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Richard Burden (Birmingham, Northfield): Will my hon. Friend comment on two things? First, in relation

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to deprivation, the PricewaterhouseCoopers report referred to unmet need as real need that should be addressed. Will that be given full weight in the Government's response? Secondly, I hope that my hon. Friend will understand that the fact that there was no contribution today from the west midlands conurbation, which includes England's largest local authority, Birmingham, indicates not a lack of interest, but a lack of time. May I draw his attention to the letter that has been written on behalf of Birmingham MPs to our right hon. Friend the Deputy Prime Minister?

Mr. Leslie: I very much appreciate my hon. Friend's contribution. I am certainly not taking the weight of contributions as a measure of how to make a judgment on this matter. There has been a long and extremely thorough consultation process.

Mr. Mark Todd (South Derbyshire): I thank my hon. Friend for commenting on the issue of how to adjust for variable costs in local government. Of the various formulae presented, surely the one that commends itself most obviously is that used in the national health service, which avoids the cliff edge, is already in place and is clearly a tried model used across the country?

Mr. Leslie: I shall come in a moment to issues in respect of area cost adjustments. I understand that there is a weight of differences of opinion. Today I want to underline the guarantee that we have been able to give so far about a no cuts arrangement in terms of authorities on a like for like basis for next year. Obviously, we wish to move further on that issue, but that is the state of play before we get into the details and the final decisions.

Mr. Clifton-Brown: May I challenge the Minister again to say whether it is cash for all seven blocks or, as the consultation paper says, in real terms for education? Can he confirm that it will be in real terms for education and all the other blocks? Will his cash guarantee apply for years one, two and three?

Mr. Leslie: The hon. Gentleman will have to wait and see when we come to the final decisions about the grant allocation. All I am saying is that at this particular time we can give that undertaking about no cash loss for any particular authority. Obviously, we hope to do more. The hon. Gentlemant seems to be making spending commitments on behalf of the Opposition. I welcome his conversion to a real terms commitment to growth for local government spending and I shall have to remember that for a later date.

Several hon. Members rose—

Mr. Leslie: I do not have much time. I should like to make some progress and then I may give way later.

The hon. Member for Bath (Mr. Foster) suggested that it would be better to postpone the change in the system for a year or so, although on 15 October he said:

I am not sure that there is necessarily consistency in the Liberal Democrat arguments. I am glad that the hon. Members for West Derbyshire (Mr. McLoughlin), for

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South-East Cambridgeshire (Mr. Paice) and for Cambridge (Mrs. Campbell) urged the Government to make progress in terms of implementing the results of the review. There is never a right time, but I think that we should make progress straight away.

Clearly, many hon. Members are concerned about deprivation, and rightly so. The factors reflecting deprivation need to be relevant in the particular services that are provided. They need to be relevant and applicable to all authorities. We need to avoid perverse incentives in the formula. For example, it would not make sense if we had a formula that rewarded school absenteeism. We need to reflect genuine need. Those are important issues. How much weight we give to those issues is of particular concern. My hon. Friends the Members for Wigan (Mr. Turner), for Pudsey (Mr. Truswell) and for St. Helens, North (Mr. Watts), and my right hon. Friend the Member for Birkenhead (Mr. Field) raised important issues in respect of deprivation, as did the hon. Member for Torridge and West Devon (Mr. Burnett) in terms of whether working families tax credit and income support come into the deprivation calculation.

Mr. Swire: The Minister referred to Devon county council's plea that working families tax credit be taken into account in an area that has a lot of low paid workers but is not too bad on unemployment. Will he give that his utmost consideration because it is a serious factor that will affect the outcome for Devon?

Mr. Leslie: I hear what the hon. Gentleman says. We shall have to weigh up those factors in the process of reaching final decisions. A number of options look at incorporating working families tax credit into the calculations on deprivation.

A number of hon. Members raised the education allocations. Clearly, those are significant proportions of funding. The document for consultation had four cross-cutting blocks, including variables reflecting deprivation issues, additional educational needs, area cost adjustment and so on. The f40 group of authorities was well represented in the debate by my hon. Friends the Members for Stafford and for Newcastle-under-Lyme (Paul Farrelly), the hon. Member for Mid-Dorset and North Poole (Mrs. Brooke), and many others. The Government will consider option 5 as submitted and the other suggestions. I understand the strength of feeling, but there is a need to balance the desire of f40 authorities for a high basic entitlement with the need adequately to tackle deprivation and educational under-achievement in certain areas.

