House of Commons Hansard Debates for 3 Feb 1994

Mr. Gummer : I think that I should give way to my hon. Friend who is Chairman of the Select Committee.

Mr. Robert B. Jones (Hertfordshire, West) : Will my right hon. Friend join me in praising the primary schools in the Dacorum district of Hertfordshire which have set up purchasing consortia? They have agreed to share attendances at outside conferences and working parties so that not every school is denuded of staff at the same time, and they are ably demonstrating that costs can be reduced and services can be improved.

Mr. Gummer : My hon. Friend is right in his reference to Dacorum. Perhaps it might be said that Dacorum is doing precisely what the hon. Member for Blackburn (Mr. Straw) said that he would like councils to do when he said that it is not the issue of resources but now the service is managed that matters. Not only that : he also said that the bill for teachers is so enormous that it is difficult to pay it. Of course that is true, and we must find ways of doing it through efficiency.

Mr. William O'Brien : Will the Secretary of State pay attention to the authorities that make up the Webber Craigh Group, of which Wakefield-- my authority--is one? In the past, that group's expenditure has been suppressed because of the lack of rate support grant. This year an adjustment has been made, and we congratulate the Minister and his colleages on that. Because expenditure was suppressed over the years, we are now finding it difficult to make the economies referred to by the Minister. Now that the second level of rate support grant has been reasonably set, will he also set the cap at a reasonable level to meet the demand for services in the Webber Craigh Group, especially Wakefield?

Mr. Gummer : The hon. Gentleman is right to point to the excellent work that that group has done on these issues. Some of the background work on unemployment and morbidity that has been done there is of great help, and I would not like in any way to underestimate what that is. I am happy to look at any of the specific issues raised by the hon. Gentleman because this authority group has sought to find ways of facing up to some of the real issues.

This is another example of the sort of area in which we have tried to be closer to the realities in the new SSA formula. As the hon. Gentleman knows, the difficulty is that when it has been favourable it tends to be commented

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on favourably, but when it happens to have reduced the SSA in an area it is not quite so popular. However, I will certainly look at the points raised by the hon. Gentleman.

Mr. John Evans (St. Helens, North) : My local authority is also a member of the Webber Craigh Group of authorities. As the Minister and his colleagues know, it has worked hard to get economic indicators as part of the SSAs, and all of us are grateful that the Government have accepted that. Over the past three years, we have had to make savage cuts in our services because of the reform that happened then. Now that the Minister has put that situation right, will he consider that perhaps we are entitled to a little something from the Government for the years that have already passed?

Mr. Gummer : I hope that the hon. Gentleman will accept that one of the problems about changing this is that those who benefited from the previous situation understandably say that they cannot possibly change now because they have got used to it, and that they must have some help in changing when they have to lower their spending because they got too much in the past. Those who find that the change is in their favour come to me and say that that means that they must have had too little in the past and therefore need extra support now because of that.

If we are to have a system whereby we are willing to react properly to real and sensible points made by local authorities, we must draw a clean line and say that we will start again from this point and do it as well as we can. Otherwise, the temptations not to change when change is necessary would be great, and I do not want to succumb to those temptations : I want to have a system that we are willing to change when a good case is put to us. The economic indicators aspect is important and I appreciate the work done by various local authorities of very different political views on which we have been able to depend.

We can expect the usual demands from Labour members for higher spending. Of course, it is a little more difficult this time because the hon. Member for Dunfermline, East (Mr. Brown) would undoubtedly have a word or two to say about that. If one reads the local government press, one sees that many in the local government world are saying that they were expecting a tougher settlement--a cash standstill or worse.

An article in the magazine Public Treasurer, which I am sure is prescribed bed-time reading, last month said :

"The local authority finance settlement has come to resemble an elaborate pas de deux"--

I am not sure whether I wish to do a pas de deux with the hon. Gentleman.

"After the announcement, councils warn of dire cuts in jobs and services."

