§ 7. Richard Burden (Birmingham, Northfield)
What assessment his Department has made of the need for a deprivation factor in the formula used to distribute central Government finance to local authorities. 
§ The Minister for Local Government (Mr. Nick Raynsford)
Deprivation indicators are included in a number of the standard spending assessment formulae used to distribute grant to local authorities. For example, the education formula includes indicators of lone parents and income support. However, we do not believe that the SSA system adequately reflects needs. That is why we introduced the neighbourhood renewal fund, from which Birmingham has received £11 million in the current financial year. It is also why we are currently reviewing the grant distribution formulae, with a view to creating a fairer system in which, among other considerations, deprivation is properly reflected. The work is still in its early stages, and we have not yet reached any conclusions.
§ Richard Burden
I thank my right hon. Friend for that reply. An accurate reflection of deprivation is obviously important to ensure that local authorities receive a fair allocation. However, does he agree that all too often the problem is that deprivation is assessed across broad areas, which averages those areas out? Pockets of deprivation may exist alongside areas of relative affluence and often do not get the attention that they deserve. Does he also agree that there are two solutions? The first is for the formula to reflect local circumstances much more exactly. The second is to ensure that local authorities, especially larger bodies, devolve their management so that local circumstances are adequately reflected. Further, does he welcome the moves that Birmingham recently made to achieve such devolution?
§ Mr. Raynsford
There are three points to make. The first is that our review of the grant distribution formulae for local government should help to ensure that we pay proper regard to deprivation as part of the general process of allocating funds to local government. Secondly, our neighbourhood renewal programme has been geared towards ensuring that additional funding helps the most deprived areas. My hon. Friend knows that Birmingham qualifies as one of the 88 authorities that are in that programme. The third point is that it is important to consider initiatives that help to establish more effective responses to particular communities. In proposing a framework to devolve more say to local areas, Birmingham city council is developing an interesting initiative that will be considered by many other authorities. I suspect that a great deal will be learned from that valuable experiment.
§ Miss Anne McIntosh (Vale of York)
As part of the review, will the Minister consider pockets of rural deprivation, in particular in those parts of North Yorkshire that have suffered from a dreadful downturn in the agricultural economy? Does he accept that there is social exclusion in areas that do not have an advanced network of public transport, and that factors of rurality and sparsity of population should be taken into consideration?
§ Mr. Raynsford
The answer is yes: there are pockets of deprivation in rural as well as urban areas, and factors 140 that lead to deprivation and social exclusion apply in rural areas, although they are different from those in urban areas. Our review will attempt to take a fair view across the country and take account of the factors that apply to rural areas as well as those that are specific to urban areas.
§ Mr. Peter Pike (Burnley)
Does my right hon. Friend accept that the taskforce report on the disturbances in Burnley in June this year identified that deprivation and housing were the two biggest factors? Does he recognise that the report also states that although Burnley has inner-city problems, it is a shire district council and does not have the finance to tackle the problems that it faces, and that it needs Government help urgently?
§ Mr. Raynsford
My hon. Friend makes an extremely important point about the particular needs of his community in Burnley. He will know that, having visited the area a year or so ago, I am familiar with the problems that he mentioned, including the housing problems. He may be interested to know that I have just come from a round table discussion at the Local Government Association which looked specifically at the lessons to be learned from the reports on the disturbances in Burnley and other cities. We take those reports very seriously indeed, and we want to ensure that we learn from the conclusions, to help authorities such as Burnley respond more effectively to the serious challenges that they face.
§ Mr. Nicholas Winterton (Macclesfield)
On the subject of housing, which featured in the Minister's reply, does he accept that some Government policies are making it very difficult for those on low incomes to rent property, particularly in affluent areas that traditionally have high rents? Even in affluent areas, there are people on low incomes. Does he agree that there is a problem, and will he turn his considerable energies to doing something about it?
§ Mr. Raynsford
The hon. Gentleman must appreciate that I am now responsible for local government, and my noble Friend Lord Falconer is responsible for housing, along with the Under-Secretary, my hon. Friend the Member for Northampton, North (Ms Keeble). Having said that, let me assure the hon. Gentleman that we take very seriously issues of need, and the Government have been putting substantial additional investment into the provision of affordable housing in many areas, including his own. We are committed to expanding opportunities for people who currently have difficulty in securing housing, after years and years in which the housing budget was remorselessly cut by the party that he represents in the House.
§ Fiona Mactaggart (Slough)
Does the Minister accept that the experience of deprivation in a number of areas is not properly reflected in their financing? For example, Slough is in the top 10 areas in the country for deaths from heart attacks and in the top 20 local authorities for ethnic minority populations, but that is not reflected in the resources that we get. Can he please consider those authorities where there seems to be a mismatch between need and resource, to see whether the sums are being done correctly?
§ Mr. Raynsford
I have to tell my hon. Friend that the perception of almost every Member of the House is that 141 the current funding system does not adequately meet the needs of their local authority. We therefore face an obvious difficulty in conducting reform because it will not be possible to satisfy everyone. We want to review the arrangements to ensure that the formulae reflect, as accurately and comprehensibly as possible, the needs that most people would want them to reflect.
There is a tension, however, between fairness and simplicity, and if one tries to take into account too many factors in order to create a fairer system, there is a risk that one will end up with a system that is opaque and incomprehensible, and no one will know how it works. That is the situation that we got into with the system that we inherited from the Conservative party. We know that we can do better, and our review will seek to improve on that system.
§ Mr. Geoffrey Clifton-Brown (Cotswold)
Despite what the Secretary of State said a moment ago, does not last week's announcement on the change in the local government finance formula amount to a huge centralisation by Government over local authorities? Or is it a new departmental policy of endorsing failure—a reward for the failure to run a proper railways policy, a reward for the failure to sort out the muddle in the tube and, above all, a reward for failing Labour councils? Or is it just the Secretary of State himself who is failing?
§ Mr. Raynsford
I have to say that the test of the electorate shows that the Conservative party has failed—twice running. Last week, we announced that we are giving local government a generous settlement, with real-terms increases, guaranteeing increases between two and three times the rate of inflation for all education and social services authorities, and with a minimum 2.3 per cent. increase for all authorities.
That should be contrasted with the experience of the years in which the Conservative party was in government, when local government faced real-terms cuts in its allocations year after year. There has been a sea change under this Government—we are offering freedom, more money, greater responsibility and greater opportunity to local government, and local government knows which party has its interests at heart.