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Mr. Nigel Griffiths (Edinburgh, South): Will my right hon. Friend resist the new Conservative policy to sweet talk the French, and instead turn his attention to the Americans and bring home to the new American President
Mr. Prescott: I am grateful to my hon. Friend for the factual point that he makes about America. I have had many discussions with Vice-President Gore during the past three years, and I have no doubt that he understands the point. He has used it in the elections when talking about the environment. It perhaps is more difficult to make the point in America, given public opinion, than it is here. Nevertheless, there is awareness of it. Vice- President Gore has been an active campaigner for global environmental changes.
Dr. Vincent Cable (Twickenham): As the Deputy Prime Minister has attributed the breakdown of the negotiations to one issue, can we assume that the other big issues, which were matters of difference, such as compensation for oil-producing companies and the demand of the large intensive energy developing countries such as China for financial assistance, have been resolved?
Mr. Prescott: I am sorry if I misled the hon. Gentleman into believing that the negotiations broke down on one issue. It was, however, a major issue between European countries and umbrella countries that could be settled only by ourselves. That is why I sought to intervene as I did. Many contentious issues were being dealt with. As for the specific issues to which the hon. Gentleman has referred, there was talk of compensation being paid to the Organisation of Petroleum Exporting Countries. There was not a great deal of sympathy for the idea that we should raise money and give it to the oil companies. That was a matter of contention for the oil companies, which were quite strong in the negotiating group, the Group of 77.
There was the prospect of a major agreement of a billion-dollar fund that would be available to help developing countries, which they welcomed. It would have come from various sources of funding. There had been agreement between the three major parties to the negotiations. I am sad that the fund has not been put into effect because we did not reach an agreement. We will keep on trying.
Mr. David Chaytor (Bury, North): May I ask about another issue that was originally in dispute between the United States and the European Union, and that is the role of nuclear energy in the clean development mechanism? The issue has not been reported over the weekend. Can my right hon. Friend say something about what agreement, if any, was reached about the role of nuclear energy and the CDM?
Mr. Prescott: That is an important point, and a controversial one in the European group of Ministers. The issue is that, with any aid that is given to developing countries under the CDM, we should not be supporting any nuclear projects. There are those who say that even the huge dams that are being created should not be included. There was great disagreement about that within the European group. More importantly, the Group of 77 took the view--I am sympathetic to the view--that it was not prepared to
The Government are committed to improving public services, because they make a real difference to peoples' lives. That commitment underlies the proposals that I shall outline for the finance settlement. Taken together with best value and modernised leadership, it will give local government the means to provide effective, efficient services that best meet people's needs.
We know that that presents a challenging agenda for local government. Councils are having to address a backlog of past under-investment, they are modernising decision-making processes, and they need to engage in partnership with a range of local stakeholders and deliver best value across the whole range of their responsibilities. To deliver that agenda, they require adequate financial support from the Government. They also require a reasonable degree of certainty about future funding, so that they can plan ahead with confidence. Erratic and unpredictable funding leads to the stop-go approach that has bedevilled public sector investment and service provision in the past. Today, I shall address those two issues: adequacy of funding and stability of funding.
The Government are delivering a stable economic environment and can therefore provide the resources needed for strong public services. Total support from Government grant and business rates will be £44.4 billion next year--an increase of £2.8 billion or 6.7 per cent., which is three times the underlying rate of inflation. Of that total, £8.3 billion will be specific and special grants available to councils; those will be the subject of separate announcements. My primary concern today is the £36.1 billion of general Government support, made up of £21 billion of revenue support grant and the £15.1 billion of business rates that the Government will redistribute to local authorities next year. That will be 4.4 per cent. more than in 2000-01.
The 4.4 per cent. increase in general grant is a national average figure. It must be allocated between authorities. The current method of allocating grant uses the standard spending assessment formula, but the operation of the SSA formula for 2001-02, if left unchecked, would produce what I regard as an unacceptably wide range of outcomes: some authorities would receive grant increases of nearly 10 per cent., whereas others would have their grant cut in real terms. Many hon. Members will know the facts. There are large changes in the estimated population of local authority areas, and there have been changes in the earnings data used to calculate the area cost adjustment.
