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Sir Paul Beresford : Does my hon. Friend agree that there is at least one positive thing? The Minister and his Department recognise that the new formula does not fit the reality of local government needs and expenditure. All those below the floor were lifted to the floor, and yet 87 per cent. of those above were capped to fund them.

Mr. Pickles: My hon. Friend makes a good point, which I shall develop later.

The ODPM has no moral authority to lecture councils on savings or council tax levels. It might make a nice innovation next year if local authorities went through the books of the ODPM and it was accountable to local councils. I am sure that we would find some savings then.

Bob Spink: As my hon. Friend is talking about moral authority and the ODPM, will he say what impact the below-inflation rise of social services budgets will have on those who rely on them, whose need is growing way above inflation? Alternatively, what impact could that have on the council tax payer?

Mr. Pickles: Given that the Government have backed a crude and universal cap, there is only one way for the
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argument to go. The most vulnerable will be hit this year. There is no other way to go. My hon. Friend knows that some councils will try to ameliorate the problem by cutting into reserves and spreading the money around, but given that we know what the position will be next year, and that we have a clear idea of the year after, I am afraid that cuts are inevitable. As a result of the way in which the school grant operates, it is inevitable that those cuts will hit the very people my hon. Friend wants to protect.

This is a Government who by stealth intend to abolish district and county councils and to waste upwards of £3.5 billion in the process. Instead of showing the courtesy to the House of making a statement outlining their intentions, they prefer to govern by leak and PowerPoint presentation to chief executives. Instead of asking councils for their opinion, they prefer to sideline them by having cosy chats with officers. We know why. The last time the Government consulted on reorganisation, they were defeated by a massive no vote. I doubt they will make the same mistake again, but the voice of the people must be heard and their democratically elected representatives must be heard.

Some £3.5 billion is too much to pay for a Department that no one would miss if it were abolished tomorrow. Some £3.5 billion is too much to pay for this gulag of despair to be seen to be doing something. If we have £3.5 billion to spare, I would rather it were spent on services that improve the quality of life of our citizens, including, to pick up on my hon. Friend's point, our most vulnerable citizens.

David Taylor (North-West Leicestershire) (Lab/Co-op): Having worked for a large shire county throughout the Conservative period in office of 1979 to 1997, I kept a close watch on their policies and attitude to the general public, and the conversion to the merits of listening to the people is so moving that it would bring tears to a glass eye. What consultation took place, and what vote were people given, on the major restructuring of local government in 1996–97?

Mr. Pickles: Why restrict it to that? Why not go back to the reforms of 1881? Why not say something about the reform of corn laws? The hon. Gentleman has to understand that it is 2006 and we are into the third term of a Labour Government. Let him grow up and accept his responsibilities. There is no use going down memory lane, when he was a young man in short trousers. Let him address the reality now.

Michael Jabez Foster (Hastings and Rye) (Lab): Will the hon. Gentleman give way?

Mr. Pickles: In a moment because I intend to refer to the hon. Gentleman. He does not look too pleased about that.

On the settlement, most councils are receiving only an inflationary increase in grant. Half of social services authorities are receiving an increase that is below inflation. The spending pressures identified by the LGA as part of the "funding the black hole" exercise on pressures in the period leading up to the settlement have not gone away. However, I will not go through those because hon. Members no doubt remember them well.
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Most councils have tough choices to face. In an effort to bridge the gap, local authorities will seek efficiency savings, apply, where appropriate, reserves and balances, and bear down on costs. That is sensible. However, for many the choice will be between council tax increases and cutting services. The contrast between the 6.4 per cent. increase in the ring-funded dedicated school budget and the 2.7 per cent. increase in the formula for authorities with education and social services responsibility is stark. That will lead to great tensions in implementing the integrated children's services agenda at a local level.

An analysis of 56 councils across England shows that almost eight out of 10 of those who are consulting on draft budgets are struggling. The main reasons for that are that half of social services run by councils received a grant increase of less than 2 per cent.; that an increasing number of vulnerable older persons need extra care; that there are inflation-busting increases in private sector contracts and fuel bills; and that there are increasing volumes of waste collection and disposal each year.

The ending of the safeguarding children and additional access and systems grants paid in 2004–05 and 2005–06 exacerbates that pressure. A number of councils are proposing job cuts and service cuts, such as increasing the eligibility criteria for elderly care services. The travel concessions, about which the Minister spoke so eloquently, will not put additional pressure on local services only if no additional passengers are attracted to the scheme.

Let us see the effects in a balanced sample of local authorities. I will take two Conservative-controlled councils, two Labour and one Liberal Democrat.

Sarah Teather (Brent, East) (LD): Why only one Liberal Democrat council?

Mr. Pickles: The hon. Lady's party does not control very many, but no doubt she will talk about a few—although, in these loving times, we are on her side.

In Conservative-controlled Cambridge county council, council tax is likely to increase by just under 5 per cent. To achieve that, budget cuts of £1.7 million are the only option. Key services, notably road maintenance, public transport and home care for the elderly and disabled, will suffer cuts. Surrey county council, which is also Conservative controlled, has been severely affected by the Government's new grant formula and has announced that 661 out of 7,000 staff will go in order to keep the council tax increase below 5 per cent.

Derby city council announced in November a budget deficit of £2.3 million, which could rise to £4.5 million. That is expected to lead to increased charges and closures of many facilities, including public toilets. In order to deliver a 4.9 per cent. council tax increase, Lancashire county council needs to save a staggering £16 million in services or direct cuts, plus £4.3 million in efficiency savings. There are proposals to close nine libraries and to replace daily fresh meals to pensioners with weekly deliveries of frozen meals. York city council, which is run by the hon. Lady's party, proposes to make four special needs teachers redundant as part of
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more than £800,000-worth of cuts in education and children's services. The council has to make savings of £6 million.

That is a pretty sorry state to be in. If the Minister will forgive me, I must say that I was not entirely satisfied with his answer on supported borrowing.

Mr. Henry Bellingham (North-West Norfolk) (Con): My hon. Friend mentioned Cambridge. Is he aware that if Norfolk county council had carried on providing exactly the same level of services with the money that the Government have given it, it would have had to put up the council tax by nearly 7 per cent., which is obviously unacceptable to people on fixed incomes? It is ultimately delivering a council tax increase of under 5 per cent., which will make it extremely difficult for many hard-working staff and vulnerable people in receipt of different services. Does my hon. Friend agree that in that respect the Minister's expression "parallel universes" comes to mind?

Mr. Pickles: My hon. Friend makes a good point. I had the joy of visiting his constituency some time ago and he was at pains to point out a number of villages that suffer from levels of deprivation that one would see in many cities. Part of the problem in his constituency is that it lacks the critical mass to be able to qualify under the grant distribution system. We have the ridiculous situation of deprivation being recognised in many cities but not being recognised in areas such as that my hon. Friend represents. It seems to me that if you are poor, you are poor, and the Government should recognise that.

In case people think that this is just a county problem, we have advice from Mr. Steven Pick, who is the chief director of finance in Barnsley. He said:

Ted Lush, the corporate director of finance and property services in Stockport, said:

The Minister scoffs at that, but that is the view of a professional. He is not a party member; he has no axe to grind. All he has to do is represent the people of Stockport and to help them out.

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