Local Government Finance (Hansard, 16 October 2002)

§ 3. Richard Younger-Ross (Teignbridge)
What progress he is making on the review of grants to local authorities; and if he will make a statement on the methodology he is using. [71951]

§ The Minister for Local Government and the Regions (Mr. Nick Raynsford)
The formal consultation on options for the formula grant distribution system closed on 30 September. We will consider the evidence, the pressures and the points made before we take decisions. Those decisions will be announced in the 2003–04 provisional settlement around the start of December.

§ Richard Younger-Ross
Does the Minister accept—he partially did in the debate that we started yesterday and have still to continue—that the present methodology is extremely complicated? Would it not be better to move from the present grant system to a fair system, abolish the present Tory council tax and have a system based on ability to pay, such as a local income tax?

§ Mr. Raynsford
The hon. Gentleman is confusing two separate elements in the local government finance framework. The Liberal Democrats' local income tax proposals are, as I understand them—they are a confused party with somewhat confused proposals—designed to be an alternative to the council tax. What we are discussing under the formula grant distribution is Government grant and how it is distributed between local authorities. That in no way relates to raising any form of local revenue through local income tax.

§ Judy Mallaber (Amber Valley)
As part of the review, will my right hon. Friend consider how to implement the Government's policy of helping coalfield areas? That policy is directly contradicted by making those areas, such as Derbyshire, subsidise the wealthier, less deprived counties through the area cost adjustment—the home counties subsidy.

§ Mr. Raynsford
Several issues have been raised during the consultation about particular indicators and measures that would be significant to coalfield communities. Some of the issues that we have considered have also related to rural, former coalfield areas with relatively sparse populations that have suffered the consequences of the decline in the traditional industries, so we are looking at the detailed factors in coalfield areas and, indeed, in all areas. I hope that, when we publish our proposals, my hon. Friend will understand that we have been doing our best to replace the unsatisfactory standard spending assessment with a fairer, more transparent and better system.

§ Sir Paul Beresford (Mole Valley)
Does the Minister agree that those local authorities that find that their grant will be supported by the floor next year, but get specific grants for a large proportion of their funding this year, may find his promise that they will be no worse off pretty hollow?

§ Mr. Raynsford
No; the hon. Gentleman is wrong. We have given a clear undertaking that no local authority will suffer a cash loss as a result of the change in 303 formula. [Interruption.] Opposition Members get very excited about this. I have explained time and again—let me do so once more so that they may eventually come to understand—that we will have a floor, which we expect to be substantially higher than the guarantee that I have already offered. Until we have received all the data, including information on up-to-date school populations, it is not possible to come forward with floors because we do not have the information on which to reach a prudent and sensible judgment. While the Conservatives are becoming increasingly irresponsible in financial matters, we believe that we need to be prudent and responsible.

§ Dr. Desmond Turner (Brighton, Kemptown)
I am sure that my right hon. Friend would agree that, in reforming the distribution of Government grant to address what are perceived as injustices, it would be very sad if we were to introduce fresh injustices. I fear that that might happen if sufficient cognisance is not taken of high housing costs, which would greatly affect unitary authorities such as mine that have high social deprivation in association with extremely high housing costs, which create terrible problems.

§ Mr. Raynsford
My hon. Friend makes a valid point in highlighting the particular needs in some areas with very high costs. He will appreciate, however, in the light of the question of my hon. Friend the Member for Amber Valley (Judy Mallaber), that there are concerns about the area cost adjustment in areas of low cost. One of our dilemmas is trying to reconcile the many conflicting claims of different areas, which see the need for changes in the system that will advantage them. Our job is to achieve a balance, reach a judgment and produce a system that is the fairest possible combination of factors, recognising the different pressures facing different areas.

§ Mr. Eric Pickles (Brentwood and Ongar)
Dealing with the specific grant element of the reforms, does the right hon. Gentleman agree with the director of inspection at the Audit Commission, Mr. Paul Kirby? He has said: The idea that you give freedom to the people who are already achieving is quite perverse. The real issues are the councils in the middle and the failing ones which actually just need a lot more freedom. Does he also agree with Mr. Kirby that pinning down councils is causing a problem?
The right hon. Gentleman has been at the Department for many years. When did he realise that the Government's reforms were causing damage to local authorities? When does he expect that local authorities will have the degree of freedom that they had under the last Conservative Government?

§ Mr. Raynsford
The hon. Gentleman should perhaps consider employment in a comedy show, because his last question indicates a remarkable lack of sense of reality. The last Conservative Government were responsible for the greatest act of centralisation of powers, taking powers away from local government, controlling local authority spending, abolishing local authorities and interfering again and again in local democracy. I am 304 delighted that the Conservatives have had a death-bed repentance and that they will follow our Government in giving freedoms and flexibilities to local authorities.
On Mr. Kirby, we not only agree with him—although not on that particular point—but have just employed him in central Government. He will be taking up a new post helping us to improve delivery. On that point, I ask the hon. Gentleman to reflect on whether he really believes that it is perverse to give additional rewards and support to successful authorities to encourage them to do even better. He will be in a minority of one if he believes that.