HC Deb 26 February 1998 vol 307 cc597-604

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

10.9 pm

Mr. Nick Harvey (North Devon)

I am grateful for the opportunity to raise the important matter of this year's local government settlement for Devon and Cornwall. The settlement will impact on the lives of all my constituents and those of my hon. Friends in the Chamber and every other person living in Devon and Cornwall.

It is worth noting that, although local authorities in many parts of the country have faced a tough financial settlement this year and have had to raise council taxes above the rate of inflation, the people of Devon and Cornwall are living in the two poorest counties in England and are, therefore, the least able to afford that. For example, in the newly shrunken Devon county council—after reorganisation it will no longer include Plymouth and Torbay—the increases will average about 20 per cent.

There is plenty of evidence that people are happy to pay more either in local government taxation or national taxation if they are getting better services and better value for money. However, no such compensation can be offered to them when receiving their bills this year. The fact is made worse by the cuts that will have to take place in many local government services throughout the two counties. Devon has had to make reductions in its service budgets of £8.5 million and Cornwall has had to make reductions of £7 million.

Devon has had the additional complication of having to cope with the reorganisation—slimming down after the loss of Torbay and Plymouth. Many of its problems in setting its budget for the coming year are in no small part due to the costs incurred through that reorganisation process. That is highlighted by the disaggregation of last year's spending in Devon being considerably different from the disaggregation of the coming year's standard spending assessment. That has left a £13 million shortfall which, shared out between the council tax payers in Devon, means that they will each be paying an extra £52—that is just to cope with the reorganisation.

One of the biggest regrets that I have is that there has not been a transitional relief programme such as that provided for Scotland when it went through its local government reorganisation, to cope with the costs that the county council has had.

The Government have allowed the capping limit this year to rise by £817,000 because they accept that the education administration costs should be based on the number of schools, not on the number of pupils. That is an important point which should be borne in mind for the future in terms of any review of the formulae used to divide funds being allocated to local authorities.

Mr. John Burnett (Torridge and West Devon)

I wonder if my hon. Friend has considered whether it would assist the funding for Devon and Cornwall if the formulae for apportioning central Government funds between different county councils were made more equitable. I am referring specifically to a sparsity factor as it affects school transport. Does my hon. Friend agree that if that were added to the formulae, it would assist Devon and Cornwall county councils?

Mr. Harvey

I have no doubt that further work needs to be done in reviewing the formulae used for the distribution of funds. I am grateful that the Government have acknowledged some of the difficulties, but there is no doubt that there is a need for further significant work to be done in revising the formulae used. I welcome the fact that the Secretary of State has said that there will be further work in this area and I am convinced that it is necessary.

My hon. Friend the Member for Torridge and West Devon (Mr. Burnett) mentioned school transport. It would be a very good thing if the cost of school transport were to come to local authorities through their highways and transportation budgets and not to be seen as a function of education. Doing so would enable transport and highway authorities far better to plan the transportation that they must provide across many different service areas and the costs incurred and tasks involved in managing their highways network.

Education costs are a particular problem in two counties that have so many small schools. Costs are much higher, for example, in keeping 300 pupils in six different small schools than in having them in one larger school. In Cornwall, one in 10 primary schools has fewer than 50 pupils, and two thirds of them have fewer than 200 pupils.

The discretionary parts of the education budget will suffer in both counties. In Devon, post-16 transport will start costing more because it is a discretionary part of the budget. Transport to denominational schools also will suffer. That issue has been cropping up not only in my postbag but in those of other hon. Members.

Other services also will be affected by the rurality factor mentioned by my hon. Friend the Member for Torridge and West Devon—such as maintaining fire services that are able to reach people across the many miles of our road network, and road maintenance. In the county of Cornwall, traffic volume has increased annually by an average of 3 per cent., yet spending on highway maintenance has fallen in real terms by 14 per cent. Moreover, the impact of tourism, particularly in Cornwall, has not been considered adequately.

Mr. Adrian Sanders (Torbay)

I am glad that my hon. Friend has mentioned the sparsity factor in the formula. However, one other aspect of the formula has impacted very heavily on some resort towns in Devon and Cornwall—the part that recognises bed nights and people who move into one area from another. That part of the formula has gone. The review has therefore begun already, as decisions have been taken that have adversely affected constituencies such as mine. The remaining part of the review, which has not yet been conducted, will have to re-examine that matter in the light of the sparsity factor. It has affected severely our ability to meet discretionary spending, although we are spending up to cap and will have the lowest council tax in Devon. We still suffer from cuts.

