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Mr. Andrew Lansley (South Cambridgeshire) (Con): I am glad to follow my right hon. Friend the Member for Richmond, Yorks (Mr. Hague) and my hon. Friend the Member for Vale of York (Miss McIntosh), who spoke on behalf of Hambleton district council. Their explanation of that council's circumstances illustrates the position of South Cambridegeshire. My right hon. Friend said that if the council proceeds in the way that the Government demands of it, in a few years it will have to choose between a large increase in council tax or a major reduction in services.

In recent years South Cambridgeshire district council, with large reserves, chose to subsidise its council tax and keep it low. In the current financial year it had to choose between a substantial increase in council tax or a substantial reduction in services. After 2,500 responses from people across the district, the council decided that there should be an increase from £70 on band D council tax to £140, which the Minister will say is an excessive increase because it has doubled. Of course, however, the increase was proposed from a low base and a below-average shire district council tax. It was proposed after years of subsidising the council tax out of reserves.

The only alternative, which the Government now seem set upon demanding of South Cambridgeshire district council, is a substantial reduction in services. As the Minister said, the Government proposed a £3.6 million reduction to the budget requirement. After receiving representations, they changed that to £2.6 million. However, we have the problem that the budget requirement, as the Government calculate it, is not a measure of a council's spending year to year, but a measure derived after the use of balances.

On the face of it, South Cambridgeshire's budget requirement went up from just over £9 million to nearly £14 million, but in reality the council proposed an £850,000 budget increase from £13.75 million, or a 6.2 per cent. increase. However, the order means that the Minister is effectively demanding that South Cambridgeshire's budget last year of £13.75 million should be reduced to £12 million this year. I cannot in my wildest imagination understand how a capping regime that is designed to reduce excessive spending can demand that a council reduces its expenditure year on year by 13 per cent.—from £13.75 million to £12 million. That is an utterly perverse effect.
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The Minister knows that he has the discretion to change these things because he has already changed the proposal once. All my colleagues who are demanding that their councils should be permitted to make larger increases than 5.5 per cent. from their low council tax bases should take heart from the fact that the Minister has accepted that council tax in South Cambridgeshire should go up by a third, because that was the effect of the way in which the order was amended after the initial determination. I cannot take much comfort from that because although many arguments are made about the trivial nature of the Government's proposals for other authorities' budgets, the situation in South Cambridgeshire is not trivial. The order will lead to the existing service base being greatly reduced, so we are not talking about the ability to increase and improve services there, although we wish to do so.

The Minister knows what those reductions will be. As my hon. Friend the Member for Vale of York said, the Government might not admit to making assumptions about the consequences of the order, but they know those consequences. Although I shall not go through the   whole list, they know that arts development grants will disappear in South Cambridgeshire, as will sports   development grants. Community development expenditure will have to be curtailed. Such development is occurring in places such as Cambourne, which is a new settlement in my constituency, to try to accommodate the tens of thousands of new homes that South Cambridgeshire must have because the Office of the Deputy Prime Minister has demanded it of us. Emergency planning will stop. Travellers' caravan sites could not be refurbished and improved, or provided. Building control regulations will have to be curbed, as will community safety and crime and disorder partnership activities. A whole string of activities, including statutory functions, will be affected.

It is thus simply not true, as the Government claimed in the statement on 7 July, that the order is compatible with authorities being able to continue to maintain service levels and to deliver their statutory functions. If that were the case, it could be true in South Cambridgeshire only if there was a further substantial reduction in balances this year, meaning that there would be no room whatsoever for further council tax amelioration through transfers from balances next year. As my right hon. Friend the Member for Richmond, Yorks said, the Minister is proposing to throw the medium-term financial strategy of South Cambridgeshire district council out of the window, which is in complete contravention of the interests of my constituents and the residents of the council.

It is absurd for the Minister to say that the Government are increasing support to local government across the board. We are debating the circumstances of individual authorities such as mine, which is a relatively low-spending authority—it is in the lowest quartile of expenditure. My authority sets a below-average council tax and that set by some other authorities is very low. However, the total external support for South Cambridgeshire has gone down by a third in the past decade. The revenue support grant for South Cambridgeshire is only £18 a head—£12 a head less than even the grant for Huntingdonshire, which is a low-spending authority that receives little external support.
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The Minister regards the proposed increase to South Cambridgeshire's budget as excessive, but it represents only an £850,000 increase in expenditure. The largest component of the increase is more than £500,000 to deal with the consequences of enforcement and legal action relating to Travellers in South Cambridgeshire. I will not dwell on this matter because we have debated it separately. My hon. Friend the Member for South-East Cambridgeshire (Mr. Paice) and I have told the Minister's colleagues how necessary it is that South Cambridgeshire and other authorities have powers to ensure that planning laws relating to Travellers are upheld and that they receive the support of Government enforcement. However, that is simply not happening, which has the consequence of creating enormous additional cost. That was why two thirds of the proposed budget increase was precisely to meet enforcement costs relating to Travellers.

