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Mrs. Spelman: The underlying point is that our proposals would help more than 5 million pensioners. Moreover, it is a year-on-year payment, not this one-off payment of £200. Under such a proposal, what happens the following year? How does the hon. Lady think pensioners felt about that proposal during the election?

Perhaps the Liberal Democrats should listen to the words of Andy Mayer, director of their think-tank, Liberal Future. He said that

My frustration with local income tax is that it purports to be the cure-all that it patently is not. Many Liberal Democrats know it and have admitted as much; as the proposal comes under greater scrutiny, the voters will also come to know it. It is a distraction from the important question of how we can make local taxation fairer to everyone. By persisting with local income tax—that said, I understand that its future as party policy is in some doubt—the Liberal Democrats are effectively ruling themselves out of this fundamental debate.

Paul Rowen (Rochdale) (LD) rose—

Mrs. Spelman: All this is taking place against a backdrop of uncertainty as we await the outcome of the Lyons review—a review commissioned to assess the previous review of local government finance. But the fact is that this Government have hidden behind reviews, sympathetic words and one-off pre-election handouts, instead of grasping the nettle and addressing the fairness issue that bedevils the current situation. I
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think that I am safe in presuming that we are some time away from another general election, so this is the time when—away from the heat of battle—we can really engage with the problems of local taxation and restore a genuine link between local taxation and local services.

Several hon. Members rose—

Mrs. Spelman: That is critical. We need to abort the process of subordinating local government and reinvigorate local democracy instead because the alternative is to foster more resentment and more economic hardship: we will then have witnessed the still birth of a new localism.

4 pm

The Minister of Communities and Local Government (Mr. David Miliband): I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof:

I welcome the debate and hope that, at the end of it, the watching millions are as informed and passionate on the subject of local government finance as the small band of experts who follow these matters carefully. I hope that the House will agree that, among the small band of experts who follow local government, and particularly local government finance, one man stands out. I pay tribute to my right hon. Friend the Member for Greenwich and Woolwich (Mr. Raynsford), and remark that this particular debate on local government matters is unusual in that he is not speaking from the Front Bench. By the end, many may wish that he were, but I know that I speak for the whole House when I say that he was always the most courteous Minister. However naive or inane the question, he always tried to answer it fully. Anyone who believes in the health of—[Interruption.] The hon. Member for North-East Bedfordshire (Alistair Burt) should listen to this; if he did, he might agree with it. Anyone who believes in the health of local government must believe that my right hon. Friend's contribution was immense.

When I took up the post, my right hon. Friend congratulated me and told me that it was the best job ever, yet I now read in this week's "Municipal Journal" that he believes local government finance is "a nightmare subject", so it turns out that he is a bit of a spin doctor himself in these matters.

I also want to welcome the hon. Member for Brent, East (Sarah Teather), who was cruelly denied the opportunity to speak to us during the Queen's Speech debate, but will now be able to do so. She may not realise that Opposition motions are usually a chance for the Opposition to attack the Government. It must be strange for her to feel that this time she is the Government, given that she was so often the subject
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of   the speech of the hon. Member for Meriden (Mrs. Spelman). Listening to that speech, I began to feel that the two Opposition parties were becoming concerned about the fight for second rather than first place—[Interruption.] I hope that the hon. Member for Brent, East will take it as a compliment to be so roundly attacked by the hon. Member for Meriden, but she must look out for Martin Miller on the side track in Cheadle, as he is mounting a strong campaign for the governing party. She had better not take her eye off him.

I want to make three main points in the debate. First, it is possible to talk about local government taxation and, therefore, income for local government, only if one is willing to talk about expenditure as well. Secondly, there is a balance of income sources for local government and they need to be understood together. Thirdly, the Lyons inquiry, following the balance of funding review, offers a special chance for the country to find a sustainable way forward for this important issue for our quality of life and the quality of our democracy.

In that context, I have to tell the hon. Member for Meriden that it was disappointing that, after 27 minutes of her speech, she should turn to our proposals and then finish before the 28th minute had passed. I am sure that we shall get to hear the details of the Conservative party proposals—[Interruption.] Yes, it must have been an oversight on her part. I am sure that among the many sheaves of paper that she has with her are her detailed proposals. We look forward to hearing all about them in due course.

Let me talk first about local government expenditure, because it is expenditure that drives taxation—national and local. Local government is at the heart of national life and it has a unique role in championing the communities that we live in and helping them to prosper. The four pillars of local area agreements for local authorities over the next two years cover enterprise and economic development, safer and stronger communities, healthier communities and older people and children and young people. They provide a clear and sensible way of thinking about the arithmetic of local government.

In 2004–05, local government in England spent £127 billion—a quarter of all public expenditure. The largest share, at 37 per cent., goes on education. Social services spending represents a further 18 per cent. and the police another 11 per cent. Those three services make up 65 per cent. of the total net current local government expenditure. Of that share, 65 per cent. goes on the pay of teachers, police, fire fighters and other local government workers. The share of spending on staffing costs varies, from transport, where it is relatively low, to education, where it is quite high.

In preparing for the debate, I was interested to see that, over the last 30 years, local government spending has risen at more or less the same rate as national spending. The pressures do not follow the business cycle as central Government spending did in the 1980s, but instead reflect real need in areas such as social services, where an ageing population, higher dependency costs and increases in areas such as care home fees are placing pressures on local authority budgets. The same goes for community safety—the hon. Lady mentioned neighbourhood wardens and I hope that we can take it
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from her remarks that she will support the drive to extend that scheme all over the country. It also applies to waste services, where we must manage ever-increasing quantities of municipal waste in ways that minimise its impact on health and the environment.

Local government is responsible for spending decisions in all those areas, but the imperative to control cost is clear and present.

Mr. Edward Davey (Kingston and Surbiton) (LD): Will the Minister confirm that the passporting of school budgets and ring-fencing of other budgets has made it more difficult for local authorities to manage their budgets prudently?

Mr. Miliband: That is often said, but the hon. Gentleman will know as well as I do that many local authorities spend above the ring-fenced or passported level on education, to some 108 per cent. to 110 per cent. nationally. My impression is that the commitment of the Government to make education the No. 1 priority is widely shared across the country.

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