Local Government Finance (Hansard, 31 March 1998)

§ 3. Sir Geoffrey Johnson Smith
When he last met representatives of the Local Government Association to discuss the distribution of local government finance in 1998–99. [35442]

§ The Minister for Local Government and Housing (Ms Hilary Armstrong)
The Local Government Association had the opportunity to discuss the distribution of the 1998–99 settlement at our meeting on Wednesday 14 January.

§ Sir Geoffrey Johnson Smith
The hon. Lady will be aware that the recent distribution of grant to local authorities has resulted in discrimination against shire counties. Looking to the future, will the Government bear it in mind that notwithstanding the apparent high level of the area cost adjustment for London and the south-east, if we detach the south-east and look only at the shire counties, it is clear that they receive far less than other counties and well below the national average—£792 per head compared with £869?

§ Ms Armstrong
Several questions on the amounts given to shire authorities have been tabled. I assure the right hon. Gentleman that there was no discrimination; we have moved to a fairer settlement this year. He knows that no changes were made to the area cost adjustment under 1020 the Conservatives. It is under consideration this year. We have commissioned additional research on the specific cost element of the area cost adjustment.

§ Dr. Kumar
Is my hon. Friend aware that there was an £8 million shortfall this year in the cash allocated for the business rate in Redcar and Cleveland? After yesterday's announcements, will she ensure that my constituents do not lose out next time on the business rate?

§ Ms Armstrong
The Government published further consultation papers yesterday on the reform of local government. On the business tax, we aim to balance the need for redistribution and stability with local authorities' ability to develop strong relationships with business. The ability to vary the national business rate at local level will meet those objectives. We look forward to the responses of all interested parties.

§ Mr. Gummer
Does the hon. Lady accept that, this year, council tax rises have been significantly greater in shire areas than elsewhere? That suggests that the distribution of the money has been unhappy for country areas. Will she look closely at why council taxes have risen more steeply in many rural areas? If it turns out that those areas have received less than they should have done, will she undertake to come forward with new proposals for next year?

§ Ms Armstrong
It is not for me to reconsider the settlement once the House has agreed it. We regularly examine the distribution to ensure that it is as fair as possible. I have examined the Conservative allegations, which the right hon. Gentleman has repeated. There is an element that he has forgotten—metropolitan areas are facing elections this year; shire counties are not.

§ Mr. Pike
However we juggle around with the figures to make them fairer—which we clearly have done—if there is a financial ceiling, we are bound to please some authorities and upset others. Should not we reconsider how much of the burden should be borne by council tax payers? We need a larger allocation from the Government to meet local government expenditure.

§ Ms Armstrong
The issue is the balance between central and local funding. After the debacle of the poll tax, too much was taken to the centre. Central Government controlled not just how much money local authorities received, but what they spent it on. That has led to an unhealthy relationship between central and local government. We want a better balance, ensuring that areas of need have their needs properly addressed and that there is a fair distribution of Government grant.

§ Sir Norman Fowler
In spite of the Government's changes to the distribution of grant, which have undoubtedly favoured Labour councils, do not the latest figures show that of the 25 councils with the highest band D council tax, 23 are under Labour control, one is Liberal Democrat and the other is a Labour-Liberal Democrat coalition? Why does the Minister think Labour councils tax more? She has mentioned the elections. Should not the public take that fact into account when they vote?

§ Ms Armstrong
The right hon. Gentleman knows that we never believed that band D properly reflected what 1021 was happening, and for this reason: the majority of properties in the majority of Labour authorities fall into bands A and B. The amount charged at band D therefore has to be higher because authorities have to raise the necessary amount from bands A and B. Indeed, from averages that we published last week, Labour councils charge an average of £590 and Tory councils an average of £626. I invite the electorate to take that into account.

§ Mr. Skinner
Before anybody runs away with the idea that marginal changes to revenue support grant distribution this financial year disbenefited the few shires still under Tory control, should we not remember that the lowest grant made to any shire county was that to Derbyshire, which has nine Labour Members? I therefore hope that my hon. Friend and others on the Treasury Bench will look at the matter very carefully with a view to ensuring that Derbyshire is not badly affected in this outcome and the one next year.

§ Ms Armstrong
Representations are being made to the Government about Derbyshire, and it would therefore not be proper for me to comment on the matter today. I assure my hon. Friend, however, that the Government are determined to see a fair distribution of Government grant throughout local government.

§ 4. Mr. Flight
What assessment he has made of the impact of the local authority funding formula for 1998–99 on the provision of services by shire authorities. [35443]

§ Ms Armstrong
The impact of any change in the formula will depend on local authorities' decisions on the size and allocation of their budgets. Shire counties have gained significantly as a result of the additional £835 million that we have provided for schools this year. For the first time in four years, we have provided an increase for the services delivered by shire districts.

§ Mr. Flight
Taking West Sussex as a good example of a shire county, we see that spending on social services has been cut in real terms. Spending on other services, other than the Government's allocation to education, has stayed approximately equal. When allocations were made, did the Government consider how shire spending would work out? Why are allocations biased against shire counties? West Sussex has had quite enough attacks on extra housing, let alone on social services spending.

§ Ms Armstrong
I dispute that there was discrimination against shire counties. When dealing with a pot of money, one must distribute it fairly and properly, matching decisions with where need is and how money should follow need. We took particular decisions on standard spending assessments this year, which were calculated to deliver fairness. We recognised the particular need of shire districts and gave them an increase for the first time in four years. Due to particular pressure on education, we ensured that shire counties, along with other local education authorities, received a fair and additional allocation.

§ Mr. Watts
Does my hon. Friend agree that if we want to assess whether the grant system is fair we need to take account of the settlements of the previous 18 years, which were fiddled by the previous Government to such an 1022 extent that Westminster receives a better grant than Liverpool? Does she agree that she is trying to restore some of the fairness in the system after 18 years of the previous Administration's fiddling?

§ Ms Armstrong
We said before the election and in the manifesto that we wanted a fairer system of grant allocation. We have told the House about the manner in which we have changed the calculation of the indexes for examining economic and social need. That was done according to a formula agreed with the Local Government Association as a whole and with all its parts. That fairer allocation was worked out against a set of indicators that everybody agreed should exist. That was the main change. It meant that some authorities did better than others. Certainly there was a real change in the way need was assessed. We believe that the previous Administration did not address need in anything other than a partisan way.

§ Mr. Yeo
Will the Minister confirm to the House what has become clear during the past 10 minutes—first, that the Government have fiddled the formula so that Labour councils, however incompetent, extravagant, or corrupt, receive more money than before and, secondly, that council tax payers, whether their homes are in band A, B, C, D, E, F or G, pay more if they live under a Labour council than if they live under a Conservative council?

§ Ms Armstrong
Addressing fairness is not fiddling.