HC Deb 28 November 2000 vol 357 cc203-10WH 12.30 pm
Mr. Iain Coleman (Hammersmith and Fulham)

I warmly welcome the opportunity to highlight before London Members a range of concerns with regard to the allocation and distribution of Government resources to our capital city. The concerns inevitably cut across a range of different policy and departmental areas, and I fully accept that those include some not covered by the Department represented by the Under-Secretary of State for the Environment, Transport and the Regions, my hon. Friend the Member for Stretford and Urmston (Ms Hughes), who will reply for the Government. None the less, I feel bound to raise many of those points, although I recognise that she may not be able to respond specifically to all of them.

In the wake of yesterday's revenue support grant announcement by the Minister for Local Government and the Regions, the Under-Secretary will understand that I am bound to voice grave disquiet about the Government's failure to introduce all the latest up-to-date information about the area cost adjustment. That element of the standard spending assessment system is designed to reflect the unavoidable wage costs that authorities face as a consequence of their geographical location. It is based on the new earnings survey, which is updated annually to provide an accurate measure of local labour costs. The data have been updated annually since 1990–91, when the previous Government introduced standing spending assessments. This is the first year in which any Government have suggested that that mechanical and technical data change should not be fully introduced. Not to introduce the data in full represents a complete U-turn on the Government's previous policy commitment to introduce a three-year freeze in SSA methodology between 1999–2000 and 2001–02.

Last year, the effect of updating the data to the new earnings survey was that London local authorities lost £37 million. No one suggested at that point that the data should not be fully introduced or that caps should be imposed to limit their effect, so it is inevitable that the Government's decision to introduce a new approach, involving so-called floors and ceilings, is regarded by many of us in London as a cynical manipulation of the finance system to favour one set of authorities over another, regardless of established practice or objective statistical evidence.

London Members and members of local government in London are not the only ones who believe that the full data should have been introduced. The Minister will be aware that the Local Government Association has previously been reluctant to comment on distributional issues relating to Government funding. However, I know that Sir Jeremy Beecham, the distinguished chairman of the LGA, recently wrote to the Minister and confirmed that it was the association's view that it would be difficult to a justify a decision not to use the up to date data for the ACA and that the association endorsed the principle that up to date data should be used as far as possible in the RSG settlement. The effect of failing to support the recommendation of the national association representing local government is that London authorities will lose out by £13 million this year. The Minister will understand that that decision has come as a grave shock and disappointment to those of us who represent London constituencies. However, we are relieved that the previous rumour and spin to the effect that none of the new data would be introduced has proven to be unfounded. In my view, such a decision would have been unconscionable, and the fact remains that the Government's preferred option of introducing new artificial floors and ceilings is bad news for local government in London.

Ms Karen Buck (Regents Park and Kensington, North)

Is my hon. Friend aware that in some instances, the imposition of a ceiling on the grant available to local authorities will substantially reduce the resources available to those authorities? For example, in my own borough of Kensington and Chelsea, which despite its image has high levels of deprivation and a rate of population growth that is among the fastest in the country, the effect will be to reduce the amount of money available for local people by —4 million. There are a number of other local authorities that, through no fault of their own, due to a combination of factors such as population growth and the imposition of the ceilings, will not get all the money to which they are entitled.

Mr. Coleman

My hon. Friend makes a good point, and I am not sure how the Government will justify their decision to the council tax payers of Kensington and Chelsea, or to those other authorities that have lost out as a result of the introduction of the new so-called floors and ceilings.

I turn now to a different source of concern for Londoners. Some months ago, I was fortunate enough to secure an Adjournment debate on the review of the index of local deprivation. At that time, I was worried that the practical effect of such a review would be that London would lose out badly in the allocation of regeneration funds from central Government. Despite the false impression—sometimes given in our national media and in glitzy magazines—that the streets of our capital are paved with gold, the reality is very different. Today, more than 500,000 of London's children live in families who depend on income support. In inner London, 49 per cent. of children live in such households, compared with less than 25 per cent. across the nation. Some 64 per cent. of England's most deprived council estates are located in London, and four of the five areas with the highest rates of teenage pregnancy are also in London. Some 57 per cent. of the country's homeless households live in London.

