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Robert Neill: I want to be helpful to the hon. Lady, and, like LABGI, that scheme was a small step in the right direction, but, unlike LABGI, it has not been killed at birth. However, the scheme to which she refers is too limited. Why do we not go down the route that most other advanced democracies have taken and introduce
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a proper arrangement that enables local authorities to go for bonds? If I were to follow through the logic of her argument, I should hope that she might support us.

At the end of the day, the local government finance document is less than satisfactory. It is less than satisfactory in its presentation-

Richard Younger-Ross: Will the hon. Gentleman give way?

Robert Neill: I am sorry, but I have done my best. I am sure that the hon. Gentleman will get the chance to speak in the debate in due course.

The document is unsatisfactory. It reflects an unsatisfactory settlement; it reflects, therefore, a Government who lack the will to tackle the serious issues of local government finance; and, above all, it reflects a Government who do not recognise the burden that that unsatisfactory arrangement places upon ordinary families and ordinary council tax payers. I do not know which is the greater indictment: the inability to recognise the harm that is being done, or the lack of will to do something about it. If we put it together, we find, as I would have said in my previous life, that the Government are bang to rights on all counts.

7.56 pm

The Secretary of State for Communities and Local Government (Mr. John Denham): I beg to move an amendment, to leave out from "House" to the end of the Question and add:

That was a very long speech. There is not a lot else to be said about it, but it was a very long speech. As my hon. Friends will have noticed, I am no Denis Healey and the hon. Member for Bromley and Chislehurst (Robert Neill) is no Geoffrey Howe, but I have a sense of how Denis Healey felt when he thought he had been savaged by a dead sheep.

I am grateful for the chance to reply to this debate. I have my notes that I prepared earlier, and they say:

I have now to say that the hon. Member for Meriden (Mrs. Spelman) is here but is not leading the debate, and that is a surprise because the hon. Lady has, after all, been complaining that Parliament has not debated these issues.

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Mrs. Caroline Spelman (Meriden) (Con): I am sure that the right hon. Gentleman is aware of the convention, through the usual channels, that each party is notified about who will speak in the debate. We understood that the Minister for Regional Economic Development and Co-ordination would do so for the Government. That is what our Whips Office was notified of, and therefore, in keeping with the convention, I asked my hon. Friend the Member for Bromley and Chislehurst (Robert Neill), in whom I have the utmost confidence, to lead the debate.

Mr. Denham: I assure the hon. Lady that it was always my intention to lead for the Government, because she complained that Parliament has not been debating these issues. She twice applied for urgent questions, and, although it is not for me to comment, in my humble opinion I think Mr. Speaker was right to decline. Now she has had the chance to lead the debate and she has not done so.

I shall turn to the background to the debate, on which the hon. Member for Bromley and Chislehurst spent 10 minutes at the beginning of his speech. Following the low level of participation in last year's debate, the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Stevenage (Barbara Follett), wrote on 12 November to the hon. Member for Meriden, who speaks for the Opposition, and to the hon. Member for Falmouth and Camborne (Julia Goldsworthy), who speaks for the Liberal Democrats, saying that we intended to lay a written ministerial statement. The hon. Member for Meriden did not reply, but had she answered the letter and said, "I think there should be a statement," we would have made an oral statement. However, she did not.

The hon. Lady is not that good at correspondence. My right hon. Friend the Member for Salford (Hazel Blears), my predecessor as Secretary of State, wrote to her on 21 January, asking her to explain the proposals by the Leader of the Opposition to cut the Department's budget, when he said that he would restrict the budget to a 1 per cent. increase in real terms. Strangely, the hon. Lady did not reply to that letter, either.

Mrs. Spelman: I thank the right hon. Gentleman for giving way. I must set the record straight, as I really do object to the House's being misled. The Leader of the House said during business questions that there had been "discussions" between those on the Front Benches about not having a written ministerial statement. I said in response that I had not seen a letter from the Department regarding having only a written ministerial statement. The hon. Member for Falmouth and Camborne (Julia Goldsworthy) had not seen a letter either. However, a letter does not constitute "discussions".

Mr. Denham: It is clearly the case that my hon. Friend the Under-Secretary wrote to the hon. Member for Meriden on 12 November-

Mr. Deputy Speaker: Order. May I say to those on both Front Benches that I think we have now dealt at sufficient length with how we have arrived at where we are this evening; perhaps we could get on with the topic before the House.

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Mr. Denham: I am delighted to do so, Mr. Deputy Speaker, noting that we still do not know how the hon. Member for Meriden thinks that cuts should be applied to my Department's budget this year.

