HC Deb 19 February 1996 vol 272 cc148-56

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

1.2 am

Mr. Elliot Morley (Glanford and Scunthorpe)

I am grateful for the opportunity to raise tonight some severe problems that are causing great concern to my constituents in the area that is to be covered by the new unitary authority of North Lincolnshire, which will take over from Humberside county council from 1 April. The new unitary authority is starting life crippled and with one hand behind its back, and I want to explore that with the Minister tonight.

The Minister will be well aware that the current spend that the new North Lincolnshire authority will inherit from 1 April for the services provided by all of the various councils amounts to something like £134 million. Humberside was spending at its capping level and 6.1 per cent. above its standard spending assessment. The indicative budget has put North Lincolnshire at 12.3 per cent. above its SSA.

Frankly, I have not seen a clear explanation why, out of the four new unitary authorities, North Lincolnshire is being treated so badly. My information is that, out of all the new unitary authorities, North Lincolnshire is being treated the worst, and it certainly is the most disadvantaged of any of the new authorities. The implications of this budget are severe: they imply a 30 per cent. increase in council tax. The inherited budget that the new council was taking over was supported by a £7 million reserve contribution from the former councils.

The background to this is that the Government have assessed the level of spending appropriate for the new North Lincolnshire council as £110 million. The new council will be able to raise £124 million, with the 25 per cent. increase in council tax, but there will still be a £10 million shortfall in the budget. There will have to be cuts in services of 8.5 per cent. and in education of 7.5 per cent., where the council has, understandably, tried to minimise the impact of cuts on such an important core service. There is very little prospect of the new council receiving any significant reserves from the successor councils.

The situation has been made worse because some councils have taken the opportunity to spend their reserves before the new councils take over. For example, Glanford council spent £1 million on what it terms "aid to parishioners". I do not criticise the parish councils and the town councils that have taken up the offer of this £1 million through the aid to parishioners scheme.

However, most of that money is going towards improvements to village halls—which is a worthwhile and important thing—but I suspect that many people, if faced with a choice between improvements to leisure facilities and to village halls, and improvements to village schools, not losing a teacher or not increasing class sizes, would prefer to see the schools protected.

The £1 million that Glanford borough council spent on the aid to parishioners scheme could have been handed over to the new North Lincolnshire authority and reduced the projected cuts in education from 7.5 per cent. to 5 per cent.—a significant saving. The Under-Secretary of State for the Environment, the hon. Member for Croydon, Central (Sir P. Beresford), is aware of this, because he received a delegation from North Lincolnshire council, made up of all parties. I thank him for receiving that delegation, and for listening to what it had to say. I emphasise the all-party nature of our concerns about the way that North Lincolnshire has been treated.

That delegation included my colleague, the hon. Member for Brigg and Cleethorpes (Mr. Brown)—a Government Member, who sat alongside me and said the exact same things—the chief executive of the new authority, the leader of the Labour majority group, and the leader of the Conservative opposition. We were all there to say the same thing: that we felt that the North Lincolnshire authority was not being fairly treated in terms of the assessment of its spending, and of the grants it was receiving, and that it was very much at the mercy of the Department of the Environment in what it could do.

People are very confused about this. Humberside county council was foisted on people by the Government. Now the Government are upturning the situation, and many people do not believe that there would have been any support for this change if it had been made clear to them exactly what the implications of the abolition of Humberside were going to be: an increase in council tax of 25 per cent. and cuts across the board of 8 per cent.

Many of us who were concerned about the abolition of Humberside thought that the situation was going to be difficult, but I have to say that even people such as myself never thought that it was going to be as bad as this. Quite frankly, this situation is nothing less than a disaster in terms of maintaining services and the burden that people will have to pay in increased council tax.

The irony is that much of the pressure for change was orchestrated by the late Nicholas Ridley and the Tory-controlled Lincolnshire county council. There was also much misinformation put around at the time, not least about Hull and its alleged dominance and the fact that it was being subsidised from the south bank. It is now clear that the rural nature of North Lincolnshire and the way that rural areas are being discriminated against in terms of the standard spending assessment has told against it. Indeed, far from subsidising Hull, it is clear that a large element of subsidy is going from Hull to the south bank. That is partly why there have been such great difficulties.

For the sake of balance, I must point out that it is ironic that, although the council tax will be reduced in Hull under the calculations—with the abolition of Humberside—it is still expected to cut services, which seems bizarre to many of us watching from outside.

