HC Deb 05 December 2002 vol 395 cc1065-84 1.19 pm
The Minister for Local Government and the Regions (Mr. Nick Raynsford)

With permission, I should like to make a statement about local authority revenue finance for England 2003–04.

I am pleased to be able to announce that next year's local government settlement will see total support from Government grant and business rates of £51.2 billion. That is a cash increase on this year's settlement of £3.8 billion, or 8 per cent. It provides substantial real-terms growth in the funding we are providing for local government. The £51.2 billion consists of £24.3 billion in revenue support grant, £15.6 billion in business rates, £4.1 billion in police grant and £7.3 billion in special and specific grants. Today, I am announcing details of the allocation to individual authorities of the £39.9 billion of revenue support grant and business rates. Taken together with the police grant, that represents an increase of 5.9 per cent. cash over this year's allocation.

We announced last year that from 1 April next year we would introduce a system for distributing grant between authorities that would be fairer, more transparent and more just. Members will know that we have taken a long hard look at the grant distribution system. We had no doubts about the need to replace the outdated and discredited standard spending assessment system, but developing a robust, appropriate and fair replacement has been a challenging task, not least because of the many competing claims from different categories of local authority.

We held detailed discussions with local government and those with expertise in this area as we looked at all the current formulae and the options for change. We held 15 meetings of the technical group in just over a year, and many more meetings were held with those with an interest, covering education, police, personal social services and other council services. We then carried out a wide-ranging consultation on those options, including useful seminars and debates in the House in which Members let us know their views. The consultation paper included 47 specific options, and another 52 exemplifications were carried out at the request of local authorities.

We received some 55,000 responses to the options on which we consulted over the summer. More than 1,000 of those came from councils, members of the public, Members of Parliament, business organisations and others with an interest; the remainder were sent in response to various campaigns. Several petitions were also received. I announced the publication of an analysis of those responses earlier today by means of a written statement. Copies of the analysis have been placed in the Vote Office.

To reach a conclusion we needed to balance the pressures, the evidence and the representations. One of the major problems with the old SSA system was that it attempted to take a view on what authorities needed to spend. That was unrealistic and inconsistent with our approach to devolving responsibilities, so we will not continue the arrangement. Notional spending allocations do not imply anything about the budget or spending choices that will need to be made. Councils, in consultation with their council tax payers, should properly take such decisions. The one exception is in respect of the Government's key priority of education: we have said that we want to see authorities pass on increases to schools. In summary, the purpose of the new system will be to distribute grant according to authorities' relative circumstances and relative ability to raise resources from council tax.

The new grant distribution formula will, in the main, no longer rely on past spending patterns. That is one of the main criticisms of standard spending assessments. The new formula will ensure that the distribution of grant is relevant to the circumstances that councils face now, reflecting up-to-date spending patterns where appropriate.

We have worked hard to make the system less complex and difficult to understand. This was never going to be easy. The sheer size of the sums going to local authorities, the wide-ranging responsibilities undertaken by councils and the differing circumstances faced by authorities across England mean that there will inevitably continue to be a degree of complexity in the formulae used. However, we have simplified the structure of the system, which can be summarised as a basic allocation to each authority with top-ups reflecting particular circumstances such as deprivation, high wage costs and sparsity.

The formulae also no longer include the perverse incentives and inadequate indicators that were present in the old system. For example, the old fire formula was based on the number of calls each authority received. That meant they had little financial incentive to improve fire safety and safety education, and so reduce the number of calls. We have tried to remove such anomalies from the new system.

Many Members will have a particular interest in our decisions on the area cost adjustment. We have concluded that pay costs should be recognised within the system, but the ACA has been redesigned to minimise the "cliff-edge" effect. It will in future better reflect the different circumstances in London and the south-east, and the fact that authorities outside those areas have differing pay costs. It will also reflect the needs of areas outside the south-east with high pay costs.

We have also increased the extent to which the system takes account of councils' relative ability to raise council tax, known as resource equalisation. It means that we make a more realistic assumption about average council tax. It does not mean that we reward high spending.

We have made good the promise to ensure that no authority's schools will lose out in real terms from the changes. The new education formula ensures that every education authority's per-pupil allocation will rise by at least 3.2 per cent. in cash terms, well above inflation.

The environmental, protective and cultural services formula has been greatly simplified, and now better recognises the basic costs that all authorities face. We have made some detailed changes to personal social services, simplifying the system so that there is now a single formula for residential and domiciliary care for older people—although as PSS was reformed comparatively recently, these changes are less extensive than others. We have listened to the argument put to us by small authorities, particularly shire districts, that they face a fixed "cost of being in business". We have allocated a flat-rate £300,000 element to most classes of authority to recognise that cost.

As I promised, the system will incorporate floors and ceilings to safeguard authorities from excessive short-term variations in grant. For the last two years we have guaranteed that no authorities would receive less grant than they did in the previous year on a like-for-like basis. Councils with education and social service responsibilities did significantly better, of course, and last year we were able to ensure that all councils received a grant increase at least in line with inflation. As Members will know, we have already made it clear that no local authorities will receive a cut in grant next year in cash terms.

The "floors" will ensure that every authority in the scheme gets a reasonable level of grant increase, given the overall distribution and the total level of funding available. To pay for the floors we will impose a maximum on grant increases, and scale back the rises received by authorities between those two levels. I am pleased to be able to announce that I am setting the floor levels so that in 2003–04 all authorities will receive a grant increase on a like-for-like basis well ahead of inflation. That means a real-terms increase in grant for all authorities.

The floor increases in cash terms for police and fire authorities and shire districts will be 3 per cent. The floor for unitary authorities, county councils, metropolitan districts and London boroughs will be 3.5 per cent. To pay for the floor increases we will set a ceiling of 4.9 per cent. for single-service police and fire authorities including the Greater London Authority, 8 per cent. for unitary authorities—county councils, metropolitan districts and London boroughs—and 12.5 per cent. for shire districts. Increases above the floor but below the ceiling will be scaled back by 5.4 per cent. for police and fire authorities, 1.3 per cent. for shire districts, and 4.6 per cent. for authorities with education and social service responsibilities.

