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Mr. Campbell: The Minister did not say that when people came along with their gold-plated services and
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an £18 million saving so that they could get a single-status authority in Northumberland. Everything seemed to be rosy, and that was only last year. What has changed?

John Healey: I am keeping a close eye, not least because my hon. Friend is ensuring that I do, on preparations for the new unitary authority in Northumberland and particularly on its finances. From everything that I have seen and been told, the new council is set to make a saving not quite of £18 million but of the £17 million-odd that it anticipated as part of the restructuring. It will also have to make almost £10 million of additional savings as a result of the legacies that have been passed to it by the combination of districts in its areas. Those are tough decisions for it to take, but I am confident that it will be up and running with its services in place by 1 April, and that it will make the necessary financial decisions in circumstances that I accept are difficult both in Northumberland and generally. All local councils face those decisions.

Robert Neill (Bromley and Chislehurst) (Con): Anxious as I know the Minister always is to learn from experience, particularly in relation to unitary authorities, and given his concern about the reliability of modelling and calculations, will he undertake to review the modelling that his Department used to calculate both the transitional costs and savings in relation to the new unitary authorities? He will recall that it was called into question by a number of academic sources, so will he undertake to review it in the light of the actual figures?

John Healey: I am surprised at the hon. Gentleman. The Department did no modelling of the financial changes. It looked very hard, using external financial expertise, at the modelling and financial figures submitted by those proposing unitary government. We debated in the House the financial elements of each change to which Parliament gave the go-ahead.

Robert Neill rose—

John Healey: I am conscious of the time, and a number of Members wish to speak, so I shall continue.

In line with the rest of the public sector, we expect councils to achieve at least 3 per cent. efficiencies every year. That means smarter procurement, better management of their assets, reorganising how the organisation works, sharing more services and collaborating more with public, private and third-sector organisations. In doing that, they cannot count cutting public services as efficiency savings. The rules in our guidance make it clear that any steps to make efficiencies must maintain or improve the quality of local services.

Mr. Mark Field: The Minister mentions smart procurement. How does he believe that will be achieved, particularly when central Government Departments have more than 100,000 different supplier contracts, often with duplications across or within Departments? How can he say that he will promote smarter procurement when central Government have so palpably failed to achieve that goal?

John Healey: Because local government is capable of achieving things that central Government do not find easy to achieve in some cases, and because leading
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councils are already doing each of the things that I have said that all councils need to consider much more seriously.

Julia Goldsworthy: Will the Minister give way?

John Healey: I give way to the hon. Lady one more time, then I shall move to a conclusion.

Julia Goldsworthy: On smart procurement, a lot of small businesses have complained to me that they find it difficult to take part on a level playing field when initial interest is expressed, because not enough detail is provided. Does the Minister agree that smart procurement can also mean making it easier for consortiums of smaller local businesses to take part in that process?

John Healey: Indeed. I accept and agree with the hon. Lady’s points.

The efficiency challenge for councils means that they need to find more than £1.5 billion in new savings every year. To put that into perspective, it is worth £90 off the average band D council tax bill. For this year, councils are forecasting around £1.1 billion of new savings, which is similar to those that they have achieved each year in recent years, but it is clearly not good enough now, and councils must do more.

I believe that council tax payers should be able to see and challenge the value for money that their local authorities provide. Therefore, from this year, I will require councils to put on council tax bills standard information about the efficiency gains that they are making, and to give further detail in the accompanying leaflets.

Robert Neill: Can the Minister help me with two points? Will he publish the assessment of the costs that local authorities will incur? In an endeavour to lead by example, will he liaise with the Chancellor of the Exchequer to ensure that each income tax and other tax demand contains a list of all the efficiencies that all Departments achieved?

John Healey: There are all sorts of ways in which the efficiencies that Departments achieve are available for public scrutiny, as well as debate in the House. It will not surprise the hon. Gentleman to learn that the cost of such changes to council tax bills are relatively marginal and that I took them into account when reaching the decision.

Let me say something about council tax and capping, which, I know, will be unpopular and unwelcome in local government. We acted to protect council tax payers from excessive increases this year, and I will not hesitate to take tough action again, including requiring rebilling, if it is necessary to protect council tax payers next year. A combination of inflation-busting increases, which we have provided every year since 1997, in the Government grant to local government, and the threat of council tax capping produced this year the second lowest ever increase in council tax. At this time of economic downturn, councils should do everything in their power to keep council tax bills down and leave more money in people’s pockets.

When I came to the job of Minister for Local Government 20 months ago— [Interruption.] I missed
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that sharp comment from my right hon. Friend the Member for Makerfield (Mr. McCartney). I do not know whether he would like to repeat it—if I missed it, the Official Reporters may have found it difficult to follow, too.

