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David Howarth (Cambridge) (LD): After this debate, the Government should go away and ask themselves what the purpose of capping is. We heard very little from the Minister about the point of this exercise. The hon. Member for North-East Bedfordshire (Alistair Burt) said that the original point of capping was to ensure that local government could not challenge national economic policy. However, we are dealing here with £4 million out of a total local government expenditure of £80 billion, and national Government spending of five or six times that. The amounts that we are talking about are trivial.

The hon. Gentleman was quite amusing about how trivial and pathetic this situation was, but it is more serious than that. Here we are in a place that used to legislate for half the world. Now it is reduced to telling Aylesbury Vale council what it can do with 4p per resident per week. How the mighty have fallen! The only reason that the Minister gave for capping these councils was that it was to protect council tax payers, but again we are talking about tiny amounts. Even in South Cambridgeshire—where the sum involved amounts to almost half the figure that we are talking about today—the cap will benefit local council tax payers by less than £1 a week. How an expensive re-billing exercise will protect local council tax payers is entirely beyond me.

As many hon. Members have said, this is really about simple contempt for local democracy. If council tax payers in the areas concerned believe that these increases are beyond the pale—or "excessive", in the words of the Minister—they will take the obvious route and vote out the councillors who brought in those levels of council tax. Given the amounts that we are talking about, it seems unlikely that that would happen, but that is their prerogative. The Minister said that members of the public had made their views known. I want to know how many of those members of the public there were, and how many of them voted in the most recent local government elections. One of the effects of capping seems to be to disempower local government, to give local voters less reason to vote, and to allow national Government to take over even the most trivial local decisions.

I expected the Minister to say that one of the points of capping was to advance national policy in some way. However, we look in vain to discover which aspects of national policy would be advanced by this exercise. As hon. Members have said, three of the councils involved have been rated "excellent" in their comprehensive performance assessment rating. So how does capping those councils further the Government's policy to improve the local delivery of services?

The measure is even undermining important national policies. In South Cambridgeshire, for example, an important growth area, cuts will be made in planning, community policing and in other new, important Government initiatives. Why is that? One reason, which the Government do not seem to understand, is that if a council leader is faced with having to reduce his budget,
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the one thing he cannot do is cut existing programmes, as that involves making people redundant and adds to the cost because savings cannot come from redundancies. He must therefore remove from the budget all the new programmes, a vast number of which have come from national initiatives. The Government are therefore undermining their own policies by capping such councils.

Mr. Lansley: A further unhappy consequence is that one is forced by this logic also to restrict grants to voluntary sector bodies and partnership organisations. Sometimes, therefore, the consequentials lie outside the budget of the local authority, but the damage in the community is if anything enhanced.

David Howarth: That is absolutely right, and many councils will be forced, because of the logic of the situation and the short time frame, to reduce expenditure by cutting grants to voluntary bodies. Certainly, that is the unfortunate position in South Cambridgeshire.

The other aspect of national policy to which one might have expected a reference was the overall level of taxation. As the Minister said, however, the Government have succeeded in keeping the council tax rise across the country down to 4.1 per cent. As that goal seems to have been achieved, I cannot see the point of this exercise. He says that all local authorities have been in receipt of grant increases higher than RPI—I expected him to make that point. RPI is no measure of local government costs, however, especially for district councils, which have small budgets subject to wide variation. Most of their budgets are staff costs, and councils must compete with the private sector for professional staff. One cannot expect them to hold down salaries in a competitive situation in which if they did so they would lose their planners, lawyers and accountants.

Another aspect of the problem that Ministers do not seem to have taken into account—which brings me back to the point raised by the hon. Member for South Cambridgeshire (Mr. Lansley)—is that district councils often have to work together to provide services. South Cambridgeshire district council, for example, works with Cambridge city council in relation to many of the voluntary bodies that it funds. One of the effects of the cap on South Cambridgeshire is to hit residents of neighbouring authorities—the citizens advice bureau in Cambridge will find itself £66,000 short, employment development grants will be £47,000 short, and there will be cuts in grants to homelessness organisations, the arts and community groups. All those groups are jointly funded by South Cambridgeshire district council and Cambridge city council. The pain that the Minister seems to intend for one council will therefore fall on the residents of a large number of councils.

