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Mr. Deputy Speaker (Sir Michael Lord): Order. If the hon. Member for Brentwood and Ongar (Mr. Pickles) wants to respond to that, will he please do so very briefly, as we have already had the debate on police grants this evening.

Mr. Pickles: I agree with every word that my hon. Friend the Member for Stone (Mr. Cash) said.

Dr. Iddon : Will the hon. Gentleman give way?

Mr. Pickles: I must make progress, as I want to leave time for my hon. Friends and other hon. Members.

Let us turn to pensioners. Now would be a good time to explain what happened to the pensioners' discount. That was intended to protect pensioners from the massive increase of 76 per cent. in the council tax under Labour, but now, when the council tax is to rise even more, the discount is thought to be unnecessary. Why is that? Will the Chancellor announce it again in March? It is not in the books. Was it just an election gimmick? If the Minister said something about it when he winds
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up, we would all be grateful. Many pensioners are wondering how they will find that extra £200, which they had counted on.

The Government have managed to achieve the nearly impossible for the public—below-inflation increases for most services outside education, and above-inflation increases in council tax. Truly, this is a new minimalism for new Labour: more is less, less is more—another increase through Labour's favourite stealth tax. Only by the occupant of the rear end of the pantomime horse is it regarded as addressing the needs of local government. Sadly, its melodious clip-clop will be heard stumbling through the rest of the year and making all our lives a misery.

Several hon. Members rose—

Mr. Deputy Speaker: Order. Before I call the next speaker, may I remind the House that there is a 12-minute limit on Back-Bench speeches, which applies from now?

8.36 pm

Mr. Neil Turner (Wigan) (Lab): Labour Members would have listened with growing incredulity to the speech of the hon. Member for Brentwood and Ongar (Mr. Pickles), had he continued. I shall give him one reason for that incredulity. He mentioned Cambridge county council having to make cuts of £1.6 million. That council has a population of about 737,000. In the 1980s and 1990s, when I was a member of Wigan council, which has a population of 300,000, we were required to make cuts of £10 million by the Conservatives—not just in one year. Year on year, we had to make such cuts. It would do Opposition Members some good—those on the Front Bench as well as those who intervened earlier—if we had a few choruses of "mea culpa" before they continue their comments.

There has been a remarkable growth in the amount of money given to local government by the Labour Government, and that is the case again this year. I have problems with this year's settlement—not with its size, but with the way the cake is sliced up. The major problem is with the formula. The new formula recognises need, particularly for social service. I welcome that. A formula based on evidence that recognises need will lead to a fairer distribution.

However, a damping mechanism has been introduced, especially in relation to social services, so that all the gains that were made by many of the authorities in the organisation that I chair, the special interest group of municipal authorities, have been damped out. I am not opposed to damping in principle. It is right, for the reasons to which I alluded in my opening remarks. When I was on the council, I would have preferred damping to massive cuts year on year. We could have achieved much more. In this case, however, the damping is far too harsh. In SIGOMA authorities such as mine, about £250 million will be taken out of our social services. We have a floor of 2.7 per cent. That protects councils that are currently over-resourced in social services at the expense of councils such as mine that are under-resourced, and will continue to be so for some considerable time.

I regret that during the consultation period the Minister did not take on board the case made by SIGOMA authorities and others for reducing that
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damping to some degree. Had he been able to reduce it even by a small amount, that would have led to about £35 million going back into SIGOMA and other authorities, including county councils. That would have significantly improved their ability to serve their people.

It is not just a question of damping in social services. On top of that, we have damping in the overall budget, with floors of 2 per cent. and a reduction of about 85 per cent. on the amount of money that authorities receiving more than the floor should get to pay for that.

I cannot understand why we have those two elements of damping. The local government settlement is about how the Government divvy up the amount of money that they have: it does not relate to the amount of money that each local authority will spend on any one element within it. Local authorities have the freedom to make those choices—they do not have to spend the amount of money on social services that is allocated by the Government—but a double damping effect places a tremendous imposition on them. It is imperative that the Minister considers this in great detail. It will not be an issue over the next year, because that is fixed, but when he comes to deal with the next settlement it is essential that that double damping is taken out; otherwise, we will have major problems with local government settlements in future.

The result is that there will be quite severe cuts in the number of services provided. Those cuts are not likely to fall on particular individuals, because all good local authorities will ensure that they deal with the essentials. However, where individuals are supported by social services, the bar of access to services will start to be raised, and the charges levied by authorities will be increased. We will end up with a postcode lottery. Authorities that have a higher rate for historical reasons, and therefore benefit from the damping, will be able to provide services that authorities such as mine, which are suffering from the damping, will be unable to provide. One authority will be unable to provide the services that another authority next door is able to provide. I am sure that Members on both sides of the House, including the Minister, would agree that that situation is wholly unacceptable and must be dealt with.

