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Standard Spending Assessment (Somerset)

12.30 pm

Mr. David Heath (Somerton and Frome): I am grateful for the opportunity to speak about the standard spending assessment for Somerset. This seems to be a dreary ritual that we must go through each year. I seem to have been making precisely the same arguments for more than 17 years and I know that the Minister shares my background in local government, so he has probably been making the same arguments, on both sides of the fence, for an equal period. The sad fact is that, until the apportionment of local government finance is right, or at least approximately right, we must continue to make the case for the areas that we represent, and I certainly make no apology for speaking for Somerset.

It is good to see in the Chamber a full house of my colleagues who represent Somerset constituencies: my hon. Friend the Member for Yeovil (Mr. Laws), the right hon. Member for Wells (Mr. Heathcoat-Amory) and the hon. Members for Taunton (Mr. Flook) and for Bridgwater (Mr. Liddell-Grainger). I hope that our arguments are the same, because we are speaking for the communities that we represent.

I am familiar with the recitals that we must make on these occasions, and I shall not dwell on the structural problems with the present formula, because we are all familiar with them. Somerset is a rural county in the south-west and its local authority shares with many others the difficulty that additional costs in the county are not properly met by the formula—for example, the cost of providing a large number of small schools in a rural county, the cost of transport and the cost of providing for a dispersed population. We have more minor roads per person in the county than almost any other authority.

As the Minister and I are familiar with local government, let us not dwell on the more formulaic versions of this debate. I assure him that I am not about to wave shrouds or bleeding stumps at him, and I ask him to do me the favour of not insulting the intelligence of Somerset people by saying that everything in the formula is perfect and that Somerset has a good deal. We all know that that is not so.

I want to raise key matters, including social services, education, the Somerset levels and the problem of flooding and the cost of flood defence. I shall then refer briefly to district councils and the effect of council tax on those living in the county.

I start with social services, which cause enormous concern in Somerset. I was lucky to secure an Adjournment debate on 16 October 2001 when I drew attention to what is reasonably described as a crisis in the provision of long-term care in the county. I know that Somerset is not alone in experiencing that problem, but I also know that it is a matter of considerable concern to the director of social services and his staff and to many people who have relatives in long-term care or who require those services themselves. Care homes throughout the county have been closed, with devastating effects on people. Many businesses that provide care home facilities are precarious to the point of going under and there are real difficulties in providing domiciliary care to the standard required because of recruitment problems.

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During my Adjournment debate, I received assurances from Ministers that were largely couched in the view that significant extra money was to be provided by the Government to help relieve what was recognised to be a serious situation for social services. They implied that it would make a significant difference to Somerset, which is, according to reputation and history, one of the best social services authorities. Independent assessments from the inspectorate and the Audit Commission have proved that the care provided by Somerset is of a high order; it was also one of the pioneers of effective co-operation between health authorities and the private sector.

The promise of cash has turned out to be illusory. There has been an increase of an extra £3 million in the base budget, but against that an almost equivalent loss has occurred—some £2.6 million—in the form of specific grants.

I shall draw the Minister's attention to three main points. The first concerns what are termed preserved rights, which relate to the income support that was available to residents before 1993 and is supposed to have been provided for in the settlement. The difficulty is that the figure has been calculated on the basis of the case load in December 2000 and multiplied by a factor based on the iniquitous area cost adjustment. That has resulted in a substantial shortfall between what is provided for by the formula and what is needed for dealing with real people in real communities who need real help. A figure need not be plucked out of the air because we have evidence, from information provided by the Benefits Agency, of how many people should receive the preserved rights money. The agency's figures, which are up to date and genuine, tell us that Somerset's allocation should be £6.3 million. However, under the formula that the Government have chosen to use, the figure is £5.5 million, which creates a shortfall of £800,000.

