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That the draft Terrorism Act 2006 (Disapplication of Section 25) Order 2009, which was laid before this House on 18 May, be approved.
Council Tax
2.22 pm
The Minister for Regional Economic Development and Co-ordination (Ms Rosie Winterton): I beg to move,
That the draft Council Tax Limitation (Maximum Amounts) (England) Order 2009, which was laid before this House on 10 June, be approved.
The draft order that I present for the approval of the House was laid under section 52F(7) of the Local Government Finance Act 1992, which was inserted by the Local Government Act 1999. In my view, the provisions of the order are compatible with the European convention on human rights.
The draft order sets out the maximum 2009-10 budget requirement for Surrey police authority, which means that we are proposing to cap the authority in-year. Subject to the House’s approval, I will make the order and issue a notice to Surrey police authority informing it of its maximum budget requirement for the year. The authority will then be required to recalculate its budget requirement at or below the level of its cap. It will also have to arrange for the relevant billing authorities to send out revised council tax bills for the current year.
Sir Paul Beresford (Mole Valley) (Con): The order is based on the notional budget, and the notional council tax as a result of the notional budget. Will the right hon. Lady explain, given the huge difference between the actual and the notional, how the notional figure was arrived at, and why, if the police authority—rather than the police force—received notification that the Government were using the notional rather than the actual and set the actual within hours of the notional, the Government did not return to accept the actual in their calculation?
Ms Winterton: The introduction of a notional budget, which is a change from the previous rather inflexible system, means that the Government, rather than using a straight, crude capping system, have been able to allow a budget to be set, which is what happened with Surrey last year. It was made quite clear to the authority that in calculating this year’s budget the Government would agree to it on the assumption of the budget that would have been set if the Government had not made an exception for Surrey last year. Today, we are taking this action because last year we allowed Surrey to have a notional budget, but it was always clear that when we considered what would be allowed this year we would return to that figure.
Sir Paul Beresford: I follow that. The difficulty with that argument is that it would be more sensible to use the actual budget, which Surrey used in its calculation, in spite of the notional from the previous year.
Ms Winterton: The hon. Gentleman’s assumption—those on his Front Bench might think that this is the way to operate, although I am not sure—would effectively mean that authorities that had set a notional budget, therefore allowing them a higher budget, would be able to continue to do that year on year, which would not be fair on other authorities. The alternative would be to return to the crude capping system that applied under the previous Administration. I shall return to some of the background issues later in my speech.
During the debate on the provisional local government finance settlement on 26 November 2008, my predecessor as Minister for Local Government, my right hon. Friend the Member for Wentworth (John Healey), said that we expected to see an average council tax increase in 2009-10 substantially below 5 per cent. He also made it clear that the Government were prepared to act against excessive increases made by any authority, including requiring them to rebill if necessary.
Three-quarters of authorities set increases below 4 per cent., almost 40 per cent. set increases below 3 per cent. and a further 23 authorities either set no increase or are reducing their bills. However, two authorities did set excessive increases this year. On 26 March, my predecessor announced to the House that the Government were “designating” Surrey and Derbyshire police authorities. He proposed maximum budget requirements for the two authorities at levels that would bring them within the capping principles that were determined by the Secretary of State for 2009-10.
In his written statement to the House on 13 May, my predecessor said that both designated authorities had challenged their proposed maximum budget requirements. He and the former Minister responsible for policing, my hon. Friend the Member for Gedling (Mr. Coaker), met both police authorities to hear their cases in person. Having carefully considered the representations made by the authorities, and having taken into account all relevant information, the Government decided to take the following action: to cancel the designation of Derbyshire police authority and to nominate it instead, with a notional budget requirement for 2009-10 that will be used in any future capping comparisons; and to proceed with the designation of Surrey police authority with a maximum budget requirement at the level proposed on 26 March—£197,206,000. The draft order therefore covers Surrey police authority only. We believe that the proposed action in the draft order, and the separate action that we are taking in respect of Derbyshire, represent a measured and proportionate response to those authorities’ excessive increases.
Robert Neill (Bromley and Chislehurst) (Con): I am very grateful to the Minister for giving way. She just said that she regarded the action in respect of Surrey as measured and proportionate, but what evidence base was used to draw a distinction between the Derbyshire case and the Surrey case?
Ms Winterton: I shall come to the difference between the two but, briefly, Surrey was given a notional budget last year yet still introduced an excessive increase this year. Ministers listened to the representations that were made and then came to their decision. As I said, even though Surrey moved to notional budget last year, it still imposed an excessive increase.
Sir Paul Beresford: When assessing the pros and cons of the decision, was it taken into account that saving £1.6 million would cost £1.2 million in rebilling? In my constituency, that works out to a cost per head of £4.65, but council tax payers below band F will not make any saving above that.
Ms Winterton:
We will find out Surrey’s actual costs in due course. Last year, Lincolnshire police authority estimated rebilling costs at £1 million, but the actual cost was £380,000. It is true that rebilling has to be
done, but that is an inevitable consequence of setting an excessive increase and being capped in-year. All authorities know that, and that the best way of avoiding rebilling is not to set an excessive increase in the first place.