As I said earlier, we will phase in the new education formula in such a way that no authority's schools will lose out in real terms. The education formula will incorporate a floor of 3.2 per cent., in cash terms, and a ceiling of 7 per cent. per pupil.

In addition to the increases in funding for local authorities' general grant, we are providing further increases in grants for specific initiatives. Of key importance will be the neighbourhood renewal fund, which will allocate £400 million of grant via local strategic partnerships to help support and kick-start public services in the most deprived areas—£100 million more than in the current year. On a like-for-like basis, local authorities will receive £1.3 billion more next year in special and specific grants.

As we promised in the local government White Paper, we have looked closely at these grants to ensure that ring fencing is kept to the minimum necessary. Members will be aware from the recent announcement on freedoms and flexibilities that the proportion of funding paid to local authorities as ring-fenced grants will, on current plans, be reduced over the three years of the spending review. Excellent councils will also receive additional freedoms from ring fencing. Ring-fencing revenue funding is set to decrease from 12.4 per cent. to below 10 per cent. by 2005–06.

Our plans for next year provide local authorities with good increases in grant. The increases mean that since 1997 we have raised Government grant to local authorities by some 25 per cent. in real terms, compared with a 7 per cent. reduction in real terms in the last four years of the previous Administration.

There could be no clearer illustration of our commitment to supporting and helping local authorities to deliver the strong local leadership and quality public services that local residents rightly expect and that local government wants to provide.

Given the significance of the review that we have undertaken, local authorities have understandably been awaiting today's announcement with some anxiety. Some authorities have been predicting a settlement under which councils will have to make cuts or impose significant council tax increases. I am glad that today's announcement demonstrates that those fears, and the scaremongering from our political opponents about cuts in grants, were unfounded and unjustified. The good increases in funding provided by the spending review, the realistic levels of floors and ceilings we have been able to set, and the decisions we have taken on the distribution of grant to local authorities mean that there is no reason why councils cannot continue to improve services while sticking to reasonable council tax increases. Today's proposals are good news for local government and as such I commend them to the House.

Mr. Eric Pickles (Brentwood and Ongar)

I should like to say a little more than the ritual thanks to the Minister for giving us early sight of the statement. To his great credit, he went out of his way to ensure that all hon. Members have a very clear idea of the changes. I am sorry, therefore, to start on a slightly sour note, but I shall be brave about it.

A written ministerial statement promised that the consultation analysis would be available in the Vote Office and the Library. I am sorry to tell the Minister that it is not to be found in either place; I hope that his officials will ensure that that is rectified.

Today, we know the real cost of the Chancellor's vanity and who pays the price of his failure to add up the figures in March. Today, we will see for the first time ordinary families on ordinary salaries in ordinary homes facing £1.000 council tax bills. In the few short years since Labour started to target them, ordinary families' council tax bills have risen by more than 40 per cent. Council tax bills of £1,000 are just the start. The Government have promised a 16 per cent. increase in council tax over two years—a slippery stealth tax buried on page 197 of the pre-Budget report: so much for open government. Council tax bills of £1,000 will be in addition to the £35 a week for every man, woman and child that will be paid in extra taxation. The Government propose the introduction of a new band of council tax, which will push even more middle-income families into higher bands, particularly in the south-east and London. This will make matters worse.

In last year's statement on the local government finance settlement the former Secretary of State, the right hon. Member for Tyneside, North (Mr. Byers), said: There is no reason why we should see large increases in council tax"—[Official Report, 4 December 2001; Vol. 376. c. 169.] Yet average council tax in England went up by 8.5 per cent.—four times the rate of inflation and the biggest cash increase in the history of council tax. However, the right hon. Gentleman should recognise that last year was part of the grand tradition of local government settlements established by the Deputy Prime Minister, who said in his statement in 1998: we look to local authorities to set sensible budgets that will keep council tax increases as small as possible."—[Official Report, 5 February 1998; Vol. 305, c. 1259.] The reality was that different council taxes rose by 8.6 per cent. in band D—three times the rate of inflation.

The Minister has just said that the distribution of grant to local councils means that there is no reason why councils cannot continue to improve services while sticking to a reasonable council tax increase, yet the Government have promised a rise of 16 per cent. over two years, or seven times the rate of inflation—a rise caused mainly by this settlement and the rising burdens that the Government have placed on local government.

Last year the former Secretary of State promised: From 2003, we will introduce a system that is transparent, fair and just.""—[Official Report, 4 December 2001; Vol. 376, c. 169.] It is right that we should judge him on those criteria. The Deputy Prime Minister has added his own special touch of mystery and ambiguity to a system that was complex and incomprehensible. We now have a system that is more complex, opaque and unjust than the one that it seeks to replace. The labels may have changed, but the reality remains the same. This is looking less like a consultation exercise and more like the last page of "Animal Farm", when the animals could not tell the pigs from the people. All this has been done just to transfer money from Conservative authorities to Labour ones. It seems that the Government are using a particularly heavy sledgehammer to give money to a few nuts.

It seems that the front-page headline in The Times in July was right when it predicted: Labour will tax Tory voters to fund heartlands Mr. Steven Pugsley of the Rural Services Partnership said that taking money away from rural services at a time when communities are looking far ministers' reassurance that they have their interests at heart would be unforgivable. The options under consideration would decimate vital services to market towns, villages and rural communities Last year, the Government made great play of the fact that there would be no scaling back of grant to pay for the floors and ceilings. The effect of scaling back falls on to a relatively small number of authorities. Birmingham would lose £1 million, Oxfordshire would lose £800,000 and Derbyshire £750,000. This year the Minister has announced the reintroduction of scaling back. What is the cost of this scale-back and will he confirm that it will affect local education authorities? How much money will be cut from education?

