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I put down a clear challenge yesterday on the question of overtime for police. We are spending an awful lot of
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money on overtime and with better deployment, use of special constables and some scrutiny of overtime we can save money and can, I hope, save £70 million.

I am conscious of the time, so my final two points relate to voluntary mergers. We have made it very clear that, following the difficulties of the merger debate several years ago, the White Paper published before Christmas set a framework for voluntary mergers. The people involved can merge if they want to and they will have the support to do so, but they will need the support of the chief constable, the authority and, ultimately, the public who they serve. To help that process, we have put in place a £500,000 fund up front to help with some of the costs of preparing for mergers. That is available to be drawn down and applied for now and will be until April of this year.

We have also said that we will consider one of the blockages to mergers, which is council tax precept equalisation. We are happy to consider how we can work through that now and in the longer term with my right hon. Friend the Secretary of State for Communities and Local Government. There is a wish to move the mergers forward. They can save resources, but they have to be voluntary and locally driven.

Finally, may I refer briefly to the roll-out of the four force pilot, even though my right hon. Friend the Member for Leicester, East is unfortunately not here. It is, dare I say it, rolling out. Forces are at different stages of implementation and are being strongly supported by ACPO in taking up that four force pilot. My right hon. Friend the Home Secretary is writing to police chiefs and chairs to encourage them to adopt the four force pilot in their local areas.

There is a lot more that could be discussed, but time is pressing. Let me simply say that I hope that Members will approve the grant today for £259 million extra for next year. I hope-dare I say it-that the Opposition will support us in that commitment and will not renege on it, whatever happens in any potential election. I believe that we have a strong financial base for police funding, strong reductions in crime and strong police numbers. I accept, however, that specific issues need to be addressed, which we will consider and reflect on. I commend the grant to the House.

Question put and agreed to.


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Local Government Finance

4.33 pm

The Secretary of State for Communities and Local Government (Mr. John Denham): I beg to move,

Madam Deputy Speaker (Sylvia Heal): With this we shall discuss the following motion, on council tax:

Mr. Denham: Before I come to the main body of my remarks, may I say that it was and is the intention that the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Stevenage (Barbara Follett), should reply to the debate? Timings in the House are uncertain and she will be dealing with an Adjournment debate in Westminster Hall for half an hour. I hope that it will be acceptable to you, Madam Deputy Speaker, and to the House if she replies to the debate-she has undertaken much of the individual correspondence and meetings with local authorities and she might be in a good position to respond to particular cases that are raised.

Before I discuss the good financial settlement that is on offer for councils again this year, I want to draw the House's attention to the 2010-11 "Housing Revenue Account Subsidy Determination" that the Government have issued today. It confirms that next year's local authority average guideline rent increase will be set at 3.1 per cent., not 6.1 per cent. as was previously agreed, because the Government believe that the previous increase would not be fair or affordable for tenants. Those considerations have always been our priority, and that will not change. What we have put in place this year will not mean steep rent increases for council tenants in the next few years.

The same concern about affordability has informed the decision that was announced by my hon. Friend in November, that the Government were capping the police authorities of Cheshire, Leicestershire and Warwickshire because of previous excessive increases. Cheshire and Leicestershire have accepted the budget caps that we have proposed, whereas Warwickshire exercised its right to challenge. After careful consideration, I have laid an order for the House's approval to set Warwickshire a maximum budget requirement of £90.395 million for 2010-11. The intention is to limit all three authorities to the equivalent of a 3 per cent. increase in council tax over 2009-10 and 2010-11. No other capping decisions have been taken for 2010-11, but we will not hesitate to cap excessive increases that have been set by individual authorities, if necessary.

Let me address the main subject of the debate-the financial settlement for local government. This is the final year of the first ever three-year settlement, which involves an £8.6 billion increase over three years, with an average increase of 4 per cent. over each of the three years and of 4 per cent. again for the coming year. The increase for this year is made up of a 2.6 per cent. increase of formula grant, bringing the total to £29 billion; a £5 billion area-based grant, which includes funding
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for the supporting people programme, the working neighbourhoods fund and the rural bus subsidy; and specific revenue grants of £42.2 billion, which includes, for example, the dedicated schools grant. Every council will receive an increase in funding.