The article goes on to quote Mr. Tony Travers, a leading independent expert on local government finance, as believing that local authorities last year

"overstepped the mark and caused themselves embarrassment" when the number of jobs lost

"failed to come near their earlier doom-laden predictions". Of course, that happens year after year.

In December, the Local Government Chronicle said of last year's prophecies :

"It is obvious many of the more vocal councils were crying wolf and their supposed job cuts have failed to materialise."

I have no doubt that we will have the same from Labour members this year.

Our grant distribution has one simple aim : to ensure that the available resources are divided fairly so that all

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authorities are placed on an equal footing. Achieving that, however, is far from simple. In evidence to the Environment Committee recently, the local authority associations agreed--I point this out to the hon. Member for Blackburn, who has made some opposite remarks-- that

"The distribution of grant to 420 authorities in England on an equitable basis is a complex task and it is not surprising that the extensive analysis and research over the years has shown that there are no simple answers."

I have already referred to the thorough review of the calculation of SSAs that we have carried out over the past 12 months. That review was prompted by the need to incorporate new data on social conditions which are now available from the 1991 census. I am pleased that the review of SSAs has been carried out in close co-operation with the local authority associations. A lot of hard work has been done, and my ministerial colleagues met delegations from individual local authorities to hear their views and discuss their ideas.

I refer to the views of the Audit Commission. The Commission published its own study and noted that the SSA system

"is a more sophisticated system for equalising needs than any overseas system examined in this study and it is an improvement on its predecessor in many respects."

I think that we can accept that as a fairly widely held view. I acknowledge and thank the Environment Committee for its timely report on SSAs. The Committee took evidence from a wide range of people. I am gratified that one of the Committee's first conclusions is : "We welcome the openness with which this year's SSA review has been carried out, and we trust that this approach will continue in future years".

One of its final conclusions is :

"We recognise that the changes to the SSA methodology this year have led to some common-sense improvements in the 1994/95 proposals."

I hope that the hon. Member for Newham, South will take that for the important--

Mr. Spearing rose --

Mr. Gummer : I am sorry that I tempted the hon. Gentleman. I really want to get on, but I will give way.

Mr. Spearing : I suspect that the Environment Committee did what is usually called a "quickie". I think that the Secretary of State will find that the Committee took limited evidence from three major local government organisations in one day. There was relatively little in terms of memoranda and the Committee did not address the question of homelessness which I put to the Minister in my earlier remarks.

Mr. Gummer : I do not want to move too closely into the definition of "quickies". The document has more than 100 pages, so I should have thought that the process was fairly lengthy. I do not think that the hon. Gentleman should dismiss so cavalierly the evidence of the three local authority associations, all of which are dominated by his party. The hon. Gentleman's local authority has the fifth highest standard spending assessment in the country, and it is difficult to see how he can complain.

Mr. Tracey : I wish to raise a point with my right hon. Friend regarding the Select Committee report. I was interested to read what the report said about the funding of London. Was my right hon. Friend surprised, as I was, to

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find that Labour Members have suggested that the day visitor principle--one of the principles relating to the calculation of SSA--should be examined? If that principle were to be changed radically, that would seriously affect the number of London boroughs and, of course, it would affect also the number of other parts of the country which are controlled by Labour authorities?

Mr. Gummer : My hon. Friend is right to point to that element, which has been introduced for the first time and has been widely welcomed. My hon. Friend might like to put together a list of the reductions in money coming to London which would have arisen if the proposals made by the Labour group on the Select Committee were carried through. That piece of information might be of use, not only to the House, but to a wider audience.

Mr. Ron Leighton (Newham, North-East) : The Secretary of State made an error when he said that Newham was fifth last year ; it is now 10th. Does not the index with which he is working with Manchester university put Newham first?

Mr. Gummer : I was referring to this year, which is still 1993-94. We are talking about next year. If Newham is 10th next year, and the hon. Gentleman finds the whole system unacceptable because of that, he is being a little idiosyncratic in the defence of a system. There is also the significant dampening grant of more than £11 million.

Mr. Leighton : The grant was £13 million.