The reason the settlement was not controversial last year-nor indeed, in practice, this year-is that it was a good settlement. For the first time in this spending review period, the Government set out to give local authorities the certainty of a three-year settlement. Indeed, having spent most of his speech talking about changes that should have been made to the coming year, the hon. Member for Bromley and Chislehurst ended up saying that a three-year settlement was a good idea. One cannot have a three-year settlement and then change it in the second or third year. The three-year settlement involves an £8.6 billion increase over three years-an average annual increase of 4 per cent. This Labour Government have delivered on that commitment year after year so that local government has had increased funding, reduced targets, less ring-fencing, and more influence over more resources, including for 16-to-19 education, English for speakers of other languages, and informal adult learning.

Moreover, this has not been happening just over the past few years. Over the first 10 years of this Labour Government, local government funding has increased by 39 per cent. in real terms.

Mr. Redwood rose-

Mr. Denham: I will give way to the right hon. Gentleman, who will no doubt explain why in the last four years of the previous Conservative Government real-terms funding was cut by 7 per cent.

Mr. Redwood: Will the Secretary of State tell us why the Government will not use up-to-date population figures, which would be much fairer for areas with fast growth?

Mr. Denham: Indeed I will. I notice, however, that the right hon. Gentleman did not explain why there is a such a sharp contrast between the 7 per cent. real-terms cut last time the Conservatives had their fingers on power over local government and the 39 per cent. increase in real-terms funding under this Labour Government. That difference is important.

Julia Goldsworthy: Will the Secretary of State give way?

Mr. Denham: Let me first deal with the right hon. Gentleman's point about population, as I was going to come to that aspect.

At the end of his speech, the hon. Member for Bromley and Chislehurst welcomed a three-year settlement. Part and parcel of having a three-year settlement was not to chop and change underlying data in the course of the three years. But of course the Government have recognised the importance of population issues, particularly at times of rapid population change. That is why, just a few days ago, at the request of Ministers, the Office for National Statistics produced a consultation document suggesting how population changes could be taken into account in future. I am surprised that the hon. Gentleman apparently had no knowledge of that taking place, as it is very important. It stems directly from the fact that Ministers recognised the issue and set in train the right processes, but, quite properly, stuck to the three-year settlement as local government wanted us to do. Although some councils would gain from a change and others would lose, they wanted a three-year settlement. We
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have produced the evidence-or rather, the ONS has, because that is its job-and that means that in future the council tax system can be more flexible and responsive.

We believe that this settlement means that in the coming year band D council tax increases will be the lowest for 16 years. The increase at band D was 3 per cent. this year, and I see no reason why it should not be lower in the coming year. In fact, measured by average household bills, last year's council tax increase was already the lowest ever.

Let me address some of the points made in the debate so far. The Opposition have focused on the claimed cost of band D council tax. We ourselves use band D in announcements, as I just did, but perhaps the Opposition should have recognised more publicly that most people-two thirds, in fact-pay not at band D but at bands A, B and C; only 9 per cent. of properties are in the top three bands. However, even if we do focus on band D rates, we find that Conservative councils increased council tax for this year by more than Labour councils. The average increase for band D under the Conservatives was 3.3 per cent., whereas Labour councils kept rises to 2.8 per cent. on average. I would say that to grab a headline, the Opposition have at the very least deliberately overstated their case and not presented the arguments in the way that would be true for the great majority of people.

Let us look into this further. The official Opposition recently published data that they claimed showed the council tax burden doubling, but which were the councils pushing up council tax take? Why, out of the top 50, according to the information revealed by the official Opposition, 30 were Conservative-controlled and only five were controlled by the Labour party. On average, council tax in Labour areas is lower than in Conservative areas, and we can all see why. That is why Labour Hackney has frozen council tax for four years while improving and protecting front-line services, and it is why all eight London Labour councils have promised a council tax freeze for the coming year.

Under Labour, with active support from the Government, local government has become more efficient. Today I confirmed that local councils are on track to have made more than £3 billion in savings by March 2010-savings that they have been able to put back into front-line services. It is because local government has demonstrated its ability to save and reinvest that I am confident that local government can meet its share of providing free adult social care for those in greatest need. We should not forget that in a full year, local government will receive more than £400 million in new resources-the largest transfer of resources from the NHS to local government since the NHS was formed in 1948. I think local government knows that this is an opportunity and a challenge-the challenge of showing that local government can deliver consistently good services across the country.

Robert Neill: Will the Secretary of State now answer the specific point that I raised with him in this context: is the £250 million in efficiency savings that is assumed to come from local government part of the 4 per cent. target demanded, or in addition to it?

Mr. Denham: We believe that in the coming year local government can make the additional savings that are needed, which total less than £250 million. Obviously
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for future years there has not yet been a comprehensive spending review, so we do not know the overall settlement for those years. However, I believe that local government can meet that target. I also believe that local government welcomes the commitment that has been made in the current proposals to the development of adult social care in its areas.

