HC Deb 23 January 2002 vol 378 cc307-14WH 1.30 pm
Mr. Andrew Rosindell (Romford)

Thank you, Mr. Deputy Speaker, for calling me to speak today.

I bring this subject before hon. Members because there is a great injustice at the end of the east London corridor. Havering, the London borough in which my constituency is located, is given a raw funding deal year upon year by central Government. The coming year is no exception. Havering has consistently attracted one of the lowest levels of standard spending assessment funding, and consequently of grant per head of population, in London. That has led to massive underfunding, leaving my constituents and those of my hon. Friend the Member for Upminster (Angela Watkinson) and the hon. Member for Hornchurch (John Cryer), who is not present, feeling badly let down and disadvantaged compared with their neighbours in other outer-London boroughs.

That simply cannot go on. The people of Romford and Havering deserve to be treated the same as people in every other outer-London borough. There is no excuse for their care homes, libraries, schools, parks and leisure services being so badly underfunded. We must remember that that underfunding results only from arbitrary calculations based on what bureaucrats think the borough is like, which often relates to 10-year-old census information and bears no relation to the true situation.

To demonstrate those points, I should like to consider a few examples of how the continued underfunding has had such a detrimental effect on council services and infrastructure. In the past five years, spending on libraries has been 28 per cent. less than the outer-London average, peaking at 32 per cent. in the financial year 1996–97 and slowly falling to a low of 22 per cent. for the year 1999–2000. It is now creeping back up, and the figure last year was 23 per cent. Equally, spending on highways maintenance has averaged 17 per cent. less than the outer-London average over the past three years.

I could go on, but I think that those two examples demonstrate very clearly that lower central Government funding means that Havering is unable to deliver the same service levels as comparable boroughs, which leaves the council in a difficult position: it either has to allow spending to drop even further or to tax more. So, what did the Labour council opt to do? It decided on the high-tax option, forcing local people to pay a higher proportion of the cost of local services, yet we are now told that there are also to be cuts in services.

For Havering, it is a lose-lose situation. Indeed, because of those forced increases, council tax in Havering is now the third highest in London, and a 22 per cent. increase is in the pipeline for the coming year. I shall call that difference the Havering tax, as it is levied on Havering people only because their borough is not given a fair allocation of resources from central Government. Perhaps the Minister will tell us what criteria he uses to decide the grant for Havering, which seems so utterly unfair to my constituents and the people of my borough.

I do not blame all the increases on the lack of SSA funding. A proportion of the increases stems from the waste and inefficiency of the past 12 years, during which time the Labour party has dominated our town hall in Havering. Equally, there is little doubt that if Government funding had been fairer in all those years—and, indeed, during the years of Conservative government—the tax increases would not have been so rapid.

That is not where the story ends. Not only do my constituents have to pay significantly more council tax, but the budgeted net expenditure per head still manages to be the eighth lowest in London. Indeed, Havering's budget is £12 million more than the standard spending assessment for this year, but the spending level per head of population remains low, at 27 per cent. less than the average in neighbouring authorities. So, people in Havering are awarded less per head by central Government than people in comparable boroughs. They pay more council tax than their neighbours to compensate and yet the remaining shortfall is such that spending remains very poor.

This year's SSA has brought some small and welcome changes, but it does not even begin to remedy the situation. Even though the abolition of the council tax benefit limitation scheme will save Havering taxpayers £925,000 and revision of the formula for area cost adjustment will save the council £1.4 million, Havering's SSA per head of population is still 12 per cent. less than the average for outer London and 19 per cent. less than that in our neighbouring authorities of Barking and Dagenham, Newham and Redbridge. Worse still, our total external support for 2002–03 is a massive 38 per cent. less than that of our neighbours.

Furthermore, the new settlement has done nothing to relieve the pressure on, for example, Havering's social services budget, which has a projected overspend of £1.5 million. That reflects the increasing number of children who need looking after and, therefore, the need to increase staffing levels. Indeed, the joint review of Havering social services that was conducted last year reported to the council with an action plan that required immediate funding of £950 million. I urge the Minister to do all that he can to ensure that Havering has enough funds for this most urgent of needs.

