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On population, the Minister last year announced a review of migration statistics: will he update the House on that, as there are no details in today’s statement? On
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efficiency, councils will need to make savings, and they have demonstrated already that they have a better track record than the Government. However, will the Minister explain why he is expecting local councils to achieve a 50 per cent. increase in efficiency next year, when we expect the country to be in recession, while at the same time the Government are indulging in a splurge worth £15 billion and families will be queuing out of the door for housing help?

Today’s statement is a tacit admission that councils will be facing cuts and further increases in council tax. If the PBR was intended to tempt shoppers into spending before Christmas, this settlement will leave council tax payers with a stonking new year hangover.

John Healey: The hon. Lady is right that councils have a good track record in making efficiency savings, especially over the past three or four years of the previous spending review period. For this current year, they are being allowed to carry over about £1 billion of those savings, and that is the right thing to do. However, as I said in my statement, we are expecting at least the same level of efficiency from local government that we expect from all parts of national Government and the public sector.

On migration statistics, the hon. Lady may know that the national statistician is leading a task force drawn from senior people in all Departments and local government. The task force is looking to improve the use of administrative data so as to render migration and population statistics more accurate. It also wants to improve projections and to find a better way to track people who enter, leave and move around our country. That will provide a better basis for making policy and funding decisions across a number of areas of Government in the future.

The hon. Lady also asked about the effect of the settlement on councils with deposits in Iceland. In practice, it means that they will not need to account for any impairment in their budgets until the year 2010-11. By that time, they should be clear—or certainly clearer—about the level of loss that they have to provide for.

Finally, the hon. Lady is right that this is a “steady as she goes” financial settlement. She said that there were no surprises but, given that this is the second year of a three-year settlement, that should be no surprise to the House. She upbraided me for not coming up with alternatives, but her only alternative to the funding pressures that all parts of the public sector, especially local government, inevitably face at this time is the removal of the council tax and the introduction of a local income tax. That would place enormous pressure on working families and local businesses at the very time in this economic downturn when they could least afford it.

Mr. Lindsay Hoyle (Chorley) (Lab): I thank my right hon. Friend for his statement, but will he assist a little more on the Icelandic issue? My local authority, Chorley borough council, invested £2 million in Iceland on 9 September. That is of course the main problem, but another problem is the ongoing revenue and interest that will be lost. Chorley is a small district authority, but what can he do to help it get that money back? Will
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he reassure the people of Chorley that the borough council was not acting on his or the Government’s advice when it decided to invest the money?

John Healey: It is rather curious and unusual to hear my hon. Friend ask for support for Chorley council. However, he is right that it should take responsibility and be able to account for its investment decisions, including its decision to invest in Icelandic banks. We have been working with Chorley council already and, if it wishes us to offer help, we are committed to giving it. That help would include providing financial experts from within the field of local government who would help the council sort out how to manage the financial pressures in the medium term. If the council believes that it has a good case for capitalisation, he may like to tell it that I am prepared to consider that.

Mr. David Curry (Skipton and Ripon) (Con): The Minister is an intelligent and reasonable man, so will he look into a genuine problem that many councils face because of the way in which the costs of the free bus pass for elderly and disabled people have differed in their impact from the assumptions made when the grant was distributed? Some councils face costs of literally millions of pounds this financial year, and more in the next financial year, over and above the value of the grant. As they cannot recoup that money from the council tax, their only chance of recouping it will be through cutting other services, including precious things like recycling. Will he discuss with the Department for Transport, which is a lead authority on the issue, the need for an urgent redistribution of the grant in the light of actual patterns of bus use, rather than anticipated and predicted patterns?

John Healey: The right hon. Gentleman probably understands local government finance and finance pressures as well as any Member of this House, as he served with distinction in the Department responsible under the previous Administration. Of course assumptions were made at the beginning of the three-year period. There was a decision, on which we consulted, about those assumptions. There was a decision, on which we consulted, to fix on a three-year settlement, because of the advantages of certainty and stability. There was a decision, on which we consulted—a decision that local government pressed us to take—that we would pay the extra money, which is £212 million this year and £217 million next year, to support the additional concession for elderly people. We decided to pay that by special grant, whereas the rest of the extra money going to local authorities will be paid through the formula grant. We are still confident that there is, in aggregate, plenty of extra money from the Government in the system to support the costs.

