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24 Oct 2002 : Column 458—continued

3.35 pm

Mr. Frank Field (Birkenhead): When we go into the next election, we will reflect on two entire periods of Labour government. Although Governments have to do many things, there are few opportunities and initiatives that they can seize to make a real difference to the country in which we live—particularly if we are interested in making it more equal and fairer. The reason why so many Members—particularly those on the Labour Benches—wish to catch your eye in today's debate, Mr. Deputy Speaker, is that they realise that we have reached one of those points when the Government have within their grasp the opportunity to make a real difference to the life chances of many of our constituents.

I therefore thought it almost eccentric of the right hon. Member for North-West Hampshire (Sir G. Young) to say that he would survey the Olympian heights, rather than indulge in the foothills of the interests that most of us will follow. Indeed, no sooner had he made that comment than, quite properly, he was making the best case that he could for his own constituency. So although I may not mention Birkenhead in my speech, I will, quite properly, represent the interests of my constituents to the best of my abilities.

In addition to the presentation made by other northern Members for the SIGOMA members—I know that the Government have looked at the document, and that they realise how robust the analysis is—I wish to

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develop four themes. First, given that, this time, the Government are trying to make a fairer settlement, I ask them to look at the total budget at their disposal. It is limited, and we cannot expect Governments to keep pushing up the taxpayer's contribution. Members have spoken of Xthe Government's money", but the Government have no money—it is our constituents' money that we are talking about.

Once the size of the taxpayer's contribution to local authorities has been decided, I beg the Government to reconsider the amount that they pay out generally, and the amount that they keep back, to make good the unfairnesses in the system. I do not believe that we have got that total balance right. We should not be fighting one another, saying, XIt is unfair that they get additional resources, because we have different circumstances that should be met." We have an opportunity to explain why our own local authorities may be unique in some instances, and hopefully to make that plea sufficiently effectively to persuade the Government to follow through with additional funds.

On the formula for compensating for inequalities and disadvantage, my first plea to Ministers is to consider whether they have got the balance right between the weight given to deprivation and to race. It is clear that local authorities with many immigrants, or with many first or second-generation black Britons, face costs over and above those incurred by the richer areas that have not had the advantage of receiving new arrivals to this country. My plea concerns whether the weighting for that is right when compared with that given to deprivation. I represent a constituency that contains the poorest area in the country. I doubt whether I have seen six black faces in my constituency since being elected. Examination of the way in which the formula operates shows that our budgets are far lower than those for areas that suffer equally from deprivation but are compensated both on race and deprivation. I am not arguing that the race element should be taken out of the formula, but that the deprivation weighting is wrong.

I also make a plea about how we calculate the deprivation index. I am pleased that the Government are moving towards a wider spread of benefits to work out whether they can devise a more sensitive way of measuring poverty. While it is true that most people on income-related benefits are genuine, some are not. I make a plea to the Government: if they cannot do so now, I ask them to consider later in the cycle the weighting of health as well as income deprivation in the overall deprivation index. People do not die early or have low birth-weight babies so that they can get on to tables to show that they live in an area of extreme deprivation. Health is a far more accurate way of measuring whether areas are poor than income figures alone.

My next plea is about the area cost adjustment, although I am not pleading for it to be abolished. Clearly, there are differences in costs for different local authorities. My plea is that the area cost adjustment should be based on reality, rather than on fiction. The Government ought to look at the excellent work of the Coventry authority, which shows that, for many authorities, a substantial part of the area cost adjustment goes not on services but on reducing the

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council tax. That is not a tenable position. By all means there should be an area cost adjustment, but it should be based on reality.

The third area on which I shall touch is the additional costs suffered by areas with declining populations. There is a myth among some Members that it is an advantage to represent an area from which people are leaving, since at least costs fall in proportion to the numbers of those leaving. Those of us who represent such areas will know a different story. Not only is the infrastructure of those areas older, more decrepit and more decayed—therefore requiring greater investment and replacement—but many of the people who are leaving are the bushy-tailed ones; the people with abilities who have to go elsewhere to look for jobs.

The areas from which people are leaving are areas with higher dependency ratios; they have people who are dependent not in any wrong sense, but in a dignified sense. They have grown old and need looking after. They cannot always follow their offspring to areas of economic advantage. Far from our costs falling, they rise disproportionately. My plea, adding to the overall case made by SIGOMA, relates to how we fine-tune the formulas that have been put forward.

I want to end with a note of thanks. The Government have opened up the debate—

Mr. Deputy Speaker: Order. Time is up.