The new system depends heavily on a council's ability to raise council tax—resource equalisation. The Minister hopes optimistically that this does not mean that we will reward high spending, but it does mean that well-run councils that have been prudent and kept council tax down will be penalised. The system will penalise debt-free authorities that will face having their capital receipts raided to pay for badly run authorities.

Let us put partisanship aside for a moment. Next week we will have the verdict of the Audit Commission on councils in England. Conservative Members suspect that high-performing authorities will lose grant and need the protection of the floor announced today. Equally, we suspect that low-performing authorities will be rewarded by the settlement. Will the Minister give a guarantee that this will not happen?

Poverty and need are treated differently depending on where one lives. Can the Minister explain why, under the formula, Lancashire receives £85.48 more per child than Leicestershire and why Durham receives £83.20 more per child than Buckinghamshire? Is it not a sad reflection on the formula that Labour has chosen to ignore and airbrush out rural poverty?

The minimum grant or floor announced today will be insufficient to meet the needs of local education authorities in that it refers only to schools and pupils. This complex minimum grant takes no account of pressures facing LEAs such as school transport and special educational needs. If authorities are forced to apply for grants wholly on education, little will be left to fund other front-line services. This will lead to a macabre game of musical chairs. Councils will raid social services budgets; pressure from the needs of the elderly will lead to bed-blocking, which in turn will cause the Government to fine authorities, leading to an increase in council tax. It makes no sense to have different Government Departments tugging each other and local authorities in opposite directions, all because, in the words of The Times: Labour will tax Tory voters to fund heartlands". Does the Minister agree with the Chancellor's estimate that council tax will increase by 16.3 per cent. over two years? Will he confirm that band D properties will incur bills of £1,000 for the first time? How many authorities, and how many local education authorities, will receive just the floor figure? How many LEAs' grant will be subject to scaling back, and can the Minister explain the curious fact that, according to his statement, the amount raised through business tax is £1 billion down on the figure published in Hansard last year?

This is a missed opportunity. Consensus could have been reached on reform of the system; instead, the Minister has chosen to ignore advice from Members on both sides of the House. This is the same old Labour, and the same old fiddled figures.

Mr. Raynsford

To change the tone, may I start by thanking the hon. Member for Brentwood and Ongar (Mr. Pickles) for his kind words about the provision of information? I say to him quite openly that this is a complex subject, and we tried our best to ensure that all Members had the opportunity to see the figures, and to understand what we are seeking to do. The full details are in the Vote Office, but, according to the normal convention, they were accessible only from the moment that I sat down.

The Opposition have been scaremongering about council tax increases for some time—long before this settlement. They talked about the threat of cuts in services, and about huge council tax increases, but those claims were based on wholly erroneous and unjustified interpretations of the consultation. It is now absolutely clear, as I hope they will have the good grace to admit, that all that scaremongering was unjustified. I hope that they will at least ponder the contrast between this Government's 25 per cent. increase in support for local government over six years, with the 7 per cent. real-terms cut under the Tories.

The hon. Gentleman's claim that the settlement will force up council tax is simply wrong, as is his claim that rural areas will suffer a loss. If he looks at the detailed figures, he will note that rural shire districts across the country as a whole get a 7.6 per cent. grant increase. What a contrast that is with the individual cuts that they suffered under the Tory Government! I can attribute his claim that the scaling factor will result in a loss to education authorities only to his misunderstanding of what it is. The scaling factor is designed to help to pay for the cost of the floors. The floors are supported first by the ceilings, but authorities that would otherwise receive more than the ceiling do not do so, and the scaling factor reduces by a very small margin the grant—

Mr. Pickles

What is it worth?

Mr. Raynsford

I have already given the hon. Gentleman the figures. They are in the statement, which he had for three hours before the debate, and I am astonished that he has not even bothered to discover them.

The hon. Gentleman's suggestion that high-performing authorities are somehow going to be penalised is quite wrong. There is no correlation between the work done by the Audit Commission, which is looking at the performance of authorities, and the needs assessment that informs the distribution. He will see that some high-performing authorities receive very good grant increases, and that some authorities that are performing less well also do so. That is because the two activities are quite separate. I am sorry that he has failed to understand that.

The hon. Gentleman's criticism of the children's education allowance is particularly ill-founded in a year in which we can state that, overall, there is a £200 per pupil average increase. That is in marked contrast to what happened when the Tories were in power. He confused the Chancellor's estimate of council tax increases in the Red Book, based on previous year trends, with what will actually happen, which will be a matter for individual authorities to determine. He also asked about the number of authorities that will get the floor level increase. The answer is clear from the figures that I have already provided, but he ought to be pleased that the floor is there. Without it, many authorities would suffer losses.

I shall pause for a moment to describe one scenario. Westminster city council has faced a real problem, not because of anything to do with our Department but because of the census data, which show a significant fall in the population of that area. Were a floor not in place, that authority would have suffered a serious reduction. Is he complaining about our efforts to provide protection for authorities through such a floor? His remarks suggest that the Conservatives have a wholly unsatisfactory understanding of what we are seeking to do. Their approach to local government has been condemned by their own record in government.

Mr. Edward Davey (Kingston and Surbiton)

I thank the Minister for his statement, and for his courtesy in providing a particularly early sight of these very complex figures. I begin by welcoming a particular aspect of the statement. The Government have listened to some of the representations that were made. I am glad that Ministers have now checked the map and that they now recognise that Kingston-upon-Thames is not in east London

Overall, however, the statement is extremely worrying for my constituents and for millions more. Rather than increasing council freedoms, the statement is a control-freak statement. Rather than being generous with Government money, the settlement is generous only with council tax payers' money. Does the Minister not realise that he has utterly failed to deliver on his promise of a fairer, more transparent and simpler system? Is it not true that, under the new system, there will be large council tax rises in the worst-hit areas for several years? How can that be fair?

