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15 Oct 2002 : Column 277—continued

Paddy Tipping (Sherwood) rose—

David Taylor (North-West Leicestershire) rose—

Mr. Pickles: I shall give way to the hon. Member for Sherwood (Paddy Tipping) first.

Paddy Tipping: The hon. Gentleman talks about the need for consensus and fairness. Will he set down the principles that he and his party would use to distribute grant?

Mr. Pickles: I am happy to do so. However, as the old saying goes, I do not think that I would have started from here. We need a thorough review of the functions of local government and to get agreement on the criteria that determine how grant is distributed. On that basis, I would certainly be willing to build a consensus.

David Taylor: Will the hon. Gentleman give way?

Mr. Pickles: In a moment.

However, it is impossible to build a consensus when individual high-performing authorities are penalised with the removal of grants worth tens of millions of pounds. It is impossible to build a consensus while low-performing authorities are rewarded with a cash

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windfall. It is impossible to build a consensus when, as The Times asserted in a July headline, XLabour will tax Tory voters to fund heartland".

Gregory Barker (Bexhill and Battle): Does my hon. Friend see anything fair in the fact that East Sussex, which is the poorest shire county in England, is also the worst affected? [Interruption.]

Mr. Pickles: I am sorry to hear Labour Members laugh. My hon. Friend speaks the truth, certainly in terms of average income and of the size of the cuts in relation to the budget.

Several hon. Members rose—

Mr. Pickles: If hon. Members bear with me, I want to make some progress and then I will happily give way—

Mr. Michael Jabez Foster (Hastings and Rye) rose—

Mr. Pickles: I mean exactly what I say: I will give way in a moment.

Decisions will be made known in December. That will be about the same time as the Audit Commission gives its verdict on larger councils, through the comprehensive performance assessment. Is the Minister prepared to give a guarantee that the top 10 local authorities will not have grant taken away from them and that the incompetence of the bottom 10 will not be rewarded with extra grant?

Mr. Raynsford: I am happy to respond to that. Before I do so, I take the opportunity to say that I have been informed that, following discussions held by my right hon. Friend the Leader of the House, we now feel hopeful that it will be possible to extend this debate on the Floor of the House next week. In response to the hon. Gentleman's question, I have already given a guarantee that no authority will receive less grant, so there is no question of any high-performing authority suffering a loss. That gives the hon. Gentleman the assurance that he seeks.

Mr. Pickles: I have to tell the right hon. Gentleman that on 12 December that will not spare his blushes.

Several hon. Members rose—

Mr. Pickles: I shall give way in a moment.

The Government have ignored this issue for six years. It is clear from the consultation that they have not used that period to gather information. After six years, we are nowhere near agreement on the heads of need. We have moved from a position in which the Government were acting like a sleeping dormouse to a new phase in which they are like a bat out of hell. Their determination to push through these reforms by May will do untold harm to fragile local government. As a result, in the words of the Rural Services Partnership,

Jim Knight (South Dorset): Having heard the Minister's reassurance, will the hon. Gentleman

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reassure us that if his party were in office it would match the Government's plans to increase local government spending by 5 per cent. next year?

Mr. Pickles: The hon. Gentleman may have misheard his right hon. Friend. He gave an undertaking that in cash terms there will be no difference in grant, but as people will readily understand, that will in no way compensate local authorities for their cost base and wage bill.

Mr. Michael Jabez Foster rose—

Mr. Pickles: Of course I will give way to the hon. Gentleman, who is so patient.

Mr. Foster: Several Conservative Members have mentioned East Sussex. Is it not the case that East Sussex took a reduction of 7 per cent. in real terms in the last three years of the previous Conservative Government? Would the hon. Gentleman be prepared to match the amount that this Government are at least guaranteeing?

Mr. Pickles: I hope that Hansard is available in the hon. Gentleman's constituency, because those words require wide circulation. [Hon. Members: XWhat does that mean?"] It means that the hon. Gentleman will have a bit of a problem.

The Minister's guarantee that no authority will receive less cash next year is not sufficient to meet councils' existing needs. We know from rising pay settlements and a growing cost base that those moneys will not meet next year's costs and will lead to council tax increases and service cuts. Even the real-terms guarantee on education is so full of escape clauses that its effectiveness should be doubted. The Association of Secondary Heads in Essex told the Department on 13 September:

Given that Essex could lose about #80 million, Kent rising #90 million and East Sussex #43 million, no cash guarantee will be effective. The removal of sums of those proportions cannot be achieved by painless cuts or salami-slicing in line with the Government's gradual withdrawal of grant by placing a floor on the loss. Whole sections of public services will be abandoned or rationed. Even if the Government announce a floor of 3, 4, 5 or even 6 per cent., local authorities will have to make decisions about the wholesale abandonment of important public services.

Sir Paul Beresford : Does my hon. Friend take into account the fact that some local authorities rely to a large extent on discretionary grants? If they are at the floor, such authorities will lose out dramatically, because the discretionary grant element will not be taken into account.

Mr. Pickles: My hon. Friend has extensive experience of these matters and he is absolutely right. Furthermore,

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local authorities want to return to the levels of specific grants seen in the Tory years, because far less discretion is available to them now than they had under the Conservatives. The Minister looks surprised, but that is what the county councils said in a letter to him; I advise him to pay more attention to his mail.

David Taylor: The hon. Gentleman is moving on from the distribution of rate support grant to specific grants. Perhaps he will take a further step and consider how the national non-domestic rate is currently distributed. The system is extremely simple: every authority receives the same sum per person. Does he endorse the Government's proposals to merge NNDR into RSG, creating a formula-based system, which will not contribute to the transparency and intelligibility that are probably major planks in the consensus that he seeks?

Mr. Pickles: I do indeed seek consensus, and I believe that consensus is possible on this issue, because I got the distinct impression from the Minister that the Government were having a rethink. I see the Minister smile, so perhaps it will be possible to build consensus. There is no sense in merging NNDR and RSG: there are several disadvantages to doing so, particularly for local authorities that currently receive no RSG. In addition, there is the importance of co-operation between business and local authorities and the need for transparency, and the current system is better in those respects than the Government's proposed changes.

Mr. David Drew (Stroud): Neither the Government nor the official Opposition have mentioned what I regard as the nub of the problem: the area cost adjustment. Many of us feel that there was a fiddle. It is understandable in the light of the notion that teachers, social workers and others in the south-east face additional costs, but it creates a blatant unfairness that must, if possible, be removed. I am interested in hearing whether the official Opposition will seek to remove the area cost adjustment.

Mr. Pickles: I do not agree with the hon. Gentleman—I do not think that the area cost adjustment was a fiddle. There is a case for examining it, but some of the proposals regarding the number of people who fall off the different steps would merely replace one perversity with another. The Government appear to have got hold of the idea of zones within counties for the purposes of the area cost adjustment, but the Minister will be aware of the huge variations that occur, for example, in the counties around London and the different parts of those counties.

Let me return briefly to the real-terms guarantee. Taking out sums of such proportions will result in public services having to be reduced. The Minister's refusal to provide even a working assumption as to the level of the floor of the withdrawal is harming local authorities' plans. Despite pleas from Sir Jeremy Beecham, the chairman of the Local Government Association, the Minister has refused to go beyond a zero per cent. floor, suggesting in a letter that 3 per cent. might be too high. However, at this time of year, councils are at an advanced stage of their budgetary cycle, and Government's silence makes them fear the worst. Council budgets are not going to be put together in the

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spring—we have moved far beyond that. Most of them are put together in the autumn. The refusal to offer anything other than a zero floor is to the detriment of local government.

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