On 22 August, the Government published the new index of multiple deprivation for 2000. To date, the Government have, despite numerous requests from organisations representing local government, for some reason refused to release the full background data that inform the new index. It is clear that the new indices disadvantage London. The exclusion from the indices of domains that measure high levels of crime and degraded physical environment has created an imbalance in favour of rural deprivation. The information that was necessary for them to be included in the formula is now available. It was a major blunder on the part of the Government to publish this new index and use it to take decisions about the allocation of millions—if not billions—of pounds in funding initiatives.

In addition, we were misled at the time of the review about how widely the index would be used. Ministers from the Department for Education and Employment, the Department of the Environment, Transport and the Regions, the Department of Trade and Industry and the Department for Culture, Media and Sport have already advised me in written answers to parliamentary questions that they are actively using the new index as an important, if not pivotal, ingredient in the determination of the allocation of Government resources. Such use of the index is contrary to commitments that were given by Ministers at the time of the review. Officers at the Association of London Government have calculated that if the 1998 index had been used as the key determinant of the allocation of resources instead of the new index, London's most deprived areas would have received an extra £ 140 million over the next three years through the neighbourhood renewal fund. What appears to be beyond question is that London will continue to lose out whenever the index is used to distribute a wide range of funds.

About two years ago, I secured an Adjournment debate on the Government's change to the regulations affecting council tax benefit claimants. The change penalised low-income families in areas of high property values by capping the level of benefit available to those in band E property. I regarded and still regard the change as highly regressive, offensive and directly contrary to the Government's stated policy of combating social exclusion. The vast majority of households caught by the unpleasant measure, previously proposed by the Conservative party, live in London.

In an answer to a written parliamentary question, the Minister was kind enough to supply me with tables showing the number of dwellings in band F and above in each local authority in the country. There are more such dwellings in my small local authority in Hammersmith and Fulham than in the metropolitan districts of Liverpool, Manchester and Birmingham combined, so hon. Members will understand my bold assertion. Given that context, I was more than a little shocked and disturbed to read the Minister's answer to another written question. She said that the Government had no plans to alter the capping of council tax benefit, and that the measure had been introduced to ensure that taxpayers did not fully subsidise the cost of people living in high-value properties.

Ms Buck

Does my hon. Friend agree that a substantial proportion of people living in high-value properties in boroughs such as Hammersmith and Fulham, Westminster, Kensington and elsewhere in London are allocated to those properties by their local authority and housing association? They have no choice whatever as to the value and council tax band of the property.

Mr. Coleman

My hon. Friend is correct. That answer was a revelation. It was completely different from all previous answers that we had received from the DETR or the Department of Social Security. The effect of such a policy, taken to its logical conclusion, would be that huge swathes of inner London would become no-go areas for anyone living on a modest to low income. We have received numerous assurances from Ministers during the past two years that the effect of the change is being monitored.

The total saving to the Exchequer in the past financial year was £4.5 million. That is a paltry and negligible saving when set beside the misery and anguish that the measure causes families that have lived in their current locations and in their local communities for generations. It is time for the measure, which affects only poor families living in London, to be scrapped without further prevarication.

Before the recess, I was fortunate enough to secure a debate in this Chamber on the cost of asylum seekers to London local authorities. London currently supports 65,000 asylum seekers, and 9,500 are provided with temporary accommodation. The Government have consistently refused to bear the full cost of that responsibility to London local authorities. In Hammersmith and Fulham last year, the council spent £16.3 million on asylum seekers and received grants from the Government of only £12.5 million—a net loss of £3.8 million to the council tax payers of my borough.

I emphasise that I do not have any cause for concern—nor do most of my constituents—about responding sympathetically, with compassion and understanding, to the needs and requests of asylum seekers and their families. In the past, I have criticised the meagre and ungenerous allowance provided by the Government to asylum seekers, and my view remains unchanged. However, if the Government expect London local authorities to respond effectively and enthusiastically to their new role—and they have, in sharp contrast to many of their counterparts in other areas—it is only right that they should receive the full cost of providing that support. By recently agreeing to pay the full cost of support to disbenefited asylum seekers, instead of applying the arbitrary cap of £300 a week that they currently apply to families with children, the Government accepted the principle of funding the cost of support in full. It is time for them to do so for the cost of support to all asylum seekers.

