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Mr. Vaizey: My difficulty when Labour Members talk about cash increases for local government is that they never talk about the additional burdens. Ministers
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love coming to the House and announcing initiatives to provide free services such as swimming or culture, but they never explain that local councils will have to pick up the bill.

Mr. Turner: There will always be such changes, and it is right to strike a balance between what local government has to pay—through the local council tax payer who will receive the services—and what the Government give in grant. The point that you did not address is that when the Conservative Government were in power, my local authority received less cash, not just below-inflation increases. The hon. Member for Bromley and Chislehurst (Robert Neill) was challenged not once but twice about what the Conservative party, were it in power, would do about grants to local government, but he could not make any commitment to more cash for local government from a Conservative Government. We had some weasel words about matching increases of under 2.5 per cent., but he could not commit to a cash increase across the board.

Alistair Burt: The hon. Gentleman did not address the significant point made by my hon. Friend the Member for Bromley and Chislehurst (Robert Neill), which was that the Government tell local authorities what new services they are going to deliver and then put the extra costs on to the shoulders of local council tax payers, who do not get the choice one way or the other. That is the problem with the Government’s handling of the situation.

Secondly, I was the Minister responsible for the city challenge in Wigan during the 1990s, which brought millions of pounds for regeneration in Wigan and changed the face of Wigan. I would have thought that as well as discussing what happened in local government the hon. Gentleman might have made some reference to that initiative of Michael Heseltine’s, which made such a difference to Wigan and the surrounding area and put it on course for its present prosperity and all the good things that have happened since.

Mr. Turner: I would have some sympathy with that point if, at the same time, you had not been cutting all our mines and other industry and making the economy of Wigan, in a particularly short period of time, hugely difficult for us. It is only because we had an extremely good local authority, led by Councillor Peter Smith—now Lord Smith—that we could help the local economy following the devastation left by the closure of the pits. I accept that the city challenge made a difference—of course it did—but that does not answer the point that the Conservatives have not been able to give a single commitment to any increase across the board for local government.

Mr. Vaizey rose—

Alistair Burt rose—

Mr. Turner: I think that I have been fairly generous in giving way on that point, so I shall carry on.

It is important that we also welcome the floors and ceilings on funding. My local authority suffers from floors and ceilings, as it does not get as much funding as it would if we did not have floors and ceilings. Opposition Members talk about the amount of money that they are getting and about reductions because they are only at
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the floor, but they should be grateful to the people of Wigan. We are suffering—we are the ones who are paying for the fact that you are getting more money than you would otherwise be entitled to. That is important. I agree with the idea in principle. It is the right thing to do, because it gives local authorities the opportunity to make measured and manageable changes rather than the kind of changes that we would otherwise have—the kind of changes that we were forced into in the ’80s and ’90s. Hasty, ill-considered desperate short-termism was a hallmark of what we experienced.

The hon. Member for Bromley and Chislehurst was a little disingenuous when he talked about the changes to the formula, saying that it needs to be changed—creaking at the hinges was, I think, the phrase that he used. What he did not say was how he would introduce those changes. If he made a change that gave a £50 million increase to Bromley and Chislehurst and made a £50 million reduction in Wigan, would he do that overnight? Of course he would not. I would hope that he would introduce it in phases. In other words, all he would be able to do is to follow the same floors and ceilings process as we have at the moment. The end result would be different, but unless there was a massive change in local government overnight on 1 April of whatever year he introduced it, such changes would have to be brought in gradually.

Robert Neill: Is the hon. Gentleman saying that he is satisfied with the transparency of the operation of the floors, ceilings and grant distribution criteria at the moment, or could it be improved?

Mr. Turner: I am not saying that it could not be improved. Of course, local government finance has never been perfect. We have always known that. The point that I was making was that you were saying that you—

Mr. Deputy Speaker: Order. The hon. Gentleman has made that mistake several times now. I was hesitating before I intervened, but he understands why I have done so.

Mr. Turner: The hon. Member for Bromley and Chislehurst made the point that the Conservative party would introduce changes. If those changes are to be introduced, either they have to be introduced in one go or they will have to be phased in. If they are introduced in phases, there will be floors and ceilings. It is no use arguing against floors and ceilings and then saying that changes will be introduced.