Mr. Gummer : It is kind of the hon. Gentleman to make sure that I did not understate my point. A figure of £13 million for next year is not unreasonable to help people over the change from fifth to 10th. I hope that the co-operation which we have enjoyed will continue, because one must have a system which provides fairness and objectivity.

It is important that it is not a matter of central Government versus local government, and that the system tries to share out the money in the most effective way. Therefore, these matters must not be party political, but they must be political matters as they involve the distribution next year of over £17 billion in revenue support grant. Grant distribution is therefore not something that I can delegate.

In any settlement, authorities which do badly are tempted to cry foul but that is not the case this year. Greenwich borough council is not one of the Government's greatest supporters--I am sorry about that and I hope that the council will become so--but it says that it "has been heartened by the attention paid in the settlement to the points which it put forward."

Northumberland county--again, not a Conservative authority--said : "The County Council is greatly encouraged by the changes to SSA methodology."

In his evidence to the Select Committee, Mr. Tony Travers said : "A number of commentators have accused SSAs of being politically rigged Yet there is no evidence of such political intervention". That is why I regret and resent the scurrilous allegations of the Opposition--particularly the hon. Member for Blackburn--that the system is somehow affected by the party political divide. That is clearly not true, and all the independent commentators and Tony Travers have said that in turn. I hope that the hon. Gentleman will withdraw

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that allegation, which is unworthy of him and which is not suitable if we are trying to find the best way to reach an achievement. It is perfectly proper for the hon. Gentleman to say that more money should be spent, although the hon. Member for Dunfermline, East might object to that. It is perfectly proper for the hon. Gentleman to object to some aspects of the Government's policy on the matter. It is not proper for him to complain about a system which is known to be objective and which is supported as objective by large numbers of the hon. Gentleman's supporters.

Mr. Robert Ainsworth (Coventry, North-East) : Will the Secretary of State give way?

Mr. Gummer : I ought to move on, but I will keep my eye on the hon. Gentleman who is attempting to intervene.

I do not want to weary the House, and I hope to continue the present system. There may be some changes, but I hope that they will not be too radical so that they can settle down satisfactorily. The methodology that I proposed in December is set out today in the local government finance Report which is before the House.

I do not want to recount all the changes in the methodology, but there is one specific set of changes which have occurred since the start of consultation which I should mention. During the consultation, a number of authorities commented on the data which we had proposed to use in calculating their SSAs. In particular, Havant district council and Tameside metropolitan borough council drew our attention to problems with the data for the number of people claiming housing benefit, which we used in the new economic index. Opposition Members have referred to that.

In the light of representations from the councils, I have adjusted the data used in the SSAs for Havant, and for authorities bordering Manchester. I hope nobody thinks that that is party political. I have done my best to get as near to the objective truth as I can. A number of other data changes have been made where more up-to-date or accurate figures have become available. For example, we have since the consultation been able to incorporate actual basic credit approvals and the latest estimates of supplementary credit approvals into the calculation of the capital financing element. The latest information on the size of local authorities' local tax bases has been incorporated to grant calculation also. In many cases, the effect of the changes is small but accuracy is important if the system is to continue to have the widespread support which the changes have brought about.

This year's review of SSAs has been thorough and wide ranging. I agree with the Select Committee that

"there will always be a trade-off between improving the technical content of the SSAs and increasing its complexity."

I hope that we do not need such a wide-ranging review for some time to come.

Mr. Robert Ainsworth : The Minister has quoted selectively from the Committee's report, and he has tried to suggest that the only people who believe that SSAs are not an objective and mathematical equation are Labour members.

Is the right hon. Gentleman aware that the Audit Commission said in evidence that by the choice of the data used, their formulation and the weight which they were given, the system could be no more than a covert way of taking political decisions in the distribution of grants?

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Mr. Gummer : The hon. Gentleman ought to read the Audit Commission report more carefully, and he should be much less selective in quoting what the report said.

