Local Government Finance

HC Deb 30 January 2002 vol 379 cc346-96

7 pm

The Minister for Local Government (Mr. Nick Raynsford)

I beg to move, That the Local Government Finance Report (England) 2002–03 (HC545), which was laid before this House on 28th January, be approved. The subject before us today, important as it is, is just part of the means by which we establish a sound working partnership between central and local government to meet the needs of all the people served and represented by local government. Councils are in the front line, providing services to their communities. We should remember just how wide ranging those responsibilities are: the quality of the local environment that each of us experiences; education to raise standards and expectations; care of some of the most vulnerable members of our society; housing; transport; street cleaning and lighting. All those and many more depend on the work of councils.

It is Government's job to provide the framework within which councils have the incentives and opportunity to deliver high-quality services and effective community leadership. That is why our White Paper on local government set out our approach to the respective responsibilities of central and local government. We will work with the Local Government Association to clarify what Government can expect from local government, and vice versa.

We will establish a national framework of standards and accountability for the delivery of high-quality services. In some areas, there will need to be agreed national minimum standards, with local flexibility on how those are delivered—and, we hope, exceeded. In other areas, particularly where councils have a proven track record of high-quality performance, we will give them a freer hand to determine and to deliver priorities locally.

We will help all councils by cutting red tape, reducing central prescription and increasing the support that they receive to improve their overall performance. There will be rewards for the best performers and carefully targeted measures to tackle poor performance.

Simon Hughes (Southwark, North and Bermondsey)

Can the Minister deal with an issue that follows directly on from the point about performance? My borough, which he knows well, has the largest publicly owned housing stock of any in London—it has about 50,000 properties. A lot of that needs capital investment. How much do the needs criteria—there may, for example, have been a stock assessment—overrule performance criteria? If the treatment of a council is always going to be governed by its performance historically, it may never get the money that it needs.

Mr. Raynsford

The hon. Gentleman raises important issues that go deep into the performance management system that we are introducing. I shall not detain the House too long by describing that because it is only tangential to the report before the House, but may I explain the three main elements of the performance assessment? First, best value performance indicators; secondly, the inspections carried out by the housing inspectorate of the performance of specific elements in the housing service; thirdly, an overall corporate assessment of the authority's ability to cope with the many corporate pressures that it faces. That will be handled by the Audit Commission, independent of Government. The commission will come to a judgment, based on that basket of indicators, of the overall performance of the authority.

The hon. Gentleman specifically raised the subject of housing. He will know that we have made very substantial increases in the capital allocations available to local authorities for the renovation and improvement of existing stock. I appreciate that in an area such as his, which has a huge backlog of poor-condition property, there is a need to look creatively at additional means of attracting finance. I am sorry that, at the Aylesbury estate and elsewhere, opportunities for raising substantial additional sums have not turned out to be feasible because of tenant opposition, but I hope that the authority and tenants in the area will continue to work constructively to find ways of levering in additional finance, on top of that which the Government have already contributed to the authority.

Simon Hughes

That is very helpful. I pick up the last point. We have had a vote on the Aylesbury estate, a very large estate. We are facing decisions on the Tabard Garden estate, another big estate, and possibly others around the Elephant and Castle. Can the Minister give an assurance that, in terms of meeting the need, carrying out the repairs and so on, no disadvantage will follow from a specific decision by tenants either to stay with the local authority or to transfer to another landlord? Will he confirm that there will be no prejudice in terms of money coming in if they decide to remain local authority tenants?

Mr. Raynsford

The hon. Gentleman is tempting both me and the House by moving from the subject of this particular debate—the local government finance report—to the issue of housing finance, which is separate, but clearly if the option of additional private finance to support the public money already offered by the Government—we had made some substantial offers in relation to the Aylesbury estate—were turned down, I could not guarantee that alternative sums would be available for Southwark in addition to the public finance, but we certainly do not wish to penalise areas that choose to retain the housing under local authority control. We have always believed that there should be options for tenants, and that tenants should decide in their best interests, but clearly some of those options will have greater financial potential than others. That is the nature of the operation.

Mrs. Gillian Shephard (South-West Norfolk)

I apologise for intervening immediately after the hon. Member for Southwark, North and Bermondsey (Simon Hughes) but the point is pertinent because the Minister is raising the question of performance. I know that he sets great store by the performance of local authorities, as indeed we all do. I am extremely concerned about the position with regard to school places in Norfolk, which has certainly had increases in funding. Of Norfolk's 52 secondary schools, only 22 can take extra pupils at the moment. That has a knock-on effect on every aspect of Norfolk life. I draw that to the Minister's attention and ask him to look into how that situation, which is unparalleled in my 30 years' experience, could possibly have arisen.

Mr. Raynsford

The specific issue of Norfolk is obviously important. The right hon. Lady will be aware that the grant to Norfolk has increased by 6.8 per cent., which recognises the needs of the area. I have no doubt that my colleagues at the Department for Education and Skills will be only too pleased to deal with the specific point that she has raised. I will ensure that it is passed on to them. She will appreciate that, as it is a specifically educational point, it is ultimately their responsibility. I shall ensure that she receives an answer from them.

Several hon. Members

rose—

Mr. Raynsford

I would like to make a little progress because literally only one sentence of my speech has related to the local government finance report. I have been happy to take questions in relation to education and housing, but I would like to make a little progress and I will then give way.

Over the past five years, we have been tackling a backlog of under-investment and inadequate general revenue funding. For 2002–03, total revenue support from Government will amount to £47.4 billion, an increase of £3.3 billion, or 7.5 per cent. on this year. The general grant formula distributes £40.3 billion of that, including the police grant. which the House has just debated. Excluding police grant, the remaining formula grant for 2002–03 will total £36.5 billion, an increase of £1.8 billion or 5.3 per cent. on the current year. Those are very substantial increases at a time when underlying inflation is running at under 2 per cent.

During consultation, local authorities impressed upon us that they still face financial problems this year, particularly in the case of social services. We considered those points and we will continue to discuss the needs of social services authorities with representatives of local government. We have already demonstrated our willingness to respond to the evidence presented by social services authorities in the initiative agreed late last year by the Secretary of State for Transport, Local Government and the Regions, and the Secretary of State for Health to respond to bed-blocking pressures.

Mrs. Angela Browning (Tiverton and Honiton)

On social services, the Minister will be aware of the case made by Devon county council. The high number of retired people in Devon has created a problem with its social services budget. I hope that the formula that the Government intend to change in time for the following year will equalise the per capita allowance for retired people, because there is a considerable differential. Devon receives a much lower rate than other parts of the country, and we are also disadvantaged in terms of sparsity. On sparsity and the way the formula for retired people is calculated, will the Government seek to achieve equalisation?

Mr. Raynsford

I will discuss a little later our proposals for changing the standard spending assessment formula in future years, but the hon. Lady will recognise that we are operating the same methodology this year as in previous years. She will be pleased to learn that Devon county council has received a 6.6 per cent. increase in Government grant. That is a substantial increase that is well ahead of inflation, and compares favourably with that received by many other county councils, so this year's settlement in no way disadvantages Devon. I accept, however, that there may be issues relating to the construction of the SSA formula—of course, it was devised when the hon. Lady's party was in government—that we will need to address in our review in the coming year. However, as I said, so far as this settlement is concerned, Devon has not been disadvantaged.

Mr. David Clelland (Tyne Bridge)

Despite the generosity of this year's settlement when compared with those of the previous Conservative Government, several points have been made about the general settlement. Reference was made to the crisis in social services, but we should also remember the unfairness of the population-based calculation, anomalies in education grants and the rules governing them, and late changes to the area cost adjustment, all of which impact heavily not only on metropolitan authorities in general, but on Gateshead council in particular. Has my right hon. Friend any good news to impart in that regard?

Mr. Raynsford

I have a number of items of good news to impart, including the future review of the SSA formula, to which I have already referred. I recognise that areas with declining populations have particular problems, and that savings cannot always immediately be made to take account of such decline. There is a difficulty, in that areas that face extra pressures because of population increases naturally feel such pressures immediately, and want compensation as soon as possible. Given that the impact of such population increases is immediate, devising a system that allows a time-lag before the consequences of population decline are felt clearly involves a funding gap, which must be filled by some means or other. We understand the problem and we will address it in the review, but there is no instant and easy solution to it.

With regard to the area cost adjustment, in that and every other aspect of the settlement we are committed to using the most up-to-date and accurate information. Last autumn, it became clear to us that figures published by the Office for National Statistics in July, which were based on data from the new earnings survey, did not give an accurate picture of the changes, because a significant proportion of the sample was omitted by mistake. When, late in the process, the error came to light, we felt it only right and proper that the figures be adjusted to take account of the correct data. Otherwise, we would have knowingly proceeded on an incorrect basis. We have made similar late adjustments in relation to a number of other factors, and as part of the settlement it is always our policy to implement the most recent, up-to-date and accurate data that we can.

Mr. Paul Burstow (Sutton and Cheam)

The Minister will know that the gap between council spending on social services, and the spending that is necessary according to the Government's SSA, has widened in the past 10 years to 12 per cent. What advice can he give to his Labour colleagues who serve on my local authority in the London borough of Sutton? Their concern is that, as a result of the settlement, the gap has widened to 13.5 per cent. Will that gap be closed through an increase in charges or in council tax, or will there be sufficient grant? It is clear that, at the moment, the grant is insufficient.

Mr. Raynsford

As I thought I had acknowledged, we recognise that there are very real pressures on social services, and we have been discussing them for some time with social services departments and authorities, and with our colleagues in the Department of Health. I mentioned the specific additional finance, some £300 million in total, that was made available last autumn—the bulk of it will take effect in the coming year—to help relieve bed-blocking pressures. We have made it clear that in our view the SSA formula, which has fallen behind in a number of ways, is not an accurate reflection of the current position. It has become increasingly unrealistic in terms of actual spending patterns, and we need to change it. That is why we will conduct an extremely thorough review to try to put in place a better formula with effect from next year.

I hope, however, that the hon. Gentleman recognises that it would have been wrong to rush forward with an inevitably defective stop-gap measure that required further amendment. It is clear that local government should not have to operate according to formulae that change year on year. We need more certainty, and the ability to plan ahead with reasonable confidence in the likely level of support. Obviously, certain variations will be needed to reflect changes in demography, but constant changes in methodology are simply dispiriting to those who must plan ahead.

Mr. Harry Barnes (North-East Derbyshire)

The first Standing Committee of which I was a member considered what became the Local Government Finance Act 1987, which introduced the poll tax and the standard spending assessment. We got rid of one of them, and thankfully we are now able to get rid of the other. Will the consequences of that Act—it has resulted in cumulative loss in many areas, but a cumulative bonanza in various others—be taken into account? The position of authorities such as Derbyshire, which were deliberately targeted by that legislation, needs to be corrected.

Mr. Raynsford

We are well aware of the problems that my hon. Friend and his Derbyshire colleagues have encountered. I hope that he agrees that this year's settlement, which, I suspect, gives Derbyshire a more substantial increase than was initially expected, has gone some way towards redressing the balance. Of course, he will recognise that we cannot overcome the legacy of many years of inappropriate calculations at one fell swoop. However, through settlements agreed in the past five years, we are seeking to increase local government resources in general and to redress the balance. During the coming year's review of the SSA formula, we will try to establish a proper and fair basis for the future. There is a difficulty, however—I will discuss it later—in that everyone expects to do better out of the review. It is the nature of politics that we are all conscious of the defects of the settlement arrangements and the formula as they impact on our own authorities. Everyone expects that those defects will be put right, and that the settlement will benefit them in future years.

Although I have many abilities, I cannot perform magic—the new arrangement cannot magically improve the allocations to every local authority. We will try to devise a system that is fairer, better and above all more comprehensible than the current one. One iniquity of the current scheme is that it is virtually impossible for anyone other than a local government finance anorak to understand how the system works.

Mrs. Theresa May (Maidenhead)

On the SSA review, will the Minister clarify one point for hon. Members' benefit? In his pre-Christmas statement on the local government settlement, the Secretary of State said that the revised SSA would come into force from the 2003–04 financial year. If the review to which the Minister has referred takes a whole year, the new SSA will not be available in time for the 2003–

Mr. Raynsford

I am very happy to put the hon. Lady's mind at rest. The review is already progressing, and will be completed in the course of the coming year so that it can be implemented from the start of the financial year 2003–04. This time next year, therefore, we will be debating a different formula—a different basis for allocation—that will apply from 2003–04.

However, this is a complex matter. The hon. Lady will be well aware of the complexities involved. The change will take time, and it will be several months into the year before we are in a position even to begin to consult about the overall framework.

Mr. Clive Betts (Sheffield, Attercliffe)

rose—

Ms Julia Drown (South Swindon)

rose—

Mr. Raynsford

I shall give way again when I have completed this response.

The hon. Member for Maidenhead (Mrs. May) will appreciate that a number of separate components are involved, such as education, social services, the environmental, protective and cultural services block, or whatever. Each of those components has to be satisfactory to the people concerned, and there must be consistency when they are put together. Account must also be taken of the overall impact. All that has to be done in an intelligent way, and models must be designed to determine the consequences. In that way, it is possible to avoid the unforeseen consequences of what might appear, on the surface, to be an entirely rational approach.

The process is complex, and will take time. We are not going to rush it. That is why, as I indicated in my response to the hon. Member for Sutton and Cheam (Mr. Burstow), we did not make a change this year. Any such change would have been rushed, and we did not consider that to be satisfactory.

Mr. Betts:

I thank my right hon. Friend for giving way, as I want to return to the issue of social services, mentioned by the hon. Member for Sutton and Cheam (Mr. Burstow). The Government are looking at the problems facing local authorities, but those authorities still have choices. Will my right hon. Friend comment on—and join me in criticising—the actions of the Liberal Democrat council in Sheffield? Over the past two years, it has managed to find an extra £1 million for its corporate publicity budget, and it has just increased senior executive officers' salaries by 30 per cent. However, when an elderly person who cannot get in and out of the bath wants a shower to be installed instead, help with the necessary adaptation is refused if that person can manage to have a strip wash. Those are the Liberal Democrat priorities in Sheffield.

Mr. Raynsford

My hon. Friend makes a very fair point about the importance of local government focusing on delivering services to people in need. Certainly, the whole purpose of our performance assessment and management framework is to put real pressure on local authorities to deliver services and not spend money on items of lesser priority. When that performance management and assessment system is introduced, I hope that my hon. Friend finds that it has a desirable effect. We are conscious that the settlement gives an increase for social services, but we are clearly aware of the pressures, as I said. We will keep the matter under review.

As hon. Members will recall, 2002–03 is the last year in which we will use the system of standard spending assessments. I have already said something about the changes that we intend to make in the calculations for future years.

A number of fire authorities, and honourable Members, have made representations about the continued use of the fire calls indicator in the SSA formula this year. We recognise that it is a perverse incentive, which penalises authorities that do effective fire prevention work, and it will not be part of the new grant formula. However, to be fair to all authorities, we cannot make exceptions here or there to the decision that we rule out changes in the methodology. That decision also covers the suggestion that we use data on fire calls differently by averaging over a longer period.

On 4 December, my right hon. Friend the Secretary of State announced our intention that, for 2002–03, all authorities would receive a grant increase at least matching inflation. That increase, and other comparisons that I shall make, are on a like-for-like basis.

In line with the Government's priorities, authorities with education and social services responsibilities will receive at least 4 per cent.—up from 3.2 per cent. last year. I can confirm today that we will put some £52 million of new money into revenue support grant, so that-as was not the case in 2001–02—no authority in this group below the ceiling will have its increase reduced to pay for the floor.