In conclusion, I emphasise that I, my constituents and the population of London do not expect preferential treatment from the Government. I recognise the huge plusses and advantages secured for Londoners by the election of a Labour Government, of which I am proud to be a supporter. However, on behalf of many in London, I reiterate that we have been subjected to an unwelcome form of special treatment in regard to some areas of policy. I hope that the Government will reflect carefully on the points that I have highlighted today.

12.46 pm
The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Ms Beverley Hughes)

I congratulate my hon. Friend the Member for Hammersmith and Fulham (Mr. Coleman)—and my other hon. Friends, who are out in force today to express their views about Government funding of London—on his effective speech. I shall deal with as many of the issues that he raised as I can in the time available.

The area cost adjustment was implemented in full. All the data changes in the ACA were applied within the formula in full at the start of the process. Few people are happy with the current mechanism for deciding the distribution of grants—the standard spending assessment formula—and my h F will know that the ACA indicator features in six of the seven SSA blocks and is included in the SSA system, as he said, to reflect the higher cost of provision in London and the south-east. There is, therefore, a simultaneous uprating on six of those seven dimensions.

Changes can often produce skewed effects such as those that we have had this year, which is why the ACA has always been contentious. Numerous research projects over the years have attempted to find a better solution. Having sought different options during the past three years, we have been unable to gain consensus among local authorities but we are committed to changing the system. When we updated the data used to calculate the ACA for this year, we found that the 1999 new income survey data had a sizeable impact because of the way in which it feeds into those seven dimensions, lifting the ACA indicator to the highest level since the mid-1990s. That is why we consulted local authorities on whether we should include that data in the 2001–02 local government finance settlement. We received many responses, with no consensus on how to proceed. As I am sure my hon. Friend knows, many of his colleagues argued that the ACA should be applied in full, but other authorities, seeing the huge impact of that, argued the opposite.

I agree with my hon. Friend that the Local Government Association said that we would be obliged to apply the data. It also asked us to find a means of assisting those local authorities that would be seriously affected. Bearing in mind our commitments in the 1998 White Paper to continue updating the data, we have updated the ACA, as announced yesterday by my right hon. Friend the Minister for Local Government and the Regions. That was the starting point of the process. I therefore have to refute entirely my hon. Friend's claim that we have not fully updated the data; we have.

As my hon. Friend rightly said, to ensure that no authority is severely affected by the data changes, which would otherwise have been the case, we shall introduce a floor and ceiling for education and social services authorities. However, it is not, as my hon. Friend portrayed it, a matter of London versus everyone else. Two authorities in London benefit from the introduction of a floor, and they will receive an increase of 3.2 per cent. My hon. Friend nods, but he failed to mention that the two authorities will benefit from a higher increase in grant because they are uplifted to the floor in the same way as authorities in different parts of the country. Some London authorities will get a significant increase and come down to the 6.5 per cent. ceiling.

The system benefits London boroughs as well as requiring some of them, and authorities in other parts of the country, to contribute to the cost of the floor. It is not an unprecedented mechanism; last year, several London boroughs benefited from a floor, which is part and parcel of the usual methodology. The central support protection grant instituted a 1.5 per cent. floor last year. Brent and several other authorities, which would otherwise have received a lower grant, benefited from that formula.

I therefore refute some of my hon. Friend's tenets. We tried to institute a procedure to uplift the data in its entirety, while setting floors and ceilings on the grant increases to ensure that authorities will receive no less than the minimum and no more than the maximum grant increases. Given that the ceiling is 6.5 per cent., that is a fair response to an unusual situation this year in terms of the degree to which the data would have had an impact on many local authorities, two of which are in London.

Mr. Coleman

I have listened carefully to my hon. Friend. Does she agree that if the new floors and ceilings had not been introduced and the data had been fully applied, London local authorities would have received an extra £13 million?

