HC Deb 12 January 1999 vol 323 cc211-20

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

10.26 pm
Mr. John Bercow (Buckingham)

The parliamentary day began with questions to the Secretary of State for the Environment, Transport and the Regions, and we continued with the Second Reading debate on the Local Government Bill. I shall conclude tonight's proceedings by raising the crucial issue of the local government finance settlement for Buckinghamshire and its implications. I am delighted to do so in the company of my hon. Friends the Members for Aylesbury (Mr. Lidington), for Beaconsfield (Mr. Grieve), for Chesham and Amersham (Mrs. Gillan) and, last but not least, for Wycombe (Sir R. Whitney)—all of whom represent Buckinghamshire constituencies and share my concern about the prospective fate of the county council's finances.

The reality is that although, nationally, the revenue support grant settlement might appear to many people to be reasonable, locally in Buckinghamshire it is undoubtedly a bad deal, bad news and is being badly received. As a result of the Government's announcement, the average increase in social services standard spending assessments this year is 5.8 per cent, but Buckinghamshire is due to receive only 2.8 per cent., or £1.5 million. Yet the authority calculates that, in order to retain existing service levels, an increase of 9 per cent.—or £5.5 million—is required. Therefore, we are immediately faced with a shortfall of £4 million.

That shortfall is exacerbated by the Government's regrettable decision this year not to roll forward to the financial year 1999–2000 the £2.5 million in special transitional grant. If that sum of money were rolled forward—as we wished and expected—it would be possible for Buckinghamshire county council both to take on and to pay for long-term care commitments. The threat to that process is a matter of genuine and cross-party concern.

My hon. Friends and I welcome the Government's proposed new grants for promoting independence. I say that without hesitation to the Minister. As yet, the conditions attached to the use of those grants are unclear, and we expect an announcement on that point by the end of January. I simply observe to the Minister and the House that, if the Government allow flexibility in the use of those grants so that Buckinghamshire, for example, can use them to pay for long-term care commitments, the local authority will have more flexibility in setting its council tax level.

If, however, there is not an announcement soon, or if the Government announce that they will not allow flexibility in the use of those independence-promoting grants, Buckinghamshire county council will be in a serious quandary. It will have to decide how to bridge the £6.5 million gap. It can do so only by raising council tax or by underfunding education.

This year, as a result of an especially severe financial settlement, the county is not spending at the level of its full education standard spending assessment, for fear that if it did so, intolerable damage would be inflicted on other services provided by the county. Next year, Buckinghamshire county council intends to spend at the full education SSA, as the Government intend, as parents and teachers wish and as the needs of our children demand. However, Buckinghamshire also wants to retain the level of social services provision.

On present reckoning, if there is not better news from central Government, Buckinghamshire county council concludes that a budget of £329 million will be required, necessitating an increase in council tax of 13.9 per cent. That is undesirable. Whether it is unavoidable is not yet clear. I hope that the Under-Secretary will be gracious enough in his reply to acknowledge that if the county council were forced to make that increase, £1.5 million of the revenue raised would go to the standards fund, £1.5 million would go to secondary schools and £400,000 would be devoted to the reduction of class sizes at key stage 2. That would be welcomed by hundreds of parents and teachers who have written to me on the subject, not least those representing the Edlesborough county combined school and the Cheddington county combined school, which are confronted by class sizes of 47 and 43.

Of course, the situation is unsatisfactory and we should prefer a better alternative. In pursuit of such an alternative, a cross-party delegation of county councillors came to see the Under-Secretary of State for the Environment, Transport and the Regions, the hon. Member for Mansfield (Mr. Meale) on Tuesday 5 January. To his credit, the hon. Gentleman gave a courteous hearing to the delegation, for which I thank him and for which I know all the councillors were grateful.