Mr. Ian McCartney (Makerfield) (Lab): I thank my right hon. Friend and comrade for giving way and apologise for making a joke at his expense. I said that when he came to the job, he had some hair.

John Healey: Many of us wish we could turn the clock back in so many ways. However, I do not regret my good fortune in taking on the job. When I did, local government was asking for greater certainty, stability, equity and flexibility in funding for local councils. With the three-year settlement, that is exactly what they got this year, and they will have it next year, too.

I know that the economic downturn is difficult for local authorities, just as it is for central Government. Some significant costs are coming down, council reserves are up, and local government has a good track record to date on efficiency. The Local Government Association is confident that councils are up for the challenge of providing the services that people need at affordable cost. I, too, am confident that the settlement will enable councils to do that. I commend it to the House.

4.19 pm

Robert Neill (Bromley and Chislehurst) (Con): I thank the Minister, as I always do, for his care and attention in outlining the Government’s proposals and the invariable courtesy that he shows the House in taking several interventions. That said, in some respects, the Minister’s very reasonableness makes him a dangerous man because that reasonableness masks an indefensible case, which bears little detailed examination.

Let us start, however, where the Minister and I agree. He is right that the three-year settlement is welcome. It is welcome right across the piece—we on the Conservative Benches welcomed it, as did the Local Government Association—and it makes good sense. He is perfectly right that the settlement gives certainty. It is implicit in what he said, although the Local Government Association would appreciate confirmation, that excepting some cataclysmic circumstance, he anticipates that the net third year will remain unchanged. Confirmation of that point would give the LGA the certainty that it wishes for—and I see that the Minister nods.

The downside is that the LGA knows that the settlement is bad news. Indeed, in addition to welcoming the certainty of a three-year process, the LGA said that this three-year settlement was the worst settlement that local councils had had in decades. To that extent, the Minister was right when he said that the statement back in November does what it says on the tin, but it was not very good news for local councils and local council tax payers.

John Healey: The hon. Gentleman has taken me a little by surprise. Could he point out for us where the Local Government Association has said that this settlement is the worst settlement in decades? If it has, I must have missed it.

Robert Neill: Yes, I will happily send the Minister the detail from the appropriate statement. I might add that
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I made the same comment, which he did not challenge, back in November, so nothing has changed in that respect since then.

It is also significant—the Minister will recognise this—that although we are in the middle of the three-year period, a lot has changed since the beginning of that period. Indeed, a lot has changed since November, and it has changed for the worse. The economic climate in which councils have to operate and in which council tax payers have to live has deteriorated. There is no getting away from the fact that that deterioration is the consequence of this Government’s policies. The Minister is certainly consistent in his figures—I recognise that—so let me do him the compliment of being consistent in the judgment that my hon. Friends and I make about his statement. The settlement was a bad settlement for council tax payers in November—I think I used the phrase “a thoroughly bad settlement”—and it remains a thoroughly bad settlement for the rest of the three-year period.

Mr. McCartney: I thank little Tory for giving way to little Labour. The hon. Gentleman’s party mantra is to cut public expenditure substantially. That was confirmed again in a debate on the economy earlier this week. If we are talking about the worst settlement in decades, can he tell us what further increases he is saying that the Conservative party would put back into local government?

Robert Neill: I will look the right hon. Gentleman straight in the eye, as I think I can—at least we have both retained our hair in our political careers—and say that the Minister answered that question when he said that efficiency and lower tax need not mean cuts in services. The Minister was right; indeed, Mayor Johnson in London and Conservative councils such as Hammersmith and Fulham are demonstrating precisely that point. However, it is perfectly reasonable for us to point out, in a spirit of constructive opposition, the concern that, even within the envelope of whatever settlement may be reached, there are areas where the system fails or does not work properly. However, I will turn to that point in a few moments, if hon. Members will bear with me.

The effect of the figures that we have—I hope that Government Members will remember this—confirms what was said in the debate in November. The Minister talks about the record levels of grant given to local authorities. The reality, however, is that council tax, which is the bottom line that most individuals and families are concerned about, will have doubled under this Government—that is, it will have doubled for families who are harder pressed than they have been in many years. The figures, which have never been disputed, are as follows. From 1997-98, the first full financial year under this Government, through to this year, 2008-09, a band D council tax bill—the standard measure normally used by the Government and all independent observers—will have increased from £688 to £1,374. The Minister said that he wanted to act on evidence and facts, and there we have incontrovertible evidence and facts.

Against that background, the Minister will know that the chairman of the Local Government Association wrote this year to say that the association anticipated that council tax increases would be about 3.5 per cent. on top of that rise. The reality is that such increases are well beyond inflation, as the Minister himself concedes. Why is this happening? It is not through a lack of effort
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by the local authorities. It is because, at the end of the day, the funding settlement has not kept pace with the rising costs that bear down particularly heavily on local government. The Minister is a sensitive man, and he knows that the rise in council tax has repeatedly been flagged up in opinion polls and other evidence as one of the most significant concerns identified by individuals and families. This settlement makes things worse. If the Government want to have a joined-up set of policies, this is not the way to do it.