The right hon. Gentleman asked me about the Department for Transport. I believe that my right hon. Friend the Secretary of State for Transport will shortly begin a consultation on possible changes to how the concessionary travel scheme is administered. One change that I think that he will be interested in, as I know his North Yorkshire county council well, is the proposition that the scheme may be better administered at county level to enable any inconsistencies apparent in the system to be more easily managed and ironed out.

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Mr. Adrian Bailey (West Bromwich, West) (Lab/Co-op): I welcome my right hon. Friend’s statement, not least because of the consistency offered by the three-year approach, which is very much welcomed by local authorities. As the finance chair of a major metropolitan authority in the 1990s, I remember well the shock that we had, year on year, as the Conservative Government reduced revenue support in real terms. I also remember the consequent slashes in public services and the council tax rises. However, may I draw his attention to the announcement in the pre-Budget report on Monday of local government’s role in bringing forward capital projects? That is likely to have an impact on the future revenue budgets of major local authorities. Will he reassure me that any such impact will be examined closely, and will be taken into account in any future financial assessments made for local authorities?

John Healey: I can indeed give my hon. Friend the assurance that we are looking into the significant bringing forward of capital investment that was announced. Some of that investment will be in schools, housing, and regeneration, and therefore some of it will rightly be routed through local government. We are looking at precisely how we can get the best out of that decision. We will publish details of our proposals for doing so, and of the impact on local authorities, as soon as we can, and as soon as those details are available, I will make sure that my hon. Friend gets a copy.

Sir Nicholas Winterton (Macclesfield) (Con): The Minister will know that my constituency of Macclesfield falls within one of the new unitary authorities, Cheshire East council. Can he advise me and the House on how the new authority will assess the 3 per cent. annual efficiency improvements that the Government expect from councils? Does he really believe that the level of inflation encountered by local government is the level of inflation to which he referred in his statement? Has he taken fully into account the additional responsibilities that central Government impose on local government, year by year?

John Healey: The pressures of inflation are not, of course, all one-way. The price of oil has been falling fast, and the price of energy is likely to follow shortly. The price of fuel at the pumps is also coming down. All that will play a part in helping local authorities to manage the period ahead. However, the nine new unitary councils across the country tell me that the move to unitary status gives them more scope for the sort of efficiency savings that they might look to make. They can also look to improve services in the short term. As the hon. Gentleman knows, I am keen to support those councils in that work. The leaders of all nine new unitary authorities have a tough task in making sure that the councils are ready and will be up and running from 1 April, but we will give them whatever support is needed.

Barry Gardiner (Brent, North) (Lab): I welcome my right hon. Friend’s decision to require councils to set out standard efficiency figures on council tax bills; that is a welcome innovation. Will he tell me whether that would capture a situation in which a council failed to renew a contract for weed-killing in the area, as Conservative and Liberal Democrat-controlled Brent council did this year? Costs have thereby been kept down, but at real
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expense and inconvenience to the public, who have seen weeds growing to 18 inches through their pavements and on streets.

John Healey: As the House would expect, I prepared quite well for this statement, but I had not covered the issue of weed-killing in Brent. [Hon. Members: “Shame!”] However, I can make two points to my hon. Friend. First, if his council this year achieves the 3 per cent. efficiency savings that we expect of all the public sector, it will be equivalent to more than £80 off council tax bills for his constituents and for every resident of Brent. Secondly—this may assist him, because he is a man with an eye for detail—I will send him a copy of the guidance that we issue that sets out precisely how councils should and should not account for the efficiency savings that they make. It is clear that straightforward cuts in services should not, and do not, count towards the efficiency savings that we look to them to make.

Alistair Burt (North-East Bedfordshire) (Con): I am slightly puzzled about the reference in the Minister’s statement to rate-capping powers for the new unitary authorities. When councils responded to the Government’s generous invitation to apply for unitary status, was it not all supposed to be done on a cost-neutral basis? Indeed, the talk in Bedfordshire—and, I am sure, in other places—is of the reduction of bills as a result of going unitary. Why would the Minister contemplate rate-capping, unless it is because the pressures on inflation and other costs will bite on council tax payers in the areas concerned, as will be illustrated in the House this afternoon, and the change will not be as cheap as they thought?

