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§ Richard Younger-Ross (Teignbridge) (LD)It is appropriate to hold this debate on funding for the Devon fire authority today as it is running parallel with the debate in Committee Room 12 on the modernisation of the fire and rescue service.
Devon fire authority is a combined authority made up of three local authorities: the large rural authority of Devon, plus Plymouth and Torbay. Although there is also the urban centre of Exeter, there are only 11 whole-time stations, six of which have retained appliances, 46 retained stations and one volunteer station, at Kingston. That makes a total of 58 stations. The authority employs some 1,444 staff, of which 591 are whole-time firefighters and 728 are retained. That leaves 125 non-uniformed staff. They currently deal with up to 18,338 incidents a year. I shall make particular mention of one of the retained stations, Newton Abbott, which deals with a remarkable 459 incidents every year.
Our argument, put bluntly, has to do with the distribution of grant. Devon receives below the national average; funding at that average would provide an additional £2 million. However, the situation is worse than that, as the Home Office does not take account of the sparsity factor. With the underfunding and the failure to take account of sparsity, Devon is severely disadvantaged compared with other authorities.
I shall deal first with capital funding. The old system had a borrowing limit; the new system will have a prudential code. Under the old system, the allocation of credit approval was about £900,000. A new fire station, such as one in Teignmouth, where the present fire station is falling down, will cost £800,000 alone, but that is a small retained station. Devon also needs to replace other stations—such as that in Exeter, which has whole-time staff—which will cost over £2 million each. The capital allocation tends, therefore, to be rather short; in fact, it is so short that there is no capital funding for vehicles, which have to be funded out of revenue by leasing. I doubt that that is a cost-effective way for any authority to spend its money, but it is the only available option. Devon spends £1.5 million a year on leasing.
From April, the prudential code will remove the limit. That sounds good in theory: authorities will be able to borrow what they like. However, fire authorities must be prudent and justify their borrowing compared with revenue. That might be fine for a small area, but a large retained area with more stations has lower revenue, so capital borrowing involves a larger number of assets but less revenue, disadvantaging large authorities such as Devon. Devon has the same population as, say, Staffordshire, but twice the number of stations and vehicles. However, Devon's funding is approximately the same, because of its similar population. On capital funding, the Met, for example, is assets-based. Why are not other authorities assets-based? Why does Devon's borrowing have to be revenue-based?
The model for the fire cover element does not allow for sparsity. It allows for our having a coast, which is fairly logical. If one has a coastal area, clearly one cannot call in other authorities—they would be all at sea. There is no one to call on in a coastal area, so the provision makes sense. If we have a large rural area, 205WH however, why do we not take account of the fact that other fire stations and other authorities are a long way away? A very small number of people may live in the area. Lovely little villages in the Devon countryside and on Dartmoor are stunning, but they are a long way from the main cities and towns, and maintaining a fire service for such areas obviously costs more.
It is the Government who say what the response times should be. I agree with those response times, and it is entirely right that there should be response times, but if there is a response time for a large rural area, more vehicles and stations are needed and the costs of running and maintaining those are higher than the costs for metropolitan authorities. Other authorities, such as Shropshire, have similar problems.
Another issue that arises from Devon's having a retained fire crew is pay. In the past, a funding differential could be justified and retained fire crews received less funding but, as we have been debating in Committee and as the Minister is right in saying, we are now looking for pay parity. We totally support the idea that retained fire crews should have pay parity. If they are fighting fires side by side with whole-time firemen, they should have the same pay. However, with regard to the introduction of pay parity, the 16 per cent. pay increase that has been agreed nationally translates into a 23 per cent. increase in staffing costs in Devon. Again, no account appears to have been taken of the disproportionate costs of bringing retained fire stations up to the same level of funding. Those costs are not borne out in the grant that is given to Devon.
Devon, as an authority, has two unique features. First, it is a combined authority. There are other combined authorities, but in terms of funding and in relation to most of the country it is unique. This year, combined authorities have to establish reserves. The Minister has accepted in meetings that account must be taken of the need to find those reserves, and I believe that the Office of the Deputy Prime Minister has agreed to an increase in the notional funding level of 3 per cent. as a consequence. The percentage increase in the council tax bill that people receive will appear to be lower. However, the real figure will still be the same. The authority still has to raise the funding.