Despite the Minister's claim that he is reducing ring fencing, most councils will see more special grants next year. He has abolished seven special grants and introduced 16 new ones, but how can feeding that financial fog increase transparency? Is it not true that, by looking solely at the grant system and failing to replace the unfair council tax, and to take budget power from Whitehall, the Government have missed the chance to establish a genuinely simpler system? As the Minister admitted, the Treasury predicts a 7.2 per cent. rise in council tax next year, but do not the Government always underestimate council tax rises—by a massive 3.1 per cent. last year? Is there not a real threat that average council tax rises next year could top 10 per cent.—four times the expected rate of inflation? The Government cannot duck the blame for rocketing council tax. It is Ministers who place councils in a financial straitjacket, with less room to move than Houdini, but they cannot escape the blame.

The Minister claims that his floors and ceilings will protect council tax payers, but he has set the level very low. Does he acknowledge that, at best, such protection will be partial and short-lived? What will happen in year 2 or in year 3, when the changes really kick in? If he is so concerned with protecting the losers, why were the Government not honest enough to announce the floors for years 2 and 3? Not only would that have shown the truth about this statement; councils could have planned for the future. Indeed, through his own local government Bill the Minister will force councils to plan budgets over the longer term, yet in this statement he is refusing to give councils the very information that they need to make those plans. Is he not just a little shamefaced about that hypocrisy?

The hon. Member for Brentwood and Ongar (Mr. Pickles) complained greatly about shifting cash between different authorities: I say "Westminster and Wandsworth" to that. Will the Minister at least concede, however, that huge shifts leave him open to the charge of gerrymandering? Does he not realise that, because the grant review was so rushed, that charge will stick? Will he confirm that he has breached Cabinet Office guidelines on good consultation by releasing the consultation's conclusions along with his settlement? Should not the Government have learned from their embarrassing mistakes in last year's settlement, and from the A-level debacle, and delayed the review by one year to allow for a full and independent analysis?

The most disappointing aspect of today's statement is without doubt the Minister's failure to bring clarity and equity to local education authority budgets. In so doing, he has ignored the principal recommendations of every professional group: Ofsted, the Audit Commission, and head teachers and governors associations. Why did he reject their idea that the bulk of education standard spending should be distributed using an activity-led formula? Given that the Government are increasingly telling schools what to do, why has he abandoned the principle of activity-led funding in favour of the discredited historical spend data? Will he explain to the House how schools appear to have lost £250 million between the Chancellor's spending review and this statement?

It was noticeable that the Minister did not bother to boast about increases for social services. Frankly, we are not surprised. Will he confirm that, with increased demand pressures and national insurance costs, the settlement represents at best a standstill for social services? How will that solve bed blocking and help children at risk? The Government may say that it will take time to make up for the lost years of Conservative underfunding, but social services are often life-and-death services. Why have they fared so badly?

The Minister said that the Government were removing the perverse incentives in the formula for fire authorities. When will he publish the new formula?

When they began the settlement process Ministers promised to move a mountain, but they have brought forth a molehill. The Minister can rightly claim that this is a better settlement than any delivered by a Conservative Government, but it will mean council tax hikes and little new cash for the most vulnerable. It will certainly not lead to the rebirth of local democracy.

Mr. Raynsford

I thought that the spokesman for the official Opposition had made a pretty poor fist of his response—until I heard the Liberal Democrat spokesman's effort. I acknowledge the hon. Gentleman's acknowledgements of the representations that he made in respect of his constituency, and I am pleased that he is pleased that we listened to them. I shall make no jibes about geography.

I wholly reject the hon. Gentleman's allegation that the Government have a control-freak tendency. The settlement is part of a process in which we are devolving greater power and responsibility to local authorities, as I am sure he will understand when we discuss the Local Government Bill in Committee later in the Session.

The hon. Gentleman complained about council tax rises, without mentioning that Liberal Democrat councils had the largest increases last year. Liberal Democrat Members should look to their local authorities before they criticise others. He also asked why we were not giving absolute guarantees of the floors and ceilings for future years. I have explained that ad nauseam, to him and to other hon. Members. Until we see the full details, including the latest demographic data, it is impossible to set an accurate floor that also allows a reasonable gap between it and the ceiling. The hon. Gentleman must understand that. No responsible Government could do otherwise, but we have said repeatedly that there will be floors and ceilings, that there will be protection for authorities, and that there will be greater certainty. That is an indefinite pledge, and we have said that it will be a continuing part of the system. The Government have made a clear commitment that floors and ceilings will continue to be parts of the system.

The hon. Gentleman complained that the Government had not consulted sufficiently. We consulted before we published the consultation paper. We listened to the consultation, and we are publishing the figures today so that they can be consulted on. The Liberal Democrats have an extraordinary approach: they would love life to be one long continuous consultation—all talk and no action.

Contrary to what the hon. Gentleman said, schools have not lost out. They are gaining substantially, as the settlement gives an extra £200 on average per pupil. It is a travesty for the hon. Gentleman to claim that there are losses.

The hon. Gentleman also spoke about inadequate funding for social services, even though the settlement contains an overall increase of 5.5 per cent. in PSS resources, and an additional £100 million specifically for bed blocking. Extraordinarily, he omitted to mention that, and even criticised the Government for increasing the number of specific grants. That shows that Liberal Democrat Members have only the most rudimentary understanding of the essentials. Their questions are very wide of the mark.

Several hon. Members


Madam Deputy Speaker (Sylvia Heal)

Order. This statement has run for just over half an hour already. I have to protect the important business that follows, so I ask hon. Members to restrict their comments to one point only. In that way, I shall be able to call as many hon. Members as possible.

Andrew Bennett (Denton and Reddish)

I thank my right hon. Friend the Minister for the hard work that he and his ministerial team have put into consulting so widely on this matter. I thank him, too, for the extra money that has been made available, and for edging towards fairness. However, he will come before the Select Committee on the Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions tomorrow morning. Will he be able to convince that Committee, or my constituents in the Bull's Head, that this system will be more easily understood? Will voters in local elections be able to determine whether their local authorities are efficient and well managed, or whether the funding system is still hampering their activities?

