§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Bates.]10.12 pm
§ Mr. Peter Hain (Neath)
When local government reorganisation happened in Wales, we were promised by the Secretary of State a "seamless transition" of services. That promise, in respect of Neath, Port Talbot especially and in respect of some other councils in Wales, has been broken. We have been especially badly hit by the budget settlement this past year in Neath, Port Talbot, and if things continue as they are, next year will be calamitous. Why is this?
First, the standing spending assessment formula is fundamentally flawed. It was devised in the early 1980s and has been made obsolete by the reorganisation of local government in Wales and the creation of 22 new unitary authorities. It is no longer appropriate, relevant or indeed accurate in relation to meeting need and delivering services. A new measure of need must be found quickly.
In reply to my question on 17 June, the Secretary of State said that Neath, Port Talbot received more revenue support grant per capita than the Welsh average, which was greater than the English average. However, that is a misleading comparison. The Welsh average should be greater than the English average, because gross domestic product in Wales is less and need is greater.
In Neath, Port Talbot, GDP per head is below the Welsh average, let alone the British average, and need is much greater. Services have to be provided to meet that need. If there were a proper formula that more accurately measured need, Neath, Port Talbot would receive an entirely different settlement—one that was not in any sense excessive, but met local requirements. Until such a fairer formula is found—and I appeal to the Welsh Office and to the Minister in particular to find one in time for next year's settlement—council tax payers will continue to be levied at an extremely high level.
Under the standard spending assessment formula, council tax payers should be protected through the damping scheme to avoid further crippling increases in their bills caused entirely by the inappropriateness of that formula. If there is any doubt about that, let us consider what has happened to the new Neath, Port Talbot county borough council compared with Swansea, the other half of what was West Glamorgan county council.
Whereas Neath, Port Talbot faced a council tax increase of 49 per cent. before damping, Swansea faced an increase of just 11 per cent. After damping, the increase was 25 per cent. in Neath, Port Talbot and 4.5 per cent. in Swansea. In no way can that disparity be justified, because the new authorities were simply continuing the existing level of provision of services in the area that had been covered by the former West Glamorgan county council.
It is absolutely vital that the Welsh Office recognises that discrimination. I am not suggesting that it was deliberate, and I hope the Minister will respond sympathetically to my special plea on behalf of Neath, Port Talbot, which is by far the most deprived part of former West Glamorgan.
256 I do not understand how the Minister can justify the fact that some Trebanos residents pays £90 more council tax than their neighbours on the other side of the village because half the village is in Swansea and the other half is in Neath, Port Talbot, when, until March, they paid exactly the same council tax for existing levels of service. The services have not increased. The whole system is in total disarray, and has been discredited. Proper protection should have been provided, and I hope it will be for next year.
The damping scheme is grossly inadequate. The Welsh Office considers the 25 per cent. reasonable, although it is some eight times greater than the rate of inflation. There is no way in which it can be justified. The Minister shakes his head, and I am glad that he agrees with me.
Neath, Port Talbot is not a profligate council, delivering services on an expansive basis that cannot be justified. It has simply continued the existing level of services. Why should there be such an increase when the Welsh Office promised a seamless transition?
Neath, Port Talbot has been forced into a difficult position through no fault of its own. In 1996–97, it increased its spending over 1995–96 by the maximum permitted 3 per cent. excluding community care. Virtually all other local authorities did the same, but Neath, Port Talbot faced a 49 per cent. increase in council tax, which was reduced to 25 per cent. after damping. That had nothing to do with the council. It is not as if Neath increased spending by some vast amount. It has operated within the maximum 3 per cent. determined by the Welsh Office.
I consider that either the damping scheme must be phased out and the council tax increase fully protected until a proper review of the SSA formula has been completed, or special provision, for which I am appealing to the Minister tonight, should be provided, if not for this year—I accept that it is probably too late—at least for next year. I hope that the review of the SSA formula will correct the enormous imbalance in the distribution of revenue support grant.