Hull, and to a lesser extent the north-east Lincolnshire councils, which have a greater urban content, have come out of the reorganisation far better than North Lincolnshire or the East Yorkshire borough. I am sure that the Minister will have seen a letter from his colleague, the hon. Member for Beverley (Mr. Cran), which emphasises how he feels about the fact that the new unitaries are being badly treated by the Government in the terms of the calculations.

The new council has certainly done its best to try to deal with the problem, and has already found savings of £3.5 million. It has one of the smallest and most efficient management structures of the new unitaries, and has been singled out for praise by the Audit Commission. It has little room for manoeuvre, however. In year one, it has to take over staff and services, and carry those commitments. It has no option but to implement the present increases in council tax and the cuts.

Although the new authority has decided to protect education as far as it can, through a lower cut, it is still a devastating blow for a fine education service, of which many of us who live in the area are very proud.

The projected cuts have implications in the loss of 121 teaching jobs, increases in class sizes, and a 12.5 per cent increase in school meal charges, and no new discretionary awards will be granted. That seems incredibly unreasonable at a time when education standards are a matter of public concern, and, indeed, of concern for the Government, and class sizes have been criticised by the Government's inspectors.

People are deeply angered by the cuts. They are well aware that the setting of grants and settlements is entirely the responsibility of the Department for Education and Employment. I am deeply angered about the cuts, particularly those in education—not only as a local Member of Parliament trying to represent the interests of my constituents, but as a parent with two children at local schools.

Glanford and Scunthorpe constituency is a close-knit and stable community. I have received hundreds of letters and petitions from the town and village communities—not only from people I serve, but from friends and acquaintances, and from both parents and governors associated with all the schools concerned.

At this stage, perhaps I should declare an interest, as my wife is a part-time teacher in one of the village schools. She is so angry about the situation that she could not even bring herself to attend the debate to listen to the arguments. Given the mood she is in, that is probably good news for the Minister.

I have here just a selection of the letters that I have received from communities in the area, from every village and every town and parish council—there are petitions and letters from every part of the constituency, from people who are concerned about the effect of the cuts on their schools.

Last Friday, I attended a packed meeting organised in Kirton in Lindsey church hall. Parents asked sensible and perceptive questions, and were deeply anxious about the impact on their junior school and also on Huntciffe comprehensive, which is one of the most over-subscribed schools in the region. There were parents from all over the rural area and from the town—parents from Berkeley infant school, which was named an outstanding school in the recent Office for Standards in Education report, and from St. Bede's, Crosby and many other schools that I do not have time to name.

All the people at the meeting had one thing in common—deep concern over the effect that the cuts will have on the future education of their children.

Only the Minister can rectify the situation; only the Department of the Environment can rectify it in terms of the grants and the way that the authority has been treated. It is not just an education issue; it could also affect the other services—there could be charges for home helps, the closure of social services homes, no capital investment, and reduced road maintenance. All the various services that the new unitary authority will inherit will be involved. It will also have implications for the private sector, which has many of the contracts and works alongside the local authority. It will also feel the impact of the cuts.

The Minister will probably say—and I have to acknowledge—that there has been transitional help from the Government. The Government have made £3.5 million capital borrowing available for the reorganisation costs. But that funding will all be taken up by the cost of the reorganisation, and there will be nothing in the budget to mitigate the problem in terms of maintaining service standards.

The Government are also providing some damping, which will put a ceiling of £3 a week on council tax rises. That in itself is a recognition of the problems that North Lincolnshire council faces, because I am not aware of any other unitary authority that has attracted that damping subsidy to try to keep down the enormous increase in council tax. That provides official confirmation of the problem facing the council.

There is a potential solution, which is what the council brought to the Minister. In a recent debate, I challenged his colleague, the Secretary of State for the Environment, to deal with the issue.

The council has suggested that it be allowed a supplementary credit approval to minimise the cuts over a three-year period, with tapered loans beginning with £6.5 million in the first year. I believe that that is a reasonable and sensible solution. It will not cost the Government anything; it will allow the council to start life on a stable basis rather than having one hand tied behind its back. It will allow the council time to find efficiency savings and to build up reserves—as a prudent and efficient council, North Lincolnshire gives every sign of doing so.

The new council deserves a chance to set up and operate in a proper way, so that it can maintain services at the correct standard. I strongly urge the Government and the Minister to consider the proposal. That is why tonight's debate is important, and that is the issue that I want the Minister to consider and to which I want him to respond. I know that the case has been put to him and his officials, and he will know that the suggestion has all-party support in the community. It has the backing of his party and his councillors.

In correspondence that I have received on the subject, the Government have tried to say that North Lincolnshire council is not a special case. I strongly refute that. North Lincolnshire council is being treated worst among the four new unitary authorities in Humberside, and, as far as I know, it has greater difficulty than any new unitary authority that has been set up. North Lincolnshire is a special case, and it requires special treatment.

