HC Deb 23 February 1995 vol 255 cc583-90

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Wood.]

10.2 pm

Mr. David Alton (Liverpool, Mossley Hill)

Let me return closer to home after presenting my petition.

I thank Madam Speaker for the opportunity to raise the subject of the level of council tax that is being paid in my city of Liverpool—the highest in the land—and the reasons for it. Those reasons are a combination of the effects of the standard spending assessment formula, mismanagement of resources and crippling and debilitating debts. I am grateful to the Secretary of State for the Environment for seeing me earlier and accepting a dossier compiled by Paddy Shennan of the Liverpool Echo, which set out a number of concerns that had been raised in the local media.

I thank the Under-Secretary for being present to answer the debate, and for the long-term interest that I know that he has shown since our days together on the Environment Select Committee, especially in regards to housing issues connected with Liverpool. I also thank the hon. Member for Liverpool, Broadgreen (Mrs. Kennedy), who, I know, shares in particular my views on the SSA formula and the calculation used to determine the amount of national resources to be made available to the city.

There is a certain inevitability in the fact that every year, as councils set their budgets for the following 12 months, city treasurers, finance committee members and council leaders issue warnings of impending doom. Even before the daffodils have bloomed, we will have been warned of record increases, and dire prophecies will have been uttered about cuts in services and job losses. Then, hey presto, as if by magic—certainly, it will be claimed, through the brilliance of the same council leaders and officials—the books will be balanced, and the bills are never quite as bad as the forecasts.

Whatever pain is inflicted is, according to local government, entirely the fault of central Government. Ministers often respond in kind, laying the blame at the door of local councils. Because those forecasts have been made so monotonously and so regularly, and because mutual recrimination has become such a tedious ritual, the truth has tended to be the first casualty in the midst of all the propaganda. I hope that the debate will be an honest attempt to consider the causes of the current financial crisis in Liverpool and the start of an attempt to put those right. Blame must be shared for the problems that face the city. A shared approach to sorting out those problems is needed.

Locally, plenty of reasons exist as to why we are already paying the highest council taxes in the country. The stark truth is that Liverpool needs to put its council in order. The council's debt amounts to more than £750 million, bigger than the debt of some developing countries. I asked the House of Commons Library to compile a list of countries whose national debt is greater than our local debt. It was interesting to find that countries such as Albania, Cambodia, Equatorial Guinea, Haiti and Uzbekistan have smaller national debts than Liverpool.

The practical outworking of that debt is that, each and every day, council tax payers in Liverpool must find £200,000, which is paid back to moneylenders. It costs each person on Liverpool's electoral roll £3 a week simply to pay back the moneylenders. To some extent, the "sins of our fathers" are being visited on the present generation. Many of our inherited debts were accumulated under Liverpool's militant Labour leadership. Not a penny of that £200,000 daily bill is available for the jobs and services that it talked about so much at the time.

Usurious rates of interest, grinding loans and crippling debts are destroying Liverpool's economy. Nor have we done ourselves any favours by the "can't pay, won't pay" culture, which has been actively promoted by some people. Last year, the city treasurer estimated that 5 per cent. of the council tax would not be collected. The effect of uncollected council tax, poll tax and rates on every other citizen in Liverpool has been disastrous. Last year alone, the cost of non-collection put almost £48 on the bills of the average B and D band taxpayer.

Although collection rates have improved this year—that is to be welcomed—there is still an enormous distance to travel in challenging a civic culture that has encouraged citizens to opt out of payments, and to ignore their obligation to the rest of community. With £68 million in uncollected poll tax and council taxes, we have the second highest deficit in the land. The "can't pay, won't pay" culture hurts not the Government, but every other Liverpool citizen, including the elderly, the poorest and the most vulnerable, many of whom struggle to pay their bills faithfully.

There is the issue of waste and sheer mismanagement. Last year, I asked the district auditor to investigate Liverpool's cable television contract. Liverpool was supposed to have made a profit of £2 million on the contract. At end of the fiasco, it turned into a deficit of £5.5 million, and the city is now embroiled in expensive litigation. The district auditor has rightly issued a damning indictment.