It became clear in consultation that the fully adjusted basis that we had used to make like-for-like comparisons from one year to the next was not regarded as fair by shire district councils. That was because the main adjustment was in respect of education, a service that shire districts do not, of course, provide.

As my right hon. Friend the Secretary of State told the House on 18 December, we therefore agreed to introduce an alternative baseline for 2001–02 that, in effect, only adjusts for transfers of service for which shire districts are responsible. In order to guarantee a minimum 2.3 per cent. increase for all shire districts, on a like-for-like basis, we will give each district whichever increase is the greater for it: 2.3 per cent. on the original baseline, or 2.3 per cent. on the alternative. The grant allocations now proposed for shire districts take full account of that guarantee.

Following the close of consultation, we have decided to extend that guarantee to police and fire authorities. Together with my right hon. Friend the Secretary of State for the Home Department, we have agreed to put extra resources into the settlement to fund that guarantee, without imposing an unduly high scaling factor on grant increases for authorities above the floor.

As a result of representations made in consultation, we have also decided to change the way in which adjustments to the base year were made for the transfer of regulation and inspection functions from social services departments to the new National Care Standards Commission. The adjustments do not now take account of new money transferred from SSAs to the commission. That will give authorities at the floor or ceiling a higher base position, and thus higher cash increases. Again, we have ensured that other authorities do not lose as a result. Taking those initiatives together, the Government have put some £73 million of new money into the settlement to support the cost of floor increases for all authorities.

I confirm that I intend to promote capital investment by excepting from the floor and ceiling limits grant increases that result from new capital allocations. I also confirm that, where grant increases for authorities that are neither at the floor or the ceiling are scaled back to help pay for the floor, this will only apply to that part of the grant increase above the floor. That should help solve the problem that was characterised last year as the nearly poor paying for the really poor".

Mr. Steve Webb (Northavon)

According to some measures, such as primary SSA, my authority of South Gloucestershire is at the bottom, so we hope that any new formula will move us in the right direction. However, our nightmare is that the new formula will be more generous but that it will be phased in through tight ceilings over many years. My constituents are angry and feel a sense of injustice after years of unfair funding, and their fear is that that unfairness will continue for years. Can the Minister offer my constituents any assurance that the new system, where it addresses long-standing injustices, will not be phased in so slowly that those injustices effectively persist?

Mr. Raynsford

I hope that the hon. Gentleman will welcome the fact that we have been able to give Gloucestershire an increase this year of 6.9 per cent.

Mr. Webb

That is not correct.

Mr. Raynsford

I was referring to the county of Gloucestershire. However, if the hon. Gentleman is referring to the district council—

Mr. Webb

The unitary council.

Mr. Raynsford

I am sorry, I meant the hon. Gentleman's unitary council. I shall refer to that unitary council separately, when I can find the right page. The hon. Gentleman will know what a nightmare it is constantly to be looking for the respective figures for individual authorities. However, I assure the hon. Gentleman that we recognise that the new formula will cause there to be both gainers and losers. I made that clear in response to an earlier intervention. It would be only fair, therefore, to continue the floors and ceilings framework, as that will prevent local authorities—especially those facing potentially large losses—from facing excessive changes as well. It would be quite unreasonable for authorities in that position to have to deal with both matters at one fell swoop. That is why we want to ensure the continuation of a floor and ceiling framework. I think that most people would regard that as fair.

Mr. David Kidney (Stafford)

My right hon. Friend the Minister does not get many bouquets at the Dispatch Box, but he deserves to be congratulated on these refinements to the floor and ceiling framework. After all, the concept was introduced for the first time only this time last year.

However, will my right hon. Friend say what proportion of this year's distribution of revenue support grant will be held back by Departments for ring-fenced grant? Have central and local government agreed a target for a smaller proportion in future years?

Mr. Raynsford

My hon. Friend offered some kind words to begin with, then threw a dart. We recognise that there is real concern in local government about the increase in ring fencing. There are good reasons for ring fencing in certain circumstances, when there are no other means of ensuring that certain outcomes—hugely important, and regarded as national priorities—can be delivered. However, we believe that circumstances have now reached a point where it is necessary to rein back on ring fencing. We made clear our commitment to do that in the White Paper. In the course of the coming spending review, we will obviously be looking to reach agreement with our colleagues in other Departments on an appropriate framework for the future. That framework will ensure that, although the benefits of ring fencing are not lost, local authorities will be able to expect to benefit from the greater flexibility that will arise when a greater proportion of grant is available through general grant, rather than ring-fenced grant.

Mr. Don Foster (Bath)

Would it not be helpful if the Minister answered the question asked by the hon. Member for Stafford (Mr. Kidney)? I suggest that his answer might be that the proportion of total Government grant going to local councils that is ring-fenced has increased from 5 per cent., when the Government came to power, to nearly 15 per cent. today.

Mr. Raynsford

I do not want to quibble with the hon. Gentleman, but I think that he exaggerates slightly; the figure is probably nearer 14 per cent. However, I will not hold that against him.

I have flicked through my papers and can reassure the hon. Member for Northavon (Mr. Webb) that the increase for South Gloucestershire, which I am sure that he will welcome, is 6.7 per cent., almost exactly the same as for the county of Gloucestershire, which has 6.9 per cent.

Ms Drown

I represent an authority that hopes to gain by the new formula, and refer my right hon. Friend to next year's settlement. Is he aware of the frustration of some of the lowest funded authorities, such as Swindon, which face more challenges than many other authorities in terms of raising standards in education and social services? However, an unfair formula distribution is further exacerbated in that Swindon's increase has been less than the average. We are looking at some difficult choices locally, and I would be grateful for my right hon. Friend's assurance that he will continue to work with the council to ensure that valued services, particularly in education and social services, will be preserved as the council goes through a difficult round of decision making.

Mr. Raynsford

We have ensured, through the floors and ceilings mechanism, that every local authority has received an increase this year that at least matches that of inflation. No authority will have to cope with an increase that is less than inflation, and most benefit from substantially larger increases than that.

We shall review the system in the coming year. As part of that review, it will be our objective to ensure that the new framework is fairer and reflects the circumstances that lead to real needs for spend for all authorities. I hope that my hon. Friend can take comfort from that. I appreciate that in certain cases, where there have been changes as a result of local government reorganisation, the patterns of spend have not necessarily fully reflected the need to spend. It is our wish, through the review of standard spending assessments, to have a better framework for the future.

With the good grant increases that we have provided this year and the prospect of stable grant settlements, all authorities should be able to deliver improvements to public services while setting reasonable council tax increases. This year, we have made changes to what must be shown on council tax bills. [Interruption.] Liberal Democrat Members seem to think this a matter for humour. Their electorate will not find it humorous if their authorities impose unreasonably large council tax increases when there has been an overall 7.5 per cent. increase—three times the rate of inflation—in Government grant to local authorities. We expect local authorities to make full use of the generous settlement that I am announcing this evening and to ensure that they do not impose unreasonable increases in council tax on their council tax payers.

Mr. Don Foster

I do not find the situation humorous. What I found humorous were the shakes of the head from many Labour Members in response to the Minister's statement that councils will be able to deliver improved services as a result of this settlement. On the increases in council tax, what is the right hon. Gentleman's estimate of the average increase that is likely to result from today's settlement?

Mr. Raynsford

This is a matter for local authorities rather than for the Government. It is not for me to make an estimate. I hope that local authorities will discuss this with their council tax payers and come to a sensible and appropriate conclusion.

There is already evidence that a number of authorities are making decisions showing their awareness of the need to be moderate in their demands. Liverpool city council, for example—a Liberal Democrat-controlled council—has indicated that it does not expect to increase its council tax at all. I welcome that. I wish that a number of other Liberal Democrat councils that are talking about large increases would follow suit. A number of other authorities have indicated to us the likelihood of modest increases. The treasurers of the Special Interest Group of Municipal Authorities predict an average increase of some 4.5 per cent.

I put it to the House that given a settlement of 7.5 per cent. in increased grant, it should be possible for all authorities to budget for the coming year with moderate increases. I do not welcome the alarmist figures that have been put around by some commentators and some hon. Members, nor the behaviour of one or two local authorities which appear to be stoking up unreasonable expectations. I cite only the Mayor of London, whose proposed 34 per cent. increase in budget rightly aroused real concern among members of the Greater London Assembly, who have sought to scale down that figure. I welcome moves to achieve a more reasonable settlement in London.

Mr. Kevan Jones (North Durham)

I note what my right hon. Friend says. Durham county council is a very well run and moderate council, as my right hon. Friend the Prime Minister, who represents Sedgefield, also knows. Durham is facing a critical situation this year because of having one of the lowest settlements of the shire counties. Some £2.7 million has been taken away or lost because the education support grant received last year is not being provided this year, and the council faces imposing an increase in council tax of between 10 and 17 per cent.

Mr. Raynsford

I am aware of the pressures faced by Durham county council. My hon. Friend has spoken to me about this and I have responded by looking at a number of issues relating to Durham county. Under the settlement for Durham the overall increase of 5.6 per cent. is more than double the rate of inflation. Durham has also benefited from a number of initiatives, such as the one that I referred to earlier on bed blocking. That has secured an additional £1.8 million for Durham county.

I do not underestimate the pressures on social services. I acknowledged those when meeting my hon. Friend and in my earlier contributions to the House. I hope that when Durham county comes to fix its council tax for the coming year, it will have regard not just to the need to maintain its services but to economy and to what it is reasonable to expect council tax payers to contribute.

Mr. Christopher Chope (Christchurch)

Will the Minister give way?

Mr. Raynsford:

I will give way for the last time. I really must make progress.

Mr. Chope

I am grateful to the right on. Gentleman for giving way. He is being uncharacteristically coy about giving a prediction for council tax increases in the coming year. Can he confirm that the council tax increase at standard spending, which is the increase if a council spends at standard spending next year and is doing so this year, will be more than twice the rate of inflation? Why is he so coy about mentioning that in public?

Mr. Raynsford

The hon. Gentleman, who has been a Minister, will know that there is no question of a standard increase in council tax for an authority spending at standard spending. The reality of the system, as he will know, is that there are huge variations between actual patterns of spend and SSA. That is one of the reasons that we are conducting a review of SSA. For authorities that are receiving an increase in grant which averages 7.5 per cent, there is no reason why unreasonably large council tax demands should be made. We expect authorities to approach this in the sensible way that a number are already doing, and I have highlighted one or two examples. I hope that all authorities will be prudent, because the public do not expect unreasonable demands to be made in council tax.

To encourage this, we have made changes in the current year to what must be shown on council tax bills. Voters will see clearly which of their councils are responsible for any increase in council tax that they are required to pay. Bills will show clearly how much different tiers of authority are charging. They will also show how much in percentage terms each tier has increased its part of the council tax compared with the previous year. Any substantial increases will therefore show up clearly on bills. If some councils set substantial increases, their council tax payers and local electorate will have every reason to question their council's decision.

Although we have reserve capping powers, the Government do not operate a system of crude and universal pre-announced capping—unlike the previous Government. Decisions on council tax are primarily for local authorities to take after consulting their local electorate and tax payers. Given this very good grant settlement, councils will find it hard to justify any unreasonable increases.

The Government have taken the necessary steps to set up a proper framework for partnership between local government and central Government. We have listened to the points made to us in consultation and we have responded. The local government settlement that I have outlined continues the trend under the Government of steady and substantial investment in local government and in the services that it provides, and I commend the motion to the House.

7.40 pm

Mr. Malcolm Moss (North-East Cambridgeshire)

We have heard the same record playing this year as in each of the past four years of the Labour Government, and it is is getting rather worn and thin. Every year, Ministers promise a generous settlement for local authorities and every year they say that there is no reason for high council tax rises; but every year council tax has risen by three times the rate of inflation—not just this year or last year, but in each year that the Labour Government have been in office.

In December, the Secretary of State claimed that there would be an increase in Government grant and business rate of 7.4 per cent. He said that there was no reason why we should see large increases in council tax next year.

Last year, the Government announced a 6.7 per cent. increase in revenue support. The then Minister for Local Government, the right hon. Member for North-West Durham (Ms Armstrong), pledged: I am confident that councils will be able to implement reasonable council tax increases, lower than last year's".—[Official Report, 27 November 2000; Vol. 357, c. 659.]. She used the same word that the Minister has used this year: "reasonable". Despite that, in 2001–02 the average council tax in England rose by 6.4 per cent. —three times the rate of inflation.

I noticed with interest that the Minister ducked the question put by the hon. Member for Bath (Mr. Foster) as to the right hon. Gentleman's predictions for council tax rises in the coming year. Let me give the right hon. Gentleman some help. It comes from one of his Labour colleagues—Mr. David Wilcox, the secretary of the county councils Labour group. He wrote to one of his colleagues: Coming local elections are causing some concern with Labour authorities that perhaps should be going for increases of around 10% but that consider they may have to cut the rise back in an election year. So far the highest proposed rate rise that I have been notified of comes from a jointly controlled council and is at 12%, although it could come down below 10% at the end of the day. Then comes the killer punchline: At this moment 9.9% feels like safe ground with 8.9% looking attractive. That was a letter from the Minister's colleague.

Mr. Raynsford

The hon. Gentleman referred to a gramophone record at the start of his speech. Does he not think that we are hearing exactly the same record that he played yesterday in the House? Does he recall that when he quoted the same letter I told him that I regarded that figure of 9.9 per cent. as unreasonable? Does he acknowledge that that is the Government's position?

Mr. Moss

Making the same point twice does not undermine the fact that it is a good point. If the Minister thinks that the figure is unreasonable, perhaps he should take issue with some of the Labour-controlled county councils that seriously fear they will have to come up with council tax increases of below 10 per cent.

The Government seem genuinely perplexed that, despite their trumpeting of the above-inflation increase in grant that they have given every year, there have been even larger increases in council tax. Is that because councils have been inefficient or profligate? Not so, says the evidence. During the past four years, the majority of councils, of all political persuasions, have experienced great difficulty in maintaining a standstill on services, let alone funding real improvements to those services.

In the equivalent debate last year, complaints about the settlement came raining down from the Labour Benches on the then Minister. I do not see much difference in this evening's debate. The explanation for the large increases cannot lie with inflation, which has averaged about 2 per cent. over the relevant period. Nor do we believe that the overall total settlement figure is inadequate. At 7.4 per cent. it is, as the Minister said, well above inflation.

The answer to the conundrum lies in the double whammy imposed on local authorities by the Government and by the Minister's Department. On one hand, they have increased the regulations and burdens on councils, while on the other they have fiddled with the funding formula, put up taxes that directly affect local authorities' costs and altered the way that grant is distributed so that less money—not more—is going to front-line basic services.

Let us examine those extra costs and burdens, which have risen far faster than Government funding.

Mr. Clelland

I, too, take issue with the Minister on some of the points he made about the 7.3 per cent. average increase, because local authorities such as Gateshead are receiving only 5 per cent. which will cause them difficulty. However, does the hon. Gentleman realise that during the first three years of the Labour Government the average increase in grant to Gateshead council was about 4.5 per cent? In the last three years of the Conservative Government, the increase was 0.7 per cent. In those circumstances, who does he recommend that the people of Gateshead vote for?

Mr. Moss

If the people of Gateshead are prepared to tolerate yearly council tax increases of three times the rate of inflation, I suggest that they may not be voting for the wrong party.

In relation to the extra costs and burdens, there is the real impact of the Government's stealth taxes. Advance corporation tax has increased the cost of providing pensions. The hidden iceberg of costs for local government pensions is estimated at £300 million each year.

