Local Government Finance (Kingston upon Thames)

I congratulate the hon. Member for Kingston and Surbiton (Mr. Davey) on securing this debate, which provides a useful opportunity to discuss the 2007-08 local government finance settlement for the royal borough of Kingston upon Thames. He put comprehensively the concerns of his local council and constituents. Let me provide some background to how an authority’s formula grant is calculated. The amount of formula grant paid to a local authority is largely based on its socio-economic and demographic characteristics and the relative ability of the area to pay council tax. We then ensure that every authority receives at least a minimum increase—the floor, to which the hon. Gentleman referred—on a like-for-like basis. That ensures stability and predictability of Government grant. This year we have also provided authorities with the grant allocations for two years thus allowing both years’ grant settlements to be taken into account for their medium-term planning. Kingston upon Thames will receive £33.2 million of formula grant in 2007-08, which is a 2.7 per cent. year-on-year increase on a like-for-like basis. It benefits from the floor protection by £397,000. In comparing that figure with earlier years, we need to bear in mind that since 2006-07, schools are funded separately. Including the schools increase gives a grant increase for 2007-08 of 4.7 per cent.—not quite the ““cuts”” the hon. Gentleman claims on his website. The hon. Gentleman raised the fact that local authorities are not able to keep the business rates they collect. It is right that local businesses should contribute to the funding of local authorities, and that we should use the grant within the settlement, including redistributed business rates, to ensure that all councils are able to set realistic council tax increases. If areas with high business rate yields kept the money locally, it would mean a switch of funding from poor and deprived areas to relatively wealthy ones such as the area represented by the hon. Gentleman:"““If it were all done locally, the equity problems would be huge, with poor areas being badly affected because they would be unable to raise the funds they need for vital services. Most people acknowledge the need for some central Government grant to equalise and redistribute resources to poor areas””.—[Official Report, 17 May 2004; Vol. 421, c. 739.]"