The sum of £8 million was committed for the new civic centre in Queen's square, a site that the council bought for £750,000, and then sold for £250,000 to a developer who will now receive £8 million to develop it. That is financial illiteracy. It is also hard to understand how nearly £2 million was spent on taxis and chauffeur-driven cars, how £500,000 was spent on mobile telephone bills, and how £1 million was paid in bonuses for work that was never done.

In addition, an estimated £ I million has been lost on letting council houses to council staff at peppercorn rents; another £1.4 million was written off on unpaid rates by street and market traders last year; £2 million was lost on a poorly advised computer deal; and £2.5 million worth of building supplies has been lost over five years. The position has been so bad that bailiffs have arrived at the council's offices on nine separate occasions to make it pay its debts.

The current council deficit is about £44 million and we are facing a deficit of £60 million. Last year's increase of 20 per cent. on the council tax will be matched by a rise of up to 11 per cent. in the next 12 months. Again, we shall be paying the highest council taxes in the country for some of the poorest services. All that is in a city that is designated as objective 1 by the European Community.

In the next 12 months, the Government will provide about £423 million to support the city. That figure is based on the standard spending assessment. The current methodology, which uses the social index to measure social deprivation, is a mysterious mumbo-jumbo, about as precise as a magical incantation. Under that formula, Liverpool emerges as the 48th most deprived authority in the United Kingdom, behind councils such as Westminster, which the formula says is fourth most deprived, as well as Bath, Norwich, Brighton and Wandsworth.

The children's social services SSA is particularly distorted in Liverpool. In that city, 40 per cent. of households and families live below the poverty line. I raised this matter on the Floor of the House a year ago and during the recent statement made by the Secretary of State. I know that Ministers recognise the problem and they are to be commended for that, but, nevertheless, Liverpool still lost £11 million on the children's SSA last year and will do so again—the third year running—in 1995–96 unless urgent action is taken.

The practical working out of that means that £13,707 is available for a child at risk on the child protection register in Liverpool. That compares with £17,412 for a child on a similar list in Birmingham, £15,934 for a child in Manchester, £27,008 for a child in Wandsworth and £30,874 for a child in Westminster. How can that possibly be justified? If a child is at risk in central London, more than twice as much money is made available for his care.

The National Society for the Prevention of Cruelty to Children was first established as a national charity in Liverpool a century ago. I am currently the president of its local branch. Children at risk from physical or sexual abuse, poverty or neglect, should not be the losers in this annual Dutch auction, as they clearly are at the moment.

The SSA does not take into account the condition of either public or private housing. In a city where 30,000 council properties and 60,000 private sector properties are officially sub-standard, that is patently absurd. The social index is obsessed with the type and size of housing, so the formula is fatally flawed in that respect as well. I hope that the Minister will be able to tell us how the Department will be reviewing those procedures.

Even more perversely, the Government's own index of local conditions, which combines social and economic indicators to determine overall deprivation, ranks Liverpool as the sixth most deprived authority in the country, yet the social index places us 84th in the league. In real terms, that puts an additional burden of £28 million—36 per cent.—on our social services bill. Put another way, the social index leads to Westminster gaining £18.3 million in SSA this year while we in Liverpool lose £845,000.

The annual calculation also includes an area cost adjustment. That leads to an extra £1.5 billion of SSA being distributed to authorities in the south-east. There is no corroborating evidence to confirm that the cost of providing services in the south-east is so substantially greater than it is in the northern conurbations such as Liverpool that it justifies that redistribution.

The situation is exacerbated by the outrageous way in which the business rates have been settled this year. It has benefited stores, shops and businesses in the south-east, while regions such as the north-west are being crucified. I commend to the Minister Disraeli's maxim of "one nation" as the Government consider this unequal north-south division of resources.