Judy Mallaber: Will the Minister also consider a suggestion that I put in my submission but was unable to make today, which is that there is a floor, perhaps at the lower quartile level once the calculations have been done, so that the lowest funded education authorities do not fall below that level?

Mr. Leslie: My hon. Friend helpfully moves the issue forward to floors and ceilings in general, and the guarantee that I mentioned earlier in terms of no cash cuts at this particular stage is relevant to her point. The hon. Member for Mole Valley (Sir P. Beresford), and the right hon. Member for Kensington and Chelsea

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(Mr. Portillo) questioned the guarantee. Of course we hope that we can do better than the commitment so far. Decisions on the levels of floors and ceilings are the next stage in the deliberations. We want to set those at realistic levels, taking into account the grant available and the range of outcomes for individual authorities. We hope that announcements will be made before early December—[Laughter.]

Sir Paul Beresford: I apologise for my levity. Does the guarantee apply to police authorities?

Mr. Leslie: No authority receiving grant will incur a cash loss. That is the guarantee that we have been able to give at this stage. Clearly, we hope to do better.

The right hon. Member for Kensington and Chelsea—who has left in his taxi, unfortunately, although the hon. Member for Cotswold (Mr. Clifton-Brown) mentioned him frequently, which was interesting and perhaps I will analyse that later—and my hon. Friend the Member for Regent's Park and Kensington, North (Ms Buck) also touched on the issue of the census. I understand the issue to which they refer, and, while we will use census information as the best available data, it will be covered by the floor guarantee that I mentioned.

Area cost adjustment is a big issue, which is very significant, and most Members accept that there are greater pay costs in different places, which is a difficult issue to address. My hon. Friend the Member for Stroud (Mr. Drew), the hon. Members for Brentwood and Ongar (Mr. Pickles) and for South Cambridgeshire (Mr. Lansley), and my hon. Friend the Member for Brighton, Kemptown argued that greater consideration needed to be given to area cost. My hon. Friends the Members for Normanton (Mr. O'Brien), for Pudsey and for North-East Derbyshire (Mr. Barnes), along with other hon. Members, were of a slightly different opinion. Whether area cost adjustment can reflect the true costs involved is an extremely important issue, and we need to make sure that we are as fair as we can be about such options.

Resource equalisation is another extremely technical issue, which is very difficult to address. My hon. Friend the Member for Stafford, the hon. Member for South Cambridgeshire and the hon. Member for Ludlow (Matthew Green) all raised the issue. Basically, it is about taking account of an authority's ability to raise council tax when distributing the grant. The argument is whether it is fairer to take more account of an authority's relative council tax base. Again, I have listened carefully to the views expressed, and I hope that we will be able to take these matters into account.

Clearly, the grant distribution system is one of the most important issues affecting public services. Getting it right is absolutely vital. We have therefore taken great care to talk to local councillors, Members of Parliament and other local government representative bodies over recent months. Much of the work is extremely detailed and technical, and I would like to place on record my thanks for the efforts and energies put in to responding to the consultation process. In trying hard to secure the widest possible involvement of all stakeholders, we hope

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that the eventual results prove more robust, reliable and authoritative. It has not always been possible to exploit every single avenue proposed, and we cannot promise that everyone will be ecstatic about the results. In my view, however, it is better to have approached the issue with an open mind, listening to concerns and basing decisions on the evidence before us, than to stick with the status quo or take the easy option of inaction and no change.

My hon. Friend the Member for Denton and Reddish (Andrew Bennett) hit the nail on the head when he invited me to go to Bull's Head public house in his constituency to try to explain the formula—that might take an extra pint or two. In respect of the points made by the hon. Member for West Derbyshire, who urged greater transparency, those familiar with the intricacies of local government finance—they are few and far between—will have an instinctive desire for a simplification of the formula used to distribute grant. One of the reasons why we embarked on the review was to try to clear away the mass of complications and complexities that has tied up the system so much.

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