HC Deb 23 October 2001 vol 373 cc129-32
2. Mr. Michael Foster (Worcester)

What plans he has to reform the standard spending assessment. [5568]

The Secretary of State for Transport, Local Government and the Regions (Mr. Stephen Byers)

We shall reform the current system to create a fair and transparent mechanism that enables councils to meet the needs of their communities. As we announced in the House on 20 July, those changes will be introduced in April 2003.

Mr. Foster

I look forward to a new funding mechanism, especially for education, that no longer disadvantages the children of Worcestershire. However, one more year of the old formula remains. Will my right hon. Friend consider some form of interim measure to help Worcestershire schools to close the funding gap?

Mr. Byers

My hon. Friend is right to point out the unfairness in the current system; that is why it needs to change. We must acknowledge that unfairness exists. I have examined the figures for Worcestershire, other counties and metropolitan districts, and it is clear that a family of local authorities has been disadvantaged through the operation of the current formula. Effective change must therefore occur.

I am not sure that I can give my hon. Friend much comfort about the year ahead, but I am prepared to meet him and other colleagues to ascertain whether any interim measures can be put in place. Nowadays, a lot of money, especially for schools, goes directly to individual schools. Perhaps we could overcome some of the difficulties by using such mechanisms.

Sir Michael Spicer (West Worcestershire)

As the Secretary of State implies, the real issue is the detail. When will he publish the details of the proposed new formula?

Mr. Byers

As the hon. Gentleman knows, many discussions are taking place with local government about the details and criteria for establishing a new formula. I hope that we shall be able to say something about it, but that will not happen until the new year. We aim to consult widely and introduce changes that will take effect by April 2003.

The current system of standard spending assessments has been in place for a decade or more. We must take our time to make sure that we get the changes right. I want the settlement for April 2003 to be open and transparent and to be seen to be fair. If it takes a few more months to achieve that, I hope that the hon. Gentleman will agree that that is time well spent because the system will be far fairer than at present.

Mr. Peter Pike (Burnley)

Does my right hon. Friend accept that many people in local government believe that we have tended to overlook the fact that when the Tories introduced the poll tax and then the council tax, they simultaneously switched the percentage of funding from local government and national Government so that local government paid the larger portion? Does he therefore accept that if we change SSAs—previously grant-related expenditure assessments—the system will not be fairer or more acceptable unless we acknowledge that, in many parts of the country, we need to fund a larger share of local government expenditure at national level?

Mr. Byers

My hon. Friend is right that, as matters stand, approximately 25 per cent. on average of a local council's revenue is raised through council tax, and some 75 per cent. comes from central Government. That balance shifted dramatically because of the decision that was made when the poll tax was abolished. We intend to deal with the question of the balance of funding in a local Government White Paper, which will be published before the end of the year. It will thus be addressed before the changes are brought in through the standard spending assessment system.

My hon. Friend was right to point out that this is one part of an overall picture. We shall be looking at the matter as a whole to ensure that when we talk about fair funding for local councils we take account of balance as well as the formula.

Mr. Don Foster (Bath)

The Secretary of State has stressed the importance of removing perverse incentives in the way in which central Government fund local services. What plans has he to reform the fire service component of the SSA, so that the welcome reductions in hoax calls announced on Friday lead to a reduction in the budgets for our fire services? Does he not consider it nonsensical that the fire authorities that have worked hardest to reduce the number of hoax calls will be rewarded not with a boost in their budgets, but with a budget cut?

Mr. Byers

The hon. Gentleman has drawn attention to one of the many issues that we are addressing, and has done so with his usual accuracy. This is clearly a criterion that militates against what we want: we are penalising success, and that should have no part to play in the standard spending assessment regime. When the details of our proposals are out for consultation, the hon. Gentleman will see that this is one of the things that we intend to change.

Ms Joan Walley (Stoke-on-Trent, North)

I hear what my right hon. Friend has said, but we were promised a reform in 1998. It is true that my right hon. Friend must get it right, but many parts of the country—particularly unitary authorities such as Stoke-on-Trent—suffer from major deprivation, and we are concerned about the funding gap that we shall experience between now and 2003. Will my right hon. Friend look again at the contingency fund that he talks about, and will he appreciate that, if the answer is to be matching funds, we do not have matching funds in Stoke-on-Trent, and we would want to be included in any meeting between him and unitary authorities?

Mr. Byers

I am acutely aware of the specific problems affecting Stoke-on-Trent, because my hon. Friend has drawn them to my attention more than once. She is, however, right to refer to the particular difficulties experienced by a number of the new unitary authorities in particular. We shall need to address that as part of the fundamental review.

I understand the concern that people feel. A review was promised in 1998, and progress has still not been made. I can tell my hon. Friend, however, that the review will go ahead, and will be in force in time for the April 2003 settlement. I believe that that will enable us to establish a fair system. In the interim, there are now ways in which money can get into local authorities over and above the SSA formula. Perhaps we should be looking at those if we wish to alleviate the problems faced by individual authorities.

Mr. Geoffrey Clifton-Brown (Cotswold)

The Secretary of State has admitted from the Dispatch Box today that the current system of distribution of the revenue support grant is unfair. Is he aware that, during the past four years of Labour government, whereas the current system has taken £450 million away from London, it has taken £700 million away from the shire counties? That has caused council taxes to rise by four times the rate of inflation—or 40 per cent., in the case of my authority. How does that square with the right hon. Gentleman's 1997 manifesto pledge: New Labour is not about high taxes on ordinary families"? When will he take realistic steps to end the unfairness?

Mr. Byers

First, I extend a warm welcome to the hon. Gentleman as he takes up his new responsibilities. I hope that it will not be too out of order for me to express the view that many Members on both sides of the House regret that he could not stick to his original portfolio. [Laughter.] Actually, I was making a serious point.

When the hon. Gentleman has a chance to look at the figures, he will see that we have, in fact, put in more money by way of the local government settlement. As for council tax increases, they are a matter for local determination. The important point is that, through the ballot box, local people can make their decisions about who they want to hold office locally. That is the best way: that is local democracy. Central Government are providing the resources, but the rest is for local determination.

Mrs. Anne Campbell (Cambridge)

I welcome the extra money that has been given to education under this Government compared with under the Conservative Government, but can my right hon. Friend ensure that when a new funding system is introduced, the damping mechanism will not continue to disadvantage authorities such as Cambridgeshire, which suffer under the current system?

Mr. Byers

My hon. Friend makes an important point. For reasons often of good motive, procedures are introduced that, over time, have adverse consequences for individual authorities. I am conscious of authorities such as Cambridgeshire, which have been affected because of the damping arrangements that have been put in place. Certainly, when we consider the new arrangements, which will begin in April 2003, that is one issue that we shall want to examine properly.