Liverpool has a lot going for it, not least its people, its ingenuity, wit and grit. If it is to prosper, it needs to have its financial crisis resolved once and for all.

Mrs. Jane Kennedy (Liverpool, Broadgreen)

I am grateful to the hon. Gentleman for giving way; I know that we are under pressure of time and would not expect him to deal with the current Labour administration, but I appreciate his comments about the efforts being made to tackle many of the problems.

Has the hon. Gentleman considered how the way in which funding is calculated affects the Merseyside fire and civil defence authority and, indeed, the police authority? Is he aware that the Merseyside fire and civil defence authority has just sent a letter to the Home Secretary and the Secretary of State for the Environment, which refers to the masterful inactivity coupled with callous indifference displayed by the Government?

Mr. Alton

The hon. Lady has, characteristically, made her point effectively. I am sure that the Minister will deal with it, and I associate myself with her remarks. Time is moving on and I must leave the Minister with half the available time in which to reply properly.

I was saying that there is only so much that people can take. Grinding council tax bills are leaving people demoralised and depressed. Council tax bills in Liverpool have become a curse. Objective 1 offers us a unique opportunity but it is illogical to place the highest council tax burden in the country on an area declared to be one of the most deprived in Europe. There is also the additionality argument. There is a suspicion that the Government have used the declaration of objective 1 status to reduce their own spending commitments in the region in the hope that objective 1 money will make up the difference.

In addition, the capping mechanisms are making it extremely difficult for Liverpool to identify matching funding to draw down objective 1 grant. I was appalled to learn that, of the 106 European regional development fund applications made by December 1994, which were worth £30 million, 100 have still not been given approval. In other words, only six applications have been approved. Projects such as the A565 approach to the north docks, which had previously been given the go-ahead by the Departments of the Environment and of Transport, are now having to begin again because they are part of the objective 1 status. It is all process and no product, expectation and little result. Objective 1 is in danger of losing its momentum and impetus as the process silts up.

I have admitted honestly that Liverpool must put its own house in order, but it is obvious that at least half the responsibility lies with the Government. All of us must now become genuine partners in rooting out inefficiency, maladministration, red tape and unfair financial mechanisms.

10.16 pm
The Parliamentary Under-Secretary of State for the Environment (Mr. Robert B. Jones)

I welcome the debate, especially as it has been secured by the hon. Member for Liverpool, Mossley Hill (Mr. Alton), who is a former colleague on the Select Committee on the Environment. He has set out his concerns for the financial position of one of England's great cities. It is right that the matters that he has raised should be considered in the House.

Liverpool city council today is somewhat different from the council of a decade ago. I acknowledge that the present political leadership of the city has tried to pull itself back into the mainstream of local government performance. The auditor still criticises them from time to time, as she did last November about overpayments to staff, but the response of the city leaders nowadays is generally responsible and realistic. However, they have a considerable distance to go in some respects, and the hon. Gentleman highlighted some of them tonight—council tax collection and housing repairs are two examples, although they are scarcely unique.

As the city has moved from confrontation to co-operation with initiatives that bring benefits to it, Merseyside has benefited greatly in the past few years. To date, a total of £55 million has been spent on city challenge initiatives, and a similar sum is in prospect. Over five years, more than one third of a billion pounds of private investment is expected, creating more than 10,000 jobs and more than 500 new business start-ups.

Liverpool has also been successful in the single regeneration budget. Both bids from the city council as lead partner were successful. The scheme at Speke and Garston will receive £17.5 million over five years, levering a further £130 million from other public or private sector sources. The scheme is a mix of employment and industrial development measures which should improve the quality of life for local residents. A second scheme—at Dingle—will receive £6.7 million over five years. It is expected to lever in more than six times as much from other sources and it should revive a very rundown residential and shopping neighbourhood close to the city centre. I hope, too, that the city council will begin to look at solutions for housing areas like Speke, such as large-scale voluntary transfers, so that standards can be improved and empty dwellings brought back into use.

