Local Government Finance

It is joined-up government. The hon. Gentleman has received an inadequate briefing from Hillingdon council. I shall write to him to explain in some detail, but the fact is that where supported borrowing is awarded by central Government to local government, the revenue costs to support that borrowing are built into the settlement, as they were this year and as they have been before. That will mean that as part of the formula grant allocation the hon. Gentleman's council will have the amount of revenue to support the borrowing that it has been granted. It will have that even before the amount that it gets each year is increased to bring it up to the floor. The idea that authorities that are below the floor—the hon. Gentleman argues this for his local authority—are penalised and unable to carry out supported borrowing is entirely a misunderstanding of the system. If it helps him and his council to see the picture more clearly, I am more than happy to write to him in detail to set out what I have explained more clearly. Formally, we are debating the core formula grant distribution for 2008-09 that covers the totals of redistributed business rates and the revenue support grant, the final details of which I laid before the House on 24 January. The House will have the opportunity to debate the formula grant for 2009-10 and 2010-11 as usual each year. However, let me make it clear that the policy on three-year settlements means that I am unlikely to change the distribution that I have already proposed and published, except in entirely exceptional circumstances. This is a tight settlement, but public finances are limited for central and local government. Unlike six other departments, which have seen a reduction in funding over the spending period, local government has seen an average 1 per cent. real-terms rise. My distribution decisions mean that every council in every region will have an increase in core grant in each year over the three-year period. So, the settlement is tight, but it is also fair and affordable. There will be a rise of almost £1 billion in the core grant for councils next year, but if they make the same 3 per cent. efficiency savings that we expect of other parts of the public sector they will have another £1.5 billion available to improve services and to keep council tax pressures down next year. I hope that that approach has the support of hon. Members on both sides of the House and that all hon. Members will ask their authorities what they are doing to realise those savings. Central Government can and will help local government to cut waste and to do things differently and better. We are therefore investing more than £380 million over the next three years for council improvement and efficiency, including £185 million for the local government-led regional partnerships. However, councils must look for such improvement and efficiency not because Ministers say so or because it benefits the Government, but because it frees up cash for councils and is therefore directly in the interests of local services and local people. I want to equip local residents to challenge their council on whether it is running more efficiently, as they have a right to expect. From 2009 information on waste and better working will be set out with council tax bills, so that local people can see what is happening in their council's search for greater efficiency. I will consult on that later this year. In framing our spending plans, we have worked closely with local government. We are delivering the important reforms for which it rightly argued. Local government pressed for greater certainty and so we made the first ever three-year settlement. Local government asked for greater flexibility and so we will move £5.5 billion into grants with no restrictions on spending. Local government wanted less red tape and so we radically streamlined the targets system from 1,200 targets for some councils to about 200 national indicators for all. Local government analysed the funding pressures with us and so we covered them in the settlement and gave the biggest rises to councils with social care and waste disposal responsibilities. Finally, local government made the case for more financial freedoms and so we will give councils new powers for business rate supplements, the community infrastructure levy and transport charges alongside recent borrowing and trading powers. Following my consultation, I can confirm my proposed grant distribution in all major respects. I have decided to accept representations from the LGA and others, as my hon. Friend the Member for West Bromwich, West (Mr. Bailey) urged me to, and have adjusted the calculation of grant increases for the purposes of the floor to reflect the transfer to local authorities of full funding for family law cases, a matter on which the Ministry of Justice announced a consultation on 19 December. That adjustment does not affect the amount of grant available in 2008-09, which already covers that spending pressure. However, it ensures that the floor increase is calculated on a like-for-like basis that includes the funding change. I also made corrections to the data used where it was justified. In other respects, the grant distribution is as I proposed on 6 December. In particular, I can confirm that we will implement fully the relative needs formulae for social services, which were decided in 2005 and introduced in 2006 but have been damped over the past couple of years. We will make the system fairer by increasing by 2 per cent. each the size of the relative needs and relative resource blocs. We will set the grant floors to give all authorities guaranteed minimum increases over the next three years at the same levels as I announced on 6 December. As in previous years, the floors will be paid for within each group by scaling back the grant increase above the floor. Let me deal briefly with some of the other points that were raised in the consultation and that have been incorporated in associated announcements. Local authorities and hon. Members have raised the issue of population and migration data with me in their representations during the consultation and in debate. As I have consistently made clear, councils welcome the three-year settlement. They welcome the certainty and the knowledge about what they will get over the next three years. To deliver a three-year settlement, we have to use the best and latest data that are available consistently across the country at the time we calculate the three-year settlement. We therefore use the most recent set of local population projections produced by the Office for National Statistics, which were produced on 27 September 2007. I can confirm that we will put in place a cross-Government programme of work driven by senior officials from central Government and the LGA, and led by the national statistician. That will accelerate the work that has already begun to improve population statistics, including on a local level. The senior programme board will aim to meet for the first time this month. To support that programme of work a ministerial group, jointly chaired by me and the Minister for Borders and Immigration, will be set up, while the independent statistics board will ensure the quality of the statistics that are produced.