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9.6 pm

Mr. Clive Betts (Sheffield, Attercliffe): The report essentially does two things. First, it sets out the overall amount of grant that central Government will give to local authorities. There have been expressions of support, certainly from Labour Members, for what the Government have done. The settlement is reasonably generous; the increase is well above the level of inflation. Secondly, it distributes the money among the individual local authorities.

As a Sheffield Member, I can accept the Government's position this year. They have gone for stability in the light of the fact that, next year, fundamental changes, for which we are all waiting, will be made, but from Sheffield's perspective today's settlement is another in a long line of unacceptable and unfair grant distributions, although it is considerably less unacceptable and unfair than the grant distributions before 1997. The Government have brought some improvements to Sheffield's position since that time.

At least we can celebrate the fact this is the last time that we will have to discuss this form of settlement—the standard standing assessment—in the Chamber. We have been promised that next year we will not simply get a settlement derived from tinkering with the formulae but one based on a completely new system. My right hon. Friend the Minister has said that that system must be transparent. It is important not simply that the anoraks can explain it to us as politicians, but that we as politicians can explain it to our constituents. That needs to be a fundamental part of any new system.

We should not be surprised that the present system, with all its regressions and proxies, is not transparent—it was not designed to be. Hon. Members talk about this Government's control freakery. Where were they in the 1990s when that system was invented and developed? It was not transparent because it was meant to hide the fundamental attack by the Conservative Government on local government spending. It was meant to hide the sleights of hand to pass money to councils such as Westminster and Wandsworth. Fundamentally, it was part of the Tory Government's command and control policy towards Labour local authorities.

On one side of the coin, we had the standard spending assessment, which is about not just grant distribution, but controlling spending levels; on the other, we had the arbitrary system of council tax capping. The two went hand in hand. They were a system of control over local authorities. That is why there is no transparency; the system was not just about grant distribution but control. The changes that the Government have introduced are welcome.

Just to show that the current system is nonsense, one of its peculiarities affects Sheffield. The chief executive has written to me about it. I have been critical of the approach of the Liberal Democrat council in Sheffield to housing benefits over the past two years, which has caused chaos and confusion among my constituents. At least the council has got on quickly with introducing the benefits verification framework, and has sought to bear down on benefit fraud. That has led to a reduction in

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benefit claimants, because the people who should not have been claiming benefits in the first place have been taken out. As the council accepts, the direct cost of that process has been borne by central Government, but there is a twist in the tale. Among the myriad formulae and proxies that constitute the SSA, one proxy for poverty and deprivation is housing benefit case loads. Under this wonderful system, if a council bears down on fraud by reducing the number of fraudulent claimants, its area is deemed to be less poor and less deprived, so it gets less grant. That is just one nonsense in the system, but it has cost Sheffield £1.2 million this year. Such stupidities cannot be explained to the public, there is no rationale or reason for them and they must be fundamentally reformed when we get the changes that we are promised.

The new system will doubtless be complicated as well, and my right hon. Friend is right to say that it cannot increase everyone's grant. However, on looking at the totality of the current system, one can instinctively tell that things are wrong with it. I can see no reason why Sheffield and similar authorities receive less grant per head. People can show me the formula and the calculations, but they cannot convince me that the system is right, and I cannot convince my constituents. Given that Sheffield's neighbouring authority, Barnsley, is bouncing along the bottom of the grant table, and given Barnsley's needs compared with authorities that get far more grant per head, the system is clearly unfair and unreasonable and needs to be changed. It is against such benchmarks that we will judge the new system.

One particular and peculiar problem of the current system deprives my local authority of resources. Because of the formula's averaging process, if an authority has areas of poverty and real deprivation, and some of great affluence—Sheffield has such areas—it will probably lose out on grant altogether and get nothing even for the very poor areas. I know that my right hon. Friend is aware of the problem, and I hope that it will be addressed through future arrangements.

On occasions such as this, many hon. Members usually berate the area cost adjustment. I suspect that that has not happened today because this is the last of such arrangements. However, we have not forgotten it and we are still unhappy about it, and we are looking for change. Everyone accepts that the cost of employing staff is higher in some parts of the country—particularly in central London—than in others, but the ACA does not work fairly across the country. We accept that the settlement constitutes a minimal change, but the ACA needs to be reconsidered in future.

Hon. Members have commented on social services, and I intervened on my right hon. Friend the Minister to point out that there were choices for local authorities. In Sheffield, higher priority could be given to important social services spending, rather than to matters such as corporate publicity and the salaries of senior officers. I accept, however, that there are real pressures on the budgets of social services, which may not have always managed their resources well in the past. We have rightly focused attention on large increases for education and on encouraging local authorities to spend that money accordingly; nevertheless, social services have been left

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behind. I am pleased to hear my right hon. Friend say that the Government are aware of that issue, and I hope that they will develop some real proposals.