Mr. Harvey

My hon. Friend makes an interesting point. I do not think that many hon. Members will weep about the affect that that change in the formula has had on the city of Westminster—not even hon. Members who pay council tax on flats in London that we use so that we can attend to our parliamentary duties. In—quite rightly—doing something about the situation in the City of Westminster, the Government have caused a knock-on effect in areas such as those of my hon. Friend. The matter will be another priority for any review. I very much hope that the tourism element of the economies of Devon and Cornwall will be given due weight, and that the point that he raised will receive the recognition that it deserves.

The issue of rural deprivation also is in need of serious attention. There is deprivation in both rural and urban areas, and one certainly would not want to suggest that the rural deprivation problem is qualitatively or quantitatively different from that of urban deprivation. Nevertheless, some of the criteria that are used in assessing deprivation fail to recognise the differences between living in the countryside and living in towns. Although some of the measurements used appear to be appropriate, they are not when considering people who dwell in rural areas.

For many years, we have been bedevilled, for example, by the use of car ownership as a measure of deprivation. If people live in particularly remote rural areas, it does not matter how poor they are, because they will simply have to have some type of car. People may not have a particularly elegant or modern car, but they will have a car of some description, as it is the only way of getting around. Simplistic measures of deprivation can therefore distort the emerging picture. That is not unique to local government finance. It is astonishing that although the south-west region has 9 per cent. of the population, it gets only 3 per cent. of the total national spend under the single regeneration budget. That is because of exactly the sort of problems that have bedevilled the local government formula. It is the same in the health service. We need a review whose impact will be felt across all public services, not only those delivered by local government.

Many of the other problems that have to be dealt with have been inherited from the previous Conservative Government and, indeed, from the Conservative administrations of many shire counties. For years, they failed to see the necessity, and still fail to see the necessity, of providing adequate services in shire areas. Perhaps some Conservative Members would be here to participate in the debate if—

Mr. David Drew (Stroud)

Look behind you.

Mr. Harvey

Oh, I am delighted that there is one Conservative here, but I regret that he does not represent Devon or Cornwall.

The record of Conservatives in running counties shows that they have not spent adequately. Part of the funding formula is based on the historic spending pattern. By the time more enlightened administrations, whether Liberal Democrat, Independent, Labour or a mixture, finally won control of some of those authorities, it was against a background of central Government by clamping down and not allowing them the latitude that their predecessors had. That simply perpetuated the failure of local Conservative administrations to provide proper local services.

This year, central Government's contribution to Devon's overall spend has fallen from 73 to 67 per cent. That reduction is equivalent to £27 million, slightly more than the increase in council tax receipts. In other words, if the Government's support this year had been sustained at the same level, the council tax would not have had to go up at all, and band D tax payers would have been saved increases of £92.

We quite understand the Government's position. We have heard in this context, as in many other contexts, about the need for responsible stewardship of the public finances and the need to avoid boom and bust. I am sure that we shall have the benefit of hearing those points again this evening. No one is calling for reckless spending, but it was with great interest that I heard the Prime Minister acknowledge during Prime Minister's questions last Wednesday that the Conservative's spending plans had been wholly unrealistic. It seems highly unlikely that, had they won the general election last year, they would have stuck to them, so I implore the new Government not to feel that they should do so.

Last year, the new Government set in train various tax measures in the Budget which, as this Parliament unfolds, will result in a huge improvement in public finances. I am sure—at least, I hope—that the local government settlements made later in this Parliament will be very much more generous and that that will result in council tax payers getting much better value for money. However, for children receiving their education now, there is but one chance. It will be too late to hear that the education system in the two counties has been much better funded in years to come. One hesitates to say it, but, for those at the other end of the age spectrum who rely on social services, it will literally be too late if the improvements come in two or three years' time.

On Sunday, perhaps as many as 30,000 people are expected to come up from Devon and Cornwall to take part in the countryside march. I understand only too well that some of them are motivated by the hunting debate, while the farmers, quite rightly, will want to highlight the plight of their industry, but many of the people taking part in the demonstration will do so out of a sense of frustration with the lot of the country dweller. Despite the hopes of the Conservative party, they will not for one moment think that all the problems started on 1 May last year.

Many people to whom I have spoken understand only too clearly that the problems are the legacy of 18 years of disastrous policies which stripped the countryside of many of the services on which country dwellers depend. People have seen rural transport fall away, the number of village schools decline and so on. 1 hope that the new Government will listen to what is being said and not believe that the marchers are concerned only about hunting. I hope, too, that the Government will recognise the plea from the heart of many who live in rural areas that something absolutely has to be done to improve their lot. All councils face problems, not only because of the Conservative Government's legacy, but because of the new Government's stance on public finances. People did not elect Labour to carry out the Tory spending cuts, and people in Devon and Cornwall should not be expected to pay so dearly in the coming year for an even lower level of service than they were offered last year.