The delegation consisted of five county councillors. It was led by the chairman of the council, Ken Ross. It included David Shakespeare, the chairman of policy and resources; Mark Greenburgh, the leader of the Conservative group on the council, who is listening intently to the debate; Councillor Pam Crawford, the leader of the Liberal Democrat group; and Councillor John Huddart, the leader of the Labour group. It was greatly assisted by an admirable duo of officials: the chief executive of the county council, Ian Crookall, and the head of finance, Sean Nolan.

It is important to understand that the delegation was cross-party and sentiments were expressed in a non-partisan fashion. Councillor Crawford said: It was important to explain the full impact of the loss of grant for Social Services…there are real pressures on the budget for older people. It is vital that we meet the pressures on old people's and children's services. To his credit, Councillor Huddart said: The cross-party delegation demonstrates everyone's commitment to protecting our services. Conservative, Labour and Liberal Democrat councillors, as I hope the Under-Secretary will acknowledge, are in touch with, concerned about and determined to promote the interests of their constituents. To that end, they have reached a consensus on the proposals that the county has made.

Mr. Brian White (Milton Keynes, North-East)

As a former member of Buckinghamshire county council, on which I had the misfortune to serve a few years ago, I am confused by the hon. Gentleman's comments. Perhaps he can enlighten me. When the disaggregation between Buckinghamshire county council and Milton Keynes occurred, there was a discrepancy in the favour of the county—some say of £5 million, some say of £7 million or £8 million—which the then chairman of policy and resources, David Shakespeare, agreed should go to Milton Keynes. For the want of it being in writing, it would have done. That means that Buckinghamshire has had a higher standard spending assessment for the past two or three years. I do not understand how the hon. Gentleman can make such comments without addressing that—

Mr. Deputy Speaker (Sir Alan Haselhurst)

Order. That is quite enough.

Mr. Bercow

I blame myself, Mr. Deputy Speaker. Invariably, as my hon. Friends will testify, my generosity in the House gets the better of me. First, if the hon. Member for Milton Keynes, North-East (Mr. White) wants to pursue the question of the future borrowing powers and financial arrangements of Milton Keynes unitary authority, he is welcome to do so with his hon. Friend the Under-Secretary. Secondly, it is a trifle cheeky for him to criticise the record of Buckinghamshire county council and my support for it, given that this year Buckinghamshire county council is spending only 0.3 per cent. under its education SSA, whereas Milton Keynes, as he knows to his discredit—apparently he supports this arrangement—is spending 8.9 per cent. less than its education SSA. That is a matter for him, his conscious, his party and his hon. Friend the Under-Secretary.

Buckinghamshire county council is a good, prudent, well-run authority. It is committed to the principle and practice of best value. Already, it is achieving savings of £2 million a year as a result of outsourcing. On top of that—I hope that the Under-Secretary will take note—it is conducting a rolling programme of root-and-branch reviews of all its services. That has already yielded annual savings of £800,000, and savings of a further £2.5 million per year is earmarked for future years. In addition, the council has frozen infrastructure expenditure in cash terms, realising a saving to the authority of £1.6 million a year. It is a good authority; it is doing all that it can to provide quality services at affordable prices on behalf of the people whom it exists to serve.

The Government's position on capping is not altogether clear. I hope that the Under-Secretary might enlighten us in his reply. In his statement on 2 December 1998, the Secretary of State for the Environment, Transport and the Regions referred several times to excessive council tax increases, for which he said there would be no justification, and which he would not hesitate to intervene to prevent. Unfortunately, he has not divulged to the world what constitutes excessive; he simply will not say. That has created an absurd game of cat and mouse.

Mr. Lindsay Hoyle (Chorley)

indicated assent.

Mr. Bercow

It is an unsatisfactory guessing game, as the hon. Gentleman rightly agrees. I hope that the Under-Secretary, who is an intelligent man, will concede that it does not make sense to operate on that basis, given that if a decision made by the council is wrong and it is capped against its expectation, it will have to re-bill. That would cost Buckinghamshire £500,000. That is not sensible. Let us know the ground rules and operate according to them.