Fuel tax rises have increased transport costs for councils, and the Government's insistence on bumping up landfill tax each year without a commensurate reduction in other taxes to compensate is causing councils a real problem. Local councils paid out £163 million in 1998–99, and by 2004 it is estimated that landfill tax will rise to £348 million a year.

Another obvious burden is that of best value. That has led to an excessively bureaucratic centralising regime and has proved itself not only incredibly complicated but—even worse—extremely expensive for councils to operate.

The Government would argue that they have recognised those increased costs, but the allocation of £40 million for central best value administration falls woefully short of the real costs to councils. The Local Government Association has complained that it costs an extra £175 million more than the allocated amount.

Criticism of best value does not come only from those on the Conservative Benches. In Wales, the National Assembly decided to abolish the regime. Labour Finance Minister, Edwina Hart, conceded that the system was "terribly bureaucratic". The Labour leader of the Welsh Local Government Association, Sir Harry Jones, stated that councils were spending more time on process than on actual service delivery.

The Government recognised that they have problems with best value. They could hardly have been unaware of the howls of protest coming from the councils, but their response—to hold a review—is pathetically inadequate. They should admit their error and scrap this absurd regime at the earliest opportunity. We would.

The list of new obligations does not end there. After the recent highly damaging floods, the costs to councils were not remotely covered by the emergency grants from the Government. Only this week, in the Civil Defence (Grant) Bill, the Government proposed restricting by 25 per cent. contingency and emergency planning expenditure in order to reduce their own liabilities. In the wake of 11 September, there are likely to be higher—not lower—costs for local government and the fire authorities.

On asylum funding, there is still a shortfall between the costs to councils and the Government's grant aid. Last year, the Association of London Government stated: Government grants made no provision for the education and social care costs of supporting asylum seekers in the year 2000–01. This is a problem because data lag means that authorities can wait up to two years before the asylum seeking child appears in the SSA formula for funding. Additional costs are incurred when councils switch to the new cabinet system from the former committee system. For example, last year Cheshire county council said that the switch would cost it £660,000 a year.

Finally, on waste and recycling, we have the ridiculous situation whereby, from this January, fridges will be subject to the ozone depleting substances regulation, with very little extra grant being made available. The most ludicrous situation of all is that there is as yet no facility in this country that can do the necessary disposal. The Government must have known that that directive would be implemented this year. Why was there such woeful preparation and why is there such inadequate funding? The Government's offer of just £6 million is laughable. The LGA has estimated the total cost to local authorities to be some £60 million, so the legacy of the Government's mismanagement of the issue will be mountains of rusting fridges littering our landscape for years to come.

Perhaps the key area of budgetary pressure, for those councils tasked with the responsibility, is that of personal social services. There is real concern that the resources have not increased by any more than the forecast totals of 5.4 per cent. in the 2000 spending review.

Mr. Betts

The hon. Gentleman has just listed a catalogue of problems facing local government and the extra costs that he believes that local authorities have. Would he like to say by how much the grant to local authorities should be increased in excess of what the Government have recommended?

Mr. Moss

If the hon. Gentleman had been listening, he would have heard me say some moments ago that we have no argument with the total level of funding at a 7.4 per cent. increase, which is generous in relation to inflation. I am arguing that the Labour Government have burdened councils with all sorts of extra regulations and red tape and then not given them the money to deliver. That is the issue.

I return to the subject of personal social services. Why have the Government stayed with those outdated figures when all the evidence points to severe and increasing demand for children's services and care for the elderly? The Government know that local authorities are already spending more than £1 billion over the total SSA to try to meet those increasing demands. To ignore the facts, to ignore the crisis, is to condemn thousands of the most vulnerable people in our society to a life of misery. The present system is not working. Older people are suffering and will continue to suffer as a consequence. They deserve better.

Mr. Raynsford

The hon. Gentleman has just said, in response to an intervention by my hon. Friend the Member for Sheffield, Attercliffe (Mr. Betts), that he has no quibble with the overall level of grant that we are proposing. How does he reconcile that with his latest comment—that he regards the social services grant increases as inadequate?

Mr. Moss

The Minister must be patient. I shall come to that later. There was last year, and has been promised this year, £200 million from the health budget to help alleviate bed blocking. That is a source of money that a Conservative Government could certainly turn to, as the present Government have turned to it, so there is no magic in all that.

The words that I just used about social services were quoted from the report of an inquiry, chaired by the right hon. Member for Birmingham, Hodge Hill (Mr. Davis). He recently chaired an independent commission of inquiry into social services in Birmingham. The report also concludes that: Birmingham's problems are not unique. There is national underfunding of social services—especially the services for older people. However it is inescapable that it"— the council— either finds the money or reduces the service it provides. Significant extra funding must be made available for Social Services as a whole … the identification of funding on a suitable scale is largely the responsibility of Central Government.

Mr. Chope

Does my hon. Friend agree that what matters is not just the overall level of funding for social services but the way in which it is distributed? Will he express some sympathy for the people of Dorset, where there are 88,000 citizens aged over 65 and the amount of funding for social services per person over 65 is £183 less than the national average? Does he agree that that is totally unacceptable?

Mr. Moss

I agree with my hon. Friend, who makes an important point.

The crisis in social services is of the Government's own making. Where is the sense in formulating ever more regulations for the nursing and residential home sector when private homes are closing down at a rate of knots? There are now some 47,000 fewer care beds than there were in 1997. That is a scandalous record, brought about by an incompetent Government. There appears to be little or no communication between the key Departments that have an input into this problem. At Prime Minister's questions, the PM himself seems totally oblivious to the time bomb that is ticking away under his nose.

Mr. Julian Brazier (Canterbury)

My hon. Friend has just mentioned Prime Minister's questions and the Prime Minister's complacent answer when attention was drawn to the crisis in the East Kent hospitals at the moment. Those problems are heavily driven by the loss of more than a quarter of our nursing home beds over the past three years.

Mr. Moss

My hon. Friend makes my point for me.

Those, then, are the key cost pressures for local government. Now let us take a look at the funding pressures.

In 1998, the Labour Government altered the methodology by which the revenue support grant was to be distributed. Those changes are still in place. They perpetuate the initial inequalities and unfairness and they penalise the better-managed councils.

Over the lifetime of the last Parliament, the shire counties lost an estimated £700 million in grant funding, while London lost £450 million. We are not arguing that the shire counties have not received any grant increases; rather, we are arguing that they would have received more grant if the funding formula had not been changed.

In the current settlement, the Government have also perpetuated the flawed funding system of floors and ceilings in their grant allocation. What is the point of having an elaborate system of SSAs, dependent on the collection and appraisal of huge quantities of data, if that exercise is subsequently ignored because the Government do not like the outcomes?

Mr. Raynsford

If I give the hon. Gentleman the figures of the cumulative increase in standard spending assessment for London, metropolitan areas and shire areas in the course of the lifetime of Labour Governments and compare it with the Conservative Government, he might find those figures instructive. Over the past four years, there have been year-on-year increases of 4.4 per cent. for London, 4.3 per cent. for metropolitan areas and 4.6 per cent. for shire areas. The respective figures during the Conservative Government's period of office from 1994–95 to 1997–98 were 0.6 per cent., 1.3 per cent. and 1.8 per cent. respectively. All categories—shire, metropolitan and London—have done very much better under the Labour Governments.

Mr. Moss

rose—

Mr. Deputy Speaker (Sir Michael Lord)

Order. There have been several long interventions in the debate. A number of hon. Members are very anxious to speak and unless interventions are briefer, or perhaps non-existent for a while, a lot of hon. Members will be very disappointed.

Mr. Moss

A wink is as good as a nod, Mr. Deputy Speaker.

Mr. Moss

I shall now return to the floors and ceilings issue. What could be more illogical or perverse than to have poor councils coughing up some of their grant to help even poorer councils? Only the present Government could come up with the philosophy of robbing Paul to pay Paul.

The unfairness of that redistribution is felt particularly by those councils in the south-east planning region that enjoy the area cost adjustment. Many of these have seen their grant reduced even though the SSA calculations were based on real need. If that is the Government's answer to the reform of the area cost adjustment, they should come clean and tell us. Reform, I would remind the House, was promised by the Prime Minister in Cambridge in the run-up to the 1997 general election. Five years later, we are still waiting—yet another example of a broken promise.

One of the most detrimental changes to local government that the Labour Government have made is that of the switch since 1997–98 from block grants to specific grants. As well as treating local councils as nothing more than mere agents of central Government, that practice actually takes money away from basic front-line services.

Non-police specific grants have increased from 4 per cent. in 1997–98 to over 14 per cent. in the current settlement. Not only are these specific grants unobtainable by certain councils but they frequently involve a complex bidding and allocation mechanism. That adds to the bureaucracy, and costs councils time and money.

The LGA is concerned about that increase in the proportion of resources devoted to ring-fenced funding, particularly for education and social services. Is not the planned increase in specific grants this year perverse in view of the Government's conclusion in their recent White Paper that the growth of ring fencing is "excessive" and that it threatens to erode local decision-making responsibility, limit authorities's ability to tackle environmental priorities and to increase council tax levels. In education, for example, specific grants have increased so much in the current settlement—up from £2.6 billion to £3.7 million—that out of the 8.8 per cent. overall increase for education, only 5.7 per cent. has actually gone to the education SSA increase. Given the proposed increases in teachers' pay, there is precious little new money available in those figures for service improvements above inflation. The teachers' pay increase will cost local authorities a further £240 million above the 2.5 per cent. provision for pay increases in the 2000 spending review. Increases in superannuation contributions will cost an extra £140 million.

Finally on education, there is the fiddle of the funding transfer from post-16 education to the Learning and Skills Council. Many councils and the LGA believe that too much has been transferred out of the revenue support grant total because of an overestimate in the growth of sixth form numbers. The £16.8 million post-16 budget support grant does not compensate in full for that loss.

So what is the outcome of this misdirected and incompetent double whammy of extra burdens on the one hand and fiddled funding on the other? Every year, council tax has soared by three times the rate of inflation, despite the Prime Minister's promise before the 1997 election that he had no plans to increase tax at all. Over the past four years, council tax has risen by £212 on band D homes—equivalent to a 30.7 per cent. increase.

At least this year the Government have come clean and planned for that increase three times above the rate of inflation. In the small print of the November 2000 pre-Budget report, council tax receipts across Britain are budgeted to rise from £14.8 billion to £15.8 billion—a 6.7 per cent. increase. Of course, as we know, inflation is predicted at 2 per cent. in that report. Actual increases are likely to be higher in the shire counties, as I have already mentioned in referring to the letter from the secretary of the Labour group.

That hike in council tax—it is likely to break the £1,000 barrier significantly for band D homes for the first time—is one of Labour's more effective and less obvious stealth taxes, but it hits the most vulnerable in society disproportionately. In fact, it is a form of regressive taxation—something the Labour party in opposition said it would never countenance.

Let us consider pensioners. Between 1997 and 2001, a couple's basic state pension rose by £837. At the same time, band D council tax went up by £212. Therefore, 25 per cent. of the couple's pension increase was grabbed back in council tax, and the figure for single pensioners is 30 per cent.

Despite all those pressures, Conservative councils still have the lowest council taxes in the country. Currently, the average household pays about £88 a year more on a band D council tax bill in a Labour council and £63 more in a Liberal Democrat council, compared with Conservative-run councils. Labour and Liberal Democrat-controlled councils have the highest council taxes in England, and 13 of the councils with the 20 highest council taxes in England are Labour controlled—none is Conservative.

The message is clear to all those who have a vote in the forthcoming local elections: vote Conservative for the lowest council tax. People should not blame their local council for council tax increases at three times the rate of inflation—the blame lies with the Labour Government and this team of Ministers. The sad thing is that all that is avoidable. The problems are all of the Government's own making; they are caused by their spin philosophy, which promises all and delivers nothing; their craving for central control; their fiddling of the funding formula; their switch to specific grants that they can control; their imposition of additional burdens, costs and red tape; and their total failure to address the inherent and severe problems in social services.

Mr. Deputy Speaker (Sir Alan Haselhurst)

I remind hon. Members that the 12-minute limit on Back-Bench speeches starts now.

8.4 pm

Mr. Jim Marshall (Leicester, South)

Thank you, Mr. Deputy Speaker. I am aware of the 12-minute limit; it is one of the reasons why, although I am sorely tempted to debate with the hon. Member for North-East Cambridgeshire (Mr. Moss), I shall refrain from doing so, except to express agreement with a specific part of his speech, but not the arguments that surround it. The hon. Gentleman mentioned the problem of social services, and as the Minister recognises, there is a real problem with them not only in delivery, but in financing them locally. Although the Government are aware of that problem, I am sure that they realise that a solution must be found before the implementation of the next financial settlement in 2003. Unless that problem is addressed seriously, it will not only persist at its present level, but escalate.

I wish to make a parochial speech on the problems that are specific to Leicester, as well as to one or two other local authorities in England. Before I do so, I congratulate the Government—a rare phenomenon for me—on the real-terms increase in this year's local government financial settlement, in which real-terms expenditure is increased by 7.5 per cent. and the SSA by 5.5 per cent. Last year's increase, coupled with this year's increase, represents a real advance in local government resources.

I also welcome the Minister's comments on the floors and ceilings scheme. I do not know what outsiders makes of that phrase, but I presume that at least hon. Members know what it means. The scheme will ensure that no authority with educational services will receive less than a 4 per cent. increase in Government grant compared with 2001–02. Again, I welcome that on the national level, but the Minister will be aware that, on these occasions, hon. Members always have local bleats, and I now wish to turn them.

Although the grant increase nationally is very good, it will not prevent local authorities from continuing to face difficulties. The Minister will know, even though he is looking at his notes, that the increase in SSA that Leicester has received is lower again than the national average. I know the reason for that, as well as the Minister does. There is a falling population, which therefore gives us a smaller proportion of the national pot, but we do not necessarily accept the reasoning behind that argument. As the Minister will also know, even though a population may be falling, it does not remove the difficulties. In some cases, the difficulties can be enhanced by the problems arising from a falling population. I hope that that point will be addressed in the overall review of the formula for 2003–04.

Brian White (Milton Keynes, North-East)

I totally agree with my hon. Friend about falling populations, but does he accept that equal problems need to be addressed in constituencies, such as mine, that have a rapidly rising population?

Mr. Marshall

It was implicit in what I said that I recognise that there are problems on both sides. I am concerned that the way that the formula works at the moment seems to neglect the problems arising from falling populations, while recognising the problems of increasing populations. Clearly, both types of local authority have problems, but they are necessarily different kinds of problem. I hope that both will be recognised in the new formula that will come into force in 2003–04.

However, the Minister will be aware that Leicester city council has approached the Department for Transport, Local Government and the Regions about the specific problems that have faced Leicester in the past 18 months, which will continue into 2002–03. We will require additional funding to finance the burden faced by Leicester's education and social services departments in dealing with a large influx of European Union nationals who came from the Netherlands but who were originally of Somali origin.

As I believe my right hon. Friend the Minister is aware, in 2001 approximately 300 to 400 Dutch Somali families moved to Leicester from the Netherlands. I emphasise that they came as EU nationals and not as asylum seekers, but Leicester is inevitably incurring significant additional expenditure to support those families. The social services department must provide the money to cover their daily living costs until those European citizens acquire habitual residence in the United Kingdom. Other support services also have to be provided. The social services department estimates that an additional £300,000 is required to finance those services in this financial year and that a further £400,000 will be required in the next financial year.