In the interests of predictability and stability, we already publish three-year plans for total grant and limit the extent to which the SSA formula will change. From this year, we will go further and provide information on the majority of capital allocations and specific grants on a three-year basis. The population and earnings data changes in the SSA formula threaten to undermine those benefits, and I am particularly concerned about the effect that that would have on the delivery of the Government's
I consider that the best approach is to accelerate the introduction of a reform canvassed in our Green Paper on modernising local government finance. It involves setting floors and ceilings on grant increases. Therefore, in the consultation on the local government finance settlement which I am launching today and which is to run until 9 January, I will make it plain that I am minded to include floors and ceilings in the distribution of revenue support grant for 2001-02 to authorities with education and social services responsibilities. RSG would be distributed so that all such authorities receive at least 3.2 per cent. more Government support in 2001-02 than they did in 2000-01; that is 1 per cent. more than underlying inflation. The ceiling for such authorities would be set at 6.5 per cent.
A floor increase of 3.2 per cent. should be sufficient to allow an authority that is improving its efficiency to maintain and enhance its services. The 6.5 per cent. ceiling represents a good increase in grant for the authorities that receive it, and helps to support the cost of introducing the 3.2 per cent. floor. However, it is not possible to set a ceiling to cover the whole cost, so those authorities that are not at the floor or the ceiling will receive an increase in support that has been marginally scaled back. For example, an authority that would otherwise have received an increase of 5 per cent. will receive 4.8 per cent.
There will be no floors or ceilings for local authorities that do not have education and social service responsibilities. I propose to continue the guarantee provided for the last two years, which ensures that no such authority will receive less central support from the Government in 2001-02 than it did in 2000-01. Some may feel that the Government are jumping the gun if floors and ceilings are implemented before consultation on the Green Paper is complete. However, this year shows conclusively how unwise the Government would be to rely totally on the traditional data-driven formula to distribute grant. Indeed, the current method of distribution by SSA has included the principle of a floor below which increases for authorities would not fall.
We would be wise, therefore, to avail ourselves now of what appears to be the best available solution. For the future, the Government will consider further whether floors and ceilings should be a permanent feature of the grant distribution system, whether they should be extended to all local authorities, and the levels at which they should be pitched. I realise that many councils will have expected proposals on grant distribution to follow a similar pattern to that which we used last year. I am therefore issuing for consultation a proposal that distributes grant without incorporating any rules about floors and ceilings. That proposal, however, includes the same minimum grant guarantees as last year, which means that no authority would receive less Government support in 2001-02 than it did in 2000-01. Support for authorities with education and social services responsibilities would be increased by at least 1.5 per cent.All those comparisons need to be adjusted to allow for changes in the functions of councils or the financing of particular services to permit a fair year-on-year comparison.
I want to touch briefly on three other issues. First, following consultation, we intend to make one adjustment to SSAs. The under-fives education SSA methodology will change, following the transfer of funding for nursery education for four-year-olds. That will improve stability of funding by ensuring that its distribution matches as closely as possible the previous distribution under specific grant.
Secondly, the guideline for the council tax benefit subsidy limitation scheme for the 2001-2002 scheme will be the same as last year, so there will be a 4.5 per cent. increase in council tax or such increase as is necessary to give the council an increase in its budget requirement equal to its full cash SSA increase. The scheme will continue to operate cumulatively. For each authority, we will use the previous year's council tax guideline, after certain adjustments, as the starting point. I am issuing today full details and guidance on the scheme for 2001-02.
Thirdly, the additional resources being provided through the neighbourhood renewal fund will help the most deprived authorities to target services on their most deprived areas. That will contribute to the neighbourhood renewal strategy objective of bringing the outcomes achieved by core spending programmes in those areas up to the average standard of the rest.
Having considered the responses to the recent consultation paper on the neighbourhood renewal fund--most of which welcomed the new funding--I have decided to proceed with the arrangements proposed in the consultation paper and am today confirming the initial allocations to the 88 eligible authorities.
In addition to the sums that I propose to allocate to social services today, I can also tell the House that my right hon. Friend the Secretary of State for Health will shortly announce details of an additional £100 million for personal social services in 2001-02. It will support improved care and rehabilitation services for older people.
My right hon. Friend will also ensure that, as part of the service planning round for 2001-02, health authorities, primary care groups and trusts give local authorities a clear indication of the NHS funds that will be provided to support social and intermediate care services through pooled budgets and other joint initiatives in time to inform the final local government finance settlement.
My Department is today writing with details of the core proposals to every local authority in England. Copies of that material have been placed in the Vote Office and the Library, and are being made available over the internet.
The proposals are another step in the Government's modernising agenda. They provide a solid, substantial grant increase and a stable financial environment. Together with best value and our other reforms, they will enable councils to plan and deliver better services for their citizens. I commend them to the House.