I will repeat what it said in full so that the hon. Gentleman will not in fact miss this out. The Commission said that the system is "a more sophisticated system for equalising needs"--

I cannot think of anything more objective than needs

"than any overseas system examined in this study and it is an improvement on its predecessor in many respects."

I find that difficult to square with the selective comments of the hon. Gentleman.

Mr. John Whittingdale (Colchester, South and Maldon) : May I thank my right hon. Friend for listening with such care to the representations which were made to him by local authorities in the south-east, and in particular for extending the area cost adjustment? That has resulted in Colchester borough council having an increase in its SSA of 14 per cent. Does he agree that, given that generous settlement, there can be no justification for excessive rises in council tax this year?

Mr. Gummer : My hon. Friend is kind to say that we listened to Colchester borough council. We have listened to all who came to us, and we have tried to make as clear a change as possible. Of course, we cannot make changes for individual local authorities. The system is designed to be objective, so it would be wrong to believe that something special can be done for any particular authority. I agree with my hon. Friend that, given the difficulties of the time, the settlement is sufficiently good for people to expect local authorities to make the kind of efficiency savings which will enable them not to have large rises in council tax.

I note that both the London borough of Ealing and the London borough of Brent have announced that they will be reducing their council tax by £100.

It may be that the political complexion of those two authorities explains how they are able to do it against the background of the Labour authorities that they replaced. They may have had a good deal more elbow room. It is more difficult for well-run Conservative councils which have already been extremely good about running their affairs to make such significant decreases. But then people have had the benefit of lower council taxes over the years.

We shall continue to discuss the SSA methodology with the local authority associations. For 1995-96, we will want to consider the treatment of the police element in the light of the proposals in the police Bill. I have also undertaken to have a further look at the way in which the area cost adjustment in the south-east region decreases as one moves away from London.

I appreciate the position of authorities which will see a sizeable reduction in the SSA next year. Despite the firm underlying rationale of the changes that I have proposed, authorities will need time to adjust to those changes. Not only have we created a system that we can stand by as objective, but we have seen that where changes are large there must be some help for people moving from one figure to another.

That is why, in December, I made proposals for a special grant to compensate authorities which have lost more than 2 per cent. of SSA as a result of the incorporation of the new census data, and of the changes stemming from the review. That grant is a generous response to the problems of those authorities and it was

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widely welcomed during the consultation process. The special grant report No. 9 will establish that grant for 1994- 95, and some £280 million will be distributed to local authorities in that year. The SSA reduction grant will ensure that authorities which face a reduction in SSA will not have to make an unreasonable demand on their council taxpayers. I shall look closely at the issue again next year before deciding whether it is justified to continue to damp the year-on-year impact on local taxpayers of the SSA changes. I announced my intentions for capping for 1994-95 on 2 December. The House will know that I hope that we will not have to have recourse to capping this year. We had few cases of capping last year and I hope that we shall have even fewer this year. Those intentions give effect to the Government's view that local authorities must play their part in controlling public expenditure by setting budgets that taxpayers and the country can afford.

As the House will be aware, capping works in two ways : by limiting budgets which in my view represent too large an increase over the previous year or budgets which are simply too much. In relation to the former, the provisional criteria allow authorities with budgets close to their SSAs larger increases than authorities with budgets which are higher relative to SSA. Those excessive increase criteria remain my firm intentions for 1994- 95.

I also announced on 2 December my proposals for relevant notional amounts for certain authorities. "Notional amounts" is not a phrase that I like, Madam Deputy Speaker, but it is one that represents the base from which I shall measure increases in budgets for the purposes of the excessive increase criteria. I proposed notional amounts for authorities which are subject to a change of boundary from 1 April 1994 to take account of the effect of their budgets of changes in their area and population. A small number of authorities made representations to us on those proposals.

