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Mr. Denham: The provision that I have announced this afternoon reflects our confidence that we will make significant progress this coming year. A full system will not be in place in every part of the country this year, and it will be some time before we can roll it out across the police service as a whole. However, we recognise the need to make progress on this area of IT development. There is no doubt that poor police IT is one of the factors that limits the most effective use of police officers' time. As we identified in last autumn's study entitled "Diary of a Police Officer", the lack of appropriate IT ties police officers to the police station as they cope with unnecessary bureaucratic duties. We are determined to make progress, and the provision announced this afternoon demonstrates our desire to do so.

The National Crime Squad and the National Criminal Intelligence Service form a vital part of a modernised police service in tackling serious and organised crime. Both agencies have an important role to play, internationally and nationally, and the valuable work that they do in turn benefits police authorities at local level.

Provision for the NCS and NCIS was increased in 2001-02, using funds from levies on police authorities. From the coming year, both bodies will be funded directly by the Home Office. That will add to the transparency of their funding, which will no longer be a hidden deduction from the general policing provision.

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Because of the central importance of the NCS and NCIS in the battle against serious crime, my right hon. Friend the Home Secretary has decided to increase provision for the NCS and NCIS from £165 million to £202 million in 2002-03. I believe that that investment in tackling serious crime will be broadly and widely welcomed.

Mr. George Osborne (Tatton): Hon. Members from all parties in Cheshire recently met the chief constable of the local force, and heard the disturbing news that our police authority grant is to increase by only 1.9 per cent. in real terms. The reason, as the Minister has made clear, is that the amount being deducted from the grant to meet the allocations for the NCS and NCIS is more than the local police force was spending. As a result of the mechanism that the Minister described, the force has lost out. Will he look specifically at the Cheshire case, as it concerns both Labour and Conservative MPs in the county?

Mr. Denham: I wonder whether the hon. Gentleman understands the question any more than I will understand the answer that I am about to give. However, I assure him that, having been alerted to the concerns in Cheshire by hon. Members of all parties, I am satisfied that we are right to say that the county has received an increase of 2.5 per cent. The adjustments in baselines to reflect the change in the way that the NCS and NCIS are funded do not undermine that argument, and are perfectly consistent with the ways in which adjustments to baseline budgets are always implemented by the Department for Transport, Local Government and the Regions.

I shall be happy to write to the hon. Gentleman to set out the case. However, I took the opportunity to check the matter earlier, and I believe that the funding increase has been appropriately represented by the Government.

A consultation exercise on the funding settlement was held in the normal way. I received 38 representations from 27 police authority areas, as well as from hon. Members, the Association of Chief Police Officers, chief constables and police authorities.

There is always concern about the size of any settlement and how the cake is cut, but, of the overall increase of 6.1 per cent., 5 per cent. will go to police authorities for the CFF, as capital, and for other specific initiatives, as well as the grant. It builds on the 10 per cent. increase in policing provision in 2001–02.

Concerns were raised about the method of adjustment to the 2001–02 baseline, on which I have touched. However, as a result of wider changes to the baseline calculations from services not affecting my Department, but in a more equitable way, we have agreed to fund an additional £5 million to that which was proposed in the autumn to make sure that, on a like for like basis, year on year, every police authority will receive a grant increase of at least 2.3 per cent. In total, my right hon. Friend the Home Secretary has been able to identify some £11 million on top of the original policing settlement to make sure that we achieve an equitable increase for all police authorities.

Llew Smith (Blaenau Gwent): The Minister will be aware that for a variety of reasons, pension costs as a proportion of the total police budget are increasing.

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Indeed, it is predicted that such costs will increase dramatically in the next few years. To what extent has he taken that into account and will he take it into account when considering the funding of the police authorities in the months and years ahead?

Mr. Denham: In the short term, the cost of pensions has been taken into account in the settlement in the normal way. However, we said in the police reform White Paper that we are looking at more significant changes to the police pension system, and we are currently working on that. There are a number of issues to address, such as having a modern benefits structure. We said in the White Paper that we would like to find a way of more satisfactorily insulating police authorities from the predictable costs of normal retirement within the pension scheme. Work on that will be continuing. For the coming year, provision has been made in the usual way and is reflected in these calculations.