This year's settlement comes on the back of a 39 per cent. increase in real-terms funding in the decade up to 2007-08. In that decade, power and responsibility were transferred to councils, giving them greater stability, freedoms and flexibilities. Almost £6 billion has been moved into such budgets with no strings attached. The performance framework has been slimmed down from 1,200 targets to fewer than 200. Next year, councils will also gain responsibility for commissioning education and training, which will be worth a further £7 billion.

Ms Gisela Stuart (Birmingham, Edgbaston) (Lab): My right hon. Friend mentions that councils are free to spend their money with fewer strings attached, but does he expect councils to take more responsibility? Does he have a view on Birmingham city council's inability to submit its accounts in such a way that the Audit Commission is able to sign them off? The council has had to waste £60,000 just to have the books re-audited to satisfy the Audit Commission.

Mr. Denham: My hon. Friend raises an important point. We had occasion, before Christmas, to raise concerns with Birmingham city council, which, on its own say so, had failed to use the working neighbourhoods fund money in a timely manner. It is the right direction of travel to give freedoms to local authorities, but we have to make it clear that with those freedoms and flexibilities comes the responsibility to use public money well and wisely for local people.

The Government's record on funding is one of real achievement and real confidence in local government. There has been real change on the ground, backed by real investment. I suspect that this debate might not attract huge public attention across all the media, but it will be followed closely in council chambers across England. In this week, next week and the week after, councillors will meet in town halls and civic centres to set council tax. They will be considering the coming year and the years ahead. They will follow our debates with interest, not least because of the looming election and the possible consequences for local councils and council tax payers.

This Government's support for local government is not in doubt. The settlement comes on top of a 39 per cent. increase in real-terms funding that compares with the 7 per cent. real cut in the final four years of the previous Conservative Government.

I reject the claim in yesterday's edition of The Daily Telegraph from 35 Conservative council leaders that low council tax increases this year have nothing to do with the Government. They said that they had

Those councillors should be grateful. In January last year, the Leader of the Opposition proposed cutting my Department's budget by £1 billion, of which it is certain that £240 million would have come from council budgets. So those 35 local authority leaders should at least be grateful that I protected them from the policies of their own political party.

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Susan Kramer (Richmond Park) (LD): The Minister is vaunting the significant amounts of additional money that his Government have made available, but is he aware that some councils are outliers, whose increases in cash per head can be counted in pennies? Richmond is a good example, with an increase of 87p per head. Many councils, like Richmond or Kingston, have had to go deep into their pockets to fund primary school places because Government help has been so limited. The number of children affected is very significant.

Mr. Denham: I do not agree that Government help has been limited. It is possible that when my hon. Friend the Minister winds up, she will be able set out how much Richmond has received over the years. However, I acknowledge that there is an underlying point, and that it is an inescapable part of the settlement. Almost inevitably, the funding formula that we have will reveal that some authorities are further from the formula target than others. Each year, the grant settlement is designed to make progress towards that target, but we must have a floor system that regulates the rate of change that takes place each year. Some authorities are affected by that, but it is very difficult to design a system that does not have some element of that sort.

Dr. Brian Iddon (Bolton, South-East) (Lab): I realise that we are moving towards target according to formula funding, but is it right that my authority should lose another £5 million this year because it is below target? That comes on top of the millions that we have lost already. Wandsworth is to receive an additional £51.653 million next year, and Kensington and Chelsea £10.061 million. I put it to my hon. Friend that my constituents are some of the poorest in the country.

Mr. Denham: The increase in Bolton is something like £13 million in the coming year. That is a significant amount of money, as my hon. Friend will recognise. The application of the funding formula requires a floor mechanism to regulate the pace of change towards the target that the formula produces. It has been widely discussed, and he is perfectly right to produce anomalies or examples that he thinks are unfair to his constituency. However, I do not accept that they are anomalies, as the system for regulating the pace at which we move towards target is broadly agreed across the House. I am pleased that his authority has been able to benefit this year from a significant amount of money.

Dr. Phyllis Starkey (Milton Keynes, South-West) (Lab) rose-

Mr. Andrew Pelling (Croydon, Central) (Ind) rose-

Mr. Denham: I shall take a question from my hon. Friend the Member for Milton Keynes, South-West (Dr. Starkey). I shall take an intervention from the hon. Member for Croydon, Central (Mr. Pelling) later, after I have made a bit more progress.

Dr. Starkey: My hon. Friend talks about floors and ceilings. Does he agree that, although councils, including my own, are ready to complain about a ceiling if it means that they do not receive as much extra grant as quickly as they might wish, they rarely complain about a floor, as that means that they do not lose grant as quickly as they might fear?