Mr. Raynsford

I thank my hon. Friend for his kind remarks about our consultation, and about the settlements in respect of Stockport. Stockport is to receive a 6.8 per cent. increase, and Tameside one of 8.3 per cent. I am sure that he and his constituents will be extremely pleased about that. My hon. Friend raised the question of whether the system was easy to understand. I have openly accepted that it is complex—but the obverse side of the coin of fairness is complexity. One cannot have both fairness and simplicity: to take account of all the myriad circumstances that have to be considered, it is inevitable that the formula has to be reasonably complex. That is unavoidable if one is to be fair. We could have a simple system, but it would not be fair. I do not think that my hon. Friend would like that.

Mr. David Curry (Skipton and Ripon)

We have a rebadged area cost adjustment, but it may well have more frontiers than its predecessors. We have a new, gothic structure in resource equalisation, which might well prove to be as complex as area cost adjustment. How much of the new structure depends on council tax banding and resources? When the Government allocate money to schools, what account has been taken of the size of school balances? Does the Minister think that school balances should not accumulate beyond certain levels, rather than mounting up and sitting Gollum-like in school treasurers' caves after collection?

Mr. Raynsford

The right hon. Gentleman asked a series of questions, but did not mention that Craven, one of the two districts that he represents, is to receive an increase of 12.5 per cent. I am sure that he and his constituents will be delighted by that. On the education question, my hon. Friend the Minister for School Standards will write to the right hon. Gentleman with a detailed response.

Mr. Clive Betts (Sheffield, Attercliffe)

I want to ask about area cost adjustment. Many of us have argued that my right hon. Friend should take account of the costs that local authorities actually incur, so why has he decided to use the new earnings survey, which reflects costs in the private sector? Why do authorities in the Merseyside area now qualify, whereas those in south Yorkshire and Tyneside do not?

Mr. Raynsford

My hon. Friend raises an interesting question about area cost adjustment. His authority of Sheffield has received an increase of 6.1 per cent. I am sure that he and his constituents will be very pleased about that. We have reformed the area cost adjustment to ensure that it takes a wider view of areas with especially high costs. Parts of west Yorkshire do qualify, but wages costs are inevitably the driver, and it is not possible for every area to benefit. The settlement is an attempt to recognise that there are additional costs associated with delivering services in high-cost areas, and to do so in a much more sensitive way than the old area cost adjustment mechanism. I think that we have made progress on that.

Mr. Gary Streeter (South-West Devon)

Does the Minister agree that when he began his statement, every child in Devon received £200 a year less than the national average for education, and that now that he has sat down, that serious discrimination remains untackled? Why did the Minister not look at that serious problem affecting west country children, instead of just loading council tax rises on to their parents?

Mr. Raynsford

Children in Devon and elsewhere in the country have benefited from the very substantial increases in education spending that the Government have made over the past six years, and that we continue to make. On average, there is a £200 increase in the amount per pupil this year, and that significant increase follows previous increases. Obviously, circumstances vary between areas, but Devon county council has received a good above-inflation increase of 4 per cent. I am sure that the hon. Gentleman is delighted that the district of West Devon, which he represents, has received an 11 per cent. increase in grant.

Mr. Martin Salter (Reading, West)

I thank my right hon. Friend for recognising the needs of local authorities that are trying to deliver public services in areas of high housing cost such as Reading, Slough and the Thames valley. An increase of 8.8 per cent. for Reading is welcome, but may I draw my right hon. Friend's attention to the need for his Department to give practical help to local authorities desperately trying to boost the amount of affordable an d key worker housing in their areas?

Mr. Raynsford

My hon. Friend will be as delighted as we are that Reading is receiving an 8.8 per cent. increase and West Berkshire one of 8 per cent. He may wonder why Reading is getting 8.8 per cent., given that the ceiling is 8 per cent. I should have explained that the capital element is outside the floor and ceiling, which is why some authorities can do even better than the ceiling.

My right hon. Friend the Deputy Prime Minister attaches great importance to affordable housing, and will announce his proposals for community plans to secure effective communities, more provision of affordable housing and the building of decent communities, particularly in areas of need such as the one that my hon. Friend represents.

Mr. Roger Gale (North Thanet)

In his statement, the Minister said that he had made detailed changes to personal social services and simplified things so that there is now a single formula for residential and domiciliary care. In Kent, that appears to mean that the Government are to take millions of pounds from social services and give it to Richmond house, so that the Department of Health can give it back to primary care trusts, so that they can give it back to social services—with all the administrative costs deducted. At the end of the day, my constituents will have to pay more for their residential care. Why?

Mr. Raynsford

Kent has received an above-inflation increase of 3.9 per cent., which is a good settlement by any standards. The Government are particularly concerned about bed blocking, which is a serious problem. It is necessary to do something about it. It does not help if people occupy beds in hospitals unnecessarily because of inefficient provision of alternative accommodation. The arrangements that the Government are putting in place are designed to ease that problem. A substantial grant is available to local authorities to help them meet their obligations. I hope that the system will achieve what I know the hon. Gentleman wants and what we certainly want—a reduction in bed blocking.

Mr. Bill O'Brien (Normanton)

I thank my right hon. Friend for his statement. I am glad that the Department is looking at the index of mass deprivation in connection with distributing resources, particularly in education and social services. He referred to the population figures, and the fact that over the past 10 years we have been using the 1991 census figures, with 1 million people incorrectly included in the formula. That means that authorities in SIGOMA—the special interest group of municipal authorities—have been losing out in funding over the past 10 years. I hope that that injustice to SIGOMA has been recognised. Can my right hon. Friend give an indication of how the Government are approaching the funding gap between what local authorities are spending and what they have been allowed?

Mr. Raynsford

I know that my hon. Friend has been campaigning assiduously for a long time not only for his own authority but for others in the parts of the country that he cares about passionately, which are represented by the SIGOMA group. I hope that there will be a broad welcome for the settlement, not just in Wakefield, which is receiving a substantial 7.9 per cent increase, but in many other areas represented by SIGOMA. On population change, we have rightly chosen to include latest population figures and put in place safeguards to ensure that authorities' budgets are not unreasonably disrupted by very sharp short-term movements. We want to use the most up-to-date data on that, as well as on the spending needs that underpin the basis of the new settlement.