In those cases where authorities have submitted information which in our view provides the basis for a better assessment of the effect on their budgets, I have specified a revised notional amount which will be used--if the House approves the notional amounts report--as the basis of the operation of the excessive increase criteria. In all other cases, the notional amounts specified in the report are those originally proposed. So we have tried always to go along with local authorities where they have come armed with effective proof. On absolute excessiveness, we have considered whether authorities which are subject to a substantial reduction in SSA as a result of the changes that we have made following the SSA review and the incorporation of data from the 1991 census should be required to reduce their budgets in cash terms. Authorities could not necessarily have anticipated the scale of those reductions and they may need more time in which to adjust their expenditure. I hope that Opposition Members will accept that, again, I have tried to find a way of helping those authorities which could not protect themselves in advance, even in circumstances in which their overall excessive expenditure ought to have made them wish to reduce it.

In order to help, it is my intention that authorities with budgets more than 12.5 per cent. above SSA, of which the SSA has been reduced by at least 5 per cent., as measured

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for the purposes of SSA reduction grant, should not be required to make more than a cash freeze on their budget for the previous year in order to avoid designation for capping. In all other respects, the provisional absolute excessiveness criterion which I announced on 2 December remains my firm intention.

As for start-up costs of local government reorganisation, we have announced details of a scheme for 1994-95 to allow authorities to borrow for certain costs. I have previously announced that if authorities include in their budgets any reorganisation costs, as defined in the scheme, those costs would be disregarded for the purposes of capping. That remains my intention.

I would not, however, expect provision to be made for significant expenditure by authorities other than those which are to be reorganised from 1 April 1995. Authorities should be quite clear that, when I take my capping decisions, I may come to a different view on the treatment of reorganisation costs. It would, for example, be open to me to decide to take account of all or part of that provision for capping purposes, if authorities had used it as a means which clearly was not part of what was designated or sensible for reorganisation. This year's settlement shows the Government's determination to take tough decisions on public spending, while recognising the importance of local services and of providing authorities with the resources that they need to provide those services at a reasonable cost to their taxpayers. It also demonstrates the Government's wish to see a fair distribution of the available resources on a robust basis which uses the most up-to-date information. It shows above all that the Government are willing to listen to local government--

Mr. Jeremy Corbyn (Islington, North) : what about an elected authority for London?

Mr. Gummer : --and to co-operate in improving the systems within which local authorities must operate.

Some of the examples which the hon. Member for Islington, North (Mr. Corbyn) would have heard if he had been here, many of which related to London, show that, when we have listened to local authorities, we have changed our proposals to fit what they have asked for. All the SSA changes were changes that the local authorities themselves sought, and we sought to meet.

Mr.Corbyn : Will the Minister give way?

Mr. Gummer : The hon. Gentleman--to whom I shall not give way--would have been better advised to listen carefully to the points that I made. Yet again, I was able to show--

Mr. Corbyn : On a point of order, Madam Deputy Speaker. Is it in order for the Minister to refer to a Member in disparaging terms and then refuse to give way to him to allow him to defend himself?

Madam Deputy Speaker (Dame Janet Fookes) : It is entirely a matter for the Minister, or any other Member who has the Floor, whether he decides to give way or not. It is not a matter for the Chair.

Mr. Corbyn : Further to that point of order, Madam Deputy Speaker.

Madam Deputy Speaker : Order. I have dealt with it.

Mr. Corbyn : What is the convention on the matter?

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Madam Deputy Speaker : The hon. Gentleman has been here for many years and he knows of many ways in which he might pursue any complaint.

Mr. Gummer : I was coming to the last sentence, but I should like to say, so that the hon. Gentleman should not feel that I have been unfair to him and in response to his intervention from a seated position about London, that I was able to deal with London. I mentioned that his colleagues on the Select Committee suggested measures which, if they were carried through, would remove £1,000 million from London. Others of his colleagues in the Opposition wanted us to change the SSA on daily visits. That again would take money from London.

The hon. Gentleman should have been here to hear that, because he could have interrupted me to say how pleased he was that I was fighting for London. I am sure that he is pleased that I am fighting for London, and that he will fight with me for London against his honourable colleagues.