The other issue that the hon. Gentleman raised, which is important, was to do with the accuracy of statistics. We all want statistics to be more accurate, and I noted that he welcomed the statement made on that point by my right hon. Friend the Minister—so do I. However, the hon. Gentleman was a little disingenuous when he said that the Australian system would somehow take the matter out of the political arena and put it into the academic arena. That would never happen. We are talking about local government and the services that it can provide for people. Those decisions are fundamentally political. The weighting given to each statistic will be a political decision. In the end, determining whether the allowance for free school meals should be £10 or £15 per
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head in a particular local authority will be a political decision. No matter whether the statistics are right or wrong, it is that political decision that will influence how much a local authority gets.

The Government have struck a balance between achieving equity for places such as Wigan that are below target and managing the necessary reductions for those authorities that get more than the formula says. I welcome the reduction in the floor from 2.7 per cent. in 2007-08 to 1.75 per cent. now. Unless the floor is reduced to a fairly low level, authorities that are entitled to more money will never get it. The reduction needs to continue, and I hope that my right hon. Friend the Minister will ensure that it does.

I shall give a couple of examples of what that means. If Wigan were to get its full entitlement, we would get an additional £6.5 million in 2009-10, and an additional £5.4 million in 2010-11. Obviously, that is £1.2 million better than what we are getting now, but we are still four or five years away from achieving equity. Adding that up, we are talking about Wigan receiving a total of £20 million or £30 million in additional money over a number of years. I believe that this is very much a work in progress, and I urge my right hon. Friend the Minister to make sure that it continues in future settlements so that all local authorities get the entitlement that they deserve from the formula.

I turn now to the important issue of revaluation. The hon. Member for Bromley and Chislehurst said that the formula was creaking at the hinges, but I think that the problem is that the council tax itself is creaking at the hinges. I believe that the Conservatives designed it to be unfair, and one of John Major’s few achievements from their point of view was to create the present unfair system.

The burden of council tax falls most on the poorest, and least on the richest. We need to change that unfairness, and I think that we missed a trick with the Lyons report. We should have gone for that, or some form of it, as I believe that a property-based council tax is the right way to go. Even so, we need something new and much more transparent that can be integrated with council tax benefit.

The Nationwide building society and others can tell us how house prices have gone up or down, year by year and month by month. I cannot see why we cannot build a system in which property bands move on a three-year basis, for example, so that values are constantly changing. In contrast, the present council tax was valued in 1989 or 1990.

I want to touch on housing, which is an integral part of local government finance and services. The housing revenue account is under review, and that is long overdue. The Audit Commission said a number of years ago that it was unsustainable, and that is clearly true. Given that rent increases are running at 6.75 per cent. at a time when inflation is below 2 per cent., and that mortgages are coming down on a monthly basis, the disparity between council house tenants and the rest of the population is clear to see. I hope that the Minister and his Department will take that on board, so that the convergence with registered social landlord housing rents is delayed and the impact on council house tenants is reduced.

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There are issues that we can deal with. If we put more money into housing, it will help the national economy, and help local economies even more. Housing repairs and maintenance, and house building, are labour-intensive, and we source most of the materials from the local economy. They have a massive impact on local authorities and economies. We should put money into that. If we put money into disabled grants, there would be a double whammy: that would not only help the local economy, but would allow people to stay in their own homes. If we allow them to stay in their homes—that, as we know, is what the vast majority want to do—it will reduce pressures on social services and on the NHS.

The Supporting People programme that the Government introduced, and the money that they put into it, is hugely important to achieving those aims. Again, if we look at the amount of money that goes into that, and at the formula, we see that there are huge discrepancies between the money that local authorities should get and the money that they actually get. It suffers from the same problem as the local authority grant. The Department for Communities and Local Government needs to consider whether we can ensure that local authorities can meet people’s needs, and can put the money to good use in the local economy. To take the example of Wigan, in 2008-09, we got £7.2 million less than we should have done. In 2010-11 we will have £5.4 million less than we should; that reduction is £1.8 million less than the reduction in 2008-09, but it is still a significant figure. We could do with that.