Mr. Desmond Swayne (New Forest, West)

Is there not something utterly perverse about the Minister claiming that there is £100 million in the budget to prevent bed blocking, when £100 million is precisely the figure that the Department of Health has in its budget for the revenue that it will raise from fining local authorities?

Mr. Raynsford

I note that the hon. Gentleman did not make any reference to the 3.7 per cent. increase that his county council has received, which he ought to welcome. Had a Tory Government been in power, his authority would have been facing a cut in its settlement. He should be celebrating the real-terms increases that the Government are delivering. Our concern is to reduce the incidence of bed blocking. It is precisely to encourage and incentivise authorities to do their best to deal with the problem that the arrangements that I have described were put in place.

Mrs. Louise Ellman (Liverpool, Riverside)

I congratulate the Minister on the continuing increase in local government funding. How can the settlement that he has announced help the Liberal Democrats who run Liverpool city council to address the continuing problems of multiple deprivation and population loss?

Mr. Raynsford

I know that my hon. Friend will celebrate the fact that her city has received a 7.3 per cent. increase. We did not hear much about that from the Liberal Democrats, did we? All we heard from them was doom and gloom about how poorly local government is doing. Actually, local government knows that the Government have been helping authorities with real-terms increases in grant, and those increases are going to authorities of all political persuasions. There is no discrimination against a particular category of authority. Liverpool should certainly be pleased about the settlement that it has received.

Angela Watkinson (Upminster)

The Minister has given an assurance that no local authority will have a cut in cash terms. The right hon. Gentleman will also know, because I have mentioned it on several occasions, that the London borough of Havering is one of a small group of authorities throughout the country that has received a perversely low settlement under the old formula. Will the Minister give a further assurance that the London borough of Havering will not receive a cut in overall terms?

Mr. Raynsford

Yes, I am pleased to give the hon. Lady that assurance. The Havering settlement involves an increase of 3.5 per cent., which is a good percentage point ahead of inflation, and I hope that she and her constituents will be pleased with it.

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

My constituents in Staffordshire Moorlands and Stoke-on-Trent will be asking what extra money there is and whether the allocation is fairer. Will my right hon. Friend tell me how, in respect of neighbourhood renewal funding, it will be possible to make sure that every penny provided will be allocated to the areas of highest deprivation in Stoke-on-Trent?

Mr. Raynsford

I am sure that people in my hon. Friend's constituency will be pleased about the settlement. Stoke-on-Trent is receiving a 6.5 per cent. increase and Staffordshire Moorlands district is getting a 12.5 per cent. increase, which is on the ceiling. So there are good results for my hon. Friend's authorities, and I am sure that her constituents will he pleased. We obviously want the considerable resources allocated through neighbourhood renewal to get through to meet real needs, but that should be determined locally, with the local strategic partnership working with the local authority to ensure that there is an identification of projects dealing with real need that can be the focus for that very important funding.

Mr. David Heath (Somerton and Frome)

For about 15 years we have waited for the day when the old formula system was swept away and Somerset schools got a fair deal equal to that of other parts of the country, and we had enough funding to put policemen on our streets. However, that step change in education has not taken place and there will be fewer, not more, police officers in Somerset as a result of the settlement. Is that fair?

Mr. Raynsford

The previous settlement was not introduced 15 years ago but came in more recently, so if the hon. Gentleman has been waiting for a change he has got his figures wrong. That is not altogether surprising, because his curmudgeonly question did not recognise the fact that his local authorities have done extraordinarily well out of this settlement. Somerset county council has received a 6.8 per cent. increase and Mendip one of 12.1 per cent., but the hon. Gentleman did not have the decency to recognise that fact.

Mr. Eric Martlew (Carlisle)

Is my right hon. Friend aware that Cumbria county council, which is run by the Conservatives in cahoots with the Liberal Democrats, has been saying on its website that the council tax will have to go up because money is being taken away from rural areas? Can he confirm that that is not true? Can he also confirm that Cumbria has a 7 per cent. increase for education—the highest anywhere in the country?

Mr. Raynsford

I thank my hon. Friend for that question. I confirm, as I have already said in response to an earlier question, that rural shire districts have done well out of the settlement. It is certainly the case that local authorities in his area have benefited. Cumbria county council is receiving a 4.7 per cent. increase, and Carlisle, I am sure that he will be delighted to know, is getting a 9.9 per cent. increase. I know that his constituents will be really pleased with that.

Sir George Young (North-West Hampshire)

For next year, the Government have responded to the strong campaign from Members of Parliament representing Hampshire and elsewhere who were concerned about the big increases in next year's rates by raising the floor above their previous proposal—and we welcome that. But does the right hon. Gentleman recognise that there are enormous longer term consequences for Hampshire residents from changes in the formula, and that unless he can go further than he has gone so far today, my constituents will simply assume that the pain has been deferred?

Mr. Raynsford

I know that the right hon. Gentleman is very familiar with these issues, because he occupied my post in a former Government—but of course when his party was in government he had to stand at the Dispatch Box and justify cuts in allocation, whereas I am pleased to be able to tell him that Hampshire county council is receiving an increase of 3.7 per cent., and that his local authority, Test Valley borough council, gets a 5.8 per cent. increase.

As I have said, the floors will continue in the system indefinitely. They play an important role in giving certainty to local authorities. The one thing that I cannot do is to predict precisely what the floor level will be—for reasons that I made clear in answer to an earlier question—but the right hon. Gentleman will know that the floors this year are not that dissimilar from last year's levels. It is certainly our intention to ensure that there are no steep changes in the floors year by year. We have to examine the latest detailed figures before we determine the floors in any one year, but our aim is to try to build consistency and give greater certainty to local government.

