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9.16 pm

Mr. David Heath (Somerton and Frome): In the previous debate, the hon. Member for Coventry, South (Mr. Cunningham) said that he sometimes thought it a disadvantage to have a background in local government when speaking on such matters in the House, and I agree with him. First, it creates the illusion of partially understanding the formulae used. Secondly, hon. Members find themselves making exactly the same speeches that they have made for decades past in local government and in the House, because the message does not seem to get through, and I am afraid that this subject is no exception.

This special grant report deals with the floors, not the ceilings, in the system. I can well understand why the Government think that a system of floors is necessary. In fact, it is not a new concept; previous Governments introduced safety nets--as the floors were then called--to prevent local authorities from losing money because of changes to the system. The basic unfairness of the system creates the difficulty. We argued time and again about

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such matters with the previous Government. That is why I find it difficult to accept the comments of Conservative Members, who now proclaim the unfairness of the system that they invented and implemented for years.

By implementing the special grant report, the Minister is at least trying to reduce at the margins the enormous disparities thrown up by the system between the funding of one authority and another. I am pleased to follow the hon. Member for Stafford (Mr. Kidney) in the debate because we have worked on the problem during recent months. We recognise that we are not alone and that many local authorities, such as Leicestershire, Gloucestershire, South Gloucestershire and Northampton, are very badly treated under the present formula. That is especially so in the allocation of education SSAs, which are, after all, the key to county council spending. If the education SSA is wrong, it has a knock-on effect throughout the system and money has to be diverted from social services, highways maintenance and so on to keep schools going.

I cannot accept a system that produces a disparity between Somerset and a leafy London borough of £1,500 a year per child. We have only to calculate how much the accumulated £1,500 per child disparity is worth to realise what an enormous difference it makes to the funding of a secondary school. We know that the problem exists partly because the SSA formula does not take account of children's basic needs. We know that the area cost adjustment has a huge effect, which is amplified by other factors that have been introduced recently.

I shall cite as an example the area cost adjustment's effect on my own police authority. We discussed the police grant earlier today. No less than 3 per cent. of the 7.5 per cent. precept increase is down to the adjustments of the area cost adjustment. That is £1 million of spending that could otherwise go into policing Avon and Somerset, and another £566,000 goes on the council tax benefit subsidy limitation scheme.

Those sums are top-sliced. The Minister intervened elegantly on the hon. Member for Barnsley, Central (Mr. Illsley) when he suggested that we have a system under which the poor subsidise the poorer. She rightly said that the money is sliced from the marginal increases rather than from core funding, but that makes not a ha'p'orth of difference to authorities that do not receive their entitlement because of the ossification of the system, which has nothing to do with stability. It is about maintaining basic injustices in the system.

I am disappointed by the report because it does nothing to deal with the huge disparities between authorities and it does nothing to create an entitlement to a basic level of funding for children in authorities such as the one that I represent. After four years of this Government, I would have expected that entitlement to be in place. For years under the Conservatives, we argued that it should be, and we are bitterly disappointed with this Government.

My hon. Friend the Member for Bath (Mr. Foster) referred to the difficulties of hypothecated funding for education authorities. That is one way in which the Department for Education and Employment tries to get round the system, but it is extraordinary that it recognises the problem but has to get round a rigid formula that is imposed by the Department of the Environment,

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Transport and the Regions. It is time that the Government dealt with the problem and that our children had a fair deal from the funding system.

9.21 pm

Mr. Tim Loughton (East Worthing and Shoreham): What a fascinating but odd debate this has been--and it is getting odder. Alas, I hazard the guess that it will not feature in the Commons sketches in tomorrow's press. Theoretically, the debate has been all about the Special Grant Report (No. 72)--a masterpiece of plain English it is not. It certainly is not a gripping and all-consuming read that is mesmerising and enthralling. I suspect that it will not reach W. H. Smith's top 10 list, even at the knock-down price of £4.10.

The first undertaking that I shall give is that the next Conservative Government will do something to simplify the nonsense that are the formulas that make up the 13 pages of the report and that have been produced all for the sake of £3 million. The two SSA reduction grants that originated under the previous Government were applied for historical reasons to the City of London, which is very sensitive to SSA changes because of its small residential population. Given that the figures were based on the census of 1991, will that arrangement continue after the new census is published this year? At what stage will that census kick in?

We are confronted with the formulas that the hon. Member for Torbay (Mr. Sanders) mentioned. As if it is not enough to be confronted with formula B minus A over T, which extends to T(Z minus S) to ½TZ, the second formula involves B minus A over T, C plus D plus E and T(Z minus S) and ½TZ. If that were not bad enough, the new formulas that apply to the new central supply protection grant steal the show. They refer to B minus A, but then page 13 of the report states:

That is all quite simple.

We understand that the formula means that 10 shire districts will supposedly benefit from the year-on-year reductions in total Government grant. Because those counties do not provide educational and social services spend, they do not benefit from the floors that we have heard so much about and to which the Minister alluded.