If the damping grant is phased out, together with the potential reduction in support grant per capita levels to match those in England, council tax bills will massively increase next year. That has been hinted at by some Conservative party sources. There could be a further 25 per cent. council tax increase next year, on top of the already savage increase this year, which will hit local people severely and be far beyond their ability to pay.
The capping limits are far too restrictive and do not recognise the proper need to spend. For example, in 1996–97, capping limits were set at 3 per cent. above the previous year's budget excluding community care transfers. That 3 per cent. was sufficient only to cover staff pay awards. It did not reflect other spending pressures, which arise as a result of the administrative cost of creating 22 new education and social services departments in Wales compared with the previous eight; the community care review; the effect of demographic changes; the Carers (Recognition and Services) Act 1995; costs of community mental health and people with learning disabilities; the landfill tax; and changes to the three for two school transport rule. Many of those pressures are entirely outside the local authority's control. On top of that, the Adrienne Jones child care report on services in north Wales is expected to lead to increased pressure for extra provision in social services budgets across Wales.
257 I hope that the Minister, who I know understands these issues, does not simply give us the same tired, old, almost flippant response that all we need is more efficiency. Efficiency savings have been pursued by Neath, Port Talbot, and are being by the new authority. There is no doubt that it can cut some of the fat off the edges, but such savings are minuscule compared with the huge cuts and council tax increases that we have already had to endure, and which could be worse next year.
Another problem concerns supplementary credit approvals. Although the Welsh Office has rightly recognised that councils need additional help to finance new items such as refurbished administrative building, IT provision, rationalisation of new telecommunications facilities and so on, and that councils can borrow to fund them, it has not allowed for loan charges within the capping limits. Unless that is changed, Neath, Port Talbot will face an extra bill of £250,000 in loan charges simply as a result of the extra borrowing that the Welsh Office has authorised. If the Welsh Office is authorising that extra borrowing, it should surely allow it to be funded under the capping limits. The capping limits should therefore be increased.
For the benefit of the House, I should like to refer to some of the extensive cuts that have occurred. For example, in the education delegated budgets, there will be 35 fewer teaching posts and five fewer non-teaching posts in the county borough by September—even though an extra 160 pupils are anticipated. In other words, pupil numbers are going up and the number of teachers is going down. How can that possibly address what I believe is a mutual desire to increase standards in local schools?
It is possible that some schools will not have sufficient funds to meet unforeseen contingencies during the remainder of the financial year. Class sizes will increase at secondary and primary level. I am told that, at secondary level, there will be an impact on subject choice offered to pupils at key stages 3 and 4. Nobody wants that—certainly nobody in the county borough. That is being forced on them.
Cuts will affect leisure facilities. It is being required that increased charges are to be levied on schools where previously provision was either free or there was a nominal charge. An extra £180,000 has to be found so that local schools can use swimming pools, playing fields, and so on. That is intolerable. We want to encourage pupils to take part in more sport and to enjoy swimming, but that will be not possible this year.
The peripatetic music budget has been cut by £150,000. I am sure that my right hon. and learned Friend the Member for Aberavon (Mr. Morris) will agree that we are proud of the music provision in our schools. As someone who came to the area from London six years ago, I have been amazed at the level of music provision in local schools, which I see at concerts in my local secondary schools every year. But the budget is being cut.
The price of school meals has been increased, and reductions in youth and adult services will hit the community. At a time when youngsters are roaming the streets with nothing to do, we ought to be encouraging extra youth facilities and not cutting them. The reduction in the special educational needs budget has been severe, and there have been significant reductions in office staff.
258 The library service is being cut in terms of opening hours, and we face library closures. 7 Staff reductions in the library service are also being considered. Social services must deal with a £2 million cut in their budget, which has reduced the authority's capacity to place, for example, victims of sexual abuse in specialist accommodation. There has been a £500,000 cut in community care, and cuts have been made in mental health services, in home care support and in staffing levels generally.