Of one thing we can be certain: whatever consultation the Government have undertaken, Buckinghamshire county council has consulted. It has surveyed residents, staff and stakeholders. It has issued consultation documents on its proposals and had a healthy and supportive response to them. It has staged a series of briefing meetings for people with a particular interest in the subject. As a result, beyond doubt, the message is this: we support the council's priorities, we want the services to continue, we are prepared to pay the cost for them.

I conclude on behalf of my hon. Friends by making two requests of the Under-Secretary. First, in the name of quality service provision and for the sake of the health of local democracy, will the Under-Secretary speedily clarify whether there will be flexibility in the new independence grants that are to be provided and, if so, what form that and flexibility will take? Secondly, will he trust the democratically locally elected politicians who are the custodians of the local interest and are charged with effectively representing it? If he gives them the chance, they will do the job, and they will not let their local residents down.

10.40 pm
Mr. David Lidington (Aylesbury)

I am grateful to my hon. Friend the Member for Buckingham (Mr. Bercow) and to the Minister for allowing me to intervene briefly in the debate. I congratulate my hon. Friend on his success in obtaining a debate on this important subject.

I shall make three points. First, I remind the Minister that in each of the local government settlements that the Government have announced since the general election, they have transferred money away from Buckinghamshire to other areas of the country through changes in the standard spending assessment formula. That has created difficulties for a council that is already run economically and prudently, and whose electors are accustomed to the level of services that it provides.

Secondly, the decision by the Government this year not to roll forward the special transitional grant for social services into the standard spending assessment for 1999–2000 was unprecedented in the years since the new system for funding social services was first established. We in the House all know that the care of the elderly, the learning disabled and other vulnerable people involves a long-term commitment by the social services department of a local authority. It cannot be switched on in one financial year and switched off the next because of an sudden, unheralded, unforeseen and unprecedented change in the Government's policy.

I very much regret that the Government chose to make such a switch in policy and I hope that Ministers will consider allowing flexibility of the sort that my hon. Friend called for. If they do not do so, there is a real threat to services such as the Princes Risborough day centre in my constituency, the Endeavour day centre in Chesham, which serves the constituents of my hon. Friends the Members for Chesham and Amersham (Mrs. Gillan) and for Beaconsfield (Mr. Grieve), and day centres in High Wycombe that serve the constituents of my hon. Friend the Member for Wycombe (Sir R. Whitney).

Short of cutting social services, there are only two ways in which the county council can compensate for the regrettable change in the Government's policy. One is to increase the council tax severely in a way that would inevitably bear hardest on those people on pensions or fixed incomes. The second is to reduce planned spending on education in a way that would also be unwelcome.

Finally, I reiterate my hon. Friend's call for the Government to make clear their criteria for capping. The opaque way in which they hold out the prospect of capping retrospectively after councils have set their budgets will make for bad budgetary planning and a lack of accountability of councillors to their electors. Every political party represented on my county council wants the Government to think again, and I hope that even now the Minister is prepared to do so.

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

I congratulate the hon. Member for Buckingham (Mr. Bercow) on his success in securing the debate and giving us the opportunity to consider the provisional local government settlement for Buckinghamshire in the coming financial year.

The local government settlement is an issue of considerable interest to local authorities. Today, we came to the end of the consultation period on the proposals that my right hon. Friend the Deputy Prime Minister announced on 2 December. Many local authorities, including Buckinghamshire, as the hon. Gentleman observed, have made representations on the settlement and have sent representatives to see Ministers to press their case. I can assure the House that, before we take final decisions, we will carefully consider all the comments made on our proposals, including those made by the representatives of Buckinghamshire and those made by hon. Members in this evening's debate. We expect to be able to announce the final settlement early next month.

I will comment later on the settlement and what it means for Buckinghamshire, but I should put the comments made by the hon. Gentleman in context.

