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24 Oct 2002 : Column 431continued
Sir George Young (North-West Hampshire): Many of the contributions to this debate will understandably focus on the problems of individual constituencies, as we have heard from the hon. Member for Burton (Mrs. Dean) and my right hon. Friend the Member for Kensington and Chelsea (Mr. Portillo). I will make some generic points that, I hope, have a wider application, illustrating them by reference to the impact on Hampshire, which will be deeply unpalatable. I see that my hon. Friends the Members for Aldershot (Mr. Howarth) and for Gosport (Mr. Viggers) are in their places.
My first point concerns the council tax. In the past 10 years, there has been a consensus that that tax is an acceptable way to fund local government. A similar consensus used to exist in relation to rates, but it evaporated when too much weight was put on them, and there was never any consensus for their successor. The council tax is rather like the ratesit is bridge with a weight limit. It can cope with a certain volume of traffic, but when some of the loads get big it begins to crumble. Although people accept that the council tax is fair at the
Secondly, the Government have made it clear that they have a commitment to drive up standards in public service, particularly in education, but the impact of the more radical proposals for redistribution would make a nonsense of the Government's ambition not only in my Hampshire constituency but across huge swathes of the south-east. What the Chancellor bestoweth in his Budget, the Deputy Prime Minister taketh away in the revenue support grant settlement. Hampshire could be #80 million worse off, which is the equivalent of two teachers in every school. There is no way that Hampshire can invest in education and social services as the Government want if its financial foundations are eroded in that way. The Budget speech and the comprehensive spending review would be exposed as empty rhetoric.
Thirdly, it is not only the Deputy Prime Minister who plans to redistribute resources away from my constituency. The Secretary of State for Health is doing exactly the same. For every #100 spent by the NHS on the average constituent, my constituents get #83. The areas that stand to lose under these proposals are the same onesall around Londonwhere health trusts are struggling to balance their books. That means that in the key sector of community care where social services and the NHS meet, both are looking for economies. Health and education, the Government's top priorities, face a grim outlook in Hampshire and elsewhere.
Fourthly, what is proposed in the consultation document is a sensational redistribution of resources with the minimum of scrutiny and debate. The RSG is larger than the budget of many Departments and, indeed, larger than the budget of some countries. By changing the formula and presenting some of the changes as technical adjustments, a major and ill-targeted redistribution of wealth is taking place on the basis of the slenderest of intellectual justifications.
More than #304 million is being taken from a group of people who happen to live in one part of the country and given to a group who happen to live in another. Furthermore, that second group already lives in areas where spending levels are way above average. Public spending per head in the north-east of England is #1,148 more than in Hampshire. A Hampshire teacher will contribute towards 47 per cent. of the county council budget whereas a teacher in Durham will contribute towards 20 to 25 per cent. That is a geographical stealth tax.
Fifthly, the proposals will exacerbate the problems of public sector recruitment in the south-east, where it is essential to meet the Government's targets. Local authorities will be unable to afford competitive wages for the staff they need, in areas where it is already
Chris Grayling: I am sure that head teachers in my right hon. Friend's constituency will share the concern of the head teacher in my constituency who wrote to me this morning. She told me that substantial council tax increases would have a Xdisastrous effect" on standards and morale and would make a difficult recruitment situation much worse. I suspect those sentiments are shared by people throughout the home counties.
Sixthly, the implications for police authorities have not been mentioned much in the debate but they will have a serious impact in Hampshire. We could lose #10.4 million, which would mean a tax increase of about 22 per cent. to compensate. That would make a mockery of the Home Secretary's ambitions on the law and order front. The chairman of the police authority wrote to me:
May I make some helpful suggestions? First, the Government should validate current spending where the SSA is unrealisticas in social services where everyone agrees that it is inaccurate. Secondly, they should fund the extra area cost adjustment from Government funds, instead of making the home counties pay for it. Thirdly, as far as possible, they should allocate grant by examining basic entitlements to standard services, instead of tweaking the formula with a whole lot of subjective judgments. Fourthly, they should remove the double counting of deprivation. Finally and crucially, they should leave the system as it is and reconsider it during the next year.