Mr. Iain Coleman (Hammersmith and Fulham)

I welcome the Minister's statement, but his decision to set the floor for London local authorities at 3.5 per cent. will come as a grave disappointment to my local authority, Hammersmith and Fulham. My right hon. Friend is well aware that Hammersmith and Fulham is a high-performing authority, but the borough treasurer advises me that it faces a £10 million cuts package and a likely council tax increase in excess of 10 per cent. Can he assure me that if the local authority can show evidence that the settlement gives them peculiar difficulties, he will meet us and listen to those representations?

Mr. Raynsford

My hon. Friend's authority is one of several in central and west London that have been affected by the census data to which I referred earlier. I should have thought that he would welcome the fact that there was a floor to protect authorities from suffering a cut. I should have thought that, rather than being disappointed with a floor of 3.5 per cent., he and his constituents would be pleased that the Government have ensured that there is an above-inflation increase for the authority, which would not otherwise have been the case, because of census information.

I entirely acknowledge my hon. Friend's point that Hammersmith and Fulham performs well, and we look forward to seeing the result in the comprehensive performance assessment issued by the Audit Commission next week. High-performing authorities have generally proved their ability to work well and prudently with their budgets and to deliver cost-effective services, and I am sure that my hon. Friend's authority will want to do that.

Mr. Charles Hendry (Wealden)

How will the Minister allay the concerns of East Sussex county council that a small increase may indeed turn out to be a reduction when we take account of the additional responsibilities that the council will be required by the Government to carry out? Is it not the truth that the figures do not compare like with like, because the services that the council has to cover this year have been extended?

Mr. Raynsford

I find it slightly odd that the hon. Gentleman should regard a 3.8 per cent. increase for his authority as a rather poor settlement. He will recall that when his party was in power authorities were getting reductions, not 3.8 per cent. increases. This is a good settlement for the hon. Gentleman and the people of East Sussex and, with the extra margin above inflation that we have granted, it should certainly enable the authority to work prudently and deliver efficient services.

Mr. David Chaytor (Bury, North)

I welcome the settlement on behalf of my constituents▀×it is the best that my local authority has ever received. I congratulate my right hon. Friend on his work in producing a fairer and simpler system. We can make representations on the new system until 14 January, but does that also apply to the allocation of neighbourhood renewal funds? Does my right hon. Friend accept that the sharp and arbitrary cut-off point for the allocation of neighbourhood renewal funds works against some of the smaller metropolitan districts, and others with high levels of deprivation, but where such deprivation does not extend right across several wards?

Mr. Raynsford

I very much appreciate my hon. Friend's extremely kind remarks. I am sure that he and his constituents are delighted at the 8.2 per cent. increase in Bury which is, as he says, the best settlement that it has ever received. I am delighted for him. The Minister for Social Exclusion and Deputy Minister for Women has responsibility for neighbourhood renewal and is holding further consultations about the formulae used to assess eligibility. I cannot promise my hon. Friend more than that, but I am sure that if he talks to my hon. Friend she will be more than receptive to any representations that he would like to make.

Mr. Keith Simpson (Mid-Norfolk)

During the past few months, the Minister has gone out of his way to consult Members of Parliament and others. He knows that, in an Adjournment debate, I raised the local government finance formula for Norfolk. The Minister will reply now by giving me the headline figures for Norfolk and—in headline terms—they will look reasonably good. However, leaving that aside—as the Prime Minister would say—can the Minister explain to Norfolk taxpayers how that headline figure will equate to all the extra costs that have been loaded on to Norfolk county council during the past two or three years? Next year national insurance will cost us about £600,000. Most of any increase will be taken away, according to his own Government's figures. Is the right hon. Gentleman prepared to meet me and a delegation of MPs from Norfolk to discuss the formula shortly?

Mr. Raynsford

The hon. Gentleman will be aware from correspondence in the local press that there has been a lot of speculation in Norfolk about alleged cuts as a result of the settlement—[HON. MEMBERS: "Scaremongering".] I had to write to point out that it was indeed scaremongering. I am pleased to be able to tell the hon. Gentleman that Norfolk county council receives an increase of 6.3 per cent., that Breckland district council receives an increase of 12.7 per cent., and that Broadland district council receives an increase of 12.5 per cent. I should be happy to receive a delegation of the hon. Gentleman and other Members—they will be able to tell me how they intend to spend the extra money that we are giving them.

Mr. David Kidney (Stafford)

Conservative and Labour Staffordshire Members who are absent are hosting a lunch for the distinguished and much respected county clerk, Mr. Bernard Price, who is retiring next year. I know that those Members would have liked to be in the Chamber, especially my constituency neighbour, the hon. Member for South Staffordshire (Sir Patrick Cormack).

May I add my words of praise to the Minister personally for the great amount of time that he has taken over the consultation for the Green Paper and in holding seminars for Members? Will he confirm that responses from residents in the authorities of the F40 group were prominent among those to both the Green Paper and the consultation? Will he explain whether the focus on the basic allowance approach benefits F40 authorities? It certainly appears that Staffordshire will benefit, so does he agree that the new focus will see off the scaremongers who said that the new system would be no better for Staffordshire than the old one?

Mr. Raynsford

I thank my hon. Friend for his kind remarks about the consultation and the efforts that we made to ensure that everyone was as familiar as possible with the way in which we were approaching the process. I am sure that he is delighted with the results for his authority: Staffordshire county council receives an increase of 7.1 per cent. and South Staffordshire district council receives an increase of 13 per cent. Those results are extremely good.

My hon. Friend has been an assiduous campaigner on behalf of the F40 group, and the Under-Secretary of State, Office of the Deputy Prime Minister, my hon. Friend the Member for Shipley (Mr. Leslie) met delegations from F40 led by my hon. Friend the Member for Stafford on several occasions during the consultation process. He will be pleased to know that overall, the F40 authorities receive an increase of 6.8 per cent.

Mr. Paul Burstow (Sutton and Cheam)

I thank the Minister for meeting a delegation from the London borough of Sutton during the consultation on the formula review, which appears to have been helpful as regards today's settlement. However, will the Minister tell us whether the scaling-back figures are included in the exemplifications that have been provided for Members? If not, what does that imply for my local authority?