As my right hon. Friend will also recognise, the impact on the educational service is even more acute. Some 900 Dutch Somali children of school age have arrived in Leicester over the past 18 months, with 488 of them—54 per cent. of the total—arriving since September 2001. These arrivals have resulted in an increased requirement in the budgets delegated to schools. On average, the sums are £1,400 per primary pupil and £1,900 per secondary pupil but, in most cases, there has been no matching increase in the standard spending assessment.

Other educational costs, such as the need to provide additional language support and additional support for admission procedures, will also have to be incurred. It is estimated that the education department in Leicester will need to spend more than £500,000, rising to more than £2 million next year, to support those children.

However, as the hon. Member for North-East Cambridgeshire pointed out in relation to asylum seekers, the SSA calculation does not recognise most of these pupils for financial assistance. That is because the calculation for primary pupils is based on their number at the beginning of the previous year's spring term while that for secondary pupils is based on the number the previous September. Therefore, all the new primary pupils who have arrived since January 2001 and all the secondary pupils who have arrived since September 2001 have not been included in the SSA calculations.

I hope that, even at this late stage, my right hon. Friend will recognise the problem and that he will be prepared to make a financial adjustment. I realise that it is too late to change the formula and too late to include those children officially in this year's settlement, but I hope that he and the Government will consider the problem, perhaps with a view to providing the type of specific grant that is available to local authorities that are faced with a sudden increase in the number of Army personnel with children in their area. Additional finance can be found in such cases.

Leicester has an enviable reputation as a multicultural city. I should hate to see the difficulties that I have described made any worse because of a lack of financial resources. On behalf of my hon. Friend the Member for Leicester, East (Mr. Vaz) and the Secretary of State for Trade and Industry, my right hon. Friend the Member for Leicester, West (Ms Hewitt), and myself, I urge the Government to consider the problem seriously and to come up with a solution that will provide further financial assistance to the city council in Leicester.

8.14 pm

Mr. Adrian Sanders (Torbay)

Given the interest that there was in the earlier debate on police grants and given the number of Members present for this debate, I wonder why we discuss both issues on the same day. More time was made available for the police debate than for the local government debate even though local government is responsible for a wide range of services. Perhaps the Minister and the usual channels might like to consider that point. The central message from today's debate is that, in the coming year, council tax payers will end up paying more and getting less. As happened last year, there may be a few parts of the country where the council tax does not rise or where services to local people are not reduced, but in most places the council tax will go up and services will come down; local people will have to pay more, and will get less."—[Official Report, 31 January 1996; Vol. 270. c. 1028.] Those are not my words or those of anyone on the Opposition Benches, but those of the right hon. Member for Holborn and St. Pancras (Mr. Dobson) in the debate on the final local government settlement of the previous Conservative Government.

A year later the right hon. Gentleman said: The local authority associations and individual local authorities accept that, while the Government are in power, all that they can expect is fine tuning of the system. The more I look at the system, the more I believe that it needs to be changed root and branch because it is a racket. It is a racket, and the racket is the standard spending assessment that we have had to live with since 1990–01 when it was introduced He also said: The undertaking that I give is that we shall have a fair system of allocation. The present one is manifestly not fair."—[Official Report, 3 February 1997; Vol. 289, c. 694–95.] We are still stuck with that present, manifestly unfair racket of a system.

The authorities that have been most disadvantaged by that system suffer from it year on year. Although this year's increase is, indeed, the highest increase that we have ever seen in local government, it does not make up for those lost years for those disadvantaged authorities. When the Minister comes to the Dispatch Box to say, "It is a 7.4 per cent. increase. We do not expect any unreasonable council tax rises," that is only half the truth. Not every authority receives 7.4 per cent. Some authorities receive much more; others receive much less. Even if those that receive much less get more than the inflation rate that the Minister mentioned, it is the retail price inflation rate. It is not the pay inflation rate or the inflation rate that local authorities have to deal with in their real world.

There are some good things in the proposals. I have mentioned the size of the settlement—that is good. Although the Minister did not mention it in his speech, the fact that the council tax benefit subsidy is to be abolished is another good thing.

However, there are some very bad things in the proposals and among them are the constant top slicing and the fact that councils are made to bid for funds. In 1997–98, 4 per cent. of funds were in that category, but the figure is nearly 15 per cent. today. It is a terribly wasteful system for councils, particularly those that go through the effort of applying for funds and do not succeed. It wastes officers' time and council tax payers' money.

The overall increase is not distributed across the board to all local authorities. The main losers from that are county and unitary social service providers. They are hit in two ways. The first is because the formula does not recognise the amount of need that there is in such areas. A number of sources say that local needs are not met by the formula. The second is because the funds are not fairly distributed. Two sectors of social services—children's social services and elderly care—face real problems. Our hospitals are filling up with people who need social services care, not hospital treatment. That fact must be tackled and, although extra money has been made available to help the social services that are under pressure, it is peanuts compared with the scale of the problem facing hospitals and social services departments in many parts of the country.

Mr. John Hayes (South Holland and The Deepings)

Untypically for a member of his party, the hon. Gentleman is making a persuasive argument. However, will he also point out that the local authorities that suffer from the problems that he has described are also often burdened with additional regulations and certainly with additional demands and statutory requirements? On top of the problems that he has described with the formula funding, that creates real tensions for personal social services throughout the country, which, he may be interested to know, were £50 million worse off in the first year of this Government.

Mr. Sanders

That is a helpful, and untypically friendly, contribution from a Conservative Member, and I thank the hon. Gentleman for it. I was going to mention regulation.

The numbers and costs involved in children's social services in particular are beyond local authority control. The Government have to accept that. If a social worker says that a child has to go into care, that cannot be covered by a target. In smaller authorities, especially some of the small unitary authorities, it takes only a handful, or even less, of children going into full-time residential care for them to have a massive social services underspend. Something needs to be done to address that problem within smaller authorities.

Correspondence between south-west social services local authorities and the Government has highlighted many of the problems that authorities face, in particular the huge discrepancy between children's SSA and actual spend; the emerging and rapidly increasing disparity between SSA and spend on younger adults, especially those with learning disabilities; the cross-funding of those essential services by holding down spending on older people's services, with consequent destabilisation of the residential and nursing care markets; and the inevitable negative consequences on health care strategies to provide more care within the community. My constituency has a well above average proportion of residential care homes, so I am well aware of their problems. They are closing almost by the week because the fees do not enable them to carry on trading.

Those problems have been pointed out by the corporate director of social services for Somerset, writing on behalf of another 14 social services authorities, including Torbay and Bath and North-East Somerset, which is represented by my hon. Friend the Member for Bath (Mr. Foster). The corporate director goes on to say: These are national trends. This demonstrates clearly that there is a chronic funding problem. Hon. Members have reflected that chronic funding problem, but it will get worse. There is a demographic time bomb because older people are living longer. The Government might say that the answer is to cull old people, but I do not think that they would—no party could come to power on that basis. The problem is, however, that they have to do something about the problem. We welcome the fact that older people are living longer, but we have to recognise that that takes more money from the public purse.

Mr. Burstow

My hon. Friend makes an important point about the dilemma that local authorities face when it comes to funding services for older people. Does he find it alarming that councils, because of their financial difficulties, face the prospect of having to allow someone in a care home to die before they can fund a new place?

Mr. Sanders

That is a tragedy and all too common. Indeed, it has even cropped up in my area.

In addition to the demographic time bomb, there is a pensions time bomb. Local authority pensions, like hon. Members' pensions, are an end-of-life deal in which people receive a proportion of final salary. That has been underfunded over the years by central Government. They have not recognised the additional costs that have to be met for pensions, which come out of local authority budgets.

The Government impose costs themselves. Best value has been mentioned. The inspection regulation regime is necessary to provide a common standard of service, but if a council is not recompensed for the full costs of implementing that administrative system, the money has to come out of cuts or from increases in council tax. Again, that is where the settlement does not meet actual need.

There is also the whole agenda of corporate government to consider. This year's increased settlement will be swallowed up chasing the extra costs that Government impose. It does nothing to help a council that is disadvantaged by the grant formula to catch up. Funding gaps will have to be filled by increased council tax, cuts in services, asset sales, privatisation, stock transfers, increased charges or borrowing. Councils can use a raft of measures, but most of them are negative. They are not wanted and should be unnecessary.

Most councils will increase their charges—my hon. Friend the Member for Bath has studied those at some length—way above the rate of inflation. They will bear no relationship to the retail prices index. Council tax is part of the problem, together with the formula. It hits the poorest hardest, in particular people on fixed low incomes, who tend to pensioners. Let us change the formula and have one that is based on local needs. Let us scrap the council tax altogether and have a taxation system that is based on the ability to pay—a local income tax.

The Minister is on record as saying that he wants to improve service delivery, and service delivery is the key. The settlement leaves a gaping hole in some local authority budgets. There are spending shortfalls almost across the board. We have highlighted social services, but no doubt it would be as easy to talk about the gross underfunding of transport and highways. The Minister tells local government to stand and deliver while he robs the highways budget. The Secretary of State has admitted that the funding formula is unfair. The Labour party promised five years ago that the problem would be fixed. Sadly, we are still waiting for treatment.

I conclude with a final quote from the right hon. Member for Holborn and St. Pancras. He said: The incoming Labour Government will be based on the supposition that democracy depends on the people who take the decisions carrying the can and the people who carry the can taking the decisions. So we shall be honest in our relations with local councils and we shall take responsibility for our share of those decisions. We shall not roam around the country blaming local councillors for decisions that we have taken in the House of Commons."—[Official Report, 3 February 1997; Vol. 289, c. 701.] It would be nice if the Minister endorsed those comments. My question for him is the question that every council tax payer will ask: who is to blame for council tax rises and the cuts to services—Government or local councils?

8.28 pm

Mr. Chris Mole (Ipswich)

I am pleased to have the opportunity to speak in the debate. I am not a great lover of tradition, which perhaps makes me ill equipped for service in the House, but I suppose that that makes me ready to join the ranks of the modernisers. I gather that the tradition for maiden speeches is to mention in equal parts the subject at hand, the constituency and my predecessor. Fortuitously for me, there are threads that link all of those.

This is the gateway to the only speech in one's parliamentary career in which hon. Members do not seek to make interventions. I am not afraid to take advantage of that tradition. I speak in this debate on the local government finance report as the leader, until recently, of one of two local authorities serving the needs of Ipswich; my predecessor, the late Jamie Cann was the leader of the other before he came to the House. Ipswich has a tradition of being well served by its local authorities; Ipswich borough council has won multiple charter marks and this year Suffolk county council was acknowledged by the Local Government Chronicle as council of the year.

People in my constituency recognise the contribution that their councils make to their quality of life, economic development and as community leaders. Jamie Cann, as leader of Ipswich borough council, made such a contribution throughout the 1980s. At his memorial service, the people of Ipswich feted him as a man of the people, a plain speaker and a hard-working constituency MP, and for his many achievements as leader of the council. Despite the growing restraints on council spending. Jamie found the means to develop leisure facilities for hard-working families and began much of the regeneration that has made our town a more thriving and attractive place; he still found time to save the Regent theatre and the Ipswich Witches speedway club. He will be sadly missed.

The first Labour MP for Ipswich, R. F. Jackson, was also the first Labour councillor and council leader in our town; I was the first Labour councillor to lead our county council. I am sure that R. F. Jackson would have appreciated the way in which Jamie's efforts added to the development of Ipswich, and would understand that councils must have resources to make partnerships work and deliver progress.

Perusing the maiden speeches of my predecessors, I could not detect any agreement on whether the Danes or Vikings first saw the benefit of Ipswich as a natural haven. Recent archaeology has shown that the Stoke Bridge area was an early settlement of the Angles; some local historians therefore see Gippeswic as the birthplace of modern English. It is certain, however, that following the granting of a royal charter by King John more than 800 years ago, the town developed strongly around its port. Such was the commercial prominence of the town that Edward III and the Black Prince gathered 500 ships off Ipswich. I wonder what they would make of the more than 500 boats that bob in Ipswich wet dock, another product of regeneration, with a new marina, new housing and new businesses, and more than £20 million of investment from sources as diverse as Associated British Ports and the East of England development agency's single regeneration budget.

Ipswich has moved on. My predecessors spoke of manufacturing, which is now much reduced, but the arrival of BT, my own former employer in the late 1960s and early 1970s at what is now Adastral park, has had a lasting effect on the town, which has become a primary location for the development of knowledge-based e-business. A manifestation of the growth of that sector is the IP-City partnership, which is successfully developing one node of the Ipswich to Cambridge hi-tech corridor. That partnership, along with the Suffolk development agency, in which local councils are major players, is driving the regional economy toward the future. If I can be permitted one glance over my shoulder, it would be to recognise that that sector needs the development of skills that would be better provided if we had a university in the town. Indeed, Members can see in the House of Commons Library a depiction of Cardinal Wolsey on his way to Westminster; he was the last civic leader to try to develop higher education facilities in Ipswich. Unfortunately, the only remaining manifestation is Wolsey's gate, which is largely held up by three reinforced steel joists.

Ipswich is blessed with local councils and councillors who are committed to their role as community leaders and to working in partnership with the private sector and other public agencies to help the town develop in a sustainable way and with due regard for the environment and social inclusion. However, I should like Ministers to note that in promoting partnership working all partners must be able to bring something to the table. Councils such as Ipswich borough and Suffolk county, which are not high spenders, want to provide community leadership in partnership, but they must be able to negotiate with resources to make those partnerships work; that is not getting significantly easier for them.

I welcome the local government finance report as something of a curate's egg. The settlement again allows for a real-terms increase in Government support; as someone who put council budgets together between 1993 and 1997, I can assure the House that it is a welcome turnaround from those dark days. We need to be realistic about the implications for council tax; all parties in the Local Government Association accept that more local spending needs to be financed locally, which has led to significant increases in council taxation over the past ten years. Not to accept that reality would be to prevent our councils from tackling challenges such as the placement of difficult young children—much of the problem stems from the Children Act 1989, which was passed under the previous Government—and the community care of the elderly, which has only recently attracted specific, but as yet not continuing or recurring, Government support.

I welcome unreservedly the increase in education standard spending, as Government estimates finally catch up with the level of spending that Suffolk county council has been making for many years. Our schools welcome the certainty that has kept them part of the LEA family—an LEA that was recently assessed by Ofsted as one of the top six in the country.

That leaves me only to introduce the fourth element of an Ipswich Member's maiden speech, for Hansard shows that it is traditional to congratulate Ipswich Town football club on its recent success. I hope that the club is in the middle of another one—at 8 o'clock, I understand, the score was one-nil. I have no difficulty in congratulating the club, which has played large in my life recently. It played Milan away on the evening of my selection as a candidate, and at home on the night of the by-election, in what turned out to be a notable double victory.

I look forward to future debate in the Chamber. In the present debate, I encourage my hon. Friends to support the Government.

8.35pm

Mr. David Curry (Skipton and Ripon)

It is a pleasure to follow the maiden speech of the hon. Member for Ipswich (Mr. Mole). He said that he was not a great fan of tradition. A few moments later, I noticed that the Labour Deputy Chief Whip arrived in the Chamber, so clearly the hon. Gentleman has already made his mark in that regard. We should not worry—he will become a fan of tradition after he has been here for a little while. After all, his affection for Ipswich Town football club denotes a gentleman with considerable faith.

We all subscribe to the hon. Gentleman's gracious remarks about his predecessor, whom we shall miss, as the people of Ipswich already miss him, but they will soon learn that their new Member of Parliament has brought to this place a great deal of experience of local affairs. He spoke of their history with affection, a little teasing and a great deal of understanding. I am sure that he will soon feel at home with us, and we will feel at home with him.

