Local Government Finance

It is inflation-busting grant rises that I have announced today, not inflation-busting council tax rises. I am proud of the 10 years of a Labour Government. I am proud of the commitment that we have given to local government. I am proud of the fact that, to date, local government has received a 39 per cent. real-terms increase in funding from central Government, and I am proud of the fact that that is in stark contrast to the 7 per cent. real-terms cut that local government had to endure for the four years of the previous Government, before 1997. This is a tight settlement. It is a tight settlement for local government, and it is a tight settlement for central Government. But there are areas of central Government, including work and pensions, revenue and customs and enterprise, which have experienced year-on-year cuts, not the year-on-year rises that I have been able to announce for local government today. The hon. Gentleman asked me a number of specific questions. Let me try to answer them. He asked whether I had heard from the heads of social services departments, and quoted one in particular. Let me quote the response of their representative body to the comprehensive spending review. The Association of Directors of Social Services said:"““Today's CSR announcement is clear evidence that the Department of Health has truly recognised the importance of social care…today's figures and settlement show that the vital contribution our social care services make to the overall wellbeing of so many hundreds and thousands of older people is beginning to win the recognition it deserves””." The hon. Gentleman asked about the local authority business growth incentive. I introduced it from the Treasury, and we could not have been clearer from the start that it was a three-year scheme that we would review and seek to build into the mainstream funding system—which we will do over the spending review period, and for which purpose £150 million is allocated over that period. The area-based grant is a larger fund than the current area fund. As a result of my proposals, more funding streams will go through it. Each will be a single payment made each month to local authorities, and all will be un-ring-fenced. I was disappointed to hear the hon. Gentleman's grudging comments on concessionary travel. I would have expected him to welcome the fact that 11 million pensioners and disabled people will benefit from free travel. I was also disappointed that he did not recognise that we are providing the funding—over £200 million in each of the coming years—and doing what local government wanted by paying it as a specific grant rather than through the formula. The settlement builds on our strong track record of commitment to and funding for local government over the past 10 years, which is extended further through this spending review period, but it is not just about cash. Local government asked for certainty, and we have delivered it. Local government asked for greater stability, and we have delivered it. Local government asked for greater flexibility, and we are delivering that too. Finally, let me return to the point with which the hon. Gentleman began: his council tax rise predictions. There is a certain regular choreography about the annual settlements. We have heard before from the Opposition their predictions of settlements and their impact on council tax. In 2004 the hon. Gentleman's boss, the hon. Member for Brentwood and Ongar (Mr. Pickles), predicted a 6.7 per cent. increase; the increase was 4.2 per cent. The following year he predicted a 7.1 per cent. increase; the increase was 4.5 per cent. I could not find any predictions for 2006, and I thought that the hon. Gentleman might have learnt his lesson—but the hon. Member for North-East Bedfordshire (Alistair Burt) obviously has not. Increased funding and capping action have delivered three of the four lowest council tax rises in the past three years since council tax was introduced in 1993. That combination—real increases in funding for local government, and a determination to take tough capping action as necessary—will continue over the next three years.