As the hon. Member for Mossley Hill said, Liverpool's position has also been recognised by the European Community. We strongly supported Merseyside's case for objective 1 status. Objective 1 is a major opportunity for Merseyside, and for Liverpool in particular. The city has secured an acceptable level of resources under round one of the bidding. That includes major developments in the city centre, at Queen's square, and for other initiatives, such as its film office and community-based economic development.

If the city puts the necessary effort into preparing and implementing its bids, it should do well out of the competitive objective I process. We welcome the close involvement of the city in objective 1, which could make a major further contribution to the development in the city, for example in the Speke and Garston area and in north Liverpool.

The objective 1 process has recently been the subject of a thorough review, to ensure that it is transparent and equitable. Local authorities, including Liverpool, have been fully involved in that review at a political level. The Government are determined to ensure that the structural funds are allocated fairly, to the best projects: those which will have the greatest and most lasting effects on the economy of Merseyside. The support from our inner-city policies and from Europe are all contributing to the improvement of the physical fabric of the city, and the opportunities for economic regeneration.

The city council's continuing task is to enable the provision of local government services for Liverpool—a business spending approaching £500 million a year. Liverpool, like most of the rest of local government, obtains most of its finance from central Government, rather than from council tax payers. In its 1994–95 budget, less than a quarter of its budget requirement was to be met from council tax payers. The council tax has to bridge the gap between the authority's budget and the central Government support that it receives. The basis for that central Government support, therefore, will always attract attention.

The key to the central Government support for a local authority is its standard spending assessment, or SSA. That is the Government's assessment of what an authority would need to spend if all authorities with like responsibilities for services provided those services to a similar standard. Clearly, the cost of providing a common standard of services will differ between authorities. Some authorities will have a relatively large number of children to educate, others relatively few. Some authorities have many miles of roads to maintain, others a relatively short length of roads. Such factors account for much of the variation between authorities in our assessment of the cost of a common standard of service.

We accept, however, that other factors are relevant. It would, for example, be too simple to base the assessment for education simply on the number of pupils. Other factors matter. For example, we allow for the fact that, in sparsely populated areas, there is bound to be more expenditure per pupil on transporting children to and from school than there would be in an urban area.

As the hon. Gentleman has said, however, social and economic factors also have an important bearing on the need for services and the cost of providing them. We seek to make proper allowance through the SSAs for the factors of social and economic disadvantage. The SSA formulae incorporate more than 20 indicators of that sort. By way of illustration, a few of those indicators are the number of children of lone parents, the number of children of income support claimants, the proportion of children from ethnic minorities, the proportion of pensioners living in rented accommodation, or living alone, or relying on income support, the proportion of people unemployed, the numbers of households accepted as homeless with priority needs and the numbers of housing benefit claimants.

That is not a complete list, but it serves to indicate how SSAs take account of many factors which are likely to give rise to differences between areas in needs because of the social or economic conditions of people in the area.

It is, of course, an extensive task to assess the relationships between such characteristics and the need for spending, but we tackle the task in a thoroughly objective way. We conduct extensive discussions with the local authority associations about the case for and against possible changes in the SSA formulae, we have a period of consultation with local government before each year's formula is considered by the House, and we publish detailed information about the formula and its basis. Indeed, that approach was commended in evidence to the Select Committee on the Environment and in the Committee's unanimous report on the subject, which was published when I had the honour to be its chairman.

The assessments share out a fixed national total among authorities. That, of course, means that one authority's gain is inevitably another's loss. So it is only to be expected that authorities are alert to arguing for changes which would work to their benefit, and against changes proposed by others, which would work to their disadvantage. Liverpool was one of almost 100 authorities which came to see Ministers this year to say how they would like standard spending assessments to be changed.