The second issue relates to residential allowances, which is the money that should be transferred to the county council to meet the cost of care packages when residential care allowances stop at the end of the financial year. In a 2001 paper from the Department of Health, the Government state that, if the formula is based on equity, Somerset should receive £1.29 million to meet the costs of that new responsibility. Instead, however, the Govt have used a formula based on the extraordinary machinations of the SSA and the area cost adjustment, which means that Somerset will be allocated only £850,000, creating a shortfall of £440,000. Perhaps the reason for the shortfall is that Somerset makes heavy use of independent sector placements. For heaven's sake, that is what the Government asked local authorities to do. It is part of the great partnership between the public and private sectors that the Government advocate. Somerset puts that policy into action and does what the Government want it to do even before they have thought of it, but it is penalised as a result, which cannot be right.

Promoting independence grants are the third element within social services. Recurrent expenditure should be continued because of winter pressures and because partnership and prevention grants are being put together. It has, however, been reduced for the inelegantly named winter PIGs—promoting independence grants for winter months—and the result

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is a shortfall of £1.4 million. The money that the Government claim to provide for social services with one hand is being taken away with the other, to the detriment of social services in Somerset and the dismay of people who rely on those services. The big question is why the Government do not use the actual cost of services for their calculation. Given that the services are available and that they are provided from their sources, why are they not used in the formulation?

Mr. David Heathcoat-Amory (Wells): The hon. Gentleman is putting the case for Somerset very well, and I strongly support his view that Somerset is badly treated in several respects. The Government have admitted that in past years, and we are looking for action. Does he agree that our case would be strengthened if we were to ensure that we were economical in our expenditure on functions such as the procurement of purchasing, which was recently the subject of an Audit Commission report, and on regional bodies and assemblies that have little public support and can absorb too much public money, which ought to be channelled into the areas that he is ably illuminating?

Mr. Heath : I am grateful to the right hon. Gentleman. I agree that it is important that the county council prioritises the areas in which it spends its money, and that it maintains the reputation that it has always had for frugality and care with public finances. The county council will make its own decisions about how to spend its money, and it is wrong for us to try to pre-empt those decisions. Nevertheless, it is essential that the county council retains its position, which it has held over many years and under varying administrations, of prioritising those areas that are most important to people in the county.

The area that has consumed the majority of funds available to Somerset over many years—way beyond the SSA allocation—is education, which brings us to a fundamental difference of opinion with the Government. I cannot accept, and I suspect that other hon. Members cannot accept, that the SSA per pupil in Somerset is so far out of kilter with that elsewhere in the country.

Mr. David Laws (Yeovil): I congratulate my hon. Friend on his persistence on this issue and his success in securing today's debate. Does he recall that at the beginning of the previous Parliament he received an acknowledgement from an Education Minister that Somerset has too low an SSA, which is unjustifiable? Will he press the Minister on the need to address that issue in the upcoming review of the education SSA so that the deficit in Somerset as set against the national average of about £200 per primary and secondary pupil can be dealt with as soon as possible?

Mr. Heath : My hon. Friend is absolutely right. The Minister to which he referred, the right hon. Member for Birmingham, Yardley (Estelle Morris), is now prominent in the education field because she is the current Secretary of State for Education and Skills. In the previous Parliament what was almost a repertory company assembled for Adjournment debates on the

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imbalance in the SSA, in which she admitted that the Government had got the education SSA for Somerset wrong. That was also recognised by the previous Secretary of State for Education and Employment, the right hon. Member for Sheffield, Brightside (Mr. Blunkett), who used to talk about the Somerset factor, which was the factor of unfairness in the formula.

My children attend schools in Frome which receive £1,500 per year per child less than children in a leafy London borough such as Hillingdon. I am not obsessed with Hillingdon, but it is the borough in which the Prime Minister sends his children to school. There is a differential that cannot be papered over by reference to the extra costs of education because the SSA does not take into account the unit costs of a rural county. The result is a distorting effect on the other services that the council provides. Although the council rightly sees education as a priority and is prepared to spend massively over SSA provision, that squeezes all the other services that people expect the council to provide.

I must now be brief on my other points, as I want to leave the Minister time to reply.

Everyone knows about the issues of flood defence in Somerset. Half my constituency is under water during the winter months; the same applies to the constituencies of many of my hon. Friends. It is a massive problem. Somerset is dealing effectively with the problem this year, and the flood defence committee has put up its precept by 30 per cent. to carry out some of the work that the Government want. However, the Government have not given a single extra penny this year to help with those additional costs of £1.5 million.