§ Mr. Adrian Sanders (Torbay) (LD)I am grateful to my hon. Friend for giving way on that point, because I think that this is where the solution lies. It is only because the authority has for the first time become a preceptive authority that reserves need to be established. Therefore, the pressure in the first year to build up those reserves means that there is an added pressure on the precept that it will levy on council tax payers. I do not understand why, if the Government have their own Contingencies Fund and reserve, they cannot act as the final reserve at least for the first year, when the Government want to keep pressure on the council tax down. If the money is drawn on, it can be repaid in future years. If it is not drawn on, that makes no odds to anyone.
§ Richard Younger-RossMy hon. Friend makes an excellent point. I hope that the Minister will respond to it and say why the Government's reserves cannot be 206WH used. Perhaps such use could be scaled down as fire authorities were able to build up their own reserves. However, he has said that there are no figures for the reserve and that fire authorities can keep very low reserves. The trouble for fire authorities is that they are subject to inspection by the Audit Commission, which will almost certainly disagree. Its report will criticise fire authorities if the reserves are not high enough.
Devon has 728 retained fire crew and 46 retained stations. The consequence of the sparsity in Devon is that for every 1,000 head of population its transport costs are £2,662 and its premises costs £944. That makes Devon appear to be a high-spending authority; those are the second highest transportation and premises costs of any fire authority in the country. The only authority that has higher costs is mid and west Wales. That should not be surprising because the geography of that area produces the same problems that we have in Devon.
The Government have partly recognised the consequences of the pay agreement; there is interim funding. However, I fear that they are not taking account of how long it will take to achieve the savings that come from the modernisation process—which Opposition Members also support. Devon has been given £500,000 to assist it, but I was surprised to hear that it has to pay that back. The extra costs to Devon are more than £2 million. I should like the Minister to enlighten us as to why there is that disparity. Why does Devon again appear, to be disadvantaged?
There is a further problem. I mentioned the number of call-outs at New on Abbott because it has the same amount as several whole-time fire stations. In the modernisation process, turnout fees and attendance fees are down but, to compensate, the retainer and the drill night fee are up, as is the hourly rate over the first hour. That is to the advantage of a large number of retained firefighters. However, the income of stations such as Newton Abbott that are reliant on turnout rather than retainer for their income will be down.
Subsequently, Devon has said that it will protect the salaries of firefighters in such stations. That is recommended under the agreement, but the fact that Devon has to do the does not appear to have been taken into account in the funding that is allocated to it. Last year, the authority set a budget of £39 million. It had an agreement with the composite local authorities that if more funding was required it could draw down a supplementary levy and £750,000 was drawn down. This year, the authority has set a budget of £44 million.
Revising the notional figure would add confusion. I want the Minister to tell us which set of figures the authority should use. Is it to base the percentage increase on £39 million? If that is the case, the percentage increase appears to be 12.08 per cent, although if we are allowed to take off the notional 3 per cent. that figure comes down to 8.8 per cent. However, can the authority say that the base figure is £39,750,000 including the supplementary levy, in which case the upper revised level would be 9.9 per cent—but, again, if we can increase the notional level by 3 per cent, that figure comes down to 6.76 per cent?
Given the anger in Devon about the increase in council tax levels, this is not just an arithmetical talking point. It is important that the authority show that it is doing its best to keep figures down—and I would argue that that is also important for the Government. I look forward to the Minister's response to that.
§ The Parliamentary Under-Secret try of State, Office of the Deputy Prime Minister (Phil Hope)I congratulate the hon. Member for Teignbridge (Richard Younger-Ross) on securing the debate—we have both been sitting on the Committee upstairs this morning and are now both debating the question of Devon's funding for the fire and rescue authority. May I also say what a pleasure it is to serve under your chairmanship, Mr. Taylor? This is the first Adjournment debate in which I have been involved that you have chaired.
The fire and rescue service and the Government have made a lot of progress over the past year. We have set in train the most substantial pack age of reform to the fire and rescue service since the second world war. It is a package that will develop a more effective and efficient service, which will save more lives. Professor Sir George Bain's independent review of the fire and rescue service set out the challenge, and the White Paper, "Our Fire and Rescue Service" responded with the Government's vision. A draft national framework will clarify the Government's expectations for the service: what fire and rescue authorities must do and what support Government will provide.
The Fire and Rescue Services Bill, currently in Committee, confirms our commitment to driving through reform and improvement. It is the first substantial piece of legislation on fire services in the past 50 years, and will give statutory effect to the roles that fire and rescue authorities already undertake, for example, in road traffic accidents aid serious floods, and their new responsibilities in responding to terrorist threats. It will also give statutory force to a fire and rescue national framework that will allow the Government to set their strategic direction for the service.