Another issue that affects local authorities in the SIGOMA areas is that most of us have primary care trusts that are seriously underfunded. The underfunding of PCTs in SIGOMA authorities amounts to £215 million. That is in addition to the £250 million that we have lost because of the damping. As a result, PCTs have no resources available to help local authorities with their social services budgets. People will not get the level of support that they need. Instead of being treated at home in dignity, close to their families, they will become more dependent and eventually have to go into acute hospitals, putting increasing pressure on the NHS. In many local authorities, it is not unusual, as Tom Jones might say, for social services and PCTs to pool resources in order to provide joint funding for those purposes. However, in SIGOMA authorities there is a single pot with two gaping holes that are pouring out £250 million and then another £215 million from those services.

It is essential that Ministers set a time scale to end such damping. Without that, the whole formula that we have set up—I think it a good formula and agree with it—will become worthless; Ministers might as well
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throw straws in the wind to decide on the amount of money. The whole thing will become discredited and the whole point of it would be brought in to disrepute.

The following two things are essential in the next round of local government settlement. First, we must have a single damping mechanism on the total amount of money that goes to local authorities. Secondly, we must have a definitive and transparent time scale, so that the damping that I mentioned can be eased out. I do not want authorities to have to make savage cuts. However, they need to understand that, because of their needs, they are over-resourced in comparison with other authorities and the Government need to take account of that.

I say to the Minister that if future settlements do not include those two things, a lot of Labour Back Benchers will be seriously discomfited.

8.46 pm

Sarah Teather (Brent, East) (LD): The local government financial year has a kind of ritual about it. It is a bit of a dance, with a touch of stand-off here, a bit of flattery there and a complex move somewhere else, all designed to distract the eye.

Contrary to popular wisdom, the new year actually begins around October, as the Local Government Association and council leaders begin to set out their stall of doom about council service cuts and council tax rises. The Government then fight back with a macho swipe at wasteful councils and warn them that they must stay within their budget this year or face the wrath of the cap. Then there is a stand-off, a bit of a public argy-bargy, a spot of name-calling and a public falling-out.

At the last minute, the doughty Minister trawls around his colleagues with a begging bowl to find a few extra coppers to forestall the crisis. He announces his Christmas bonus to councils in December and tells them that they need to thank him for it. However, councils protest that it is still not enough and charge their MPs to explain the difficulties to the House in January. Then councils fix their budgets, cut some vital services, hike up the council tax and the voters protest; so Ministers cap them. Councils then cut a few more services and we begin the annual dance of the pantomime horse all over again. [Interruption.] I had to get the pantomime horse in; there was a race to get it in first.

In December, the Minister announced that a few extra scraps would again be thrown from the master's table to grateful local councils, so why do councils still moan? They complain because it is the very system that keeps them in chains, and until the Government are willing to tackle that, we shall be forced to repeat the same moves, year after year.

In the meantime, the Government have introduced some reforms, but as the hon. Member for Brentwood and Ongar (Mr. Pickles) said, the local government community was united in opposing them. The Government had a consultation about the change to the formula, but everybody said that it would be a bad idea; they introduced it anyway. The problem with the new formula is that, far from making things simpler or more transparent, it increases the potential for ministerial discretion in the allocation of funding.
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For example, why does Northumberland get nearly £100 per capita of grant more than Somerset? There may well be a perfectly legitimate reason, but the Government should be willing to make those reasons public and transparent and to debate them.

Another side effect of this year's settlement is that, on the whole, districts have done better than expected. That may be a coincidence, but I cannot help wondering whether it has something to do with the Government being desperate to avoid last summer's capping embarrassment, when they employed the full machinery of legislation to make an example of a set of tiny district councils, an example that for the most part provided little more benefit to the average council tax payer than the cost of a pint of beer.

However, some developments are to be welcomed and it is important that we do so. As the Minister said, the Government have done much work to identify spending pressures with the LGA, and that is to be welcomed. We also welcome the shift toward three-year settlements, with the two-year settlement in this instance being fitted in with the three-year spending reviews.

However, technical difficulties arise from a move to longer settlements. The Government will use projections from the 2004–05 mid-year population estimate to calculate funding through to 2007–08 and projections are, of course, based on historic trends, which poses problems for areas where population growth is speeding up, and for some northern cities, which have managed to stem population decline but where projections imply it is continuing.

Fundamental questions also remain about the data source. The Office for National Statistics has finally admitted that, for many inner-London councils with high migration levels and very large ethnic minority communities, its population figures and methodology are fundamentally flawed. My own borough has battled with that. Brent council estimates that the ONS may underestimate its population by as many as 20,000 people, when compared with Greater London assembly estimates. The implications are real, since for every 1,000 fewer individuals in the calculation, the estimated lost revenue approaches £500,000. Will the Government look at ways of ensuring that projections are informed by the most up-to-date data available?

There are some glaring omissions in the statement. The Government have included no amount for the cost of their latest policy wheeze—council structural reorganisation—and I wonder whether the House should assume that that will not be implemented until 2008–09, or whether it is to go entirely unfunded? The Cambridge academic Michael Chisholm calculates that the cost will be up to £3.5 million. The Government may dispute the figure, but they surely do not claim that the process will be entirely free.

The fundamental problem with the settlement, as with last year's and the year's before, is that it provides little freedom for councils to do their job properly. If we believe in local government, we have to give councils the freedom to raise and spend their own money. That means drastic local government financial reform, not a bit of tinkering with the formula.
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