In conclusion, I have deep sympathy for any Labour candidate for a Hampshire seat at next year's local elections or at a more distant general election. These proposals are a serious mistake, which the Government may live to regret.
Mr. Paul Truswell (Pudsey): I have listened with great interest to some of the contributions from Opposition Members, but the message that should come from the review is XThe party's over." For those of us looking from the north at the current system it seemed that its architects, the previous Conservative Government, had told their civil servants, XHere are the results, now go away and come up with the formulas." That gerrymandering jamboree has been paid for, in my area of Leeds, with higher council taxes and fewer services.
It is tempting to cherry-pick the options in the consultation paper for the benefit of one's own authority. Leeds has resisted that temptation and has thrown its weight behind the proposals made by SIGOMAthe special interest group of municipal authorities outside London. Those proposals do not maximise the advantages for Leeds, but they are based on a sustainable series of arguments. The concern in Leeds is that it could gain about #12 milliona mere #18 per head in the best-case scenariobut lose up to #18 million in the worst.
The SSA system has long been riddled with flaws and anomalies. For example, we in Leeds find it amazing that some London authorities receive up to #2,000 more in education SSA per pupil than we do, yet Leeds has seven of the most deprived wards in the country. Indeed, its SSA is currently #79 per head less than the average for its class of authority.
On education, Leeds welcomes the proposal for unmet as well as met need to be included in the calculation. We certainly share SIGOMA's regret at the lack of a more sophisticated measurement of need, and support the arguments in favour of including the index of multiple deprivation.
On social services, large increases in SSAs were promised in the 2002 spending review, but unfortunately, under the consultation document, the benefit will be largely lost to Leeds. The Government will be only too aware that an increasing number of care homes in many areasLeeds is a perfect exampleare closing down because of insufficient income, putting massive additional pressure on local authority services and finances. That, coupled with the Government's proposal to penalise local authorities in connection with bed blocking, puts local authorities in an increasingly difficult position. It is crucial, therefore, that the Government address that issue and do not simply give with one hand and take with the other.
There are other anomalies. For example, the present formula uses the proportion of children living in flats as a good measure of deprivation in working out social services SSA, but that indicator gives implausibly large sums of money to authorities in London. In fact, it gives Westminster #206 for every child but Leeds a mere #9 a child. Where is the factor that takes account of the large number of back-to-back and terraced homes in Leeds? It simply does not exist.
The Government's fixed costs optiontop slicing #300,000 for the cost of simply being in business and allocating that sum across the board to local authoritiesis simply unjust and unfair. Unless the mechanisms by which it is calculated can be rationally weighted, the idea should be rejected outright.
Resource equalisation is another crucial element of the debate from the Leeds and SIGOMA point of view. The gap between local authority current needs assessmentSSAand actual spending amounts to #3 billion, which has to be met locally from council tax. This year, Leeds will spend more than #10 million above SSA on education and #18 million more on social services.
We therefore support the measures required to introduce some equalisation into the system. We believe that the most appropriate way of updating is by using a fixed percentage increase to eliminate the gap between notional spending and actual spending. That is reflected in the consultation document's first resource equalisation optionRE1. However, specific funding is needed from outside the system to achieve fair equalisation; it cannot be achieved with the existing elements.
A number of colleagues have mentioned the area cost adjustment. That probably represents the single greatest cause of injustice and anger in the present system. [Hon. Members: XHear, hear."] ACAI am sure that this message will come from everyone, except perhaps the authorities that currently benefit from the systemneeds to be clearly linked to real circumstances experienced by real local authorities living in the real world. It cannot continue to be based on a convenient mythology, which is the hallmark of the present system. It is extremely disappointing that such an option has not been included in the consultation document.
The ACA factor has been demonstrated through research to overcompensate authorities in terms of actual costs. Additional resources, despite protestations across the House, have been used to keep council tax down rather than to meet needs and improve services. Any new ACA option should take account of wage pressures not only in the south-east but on a regional basis. In addition, the present approach makes far too many assumptions about the impact of private or general market pay levels on what local authorities have to pay.