Of the 15 authorities that had previously been set notional budget requirements, Surrey is the first to have set an excessive increase in the subsequent year. As I have said, it is also true that the capping powers introduced by this Government are more flexible than they were previously. Under the regime that operated before, we would have had to designate Surrey police authority last year: instead, we were able to nominate it. That is an important difference.
Even after capping, Surrey police authority will get a 2.5 per cent. grant increase from the Government. It will get a total of £5.7 million extra compared to last year, and it is also being allowed to set a band D council tax increase of 3.2 per cent. That is higher than the average increase in England of 3 per cent.
Robert Neill: I am very grateful to the Minister for giving way again and, as always, she is being most generous. My hon. Friend the Member for Mole Valley (Sir Paul Beresford) mentioned the cost of rebilling, and the Minister referred in part to that. Was any attempt made to consult and find out the rebilling cost before a decision was taken? How can she assert that the action was proportionate if Ministers did not know what the cost of rebilling would be, compared with what might be recovered?
Ms Winterton: As I have said, any authority that is going to set an excessive increase knows that it will have to carry out in-year rebilling. It is that authority’s responsibility to take that into account when it decides to set a higher increase than anywhere else. The hon. Gentleman may feel it is right for the council tax payers of Surrey to pay an extra £1.6 million. Presumably that is his proposition. However, we believe that there is a duty on the Government to curb excessive council tax increases, particularly in difficult economic times.
We recognise the inflexibility of the system introduced by the hon. Gentleman’s Administration. We adjusted the system, and for a number of years there was no capping whatever, but we have to take a balanced view. We are trying to get the balance right, to ensure that council tax payers are protected from excessive increases, particularly during these difficult times. It is not a bolt from the blue. No authority can think, “Oh goodness me, we didn’t think about the rebilling costs.” Authorities know about the costs when they set the increase, so it is their responsibility. However, as I said, although last year Lincolnshire police authority said that rebilling would cost about £1 million, the actual figure came out at £380,000. I am sure the hon. Gentleman will agree that it is important that we see the actual costs. My right hon. and hon. Friends met the authorities and listened to their representations, but if there is the flexibility for a notional budget one year and they still set excessive increases it is important that the Government take action.
Robert Neill:
I hope not to trespass too much on the Minister’s time, but will she deal with this simple point for me? Given that she says we must look to the actual figures—she quotes the Lincolnshire example—is it not
all the more important to make at least some inquiry into what Surrey’s billing costs will be? Unless the Government know the actual costs, how can they decide whether the action is proportionate and in the overall interests of council tax payers? Perhaps there is a gap in the system that should be looked into.
Ms Winterton: Perhaps the hon. Gentleman’s policy will be that whatever figure is given will be taken into account in any future response. Of course, Surrey produced an estimate when challenging the cap we proposed, and that was taken into account. I merely point out that sometimes—as in Lincolnshire last year—there can be a slight difference between the estimated costs given at the time of the challenge to the cap and the costs that actually arise.
Sir Paul Beresford: I will mention it to the right hon. Lady if I receive any letters from band D council tax payers, particularly those who pay by 10 monthly instalments, thanking us and the Government for the reduction, which will be about 32p a month.
Ms Winterton: I am sure the hon. Gentleman will pass on any representations he receives.
As I have said, we think the response to the different authorities is proportionate. In this instance, Derbyshire has been treated the same as Surrey was last year.
It is worth remembering that two years ago—in 2007-08—the authority’s council tax precept stood at £171.27. It set an excessive 9.7 per cent. increase last year, and was designated for capping and in-year rebilling, but, as with Derbyshire this year, the designation was cancelled and instead the authority was nominated and set a notional budget requirement. In other words, the authority was allowed to keep its excessive increase in full in 2008-09, and it avoided any rebilling costs for the last financial year.
However, this year, the authority set a precept of £197.10, which is 15.1 per cent. higher than its 2007-08 precept. By contrast, the average council tax increase for England over those two years was 7 per cent. As I have said, even with in-year capping, Surrey is left with an actual precept increase of 3.2 per cent., and £5.7 million is going into policing there this year.
Out of 421 authorities, including 37 police authorities, Surrey is the only one that has set an excessive increase for two years in succession. The current economic climate makes it even more important that local authorities keep council tax under control. This Government increased Government grant for local services by 39 per cent. in real terms in the first 10 years after we took office. The 2007 comprehensive spending review provided a further £8.9 billion up to 2010-11. I urge hon. Members to support the order, because I believe that it is the right way to strike the balance, and to ensure that while authorities have extra money, excessive council tax payments do not fall on council tax payers.