It is unfair to blame the new councils for what the old Humberside council may or may not have done in the past. It is not just Humberside council's policies that the council is absorbing, but the policies of the district councils, which are under differing political control. It is a new council, and it is not responsible for what has happened in the past. It wants to do the best for the community it represents; it deserves the chance to do so.

The council suffers the worst effects from the abolition of Humberside; it deserves sympathetic consideration for that, and for the way in which the standard spending assessment has worked against it. I know that the issue of the SSA is far larger than we can possibly deal with in an Adjournment debate. I also know that the local government organisations have made a series of recommendations to the Government, and that there is a continuing debate about the best way to calculate and operate the SSA. All that will not help North Lincolnshire unitary authority. It needs help now, because it starts life on 1 April and time is running short.

In a debate on the setting of the rate, I obtained a promise from the Secretary of State that he would consider some of the points that I had raised with him in an intervention. Straight after that debate, I sent him a personal letter, which was the nearest thing that I have ever written to a begging letter. I have yet to receive a reply. It would be nice if the Minister gave me a positive reply tonight. There is a solution. I ask the Minister please, please, to give this issue his most sympathetic consideration.

I am sure that the Minister does not want me to beg him to do something about this disastrous situation as we near 1 April, but surely he will recognise and consider the dilemma of the people affected—the people who wrote all the letters and who are concerned about the effect on their children. They want their children to get the best possible deal, the elderly looked after, good-quality services, and the council to be given a proper start in life. Local people in North Lincolnshire deserve a better deal than they are getting under the present arrangements, and the Minister is the only person who can do something about that.

1.20 am
The Parliamentary Under-Secretary of State for the Environment (Sir Paul Beresford)

I congratulate the hon. Member for Glanford and Scunthorpe (Mr. Morley) on securing this Adjournment debate, in spite of the hour, and the fact that he has left me only a few minutes to reply. Of course, he has taken one side of the argument. The matter is not in our hands alone, and, in fact, we have reacted. He is correct to say that we met a deputation that included my hon. Friend the Member for Brigg and Cleethorpes (Mr. Brown) on this matter, which we took extremely seriously.

As the hon. Gentleman said, we accepted the proposal to abolish Humberside county council and to set up four unitary authorities, of which North Lincolnshire is one. As well as inheriting county functions from Humberside, it will take over district functions from the boroughs of Scunthorpe, Glanford and, in the area of the Isle of Axholme, Boothferry. Reorganisation will take place on 1 April this year, but there has been a shadow authority since last May.

I accept that, inevitably, there will be difficulties in the transition from one system to another. That is true across the country where such steps have been taken. We have taken steps to help North Lincolnshire and the other reorganised authorities to deal with those problems.

When a county is abolished and its responsibilities transferred to successor authorities, we need to work out a base budget for each new authority that must reflect its share of the county's budget and the pattern of spending in the area. We have made a similar calculation if the area of a district is split. This disaggregated budget—known as the notional amount—provides a baseline for the new authority as it prepares to take over its new functions, and serves as the capping baseline for the year after reorganisation.

The budget disaggregation exercise proved straightforward in Humberside and was agreed locally. North Lincolnshire's inherited 1995–96 budget is about £118.6 million. That was confirmed when the House agreed the relevant notional amounts report on 31 January. We also worked out what each authority's standard spending assessment—SSA—would have been in 1995–96 on the reorganised boundaries. North Lincolnshire's indicative 1995–96 SSA was £105.7 million.

Those figures show that the county had been spending more in North Lincolnshire relative to our assessment of its need to spend. In effect, it had been cross-subsidising services in one area at the expense of taxpayers in another.

The figures allowed us to work out the direct council tax effect of reorganisation—essentially, the difference between what council taxes were in each borough and what they would have been in 1995–96 on reorganised boundaries. That shows significant increases in the three areas that make up North Lincolnshire: an increase of £136 at band D for taxpayers in Scunthorpe; £161 for Glanford; and £166 for the Isle of Axholme area of Boothferry.

We have decided to provide transitional assistance to council tax payers who face unacceptable tax increases directly attributable to reorganisation. We will damp increases that exceed a threshold of £104 at band D—£2 a week. I stress the words "directly attributable to reorganisation". We do not propose to damp the consequences of an authority's own spending decisions, which I think is understandable.