There is one final matter that I hope the Government will consider. As I have said, the settlement is generous overall, but generosity can be a two-edged sword. Central Government give local authorities a big share—about 80 per cent.—of local authority budgets, and they control such expenditure to a degree by determining how much a local authority will be allowed to spend. That causes enormous gearing problems. If a local authority decides to increase its budget and therefore to increase council tax, and if council tax constitutes only 20 per cent. of its spending, the 4:1 gearing ratio proves a real disincentive to responding to the wishes of the local electorate by spending extra money to improve local services.

Ring fencing has been raised by other hon. Members. I believe that there will be a problem in the long term arising from the fact that central Government control 80 per cent. of local authority grant, compared with the 20 per cent. that comes from council tax. Moreover, central Government increasingly seek to determine how the grant that they give to local authorities is spent.

Those two factors are fundamental and crucial. They go to the heart of local democracy and the freedoms of local authorities. They are also central to efforts to get people re-engaged with local politics. I know that my right hon. Friend the Minister will not be able to deal tonight with the problems that remain, but I hope that the Government will address them in the future. I look forward to Ministers returning to the House on a future occasion with proposals to tackle the problems that I have described.

Mr. Deputy Speaker: Order. If all hon. Members who wish to speak in the debate can confine their remarks to about seven minutes, they will be successful. If they cannot, they will not be able to speak in the debate.

9.15 pm

Mr. Mark Prisk (Hertford and Stortford): I am grateful to you, Mr. Deputy Speaker, and I shall take note of your request.

I shall begin by welcoming the headline increase of 7.9 per cent that has been proposed for Hertfordshire county council. That reflects the record increase in the county's school population, the growing elderly population, and the higher costs that the county faces. I am sure that the last factor is something that the hon. Member for Stafford (Mr. Kidney) and I could discuss at greater length, given the opportunity.

It is good that the Department has listened to the representations from me and other hon. Members with constituencies in Hertfordshire, and from county council officers. It has recognised our needs and the pressures that we face, but I hope that the Minister will understand why I was somewhat disappointed by the subsequent imposition of the floors and ceilings cap. That has meant that Hertfordshire will get £2.6 million less than it sought.

Given that the Department listened to representations, discussed people's needs and looked at the pressures involved, I fail to understand why it then imposed a simple, crude cap in a rather arbitrary way. I do not think that that has helped the process, as I hope that the Minister will understand.

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The result is simple: Hertfordshire county council's budget has been reduced by £2.6 million. That includes a reduction of £1.6 million in the schools budget, which could not have come at a worse time. Hertfordshire has one of the fastest-growing school populations of any county in the country, and that puts considerable pressure on school places.

Every week, I receive letters from distraught parents who are trying to get their youngsters places in nursery, primary or secondary schools. The rising school population and the funding that is about to be made available mean that there will be more letters and more disappointed parents and pupils.

The problem is compounded by the teacher shortages that we suffer. Those shortages are evident at primary level, and secondary school head teachers in my area tell me that the problem is also being felt at secondary level, especially in Hertford. That reflects one of the elements that the Department originally recognised—the fact that, in Hertfordshire and the other home counties, it is extremely difficult to retain senior staff.

The third reason why the budget cut has come at an especially bad time for our schools is that the pupil-teacher ratio in Hertfordshire is bad and getting worse. My right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) has rightly and recently made it clear that pupil-teacher ratios in Hertfordshire, unlike other parts of the country, have worsened over the past five years. Indeed, they have worsened every year since this Government came to power. I say that with considerable regret, which I hope that the Minister will understand.

The settlement involves a cut of £1.6 million in the schools budget. Contrary to the Government's promise in 1997, if the budget cut is implemented things are only going to get worse in Hertfordshire schools.

Two other uncertainties remain, and I would welcome any response from the Minister with regard to them. The first is related to previously housed asylum seekers, an issue that was raised before. I know that ceilings have been imposed on the costs involved, as other hon. Members have mentioned. The difficulty in Hertfordshire is that there is a £1 million gap between the cost to the county and the money that is forthcoming from the Government. The ceiling has been relaxed in Oxfordshire and for London authorities, and I should welcome any indication from the Minister of a similar flexibility for Hertfordshire.

My right hon. Friend the Member for Skipton and Ripon (Mr. Curry) referred to preserved rights. I do not claim to be expert in the finer details of local government finance, but I understand that this relates to elderly people who were in residential homes before 1993. The county council is quite prepared to accept responsibility for these people, and has done so, but on the basis that the Government are willing to provide the funds. At this point, the funds from the Government are £2.2 million short. I know that the county is making representations to the Minister, and I ask him to bear those in mind.

The cost of running services in Hertfordshire and other home counties is high and is rising faster than in other parts of the country. The pressures are great, particularly with regard to our school population. I was pleased that the Government listened to our representations about the SSA, but deeply disappointed that they were ignored,

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given the arbitrary nature of the floors and ceilings mechanism. The mechanism is crude; it contradicts the aim of matching spending to need. In Hertfordshire, it will betray every child in our schools.

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