Can the Minister tell us how the £100 million allocated to be paid back to the NHS—

Madam Deputy Speaker

Order. I asked for one question only.

Mr. Raynsford

I am grateful to the hon. Gentleman for acknowledging the attention that we gave to his representations and I am sure that he is as delighted as his constituents will be that Sutton has received 7 per cent., a good increase. He asked about the scaling factor; he will know that that was applied before these figures were announced. There is no scaling back on the figures announced. It is the process involved in determining the floors and ceilings to ensure that there is a zero sum process to support the floors through both the ceiling and the scaling factor.

Ms Karen Buck (Regent's Park and Kensington, North)

My right hon. Friend will be aware that London local authorities entered into this process with some scepticism and there will be many, such as Brent and Tower Hamlets, that are pleased with a settlement that reflects their high costs and levels of deprivation. My authorities, the Conservative boroughs of Westminster and of Kensington and Chelsea, have spent recent months advising their residents that they can expect cuts of up to £40 million. Will my right hon. Friend confirm that they will receive increases of between £4 million and £7 million, and that the cuts that Westminster proposes—such as the £250,000 play charges for the poorest parents in the borough—are wholly unnecessary?

Mr. Raynsford

There is no justification for scaremongering—no more in Kensington and Westminster than in other parts of the country. We have always said that we were seeking a fair settlement and that we would ensure that no council faced losses. As we have put a floor in place, Kensington and Chelsea, and Westminster, are protected from the consequences of the census data that showed a lower population than had been previously expected. Those factors apply in those authorities as well as in the neighbouring authority of Hammersmith and Fulham, to which I have referred. I am sure that my hon. Friend and her local residents will be relieved that we have a floor in place; otherwise, there would have been a serious consequence from the adoption of the most up-to-date census data.

Mrs. Angela Browning (Tiverton and Honiton)

I seek a direct answer to my question, not a pre-prepared one. Is it still the Minister's intention to sequestrate the capital receipts of debt-free councils and redistribute them, such as the receipts of East Devon district council in my constituency, which has benefited the council taxpayer by keeping taxes low and providing good services and is now to be penalised for that good stewardship? It is, of course, a Conservative-controlled council.

Mr. Raynsford

I am sorry that the hon. Lady has not recognised the extremely generous settlement that we have given to her authority. Not surprisingly, she has not mentioned that Mid Devon will get an increase of 12.5 per cent. We have always taken account of the availability of capital receipts on the principle that it is right that when resources that have been paid for by central Government—housing stock, predominantly—are realised through sale, there should be a contribution to the wider national housing scene. That has always been the case. We are proposing changes relating to debt-free authorities that, as a result of current arrangements, would not be subject to that regime and would get an unfair advantage if that were not changed. That will be part of the legislation going through the House, which the hon. Lady will be able to debate in due course.

Mr. Frank Field (Birkenhead)

May I thank my right hon. Friend for the statement, and for the way in which he involved people in the long consultation process? Birkenhead has one area with the highest proportion of poor children anywhere in the country. What increase in taxpayers' resources will be going to Wirral council to help provide better services to some of the poorest people in the country?

Mr. Raynsford

I thank my right hon. Friend for his kind words. I am sure that he will be delighted that Wirral will receive an increase of 7.7 per cent., which is equivalent to £18.4 million of additional grant. In addition, the authority will be receiving £5 million in neighbourhood renewal funding. These are substantial increases being made available to meet the needs of his deprived community, and I am sure that he will welcome that.

Mr. Michael Portillo (Kensington and Chelsea)

Will the Minister recognise that the floor, though welcome, is an insufficient fix to meet the dismaying problem of the very poor response rate to the census, particularly in inner London boroughs? Is it not plausible that part of the problem is the fact that asylum seekers have been given insufficient help in filling out their forms? As at least some of the newcomers from Sangatte will probably find their way to inner London, will the Minister say what plans he has to make sure that local authorities are properly compensated for the costs that they face, at least in the short term?

Mr. Raynsford

Last year the right hon. Gentleman was complaining about the ceiling for Kensington and Chelsea. Had we taken on board his representations that the ceiling was unfair, there would have been no finance for the floor, from which his authority is a beneficiary this year. The census issue is a complex and serious one, and I know that a number of authorities that have seen a substantial reduction in their population in the latest census data compared with what was anticipated are naturally concerned. However, the floor provides protection for those authorities, as I acknowledged in my response to my hon. Friend the Member for Regent's Park and Kensington, North (Ms Buck). I say the same to the right hon. Gentleman. As far as asylum seekers are concerned, the Government are keen to ensure that there is a robust regime in place to handle our responsibilities and to ensure that there is effective help for authorities that have to meet additional costs because of the presence of asylum seekers in their area.

Mr. David Clelland (Tyne Bridge)

My right hon. Friend should be congratulated on finally getting rid of the anomalous and unfair standard spending assessment system; that will be widely welcomed. He has said that one of the factors that he takes into account is the relative ability of authorities to raise council tax. Does he agree that many authorities in the south of England that benefited from the fiddling of the former Government have low council tax bases, and that their ability to raise funds from council taxes is far greater than authorities such as—to pluck a couple out of the air—Newcastle upon Tyne and Gateshead? Does the settlement fully reflect those differences and, if not, why not?

Mr. Raynsford

I am pleased that my hon. Friend acknowledges the progress that we are making in terms of grants to local government, and in eliminating some of the anomalies and unfairness inherited from the previous Government. I believe that the settlement announced today is good news for both Newcastle upon Tyne and Gateshead, both of which have received significant increases. Above all, my hon. Friend will be pleased that there is in place a framework that acknowledges the needs of more deprived communities. Deprivation is taken into account and the resource equalisation process helps authorities with high needs but a low council tax base. That is an important element in our new structure.

Several hon. Members


Madam Deputy Speaker

Order. We must now proceed.