When I was a Minister, with responsibility for local government, the hon. Gentleman came to see me, I suspect, to ask for more money, but there again, almost everybody did. The only point that I make about Ipswich is that in the return match against Dynamo Kiev, the club lost handsomely. I would not wish to draw any analogies about the next election result on that basis. Being a supporter of Bolton Wanderers for reasons that are too complex to explain, I have some doubts about wishing to see Ipswich rise above the bottom three in the table, because I know which team would replace it.

I hope that I am not regarded as eccentric for wanting to make a speech, rather than an intervention, in the debate. I note that total standard spending for local government is about £60 billion in England. That is a quarter of all public expenditure. I cannot help but note that when the Chancellor delivers a Budget, we spend five days debating it, and when we are speaking about the distribution of 25 per cent. of total public expenditure, we spend three hours debating it. Perhaps we should reflect on that allocation of time.

I accept that the settlement is relatively generous. I am grateful for the abolition of the council tax benefits subsidy limitation scheme—a wonderful mouthful. I served on the Committee that passed the relevant order, and I said at the time what a silly idea it was. It was a means of making the almost-poor subsidise the poor. I am glad that the Government have at last come round to my way of thinking and got rid of the wretched thing, which only pushed up council taxes at the expense of those least able to pay, in those local authorities with the largest number of houses in the lower bands, multiplying the effect of hitting the people whom, in theory, the Government were trying to help.

As the hon. Member for Torbay (Mr. Sanders) said, the increases in RSG and SSA necessarily have implications for the level of council tax. In a sense, they pull the council tax up with them. If a council raises a third of its money locally, if the Government say that spending should rise by, say, 7 per cent. and insist on the passporting of all the SSA through to the services, and if the Government further provide only two thirds of that increase, it follows as night follows day that the other third must come from the council tax in roughly the same sort of volume as the increases that the Government have made. In North Yorkshire, that pull-through effect automatically means that a council tax increase of some 4.5 per cent. is necessary to make the settlement whole.

Although the settlement may be relatively generous, serious problems exist. Like other hon. Members, I shall talk about social services. Three years ago in North Yorkshire, we "lost" £3 million because of a change in the method of calculating the formula. Social services are historically underfunded; they do not have the same lobby as education. All head teachers suddenly became wonderfully acquainted with the area cost adjustment, even those who taught in schools that were nearer the Scottish border than the south-east region.

Social services funding is fragmented by its nature. The people whom it helps are not perhaps the most eloquent in arguing their case. Social services are therefore the Cinderella of local government. In North Yorkshire, we have had to overspend more than £3 million to keep social services afloat. That has almost exhausted the reserves. We must now rebuild the budget, stabilise it and reconstitute the reserves.

The reserves are used to deal with not only the demand on social services but natural disasters such as foot and mouth disease. The Selby rail crash happened in my constituency, and the coroner's costs fell on the local authority. Flooding also occurred there. Reconstituting the social services budget and covering the emergency costs are worth another 4.5 per cent. or more.

A curious quirk of the Bellwin formula, which I am sure that the Minister recognises, means that the amount of money that the Government allocate to alleviate emergencies depends on the number of teachers that the local authority employs and their grades. It kicks in after 0.2 per cent. of the budget, which is largely determined by the teachers' pay bill. [Interruption.] I await the Minister's wonderful new scheme. I remember his predecessors' words about finding a way through the area cost adjustment. They knew that the north-west passage was somewhere in the ice floes. Boat after boat got stuck in the ice because the north-west passage did not exist. The Minister will find it difficult to negotiate his way when the wonderful sons or daughters of SSA come into existence.

Mr. Andrew Stunell (Hazel Grove)

Will the right hon. Gentleman give way?

Mr. Curry

I am afraid not because I am time limited.

The build-up of pressure on social services is remorseless, and demography partly accounts for that. However, the increase in demand is most acute in children's services; it is not surprising that local authorities decide to play it safe after so many high profile cases of social services failures. The implications are enormous. The Government know that the funding is inadequate, that the inadequacy will continue and that that invites a crisis.

We all know that local authorities currently spend £1 billion above their SSA on social services. The Minister is an intelligent man; he knows that that constitutes a crisis. I am sure that he would have loved to use some of the Department's transport underspending for social services, but the Treasury would not allow him to make the transfer, and he simply got stuffed.

Our case in North Yorkshire is eloquent. We can foresee the pressures. Elderly people whose care was previously funded directly by the Department of Social Security, now the Department for Work and Pensions, under the so-called preserved rights will be funded by the local authority. There are approximately 1,000 cases in North Yorkshire. Let us consider the fees. The weekly fee for ordinary residential care is £229 under preserved rights, but North Yorkshire pays £275; the fee for highly dependent people is £265 under preserved rights, but North Yorkshire pays £300; the nursing fee is £342 under preserved rights but £390 for North Yorkshire.

It is inevitable that care home owners will ask for the equalisation of those fees. North Yorkshire has not paid that money without heavy negotiations with the care homes. In my constituency, care homes gave notice to the local authority to terminate contracts for people, including those in their 90s, who had been in homes for years because the owners believed that they could not make a living, the local authority could not pay more and the victims tended to be the least able to understand the problem or to defend themselves. Those scattered incidents will become more common unless we consider the structure of the services.

The county has received short-term funding through the building capacity and partnership scheme, for which we are grateful. But the Minister talked about the need for certainty. He said that that was why he was reforming his system. Well, we are all sitting here agog, waiting for the next phase of the spending review before we know whether that funding will continue in the third year, so there is no continuity there.

The Government have also issued guidelines on charging. North Yorkshire's local authority has had an extensive range of charging, but some of that will have to be discontinued, as its estimated cost is more than £500,000 over six months. That is just for social services departments. In addition, the rules have changed on the educational standards fund, so that the Government's participation goes down.

Then we have the wonderful, complicated business of the transfer of funding from the local education authorities to the learning and skills councils, which makes the Schleswig-Holstein question look elementary. That has been done in a way that has left a number of local authorities, including Durham and North Yorkshire, having to subsidise education below the levels of their sixth forms because of the way the money has been passed back, after having been taken from the local authority. This means that the counties are going to have to subsidise education in that way.

In general, I welcome the settlement. I look forward—as one who has been there and got the tee-shirt—with eager anticipation to what comes after it. I exhort the Minister to take seriously his own promises about ending the ring fencing. and to urge his Secretary of State to take seriously what he said in Harrogate, which was that he was going to dismantle some of the apparatus—the great gendarmerie—that is supervising best value. That great inspectorate has taken over most of the democratic and accountable functions in large parts of our public services. I look forward to what is to come. As the clown said to Cleopatra: I wish you joy of the worm.

8.46 pm

Mr. David Kidney (Stafford)

Having listened to my hon. Friend the new Member for Ipswich (Mr. Mole), I am convinced that he is going to be a formidable debater in our proceedings. I was pleased to hear his praise for his predecessor, a fine man who is sadly missed in this place. I encourage my hon. Friend to retain his zest for modernisation, speaking as a member of the Modernisation Committee with a full agenda for modernisation in this Parliament.

Local government is big business. In this financial year, councils in England are spending more than £61 billion on delivering daily the broad range of services with which we are so familiar. The Government send those councils three quarters of that spending power: half in the form of revenue support grant and a quarter in non-domestic rates. So only a quarter of the spending by English councils comes from the councils' own resources—council tax, fees and charges.

Last December's White Paper says that this imbalance of income is less important to address than what the White Paper calls an imbalance of control. Most directly, this phrase refers to local education authorities passing Government grant through to individual schools. My view is that both are vitally important and that it is time to look at more radical ways of giving councils more control over their income. This is a complex issue, but I would like to see the time come when councils collect a range of taxes that are payable locally and spent locally.

How the Government share out their revenue support grant is of intense interest to all hon. Members and their constituents. The present formula, dating back to 1991, is widely discredited. It comprises an obscure set of values grafted on to outdated standard spending assessments, and causes great disparities in funding between councils. These are disparities that this Labour Government say that they cannot justify.

The case for reform of the system was definitively set out in the Government's Green Paper on local government finance, published in September 2000. In general, the Government hold out the prospect of a fairer system with simplified formulas, floors and ceilings, safety valves and a limit on the use by Departments of ring-fenced grant.

For education in particular, the White Paper published in December promises us a standard pupil entitlement that can be tracked through the system from the Government settlement to the individual school budget. The only enhancements to Government grant for education would be for deprivation and for high costs of recruitment and retention. I would strongly welcome a system such as that for distributing Government grant to councils. It is my profound regret that we do not have such a system yet.

Mr. Mark Todd (South Derbyshire)

Does my hon. Friend share my impatience with the slow progress of change? Many of us who represent constituencies that have been adversely affected by the current system have lobbied assiduously for change for the past four or five years. Does my hon. Friend agree that the outcome of the current review is so impatiently awaited that it could be described as a "last chance saloon"?

Mr. Kidney

We have been waiting a long time for change. I am probably more forgiving of the Government's conduct than some hon. Members, because I have followed the subject closely and I know the huge scale of the challenge and the sincere commitment of the Government. My right hon. Friend the Minister has been pressed hard tonight to confirm that the new system will begin from next year's local government settlement, and he has said that it will. May I say to my right hon. Friend that, in working out the details of the new system, I hope that the Government will be open with us. Hon. Members have a keen interest in what has been developed, and rightly so.

It would not be correct to say that the Government made no changes to the present system after the 1997 election. In a written answer to me in 2000, the then Under-Secretary of State at the Department of the Environment, Transport and the Regions, my hon. Friend the Member for Stretford and Urmston (Beverley Hughes), informed me that there were 15 changes in the method of determining SSAs for the 1998–99 local government settlement and 20 changes for the 1999–2000 settlement. One of those changes, in respect of children's services within social services, has benefited Staffordshire county council by about £1 million a year.

However, it is in education funding that the greatest dissatisfaction is expressed. That is because of the vastness of the disparities of funding and the importance of the service. Year after year in the 1990s, in the league table of education funding for shire counties, Staffordshire was stuck in last-but-one position. Parents, school governors and teachers would compare our lowly position with the high position every year of Hertfordshire, and would ask why their children's education was worth less than that of children in Hertfordshire.

Many changes have been made since 1997. The Labour Government have increased overall spending on education. The rising tide of funding for capital as well as revenue spending has benefited Staffordshire. For example, in 1997–98 Staffordshire's education SSA was £279.1 million; by 2000–01 it was £336.4 million. In 1997–98, Government grants were £12.9 million; by 2000–01 they were £21.5 million. In 1997–98, capital spending was £7.4 million; by 2000–01,it £34.2 million.

Frustratingly, the disparity with our friends in Hertfordshire has not closed; it has not even stayed the same, but has continued to grow.

Mr. Mark Prisk (Hertford and Stortford)

As a Member representing a Hertfordshire constituency, may I ask the hon. Gentleman to recognise the simple fact that because of higher housing and salary costs, Hertfordshire's local education authority has higher costs?

Hon. Members

Rubbish.

Mr. Kidney

As the hon. Gentleman will have gathered from many sedentary comments, there is not much sympathy for that argument. If the new system is developed according to the Government's intentions, it will include a factor for recruitment and retention costs, which are higher in some parts of the country than in others.

David Taylor (North-West Leicestershire)

My hon. Friend rightly referred to Staffordshire's ever present bottom-but-one place in the league table for primary and secondary school SSA. I regret to say that Leicestershire has had an ever present place in the bottom slot. Does he acknowledge that the problems that he described in Staffordshire are even worse in Leicestershire?

Mr. Kidney

There is some variation each year, although Staffordshire and Leicestershire are among those counties that often appear at the bottom of the pile, as my hon. Friend says.

Two years ago, the 40 worst-funded local authorities decided to band together to draw attention to the injustice of the disparities and to the discontentment across the country, and to campaign for a fairer settlement. Whether metropolitan or shire, unitary or non-unitary, and whatever their shade of political control, the authorities formed a fair funding forum. They called themselves F40 for short.

Inside Parliament, I have been willing to make contact with hon. Members from both sides of the House who have constituencies within the boundaries of F40 authorities. Together, those hon. Members and authorities have mobilised a strong force for change. That was vividly shown by the 14,402 representations that the Government received from F40 campaigners in support of the case for change set out in the local government finance Green Paper.

I believe that the F40 campaign has been the stimulus for changes that have already taken place. There has been the Green Paper proposal for a new pupil entitlement, the introduction of floors and ceilings into last year's and now this year's settlement, and the introduction of flat rate payments to all schools.

I pay tribute to all those who have helped to organise the F40 campaign, and to those who have supported it. I also pay tribute to Ministers who have given us a fair hearing, and have acted when convinced of the justice of our cause. Things are changing. I described Staffordshire's perennial position next to bottom of the funding league table for shire counties. I see from a written answer on 15 January that we are now seventh from the bottom.

Tomorrow I face an audience of 400 angry parents, governors and teachers in Stafford. They will tell me that all this is too little, too late. When I say to them that a fair, fully funded new system will be in place for next year's local government settlement, I sincerely hope that the Government do not subsequently let me down. More importantly, I hope that they do not let down those parents, governors and teachers who have waited so long.

8.56 pm

Sir Paul Beresford (Mole Valley)

The previous two speeches—my right hon. Friend the Member for Skipton and Ripon (Mr. Curry) is about to skip out as fast as he can—brought back memories. My right hon. Friend and I looked after local government under the last Conservative Government, although that way of putting it is debatable. I can remember much the same complaints and points being made then by different Members representing different parts of the country. I look forward to this breath of fresh air: this new idea that is brightly being proposed. However, if the formula has any indicators or recognition of need—I certainly hope it does—we will have exactly the same thing all over again. I suspect that the sign of the albatross may be appropriate given some of the Minister's comments. I must say that they caused a smile.

My right hon. Friend the Member for Skipton and Ripon has stolen some of my thunder, especially on social services. In Surrey, social services are at crisis point, particularly the care of the elderly. Reference was made to the value of property in the south-east. Many of the elderly in Surrey are looked after in large, old, high-value homes. They require changes to be made to comply with new regulations, so many of them have closed. It is of more value to the owners to sell them and to use the profit to move to a better life, perhaps in another country with more sunshine—that was said with a touch of bias on my part—than to pay for the necessary changes.

I was intrigued by the fact that the Minister went on at some length about the size of the announced increase. At 7.5 per cent., it is a considerable increase, but that does not necessarily mean that all is simple and clear. Underneath the Minister's smile and spin presentation are some nasties. The obvious one is the specific grants, which have increased annually and been top-sliced. Funds are specifically designated to selected local authorities, apparently at ministerial whim. The volume of specific grant allocation has tripled since 1997, and the Government have voiced woolly aspirations to reverse the trend.

We should reflect on the fact that this year there has been a 40 per cent. increase in educational specific grants, and a 100 per cent. increase in Department of Health specific grants. All those are tied closely to defined expenditure in uniquely prescribed modes, with all the accompanying bureaucracy and expense of guidance, conditions, reports and audit.

The grants are designed in such a way as to knock flat the Government's claim of increased stability and predictability in local Government finance. Local authorities are being forced to rely increasingly on major specific grants that can be withdrawn at any time. Major grants are now to be attached to local public service agreements. Most major authorities are negotiating on those grants now. They will be heavily dependent on fairly unpredictable factors such as road accidents, graffiti and, perhaps, the examination results of small groups of pupils. I suspect that that could present the Minister with another albatross.