As I said, leisure services have been cut. One of those cuts can be illustrated perfectly by the example of a family living in Croeserw in the Afan valley in the constituency of my right hon. and learned Friend the Member for Aberavon, where the local swimming pool was closed because the council could not afford to keep it open. The family of four wanted to swim, but had no transport. They had to spend more than two hours travelling by bus from home to the aquadome at Aberavon beach, which cost them £12.50, and it cost them £7.50 to get in—all this when they could have gone to their local swimming pool. That is intolerable in an area of low incomes and high unemployment.
The Tonmawr 2000 scheme has been developed by local people and has attracted grants form the Welsh Office, for which we are grateful. It has been visited by three successive Secretaries of State for Wales, including the present incumbent. Despite this, and despite its capital funding, there is insufficient revenue funding to keep it open. It is £30,000 short, and it will have to close in August. Technical services are being cut, as are concessionary bus fares for pensioners, transport services for schools and transport services for the valleys—the last are desperately needed in areas where car ownership is very low.
All sorts of direct services are being cut, and next year—I have described what we are facing this year— could be absolutely catastrophic. I appeal to the Minister to look at the situation in Neath, Port Talbot, where masses of teachers could be made redundant next year. Local authority estimates suggest that, on present trends, 60 to 70 school-based redundancies are possible, and 130 to 170 teachers could be made redundant if there is not a decent provision next year.
I appeal to the Minister to be far more generous. Unless he is, social services will be cut even more savagely, as will school services and budgets. Reserves will be exhausted, and leisure services, direct services and maintenance of roads and other facilities will be cut.
This is not an attempt to make party political points or to bring scare stories into the Chamber. I am not making a ritual plea for extra spending from a profligate Labour council. This council has taken over existing service provision in areas of high unemployment and deprivation, and has sought to cope with it. Neath, Port Talbot county borough council is a victim of special circumstances, and has been a victim of discrimination in the way in which the funding formula has been worked out. I urge the Minister to respond positively to the plea, and to solve the problem for next year.
§ Mr. John Morris (Aberavon)
As I am anxious to allow the Minister time to reply, I will say only a few words in support of the able speech by my hon. Friend the Member for Neath (Mr. Hain) on behalf of his and my constituents.
259 I anticipated in my speech to the Welsh Grand Committee on 29 November the dire state in which our constituents would find themselves if nothing was changed. I spoke to the Secretary of State on the eve of the announcement—unfortunately, to no avail. The situation has been revealed in the past few months by the amounts that have had to be levied in tax increases, which have been wholly disproportionate for that part of West Glamorgan that has gone to Swansea and that part that has gone to Neath, Port Talbot and Upper Lliw.
The situation is worse than we anticipated. On top of that, the new council has had to slash education and other social services and the balances have had to be used. That cannot be repeated. The formula for distribution will have to be changed substantially. That has had to be done in the past; I had to do it in my time. I invite the Minister and the Secretary of State to go back to the drawing board to get it right for the future.
§ The Parliamentary Under-Secretary of State for Wales (Mr. Gwilym Jones)
I acknowledge the courteous contribution of the right hon. and learned Member for Aberavon (Mr. Morris). I am glad to have the opportunity to respond to the hon. Member for Neath (Mr. Hain). I will try to set the record straight on Neath, Port Talbot's funding.
Naturally, there has been considerable interest both inside and outside the House over the past few months in the Welsh local government revenue settlement. In the limited time available, I do not intend to dwell on what has already been well rehearsed. Tough choices have to be made, but it is a matter of record that I consider it a reasonable settlement that furthers the Government's aim of restraining public expenditure while providing a reasonable spending opportunity for local government.
In that, we are asking no more of local government than of other parts of the public sector in Wales. It is fair that local government should contribute to such restraint, and always be mindful of more cost-effective ways of carrying out its functions.
I would, however, like to recap the main features of the settlement, to put Neath, Port Talbot's position into context. Total standard spending has increased by 3.1 per cent. After provision for the police and specific grants are excluded, the level of unhypothecated funding available to local authorities through standard spending assessments has increased by 2.9 per cent. Both those levels of increase are above the level of inflation, which is forecast to remain low.