Mr. Corbyn : I am deeply grateful to the Minister for giving way at last. I really appreciate it. I want him to know that. While he is on the subject of London, he will just occasionally have picked up the argument for an elected authority for London so that London's planning, transport, housing and other issues can be properly co-ordinated. Every other capital city around the world--[ Hon. Members-- : "Ah."] Obviously, the Minister's colleagues are upset. I should be grateful if the Minister would let me know what he says to Londoners when they respond to his document by asking for the return of an elected authority for London that could help to solve London's problems and enable London to speak with one voice.

Mr. Gummer : I am happy to say that, of all the issues that Londoners want to talk about, an elected authority is pretty well down the list, even if they want to talk about it at all. It is interesting that, with our enormous investment in the London tube system, we are paying for all those years when the Greater London council did not invest in that system. In almost every case, the all-enveloping London authority wasted thousands of millions of pounds. It also left behind enormous problems, which are now being suitably met both by elected boroughs and by the involvement of Government in the enormous investment in London.

I commend the settlement to the House. It is a fair settlement in a difficult year and it has been recognised as such across the board. It has wide support and we have sought to achieve a fairer system of sharing out the money. I am pleased that many different authorities, of all political complexions, have suggested that what we have done is well done.

5.10 pm

Mr. Jack Straw (Blackburn) : In July 1979, the then Secretary of State for the Environment, the right hon. Member for Henley (Mr. Heseltine) announced his strategy to set local government free. He said :

"We will sweep away tiresome and excessive control over local government. They do not need, they do not want, the fussy supervision of detail that now exists."

But 15 years on, the reality is very different. Each of the 144 Acts of Parliament affecting local government that has

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been passed since then has restricted its rights, increased the tiresome and excessive control of which the right hon. Gentleman spoke and extended

"the fussy supervision of detail".

The party that once campaigned to roll back the frontiers of the central state has been responsible for a massive extension of the powers of the central state. In an article just last week in The Guardian, a former Conservative education Minister, the hon. Member for Stratford-on-Avon (Mr. Howarth) said that the result of the past 15 years has meant

"the virtual destruction of the autonomy of local government". In Britain, local government is more centrally controlled than it is anywhere in the western world, in Europe or outside the old Soviet Union. The Conservative party of Joseph Chamberlain now has a local government policy of which Joseph Stalin would have been proud. The key to the central state power that Ministers now exercise over England's 400 local councils and 24,000 councillors is capping. The first objection to capping is that it patently undermines local democracy and local accountability. That view is widely understood across the parties and was even a few years ago. In her memoirs, Lady Thatcher records that the then Secretary of State for the Environment, Chris Patten, was

"strongly opposed to any kind of comprehensive capping of local authorities. He argued against it on the grounds that it would undermine the principle of local accountability".

The second objection to capping is on the grounds of fairness. As long as local government draws a substantial part of its revenue from central Government--that will continue for ever into the distance--there will have to be as fair a system as possible for the distribution of that grant to recipient local authorities. That was the purpose of the standard spending assessment system when it was established in the late 1980s. At that time, as the Audit Commission made clear in its report "Passing the Bucks" published last March, and the Select Committee on Environment repeated in its report : "SSAs were now being used for tasks for which they were not orginally designed."

The Secretary of State comprehensively failed to mention that in his quotations from the Committee's report, which were so selective that I seriously doubt whether he has read or comprehended it. The Audit Commission report continued :

"The manner in which SSAs are used to limit council expenditure has confused accountability for local services between central and local government."

That is obviously the case because, as the Audit Commission said, when the SSA system was established, less than 50 per cent. of total local authority revenue was controlled by the SSA system. Now, 80 per cent. of local government revenue is directly dictated by the SSA system and the total spending of every authority is controlled by its SSA.

If one uses a machine in a way for which it was not designed, one imposes intolerable stresses on it for which no design solution exists, and the result will be irrational, unpredictable and, in the case of SSAs, profoundly unfair. I am glad that every member of the Select Committee recognised that truth. Again, the Secretary of State stayed silent on this statement by the Committee :

"We appreciate that the use of SSAs in the capping process is putting pressure on the SSA system. We recommend the

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