HC Deb 14 November 2002 vol 394 cc252-60

Motion made, and Question proposed, That this House do now adjourn—[Joan Ryan.]

7.1 pm

Judy Mallaber (Amber Valley)

I thank the Speaker for granting me this debate on local government funding in Derbyshire. I was greatly concerned to have missed being called in a previous debate on the funding review, especially as so many representations have been made to me by my constituents. I am pleased that other Members representing Derbyshire constituencies are in the Chamber, as they, too, may want briefly to contribute to the debate. I shall reiterate some of the points made by hon. Members in the previous debate, but I want to raise some issues relevant to Derbyshire that were not considered on that occasion. I shall begin with highways. That issue was only touched on in the previous debate and I did not raise it in my written submission to the review. I am concerned that Ministers are coming under great pressure not to change the current formula. We want to support the proposed new formula on highways.

The Under-Secretary, my hon. Friend the Member for Shipley (Mr. Leslie), may not be aware that the Woodhead pass on the Sheffield to Manchester road has already been closed this year due to snow. He may not know that Derbyshire county cricket club was the only one to have a first-class cricket match cancelled because of snow in June. We are very well aware of the problems caused by snow, but the new formula should none the less use temperatures rather than lying snow as a measure. They are more relevant when determining whether pre-gritting is needed.

Derbyshire grits about 52 per cent. of the total highway network—even more than the Audit Commission recommends—but that is essential for road safety. An icy or frosty road can be more dangerous than one where there is melting snow. Winter gritting takes place between 60 and 70 times a year in Derbyshire, but there is snow on only 20 of those occasions. Furthermore, when snow readings are taken, urban areas sometimes benefit due to the fact that snow has fallen in high regions elsewhere.

The proposed new highways formula also removes the threshold whereby Derbyshire gets no extra cash for traffic flows. Such money is mostly awarded to urban areas. A certain volume of traffic, such as heavy lorries, causes the same damage even if it flows during a longer period, so there should be some recognition of that, rather than an artificial cut-off point.

If Ministers do not agree to changes in the formula, Derbyshire will suffer twice. The main, and very busy, road through the county, the A6, and other roads have been de-trunked and the special grant of £12,000 per kilometre that we currently receive would be reduced to £5,000 per kilometre in the standard spending assessment. That would result in a loss of £1 million for the carriageway for which the county council has recently become responsible. We were told that the grant would continue for longer, but it will now be absorbed into the SSA after only nine months. We have not objected to that because the new standard spending assessment formula is more rational, but it will be a double whammy. We will be very upset if not only do we not get the new rational formula, but we also lose out on what we might otherwise have expected to get because we have taken over responsibility for the de-trunked roads.

On education, I will reiterate some of the arguments made in the previous debate, but also ask Ministers to consider a proposal that I made in my submission to the review, which seems not to have been considered. I have replied to 300 letters from constituents asking for the review to put right the unfairness in the present system, which has discriminated against Derbyshire children for many years. They support the arguments put by the worst funded education authorities for a proper basic level of funding per pupil. They are not arguing against extra help for those areas with great deprivation, but they cannot understand why children in more affluent areas, such as Hertfordshire, get more—£300 more per secondary pupil and £250 more for primary pupils. They do not understand why there is a home counties subsidy.

The sense of grievance undermines positive feelings about the additional resources that have come into education under Labour, which have been of huge benefit to our schools. If the problem is not recognised, it will undermine the good that has been done as a result of that extra spending. It needs to be recognised in some way that the current disparity in funding is not based on real educational and social needs, otherwise there will be huge disillusion.

I appreciate the difficulties for Ministers in trying to deal with that problem, as they face pressures from all sides, but surely there is only one principle, which is the one put forward by our education chair in Derbyshire—that similar schools with similar characteristics in different authorities anywhere in the country should get similar resources and be able to employ a similar number of teachers and support workers and have similar information and communication technology equipment and so forth. That is the basic principle. It might mean different amounts of cash going into different schools, but there would be parity between schools with similar characteristics.