The Minister has said quite frequently, as did his predecessor, that freezing the SSA methodology brought stability. That has been questioned by Members on both side of the House today. Many of us think that the Government have refused to consider any desirable changes suggested by local authorities and introduced their own changes, necessitated by their own policies, while pretending that they are data changes rather than methodology changes. As we are well aware, authorities are now faced with the complete unpredictability produced by the new grant formula.

There is no doubt that the Government's paranoid obsession with central control has landed local authorities throughout the country with enormous volumes of regulations and requirements. Along with my right hon. Friend the Member for Skipton and Ripon, I served on a Committee that warned the Government about the so-called best value regime. We told them that the costs would be astronomic, and would not be justified by the results. That warning has been proved correct.

I believe that last year the cost of installing the best value system, with its myriad officials, meetings, consultations, audits and auditors' reports, swallowed many authorities' grant increases. The size of the Audit Commission has more than doubled, the extra being funded by local government. As I said yesterday, I understand that the internal costs of the monitoring of councils by the Department's officials has risen to £600 million, charged to the taxpayer. Local authorities' extra costs have been increased by the replacement of the traditional clear, open committee system with a choice of systems. The Minister said yesterday that there was a choice, but no one wanted it. It was a choice between three bad options, the fourth having been withdrawn. While adding dramatically to authorities' costs, that has led to a diminution in the transparency of decisions and a general reduction in council tax payers' interest in the activities of their local councils.

This extraordinarily centralistic Labour Government purport to be a friend of local government, but clearly are not. I have no doubt that if the trend continues, next year's local government finance report will make sad reading.

Underlying the setting of council tax is the way in which local authorities use the position in relation to the services they provide. They have opportunities to make distinctive economic changes, which the hon. Member for Torbay (Mr. Sanders)—who is not here now—failed to recognise. I do not think he has heard of the word "efficiencies". I am sure that, on average, Conservative councils will end up charging council tax payers less, but I am also sure that the Minister will ignore that and turn to the percentage argument.

Year by year, Labour Ministers choose to ignore the fact that a small increase in a small council tax may be large in percentage terms and, conversely, a large increase in a huge tax may be small in percentage terms. The percentage argument does not work; what counts in the end is the quality of service received by the public, and the size of the bill that arrives through their doors.

A very simple example has come up. In times gone by, the media regularly took part in the sport of comparing Wandsworth with Lambeth. Interestingly, that comparison is still valid. The cost of a quality household waste collection in Wandsworth is approximately £24 per household. There is a poorer contrast next door because the cost in Lambeth is approximately twice as much per household.

I am not alone in making that comparison. This afternoon I was handed a copy of a cutting from the South London Press. It details a visit from the hon. Member for Vauxhall (Kate Hoey) to the south London Patmore estate. That estate is split by a boundary line. Part of it is under Labour-controlled Lambeth and part of it is under Tory-controlled Wandsworth. She explained to the South London Press: There is a huge difference in the level of service provided between the two boroughs. The Patmore co-operative is fantastic but they are being let down by the local authority"— Labour Lambeth.

We must remember that the public, the council tax payer, the firms that pay business rates, are footing the bill. There is not enough recognition by the Government of the need to take the load off local government and to give democratically elected members the opportunity to produce quality services without myriad auditors and other people peering over their shoulders at their every move.

9.6 pm

Mr. Clive Betts (Sheffield, Attercliffe)

The report essentially does two things. First, it sets out the overall amount of grant that central Government will give to local authorities. There have been expressions of support, certainly from Labour Members, for what the Government have done. The settlement is reasonably generous; the increase is well above the level of inflation. Secondly, it distributes the money among the individual local authorities.

As a Sheffield Member, I can accept the Government's position this year. They have gone for stability in the light of the fact that, next year, fundamental changes, for which we are all waiting, will be made, but from Sheffield's perspective today's settlement is another in a long line of unacceptable and unfair grant distributions, although it is considerably less unacceptable and unfair than the grant distributions before 1997. The Government have brought some improvements to Sheffield's position since that time.

At least we can celebrate the fact this is the last time that we will have to discuss this form of settlement—the standard standing assessment—in the Chamber. We have been promised that next year we will not simply get a settlement derived from tinkering with the formulae but one based on a completely new system. My right hon. Friend the Minister has said that that system must be transparent. It is important not simply that the anoraks can explain it to us as politicians, but that we as politicians can explain it to our constituents. That needs to be a fundamental part of any new system.

We should not be surprised that the present system, with all its regressions and proxies, is not transparent—it was not designed to be. Hon. Members talk about this Government's control freakery. Where were they in the 1990s when that system was invented and developed? It was not transparent because it was meant to hide the fundamental attack by the Conservative Government on local government spending. It was meant to hide the sleights of hand to pass money to councils such as Westminster and Wandsworth. Fundamentally, it was part of the Tory Government's command and control policy towards Labour local authorities.

On one side of the coin, we had the standard spending assessment, which is about not just grant distribution, but controlling spending levels; on the other, we had the arbitrary system of council tax capping. The two went hand in hand. They were a system of control over local authorities. That is why there is no transparency; the system was not just about grant distribution but control. The changes that the Government have introduced are welcome.

Just to show that the current system is nonsense, one of its peculiarities affects Sheffield. The chief executive has written to me about it. I have been critical of the approach of the Liberal Democrat council in Sheffield to housing benefits over the past two years, which has caused chaos and confusion among my constituents. At least the council has got on quickly with introducing the benefits verification framework, and has sought to bear down on benefit fraud. That has led to a reduction in benefit claimants, because the people who should not have been claiming benefits in the first place have been taken out. As the council accepts, the direct cost of that process has been borne by central Government, but there is a twist in the tale. Among the myriad formulae and proxies that constitute the SSA, one proxy for poverty and deprivation is housing benefit case loads. Under this wonderful system, if a council bears down on fraud by reducing the number of fraudulent claimants, its area is deemed to be less poor and less deprived, so it gets less grant. That is just one nonsense in the system, but it has cost Sheffield £1.2 million this year. Such stupidities cannot be explained to the public, there is no rationale or reason for them and they must be fundamentally reformed when we get the changes that we are promised.

The new system will doubtless be complicated as well, and my right hon. Friend is right to say that it cannot increase everyone's grant. However, on looking at the totality of the current system, one can instinctively tell that things are wrong with it. I can see no reason why Sheffield and similar authorities receive less grant per head. People can show me the formula and the calculations, but they cannot convince me that the system is right, and I cannot convince my constituents. Given that Sheffield's neighbouring authority, Barnsley, is bouncing along the bottom of the grant table, and given Barnsley's needs compared with authorities that get far more grant per head, the system is clearly unfair and unreasonable and needs to be changed. It is against such benchmarks that we will judge the new system.

One particular and peculiar problem of the current system deprives my local authority of resources. Because of the formula's averaging process, if an authority has areas of poverty and real deprivation, and some of great affluence—Sheffield has such areas—it will probably lose out on grant altogether and get nothing even for the very poor areas. I know that my right hon. Friend is aware of the problem, and I hope that it will be addressed through future arrangements.

On occasions such as this, many hon. Members usually berate the area cost adjustment. I suspect that that has not happened today because this is the last of such arrangements. However, we have not forgotten it and we are still unhappy about it, and we are looking for change. Everyone accepts that the cost of employing staff is higher in some parts of the country—particularly in central London—than in others, but the ACA does not work fairly across the country. We accept that the settlement constitutes a minimal change, but the ACA needs to be reconsidered in future.

Hon. Members have commented on social services, and I intervened on my right hon. Friend the Minister to point out that there were choices for local authorities. In Sheffield, higher priority could be given to important social services spending, rather than to matters such as corporate publicity and the salaries of senior officers. I accept, however, that there are real pressures on the budgets of social services, which may not have always managed their resources well in the past. We have rightly focused attention on large increases for education and on encouraging local authorities to spend that money accordingly; nevertheless, social services have been left behind. I am pleased to hear my right hon. Friend say that the Government are aware of that issue, and I hope that they will develop some real proposals.

There is one final matter that I hope the Government will consider. As I have said, the settlement is generous overall, but generosity can be a two-edged sword. Central Government give local authorities a big share—about 80 per cent.—of local authority budgets, and they control such expenditure to a degree by determining how much a local authority will be allowed to spend. That causes enormous gearing problems. If a local authority decides to increase its budget and therefore to increase council tax, and if council tax constitutes only 20 per cent. of its spending, the 4:1 gearing ratio proves a real disincentive to responding to the wishes of the local electorate by spending extra money to improve local services.

Ring fencing has been raised by other hon. Members. I believe that there will be a problem in the long term arising from the fact that central Government control 80 per cent. of local authority grant, compared with the 20 per cent. that comes from council tax. Moreover, central Government increasingly seek to determine how the grant that they give to local authorities is spent.

Those two factors are fundamental and crucial. They go to the heart of local democracy and the freedoms of local authorities. They are also central to efforts to get people re-engaged with local politics. I know that my right hon. Friend the Minister will not be able to deal tonight with the problems that remain, but I hope that the Government will address them in the future. I look forward to Ministers returning to the House on a future occasion with proposals to tackle the problems that I have described.

Mr. Deputy Speaker

Order. If all hon. Members who wish to speak in the debate can confine their remarks to about seven minutes, they will be successful. If they cannot, they will not be able to speak in the debate.

9.15 pm

Mr. Mark Prisk (Hertford and Stortford)

I am grateful to you, Mr. Deputy Speaker, and I shall take note of your request.

I shall begin by welcoming the headline increase of 7.9 per cent that has been proposed for Hertfordshire county council. That reflects the record increase in the county's school population, the growing elderly population, and the higher costs that the county faces. I am sure that the last factor is something that the hon. Member for Stafford (Mr. Kidney) and I could discuss at greater length, given the opportunity.

It is good that the Department has listened to the representations from me and other hon. Members with constituencies in Hertfordshire, and from county council officers. It has recognised our needs and the pressures that we face, but I hope that the Minister will understand why I was somewhat disappointed by the subsequent imposition of the floors and ceilings cap. That has meant that Hertfordshire will get £2.6 million less than it sought.

Given that the Department listened to representations, discussed people's needs and looked at the pressures involved, I fail to understand why it then imposed a simple, crude cap in a rather arbitrary way. I do not think that that has helped the process, as I hope that the Minister will understand.

The result is simple Hertfordshire county council's budget has been reduced by £2.6 million. That includes a reduction of £1.6 million in the schools budget, which could not have come at a worse time. Hertfordshire has one of the fastest-growing school populations of any county in the country, and that puts considerable pressure on school places.

Every week, I receive letters from distraught parents who are trying to get their youngsters places in nursery, primary or secondary schools. The rising school population and the funding that is about to be made available mean that there will be more letters and more disappointed parents and pupils.

The problem is compounded by the teacher shortages that we suffer. Those shortages are evident at primary level, and secondary school head teachers in my area tell me that the problem is also being felt at secondary level, especially in Hertford. That reflects one of the elements that the Department originally recognised—the fact that, in Hertfordshire and the other home counties, it is extremely difficult to retain senior staff.

The third reason why the budget cut has come at an especially bad time for our schools is that the pupil-teacher ratio in Hertfordshire is bad and getting worse. My right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) has rightly and recently made it clear that pupil-teacher ratios in Hertfordshire, unlike other parts of the country, have worsened over the past five years. Indeed, they have worsened every year since this Government came to power. I say that with considerable regret, which I hope that the Minister will understand.

The settlement involves a cut of £1.6 million in the schools budget. Contrary to the Government's promise in 1997, if the budget cut is implemented things are only going to get worse in Hertfordshire schools.

Two other uncertainties remain, and I would welcome any response from the Minister with regard to them. The first is related to previously housed asylum seekers, an issue that was raised before. I know that ceilings have been imposed on the costs involved, as other hon. Members have mentioned. The difficulty in Hertfordshire is that there is a £1 million gap between the cost to the county and the money that is forthcoming from the Government. The ceiling has been relaxed in Oxfordshire and for London authorities, and I should welcome any indication from the Minister of a similar flexibility for Hertfordshire.

My right hon. Friend the Member for Skipton and Ripon (Mr. Curry) referred to preserved rights. I do not claim to be expert in the finer details of local government finance, but I understand that this relates to elderly people who were in residential homes before 1993. The county council is quite prepared to accept responsibility for these people, and has done so, but on the basis that the Government are willing to provide the funds. At this point, the funds from the Government are £2.2 million short. I know that the county is making representations to the Minister, and I ask him to bear those in mind.

The cost of running services in Hertfordshire and other home counties is high and is rising faster than in other parts of the country. The pressures are great, particularly with regard to our school population. I was pleased that the Government listened to our representations about the SSA, but deeply disappointed that they were ignored, given the arbitrary nature of the floors and ceilings mechanism. The mechanism is crude; it contradicts the aim of matching spending to need. In Hertfordshire, it will betray every child in our schools.

9.21 pm

Mr. Kevan Jones (North Durham)

Like my hon. Friend the Member for Leicester, South (Mr. Marshall), who is no longer in his seat, I intend to be parochial and raise the dire situation faced by Durham county council this year.

The Minister has referred to an average settlement of more than 7 per cent. Durham's allocation is just over 5 per cent., one of the lowest settlements of any county council in the country. Durham county council has always been moderate and responsible. Even during the 1980s, a time of lunacy in some London boroughs, Durham was a responsible council that worked within its means. It went through some tough times, with the closures of the steelworks at Consett and the Durham coalfield, but it came through and worked in partnership with local business and local people. This year, however, it finds itself in a depressing situation.

Social services and education have been mentioned tonight. Durham, like many other county councils, is facing pressures due to the growing numbers of elderly people in the community. That is exacerbated in County Durham. Its long industrial past has meant a legacy of industrial-related diseases to elderly people, and they need intensive care from social services.

The other pressure is children's services, which was mentioned by the hon. Member for Torbay (Mr. Sanders). He is right to say that those services are expensive and there is no control over them. Durham's intake this year is up by about 30 per cent., and the council cannot budget for that. A colleague of mine on Newcastle city council, Colin Gray, the chair of finance, used to say that it would be cheaper to send someone to Eton or Harrow than it would be to have them looked after by the local authority. Education services are very expensive and councils such as Durham have very little control over the number of children in their care.

It has been announced that Durham will receive an additional £1.8 million mainly to deal with bed blocking, which has been a problem for Durham and most other councils this winter. That compares with last year's figure of £1.6 million, which does not bring a great deal of joy to the county council. It has been estimated that to deal with its social services problem, the council needs about £10 million. That raises a bigger problem, faced by many councils, of how to make the connection between councils, social services departments and the health service, because £10 million is a drop in the ocean to the health service but not to a council such as County Durham.

The council is making some difficult decisions this year about the closure of homes. It is undertaking rationalisation that the present leadership realises is long overdue. The council is also making a capital investment of £10 million in new provision. That capital receipt came from the council's share in the sale of Newcastle airport. The council is facing up to its social services problems and tackling them.

In Durham, education offers a good example of non-joined-up government. Last year, the county council received £2.76 million in education budget support grant. That was withdrawn this year so it will be difficult for the council to meet the standard funds for investment in schools. That is sad. In my constituency and throughout Durham, since Labour came to power in 1997 there has been some good capital investment. For example, almost £3 million has been spent on Pelton Roseberry school and we can see the difference that has made. However, Durham will have to find that funding this year.