North Lincolnshire is the only authority to qualify for that transitional reduction scheme. It will receive an additional grant of £2.18 million in 1996–97 to benefit local taxpayers. Our 1996–97 grant settlement for North Lincolnshire gives it an SSA of about £110 million-an increase of 2.4 per cent. over the equivalent figure for 1995–96.

Like many authorities, North Lincolnshire has argued that its SSA is too low. It argues, in particular, that the SSA somehow fails to provide for the higher concentration of need in Scunthorpe compared with the more rural parts of its area. However, the position is that the SSA calculation takes account of the aggregate needs of the area as a whole, both rural and urban.

It is for North Lincolnshire to decide the level of its budget for 1996–97, and it is not required to budget at SSA. Indeed, our provisional capping rules would allow it to set a budget as high as £123.8 million. After allowing for care in the community changes, that would mean an increase of 2.8 per cent. over 1995–96. If it budgeted at our provisional cap, North Lincolnshire would be 12.5 per cent. above its SSA—the level which our capping rules consider "absolutely excessive". That is very high, and it offers considerable scope for the authority to make savings over time.

We anticipate that the reorganised authorities will use the opportunity to cut costs and to improve efficiency—and they accept that. However, we recognise that there may be some one-off, transitional costs associated with reorganisation. So we have put in place a scheme for authorities to bid for supplementary credit approvals, allowing them to defer the impact of those transitional costs until the associated savings are achieved. We made £50 million available under the scheme for 1995–96, and a further £100 million for 1996–97.

North Lincolnshire bid for £5.6 million for 1996–97, including just more than £1 million for redundancy costs. Before Christmas, we allocated it £3.5 million, which includes a ring-fenced £1 million for redundancy. That makes a cumulative allocation of £5.3 million. The authority submitted a bid for a further approval of £6.55 million. As the hon. Gentleman may be aware, North Lincolnshire has suggested looking at capitalising some of the spending, and that is being considered at this stage. However, the bid for £6.55 million is additional to the support already available.

I think that the hon. Gentleman will accept that North Lincolnshire is a new authority, and as such, it has the chance to do things differently. It need not be constrained by the decisions and practices of its predecessors. I know from personal experience—in taking over from the Greater London council and then the Inner London education authority—that there is room for fast action to make considerable savings, rather than cuts, and that the reorganisation offers scope to make significant savings, which will not be as painful as the hon. Gentleman suggests. In light of that, I do not feel that there are exceptional local circumstances that would justify giving North Lincolnshire yet more by way of SSA.

Mr. Morley

I do not dispute the fact that the new authority may well be able to find efficiency savings—the authority itself does not dispute that fact. The issue at stake is that, from day one, year one, the authority must take over the staffing and the services from the predecessor authorities. Even according to the Department of the Environment's guidelines, 90 per cent. of staff must be taken over. The scope for finding savings in year one is very limited. Those savings may well be achieved in year two, year three and subsequently, but the real crisis will occur on 1 April.

Increased council borrowing would allow the authority to mitigate that problem, find the savings and repay the borrowed money to the Department of the Environment over time. That seems to be a perfectly reasonable and sensible policy, and I am sure that the Minister will agree that the authority cannot find savings from day one, year one.

Sir Paul Beresford

I do not agree with the hon. Gentleman—and I speak from personal experience. There has been a shadow authority since May this year, which has done the planning to allow the new authority to move forward. It will inherit control from its predecessors, some of whose expenditure was quite excessive.

We have recognised its difficulty—that is why the authority has an SSA of £718 per head, and why the cap has been set at 12.5 per cent. above SSA. That is why it has damping of £2.2 million—it is the only authority which has it—and that is why the supplementary credit approvals have already been given for 1995–96 at £1.8 million and for 1996–97 at £3.5 million. We accept that there have been difficulties; they have been recognised. We are considering the argument made by North East Lincolnshire. If we accept that, it may be acceptable for North Lincolnshire.

Ultimately, however, we have considered the matter carefully and produced considerable funds. The opportunity exists to make savings from an early stage, and I am sure that they can be achieved. I say that having been, as a council leader, through two such processes—admittedly in profligate authorities, but not quite in the same class as those of Humberside.

I am sure that, when it sets its mind to it, the new local authority will be extremely successful; it will produce the services, it will produce savings, it can do it efficiently, and it can start soon. Approximately 80 per cent. of the staffing level will pass over as a standard order under TUPE-type conditions, but there is ample opportunity for the authority to make savings and reorganisations very early, especially—to leave the chalk face and the social services face—in administration behind the scenes. I am confident that the councillors will be able to do so, in spite of the scare tactics that have been displayed this morning.

Question put and agreed to.

Adjourned accordingly at half-past One o'clock.