When we talk about housing and the Supporting People grant, we also need to talk about the primary care trust. I know that that does not come under the heading of local authority funding, but it is an important issue. Often, local authorities and primary care trusts pool resources, grants and funding. The line between what the NHS provides and what the local authority provides is becoming increasingly blurred. Fights about who should fund what just allow vulnerable people to fall between the two. It is right that PCTs and local authorities should get together on that issue, as they increasingly do.

I have explained why the Supporting People programme and NHS funding is important. The difficulty arises when a local authority such as mine is underfunded under the local authority grant, under the Supporting People grant, and in its primary care trust funding. That compounds the problems and makes servicing those needs extremely difficult. To give the example of Wigan once again, in 2009-10, our PCT funding will be 4.7 per cent., or £25.5 million, below target. In 2010-11, we will have £25.4 million, or 4.5 per cent., less than we should. That is a £56,000 a year difference, under the final figures. I worked out that, on that basis, we will achieve our target on 14 April 6518 AD. I am not likely to be around then. It is important that we make progress on that issue because of the impact that it has on local government and the services that we provide.

The shortfall in those three programmes is £36.2 million in one year. If we carry that forward year on year, we can imagine the difficulty that my local authority and primary care trust will have in providing people with necessary services. Those are not services that I have plucked out of the air; I am referring to services that demonstrably and measurably cannot be provided, or fully provided, because of underfunding. I know that
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the Minister is aware of the issue because Rotherham, his local authority, is in a similar position; I think that the figure is £35.8 million for Rotherham, whereas it is £36.2 for Wigan, over the three years. He is well aware of the problems, and I know that he is working hard within both local and central Government to address those issues.

The public services that we need must be given those resources. On the Government formulas, the independent advice given by the Advisory Committee on Resource Allocation for PCTs, and other advice given through local government, is that the money that we are talking about is the kind of money that is necessary to provide services that people in Wigan, Rotherham and other areas need. It is not a matter of shifting money from the south to the north. There are areas in London that require additional funding. It is not about towns v. country. There are country areas that require additional funding. It is about fairness, justice, equity, equality, and giving support to those who need it. That is why we on the Labour Benches came into politics, and why it is so important that my right hon. Friend continues the work that he has done to make sure that all local authorities and all primary care trusts get the resources that they need to provide the services required by their people.

5.10 pm

Julia Goldsworthy (Falmouth and Camborne) (LD): It is a pleasure to follow the hon. Member for Wigan (Mr. Turner). I have a great deal of sympathy with many of the points that he makes, because my local authority is also one that is near the ceiling and a long way away from its target funding, and it would benefit from the resources that it should receive, according to the funding formula. I also agree with the hon. Gentleman that it seems sensible to propose a rolling three-year budget that would provide stability, as well as extra flexibility to respond to the difficult economic situation.

We are in the second year of a three-year agreement, so there are no nasty or pleasant surprises in the reports that we are debating today, although I appreciate that some councils, such as West Somerset, would have been biting their nails until they found out whether they qualified for transitional funding. Ultimately, it is a very tight settlement and the Minister has been up-front about that. The hon. Member for Bromley and Chislehurst (Robert Neill) pointed out exactly how tight the settlement is, once the schools grant is taken out. It will be extremely difficult for many councils.

Even though the three-year settlement has offered certainty to local authorities and has been useful for planning purposes, as my hon. Friend the Member for North Southwark and Bermondsey (Simon Hughes) said, it is not surprising that there were not many responses to the consultation. I wonder, and the Minister may know, whether any of the responses were from individuals. The documentation provided to us is not the easiest to negotiate.

I notice that in November the Minister’s statement was published alongside a guide to the local finance settlement, which replaced the plain English guide to the local government finance settlement, first issued in 1998. No wonder these documents are difficult to understand. I worry that we have a system of local government finance that is very complicated: local
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government officers, civil servants and Members of Parliament all bury their heads in it to try to understand it, but for council tax payers it is difficult to understand what services they receive in return not just for their council tax, but for the taxes that they pay. We all need to do more to illuminate the process and make it simpler to understand. It is important that the public should be able to do that.