2.41 pm
Robert Neill (Bromley and Chislehurst) (Con):
I am sure that all hon. Members will want to thank the Minister for Regional Economic Development and
Co-ordination for introducing the measure with her customary charm and courtesy, but I am sorry to say that her having done so does not alter the fact that the case is not terribly good. However nicely the case is put, council tax on band D properties has more than doubled in the Government’s time in office, so it is a bit rich for the Government to lecture anyone, including a police authority, on increases in expenditure, particularly as the Audit Commission has given Surrey police authority the highest rating for value for money.
My party introduced capping, and I accept that, but the world has rather moved on since. As time has gone by, it has become more and more apparent that the current system of capping is past its sell-by date, as I told the right hon. Lady’s predecessor a year ago when we debated the matter. The Surrey case very much demonstrates that. The right hon. Lady made a good deal of the proportionate nature of the response, but with respect, I point out that the evidence suggests that the response is not genuinely proportionate.
There was a Westminster Hall debate on 11 June, I think, dealing with the subject. Neither the right hon. Lady nor I was able to be present, but I know that we both read the transcript. Ten out of the 11 Surrey Members of Parliament attended; the other sent his views via one of his colleagues. The hon. Member for Chesterfield (Paul Holmes) was there, too. It was a lively debate, and every one of those Surrey Members of Parliament expressed the same view: the response was not proportionate. The figure quoted clearly then—it has never been contradicted by any Government source—was that about £1.2 million would be expended to recover £1.6 million, so all in all, the Government may get back about £400 million. That is not a proportionate response, given the background.
Dan Rogerson (North Cornwall) (LD): It is £400,000.
Robert Neill: The hon. Gentleman is quite right; I am very grateful. The sum is so small that one could almost forget about it, in the overall scheme of things. It was also pointed out that although the Government are posing as a defender of the council tax payer, there is a certain irony, because there is not evidence of a level playing field. Under this Government, in the first eight years of the Metropolitan Police Authority’s existence, its precept was allowed nearly to quadruple, without any intervention from the Government by way of a threat of capping. It is interesting that no action was taken. Whether that had anything to do with the political complexion of the Mayor who then ran the police authority is difficult to say, but the opaque nature of the way in which the system works sometimes causes people to question whether decisions are taken on an entirely objective basis.
The treatment of the two police authorities is interesting. One wonders whether the treatment was entirely due to what I have just mentioned, or whether the Labour party hoped that Derbyshire was a county council it might just have hung on to in an election that was about to come up as the orders were being laid. The ruse did not work, of course, and I suspect that Labour will not have to worry about any shire counties being under its control for some considerable time.
That does not alter the overall picture. As hon. Members from Surrey explained very well in the debate, the situation is a consequence not of profligacy on the part
of the Surrey police authority, but of unfair funding that seems to leave Surrey police—a force that faces considerable policing challenges, which were well set out in the debate by the Members representing the county—one of the worst-funded police forces in respect of the pressures that it faces. I know that my hon. Friend the Member for Mole Valley (Sir Paul Beresford) will speak in the debate, so I leave him to develop that point in more detail.
Against that background, despite the Minister’s valiant attempt to present the order in her usual reasonable way, there is a bit of cheek in the Government capping Surrey and claiming to put right a problem of their own creation, because of the way in which the capping regime has become too blunt as time has gone on, and the lack of transparency in the funding formula.
If there is an issue about the people of Surrey’s priorities in relation to the policing budgets, and about what they think is the appropriate level to expend given the pressure of policing demands on the county, the right way is to let them decide. Rather than a decision being taken on high, with the right hon. Lady or any of her successors arriving in some vice-regal capacity to rescue them, it would be much better to let the people of Surrey have a vote and decide whether the proposed precept rise is excessive.
That would be a genuinely democratic result in which people could all have faith. It would save us all having to go through the annual ritual of the debate about what is notional and what is actual—I shall not go down that route—and it would save having to go through the annual ritual of householders being somewhat bemused when they open the rebilled bills for comparatively small amounts.
There was a time when capping had to be used to constrain large increases in council tax bills that went well beyond the norm. We are getting to the stage where a comparatively small excess on the part of an authority which, on the face of it, has a history of not having received its fair share of the available pot, is being dealt with in a manifestly disproportionate way. With respect, clodhopping might be a more accurate description of how the matter is being dealt with.
As on previous occasions, we do not intend to divide the House, but we want to register the fact that the situation is probably an indication that the system is approaching its sell-by date, and that next year others may have to put in place a different system to make sure that the issues are decided by voters, not in a debate that would seem somewhat unreal to people in the county of Surrey.
2.48 pm
Dan Rogerson (North Cornwall) (LD): I agree with much of the speech made by the hon. Member for Bromley and Chislehurst (Robert Neill), as is often the case because he speaks very reasonably on such issues. He teased the Government a little, but it is time that his party was teased as well on the topic of capping. Let us be honest. The measure was introduced by the Government whom he supported. He proposes a referendum when an above-prediction increase is proposed in an area. That is an interesting concept and I generally approve of such a method, but we have discussed the cost of a rebilling exercise, and the cost of running a referendum might be rather high as well.
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