How does that principle work for one of my head teachers, who moved from a southern county to Derbyshire? He moved to a similar sized school, but one that takes pupils from far greater areas of deprivation and has more statemented pupils. He had £300,000 less in his budget, which is equivalent to about 18 to 20 teachers on top of the present 73, than he would have had according to the formula in the county from which he came. That head teacher has emphasised to me his appreciation of the help afforded by the extra money that has come from the Labour Government. The school now has technology status. Frankly, he went for that because he could not afford to buy computers for the school. He appreciates that, but feels aggrieved—as do many of his pupils. The head of the neighbouring primary school told me that the Ofsted inspector frankly refused to believe him when he described the level of funding it received.

I want the Minister to respond to three points on education funding. Like hon. Members who represent other authorities, I want higher basic funding per pupil and I support the option that includes working families tax credit as one of the indices of deprivation, which should also apply to the social services formula. That system would better reflect poverty in rural areas, where unemployment figures may not be as high as in inner city areas, but pay levels are very low.

On the first day of the debate on the review, a major clothing company announced the closure of two more factories in my constituency and the neighbouring Erewash constituency. A huge number of jobs have gone in the east midlands in that sector. My neighbour, my hon. Friend the Member for North-East Derbyshire (Mr. Barnes), lost 700 jobs at Biwaters in Clay Cross, but our local jobcentres tell us that those job losses have not been reflected in the recorded unemployment levels. Many of those involved must have disappeared from the register and may well have gone into much worse paid jobs elsewhere. Any change that would better reflect deprivation would give a truer reflection of local circumstances and needs.

Will the Minister consider a proposal that I put forward in my submission? In the previous debate, I was able to intervene to make the proposal, but I am afraid that I was rather unclear and he thought that I was talking about floors and ceilings as with the damping mechanism. I was proposing that there should be a mechanism to level up education authorities in the lowest quartile of SSA for the proposed new education spending blocks. I gave examples that included the education 2 proposal, and did not help authorities just because they got the area cost adjustment. The mechanism would level up the lowest funded education authorities.

We have a real problem locally. Every teacher and parent in Derbyshire seems to know about the gap between our area and others. Levelling up would be an easily demonstrable method of proving to those parents and teachers that we care and that we understand about the poor levels of funding. I ask the Minister for his response to that proposal.

We have been asked whether it matters that the funding of authorities such as Derbyshire is so much lower than elsewhere. We keep our education and social services spending above standard spending assessments to compensate at the expense of other services. The Government know that teachers are concerned about work loads. Our teacher contact ratios are substantially higher than nationally, a majority of heads in small schools teach more than half the week, all non-essential support services—curriculum development support, teachers' centres, community support and a range of other services—have been lost over the past 10 years and nearly half our key stage 2 pupils are in classes of 31-plus.

I visited an infant school in a severely deprived part of my constituency—a good school with beacon status. The head told me that when she meets heads elsewhere, she is amazed that they have the resources to allow non-contact time for infant and primary teachers. She told me of cuts in a major literacy project and how such shortages are limiting her school from making yet more progress. I ask the Minister to respond on the specific proposals that I have made, some of which were put forward by other hon. Members in the debate. The other specific proposal is about levelling up.

My next point, about the area cost adjustment, was well aired in the debate, so I will not go into it at length. However, at Prime Minister's Question Time on the day before the debate, the Prime Minister reaffirmed the Government's commitment to help coalfield areas and talked about the resources that were going to help those communities to raise their aspirations. However, the consultation document does nothing seriously to reform the area cost adjustment, which makes coalfield areas such as Derbyshire subsidise the home counties solely because they are wealthier and, moreover, adds to the inflationary spiral in the south-east. They do not have higher costs that justify the huge subsidy. The ACA has gone up from 1.8 per cent. to 4 per cent. of costs. They sometimes have to pay higher retention payments for staff and put them higher up the scale, but not at a rate that justifies this ever increasing proportion going to the area cost adjustment. Surely joined-up government should not allow coalfield areas to be given money with one ministerial hand only to have it snatched away with the other.