Mr. Adrian Flook (Taunton): I thank the hon. Gentleman for giving way and for securing the debate.

It is not even a question of the Government providing the same amount as last year; they have given less money. Will the hon. Gentleman join us in asking the Government for at least matching revenues to put towards flood defence?

Mr. Heath : The hon. Gentleman is right, and if we want to take the issue seriously—it is becoming more serious as the years pass—we need the Government to agree that, if the defences are being put in place this year, the money should come from the Government this year, not some years in the future. It is no good for them to run away from the issue.

Most of my comments have concerned the county council, because it controls the majority of the council tax and expenditure in the county, but my next point concerns South Somerset district council. It made the valuable point to me that, although its settlement looks good on paper, it is not. It looks as if it has extra money, and it should have received additional money from the housing transfer in a Government grant. However, the capping procedure brought in by the Government means that the good citizens of south Somerset will not benefit from that; indeed, they will be put in a worse position, which is wrong.

Mr. Ian Liddell-Grainger (Bridgwater): Will the hon. Gentleman give way?

Mr. Heath : I shall give way briefly and for the last time.

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Mr. Liddell-Grainger : I believe that the whole of Somerset can be included in this point. The situation with foot and mouth on Exmoor gave rise to the same problem. The council spent £250,000, but did not receive any help from the Government. That is exactly the same situation as in south Somerset.

Mr. Heath : I am sure that the hon. Gentleman is right. I do not know the situation in west Somerset, but I am sure that we would hear exactly the same points from people in Mendip, Sedgemore and Taunton Deane. There is no time to list every problem.

What is the result? I fear that we will have substantial increases in council tax again this year, not because Somerset or any district council, whatever political party controls it, has been profligate in its use of funds, but because of Government policy. That will be replicated in county and district councils throughout the south-west peninsula, and it is likely that the norm for south-west counties will be a council tax increase that goes into double figures. The Government will downplay the situation and say that the increases are likely to be only 5 or 6 per cent., or whatever figure they come up with. They try the same trick every year and then say that the councils must have overspent. We know the facts, and it will be an unsupportable increase. The impact on individuals will be disastrous, as they will have to find extra funds, often out of fixed incomes, without receiving any benefit: they get worse rather than better services, which cannot be right. I do not have time to go into the iniquities of the uniform business rate, but I could speak for another half hour about its effect on businesses in the county.

South-west authorities are treated badly by the current formula. The SSA per capita in the south-west is £876. It is £1,265 in London, £1,043 in the north-east, and £1,027 in the north-west. The England average is £995. Some time, some Government will have to get this right for the west country, because we are losing patience with a system that delivers so badly for our region and provides us with so little benefit. There are many factors—partly the SSA formula, which is to be reviewed next year, and partly the iniquitous area cost adjustment, which is unsupportable to anybody other than those who receive it, who obviously would like it to be maintained. The Government cannot constantly retreat behind the need for consensus with local authorities. They will not achieve it, as the winners will never give up what they have, and the losers will always want more.

I fervently wish that the Minister would provide some answers on the future design of local government finance and say how the effects that I have described can be mitigated. Nothing would please me more than never to have such a debate again, because I am bored stiff producing a litany of despair from Somerset and the west country each year about the way the area is treated by consecutive Governments. That will happen only when we get a fair deal from the Government, and I believe that we are a long way from that.

12.50 pm

The Parliamentary Under-Secretary of State for Transport, Local Government and the Regions (Dr. Alan Whitehead) : I join the hon. Member for Somerton and Frome (Mr. Heath) in bemoaning the fact that we do not have sufficient time adequately to address the detail of the issues that he has raised.

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I congratulate the hon. Gentleman on securing the debate on this important issue. He told me that he would not go into the arcane details and the highways and byways of the SSA system, and I shall attempt not to do so. He outlined how the SSA system relates to local authorities and how it decides grant outcomes and produces, over time, problems for those local authorities. That applies not only to Somerset but to local government more widely. I shall speak about the issue generally, although I shall attempt to address the hon. Gentleman's points about Somerset, too.

