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24 Oct 2002 : Column 436—continued

2.12 pm

Mr. John Burnett (Torridge and West Devon): I join other Members who paid tribute to the hon. Member for Stafford (Mr. Kidney) for his sterling work on the f40 group. I commend to the Minister, if I can catch his eye, a work entitled XThe Fiscal Crisis in the United Kingdom" by Professor Iain McLean and Alistair McMillan of Nuffield college, Oxford. It is an independent and extremely well-researched paper. It shows conclusively how badly the west country is treated in the apportionment of Government investment within the United Kingdom. I endorse, also, the comments made by the hon. Member for Wigan (Mr. Turner) on area cost adjustment and by the hon. Member for Burton (Mrs. Dean) on the matter of resource equalisation.

On 15 October we had an Adjournment debate on option 5 funding for Devon. We put forward the points raised by the f40 group. The Minister for School Standards, set out the additional expenditure that Devon and other local authorities have received. I recognise that. It is quite apparent in my constitutency, especially capital expenditure on the fabric of school buildings. Yes, there have been significant improvements. After 30 years of neglect our school buildings are getting better and there has been additional expenditure on education. However, I remind the Minister that Devon is one of the few local authorities with an expanding population. The funding review of local government finance is the most important for over a decade. It is of critical importance to the services that Devon county council provides, to the council tax payers of Devon and to the buoyancy of the Devon economy.

In the time available I want to cover some of the major points. On education funding, as the hon. Member for Totnes (Mr. Steen) said in his Adjournment debate, we in Devon receive about #195 per pupil per year less than the national average. Devon county council has to spend about #19 million a year on school transport. Effectively all four of the options in the Government paper leave us substantially worse off. We end up worse off than we are now.

There is a huge head of steam building up in Devon on this matter. I, like most other Devon Members, have received more letters from constituents on this than on any other matter. On 16 July I and other Devon Members took a delegation of head teachers, governors and others to 10 Downing street to present a petition to the Prime Minister. He listened to our points. I and hundreds of thousands of people in Devon hope that he acts on the evidence that we presented.

We support option 5 which is being proposed by the f40 group. There is a powerful all-party consensus of a great many Members who are promoting this option.

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I believe some 200 Members are behind it. In a nutshell we want, first, to maximise the amount per pupil. Secondly, if the formula is to provide for deprivation, not just for education, but also for other services, working families tax credit should be included as a measure, as well as income support. The Government have indicated that they are predisposed to allow this change. The case is compelling. Working families tax credit in conjunction with income support is a far better measure of deprivation and should be used throughout the formula. Income support measures unemployment. Working families tax credit measures those on low pay. Deprivation affects those on low pay as well as the unemployed.

Mr. Hugo Swire (East Devon): Is it worth pointing out that average wages in Devon are 20 per cent. below national average?

Mr. Burnett: That is an extremely good point and the hon. Gentleman will not be surprised to know that I am going to make it. Low pay in Devon arises from seasonal work and poorly paid employment.

The use of working families tax credit within the grant distribution formula reinforces the Government's objectives of getting people into work and supporting those on low pay. The inclusion of working families tax credit also reflects the fact that low-income families are likely to have similar needs to those of the unemployed. Therefore, local authorities with a high number of working families tax credit claimants will have increased levels of deprivation.

In addition, there is the crucial matter of school transport and sparsity. A substantial amount of Devon county council's budget is devoted to school transport. In the schools block, which is over 80 per cent. of the education block, there is provision for primary school transport. I can assure the Minister that that is simply not enough. The vast majority of those travelling to secondary schools in my constituency and others qualify for school transport. That must be recognised in the formula. I see a great many heads nodding. I am delighted that there is a large degree of consensus.

Any changes in the distribution mechanism for social services must be seen in the context of the inadequacy of the quantum of resources available for those services. The Local Government Association and the Association of Directors of Social Services consistently state that nationally authorities are annually budgeting some #1 billion above social services standard spending assessments. As the Minister knows, many parts of the budget are demand led. Devon county council spends more than 10 per cent. above the social services standard spending assessments. Devon has two major concerns regarding the social services formula. Because of the concern about continuing reliance on past spending levels within the younger adults formula, we would welcome a separate formula for mental health within the younger adults sub-block. Secondly, we acknowledge that the distinction between residential and domiciliary care is becoming very blurred. That would point to the need for a combined formula in future. Devon has campaigned for several years for a total resident population rather than a household population to be used as the client group, and for a degree of weight to be given to sparsity in domiciliary care cases.

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On police funding, the police options in the consultation paper show Devon and Cornwall losing some #2.1 million to #5.3 million. To give an example, #5 million is equivalent to 12 per cent. of our entire council tax receipts or the cost of 200 police officers—

Madam Deputy Speaker: Order. I call the hon. Member for Stafford (Mr. Kidney).

2.20 pm

Mr. David Kidney (Stafford): There is a keen interest in this subject around the House and among the public and councillors in our English constituencies, for very good reasons. First, local government is responsible for a quarter of all public spending. Secondly, we have waited 10 years for this change, and people reasonably fear that this will be a once-in-a-decade operation, so they are anxious to have their say now. Thirdly, local government depends on money that comes from the Government for 75 per cent. of its spending, so this is a vital subject.