To make matters worse, my constituents feel equally aggrieved about the fact that Havering has to pay its share to the Greater London Authority and other centralised services, but takes so little back in return. Perhaps the Minister can tell us how Havering has benefited from the creation of the Greater London Authority, bearing in mind the amount that we have to pay towards its costs. Hornchurch has lost a fire engine and a police station has been closed in Collier row in my constituency.

If that is not enough, let us consider the example of the London borough grant scheme. Havering pays roughly £1 million a year into the scheme, but receives only approximately £50,000 back in local grants. The truth is that people in Havering are subsidising the rest of London. That has gone on for years and is unacceptable to me, to my hon. Friend the Member for Upminster and to everyone in my borough. We want serious and urgent action to be taken to put matters right.

What can be done? The local government finance review provides the ideal opportunity for the Government to put right the funding inequality that has disadvantaged Havering for so long. The most striking method of redressing the imbalance is changing the way in which the allocation is calculated.

The main problem is that the current calculation is based on indicators and arbitrary factors. It would be better and fairer to base it solely on population, as some calculations that the London borough of Havering has made demonstrate. From the 2001–02 SSA, the average spend per head for Havering was £855, compared with £1,161 for the neighbouring borough of Barking and Dagenham, £1,472 for Newham, and £1,027 for Redbridge. That clearly shows the appalling extent to which the people of Havering are unfairly treated.

If Havering had received the same grant per head, based on our population, as the other-London boroughs, it would have meant an extra £39.813 million, based on the Redbridge grant; £70.757 million based on Barking and Dagenham's grant; and a stunning £139.578 million based on Newham's figure. Those figures are not insignificant. They would have gone a long way towards keeping open the care homes in Romford that have had to close. They would mean that Romford town could again have a swimming pool and leisure centre, which the council closed. They would also allow the run-down parks to be returned to their former safe and pleasant state.

I look to the Minister for some assurances. Will he ensure that any review of the formula tackles the needs of the London borough of Havering? Will he personally ensure that the years of underfunding in Havering, under Labour and Conservative Governments, are redressed? Will he also examine the case for population-based funding? Lastly, will he guarantee that Havering will never be the underdog of London again?

Mr. Deputy Speaker (Mr. Nicholas Winterton)

The hon. Member for Upminster (Angela Watkinson) has sought my permission and that of the hon. Member for Romford (Mr. Rosindell) and of the Minister to participate in the debate. I am happy to call her.

1.42 pm
Angela Watkinson (Upminster)

I congratulate my hon. Friend and neighbour the Member for Romford (Mr. Rosindell) on securing the debate, which gives us the opportunity to highlight the specific financial difficulties that the London borough of Havering experiences. Local residents are alarmed that, after an increase in council tax last year of 12.5 per cent., they now face another rise of up to 23 per cent., which is what the council would have to charge if it set a budget at current approvals plus inflation. It is going through the budget-setting procedure and considering a package of cuts to try to mitigate the increase.

The formula under which the SSA is currently calculated serves Havering badly. Unemployment and benefit take-up are low in Upminster, and we have few houses in multiple occupation. Such factors do not serve Havering well. I was under the impression that green belt affected the local government settlement. Havering council believes that too, because it has said so in a succession of local meetings. I was surprised to be told by the Minister in answer to a written question Under the current formula the amount of green belt has no direct effect on the level of grant an authority receives through the Local Government Finance Settlement."—[Official Report, 22 January 2002; Vol. 378, c. 714W.] I should appreciate some clarification of that in the Minister's closing remarks.

The council has expressed its disappointment that there is no safety valve in the interim before the review of the formula in 2003. It stated: We would like to see the rate of Council Tax increase over a number of years as one of the criteria for eligibility of Safety Valve Grant. Havering's cumulative percentage increase in Council Tax has been 34 per cent. higher than the outer London average, despite an extensive savings programme and the use of reserves … Poverty and deprivation are the prime cost drivers for need to spend on additional educational needs. I have a specific anxiety about special educational needs. Havering is well served by three special needs schools. Until last September, there was a special needs nursery unit at Mead primary school in Harold Hill. Since September, no children have been referred to the unit, despite the great need throughout the borough. I am gravely worried about its future.

