HC Deb 21 November 1995 vol 267 cc452-4
10. Mr. Thurnham

To ask the Secretary of State for the Environment what recent representations he has received about the area cost adjustment factor; and if he will make a statement. [741]

Mr. Curry

I have announced an independent review of the area cost adjustment.

Mr. Thurnham

Will my hon. Friend speed up his review of that most unjust subsidy, which is now costing the people of the north more than £1.5 billion a year? Is it not high time that we northerners ceased subsidising southerners to quite such an extent?

Mr. Curry

My hon. Friend will understand if I am not tempted into that particular form of global warfare. He will appreciate that the area cost adjustment is in place to try to compensate for the additional labour costs in London and the south-east. All those who get it think that it is inadequate, and all those who do not think that what is given is unjust. That is why the only way forward is to set up an alternative. Provided that it is robust and delivers the results that we want, and provided that the local authority associations are able to agree that it is robust, which is asking quite a lot, it can go into the formula for the revenue support grant the year after next.

Mrs. Anne Campbell

Does the Minister recall that, when I came to see him with an all-party delegation of councillors and hon. Members earlier this year, he gave us an undertaking that the research into the area cost adjustment would be effective for next year's settlement? Is that still the case? Will he take on board the fact that the people of Cambridgeshire are utterly fed up with the way in which their standard spending assessment is so much lower than that of neighbouring counties?

Mr. Curry

No. What I told the hon. Lady, which is what I told the House, was that we were seeking an alternative and that, if it proved robust, it would be used. We considered whether a travel-to-work concept would work, and the Association of County Councils was also pursuing an alternative methodology. Neither stood up to robust analysis. That is why we have to look to an entirely different approach and why I set up the review. We hope to have the results of that next June so that they can go into the following year's settlement.

Mr. Rathbone

When considering those matters, will my hon. Friend remember that the area cost adjustments were originally set up to compensate county councils such as East Sussex for the additional costs that they have to bear? Will he ensure that those additional costs will be met in future—provided of course that East Sussex county council is more efficient than it is at present?

Mr. Curry

It is a basic misunderstanding to assume that the area cost adjustment is just £1.5 billion off the top, from which, if it were not applied, everyone else would be able to benefit. If one did not have the present method, one would still have to calculate the additional cost in London and the south-east. That would clearly have to come out of the total settlement. So people must be cautious before they assume that there is a bonanza available for redistribution. I am determined that the method we use will be robust, stand up and compensate the real costs. The purpose of the inquiry is to identify actual costs, wherever they are incurred, in a fair way.

Ms Armstrong

Although the Minister has not yet established the review and identified members of the review body, will he ensure that they address not only the unfairnesses already mentioned, but those concerning the manner in which areas of deprivation are identified? Nobody, but nobody, accepts that Westminster is the fourth most deprived area in the country.

Mr. Curry

I am sorry that the independent report which said that is inconvenient for the hon. Lady, because it means that the hon. Member for Holborn and St. Pancras (Mr. Dobson) has spent all these years peddling something that is patently untrue. I am afraid that that is just hard luck; it is untrue.