We have provided the best settlement for seven years. We have provided a 5.4 per cent. increase for councils total revenue spending. That is an additional £2.6 billion and provides local authorities with a real increase of 2.9 per cent. I am confident that local authorities will continue to produce more efficiency savings as they continue to modernise. Therefore, the increases that we have provided will provide even greater headroom above inflation.

The English settlement provides an extra 7.2 per cent. or £1.4 billion for education, on top of the extra £5.4 billion that my right hon. Friend the Secretary of State for Education and Employment announced that we would be providing over three years for capital investment in modernising our schools.

Council tax payers will have also been pleased to note that we are not expecting them to pick up the tab for this extra expenditure. We have allowed for an extra £2 billion of Government grant, so that council tax bears only its fair share of additional spending. That provides that, if local authorities increase their budgets in line with SSAs, council taxes will rise by 4.5 per cent. on average—I appreciate that, within this figure, there will be variations between authorities. I will come on to that point later.

Personal social services receive an extra £500 million or 6.1 per cent. in cash terms as part of the Government's new approach to social services. That is a 3.6 per cent. increase in real terms. We are increasing resources by more than 3 per cent. a year in real terms, on average, over the years 1999–2000 to 2002–03.

I am sure that authorities in Buckinghamshire will recognise that this is a good settlement and that they have benefited from it. As always, authorities are affected to a lesser or greater extent by the changes made to the distribution of Government grant.

Last year, we announced a number of changes to the SSA formulae to make them fairer. This year, we have made more changes to SSAs, where those are justified and will lead to a fairer system.

We have specifically made changes to the children's social services formula. The new formula has been introduced following detailed research, mainly undertaken at York university, which has been the subject of thorough and detailed discussion with local government. The analysis used to develop the formula reflects the pattern of service costs since the Children Act 1989, and includes details of all types of children in touch with social services.

The formula includes plausible factors influencing the need to spend and uses a statistical method which ensures that results are not biased by historic levels of funding. The new formula for children's social services provides a better indication of need and a fairer allocation of grant among authorities than the previous one.

All the major criticisms of the formula have been fully investigated. We did not introduce it in last year's settlement because there were doubts which required further examination, and that examination has taken place in the intervening year. As a result, a fostering cost adjustment has been developed to allow for the uneven costs of foster care across England.

Although standard spending assessments for some authorities are reduced as a result of that change, we have ensured that no authority will receive less grant from the Government in 1999–2000 than it did in 1998–99.

We have also introduced changes which make allowance for the additional cost of providing social services for the elderly in their own homes in rural areas and, for the next financial year, the distribution of grant will take account of deprivation in the part of the formula that deals with what are called county services, such as libraries and probation.

However, we have not made other changes which were suggested to us. Despite extensive discussions with local government, no clear-cut improvements could be identified on issues such as the area cost adjustment and the additional educational needs SSA. We were pressed to make changes on those, but we did not do so because we did not believe that they would be justified.

Many authorities in the south-east were concerned about possible changes on those issues and made representations to us. We accepted that none of the proposals that we had before us represented a clear improvement on the existing system, so we have left that part of the formula unchanged.

We will continue to seek ways of making the system fairer, and we have launched a long-term, three-year research programme to try to find a fairer, more robust, simpler and more stable way of distributing grant. That is the biggest challenge in local government finance, because the demands of fairness on one side and simplicity on the other are not easily reconciled. We have an extremely complex system, which many people think is not as fair as it should be. The challenge over the next three years will be to achieve a system that is more comprehensible to ordinary people and that also achieves the objectives of fairness.

As we said in our July White Paper, we do not expect to change the SSA formula over the next three years. That will allow a period of stability for local government, and for the research, to find out whether we can come up with different ways of distributing grant.

We also announced SSA totals for three years in the comprehensive spending review. Those may change slightly, to reflect changes in local government's functions and responsibilities. Apart from those, there will be no changes, so the new approach will allow local government to plan ahead on a firm basis—for three years—for the first time. That can be only good news for councils and council tax payers alike.