This remorseless rise in council tax makes nonsense of the supposed fiscal stimulus that we saw introduced before Christmas. The anticipated 3.5 per cent. increase is actually less than the Government’s anticipated figure of 4.5 per cent., which was hidden away in the small print of the pre-Budget report. It is thanks to local government, not the Government, that that figure is coming down. A 3.5 per cent. increase would take band D council tax bills up to about £120 a month by April, and that would eat up much of the so-called spending power that the Government said they were putting back into people’s pockets. They are giving with one hand and taking back with the other.

Tim Loughton: Does my hon. Friend also recognise that particular parts of the population have been hit disproportionately hard, not least pensioners in constituencies such as mine? About a third of the increase in their pension has been gobbled up automatically by the rise in council taxes, and they do not have an income that can rise to compensate. There is a double whammy, in that pensioners with meagre savings are now receiving less—if any—interest on those savings to make up the shortfall. Those people are suffering a real-terms decrease in their living standards.

Robert Neill: I am grateful to my hon. Friend for making that very cogent point. I have come across such circumstances in my constituency, as have many other Members in theirs.

The injustice being done to those pensioners is compounded by the complexities and difficulties that many of them face when negotiating their way through the system to claim council tax benefit. That is getting harder and harder, as I know from constituents and members of my own family who have negotiated their way through the system. The consequence is that, under this Government, the number of eligible pensioners taking up council tax benefit has fallen from about three quarters to a half. That is scarcely a record to be proud of, which, with respect to the Minister, makes it all the more ironic that he should say that the Government want local authorities to flag up efficiency savings on council tax bills. A little bit of flagging up of the Government’s inefficiency in handling the council tax benefit regime might redress the balance somewhat.

Those problems are compounded yet further. As the Minister knows, some of his cover was blown in the November debate. If we look at page 203 of the pre-Budget report—a document that no one in the Government has so far sought to disavow—we see that, in addition to above-inflation increases in council tax this year, which come on top of the doubling of council tax during the past 10 years of this Government, the report postulates a further council tax rise of 10.7 per cent. over the following two years—2011 and 2012. That additional
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10.7 per cent. increase is postulated in the same pre-Budget report that postulates that retail prices index inflation will slip into a negative figure, giving a deflationary figure of minus 2.25 per cent. over that same period. If we put the two figures together, we can see the reality of the whammy that is going to hit people over that period.

Dan Rogerson (North Cornwall) (LD): The hon. Gentleman is very generous; he said that the Minister was being very reasonable because he was covering up for various unpopular aspects, and I think that the hon. Gentleman is being very reasonable because he is covering up for the fact that not a great deal is there in the way of an alternative. I would be interested to hear about the Conservative party’s position on council tax and its long-term position on local taxation. What big difference would his party make?

Robert Neill: As I never like to disappoint the hon. Gentleman, who I know wants to get back home to the family in Cornwall—quite rightly in this bad weather and when he has a young baby—I will make a bit of my speech out of context especially for him, so he can hear it now. We have a very clear alternative, as we would assist local councils and work with them over the first two years of a Conservative Government to freeze their council tax. If they can keep their increases down to 2.5 per cent., we would match-fund them by taking moneys from central Government budgets to freeze the bottom line to their council tax payers. That is a very positive alternative.

Mr. Edward Vaizey (Wantage) (Con): Does my hon. Friend agree that the reaction of Labour and Liberal Democrat-controlled councils to that policy was absolutely outrageous, as they effectively said that they would not come to the table to help keep council tax low for their council tax payers?

Robert Neill: My hon. Friend is absolutely right. That gives the lie to the weasel words we hear from other parties about their desire to protect council tax payers. There is only one sensible way to do that, and I urgently hope that councils of all political persuasions will, despite the difficult hand that the Government have dealt them, do their level best to keep council tax down and below inflation, where possible, in the knowledge that in due course we will work with them to freeze it. It is the bottom line that counts to hard-pressed people.

David Wright (Telford) (Lab): We all want to keep council tax down. Will the hon. Gentleman publish a list of Conservative council leaders who have signed up to this two-year commitment, and will he do so today?

Robert Neill: Funnily enough, and unhappily, I do not carry such a list with me on my mobile word processor. If the hon. Gentleman is patient, however, he will find out not only about the commitments that have been made, but about the local authorities that are already working to cut tax. Indeed, some local authorities such as Kensington and Chelsea have already announced a £50 efficiency bonus; some, such as Hammersmith and Fulham, have announced a 3 per cent. reduction; and the largest levier in the country, the Mayor of London, has announced a freeze. Action has already been delivered.

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