The council also stated: Consideration should be given to splitting the Environmental, Protective and Cultural Services block so that those services, which are driven by activity rather than deprivation, such as refuse collection, waste disposal, and Concessionary Fares, are fully reflected in the formula, thereby ensuring a fairer distribution of resources. As my hon. Friend has pointed out, Havering fares badly when compared with neighbouring boroughs. I shall not repeat the statistics and services that my hon. Friend detailed, but I want to concentrate on education. Last week, I met a group of primary school heads in Upminster. The education budget is already running at £1.4 million below SSA, and they are worried that a further cut of £1.4 million is proposed. That means that the education budget will run at £2.8 million below SSA.

The education budget constitutes the lion's share of any council's expenditure. The lion's share of any school's expenditure is its staffing budget. The teachers whom I met told me that they are worried about losing non-teaching assistants and about the maintenance of their buildings. Given the Government's total inclusion policy whereby children with special needs are placed in mainstream schools, the need for non-teaching assistants is acute. Schools need more of them, not fewer.

Another problem is the army of carers for elderly people which the council will have to find in the wake of its phased closure of elderly persons' homes. That is another budgetary device. There is a serious delayed discharge problem in the local hospitals. Some elderly patients who are no longer clinically ill need to be discharged but are too frail to return to their homes. The absence of care beds in the public and private sector means that elderly people must be cared for in their homes, which will require a large increase in the number of carers. Havering has the lowest number of carers per head of population in London.

In a debate on the local government White Paper on 11 December 2001, I asked: What assistance can the Secretary of State offer … local authorities such as the London borough of Havering, which receive a perversely low settlement under the current system? What help can he offer the council tax payers who suffered the third highest increase in the country last year—12.5 per cent.—and who face a possible increase this year of more than 20 per cent.? The reply was surprising. The Secretary of State said: As for Havering, on any judgment the settlement announced last week is obviously generous. The local council in Havering will have to explain why it is even considering a council tax increase at the suggested level. Given the funding that is being made available and, indeed, the additional funds that may be made available as a result of the abolition of the council tax benefit subsidy limitation scheme—which will benefit a number of local councils—the council needs to consider the level of council tax increase that it should be setting. There is no good reason for that proposed increase, as we have made clear."—[Official Report, 11 December 2001; Vol. 376, c. 725–6.] I would be grateful for an explanation of the difference of opinion between the local council and the Government.

1.49 pm
The Parliamentary Under-Secretary of State for Transport, Local Government and the Regions (Dr. Alan Whitehead)

I congratulate the hon. Member for Romford (Mr. Rosindell) on securing this Adjournment debate, which gives us an opportunity to debate the local government finance settlement for 2002–03. I hope that he will understand that I have a limited amount of time in which to deal with the points that he has raised today, but I shall attempt to address them in the time available.

The hon. Member for Upminster (Angela Watkinson) mentioned, in reading out an answer that she had received from my right hon. Friend the Secretary of State for Transport, Local Government and the Regions, that the overall settlement this year is another good one for local authorities. It demonstrates our commitment to investing in Modern local government, and we want all councils to have the funds to improve their services while keeping to reasonable tax increases. We shall certainly work closely with local government as we consider the spending plans for 2003–04 onwards in the context of the spending review.

The debate could be conducted in terms of overall settlements, and of what the Government want to happen in local government. The hon. Gentleman asked me for a number of specific assurances about Havering, which would detach Havering from the rest of the country, in terms of a fairer and more transparent settlement for local government as a whole.

Mr. Rosindell

I was suggesting that the grant be calculated per head of population. Surely that would be consistent across the country, so how would it detach Havering from the rest of Britain?

Dr. Whitehead

I had intended to cover that point in a moment. I would caution the hon. Gentleman to beware of his wishes, because they might come true. If the formula of a simple settlement on a head of population basis were to be implemented, it would immediately strip away all the considerations that go into the SSA, which attempt to adjust the system according to a series of indicators over and above the population figure per local authority. Those considerations are currently used to adjust the amount of money that a local authority receives in grants, and affects the relation of that to its SSA.

The notion of the standard spending assessment—which was introduced by the Conservative Government at the end of the 1980s—was ferociously to equalise out the theory of what would come to local authorities in the form of grants for the provision of a standard basket of services, based on the collection of a large number of indicators for the SSA arrangement.