Furthermore, money has been taken from council budgets for the learning and skills councils, as has been mentioned; £850,000 has been taken from Durham county council's budget that was not spent on sixth form provision. The result is that primary and secondary schools will suffer because that money was arbitrarily taken from the budget. When I made representations to the Minister about that, he said that it was a matter for the Department for Education and Skills. However, I plead with the Government to use joined-up thinking on such decisions.

Durham is not an irresponsible council. It has had to take many difficult decisions during the past few years but we shall face a record rise in council tax this year, whether we like it or not. According to my estimate, after today's announcement, grants of about £300,000 will be allocated to Durham county council. That is a drop in the ocean when education has lost £2.76 million alone, apart from the pressures on social services.

I plead with the Minister to consider Durham's case. The problems will not go away and the council will find it difficult not to impose council tax rises of 10 per cent. or more. Several hon. Members have referred to the new system that will apply next year. I accept that, but I agree—with some trepidation—with the right hon. Member for Skipton and Ripon (Mr. Curry) who pointed out that we are trying to find a system that will please everybody, but clearly we cannot do so.

Durham faces a tough year and local politicians will have to take some hard decisions. I plead with Ministers to reconsider Durham's case. We will not be able to avoid a council tax rise of at least 10 per cent.

9.28 pm

Mrs. Annette L. Brooke (Mid-Dorset and North Poole)

There are parts of four councils in my constituency: two district councils, one unitary council and the county council. In our local newspaper, all the predictions are that although council tax may rise by less than 10 per cent. in one or two places, the rise for the councils in my constituency and for neighbouring authorities will be much more than 10 per cent.

The Minister might have given me good news for the district councils although I am not sure. If the news is not as good as I thought, I shall write him another letter.

I shall concentrate on the county council and the unitary authority and, yes, I shall speak about social services again. I make no apology for being repetitive because they are so important. Last year, throughout the south-west region, 13 of the 15 authorities spent 72 per cent. above the SSA for children's services, so we cannot point the finger at individual authorities.

I am a member of Poole unitary council. I promise that I will not go through the budget line by line—I shall choose a few examples. Poole is a small authority and, as several hon. Members have pointed out, that makes things doubly hard just one change has a big impact. Spending on children's services is an enormous 70 per cent. above SSA. In the social services budget for 2001–02, with an SSA of about £23 million, Poole unitary authority is heading for a £2 million overspend. That might not sound a huge sum, but it certainly is in relation to the budget. That obviously signals tremendous problems for next year.

Many hon. Members have mentioned the problems in social services. We cannot take risks with our precious young people. We must respond to real-life problems. I cannot believe that the Minister is actually asking us to look for cuts in the social services budget when it is so tight.

On Friday I had a meeting, along with other MPs, with Poole unitary authority. I asked why, when most authorities were reporting an overspend on social services, Poole's overspend was so large proportionately. The answer was that there were special factors, such as an inability to find enough foster parents and a consequent need to buy in extra help, and the fact that some children needed very expensive education.

Poole, as an authority, has a low council tax. It is in the lowest quartile for the country. It is one of the lowest spending authorities throughout the south-west—it has been in Liberal Democrat control for the past 10 years. One cannot really accuse Poole authority of being an irresponsible high spender, but what is it to do unless there is some response to all the cries, from throughout the country, about the particularly severe situation regarding social services?

I beg the Minister to listen tonight. We hope for better with the new formula, but the crisis is with us now. We cannot afford to wait another year before that may be addressed. I put that plea for all the councils with the same problem, because it is so serious and the individual cases are harrowing. I shall be in a position to vote, and I certainly cannot vote for any shortages on the social services budget.

We are short of time so I shall change topic rather abruptly and move on to fridges for a while, to illustrate my point. I repeat that Poole is a small unitary authority. I thought that there was a mistake in an e-mail that I received tonight, but I can now see that the figures do add up. Poole has been allocated £17,000 to store all the surplus fridges, and officers from Poole unitary authority have told me that that amount is about £180,000 short. That is a very big sum for a small unitary authority.

I thought that that figure was wrong, but the Local Government Association predicts that storage of surplus fridges will cost between £60 and £65 million—10 times the £6 million that has been allocated. Whereas I responded in a similar way to the Minister when I read that e-mail, thinking that it was wrong, I now, having heard the LGA figures, think that it is right.

The question for my council and many other councils is whether they should budget for costs of £180,000 or whatever and build that figure into the council tax because they have to find that money, or hope that the Minister will monitor the costs closely and address the matter if the costs exceed £17,000, or whatever amount each authority has been allocated.

Our biggest concern must be the fact that there will be high percentage increases in council tax. It was refreshing when the hon. Member for North-East Cambridgeshire (Mr. Moss) said that the high percentage increases in council tax would be down to the Government. In my area, we usually find that if it is a Liberal Democrat-controlled council, various leaflets say that it is the Liberal Democrats' fault. If it is a Conservative-controlled council, those same leaflets say that it is the Government's fault. It is bad that we have a blame culture.

The only point that I want to raise on reform of the area cost adjustment is that it must be clear, open and transparent so that local councillors are genuinely accountable to their electorate, which they are not at the moment. At the moment it is a case of who tells the best story and how many times. We have some amazing graphs that go off the pages referring to council tax increases in Liberal Democrat councils, but at the end of the day my authority and Dorset county council have relatively low council taxes, so that is not the issue.

However, a large percentage increase is an issue for many elderly people and others on fixed incomes. It is not easy to say that the problem is that we have not spent enough over the years on our services and that we have got to up the money to cover the social services this year. That really hurts those at the other end of the range—the elderly and the vulnerable. We need much more help than is offered in the local government financial settlement for 2002–03, and I urge the Minister to consider funding for children's social services in particular.

9.35 pm

Mr. Andrew Lansley (South Cambridgeshire):

I am grateful to the House for the opportunity to contribute to this debate. There is a certain symmetry in being the back marker in this debate because Cambridgeshire has the dubious distinction of receiving the lowest SSA per head of any shire county.

I welcome the maiden speech of the hon. Member for Ipswich (Mr. Mole). We at the other the other end of the A14, as part of the Cambridge to Ipswich corridor, would probably be happy to trade a bit of Cambridge's knowledge, industry and expertise if Cambridge United received a bit of footballing expertise in return. He mentioned higher education expertise, and I recognise that that matters. Given that he thought Cardinal Wolsey was the last person to promote such expertise, perhaps he should have a word with the Lord Chancellor, who seems to see himself in like guise.

I want gently to chide the hon. Member for North Durham (Mr. Jones) and, to be evenhanded, my hon. Friend the Member for Hertford and Stortford (Mr. Prisk) on their contributions to the debate. It is very interesting to consider the respective SSA per head of shire counties. Hertfordshire, at £774 per head, and Durham, at £771 per head, contrast dramatically with Cambridgeshire at £647 per head for 2002–03. If my hon. Friend reads the report of my little contribution, he will find that one of the pressures on school places in Hertfordshire is that there are those in my constituency, just over the border from Hertfordshire, who are trying to place their children in schools in Hertfordshire, rather than in Cambridgeshire. They do so because Hertfordshire has £270 per pupil more to spend on schools than we do in Cambridgeshire.

Although my hon. Friend may claim a fast-rising population and high relative costs, the population of South Cambridgeshire is among the fastest growing anywhere in the country. The cost of employment, housing and living in Cambridgeshire are at least as high as in many parts of Bedfordshire, Essex and, indeed, Hertfordshire, including Hertford and Stortford, yet those counties receive the area cost adjustment, whereas Cambridgeshire does not.

The hon. Member for Sheffield, Attercliffe (Mr. Betts) remarked on the lack of comment on the area cost adjustment in the debate. He wondered why that was—if for no other reason, it was because I had not spoken at that time. The Minister will recall that the first debate on the Adjournment that I was able to obtain in the House took place in July 1997 and was on the area cost adjustment. One of the more recent—not the most recent—debates on the area cost adjustment took place in January 2001. In response to the debate in July 1997, the Minister said: I assure him"— he was referring to me— that we shall study the further surveys carefully and discuss them, as a matter of urgency, with the local government associations. We shall not be precluded from taking decisions at the earliest opportunity about possible adjustments that might be appropriate."—[Official Report, 18 July 1997; Vol. 298, c. 670.] In January 2001, three and a half years later, the then Under-Secretary of State for the Environment, Transport and the Regions, the hon. Member for Stretford and Urmston (Beverley Hughes), changed the Government's position. She said: We are not rushing to make hasty solutions".—[Official Report, Westminster Hall, 30 January 2001; Vol. 362, c. 14WH.] All that was in pursuance of the commitment made by the then Leader of the Opposition—now the Prime Minister—on 30 April 1997, days before the general election. He said: We will review the area cost adjustment in time for the next financial year". I am afraid that the Minister must understand why my hon. Friend the Member for Maidenhead (Mrs. May), the shadow Secretary of State, has pressed that matter a little. We have found in the past that, when we have been told that something will be reviewed in time for the next financial year, four years have gone by and nothing has been done. Something must be done about the area cost adjustment. It must reflect costs accurately across the country. The kind of cliff-edge effects that currently occur are unsustainable. Respective costs across the country must be acknowledged.

I shall not continue to describe how that change should take place. However, I shall say two things. First, the grants must be disaggregated to district council level—with respect to my hon. Friend the Member for North-East Cambridgeshire (Mr. Moss), there are big differences between his constituency and mine in Cambridgeshire. It is deeply unsatisfactory that a fast-growing district council, such as South Cambridgeshire district council which is in an area of national importance in terms of development and infrastructure, should have a 2.3 per cent. increase in grant. Not only the county council but the district council—which has such a large planning function—have been woefully under-provided with grant by the Government given the councils' responsibilities.

Methodology may not have changed, but the data have. It is unsatisfactory, from our point of view in Cambridgeshire, that we have seen another increase in area cost adjustment factors, which had the net effect of taking £300,000 out of Cambridgeshire's relative allocation compared with what would have been allocated in 2000–01 when the previous factors applied.

The Minister referred to the importance of using the latest data. Data from 16 October 2001 was used for the council tax. Therefore, when the local authority's resources were assessed for the purposes of grant, up-to-date data were being used. However, when population was assessed, estimates for 30 June 2000 were used. For somewhere such as South Cambridgeshire, the difference between the estimate of a 1.3 per cent. increase in population per annum and the actual increase in population of more than 1.5 per cent. meant that that increase was not reflected in the allocation of grant.

Many hon. Members have spoken about the implications for council tax. I agree with what was said about the stress being put on local authorities as council tax reflects an increasing proportion of the cost of providing services. The same is true in relation to the national non-domestic rate, because of a 9.8 per cent. increase this year. The product of that rate is a further burden on businesses.

Cambridgeshire county council is currently consulting on the basis of a 9.8 per cent. council tax increase, and the district council is considering anything up to a 40 per cent. increase—from £50 to £70. We discussed the police, who are considering an increase of 20 or 30 per cent. to sustain their position. The net result could be an overall increase of £95 in band D council tax this year, which is the equivalent of nearly £2 per week.

As my hon. Friend the Member for North-East Cambridgeshire rightly said in his opening speech, a very high proportion of the additional money being provided to those on fixed incomes—through the basic state pension, for example—could be taken up next year by the increases in council tax, much of which is a product of distortions in the Government grant distribution system.

9.44 pm

Mr. Moss

With the leave of the House, Mr. Speaker, I begin by complimenting the hon. Member for Ipswich (Mr. Mole) on his maiden speech. He spoke authoritatively on local government finance and shared his experience and expertise of local government with us. He was gracious and generous in his comments about his predecessor who was an assiduous Member of the House and achieved much for his constituency. The hon. Gentleman showed that he is a worthy successor.

The debate has been useful. I agree with my right hon. Friend the Member for Skipton and Ripon (Mr. Curry) that, given the enormity of the money involved as a proportion of total Government spending, it is ridiculous that we have only three hours to debate local government finance when we spend almost a week on the Budget.

Many hon. Members took the Minister up on his promises, especially to review the SSA and, by implication, the area cost adjustment. I intended to mention my experience of the area cost adjustment in Cambridge, but my hon. Friend the Member for South Cambridgeshire (Mr. Lansley) took care of that authoritatively. It makes no sense to have the cliff-edge syndrome, as he described it, in which one side of the county boundary receives substantially more money per pupil than the other. That needs to be addressed. The hon. Members for Sheffield, Attercliffe (Mr. Betts) and for Stafford (Mr. Kidney) also mentioned that.

The Minister said that the SSA is unfortunately so complicated that only boffins in anoraks can understand it and, by implication, that he, perhaps, did not. [Interruption.] If any hon. Member can tell me that they understand the formula in the report, I shall willingly take my cheque book out. It is extremely complicated and we wish the Minister good speed in coming up with something that is agreeable to all. I suspect, however, that he is setting himself an impossible task and that those who have suffered low SSAs will be disappointed when the fruits of the reorganisation do not materialise as they expect.

There were recurrent themes on both sides of the Chamber. The crisis in social services was emphasised in particular. We all know that that is a problem not just for local government funding and local government, but for government as a whole. We would be more than happy to co-operate with the Government to consider that in a broader perspective so that social services are given the right funding without necessarily making councils rob Peter to pay Paul.

My hon. Friend the Member for Mole Valley (Sir P. Beresford) and the hon. Member for Torbay (Mr. Sanders) mentioned best value. My hon. Friend also raised problems of ring-fenced funding, as did the hon. Member for Sheffield, Attercliffe. The important point was made that if 80 per cent. of local government money is funded by the Government and 15 per cent. of that goes to specific grants, that reduces significantly the flexibility of every council to pursue its responsibility to ensure that it has a balanced approach to the provision of services across the board.

My right hon. Friend the Member for Skipton and Ripon also mentioned the transfer of funding for post-16 education. That has not been calculated correctly. I know that the Government have made some adjustments from the initial announcements made late last year, but some councils still believe that they have been penalised because of the inadequate compensation. The floors and ceilings mechanism was not universally welcomed by hon. Members on both sides of the House. It is possible that the Government are devising a crude way to even out differences, especially in relation to the area cost adjustment.

We will not seek to divide the House on the report. We want money to go to local councils as soon as possible and cannot understand why the Liberal Democrats want to vote against the Government. Perhaps the Government should sit on their hands. Liberal Democrats might then have the difficulty of explaining to their local councils why there is no money in the budgets next week.

9.49 pm

Mr. Raynsford

With the leave of the House, Mr. Speaker, I should like to reply. We have had a good, thorough and extensive debate, which has covered a wide range of issues. I shall try to do justice in the short time available to the many speeches that we have heard.

The hon. Member for North-East Cambridgeshire (Mr. Moss), speaking for the official Opposition, deftly tried to damn me either way by picking up my remark about the complexity of the system and the fact that it was probably only intelligible to anoraks; he then suggested that probably even I did not understand it. If I agree, I condemn myself for not understanding the system; if I do not, I condemn myself as an anorak. Either way, I cannot get out of that. [Interruption.] I ask Members to wait until the end of the speech before judging.

My hon. Friend the Member for Leicester, South (Mr. Marshall), who opened the debate from the Back Benches, welcomed the real-terms increase in grant and highlighted some specific questions from Leicester, particularly the addition of 488 pupils to the school register since the annual census, largely as a result of the influx of Somalis from Holland. That unique and special problem will be considered by the education funding strategy group. However, we cannot make an immediate change to a formula which has been generally agreed and will not be changed in the course of this year. We understand the problem and shall obviously look at it.

