. Higher gains may be attainable. Importantly, those efficiency savings are retained by the authority. That is 7.5 per cent. over three years in Southend, half of which will be productivity improvements, half of which we expect to be cashableto be spent on other services or, indeed, if the council chooses, to keep the council tax down.
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The efficiency agenda is important for councils such as Southend. It is an opportunity for local authorities to free up as much resource as possible to redirect that resource to front-line services or to keep council tax low. Crucially, efficiency is not about cutting services. It has to generate genuine savings in the ways that the council operates to free up resources for use in the ways I have described. The regional centres of excellence will play an important role in supporting local authorities to identify and to deliver efficiency gains.
I understand why the hon. Gentleman comes back repeatedly to the House to plead on behalf of his authority. As the local Member of Parliament, he is more than entitled to do so, but I emphasise to him and to his constituents that they have had very good grant increases over the previous two years and next year, that successive council tax increases will not be tolerated and that, were his party to get into power, he would have to explain to his constituents why they would receive a cash freeze to their grant settlement in future years.
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