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Mr. Denham: My hon. Friend may be aware that her local authority has received an extra £18 million this year. She makes a very valid point, but the reaction that she describes is perhaps an inevitable part of human nature. There will always be more complaints from those who believe that they should have got more than there will be praise from those who have been protected by the system. She is absolutely right to make that observation. My firm belief is that not only in this year, but in previous years, the Government have worked hard to get the balance right between the ceiling and the floor, to ensure that the pace of change is reasonably predictable and understandable by local authorities.

I was speaking about how I resisted the call of the Opposition last year to cut my Department's grants to local authorities by several hundred million pounds. The councillors who wrote to The Daily Telegraph may have been embarrassed by the truth, which is that the councils that have loaded most burden on to council tax payers have been Conservative. Of the 50 councils with the highest increases in council tax over the first 10 years of this Government, around 30 are Conservative-controlled. Labour controls just five.

The current settlement means that we can expect the average band D council tax increase to fall to a 16-year low. Many councils have already indicated that they plan for modest council tax increases or none at all, including all eight London Labour councils, which have committed to a council tax freeze while protecting front-line services. Our expectation this year follows last year's average increase of just 3 per cent., the lowest since 1994-95.

That is good news for council tax payers from the Labour Government. What would they get from the Opposition? An apparently attractive but empty and unfunded promise. On 30 September 2008 the right hon. Member for Witney (Mr. Cameron) told the BBC that council tax would be frozen for two years under a Conservative Government. The Conservative party press release of 29 September 2008 said that the cost would be £500 million in the first year and £1 billion in "subsequent years". It said that that would be funded from cuts in advertising and consultancy budgets.

Latest costings show that the Opposition have seriously underestimated the cost. A two-year freeze starting this year would cost £1.97 billion-£650 million in the first year, and £1.32 billion in the second year and every year after that. Even on the Opposition's own figures there is a £470 million gap, so I wonder whether that is likely to happen.

On 7 January the Leader of the Opposition told the BBC:

the two-year freeze-

Asked by the BBC's admirable Evan Davis:

the Leader of the Opposition insisted that the freeze would go ahead. So would it happen? Is it a promise, or merely another vague aspiration? Apparently it will go ahead. [Interruption.] Well, those taking part in council tax debates throughout the country need the answer today.

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Last Sunday, the shadow Chancellor had a different use for cuts in advertising and consultancy.

he said,

Yesterday, asked by the BBC's equally admirable Nick Robinson about cutting spending to cut the deficit, the hon. Member for Tatton (Mr. Osborne) said:

Which is it? Cuts in advertising and consultancy to reduce the deficit or to reduce council tax? It cannot be both. The House and local councils need to hear some answers today before promises are made at local level. There have been many candidates from Opposition parties dropping leaflets through letterboxes over the past few weeks promising a freeze in council tax without any explanation of how even part of it is to be funded.

Mr. Pelling: Will the Secretary of State give way?

Mr. Denham: In a moment.

The Opposition's council tax plans are, as The Observer said on Sunday, "mired in confusion".

We also need to know when the freeze will start. If it does not start until next year, there is another problem. As the pre-Budget report makes clear, advertising and consultancy will be cut by this Government by £650 million in 2012-13 as part of our plan to halve the deficit, so there is no money in the coffers to pay for the second year of the proposed council tax freeze. There is at least a £1.12 billion black hole in the Opposition's local government spending plans in the first two years, and the same amount every year after that.

Justine Greening (Putney) (Con): The right hon. Gentleman is doing a great job of setting out to the public the fact that we will help councils freeze council tax, whereas his Government will not. Perhaps he can explain whether it is his proposal to go ahead with another revaluation shortly.

Mr. Denham: We have no plans or preparations for a revaluation of council tax.

Robert Neill (Bromley and Chislehurst) (Con): What about the database?

Mr. Denham: Oh, the database! A standard, routine contract is put out to tender every few years to update the valuation database in the normal way; that has nothing to do with council tax revaluation. I wrote to the hon. Member for Putney (Justine Greening) after she claimed in the Sunday Express that the database was evidence of secret plans for a revaluation of council tax. She never replied to my letter, and I am surprised that the Opposition continue to raise the issue.

Justine Greening: Will the right hon. Gentleman give way?

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