3.43 pm

Mr. Andrew Turner (Isle of Wight): The Isle of Wight, which I am proud to represent, has much to be proud of. Vectians are robustly independent and provide a loyal and hard-working work force. However, we suffer, as do many constituencies, from relatively high and seasonal unemployment. Our gross domestic product is creeping above 75 per cent. of the national average. Some 25 per cent. of jobs are in tourism and 40 per cent. are dependent upon it. There are a huge number of small businesses that defy the classic small and medium-sized enterprise definition because a SME nationally is large in Isle of Wight terms. Some 26 per cent. of the population are pensioners who live on fixed or declining incomes.

The economy is looking up. Despite a recent halving of jobs at Westland, there are new jobs and new contracts at AMS, SP Systems, NEG Micon and GBR Challenge, which builds the United Kingdom's official entry for the Americas Cup, which is taking place now. I congratulate GBR Challenge on how well it is doing.

My constituents and local authority are greatly concerned at the Government's review of local government funding, because the proposals, in the worst-case scenario, will lead to a loss of 10 per cent. of Government grant, which is equivalent to a 30 per cent. rise in council tax. To a band D council tax payer, that would put an extra #366 a year on top of what they pay normally. Such an increase is unaffordable to many residents, whether or not it is dampened in the short term by floors or ceilings. The council has said that such a proposal would lead to impossible cuts in services.

There are two important issues that I would like to raise today. The first is the methodology for calculating the area cost adjustment and the second is my heartfelt wish that the Government would recognise the essential additional costs of providing services on an island.

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The Isle of Wight is concerned that the data used for the area cost adjustment are not valid for the size of population of the island. At present we are aggregated with Hampshire to produce a robust enough earnings sample but, of course, Hampshire is a wealthy area and the Isle of Wight is a less wealthy area. The small size of the sample produces greater opportunity for error. This is not the basis of a fair distribution of grant or a basis that can be justified to my constituents.

On the island, we have a relatively low-skilled work force. That means that we need to recruit from a wider area than the island for many occupations. When we recruit one employee to the council, we often have a difficulty, in that they have to move and their spouse or partner can then be put out of a job, as we do not necessarily have two equivalent jobs available on the island or within easy travelling distance. We need the area cost adjustment to be calculated on a fair statistical basis and not built up from a hand-sized sample that is sub-divided, further reduced, weighted and reworked, as happens at present.

On the costs of providing council services on an island, the Minister will know that the Elliot review in 1996—the local government finance review of the area cost adjustment by Professor Elliot—recommended that a study be undertaken into the differences in non-labour costs affecting two councils only, those being the Isle of Wight and the Isles of Scilly. Such a study was recently undertaken by PricewaterhouseCoopers and has been sent to the Minister's officials. It evaluates the costs solely attributable to separation by sea at #4.2 million, or almost 4 per cent. of the council's budget.

The report's terms of reference were to examine how the Isle of Wight council's costs of service provision were affected by severance by sea and to analyse and quantify the additional costs incurred. When the Minister sees the report, I am sure he will agree that it is robust and does not exaggerate. I have been through the report with a fine-toothed comb and it does not over-egg the pudding or exaggerate the case. Its robustness may be measured by the fact that it refers to a reduction in the estimated cost of severance by sea from #5.6 million in an earlier report in 1996 to #4.2 million today.

PricewaterhouseCoopers excluded many factors that result in higher costs but are not directly and wholly attributable to severance by sea, such as the cost of discretionary services; diseconomies of scale—because the island is a small authority—costs that arise from demographic factors such as the high population of elderly people; the costs of supporting or maintaining the economy of the island; and costs that are attributable to the physical geography of the island, such as the cost of coastal protection.

Even that robust report and its robust definitions came up with additional costs of #580,000 a year for special education, #827,000 a year for fire services, #400,000 a year for waste management, #655,000 a year for construction and #1.2 million a year for social services residential care.

I shall deal with one or two of those areas in more detail. In social services, the council pays for 1,750 residential care placements a year—not many for a large council, but quite a lot for a small one—and 350 nursing home places. The council must keep enough nursing and

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residential care homes in business to ensure that places are available on the island. It is unacceptable to place elderly people on the mainland, because a journey by public transport from Ventnor to Basingstoke to visit an elderly person, or anyone else, would cost #27 for the round trip and take most of the day. PricewaterhouseCoopers concluded that prices were higher because of less competition—it compared the island with Hampshire, Portsmouth and Southampton—with additional costs to the tune of #1.24 million.

We use residential places for 40 children with special educational needs, for services that it is not cost-effective to provide on the island. Some non-residential places are available in south Hampshire, but the additional time and cost of perhaps accompanied travel must also be taken into account. Such places sometimes cannot be taken up because of the disruption that weather conditions cause to travel. An additional #580,000 annual cost is incurred providing those residential places.

The fact that islands face additional costs has been recognised and reflected in grant systems in this country and elsewhere. The Scottish special island needs allowance is one example and the Danish grant distribution system is another—

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