I am a friend of the Government, and I want to point out that some of the criticisms of their position are unfair. First, on the criticism that there has not been enough effort to try to change the existing system, in 1997, the first year of the Labour Government, there were 35 changes to the existing formulae. What we found, however, was that the system was so complex that to change one piece in one place had unexpected consequences in other places. The Government therefore concluded that a totally new system was needed, and I approve of that decision. The Government then gave local government the opportunity to agree that new system—what could be better than a system to which everybody agrees and signs up? Because of the all the vested interests, which we are rehearsing today, it was not possible for those authorities to agree that system. When they complain about the effect of the new system on their finances, I hope that the Deputy Prime Minister asks them what their position was when they had the opportunity to agree the system for themselves.

The Government also deserve credit for the extra funding that they have put into local government overall. I give special praise to the decision by the Chancellor of the Exchequer and the then Secretary of State for Education to introduce flat-rate payments to every school in the country in response to our complaints about the unfairness of the distribution system. As has already been mentioned, the Government deserve credit, too, for the thoroughly open way in which the process has proceeded—the Green Paper, the consultation document, the seminars for Members, and the meetings and delegations that have been seen.

The Government hope that the new approach will be simpler, easier to understand and easier to explain, of which we all approve. When we see the possible consequences for our local authority, however, we find a credible measure that we would like to insert into that simple system to benefit our area. People put up many different arguments, which was a fault of the previous system—it was overloaded with credible but partial systems that bent it to suit different authorities' areas, which made it complex and difficult to understand.

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The Government must therefore be brave, resist all those blandishments and arguments and keep the system simple.

Of course, the new approach will not be an objective exercise that speaks for itself. The Government will make political decisions. They will decide where to draw the line between basic amounts and top-ups. They will decide what measures to use for the top-ups. They will even decide what evidence to use for those measures. We must recognise that those political decisions are the ones that we want to influence as Members of Parliament.

Some overarching aspects of the new system need to be pointed out because of their effect on the whole, such as the promise of no losers and the system of floors and ceilings. Between them, their operation means that there is significant loss of room for manoeuvre in the overall settlement. Nevertheless, it is a fair attempt to provide stability and security for those who worry about losing grant.

The next overarching issue that is worrying for areas such as mine in Staffordshire is the operation of area cost adjustment in the new system, and the proposal for resource equalisation, both of which threaten to overwhelm completely all the good work done for individual formulae for the service blocks. The final issue is the modern expansion by a Labour Government of the use of special grants and specific grants, all of which will be taken out of the money that is available through the system to distribute to local authorities equally.

I do not have much longer to speak, but I want to mention briefly the f40 campaign, with which I have been associated. First, the campaign relates only to education funding, but we are debating the whole of local government finance, which is an important distinction to draw. The campaign grew out of a collection of only seven or eight shire counties that, under the present system, constantly found themselves at the bottom of the funding league table, year after year. They wanted change, and they argued for it, but nobody listened because they did not have a big enough influence. A strategic decision was therefore taken that drawing a line at the bottom 40 authorities in the lowest-funded league table would provide some clout. The good thing about f40 authorities is that they represent all parts of the country, all kinds of councils—shires, metropolitans and unitaries—and all kinds of political control. The campaign therefore has a sensible balance. I hope that we are able to persuade the Government to listen to our non-partisan view—I admit that we come from a particular position, but it is the one at the bottom of the pile.

As for Staffordshire—and the reason why I feel so strongly about this subject—we are poorly funded. This year, the local education authority was inspected jointly by Ofsted and the Audit Commission. First, they found that our education attainment is at or above the national level, which is a tremendous tribute to the hard work of the teachers, governors, school staff, parents and the students themselves. They also found, however, that we are funded at a level that is 12 per cent. below the average for local authorities, which, given what we have achieved, is an incredible amount. We are 33rd out of 34

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English shire counties in the funding table, the local authority spends above its SSA to try to compensate, and we are not eligible for major funding streams such as excellence in cities and education action zones.

My recent experiences demonstrate why I feel so strongly: a first school has asked two experienced teachers to leave because it cannot afford their salaries; an Ofsted report told me that a primary school had to choose between office staff and a special educational needs co-ordinator; and a high school had to ask four teachers to leave because the budget did not add up at the end of the financial year. Politically, I find that, whatever the good news about educational achievement or funding—I would hope that a Labour Government would be interested in this point—whenever I mention it, everyone says, XYes, but what about the unfair funding system?" All the good news is lost to the area.

F40 supports option 5 because we thought that the Government were interested in closing the league table gap between the best-funded authority and the lowest-funded authority, and option 5 seeks to do that. I want a system that has the maximum proportion in the basic amounts and the least possible in the top-ups. I want the top-ups to be based as closely as possible on actual additional costs presently incurred. I want no major distortion of the new settlement by wholesale resource equalisation. I want a closing of the gap between the best and worst funded authorities. Finally, I want a reduction in the use of special and specific grants to pay for improving the finances of the lowest-funded authorities while keeping the Government's commitment to no losers and a fair system of floors and ceilings.

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