We have also introduced integrated risk management plans, which are about targeting resources at locally identified risks in a cost-effective manner. The hon. Gentleman mentioned the question of response time and standards. It is important to recognise that the new system is based on risk assessment at a local level and how the service should respond to ensure that it saves more lives and prevents more fires. That is the purpose of the IRMPs— the fire and rescue services will formally adopt IRMPs, and they will come into effect on 1 April 2004. Together, we have made real progress but there is clearly much still to do. That applies to the fire and rescue service as a whole, so of course it applies to Devon.
In some respects, although the hon. Gentleman did not mention this, Devon is already ahead of the game, for instance through its partnership with other emergency services. Fifteen Devon fire stations participate in a co-responder scheme with the ambulance service. Under that scheme, Devon fire and rescue service has attended 2,841 incidents since 1997, including 932 last year. That has made a real contribution to reducing deaths in the area from coronary heart disease. Devon has also developed the rapid extraction and co-ordinated treatment— REACT—initiative, which is a common framework with other emergency services for dealing effectively with road traffic accidents. 208WH The fire authorities of Devon and Cornwall have established a joint arson taskforce, which has succeeded in arresting the sharp increase in deliberate fires. Indeed, I was in Devon to meet two of the leading figures in that taskforce and was impressed by both their professionalism and commitment, and the results achieved. The taskforce is staffed by a police officer, a fire officer and a dedicated analyst. It has received 178,000 from the Government-led arson control forum since 2002, and will receive a further £106,000 in 2004–05 and £112,000 in 2005–06. I know, because I met them, that those officers and brigades are happy with that extra funding.
Devon is to be congratulated on that good work hut, as its draft IRMP makes clear, there is much more to be reviewed over the coming months. I look forward to seeing how Devon, and the whole service, picks up the pace of progress to provide a more efficient and effective service that saves more lives, which we are all aiming for.
The importance of efficiency is reinforced by increasing public concern about large council tax increases, as the hon. Gentleman said in his conclusion. It is right that local authorities, not central Government, should take decisions and determine their budgets. However, it would be irresponsible of central Government to stand back and allow excessive increases, and it is right that we act in such circumstances.
I must tell the hon. Gentleman that the Government have delivered another good settlement for fire authorities. They have ensured that all authorities receive above-inflation increases, with fire authorities receiving grant increases of between 3.5 and 5 per cent. Since taking office this Government have increased local authority funding by 30 per cent. in real terms. Given above-inflation settlements in the last two years, the Government have now made it clear that they expect council tax increases to be in low single figures. They will, if necessary, use their capping powers to deal with unacceptable increases. To that extent we possibly share a concern about council tax increases.
The Government are not prejudging who would be capped, or what our capping principles would be. We will wait to see actual budgets and council tax rises before making decisions. I am pleased that the average increase, as announced by the Chartered Institute of Public Finance and Accountancy today in its survey, is around 6 per cent. We have dramatically decreased council tax increases. We are rapidly moving in the right direction and we are serious about capping. We do not want to cap, but we will use our powers to cap excessive increases, if that is necessary.
I understand that Devon fire and rescue authority has set a budget that equates to a notional council tax precept of 11.5 per cent. Although that is not the biggest increase among fire and rescue authorities, it is still larger than we hoped for.
§ Richard Younger-RossOn what basis is that 11.5 per cent. figure calculated? As I have indicated, there are two budget figures that could be used and there is the matter of whether that allows for the 3 per cent. notional increase.
§ Phil HopeI was about to come to some of the hon. Gentleman's detailed questions on the notional 209WH increases. I should like to emphasise that although that council tax precept of 11.5 per cent. is not the biggest increase, it is larger than we would have hoped for, given that we have been talking about low single figures, and given that the increase in formula grant of 3.9 per cent. is above inflation. I shall come to the analysis of that in a moment. Although the hon. Gentleman might say that that is below average, something has to be below average for something else to be above it; otherwise, everyone would get the same increase. The 3.9 per cent. figure is well above the rate of inflation.
Devon fire and rescue authority, and other authorities, have made the Government aware of some of the difficult issues and decisions that they have faced in setting their budgets, particularly pressures due to pay increases—which I will come to—the bulge in pensions and the combined authorities' need to build up reserves. Those are the three questions that the hon. Gentleman put to me.
The hon. Gentleman mentioned capital. He will be aware that the private finance initiative is another source of capital funding. Some £53 million of PFI credits is available each year for projects in England and Wales. I visited Cornwall, as I mentioned earlier, and saw how the hon. Gentleman's neighbouring authority-the Cornwall county fire brigade-has benefited from such support. I saw how it had taken some old, decrepit fire stations and successfully transformed them, using a PFI deal, into community fire stations. There is no reason why Devon should not be able to apply for private finance initiative money in future.