John Healey: The simple answer to the hon. Gentleman is that I want to be prepared for every situation, no matter how unlikely I believe it to be. I have every confidence in the two new unitaries in Bedfordshire. They are well led, and have some good senior officers in place, whom I have met. In both cases, I expect those concerned to be able to set up the new unitary and to improve services for local people. I also expect them to make the financial savings that were part and parcel of the proposal on the basis of which Parliament gave them the go-ahead. Everything that they tell me suggests that they will do so, but I want to be prepared for any eventuality, as this House would expect me to be. However, I do not necessarily expect the new powers to be used.

Mr. John Maples (Stratford-on-Avon) (Con): The VAT reduction of 2.5 per cent. is worth about £200 a year for somebody on £20,000 a year. A 5 per cent. increase in council tax will absorb about a third of that, so I urge the Minister to use the capping powers that he threatened to use, and to do so in a draconian way, hopefully keeping council tax increases below 3 per cent., rather than below 5 per cent. He specifically mentioned designating Warwickshire police authority, which last year raised its precept by nearly 13 per cent. It was notified at the time that it would be expected to implement a much lower increase this year. The Minister mentioned an increase of about 3 per cent. May I urge him to make it much lower than that? Given last year’s 13 per cent. increase, getting back to an average of 3 or 4 per cent. would require much lower increases in the next two or three years. I hope that he will make it clear to the authority that he expects something like a 0 per cent. increase this year.

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John Healey: I take those as representations from the hon. Gentleman, and I confirm that the three police authorities that I mentioned will have 21 days in which to decide whether they wish to challenge the Government’s decision. If they decide to do so, any representations will be considered very carefully. I made the announcement today because we propose to follow the action we set out not just last year but this year to deal with what he rightly says was an excessive rise last year in the police authority precept. However, we are concerned that we should ensure that the police authority can manage, so I see no reason to move away from the intention of the announcement that I made last year on how we proposed to use our capping powers in relation to his police authority in Warwickshire.

Mr. Mike Hancock (Portsmouth, South) (LD): When will the Minister publish his evidence to support the requirement for local government to save a further 50 per cent. in efficiency savings? He must have had some pretty good evidence that that could be delivered. I should also be interested to know what he means by “substantially below 5 per cent.” Does he have a figure for the rise in the capping level? May I echo the sentiments of the right hon. Member for Skipton and Ripon (Mr. Curry), who raised the issue of concessionary bus fares, because undoubtedly some local authorities will make cuts in services to meet the obligation on concessionary fares that the Government placed on them? That is not right, and the last thing that we want is consultation. What local government needs is a remedy and an answer to the Government’s promise fully to fund that policy.

John Healey: The Government have fully funded the extra entitlement for nearly 11 million older people to ride anywhere they choose free on local buses. That has been a liberation for many people, and I am disappointed that the hon. Gentleman should adopt that fairly negative tone in the House. [ Interruption. ] He heard what I said about the proposals for the Department for Transport to look at how the scheme could be administered better in future. I hope that he will encourage his council in Portsmouth to contribute, just as I hope that all hon. Members with an interest in the matter will encourage their councils.

Mr. Brian Binley (Northampton, South) (Con): The Minister said that every authority will have an increase, yet he also said that in 2009-10 the average increase will be 2.8 per cent., and that in 2010-11 it will be 2.6 per cent. He knows that the Government have acted shamelessly on the distribution underneath that national average, and that money has been shoved mainly to Labour seats in the north and in Scotland at great cost to my county of Northamptonshire. As a result, we have cut deeply into local government expenditure for four years, so will he admit that local government inflation is running at more than 4 per cent., and has done so for four years? Will he tell me the figure for those two years for Northamptonshire, so that people can know exactly what he is proposing and exactly how much the cut is?

John Healey: I can indeed; this year, Northamptonshire received a 4.4 per cent. increase in core grant. Next year, it will receive a 3.71 per cent. increase, and it will receive a total increase in Government funding of more than £25 million extra. Northamptonshire is receiving those
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increases—this is why some of the largest increases in the country are in counties in the south and south-west of England—because we have given priority in this three-year settlement to funding those areas with social care and waste disposal responsibilities, which were the two particular cost pressures that the Local Government Association and local government itself said were most important and most pressing.

Anne Main (St. Albans) (Con): As the Minister knows, Hertfordshire is an excellent-rated authority. Unfortunately, it is also a floor authority, and we do extremely badly under the Government’s funding formula grant. Will the Minister consider bringing forward the review of that grant from 2010 to 2009 to help us out?