Next year's finance settlement is, by any measure, good for local government. It demonstrates our continued commitment to investing in local government. The settlement should in general allow councils to improve their services while keeping to reasonable increases in council tax. I underline what I said about the SSA system. Despite the considerable investment that we have provided each year since taking office, some authorities still face pressures. I acknowledge that, and understand where those pressures come from and how they impact on local authorities. We shall consider those matters with local government as we consider the spending plans for 2003-04 onwards in the context of the upcoming spending review.

We were able to increase provision for local government in the spending review 2000. Next year's proposed settlement benefits from the plans laid at that time. The proposals currently under consultation provide that Government grants and business rates support will be £47.3 billion in the next financial year. That is an increase of £3.3 billion, or 7.4 per cent.

Overall spending on education will rise by £2.1 billion, or 8.7 per cent. Personal social services will increase by £684 million or 6.5 per cent. Those figures relate to the national settlement. The hon. Gentleman will take limited comfort from that overall statement, although it was important to make it to answer some of his points about Somerset.

If we consider the comparative figures, we can see that Somerset will receive a good settlement this year. The council has benefited from the extra investment that we have made in local government. For the four years before 1998-99, Somerset received an increase in SSA of only 2.1 per cent. each year. Since then, the county has received an average increase of 5 per cent. Under our proposals for next year, Somerset will get a general grant increase of 6.1 per cent., or £14 million, which is more than three times the rate of inflation. That compares favourably with a number of other local authorities in England.

The hon. Gentleman made specific points about circumstances in Somerset which relate to the operation of the standard spending assessment, including social services expenditure. The Government well understand the pressures on social services authorities, especially in relation to care packages and long-term care for people in their homes or in residential care establishments. The hon. Gentleman will be pleased to know that yesterday the Government announced the figures for the so-called bed-blocking initiative, which will provide £726,000 for Somerset for the next year and at least that amount for the year after that. It will go a considerable way to assist Somerset with high-maintenance care packages for people in care homes.

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The wider issue in respect of care homes, especially in southern England, is the continuing provision of such homes, the cost of packages and property, and the temptation that some care homes face to cash up when substantial amounts of money come their way for the land on which they stand. The resulting distortion in the number of places available and the question of how to deal with that problem in the long term are matters of great concern which the Government understand.

The hon. Gentleman referred to the allocation of residential allowance by SSA, rather than by past patterns of expenditure. The residential allowance transfer is for new cases, that is, for people placed in care after 1 April 2002. The SSA calculation on the basis of need is right, but it is true that past patterns penalised councils that chose to use their own homes for those arrangements, and we wanted to get rid of that unfairness.

I am aware of the strength of feeling about the education funding formula for Somerset. I will not go into details about what has been provided for education funding; the figures show that Somerset children will get a substantial increase in the amount made available for their education in the coming year.

The hon. Gentleman raised deeper questions about how the SSA formula works in relation to education, social services and other functions and I shall say a few words about it in the brief time available. The Government are committed to a fundamental reform of the SSA formula. As I have a background in local government, I recognise that a formula that attempts to achieve equity of outcome by providing an indicator for everything and a weight to that indicator on occasions, using Byzantine formulae, sometimes has the opposite effect. I was not alone among local authority leaders in thinking that I had been a good boy in a particular year only to find that the outcome of the formula showed that I had not been a good boy, and had had no apparent effect in the real world.

The SSA formula as it stands tends to penalise those authorities that had relatively low levels of expenditure in the early 1990s when it was introduced. It relates to a world that is different from the real world in respect of the costs of the indicators used. For example, the SSA formula assumes that the average band D council level is about £700, when that is increasingly drifting away from reality. A formula that allocates changes in grants according to indicators that do not relate closely to reality will inevitably produce distortions. Consequently, we are committed to making changes. I issue a challenge to local government, which I hope will discuss the changes positively. Do we want a simpler formula that is easier to understand, but which causes problems with equity, or do we want to increase equity? I suggest that we need a more simple, straightforward and understandable formula, based on reality. The Government are committed to finding such a formula.

Mr. Bill O'Brien (in the Chair): Order. Time is up.

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