The support that we are providing through aggregate external finance towards that spending has increased by 2.8 per cent. when the additional £15.8 million that we are providing in council tax reduction grant is taken into account. In the past, local government has argued for greater flexibility to raise revenue from local taxpayers, to whom it is accountable.
In addition to the settlement, we have provided Neath, Port Talbot with resources to cover the transitional cost of local government reorganisation. In the last financial year, the Neath, Port Talbot shadow authority was allocated £950,000 in special grant, with a supplementary credit approval of £900,000. The authority has been allocated a further supplementary credit approval of 260 £980,000 this year. That demonstrates the Government's commitment to ensuring the smooth transition to the new local government structure.
Local government has, I am afraid, historically spent above the level of its standard spending assessment, financing the additional spending through local taxation, and, to a lesser extent, the use of reserves. In appreciation of that, provisional capping principles allowed local authorities the opportunity to set their expenditure at a specified percentage over the preceding year's spending level.
This year, capping allowed all Welsh local authorities to increase last year's spending by 3 per cent., if they insisted. I should add that the £25.2 million in new community care funding that we are providing this year is not covered by capping. With that, the increase in budgets implied by capping principles is around 4 per cent.
Against such a background, I cannot accept the assertion of the hon. Member for Neath that Neath, Port Talbot has been discriminated against. Its SSA of £120.5 million represents an increase of 2.7 per cent. on its notional SSA for last year. That is slightly below the average increase because of a reduction in the authority's share of the total number of school pupils in Wales, but at £860 per head, its SSA is £14 per head above the Welsh average.
As the hon. Member for Neath knows, the Welsh settlement provides local government with more than £60 per head more in spending power than is provided for English authorities. The new unitary authorities' SSAs and revenue support grant entitlements were calculated using a distribution formula developed in consultation with local government over the past two years. It was ratified by the Welsh Consultative Council on Local Government Finance last November as the best objective methodology available for distributing resources.
Work on the distribution formula is an example of co-operation between the Welsh Office and local government, which we all find most desirable. That has been the case since the start of present Welsh local government finance arrangements in 1981–82. I hope that co-operation will continue to be the cornerstone of the work, not least in that both sides acknowledge the need for improvement of the formula to reflect more closely the most up-to-date position.
My right hon. Friend and I are anxious to see greater local government involvement in the settlement process. We agreed to the request of the Welsh Local Government Association that elected members should, for the first time, participate in the working groups on revenue and capital spending. The local authority representatives on the distribution formula working group include the leader and the chief executive of Neath, Port Talbot.
However, all this work has been severely disrupted by the association's boycott of discussions with the Welsh Office. I fail to see how the association expects to make the case for its spending requirements 1997–98 if it refuses to talk to me and my right hon. Friend the Secretary of State and our officials, but that is a matter for it. I have some hopes that progress can be made in discussing the distribution formula for 1997–98. We would welcome local government views on ways in which the formula could be strengthened.
Before I turn to the concern that the hon. Member expressed about council tax levels, I should like to correct a misconception. Both this evening and during Welsh 261 Questions last week, he referred to council tax payers in one half of Trebanos paying £90 a year more than those in the other half. That is not the case. The whole of Trebanos is in the community of Pontardawe, which is wholly within the county borough of Neath, Port Talbot.
The level of council tax in a particular area depends on the extent to which authorities have chosen to spend above the Government's recommended maximum, because all spending above SSA is funded from council tax. It has always been the case that communities in close proximity to each other but within different local authority areas can have significantly different council tax levels. The considerations that affect council tax levels in Neath, Port Talbot are essentially the spending decisions of the authority for 1996–97. Inevitably, the spending patterns inherited from the council's predecessor authorities will have some influence.
Provisional capping principles give Neath, Port Talbot the opportunity to set expenditure levels 3.9 per cent. above its 1995–96 spending level. The authority took full advantage of this opportunity, and I trust that, in doing so, it took account of the effect on council tax payers.