The hon. Member for Torbay (Mr. Sanders), speaking for the Liberal Democrats, acknowledged that the grant increase was generous overall, but expressed concern, as many Members did, about particular difficulties in relation to social services. I acknowledged that issue in my opening remarks. The hon. Gentleman highlighted failings in the grant distribution formula which, as he knows, we have pledged to replace. My hon. Friend the Member for Ipswich (Mr. Mole), in an impressive maiden speech, paid tribute to his predecessor, Jamie Cann, whom we all miss; he was an assiduous Member of Parliament, as well as an assiduous and dedicated leader of Ipswich borough council before coming here. We all miss him. My hon. Friend highlighted the importance of community leadership and spoke with knowledge and authority about the financial pressures on local authorities; I am sure that he will contribute authoritatively to many future debates on the subject in the House.

The right hon. Member for Skipton and Ripon (Mr. Curry), in a characteristically thoughtful speech, remembered his own days in the post that I currently occupy. I have been thinking about him; when I went to meet the LGA after the publication of the provisional settlement, it began by reminding me of its meeting with the right hon. Gentleman six years ago, which he opened with the words, "We've all been stuffed by the Treasury." I am pleased that that was not the experience this year.

Mr. Curry

I am delighted to have afforded much innocent pleasure over many years to many people in local government, who no doubt have a great nostalgia for the Minister who was honest. The right hon. Gentleman and I have shared the occasional glass of something and the occasional meal. Now and again, we have mused about the behaviour of the Treasury; in those conversations, I have not noticed a sharp difference in view between us.

Mr. Raynsford

I look forward to continuing this conversation with the right hon. Gentleman, perhaps over another glass of wine one evening.

My hon. Friend the Member for Stafford (Mr. Kidney) made a powerful case for the reform of the standard spending assessment to end the disparity in the treatment of different counties, particularly his own. That is a complex issue, which I shall pick up when I deal with the contributions of other hon. Members. The hon. Member for Mole Valley (Sir P. Beresford) criticised the best value regime, which is not surprising, given that he was very much committed to the discredited compulsory competitive tendering regime, which it replaced. There is no appetite in local government for returning to CCT. We shall continue to refine and improve the best value regime; as it beds in, and as we cut out unnecessary complexity which, I accept, has been present in the early stages, there will be genuine benefits in driving up services.

My hon. Friend the Member for Sheffield, Attercliffe (Mr. Betts) made a passionate case for the reform of the SSA system, which has particularly disadvantaged areas of great need in south Yorkshire and neighbouring areas. He mentioned a perverse incentive in the current housing benefit arrangements, and said that reduction in fraud could reduce local authorities' grant entitlement. We accept that that is a fair point and we will examine it in the formula review.

My hon. Friend the Member for North Durham (Mr. Jones) highlighted the difficulties facing his county. There is no question but that there is real pressure there in relation to social services, which I have acknowledged in discussion with him. The grant increase for County Durham is 5.6 per cent. It is a little lower than the shire county average of 6.1 per cent., but it is a good increase, well above inflation, and compares with 3.2 per cent. last year. It involves an additional £15.8 million for County Durham.

The hon. Member for Mid-Dorset and North Poole (Mrs. Brooke) drew attention to social services pressures in her area and also to the matter of refrigerators. The £6 million Government grant is designed to cover the cost of storage of fridges up until March this year—only in the period from January to March—and should not be confused with an annual figure. We will consider the position urgently and determine what further action is required beyond March to help deal with the issue. I hope that that reassures the hon. Lady.

The hon. Member for South Cambridgeshire (Mr. Lansley) also presented the problems facing county councils and in doing so highlighted the dilemma. Whatever changes we make to the formula, there will inevitably be some authorities that receive less than others, either per capita or in an overall figure. That is the nature of a formula system for distribution of grant.

I hope that the hon. Gentleman will acknowledge that a formula system is better than an arbitrary system of allocation by ministerial fiat. He has drawn attention to the problem that arises when a formula is used. I do not underestimate the difficulties of trying to create a fairer and better system in the future than the one that we have at present, but I believe that we can make progress in simplifying the system, making it slightly less opaque than it is, and addressing some of the genuine unfairnesses that are inherent in the current arrangement.

The report that we have debated this evening confirms a generous settlement which gives an average increase of 7.5 per cent. in funding for local authorities in England. Some speakers criticised aspects of the settlement or expressed concerns about the current position in their constituency, but almost all acknowledged that this year's settlement is generous. It is not a panacea for all local authority problems. We recognise the very real pressures that local authorities face, not least in respect of social services, but it is a settlement that gives real-term increases in grant to the vast majority of authorities and a guaranteed increase of at least inflation for every authority in England.

How very different was the experience that local government had under the previous Government. The average grant increase in the last five years of the Tory Government was just 2 per cent. per annum—just 2 per cent. per annum over that five-year period. Since 1997, we have seen an average of 6 per cent. per annum, and this year the increase is 7.5 per cent.

This is a good settlement from a Government who are committed to local government and to forging a new relationship with local government. We recognise the hugely important contribution that local government makes to meeting local needs and delivering services to people in its area. We are determined to work in partnership with local government and to help local authorities meet their responsibilities and deliver to their residents the high quality services that their residents expect and need.

We are making real progress in establishing a far better and more positive relationship with local government—a relationship based on trust, the removal of unnecessary red tape and bureaucracy, giving greater freedoms to local authorities, and putting that in the context of a performance management system that will drive up standards. The ultimate aim is to deliver high quality services to people in need. All of us, whether from the local government or central Government perspective, want high quality services to be delivered to the people whom we represent. This is a good settlement, which I commend to the House.

Question put:—

The House divided: Ayes 286, Noes 40.

Division No.149]	[9.59 pm
AYES
Adams, Mrs Irene (Paisley N)	Brown, Rt Hon Nicholas
Ainger, Nick	(Newcastle E & Wallsend)
Ainsworth, Bob (Cov'try NE)	Bryant, Chris
Allen, Graham	Burden, Richard
Anderson, Rt Hon Donald	Burnham, Andy
(Swansea E)	Cairns, David
Atkins, Charlotte	Campbell, Alan (Tynemouth)
Austin, John	Campbell, Mrs Anne (C'bridge)
Bailey, Adrian	Campbell, Ronnie (Blyth V)
Baird, Vera	Caplin, Ivor
Barnes, Harry	Caton, Martin
Barron, Kevin	Cawsey, Ian
Battle, John	Challen, Colin
Bayley, Hugh	Chapman, Ben (Wirral S)
Beckett, Rt Hon Margaret	Clark, Mrs Helen (Peterborough)
Benn, Hilary	Clark, Dr Lynda
Bennett, Andrew	(Edinburgh Pentlands)
Berry, Roger	Clark, Paul (Gillingham)
Best, Harold	Clarke, Rt Hon Charles
Betts, Clive	(Norwich S)
Blears, Ms Hazel	Clarke, Rt Hon Tom (Coatbridge)
Blizzard, Bob	Clarke, Tony (Northampton S)
Boateng, Rt Hon Paul	Clelland, David
Bradley, Rt Hon Keith (Withington)	Clwyd, Ann
Bradley, Peter (The Wrekin)	Coaker, Vernon
Brennan, Kevin	Coffey, Ms Ann

Cohen, Harry	Iddon, Dr Brian
Connarty, Michael	Illsley, Eric
Corston, Jean	Jackson, Helen (Hillsborough)
Cranston, Ross	Jamieson, David
Crausby, David	Jenkins, Brian
Cryer, Mrs Ann (Keighley)	Johnson, Alan (Hull W & Hessle)
Cryer, John (Hornchurch)	Jones, Helen (Warrington N)
Cunningham, Jim (Cov'try S)	Jones, Jon Owen (Cardiff C)
Cunningham, Tony (Workington)	Jones, Kevan (N Durham)
Curtis-Thomas, Mrs Claire	Jones, Lynne (Selly Oak)
Darling, Rt Hon Alistair	Jones, Martyn (Clwyd S)
Davey, Valerie (Bristol W)	Joyce, Eric
David, Wayne	Kaufman, Rt Hon Gerald
Davidson, Ian	Keen, Alan (Feltham & Heston)
Davies, Geraint (Croydon C)	Keen, Ann (Brentford & Isleworth)
Davis, Rt Hon Terry	Kidney, David
(B'ham Hodge H)	Kilfoyle, Peter
Dawson, Hilton	King, Andy (Rugby & Kenilworth)
Dean, Mrs Janet	Kumar, Dr Ashok
Denham, Rt Hon John	Ladyman, Dr Stephen
Dobbin, Jim	Laxton, Bob
Dobson, Rt Hon Frank	Lazarowicz, Mark
Donohoe, Brian H	Lepper, David
Doran, Frank	Leslie, Christopher
Dowd, Jim	Levitt, Tom
Drew, David	Lewis, Terry (Worsley)
Eagle, Angela (Wallasey)	Liddell, Rt Hon Mrs Helen
Eagle, Maria (L'pool Garston)	Linton, Martin
Ellman, Mrs Louise	Lloyd, Tony
Ennis, Jeff	Lucas, Ian
Etherington, Bill	Luke, Iain
Fitzpatrick, Jim	Lyons, John
Fitzsimons, Mrs Lorna	McAvoy, Thomas
Flint, Caroline	McCabe, Stephen
Flynn, Paul	McCafferty, Chris
Follett, Barbara	McCartney, Rt Hon Ian
Foster, Rt Hon Derek	McDonagh, Siobhain
Foster, Michael (Worcester)	McDonnell, John
Foster, Michael Jabez (Hastings)	MacDougall, John
Foulkes, George	McGuire, Mrs Anne
Galloway, George	McIsaac, Shona
Gapes, Mike	McKechin, Ann
George, Rt Hon Bruce (Walsall S)	McKenna, Rosemary
Gerrard, Neil	McNamara, Kevin
Gibson, Dr Ian	McNulty, Tony
Gilroy, Linda	MacShane, Denis
Godsiff, Roger	Mactaggart, Fiona
Griffiths, Jane (Reading E)	McWalter, Tony
Griffiths, Nigel (Edinburgh S)	McWilliam, John
Grogan, John	Mahmood, Khalid
Hall, Mike (Weaver Vale)	Mahon, Mrs Alice
Hall, Patrick (Bedford)	Mallaber, Judy
Hamilton, David (Midlothian)	Marsden, Gordon (Blackpool S)
Hamilton, Fabian (Leeds NE)	Marshall, David (Shettleston)
Hanson, David	Marshall, Jim (Leicester S)
Harris, Tom (Glasgow Cathcart)	Marshall-Andrews, Robert
Havard, Dai	Martlew, Eric
Henderson, Doug (Newcastle N)	Meacher, Rt Hon Michael
Henderson, Ivan (Harwich)	Michael, Rt Hon Alun
Hendrick, Mark	Milburn, Rt Hon Alan
Hepburn, Stephen	Miliband, David
Heppell, John	Miller, Andrew
Hesford, Stephen	Mitchell, Austin (Gt Grimsby)
Heyes, David	Moffatt, Laura
Hill, Keith	Mole, Chris
Hinchliffe, David	Moonie, Dr Lewis
Hoey, Kate	Moran, Margaret
Hoon, Rt Hon Geoffrey	Morley, Elliot
Hope, Phil	Morris, Rt Hon Estelle
Hopkins, Kelvin	Mudie, George
Howarth, Rt Hon Alan (Newport E)	Mullin, Chris
Howarth, George (Knowsley N)	Munn, Ms Meg
Howells, Dr Kim	Murphy, Denis (Wansbeck)
Hoyle, Lindsay	Murphy, Jim (Eastwood)
Hughes, Kevin (Doncaster N)	Murphy, Rt Hon Paul (Torfaen)
Hutton, Rt Hon John	Naysmith, Dr Doug

O'Brien, Bill (Normanton)	Southworth, Helen
O'Hara, Edward	Spellar, Rt Hon John
Olner, Bill	Squire, Rachel
Organ, Diana	Starkey, Dr Phyllis
Osborne, Sandra (Ayr)	Stewart, Ian (Eccles)
Owen, Albert	Stinchcombe, Paul
Pearson, Ian	Stoate, Dr Howard
Picking, Anne	Stringer, Graham
Pickthall, Colin	Stuart, Ms Gisela
Pike, Peter	Tami, Mark
Pollard, Kerry	Taylor, Rt Hon Ann (Dewsbury)
Pond, Chris	Taylor, David (NW Leics)
Pope, Greg	Thomas, Gareth (Clwyd W)
Prentice, Ms Bridget (Lewisham E)	Thomas, Gareth R (Harrow W)
Prentice, Gordon (Pendle)	Timms, Stephen
Prescott, Rt Hon John	Tipping, Paddy
Primarolo, Dawn	Todd, Mark
Prosser, Gwyn	Touhig, Don
Quin, Rt Hon Joyce	Truswell, Paul
Rapson, Syd	Turner, Dennis (Wolverh'ton SE)
Raynsford, Rt Hon Nick	Turner, Neil (Wigan)
Reed, Andy (Loughborough)	Twigg, Stephen (Enfield)
Reid, Rt Hon Dr John (Hamilton N)	Tynan, Bill
Robertson, John	Vis, Dr Rudi
(Glasgow Anniesland)	Ward, Ms Claire
Roche, Mrs Barbara	Wareing, Robert N
Rooney, Terry	Watson, Tom
Ross, Ernie	Watts, David
Roy, Frank	White, Brian
Ruane, Chris	Whitehead, Dr Alan
Ruddock, Joan	Wicks, Malcolm
Russell, Ms Christine (Chester)	Williams, Mrs Betty (Conwy)
Sarwar, Mohammad	Winnick, David
Savidge, Malcolm	Winterton, Ms Rosie (Doncaster C)
Sawford, Phil	Woodward, Shaun
Sedgemore, Brian	Woolas, Phil
Shaw, Jonathan	Worthington, Tony
Sheerman, Barry	Wray, James
Short, Rt Hon Clare	Wright, Anthony D (Gt Yarmouth)
Simpson, Alan (Nottingham S)	Wright, David (Telford)
Skinner, Dennis	Wright, Tony (Cannock)
Smith, Rt Hon Chris (Islington S)	Wyatt, Derek
Smith, Geraldine (Morecambe)
Smith, Jacqui (Redditch)	Tellers for the Ayes
Smith, Llew (Blaenau Gwent)	Angela Smith and Dan Norris.
Soley, Clive
NOES
Allan, Richard	Hancock, Mike
Barrett, John	Harris, Dr Evan (Oxford W)
Beggs, Roy	Heath, David
Breed, Colin	Hermon, Lady
Burnett, John	Holmes, Paul
Burstow, Paul	Hughes, Simon (Southwark N)
Calton, Mrs Patsy	Keetch, Paul
Carmichael, Alistair	Lamb, Norman
Cotter, Brian	Laws, David
Davey, Edward (Kingston)	Moore, Michael
Doughty, Sue	Pugh, Dr John
Foster, Don (Bath)	Reid, Alan (Argyll & Bute)
George, Andrew (St Ives)	Robinson, Mrs Iris (Strangford)
Gidley, Sandra	Robinson, Peter (Belfast E)
Green, Matthew (Ludlow)	Russell, Bob (Colchester)

Sanders, Adrian	Webb, Steve
Shepherd, Richard	Williams, Roger (Brecon)
Stunell, Andrew	Younger-Ross, Richard
Taylor, Dr Richard (Wyre F)
Taylor, Sir Teddy	Tellers for the Noes:
Thurso, John	Mr. A. J. Beith and Mrs. Annette L. Brooke.
Tonge, Dr Jenny

Question accordingly agreed to

Resolved,

That the Local Government Finance Report (England) 2002–03 (HC 545), which was laid before this House on 28th January, be approved.