We have seen a fundamental change in the past year, and since the three-year settlement was announced. Despite the Government’s claims to have boosted funding through measures such as LABGI, it is pretty much unchanged since the earlier announcement, and there has been no response to the economic crisis. The economic turmoil is creating extreme funding pressures and uncertainties for many councils.

The credit crunch has had a significant impact on councils’ income, not just from their fees and services, which according to the Local Government Association totalled £11.5 billion last year, compared with the £23 billion that they received in council tax revenue. A significant amount of councils’ revenues is received from charges, and the LGA estimates that that could fall by up to £2.5 billion this year—a substantial hit on funding, which may not derive from central Government grants, but will certainly have an impact on their cash flow.

Councils have also seen lower income from their investments because of lower interest rates. Although the Minister said that as a result of those lower interest rates borrowing is cheaper, I wonder what assessment he has made of whether that borrowing is easier to come by, even if it is cheaper. Councils’ estimates of income from capital receipts have plummeted, which has not just impacted on their income, but is impacting on their investment programme. In spite of those pressures, there has been a significant increase in demand for services.

Sir Alan Beith (Berwick-upon-Tweed) (LD): Before my hon. Friend leaves that point, may I draw attention to the impact of the unavailability of capital receipts from land sales on major proposals to repair and replace schools? That means that local authorities such as Northumberland continue to have a very high maintenance budget for schools such as the Duchess’s school in Alnwick, because the capital to rebuild it is not available from land sales.

Julia Goldsworthy: My right hon. Friend makes an extremely important point. The lack of capital receipts impacts not only on capital spending but significantly on councils’ revenue commitments.

Other things, outside the credit crunch, are involved. The whole baby P episode, for example, has resulted in additional demands and pressures on children’s services. Furthermore, we still have to deal with the demographics of an ageing population, and that places additional pressure on adult services. My hon. Friend the Member for Kingston and Surbiton (Mr. Davey) cited other issues, such as the number of young people registering to transfer to primary schools. That is having a massive impact. During this debate, he told me that in the past year he has seen a 12 per cent. increase in primary school applications; that has a massive impact on a council’s resources.

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As other hon. Members have pointed out, in addition to all that, councils are being asked to take on increased responsibilities. One of the most controversial has been the cost of concessionary bus travel, and there is a question about whether the grants given by central Government cover the costs. Also coming down the line is the roll-out of free swimming. In my local authority area, in Cornwall, we are worried about that because our population doubles in summer; a lot of holidaymakers will benefit from access to free swimming, but the council tax payers will have to meet the costs. There is increasing concern that such additional financial burdens are not being adequately funded.

Will the Minister provide us with information about how those pressures are impacting on councils and how councils are responding to them? I have seen anecdotal evidence of councils reporting recruitment freezes. Of course there will be further drives for efficiency, but I have heard that councils are using more temporary staff as a way of trying to keep cost pressures down. I would also appreciate the Minister’s comments on whether he is aware of any potential plans for significant service cuts. Councils want stability, but they also want reassurance that the Government are sensitive to such rising pressures. Today’s statement is a denial of some of the problems that many councils face.

Dan Rogerson: My hon. Friend is making an excellent case about the pressures under which local authorities find themselves. She has talked at length about the economic problems that we face at the moment. What does she feel about the fact that local authorities have to take up the slack when other Government agencies have withdrawn from areas? I am thinking of jobcentre closures and so on. Local authorities now find themselves having to do the work of other Government agencies—

Simon Hughes: Post offices.

Dan Rogerson: Post offices are also involved, as my hon. Friend rightly says. Local authorities have to carry other things because the other providers that were originally in the area have gone.

Julia Goldsworthy: My hon. Friend makes an excellent point, to which I shall come later. Although last year’s pre-Budget report announced additional support for the Department for Work and Pensions for Jobcentre Plus, a lot of such pressures are now falling on local councils. Although increased support has been announced, its scale does not match the problem.

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