The level of expenditure inherited by the authority is reflected in its 1995–96 notional budget amount, which was debated and approved by the House on 8 February. The notional amounts for all the new unitary authorities were derived from a joint Welsh Office/local government exercise to disaggregate the 1995–96 budgets of predecessor authorities on a unitary authority basis.
A parallel exercise was undertaken to disaggregate SSAs. The new authorities were consulted on the figures, which were generally accepted by them as a fair reflection of spending patterns. Certainly this was the case for Neath, Port Talbot. The disaggregated budget figures showed that West Glamorgan county council spent proportionately more in the Neath, Port Talbot area than elsewhere in West Glamorgan. This spending pattern has been preserved in Neath, Port Talbot's notional amount and reflected in the authority's capping limit for 1996–97.
The hon. Member for Neath argued that the authority's SSA and revenue support grant allocation is inadequate to support the chosen level of spending, and that the Government have an obligation to intervene to reduce council taxes. In response to that naive argument, I have to tell him that it is essential that the SSA distribution formula is based on objective indicators of need, which apply consistently to all local authorities.
Any distribution system which reflected the discretionary spending decisions of individual local authorities would result in a discredited free-for-all. The principle of a sound, objective basis for distribution is one which I am sure local government will continue to endorse. It has certainly been one of its key priorities in a decade and a half of co-operation on formula work.
Inherited levels of spending are a matter of fact, and the costs involved have been derived from the disaggregation exercise. The exercise certainly does not imply acceptance by the Government in terms of the appropriateness of spending levels. Our views of recommended maximum levels of expenditure are reflected in total standard spending for Welsh authorities and individual SSAs.
262 Capping limits exist in recognition that local authorities may prefer to spend at above the standard spending assessment. They are not spending targets set by Government. It is for local authorities to make their own decisions in the light of local circumstances.
We have always recognised that the disaggregation of 1995–96 budgets and SSAs to unitary authority level could result in significant increases in council tax in some instances. We provided £30.1 million in council tax reduction grant from within aggregate external finance to ensure that no council tax payer in Wales faced an increase in council tax as a result of disaggregation.
When it became clear that the majority of local authorities in Wales intended to set budget requirements at, or very close to, their capping limits, we announced a further £15.8 million in council tax reduction grant to limit increases to 25 per cent. I emphasise, as the hon. Gentleman picked up on earlier, that it was not an approval for council taxes to go up by 25 per cent.—it was an effort to alleviate the burden on council tax payers and to try to limit it to no more than 25 per cent.
§ Mr. Jones
If the hon. Gentleman had been listening earlier, he would have heard me explain that it was because West Glamorgan county council had a significantly greater spend in the area of Neath, Port Talbot. That has been reflected in the disaggregation of the spending—the exercises were conducted jointly between the Welsh Office and local government, and agreed between the two.
Neath, Port Talbot's reduction grant entitlement is £3.8 million. As the hon. Gentleman acknowledges, council tax increases in his authority's area would have been far greater without this support. I refute the view that the settlement has discriminated against Neath, Port Talbot. The authority has received a reasonable settlement within the overall public expenditure level. It has also benefited from a significant amount of council tax reduction grant.
Neath, Port Talbot, like other local authorities and public sector organisations in Wales, must manage its priorities within the available resources. I believe that those resources are sufficient for them to do the job, and that they and the hon. Gentleman should instead have a proper regard for the burden they represent for the taxpayer.
Alternatively, we should take the hon. Gentleman's arguments and what has happened in areas such as Neath, Port Talbot, as an awful warning of what would happen to taxation generally if we ever have a Labour Government—by their actions shall ye know them. The hon. Gentleman is striking testimony that there is not new Labour in Wales, as my right hon. Friend the Member for Wokingham (Mr. Redwood) might have said. I prefer the less subtle maxim: you can't teach old dinosaurs new tricks.
§ Question put and agreed to.
§ Adjourned accordingly at eighteen minutes to Eleven o'clock.