The hon. Gentleman is suggesting that all that should be removed, and that we should introduce a grant system calculated per head of population. If we were to do that—presumably across the whole country—he might find that Havering would lose out substantially. The formula would be adjusted nationally to take account of the shire counties and various other areas that do not have many indicators positively in their favour in terms of additional needs over and above head of population. Such areas would, therefore, get a substantially greater proportion of the overall cake in the settlement. Consequently, Havering—which has some positive indicators, but not as many as some other local authorities—could lose a substantial amount of money in that general redistribution. The hon. Gentleman would probably be rather upset about that, so I would caution him against going down that route for a local government settlement.

Mr. Rosindell

Perhaps we could see the figures.

Dr. Whitehead

It is not possible to provide exact figures; if we did, we would have to recast the entire country according to the hon. Gentleman's nostrums for the future of standard spending assessment, involving per capita distribution. Discussions that will be held over the coming year on what is a fair, just and transparent settlement will have to take account of a series of factors. If he could see the overall effect that a per head of population outcome would have nationally, I suspect that it would not be one that he would want.

The hon. Member for Upminster suggested, when referring to those formula inputs, that the existence of green belt in a borough made a difference. I can only re-emphasise what I said in my letter to her, which is that that is not a consideration when we calculate a local authority's overall SSA. There are a number of other factors, however, and the hon. Gentleman asked which ones were taken into account in Havering.

Havering does receive a lower grant increase than the London average of 1.2 per cent., because it has a steady population. It has a decrease in pupils aged five to 10 greater than the London average of 0.1 per cent. I am not saying that the settlement for Havering, or for a number of other local authorities, is absolutely perfect. I am suggesting that, as a result of a number of indicators, SSAs come out in particular ways.

The SSA system tends to have several other long-term outcomes. First, it institutionalises the effects of certain local authorities having had low budgets in the early 1990s when the SSA system was introduced. That tends to roll over as the system runs forward. Secondly, if the population of an authority stays static or decreases, it tends to cause problems for its funding because the money either does not come in or is taken away by the SSA system at a speed with which the authority may not be able to cope. For example, if there is one fewer child in a classroom—a decrease in pupils results in a decrease in grant—it is not easy to reduce the number of teachers by one twenty-ninth at the same time. Those problems are built into the SSA system.

I can confirm that the Government have announced their intention to pursue a root-and-branch review of the way in which the SSA system works, in order to introduce a new system of calculation of grants for local authorities based on a simplified, more transparent system. The new system will take into account to a greater extent an assessment of need, accurately based on what a local authority is doing. That system would come in for the next financial year.

The hon. Gentleman has already made a specific proposal, but if he or his local authority have any thoughts on aspects of the scheme, their views would be very welcome. This review is being conducted to ensure that the future system distributes the available money on a fairer, more transparent and more equitable basis. I would, however, caution hon. Members that, under such schemes, there will always be winners and losers.

One of the problems that has come my way is that a different form of SSA calculation—not related to the philosophy of how the SSA originally came about— could well be appropriate for the future, but many hon. Members have particular views about how an extension of the SSA system, or a tweaking of the indicators, might solve the problem of a local authority. I suggest that we need a system for local government that is robust, that has the confidence of local government in terms of how it works and its transparency, and that produces a just and equitable distribution of the available money. The Government are committed to doing that over the next year.

I can assure the hon. Members for Romford and for Upminster that I will take into consideration the points that they have raised about the way in which the SSA system works, and about the particular pressures on social services budgets. It is recognised nationally that such pressures exist, particularly in relation to the importation into those budgets of very large packages that might result from a court order. That can distort a social services budget when a local authority is working within a fixed budget.

The Government believe that there is a good settlement overall for 2002–03, but there will be winners and losers. The consultation period on the settlement has now passed, but I can assure the hon. Gentleman that what has been submitted in writing will be carefully considered when the final settlement is announced. Indeed, Havering submitted a substantial document, "Justice for Havering", a while ago. The hon. Gentleman's remarks today have also been very valuable.

It being Two o'clock, the motion for the Adjournment of the sitting lapsed, without Question put.