John Healey: I will not, but I will tell the hon. Lady that next year, her county will receive more than £39 million extra compared with this year under the settlement. She complained about the floors that we introduced. However, without floors, as my hon. Friend the Member for West Bromwich, West (Mr. Bailey) said, the experience of councils was not just that they were at the mercy of decisions made by the Tory Government to cut council funding, but that wild swings made things even more difficult to cope with. That is not the case any more: every authority in every region will receive an increase in the core grant in each year of the three-year settlement.

Peter Bottomley (Worthing, West) (Con): West Sussex and Worthing get the lowest increases—one day, I hope to be in the House to hear that that is no longer the case. May I ask the Minister why the word “plain” has been left out of the updated version of the plain English guide of 1998? Is it because it is no more complicated than it was before? Just to complicate the issue, may I move on to the un-plain guide, and ask why he used four, five or even six different log numbers when adjusting the police top-up? Is that really necessary—do the sums justify using five significant places in six different ways to top up police grants?

John Healey: I think that “plain” for local government financing is a three-year settlement; it is predictability; and it is knowing from last year what local councils and police authorities can expect in core funding. My hon. Friend the Minister for Security, Counter-Terrorism, Crime and Policing has undertaken that, towards the end of the spending review period, the Government will look again, with the police authorities, at the formula for funding policing and police authorities in future. I encourage the hon. Gentleman to make a contribution when that review begins.

Mr. Graham Brady (Altrincham and Sale, West) (Con): What account has the Minister taken of the additional costs that would fall on Greater Manchester local authorities in the event of a vote for the introduction of the congestion charging scheme, which would be accompanied by £1.2 billion of borrowing by Manchester authorities now, with repayment starting immediately and continuing into the future, regardless of whether a charge introduced in five years’ time pays for the cost or not?

John Healey: One of the advantages of being a champion of localism is that I can reasonably say that those sorts of decisions are rightly made by the local authorities involved. They will be made by the relevant local authorities
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after they have properly consulted the people of Greater Manchester about their proposals. The Government have made it clear that they will stand by to provide capital support and encouragement to achieve the substantial transport improvements required in that great city for the future.

Anne Milton (Guildford) (Con): Is the Minister aware that Waverley borough council tenants recently presented a petition to No. 10 Downing street, because 49p in every pound that they pay in rent goes to the Government? For Guildford borough council, the figure is 44p in every pound, and most of that money goes to pay the debts of more profligate councils. Is he also aware that Guildford and Waverley will receive one of the lowest increases in central Government grant? Guildford is down £300,000 on the concessionary bus travel scheme, yet we are one of the biggest contributors to the Treasury’s coffers. Starved of money for infrastructure, councils are left with very little choice but to raise council tax or cut services.

John Healey: Guildford and Waverley councils both benefit from the protection of the floor system that we have introduced. Without those floors, they would receive considerably less, because we have a formula that we apply across the country that tries to balance the needs of local areas with their ability to pay. May I simply tell the hon. Lady that I would invite and welcome written representations from her local authorities on the financial settlement, but unlike last year, I do not plan to meet individual authorities. I am confirming the second year of a three-year settlement, but as is right and proper, I will meet any parliamentary colleagues who approach me for such meetings. My diary secretary may protest, but if I properly can I am anxious to reduce the number of meetings from the 42 that I had last year given that this is, as the hon. Member for Falmouth and Camborne (Julia Goldsworthy) said, a settlement announcement that contains no surprises.

Mark Hunter (Cheadle) (LD): There is no doubt that metropolitan authorities have lost out continuously in recent years as a result of the funding formula, and some metropolitan authorities lose out more significantly than others. In my constituency, which is in the Stockport metropolitan borough council area, a high school that is only a mile away from a similar high school in Manchester receives approximately £200 a year per pupil less funding. Will the Minister say anything at all about whether the Government are determined to address the fundamental inequalities in the funding system?

John Healey: The hon. Gentleman’s contribution is almost a year too late. When I announced the changes in the formula in the three-year settlement, we established a system that provides urban metropolitan authorities with the funding that they need. That point has been confirmed by the special interest group of municipal authorities, which is the representative body for his sort of authority. It has said that it welcomes the three-year settlement and the changes that I made to the formula, which make the formula fairer for such authorities.

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