Despite failing to support South Cambridgeshire in that respect, however, and having demanded that tens of thousands of additional homes are built in South Cambridgeshire, having failed to use the revenue support grant to provide any additional significant support to the authority, and having demanded that it cuts its budget, the Minister comes to the House with the argument that he is protecting the council tax payers of South Cambridgeshire. However, that argument has no support from me or the residents of South Cambridgeshire. He is not protecting council tax payers, but proposing a complete absurdity. He knows that the proposal is completely arbitrary. The hon. Member for Sheffield, Attercliffe (Mr. Betts) was absolutely right to argue that we have ended up with crude, universal and arbitrary capping. Whatever the reserve powers on capping were intended to address, it was not these circumstances.

The Minister would be wise to bear it in mind that he had to amend his initial proposal because it was clearly arbitrary and unreasonable, which was how I described it to him in my correspondence. However, he continues to propose something that is arbitrary and unreasonable. At the very least he should just say that South Cambridgeshire should not be required to reduce its budget below last year's figure of £13.75 million. That budget was not excessive then. It is not unreasonable to request that the council does not increase its budget year on year, but the Minister's demand that the budget should go down by 13 per cent. is arbitrary, unreasonable and unacceptable.

3.8 pm

Mr. Robert Walter (North Dorset) (Con): I shall put what I want to say in a little context. If my local authority, North Dorset district council, had been permitted to make its proposed council tax increase, it would have moved from being the local authority with the seventh lowest council tax in Britain to that with the 12th lowest.

Before the hon. Member for Brent, East (Sarah Teather) leaves the Chamber, let me say that I am grateful to her for the fact that her robust and measured speech contrasted with the response of her predecessor, the hon. Member for Kingston and Surbiton (Mr. Davey), to the original announcement on 23 March,
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which the hon. Gentleman used as an opportunity to take pot shots at Conservative local authorities' spending. He singled out my local authority, North Dorset—I think that he was briefed by the future Mrs. Davey, who unsuccessfully tried to unseat me for the second time on 5 May. I am delighted that the leader of the Liberal Democrat group on North Dorset district council, who also sits on Dorset county council, has tabled a motion, which Dorset county council will debate tomorrow, in his name and those of his Liberal Democrat colleagues:

which is, of course, Conservative controlled—

On 23 March, the right hon. Member for Greenwich and Woolwich (Mr. Raynsford) invited hon. Members and local authorities to make representations to him, and all local authorities did so. If that was micro-management by the Office of the Deputy Prime Minister, and if the ODPM thinks it knows how local authorities should manage their budgets, then the encounter was disappointing—I note that the hon. Member for Poplar and Canning Town (Jim Fitzpatrick), who met us on that day, is now a Front Bencher.

At that meeting, we did not discuss what the Government feel North Dorset district council should do, which was unusual. When I asked the Leader of the House about that approach at business questions, he also found it most unusual:

I did not like what Ministers said, because they did not say anything. We made our presentation, for which we were politely thanked, but no discussion took place.

If the Government really believe that they know how North Dorset district council should raise and spend money, they should explain where it is going wrong. We must ask why a small local authority such as North Dorset has attracted special consideration. As I have said, band D council tax is £98, and although the percentage increase in council tax was large, it amounted to 36p a week. Even after the rise, the council tax was the 12th lowest in the country and the lowest in Dorset. As I have said, in neighbouring Weymouth and Portland, which is Labour controlled, band D council tax is £232.
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For about 10 years, council tax has been kept low by the use of interest earned from capital, which was raised mainly from the sale of council houses. The Government want councils to use that capital to benefit their areas. As the capital programme is implemented, investment interest will fall because the investments themselves will fall. Furthermore, we live in a low interest rate environment. In essence, council tax has been subsidised for about 10 years, but it will be impossible to subsidise it in four or five years' time. North Dorset district council has publicised that point at roadshows, in newspapers and during consultations, and council tax payers have indicated that they would support rises in tax in order to maintain or improve council services. The council intends to raise tax levels smoothly over five years to reach a budget that no longer relies on interest from reserve capital.

North Dorset is not an overspending council—it spends less than its formula spending share. It is not profligate—its spending is average among its Audit Commission family of councils. It has given proper protection to taxpayers, who have benefited from a lower council tax because the council has been supported by interest earned from reserves for the past 10 years. It plans to increase tax gradually over five years to offset the reductions in its reserves, and it is also making substantial efficiency savings, which is reasonable and responsible. It is investing its capital in affordable housing, which is one of the greatest needs in the area. Its proposed tax rate would still be the 12th lowest in the country. At the end of its five-year plan, taxpayers would benefit from a rate close to the national average.

The Government's action will return about 12p a week to the taxpayer. The cost of rebilling is equivalent to nearly £6 on the council tax bill, which is not value for money, and the Government would give a fail judgment to any council that proposed such action. North Dorset is a low-tax council. Since the Government published their guidance last year, it has been penalised for having a low council tax over the past 10 years. Councils that start from a higher tax base have increased council tax by more in real terms than North Dorset district council.

Where is the natural justice in capping North Dorset district council? The Government's accusation of overspending is meaningless. If the council keeps to a 5 per cent. rise over the next five years, it will have to reduce its size by 25 per cent., which strikes at its very viability. It has slightly more than 200 staff to deliver more than 30 major services, the same number of services as is provided by much larger councils. It must be allowed to manage its own affairs, and my constituents, who pay the council tax, support it. It is being capped for increasing tax by the cost of one cigarette a week. How much public money has been spent on taking that action?

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