10.26 pm
The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Mr. Nick Raynsford)

I congratulate the hon. Member for North Devon (Mr. Harvey) on securing the debate and on taking the opportunity to plead most effectively the case of his county and the adjoining county of Cornwall. Before I come to specific issues that he raised, it would be appropriate to make a few general points about the Government's approach to relations between central and local government—indeed, the hon. Gentleman anticipated that I would make a few such remarks.

The Government have a new agenda for Britain's future, and a vision for local government's place in that future. We want to reinvigorate local government in ways that encourage increased democracy, so that local people can have more of a say in their council's affairs. We want increased autonomy, so that authorities have more freedom to take their own decisions, and increased accountability, whereby elected representatives are more visibly accountable for their actions. We also want increased emphasis on partnership, not only between central and local government, but between local authorities and local people, businesses and groups.

As part of the process to achieve our aims, a review of local government finance is being carried out by the Department of the Environment, Transport and the Regions, which is working closely with local government, business and other representative organisations. Consultation papers on possible changes to aspects of the local government finance system will be issued over the next month or so, as part of the wider consultation on the modernisation of local government.

We have already published the first of our consultation papers, "Local Democracy and Community Leadership", which sets out proposals covering four broad themes. The first is the importance of modernising electoral arrangements to improve councils' accountability and to increase participation in local elections. We explore options such as annual elections, electronic voting, rolling registers and the use of new days and ways of voting.

Secondly, we suggest a number of new ways in which councils can listen to their communities and involve local people in their decisions, policy planning and policy review, through, for example, citizens juries, focus groups, referendums and the rather unattractively named techno-democracy.

Thirdly, we have encouraged new ways in which councils can work, giving them clearer political and management structures. We have, for example, explored the possibilities of executive mayors, cabinet systems, lead member systems and single-party executive committees.

Fourthly, we have set out the case for strengthening councils' roles as leaders of their local communities and for giving councils the powers that they need to meet community priorities and aspirations. For example, we have considered community planning, whether to impose a new duty on councils to promote the economic, social and environmental well-being of their areas, and the option of developing a scrutiny role. Follow-up consultation papers will cover best value in service delivery, a new ethical framework for local government, and the reform of local government finance.

I come to the specific issue of local government funding. All public expenditure programmes have to be examined rigorously each year—local government spending, which accounts for a quarter of all public expenditure, is no exception. Decisions on local government spending must look not only at the pressure on local authorities, but at the scope for greater efficiency and effectiveness within local authorities.

As the hon. Gentleman stressed, we are committed to sticking to the public expenditure plans. Although we shall keep within existing spending targets, we have reorganised priorities. The hon. Gentleman rightly stressed the educational needs of Devon and Cornwall and the importance of prompt action; he said that we could not put off for several years dealing with the educational needs of the current generation of schoolchildren. He will recognise that we have put an extra £853 million into education, every penny of which will be covered by this year's revenue support grant. It is a better, fairer, more flexible settlement than in previous years, although it has been agreed within a framework of tight control on public finances. We have increased total standard spending by 3.8 per cent. and provided an extra £350 million for community care. We have also provided £1.3 billion to improve the state of school buildings through the new deal for schools.

In addition, although not within the general ambit of local government spending, we have released £800 million of additional capital spending power for housing through the capital receipts initiative—£174 million to be released in 1997–98 and a further £569 million plus £41 million in revenue support in 1998–99. Of course, part of the money will go to Devon and Cornwall. We have already released more than £10.5 million in additional expenditure in those two counties, for housing and housing-related regeneration.

Mr. Sanders

The Minister is talking about approvals to borrow more money, not cash in hand. The problem that the authorities face is that they need cash in hand for services that they are not under a statutory obligation to provide. That is where the funding gap exists for local authorities in Devon and Cornwall.

Mr. Raynsford

With respect, I have been talking about a range of different issues, including education. I made the point that the £835 million of additional spending was covered entirely by revenue support grant. I have also touched on other developments, including the capital receipts initiative, which has been warmly welcomed by authorities all over the country, as they were asking for additional borrowing capacity to meet important housing needs.

Standard spending assessments are the basis for the distribution of revenue support grant. They are based on measures of spending need that apply to all local authorities and are discussed with local government representatives. The SSAs for 1998–99 were debated in the House on 5 February, and the local government finance settlement has now been agreed.

Having said that, we are committed to a fair distribution of Government grant among authorities, and we believe that there is scope for improvement in the arrangements in future years.

Mr. Paul Tyler (North Cornwall)

I appreciate that this is a short debate, and I am grateful to the Minister for allowing me to make one simple point. Does he agree with a number of his distinguished colleagues that, at the end of the day, Ministers have to make decisions and that even when we improve the formulae to near perfection, they will not be perfect? One of the current problems in Devon and Cornwall is that we are still suffering from the backlog of many years of inadequate formulae, so the cumulative effect on all authorities in Devon and Cornwall, whatever their political control, is that there is a formidable backlog in terms of capital expenditure and revenue support. Does the Minister agree that, at the end of the day, there must be a political decision to assist us?