Mr. Mark Todd (South Derbyshire)

I have been following my hon. Friend's argument on the ACA—an arid area of what is already a dry topic. As I remarked in the last debate, of the options that are available on the area cost adjustment, following the existing NHS formula for allocating assumptions on increased costs is surely the best. It is a tried and tested formula, established in the largest employer in Europe, and should surely be commended in local government.

Judy Mallaber

I thank my hon. Friend, who is more on top of these arid arguments about the ACA than I am. I commend his suggestion to the Minister, who I am sure will respond favourably.

Perhaps the Minister could also respond to the suggestion, made partly in jest and partly seriously, that if some wealthier counties with higher salaries are so worried about losing out, we could add a couple of higher council tax bands, expand their tax base and use that as part of the review of local government. That might be one element to throw into the equation when considering the finance review.

I plead with the Minister not to choose options that build on past spending patterns and unfairness, as is the case with some of the proposals on police, fire and resource equalisation. On the police, for example, all the options are bad for Derbyshire. One would enable us not to use past establishment figures. Derbyshire county council did very badly historically related to the establishment figures. There is great advantage in phasing it out. Surely there is no justification for basing new options on past spending patterns which were unfair. That relates to other areas as well, of course.

Mr. Harry Barnes (North-East Derbyshire)

Is my hon. Friend aware that there is a particular problem in the proposed formulae for shire counties in general, and that almost 90 per cent. of them in all the categories provided lose out? I know that the size of the cake is growing, but the proportion that is going to shire counties is shrinking if we follow this particular formula. Derbyshire has serious problems. In this area it requires about a 5 per cent. increase in the next settlement in order to stand still in its expenditure.

Judy Mallaber

I thank my hon. Friend for his helpful comment. We have serious problems in this area and I hope that, within the difficulties that we have with all the formulae and current budget settlements, we do not exacerbate that but improve it, by at least not basing the new formula on past establishment figures.

Mr. Todd

My hon. Friend touched on the issue of resource equalisation—perhaps an even more arid area in this dry topic. May I draw her attention to the fact that what appears to be the thrust of this is to establish a set of formulae to establish need, but then to say that we will throw that away and track back to previous spending patterns which may well have been justified by the authorities in question and their electorates, but should not be the basis for the allocation of Government resources?

Judy Mallaber

I agree, and I am grateful that my hon. Friend is so assiduous and understands all the complex arguments in all these issues.

Finally, on social services, I have no particular arguments on the options, other than to reiterate the argument for using working families tax credit within the deprivation index. Obviously, that is relevant to social services too. Overall there is an inadequacy in the global amount of social service funding, which requires Derbyshire to spend substantially above standard spending assessment in order to meet the basic needs of our residents in the county.

Those are the main points. All of us could go on endlessly, but I should leave sufficient time for the Minister to reply to those points.

7.17 pm
The Parliamentary Under-Secretary of State, Office of the Deputy Prime Minister (Mr. Christopher Leslie)

I congratulate my hon. Friend the Member for Amber Valley (Judy Mallaber) on securing the debate. There is a lot of competition for time to debate local government finance, believe it or not, and the measure of support from hon. Members representing that county is evident today. My hon. Friend has covered a remarkable number of points in her speech and I shall try to address as many of them as possible.

My hon. Friend is particularly concerned about funding for schools, and has registered her support for the proposal put forward by the F40 group. I am aware of the strength of feeling about this issue in the F40 group and in Derbyshire, following recent meetings with representatives. I know that my hon. Friend the Minister for School Standards has also been discussing with the F40 group delegation how the current funding review might impact on their authorities. I understand that there has been a constructive exchange of views.