Ms Hughes

I cannot confirm the figure as I do not have time to calculate it from my table. However, I agree that some London authorities will contribute to the cost of the floor and two authorities will benefit. Some of those authorities will contribute because their increase otherwise will come down to the 6.5 per cent. ceiling, and others, like my hon. Friend's, will make a small contribution. His authority will have an increase of, I think, 4.7 per cent. if option A is endorsed. It would have an increase of 4.8 per cent. if the traditional methodology were applied.

I want to put the matter in a wider context. Whatever the figures in terms of costs and benefits, we must focus on the fact that London boroughs will receive a 5.3 per cent. increase across the board on average. Non-London authorities will receive a 4.1 per cent. increase. That shows the substantial extent to which the proposed grant settlement this year, notwithstanding the floors and ceilings, gives a generous, above-average increase to London boroughs.

My hon. Friend also mentioned the use of the indices of deprivation and I am glad to be able to clarify some of the issues that he raised. His starting point is that a number of London boroughs appear to be less deprived than they were on the 1998 index. My hon. Friend's constituency is in one of those boroughs and he has expressed anxiety about the matter in the past.

We should bear in mind, first, that the previous index relied heavily on the 1991 census information, which is now nearly a decade out of date. Since then, under the previous Administration, various areas have suffered. Serious job losses have occurred in coal mining, tin mining and other manufacturing industries that were in decline. It is hardly surprising if, in the new index, deprivation is defined in small pockets, with more reliable data and more sensitive methodology. If, as a result, we can see that deprivation exists in areas that were not identified in the previous index—in other words, the list now includes other areas—the relativities will clearly shift. However, that does not mean that we do not recognise the significant deprivation that still occurs in parts of London.

Ms Buck

My hon. Friend is right to say that it is appropriate to include in the formula those areas whose level of deprivation had not previously been properly recognised so that they can receive assistance, but is she aware that a number of statistics in the urban White Paper confirm that London still has a lower level of employment than any other region in the country, despite the reality of its economic success? That is the result of the huge scale of multiple deprivation in our socially excluded communities. Although the index of multiple deprivation shows that London has lost out as a region, we believe that the change is not substantiated by the figures.

Ms Hughes

My hon. Friend will be aware that employment is one of the most heavily weighted domains covered by the new index of multiple deprivation. I do not accept her conclusion that London will lose out because of a change in relativities. It depends on the size of the cake, on what the index is used for and on what other sources for regeneration will be coming to London that do not have the index applied to them. I shall touch on that point later, if I have time.

I can give other employment statistics. For instance, the north-west has the largest number of people in the 20 per cent. most deprived wards—a figure higher than in London. Nearly 50 per cent. of wards in the north-east are in the 20 per cent. most deprived areas nationally. Again, London is second on that list. I know that my hon. Friend will acknowledge that significant deprivation exists in other parts of the country. My simple point is that the previous index did not sufficiently recognise the fact. We have now included those measurements and used a more sophisticated methodology.

Inevitably, when one includes new areas—in a sense, the list of those who are recognised as deprived is longer—their positions will shift. That does not mean that we do not recognise the significant and serious deprivation that exists in parts of London, although there is evidence of real change in some communities. The report, which will be published fairly soon, deals with that issue. Indeed, some improvements have taken place in those parts of London represented by the right hon. Member for Kensington and Chelsea and my hon. Friend the Member for Hammersmith and Fulham, although the index recognises that serious deprivation still exists in other parts of London, such as the area represented by my hon. Friend the Member for Bethnal Green and Bow (Ms King).

I am running rather short of time, so I shall touch on the council tax restriction mentioned by my hon. Friend the Member for Hammersmith and Fulham. I understand the point that he seeks to make about the cost of property in his constituency and elsewhere in London, and I know that he has discussed the matter with my hon. Friends. The point that he makes is recognised. We think it fair that there should be a cut-off point, and in a sense it parallels the provision for council tax benefit. A report has been commissioned to consider the impact of that move, and we are committed to considering the outcome of that research. I cannot promise that there will be further developments, but it is an issue that we take seriously.

In conclusion, I share the concerns raised by my hon. Friends but I do not share their conclusion. If they consider the whole range of resources announced elsewhere, they will see that London is dealt with fairly.

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