I readily admit that I am not always the sharpest knife in the drawer, but will the Minister explain to me--other people and the House of Commons Library have not been able to--why no fewer than 103 district authorities fit the criteria for the central support protection grant, but only 10 of them will benefit from it? They range from Brentwood to Weymouth and Portland, and include East Dorset district council, as my hon. Friend the Member for Christchurch (Mr. Chope) mentioned. What about the other 93 authorities? The list starts with Bromsgrove, which received a 0 per cent. increase in total external support. St. Edmundsbury received a 0.3 per cent. increase, Tewkesbury received a 0.4 per cent. increase and Chester received a 1 per cent. increase. The list extends to North East Derbyshire. It is not clear how those authorities will benefit, although we are assured that the central support protection grant will ensure that any

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authority that does not qualify for the grant floor will none the less receive a Government grant no lower than that which it received in 2001-01. Will the Minister explain that point?

Some interesting contributions have been made. My hon. Friend the Member for Christchurch pointed out that his council will, on the face of it, be a beneficiary of the CSPG. However, he told us that the extra pensioners in his constituency are a great expense for the council and that benefits such as concessionary fares, which the authority will now have to fund, are not being refunded by the Government. The hon. Member for Barnsley, East and Mexborough (Mr. Ennis) was concerned that his constituents had missed out, and the Minister did not allay his fears. What the hon. Member for Torbay called his dog's breakfast speech was concerned entirely with the formula of Z.

I agree with the comment made by the hon. Member for Upminster (Mr. Darvill) about the need for a fundamental review of the whole system. Interestingly, the 11.5 per cent. council tax increase that he foresaw is out of sorts with the Minister's figure. I agreed also with the hon. Member for Stroud (Mr. Drew) on the inaccessibility of special grants. In my authority area, West Sussex, 72 per cent. of the extra education funding received by the county council is not for it to spend as it wishes, as it has been provided in specific grant form.

This debate has been about floors and ceilings. It is the flaws within those floors and ceilings that are yet another example of centralisation by the Government. What is the point of introducing an elaborate system of SSAs that depends on the collection of large quantities of data, if those data are subsequently ignored because they do not fit the Government's dogma? That is all part of the Government's funding fiddle.

9.27 pm

The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Ms Beverley Hughes): For the past hour and a half, we have ostensibly been debating the special grant reports. Of course, those reports raise a number of other important distribution issues, many of which have been mentioned.

Two specific points were made about the special grants themselves. I shall deal first with that made by the hon. Member for East Worthing and Shoreham (Mr. Loughton). I assure him that it was entirely wrong. The grant ensures that no council receives less on a like-for-like basis. That is the basic criterion on which 10 councils qualify. The hon. Member for Torbay (Mr. Sanders) said that the inclusion of the 10 councils reflected political bias. Had he done the most basic research, however, he would have found that they comprised one Labour council, one Liberal Democrat council and five Conservative councils. Three of them are without overall control. I fail to see how that reflects political bias towards Labour authorities. If the hon. Gentleman can identify such bias, he will have to explain it to me after the debate.

The second and main issue was the problems associated with the standard spending assessment and distribution. This is an entirely vexed question, on which the three

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main parties do not agree. The problems relate not to data, as the hon. Member for Torbay alleged, but to methodology. There is no consensus on the area cost adjustment. Indeed, the whole system is complex and is neither transparent nor understandable. Some would argue that it does not take account of the different trends that apply in different places.

The previous Government failed completely to tackle any of those problems and simply reduced funding year on year. They did nothing at all about distribution.

We have instituted a fundamental review and, as my hon. Friend the Member for Stafford (Mr. Kidney) pointed out, we were grateful for the large number of replies. As the contributions from my hon. Friends the Members for Upminster (Mr. Darvill) and for Stroud (Mr. Drew) and the hon. Members for Somerton and Frome (Mr. Heath) and for Kingston and Surbiton (Mr. Davey) showed, once we start debating the matter, it turns out that every Member wants different changes that would benefit his own area. I do not blame them for that, but it reflects the difficulty inherent in the issue. I am not convinced that, as one of my hon. Friends maintained, if we introduced a new system, we would completely eradicate all complaints. I think that hon. Members would still want more for their own areas.

This year, because of the huge skews produced by applying the current methodology to the data, we have introduced floors and ceilings. I am sorry that Conservatives Members do not feel that they can support that proposal. Their basic premise was of course wrong. In the previous system, under the central support protection grant, which we have debated tonight, all authorities above the minimum contributed to the minimum guarantee. That will work in the same way in the system that we have introduced this year. As my right hon. Friend the Minister for Local Government and the Regions said in an intervention, the main difference is that the new system is transparent. People can see what they are getting and whether they are contributing to the floor.

My hon. Friend the Member for Barnsley, Central (Mr. Illsley) raised a number of issues, but I must point out that there are no restrictions on the use of the neighbourhood renewal fund. It is intended to drive up standards in the most disadvantaged areas, and provided that Barnsley demonstrates that it is hitting the targets, it can use its extra £2.7 million as it wishes.

Although distribution is important, the real issue is the overall investment in, and the commitment to, local government. I say to Conservative Members that it is this party--

It being one and a half hours after the commencement of proceedings on the motion, Madam Deputy Speaker put the Question, pursuant to Standing Order No. 16(1).

Question agreed to.


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