The city council made a number of points to us when it came on 11 January to see my hon. Friend the Minister for Local Government, Housing and Urban Regeneration. It was concerned about the changes introduced in 1994–95 for the part of the SSA relating to social services for children, to which the hon. Gentleman referred. As my hon. Friend the Minister told the House on 1 February, the Department of Health expects to commission research this year on which it might be possible to refine the SSA for children's social services. However, it would not be sensible to rush into further changes without sound material on which to base any alteration.

The city has also asked us to include in the elements of SSAs for education and social services the economic index that is used elsewhere in the SSAs. As with all parts of the SSAs, we are prepared to be persuaded by the objective evidence in support of alterations. Any change has to be defensible for authorities at large, not just for particular authorities such as Liverpool.

The city has been particularly critical of the social index used in the standard spending assessments. It asks, as the hon. Gentleman did, how it can be right that Liverpool is ranked 81st out of 364 authorities. That is a very selective approach to the evidence. On the economic index, Liverpool ranks sixth. On the social and economic indices combined, Liverpool ranks 17th. Indeed, of authorities outside London, only Manchester ranks higher.

Liverpool has a relatively low proportion of people in the ethnic minorities compared with some of the other major cities. It is not unreasonable that this difference should be reflected in the SSAs. Our analyses show that the numbers of people from the ethnic minorities are one of the factors associated with variations in local authorities' expenditure. Indeed, hon. Members from cities with large proportions of their population from the ethnic minorities urge us to make an even greater allowance for the extra expenditure of local authorities in supporting those groups.

I know, however, that some of the representatives of local government feel that we should look again at the indicators that reflect various forms of social and economic deprivation. My Department has, for instance, had developed an index of local conditions which some of the local authorities feel might be a preferable indicator for SSAs. If the local authority associations wish to set out the arguments for and against such a change, we should be willing to consider them.

The city also believes that the standard spending assessment relating to debt charges should be based on the actual debt of an authority, rather than on a notional debt. I certainly cannot agree. Authorities have discretion over the size of their debt. It is up to them to decide how much debt they redeem. They are required only to set aside a specified percentage each year. Basing the SSA on the actual debt would disadvantage authorities that had acted prudently in paying off debts more rapidly than required by law. Indeed, this is the very point that Labour-controlled Lewisham made strongly when it came to see me.

The hon. Gentleman referred to the area cost adjustment. The area cost adjustment always provokes strong reactions. Authorities that receive it contend that it does not cover all the extra costs which they face through being in the south-east. Those who do not receive it are convinced that it is already over-generous. The hon. Gentleman's point tonight is in complete contradistinction to the point made by the hon. Member for Newbury (Mr. Rendel) not long ago. We look at the matter objectively. We carried out an extensive examination of the area cost adjustment in 1993. We satisfied ourselves that it is, indeed, justified.

In the coming year, we intend to carry out research to see whether the zones on which the area cost adjustment is based can be better founded. It may be better, for example, to base them on travel-to-work areas. We would in any case expect to bring up to date the information on which the adjustment is based. One factor in this will be the revaluation of business premises where the new business rate bills can be reflected in the area cost adjustment for 1996–97.

In the end, Liverpool is bound to judge the SSAs by the level of expenditure they reflect. Of the 36 metropolitan districts, Liverpool's SSA per head of population is the third highest. Its SSA is exceeded only by Manchester and by the neighbouring borough of Knowsley. Liverpool's SSA per head is £887 in 1995–96. This compares with an average of £756 per head for the metropolitan districts as a whole.

I believe that this demonstrates that the SSA system already recognises that Liverpool is a city with spending needs considerably greater than most. If the evidence supports changes in the SSA formulas which would allow even more to Liverpool, we would certainly be prepared to consider changes. However, we must retain the objectivity of the standard spending assessments and seek as wide a measure of agreement as possible in local government so that the approach is as fair and open as it can he between authorities.

Meanwhile, I urge the city council to consider its priorities most rigorously and to sustain the search for efficiency savings to avoid the notoriety of having the highest levels of council tax in the country, as it did in 1994–95.

Question put and agreed to.

Adjourned accordingly at twenty-nine minutes past Ten o'clock.