HC Deb 18 December 2001 vol 377 c146
12. Mr. Laurence Robertson (Tewkesbury)

If he will make a statement on the working of the area cost adjustment. [21568]

The Parliamentary Under-Secretary of State for Transport, Local Government and the Regions (Dr. Alan Whitehead)

The area cost adjustment consists of two elements: a labour cost adjustment and a rates cost adjustment. The labour cost adjustment is by far the most important. It is based on comparisons of average wages in London, the south-east and the rest of the country. Average wages are derived from the new earnings survey for a range of occupations considered to be relevant to local authority employment.

The rates cost adjustment is based on rateable values per square metre for commercial office space. There is a slightly different approach for schools buildings.

Mr. Robertson

I am grateful for that reply. Does the Minister know that the area cost adjustment costs Gloucestershire £4.648 million a year? I understand that the Government are to review the area cost adjustment. Does he agree that it is wrong for Gloucestershire to lose out by such an amount? Does he further agree that the basis for the formula—that it costs more to run services in, for example, neighbouring Oxfordshire—is wrong, and will he therefore guarantee that Gloucestershire will not lose out unfairly after the review?

Dr. Whitehead

The hon. Gentleman will be aware that the current ACA methodology was developed under the Conservatives in the early 1990s. If there are serious problems, perhaps he should consult the history books to ascertain how they arose. At the time, Conservative Ministers did not believe that there was strong evidence to show that average wages varied much between authorities outside the south-east. That may have changed by now, and the Government are therefore reviewing the matter.

Various options, including an ACA that is more specifically associated with individual authorities, are being discussed with the Local Government Association. If the hon. Gentleman wants to know how openly the review is being conducted, he can look at the LGA website, where the different options are displayed.