We have listened to some of these concerns and acted on them. In particular, we have addressed the issue of reserves. On 16 February my right hon. Friend the Minister for Local Government, Regional Governance and Fire wrote to all combined fire authorities declaring that he is minded to increase the combined fire authorities' alternative notional amounts by 3 per cent., subject to parliamentary approval. That change, which the hon. Member for Teignbridge mentioned, will help all combined fire authorities, including Devon, to limit their notional increases. The chairman of Devon fire authority has welcomed that publicly in the local press. As my right hon. Friend said in his letter, the Office of the Deputy Prime Minister will issue a formal response to the wider consultation on alternative notional amounts, which will also address in due course the other points that authorities have raised during the consultation.
It is up to fire authorities to undertake their own risk assessments and determine their reserves on that basis. Government advice has always made that clear. I accept that the 3 per cent. increase in the notional amount— this uplift—makes no difference to council tax bills; it is a matter of making comparisons.
The Government have said that they will meet the additional revenue consequences of responding to new dimension incidents. The hon. Member for Teignbridge will know that we have put in a significant amount of resources throughout the country for handling them. I turn now to the affordability of the pay deal, which the hon. Gentleman said was a problem in Devon. The negotiations on the pay deal are between the local
210WH authority employers and the Fire Brigades Union. Any deal that is not affordable within existing public expenditure provision must be paid for by modernisation. The employers have assured us that the deal signed in June last year is affordable and will balance over the SR02 period.
§ Richard Younger RossIt is reasonable for the Minister to make that point. However, Devon is one authority and it has a particular problem with retained fire crews. I want the hon. Gentleman to take account of that and to consider it in the formula grant that they give to Devon and the other authorities that have had that problem for a couple of years. Will he also deal with sparsity, which he has not mentioned?
§ Phil HopeYes, I understand that point. It was at the request of the employers and the Fire Brigades Union that the Deputy Prime Minister agreed to make £30 million of transitional funding available to fill a short-term gap. The hon. Gentleman mentioned the figure that affects Devon. Ay right hon. Friend the Minister for Local Government, Regional Governance and Fire stated in his letter to all fire and rescue authorities in January that transitional funding will, subject to the conditions being met, he paid in 2004–05. That will ensure that the full benefit of the transitional funding can and should be reflected in all fire authorities' council tax bills or precepts in 2004–05.
The Local Government Association has agreed that fire authorities will pay that transitional funding back during the SR02 period, which, in practice, means 2005–06. The Office of the Deputy Prime Minister currently proposes to recoup the transitional funding from authorities with responsibilities for fire and rescue services through the local government finance settlement for 2005–06. We are looking at the funding spending share and we understand the point made by the hon. Member for. Teignbridge. However, is it right that we should pay for any pay deal in our funding? There would not be al incentive to negotiate a good deal if we simply said, "Yes, we will meet those costs through the formula spending share". The hon. Gentleman must appreciate that a process of negotiation is being undertaken, but we will consider the funding formula spending shares in future.
A related issue that the hon. Gentleman did not raise is that of the potentially uneven distribution of costs and savings, which was implicit in his point about the nature of retained fire crews in his area and the sparsity factor. The Government recognise that revisiting the formula spending share could be an issue, given the changes to the fire and rescue service that we have announced. A working group of offs vials has been set up to examine the case for change and possible alternatives. The Government will consider any proposals for changes to the formula in the light of the working group's conclusions. However, it may also be worth pointing out that if there were an imbalance in the potential for savings between authorities, we would expect some authorities to have little or no budget increases in the next two years at least.
On pensions, we acknowledge that there may be a bulge in retirements over the next year or two. Of course, we would have expected that factor to be taken into account when calculating the affordability of the pay 211WH deal. We debated that Upstairs when we discussed the future of the pension scheme. However, we acknowledge that there are wider issues concerned with pensions funding. We are committed to reviewing pension arrangements for all firefighters. We propose to issue proposals for consultation in 2004 and, as I said in Committee, to be operational from 2005. We are also reviewing the financial arrangements for funding the existing firefighters' pension scheme.
I wish to make it clear that the Government remain absolutely committed to working in partnership with authorities to modernise the fire and rescue service and to save more lives. Limiting council tax increases, as the hon. Gentleman would like, to reasonable levels can and should be consistent with making real progress on modernisation.
§ Sitting suspended until Two o'clock