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Mr. Nick Raynsford (Greenwich and Woolwich) (Lab): I congratulate my hon. Friend and his colleagues on securing additional funding to that provided for in the provisional settlement, which means that this is a better settlement than was anticipated. However, I do not think that he would ignore the fact that it is a tight settlement, with increases on average for education and social services authorities, excluding the dedicated schools budget, of only 3 per cent. this year, and in London of only 2.5 per cent. If I read the figures correctly, the increase is only 2.5 per cent. for my own authority, while Rutland, curiously, secures the best settlement of all education and social services authorities—a 6.8 per cent. increase. Does my hon. Friend feel that that reflects the aim of ensuring the targeting of resources on those in the greatest need?

Mr. Woolas: I welcome my right hon. Friend's contribution, given his deep and extensive knowledge of the system. One of the other reasons that Opposition Members are grating their teeth is that today's announcement scuppers the suggestion that there is a bias in the settlement against the south-east. The Government do not follow that policy; they have a fair policy. I warn my right hon. Friend that one has to look at the amended tables to ensure that we are comparing like with like, but I believe that we have provided a very fair settlement to authorities throughout the country and to different types of local authorities.

Mark Hunter (Cheadle) (LD): I thank the Minister for his statement. It is a pleasure for me to make my first contribution from the Front Bench on this subject, having spent the best part of the past 20 years in local government and as someone who still passionately believes in the case for local government.

It is interesting to see in today's statement the contortions that the Government are going through again to lay the blame for council tax rises squarely at the feet of local authorities. Let me remind the House that it is not local government's fault that Labour has failed to introduce a decent funding system for councils, just as it is not local government's fault that the only way in which it can raise money is through the abysmally unfair and unpopular council tax.

Today, we have another "one-off" bung, although this year it will fall well short of filling the black hole that councils face, which according to LGA estimates could still be the best part of £2 billion. Will the Minister
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confirm that this is the third one-off grant in as many years? Perhaps he should consider renaming it an annual grant. Whatever we call it, though, the sad fact is that it will not be enough.

To fill the gap, councils would need to raise council tax by around 8 per cent. Of course, the statement has shown that such rises will not be permitted, thanks to the capping rules that were announced today. The planned cap of 5 per cent., far above inflation, does nothing to alleviate the problems for people who already struggle to pay their council tax bills—nothing will, frankly, except the abolition of council tax itself. Of course, the cap is an affront to local democracy. Perhaps the Minister will explain why Labour, which has boasted of its achievement in ending the Tories' "crude and universal" capping mechanism, now sees fit to introduce a two-year capping regime that is both crude and universal in itself.

Is the Minister aware that, thanks to the combination of spending pressures, tight grants—the right hon. Member for Greenwich and Woolwich (Mr. Raynsford) described this settlement as tight—and no freedom on council tax, councils will once again be forced to cut services? Did the Minister read the social exclusion unit's report, "Improving Services, Improving Lives", which concluded that the quality of services provided by local government is fundamental to tackling social exclusion? Is he not therefore concerned that this settlement, combined with absolute restrictions on council tax rises, will force cuts in services? It is likely to worsen social exclusion. After all, cuts will not be easy to come by in many local authorities; councils are already striving to be ever more efficient. Is he aware that councils are producing £58 million-worth of efficiency savings every month—more than any other sector of government? Why, therefore, are they not believed when they speak of spending pressures?

The Minister has been quick to dismiss the LGA's assessment of spending pressures, but it personally surveys every local authority's finance department; the Office of the Deputy Prime Minister does not. Does the Minister think it wise to scoff at the LGA's estimates, given that the ODPM makes so little effort to establish the situation on the ground? Will he now acknowledge that the LGA is indeed right to warn of a black hole of some £2 billion? For the benefit of councils struggling to balance next year's budget, perhaps he can tell the House where precisely he would like services to be cut. Would he prefer a reduction in care for the elderly or cuts in children's social services; or would he like the streets to be left littered with rubbish and graffiti?

As we are all too well aware, Sir Michael Lyons is conducting a review of local government and local government finance. Enjoyable though it may be—

Mr. Eric Martlew (Carlisle) (Lab): On a point of order, Mr. Deputy Speaker. Is this a question to the Minister or a speech?

Mr. Deputy Speaker (Sir Michael Lord): Order. I think that the hon. Gentleman can safely leave these matters to the Chair. The Minister will have detected questions here and there.

Mark Hunter: You are very kind, Mr. Deputy Speaker.
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Enjoyable though it may be for us to assemble here every year—with the eyes of local council employees, fearful for their jobs and their futures, on us—we Liberal Democrats hope that Lyons will bring an end to this whole sorry charade. Why do we put up with the most centralised and antiquated local government finance system in Europe? Why do the Government ignore all the evidence that demonstrates that the system is failing the people of this country? Given that local government is raising only 25 per cent. of its revenue, and given that it is not even allowed to make decisions about that 25 per cent., this grant statement is councils' only hope of securing adequate resources to serve their communities.

An out-of-date statistic here or a change in Whitehall priorities there can cost councils dearly. Just last year, my own council of Stockport—

Mr. Deputy Speaker: Order. I am reluctant to stop the hon. Gentleman during his first attempt at such questioning, but he has said enough for the Minister to respond to.

Mr. Woolas: I congratulate the hon. Gentleman on his appointment to the Liberal Democrat Front Bench and on his contribution. I suspect, however, that the "Focus" leaflet was written irrespective of what I announced today. Against the background of a now 39 per cent. increase in real-terms Government grant to local authorities, it is not credible—and taxpayers know it—to paint the picture that the hon. Gentleman has attempted to paint. I suspect that, rather like the hon. Member for Brentwood and Ongar (Mr. Pickles), the Liberal Democrats feel the rug being pulled from underneath them, given the fair settlement that has been announced today and its two-year nature.

The Local Government Association's claim of a £2.2 billion shortfall has now been revised downwards, following sensible and mature discussions with the association, which is led by a very able Conservative leader. The figures have been revised, discussed and analysed, and we have a joint programme of action to pay the fair extra burdens, under the policy introduced by my right hon. Friends the Member for Greenwich and Woolwich (Mr. Raynsford) and the Deputy Prime Minister. If local authorities face genuine extra cost pressures, we have a joint strategy to address those costs, which contrasts with the yah-boo approach of the Liberal Democrats to criticise and blame every problem in local authorities on the Government, while at the same time calling for further devolution. I suspect that the "Focus" editor is at his or her word processor as we speak, making amendments.

Mr. Frank Field (Birkenhead) (Lab): I thank my hon. Friend the Minister for the amount of time that he spent with Councillor George Davies and other senior councillors from the Wirral as they expressed the injustice that they feel over the level of Government support. My hon. Friend will know from those conversations that a particular concern for the Wirral is the level of support for social services. To what extent has his statement today made good the injustice that we feel about the level of support we receive from the Government compared with that received by comparable local authorities in the south-east?
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