I must admit that for several years I had the dubious pleasure of being leader of Cambridge city council, South Cambridgeshire's neighbour. In many ways, South Cambridgeshire was an infuriating neighbour. It followed a financial strategy that I would never have followed. I thought that it could have used its reserves in a more constructive way. But that was the way it chose to use its reserves, and it should be judged at the ballot box, not by the Minister.
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If national policy goals are not the reason for the Government's policy, what is? There might be one last reason: pour encourager les autres—to pick on a few small councils, and to bully them as a warning to others. The sheer arbitrariness of what is happening is an advantage from that point of view. When the Minister was trying to explain why the criteria had changed, and why councils that are capped this year would not have been capped last year, or are having their budgets reduced from last year's levels, he referred to councils being allowed to second-guess. In other words, they would know what the rules were, and the Minister cannot allow councils to know what the rules are. That is extraordinary, and, as the hon. Member for Sheffield, Attercliffe (Mr. Betts) pointed out, it is an abuse of power. It is a refusal to treat local authorities as rational beings, rather than as objects of manipulation. There is no chance of a stable constitutional settlement between central and local government on the basis of such manipulation. It is the ultimate in centralisation.

The Office of the Deputy Prime Minister seems to be treating councils as unruly circus animals that must be induced to perform tricks. It is disgusting to watch, and should not be the basis of a mature democracy. The House should reject this contemptible order, and look to a democratic system of local government and a fair system of local government finance to restore the proper balance between local and national Government.

3.55 pm

Mr. Philip Hollobone (Kettering) (Con): About 20 per cent. of my constituents live in the Daventry district council area, and they are extremely concerned about the order. I also speak on behalf of my hon. Friend the Member for Daventry (Mr. Boswell), who unfortunately cannot be with us but who has written to the Minister expressing his concern, and has met him recently.

Within the Daventry district part of the Kettering constituency lies the battlefield of Naseby, where in 1645 the forces of Parliament overcame an over-mighty Executive. I invite the Minister to travel up to Naseby for a re-enactment of the battle. I am sure that members of the district council would be willing to take him on with me, and teach the Executive a lesson 460 years later.

The order is particularly absurd in the case of Daventry district council. The Government wish to limit the council's budget to £7.8 million, and to reduce the band D requirement from £109.62 to £102.41, which would save £200,000. That is the equivalent of 14p a week, or £7.20 a year. For 14p I could not even buy half a copy of the Daventry Express, the local weekly, or half a copy of the daily Chronicle and Echo, which local residents read.

As other speakers have said, Daventry district council would not have been caught out under past capping regimes. It spends £412,000 less than the formula spending share guidelines, and is well into the bottom half of the league table of total council tax bills. One of the effects of the order is to disrupt the long-term financial planning that the Government require of local authorities. They require authorities' medium-term financial strategies with projections of at least four years.
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The Daventry Express quotes council leader Chris Millar, one of the most exceptional council leaders in the country:

In short, the Government want to micro-manage some of the very best local authorities in the country, which means that there will indeed be a severe impact on local services. Council leader Chris Millar also said:

That will be a direct result of the Government's action.

As was pointed out earlier, there has been no regulatory impact assessment, and the Government have admitted that they cannot make assumptions about which local services and activities may be affected. So they are prepared to cap authorities' revenue budgets, but they shrug their shoulders when it comes to the damaging effect on the services provided to local people. Although this is obviously a party political attack on Conservative-controlled local authorities, so far as Daventry district council is concerned, there has been cross-party condemnation of the Government's actions.

Two issues perhaps affect Daventry rather more than some other authorities mentioned, the first being negative housing subsidy and the associated transitional recovery scheme, which the Government have approved. I submitted a written parliamentary question to the Minister, to which he was good enough to respond, saying that the order does not affect the authority's entitlement to benefit from the transitional measures under this scheme. That is certainly not the local authority's understanding, and I should welcome the Minister's confirming whether the negative housing subsidy and the transitional recovery arrangements have indeed been fully taken into account in applying this order.

Daventry district council wanted to increase its council tax by 13.6 per cent., which is an increase in cash terms of £13.12 a year. Some £10 of that—10.4 per cent.—is in accordance with the transitional recovery arrangements that apply to the negative housing subsidy. These arrangements have been approved by the Office of the Deputy Prime Minister, and yet, because the authority has now been capped, it will no longer be able to recover the amounts it was previously promised. The council says that, to judge by the full implications of this order, by 2009–10 it could well have a cumulative deficit of £1.9 million, which will place it in an extremely perilous position. Councillor Christopher Millar says:


by which he means this order. Our spending so much time debating these ridiculous orders and micro-managing well-run local authorities does not enhance the image of the Government or of local government.

The most absurd aspect of this order is the Government's forcing Daventry district council to re-bill local residents. The Government want to save
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£198,000, but the cost of rebilling will be £100,000, so half the benefit will be lost. It might well go to the Post Office through the extra postage spent; however, there will be no benefit to local residents. When the Minister winds up, I hope that he will explain why, if local authorities such as Daventry district council are to be penalised by this order, arrangements cannot be made for the saving in grant to be carried forward to the next year to avoid the cost of rebilling, instead of imposing this additional requirement.

4.3 pm

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