Richard Burden: If local government is to save and reinvest in the way that my right hon. Friend says, is it not important that at a local authority level there is absolute transparency and straightness with local populations about what is going on? Does he share my concern about Birmingham city council, where apparently thousands of pounds are being taken from local budgets, including in my own constituency-£55,000 in 2007-08, £69,000 in 2008-09 and £241,000 in 2009-10? That is apparently in order to make efficiency savings that will be reinvested, but it is the devil's own job to find out exactly where they are being reinvested other than to finance rather dubious city council reorganisation. Does he agree that authorities such as Birmingham need to be a lot more transparent with the people they are meant to serve?

Mr. Denham: I certainly agree with my hon. Friend that local authorities need to be absolutely transparent in their budgeting and in the way that they use resources. As he will know, a few weeks ago we had occasion to raise some concerns with Birmingham city council about the use of working neighbourhoods fund money. That came to light because a local strategic partnership had published minutes showing concerns that the money was not being used. In that particular case, we had no desire to punish the people of Birmingham for their council's actions, so when we recently announced additional working neighbourhoods fund money we included Birmingham in that. It is important that this money is used effectively on behalf of the people of that city. Similarly, if local authorities are making changes to their budgeting arrangements, they should be open and people should know exactly what is happening.

Barry Gardiner (Brent, North) (Lab): On that point about transparency, what does my right hon. Friend think about a council that made a commitment before the last local elections that there would be absolutely no increase in council tax over the coming period-one of the parties in the coalition said that it would reduce it-and yet has increased it year on year for the past three years? That is Brent council. Does he not think it a disgrace that the hon. Member for Brent, East (Sarah Teather) is not in the Chamber to defend her party?

Mr. Denham: I certainly understand my hon. Friend's concern about promises made and broken, which nobody likes to see.

I wish to say a little about the Opposition's figures. I believe the House will agree that every word from the hon. Member for Bromley and Chislehurst suggested or implied that councils should have had more funding from this Government. He certainly made many references to councils that he felt were not getting enough, and he made no proposals that councils should have their funding reduced, so the only conclusion I can draw is that he thinks councils should have had more money. However, as we pointed out earlier this year, the Opposition's official policy is that my Department should have had its funding cut by £1 billion this year.

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Mrs. Spelman indicated dissent.

Mr. Denham: The hon. Lady shakes her head, but if she cares to dig out the letter from my predecessor-I can send her another copy-I will be pleased to receive her reply explaining what the Leader of the Opposition meant when he said that growth in my Department's budget would be limited to 1 per cent. We have never received a reply. The implication of the Leader of the Opposition's policy is that my Department's funding would have been cut, not next year, not the year after but this year, by £1 billion. Compared with the current funding, including our housing pledge, Conservative policy would mean a £1.8 billion cut in its funding. We have never had an explanation of where those cuts would come or of by how much council tax would have to go up.

Mark Hunter: On the subject of budgets being cut and promises broken, can the Secretary of State explain why, despite the Government's claim to have made a fair settlement for local government this year, many local authorities, including Stockport, which covers my constituency, are receiving less in central Government grant than the amounts indicated in the Government's own funding formula? How can that be fair, and why are people such as my constituents still being short-changed by this Government?

Mr. Denham: The hon. Gentleman knows enough about the system to recognise that under a funding formula, at any one time some authorities are above the strict position in the formula and others below it. Because convergence is difficult and cannot be achieved overnight, there is always a process of floors and transitional arrangements. In any system that is ever devised, some people will be able to say, "This year in my authority we are away from the funding floor," but that does not mean we should not set up the system to make progress in the right direction every year. If one looks at the variations in the formula grant for different local authorities this year, last year and the year before, one can see progress in the right direction.

Mark Hunter: Will the Secretary of State give way?

Mr. Denham: No, I must make some progress, or I will speak for as long as the hon. Member for Bromley and Chislehurst, and then I will be embarrassed having made comments about the length of his remarks.

The Opposition have said that they would pay councils to have a council tax freeze, but that adds another £1.3 billion a year to promises that they cannot possibly afford to carry through. No one can really believe that there is any credibility in what they are saying. The truth is that Conservative councillors and MPs up and down the country are saying that they want more money for their area, while they are all campaigning for a Conservative Government who promise to give them less. It is time that the Opposition were open and straightforward about their plans, which are pretty bad.

John Austin: On that point, I have here a publication from the Bexley Conservatives. In claiming the credits of their council, it points to two new academies built, four schools rebuilt and nine new children's centres, all achieved by the wonderful Bexley Conservative council. How does the Secretary of State contrast that with their spending plans if we were to have the misfortune of a Conservative Government?

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