We believe that the changes to SSAs are fair, but councils need time to adjust their spending levels. As in previous years, we will pay grant to limit the effect on council tax payers where changes in the way that we calculate SSAs lead to significant loss, but over and above that, we will ensure that no local authority receives less Government grant than last year. There will therefore be no losers, which means that there is no case for large council tax increases.

We were elected on a manifesto commitment to end crude and universal capping. However, we promised to retain a reserve power to control excessive council tax increases. The new reserve powers are set out in the Local Government Bill, which was debated today. The Government have a strong interest in local government taxation and spending decisions and must have reserve powers, which will enable them to limit excessive council tax increases and so protect local taxpayers.

Mr. Dominic Grieve (Beaconsfield)

Will the Minister give way?

Mr. Raynsford

I will not, if the hon. Gentleman will forgive me. Time is very short and I want to deal specifically with Buckinghamshire, which I know is a matter of concern.

We hope that the other changes proposed as part of the review of local government finance will mean that the reserve power has to be used rarely, if at all. Local government knows that this is a matter of trust: if it fails to deliver prudent budgets, or if efficiency and economy fall short of the standards that people expect, we will use our reserve powers.

Until the new legislation comes into effect, we will use existing powers as a reserve power to limit excessive council tax increases. We have not announced capping principles in advance, but we will still be prepared to use the powers to limit excessive budgets once set, to protect local taxpayers. We will decide whether we need to use our capping powers and what criteria will apply once authorities have set their budgets.

The hon. Member for Aylesbury (Mr. Lidington) urged me to announce the criteria in advance. That is not a sensible approach. It would apply a mechanistic formula in which there would be a perverse incentive for authorities to increase budgets to the limit. That is not a sensible way forward. We have made it clear that we will use the reserve power only when we believe that authorities have not acted responsibly.

We expect authorities to approach their budgeting within a responsible framework and to do so in the spirit that the hon. Member for Buckingham mentioned. He insisted that authorities should be free to decide the appropriate level. We expect them to do so with proper concern for prudence and responsibility.

We are providing significant real increases in funding from Government grants and the business rate, and the provisional settlement sets out how those resources will be distributed. Local authorities should carefully consider their needs in the light of that settlement when drawing up spending plans. We are not a tax-and-spend Government, and we expect authorities to act responsibly as well.

The standard spending assessment for Buckinghamshire will increase by 4.5 per cent. The hon. Member for Buckingham would have to look back as far as 1993–94 to find a bigger increase. Indeed, the average increase for Buckinghamshire between 1993–94 and now has been barely 2 per cent. a year. Buckinghamshire's increase this year is well above the rate of inflation, which shows our commitment to improving local services. An education increase of 5.4 per cent. shows our commitment to education in particular.

The hon. Member for Buckingham mentioned the difficulties faced by Buckinghamshire's social services. The county has received an extra £1.5 million in its personal social services SSA. In its representation on the provisional local government finance settlement, the council expressed its disappointment that the Government had not rolled forward the special transitional grant into next year's SSA. The hon. Gentleman raised that matter in his speech. However, to adjust in that way would make no sense in the light of the comprehensive spending review, which started from a zero base, looking at expenditure needs in the round. The only fair comparison involves looking at the total resources provided for social services. In Buckinghamshire' s case, the amount of grant from the Department of Health in 1999–2000 is increasing compared with the figure in 1998–99. When added to the SSA, it provides a 2.8 per cent. increase, which is above the expected rate of inflation and far more than the total SSA allocation to Buckinghamshire in any of the past four years.

The comprehensive spending review has brought about a completely new approach to the way in which money is allocated to local government—over a longer period, in order to provide stability and predictability, and with more focus on outcomes. We accept that some new clients are still coming into the system—albeit a diminishing number—as a result of the community-care changes of 1993. There is more than sufficient funding within the social services settlement to meet the costs of previous—

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 four minutes to Eleven o'clock.