It might be helpful if first I provide some background to our plans to introduce the new funding system. Hon. Members will know the range of general issues and difficulties that we face, and I do not intend to spend time repeating the general points made elsewhere. There was widespread agreement that the formulae for distributing grant needed to be overhauled. We have been working hard to devise a new system that will deliver our aims of a fairer, more transparent system for the distribution of the local grant. It is important to emphasise now one significant change from the old principles of the standard spending assessment, whose

original idea was to deliver a standard level of service for a standard level of council tax. That approach has not worked. We are all clear that such an approach is fundamentally incompatible with our objective of giving greater freedom and discretion to local authorities. Rather than pretending that we can say how much councils should spend, under the new framework we are focusing on how we divide up grant—real money—between authorities.

Unsurprisingly, we have received many representations from local authorities about how they wish to receive grant. The formula review is about the distribution of a pot of money between authorities. As my hon. Friend the Member for North-East Derbyshire (Mr. Barnes) noted, everyone argues for a bigger slice of the cake. We cannot give all authorities a greater share, but I can reassure the House that the system will consider the relative needs of different authorities and determine grant on that basis.

My hon. Friend the Member for Amber Valley mentioned highways, and the formula issues that affect local government spend in that area. The Government have looked carefully at the current highway maintenance formula throughout the review, and we share concerns that the indicators do not seem appropriate for assessing the cost of road maintenance. That is why we propose that the new formula should consist of a basic amount per kilometre of road, with top-ups for traffic flow, winter maintenance costs and pay costs. We are considering all the responses that we have received, including concerns about special grant for de-trunking, and so forth. We will make our decisions known when the final results are available.

With regard to the options for the education formula, it is worth reiterating that considerable increases in funding for education are coming through, thanks to the spending review, over the next three years. In addition, hon. Members will know that the Government have given clear commitments that no authority's schools will lose out in real terms.

For the education formula itself, we want a fair clear system that is justified by the educational needs of children, and based on more up-to-date evidence of cost and need. Any formula will need to have an element for deprivation, and enhancements for areas where schools need to pay more to recruit and retain staff.

Under the current system, the main reason why authorities in London and the south-east receive a higher level of funding than other authorities such as Derbyshire is that they receive extra funding through the area cost adjustment to take account of the extra cost of recruiting and retaining staff in the area.

Options set out in the consultation paper are based more on evidence that suggests that authorities with significant deprivation and additional staff costs need to spend significantly more to achieve the same results for their children. I accept that there is scope for judgment about the evidence, but the four options that we have reflect that.

Judy Mallaber

The group of northern counties has produced an analysis that shows that many of the areas that get extra money through ACA are spending the extra money not necessarily on education services but on other services, or to keep council tax levels down. It is not clear that the new formula really measures actual needs, and the resulting disparity in funding is substantial.

Mr. Leslie

Obviously, there are differences of opinion between local authorities on that point. However, I hear what my hon. Friend says. I know that the F40 group, of which Derbyshire is a member, has expressed its dissatisfaction with the four new options set out in the consultation paper. That is why the option 5 proposal has been made, and I have received a great weight of correspondence from F40 authorities in support of that. I can reassure the House that we have considered all those matters carefully, and we will try to take them fully into account when we make the final decision.

I should make it clear that in introducing the new funding system, our aim is to produce the best possible match between the distribution of funds and the differing circumstances and needs of local education authorities. I hear the interesting proposal concerning the lowest funded quartile of education SSAs. Even though the consultation has closed, my hon. Friend the Member for Amber Valley incorporated the proposal in her earlier submission, and we will certainly consider it.

Option 5 suggests that money be taken out of the factor in the formula for deprivation and put into the basic allowance per pupil. That would, of course, have an impact on authorities with high levels of deprivation. In working up a new funding system we need to consider how changes will affect all authorities, not just those in the F40 Group.