Mrs. Annette L. Brooke (Mid-Dorset and North Poole): Following on from that point, what advice will the Minister give police authorities about their budgeting this year? If they are anticipating a pension time bomb in several years, it might be prudent to put extra money on one side now, but if there is to be a change in a few years, there would be no possibility of putting more police on the beat. What advice will he give the authorities on coping with the future, given the uncertainty of the change ahead?

Mr. Denham: The police authorities should probably approach the coming year as they have approached previous years. If the Home Office felt that there was a need for central guidance which varied from that advice, we would send it out. However, I have said to my hon. Friend the Member for Blaenau Gwent (Llew Smith) that we recognise that pensions are an issue for police authorities' budgets, and we want to deal with that as we look at the future of police pension provision. I would not like to trigger any dramatic change today in the way in which police authorities approach their budgeting for this issue for next year.

Angela Watkinson (Upminster): Will the Minister acknowledge that the contributions made by police into their pension funds are almost double what many other public sector workers, such as local government officers, pay?

Mr. Denham: I accept that the contribution rate is quite high. Equally, full pension rights can be achieved after 30 years of service, which is not the case in other schemes. Indeed, an issue that arises when considering the future of pension schemes is how to achieve a system that is seen by all sides to be equitable in terms of the cost to the employer and to the police officer, and which continues to reflect the rather special nature of a police career and the duties and responsibilities of police officers. That is one reason why we have the sort of pension scheme that is in place at the moment. These are not easy matters to keep in balance, and we will need to do that as we develop our ideas on the future of the pension scheme.

David Davis (Haltemprice and Howden): The costs that the Minister has been talking about, and others,

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put particular pressure on some police forces so that the settlement that the formula has delivered is not enough to cover their costs. Some police forces, such as mine in Humberside and South Yorkshire—of particular interest to the Home Secretary—are badly hit by the formula and have been for some years. In my case, it has meant doubling the council tax precept to cover the costs. Earlier the right hon. Gentleman mentioned changes to the formula. Can he give us any guidance and hope that the formula will be changed in such a way as to help the likes of the Humberside and South Yorkshire forces in future? They are good police forces doing a good job, but they are dying the death of a thousand cuts.

Mr. Denham: I do not accept that either of those forces is dying the death of a thousand cuts. The increases in resources during the past two years were unheard of under the right hon. Gentleman's party, so let us not have loose talk of that sort because it is damaging.

Let us talk about the formula. All that I want to do—extremely tentatively—is to set out the principles. A part of the pension costs arises from predictable costs that occur when people retire from the police service in the usual way. The police service as a whole and individual police forces have no control over that, but the costs can vary unpredictably if, 30 years previously, there was a cohort with an especially substantial intake. When that group leaves the service there can be a disproportionate impact on pension costs and the budget for that year, and that fact will not be reflected 100 per cent. in the damping mechanisms that are currently in the system. My aim—although I am not sure whether I can achieve it—is to have a system that better protects forces from those costs.

Another cost built into pension schemes reflects to a large extent the success or otherwise of police services in effectively managing health and medical retirement issues. We all acknowledge that some forces have dealt with those much more effectively than others. I am not convinced that those costs are central and that we should pick them up, or that it would serve the good management of the police service to say that whatever the rate of medical retirement the cost to the pension scheme would be picked up centrally. The honest answer is that we shall have to get that right, so that we send the correct signals through the system. We must try to protect police authorities against costs over which they cannot possibly have control but which can affect their budget. However, we do not want to send a signal that poor management will be subsidised by the central police settlement. That will be my approach.

I have already referred to our actions in finding additional resources from outside the planned settlement to ensure that each police authority receives a grant increase during 2001-02 on a like-for-like basis of at least 2.3 per cent. The mechanism is part of a system of floors and ceilings that have applied to the local government grant settlement. Although the mechanism has generally been welcomed, some authorities would have preferred a higher floor, while others were concerned that those above the floor were paying for those below it. We have damped that effect with the additional resources found by my right hon. Friend the Secretary of State for Transport, Local Government and the Regions. The introduction of the floors and ceilings system has been useful this year.

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I want to make a couple of points about the special grant. As my hon. Friend the Member for Burnley (Mr. Pike) pointed out, I have received requests for special grant to support several police authorities who suffered during the disturbances last summer. I am pleased to tell the House that my right hon. Friend the Home Secretary has agreed to meet more than half the extra policing costs that were incurred and to give grant as follows: £2.22 million to West Yorkshire; £1.44 million to Greater Manchester; £0.82 million to Lancashire; and £0.56 million to Staffordshire.

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