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Mr. Peter Bone (Wellingborough) (Con): You talk about grant floors. Are there also grant ceilings?

Jim Fitzpatrick rose—

Mr. Deputy Speaker: Order. The hon. Member for Wellingborough (Mr. Bone) should refer to the Minister in the third person. I repeat my ruling about the purpose of this Adjournment debate.

Jim Fitzpatrick: Thank you, Mr. Deputy Speaker. I am grateful for your protection. If the hon. Gentleman wants to drop me a line on that specific question, I am sure that we will be able to provide a detailed answer. As the hon. Member for Poole said, sometimes the point is not simply to make representations in respect of this particular year; it is to lay foundations for arguments for subsequent years. This is an ongoing dialogue with local authorities. The Minister for Local Government's visit to Poole next month will be part of that.

The central allocation makes explicit what was always implicit in the system—that after taking account of differences in relative needs and resources, some of the grant is allocated on a per capita basis. We regard stability as a key issue in local government funding. I have already made it clear that the grant floor is a long-term part of the funding system.

The hon. Gentleman raised issues about the funding formula. To work out each council's share of formula grant, we need first to calculate the relative needs formulae, which include information on the population, social structure and other characteristics of each authority. Each of the main services provided by councils has its own relative needs formula. There are seven formulae in all for children's services, adult social services, police, fire, highways maintenance, environmental, protective and cultural services, and capital finance. The formulae assess the relative need for a particular service in each area based on the characteristics of the area.
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The hon. Member for Poole suggested that the funding formulae do not recognise the significant pockets of deprivation within Poole. However, most of the funding formulae take account of the relative levels of deprivation in each area. For example, in calculating Poole's relative need for children's social care, we take account of the proportion of local children in income support households and the proportion of working age adults who claim income support. To calculate the relative needs formula for environmental, protective and cultural services, we take account of rates of incapacity benefit, income support and other unemployment related benefits in each area. It is wrong to say that the funding formulae ignore deprivation factors in Poole or elsewhere. In fact, our formulae take detailed account of the relative levels of deprivation in each local authority area.

The hon. Gentleman suggested that the higher than average number of ageing people in Poole places a greater strain on social services. However, that is taken into account in the older people's social services funding formula, which is based on the number of pensioners in each area, their levels of deprivation and the proportion of very old people living in each area. The Government are committed to ensuring that local authorities can deliver effective local services without needing to impose excessive increases in council tax.

Annette Brooke : I, too, am grateful for the proposed visit by the Minister for Local Government. Is there any work on the methodology of the area cost adjustment to take account of the special characteristic in Poole and Dorset of high house prices and low average salaries?

Jim Fitzpatrick: I can assure the hon. Lady, notwithstanding representations that she has made with local colleagues, as well as representations by the local authority, that there is an ongoing assessment of the area cost adjustment and all the factors involved. In reaching the local government financial settlement for each area, the Department bases its calculations on all the evidence presented by its own sources and, indeed, by local authority sources. As I said in response to the hon. Member for Poole, a dialogue is under way. There is continual assessment and reassessment, and any evidence or information that is presented is taken into account and assessed. Conclusions are reached by civil servants, and final submissions are made to Ministers, who make announcements to the House. We are open to representations and so on. Some people may think that certain factors are not taken into account, but I can assure the hon. Lady that all representations are considered very seriously.

We have worked closely with the Local Government Association to look at the pressures that councils will face in the next two years, and the ways in which central and local government can manage those pressures. We accept that there are pressures on councils, especially waste management and social services, which is why we have provided an extra £305 million in 2006–07 and £508 million in 2007–08 in formula grant above what was previously planned. We are satisfied that the settlement following the spending review 2004, coupled with the significant extra investment that we have made
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in recent years, is sufficient to fund all the cost pressures that local authorities face in delivering services over the next two years.

We have agreed to work jointly with local government in a number of areas. We will work with the Local Government Association to take account of pressures, and we will focus on pay, adult social care and waste in the context of the 2007 comprehensive spending review. We will introduce a strengthened new burdens procedure, and we have reaffirmed our commitment to discuss new burdens with local government as well as the measures to mitigate them. I understand the concerns of people in Poole, particularly of pensioners on fixed incomes and others on low incomes who are worried that the settlement may impose another large increase in council tax for the next two years. There is no need for them to be anxious but, given the average 3.4 per cent. increase in formula grant until 2007–08 that Poole has received since 1997, residents are right to express dismay at the persistently high council tax increases imposed on them and the proposed increase for the forthcoming year.
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Given the Government's significant extra investment in public services and the scope for efficiency improvements, it is unacceptable for local authorities to set large increases in council tax. The average council tax increases in both 2006–07 and 2007–08, as we have said, should be less than 5 per cent. We have made it clear that we are prepared to use our powers to cap any excessive council tax increases, and we have done so in the past two years.

In conclusion, I can assure the hon. Member for Poole, his colleagues and his constituents that I understand fully the points he has raised today. We have provided a good settlement overall, and, given the significant investment in local services, we believe local authorities can and should deliver council tax rises below 5 per cent. in 2006–07 and 2007–08. I will alert my hon. Friend the Minister of State to matters raised in this debate before his visit to Poole next month.

Question put and agreed to.

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