Mr. Raynsford

I accept readily two of the hon. Gentleman's propositions: first, that Ministers must take decisions, and secondly, that there is a problem inherited from the previous Government, which we cannot expect to overcome immediately, but which we are seeking step by step to improve.

The standard spending assessment review this year was designed to make some changes. In respect of tourism, there was a general view that it was correct, despite the knock-on consequences for authorities that have been highlighted in tonight's debate. We have already said that we shall be looking at other indicators for the forthcoming year, as we believe that there is scope for improvement. There should be proper and full discussion with local authorities to assess the impact of changes before decisions are taken, but I accept absolutely the hon. Gentleman's point that Ministers have to take decisions in the last analysis, and we shall do so.

Mr. Ben Bradshaw (Exeter)

Does my hon. Friend agree that the Government have already moved quite a long way in that direction, as this year Devon has received an increase in funding that is above inflation and above the national average? Despite that, the Liberal Democrat-controlled county council is imposing cuts and a 20 per cent. increase in the council tax. By contrast, the Labour-controlled local authority in Exeter received a far smaller increase in funding, yet services are being maintained and there is a zero increase in council tax.

Mr. Raynsford

I congratulate my hon. Friend and, indeed, Exeter council on its achievement. I am delighted to know that the council is able to manage so well with the resources available to it. I shall deal with the wider issues of funding for Devon and Cornwall in a moment.

We shall look further at the standard spending assessment system. We shall listen to local government views on how SSAs might be improved, both for 1999–2000 and in the longer term. If the hon. Member for North Devon feels that the SSA system does not treat Devon and Cornwall fairly, I should be happy to examine any proposals that he has for different methods of calculation.

I noted the hon. Gentleman's comments about the number of small schools in the counties, which is a particular concern. That issue might be looked at if he feels that we should do so. Any system of this nature has to be universal, and any changes must apply to all authorities equally. When making changes, we must therefore be sure that they produce a fair impact across the whole country and that there is a sound assessment of needs.

I shall say a brief word on capping. We again gave clear signals that, although we propose to replace the current crude capping system, capping will continue in 1998–99. The Deputy Prime Minister restated his provisional capping principles to the House on 5 February. They allow authorities, on average, to increase budgets by 4 per cent., compared with 2.4 per cent. in 1997–98. It is now up to authorities to set their budgets in the light of all the circumstances, including the provisional capping guidelines. Authorities are aware of the procedure for seeking a redetermination of their cap if they set budgets above the provisional limit. We would consider their cases carefully, but in the event of an authority not getting everything that it asked for, it would have to bear the costs of re-billing council tax payers.

The particular circumstances of rural counties such as Devon and Cornwall are recognised in SSAs, which include allowances for sparsity. I realise that some authorities have anxieties about the area cost adjustment and the possible implementation of the findings of the Elliott review. That is why we did not implement the proposals this year. We felt that greater agreement should be achieved on the issue, and have therefore commissioned further research, which we intend to look at carefully before taking the matter forward.

Devon county council has seen its 1997–98 SSA increase by £13.2 million, or 3.1 per cent., for 1998–99. That is the figure arrived at after adjustments for changes in function were made. The adjusted increase in the SSA for education is higher, at £13.448 million. Those figures compare with the class average increase in SSAs for shire counties of 2.9 per cent. Therefore, Devon has not been treated unfairly in relation to other counties. It has received an increase slightly ahead of the national average.

The provisional cap for Devon for 1998-99 has been set at £440.104 million. That means that the county council will be able to spend up to £16.932 million above base budget—a permitted increase in budget of 4 per cent., compared with only 2.5 per cent. for last year and the county average of 3.7 per cent. Again, Devon's outcome is slightly better than the average for all counties across the country.

The hon. Gentleman mentioned reorganisation. I accept entirely that Devon is affected by reorganisation as Plymouth and Torbay become unitary authorities. Devon made representations to us on that, principally over the council tax increase as a result of the reorganisation and the disaggregation of its 1997–98 budget for education administration between itself and the new unitaries. We estimate that, as a direct result of reorganisation, the council tax increase in the new Devon will be £40 at band D.

The hon. Gentleman was not correct in saying that there is no transitional relief. There is a transitional relief scheme, but it comes into effect only when the increase is more than £52 at band D. Devon, of course, falls below that threshold. We feel that an increase of less than £1 a week is not unreasonable, and it is important to recognise just what we mean when we refer to a council tax increase as a direct result of reorganisation. In Devon, it has come about because the county council had previously, quite legitimately, been spending more in the remainder of the county than it had in Plymouth and Torbay.

The motion having been made after Ten o'clock, and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at twenty-one minutes to Eleven o'clock.