My hon. Friend the Member for Amber Valley touched on other issues in relation to authorities with sparse populations. We intend the formula to contain a "sparsity" element to reflect the costs of home-to-school transport. We also hope that transport funding in each LEA will contain an assessment of the impact of sparsity. We estimate that in the new formula, 60 per cent. of the transport element in the LEA block, for example, will be distributed through the sparsity index. That may be to the benefit of Derbyshire.

My hon. Friend the Member for Amber Valley mentioned that the area cost adjustment was a significant issue. My hon. Friend the Member for North-East Derbyshire (Mr. Barnes) urged us to look at ways in which it might be changed. Numerous research projects have been undertaken over the years to find a better solution. We conducted research relatively openly. It is out there for people to see. We have thoroughly reviewed the way in which the area cost adjustment is calculated. Different research proposals were developed and have been widely debated.

There has been much discussion about which data source to use, which type of economic model to use, and where the boundary lines should be drawn. I think that about 21 different options for area cost adjustment have been proposed. There is little agreement between authorities on the merits of the options. While the vast majority of people recognise that pay costs should be recognised within the system, how we do that and what weighting we place on it are obviously matters for the Government.

Judy Mallaber

May I at least tempt my hon. Friend to say that we will not carry on with the ever increasing proportion that is going into the ACA, and at the very least, that the trend will come down rather than continue to go up?

Mr. Leslie

My hon. Friend may tempt me in that regard—but whether she succeeds is another matter, and I am afraid that I cannot give any announcements or decisions on that. We must take these matters in the proper order.

My hon. Friend mentioned that introducing higher council tax bands might be part of a solution for authorities if they wished to expand their tax base. The matter obviously relates to the revaluation of council tax banding and whether it should start in 2005, with bills then issued for the financial year 2007 based on that revaluation. The Government are concerned about the fairness of the tax system, but we are also listening to the views of taxpayers and local government about council tax bands. The matter may well have an impact on finance, but I should mention that dwellings in band H account for less than 1 per cent. of the total number of dwellings in England, so increasing the number of bands above that would not necessarily result in significant increases in the local tax base.

Mr. Barnes

Might not an additional approach be to make the difference between the amounts that people in different bands are expected to pay more progressive? The property value in the top band is eight times that in the bottom band, but the highest resulting payment is only three times what people in the lowest band pay. If the range was greater, more money could be drawn from the top and less from the bottom.

Mr. Leslie

These are interesting debates. They are separate from the formula grant review, I might add, but they are issues of significance and we will come to them when we address the question of revaluation and council tax banding.

I want briefly to touch on some of the overall issues. It would not be right to look at Derbyshire in isolation from the bigger issues of local government funding. This year we have seen an 8.8 per cent. increase in resources for education. Resources for social services have risen by more than 3 per cent. in real terms each year since we took office. This year, expenditure on policing has increased by 6.1 per cent.

There is better to come over the next three years. For social services, there will be an average increase over the next three years of 6 per cent. in real terms. Spending on education will rise by 6 per cent. for the next three years. For policing there will be an extra £1.5 billion, more than in the financial year 2002–03. There will also be more money for the environmental, protective and cultural services area of expenditure.

Derbyshire has also benefited significantly from extra money under this Administration. Whereas it received a 1.8 per cent. increase in the last four years of the previous Administration, under this Government we have typically seen 5.1 per cent. increases. The increase in spending on education in the past five years has been 37 per cent. Whereas in 1997 the capital increase was £4 million, in 2001–02 it was £50 million, this year it was £37 million, and next year it will be £27 million. Significant sums have also been made available to Derbyshire for social services.

Judy Mallaber

Will my hon. Friend give way?

Mr. Leslie

I am afraid that I do not have much time. I want to make a couple more points. We have consulted at length. We have considered all the issues carefully. There is a guarantee that no authority will lose out. We want a transparent system that ensures that authorities get a fair grant. That is the intention and the approach that the Government wish to take.

Question put and agreed to.

Adjourned accordingly at half-past Seven o'clock.