House of Commons Hansard Debates for 3 Feb 1994

Mr. Rendel : Obviously, I did not make myself clear. There is no incompatibility between local people now calling for greater Government intervention in terms of providing money towards local costs at a time when local costs--and SSAs--are increasing, but unfortunately the Government are cutting the grant.

A policy of local income tax--which would allow whatever rate was set by the Government under the present system for grant from central sources to decrease gradually, while more and more of the rate was taken on to a local income tax--would mean that national income tax was decreasing, while local income tax was increasing. Taxation would remain at the same level, but more of the local tax would be raised locally. That is the important argument. That is why the two principles are compatible.

Mr. Deputy Speaker (Mr. Geoffrey Lofthouse) : Order. I remind the House of the 50 minutes available before the wind-up speeches begin. Five hon. Gentlemen are hoping to catch my eye. Long interventions do not help.

Mr. Harris : I will not pursue that point, but I could pick many holes in the hon. Gentleman's argument.

I want to use the time allotted to me to discuss the special problems of the Isles of Scilly in my constituency. The contrast between the Isles of Scilly and many of the local authorities that have been mentioned in the debate could not be greater. The Isles of Scilly council is unique in local government. It is a unitary authority with a population of slightly fewer than 2,000, but it has all the responsibilities, at all layers, of local government. The difficulty is that any small change is therefore greatly

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magnified. I shall illustrate that by outlining the difficulties that the Isles of Scilly council foresees in the current settlement. There are three problem areas. The first is education. The standard spending assessment for education has been cut by £59,000 for the Isles of Scilly--a minute amount compared with the expenditure of other authorities that have been mentioned, but large in proportion to the budget of the Isles of Scilly. That has come about simply as a result of a factor mentioned by Conservative Members--the fact that the figures on which the formula is based are already out of date. There are 22 more pupils in the Isles of Scilly than there were when the figures were collected. That is a minute number, but it has big funding implications for the Isles of Scilly.

There are other factors. Several of the pupils who account for the increase live on the off-islands. They have to be boarded on St. Mary's, the main island. That adds to the cost.

Another factor is that the formulae do not take account of the fact that there are no educational facilities for pupils aged over 16 on the Isles of Scilly, so they have to go to the mainland, which means that the Isles of Scilly council pays about £75,000 every year in boarding and travel costs to take those pupils to the schools on the mainland, mainly in Penzance in my constituency. The formula takes no account of that factor, and it adds to the difficulty. There is, therefore, a significant shortfall in the spending on education. My hon. Friend the Member for Isle of Wight (Mr. Field)--perhaps the Isles of Scilly and the Isle of Wight are similar in some respects--mentioned the costs of providing the fire service on an island. Those costs and those difficulties are compounded on the Isles of Scilly, because all five inhabited islands need some fire cover. Yet, as I understand it, the money that is made available to any local authority that is a fire authority depends in part on the number of calls and the number of false alarms that are made during the year.

Fortunately, very few people cause a false alarm on the Isles of Scilly, but if one adds all those factors together, there is a big shortfall in the funding of fire services. It costs £91,000 to provide fire services on the Isles of Scilly. The SSA for the islands is only £57,000.

The third factor is the revenue that is handed over to local authorities to recognise to some extent the extra expenditure they incur as a result of dealing with tourists. That is done on a national basis, as I understand it. There has been a decrease in that revenue, because the feeling is that surveys have shown a decrease in tourism in the past year. That, fortunately, is not true of the Isles of Scilly, where there has been an increase.

Those factors add up to a cut in the SSA for the Isles of Scilly council of 2.9 per cent. In fact, its SSA has been reduced this year from £2,556,000 to £2,482,000--a decrease of £74,000. Incidentally, the reason why the council has apparently so large an SSA in relation to the population is that, as I mentioned earlier, it is a unitary authority providing all services, and with large extra costs because they are provided on an island.

I understand from the documents and from the speech made by my right hon. Friend the Secretary of State that the special grant to take account of decreases in SSA will apply when there is a reduction of 2 per cent. As I said, the SSA for the Isles of Scilly has decreased by 2.9 per cent. I ask the Minister of State whether he can throw any light

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on the situation when he replies to the debate, because the Isles of Scilly are not mentioned in the document as qualifying for that special grant. I hope that he will consider that. If he cannot give me an answer tonight, I know that he will provide one later. However, my plea to the Minister of State and his colleagues is to reconsider the special features of the Isles of Scilly. We all go in for special pleading in a debate such as this. I make no apology for doing just that for the islanders I represent, and I hope that my arguments will be considered--not only seriously, as I know they will be, but sympathetically.

8.39 pm

Mr. Eric Illsley (Barnsley, Central) : I shall be as brief as possible, and I intend to talk about the standard spending assessment and capping criteria. As we know, the Government are now trying to use the capping criteria to get local authorities to spend exactly to their SSAs.

You will be aware, Mr. Deputy Speaker, of my opposition in previous years to the methodology used in calculating standard spending assessments. They use out-of-date census data and inadequate indicators that take no account of need, unemployment, social deprivation, or the need for health education. They use inadequate ethnicity factors, and they make too much use of proxies, rather than direct indicators.

I am pleased to be able to say that the Secretary of State has at last taken on board many of the complaints that have been made in the House, especially by people representing areas covered by the Webber-Craigh authorities, such as my hon. Friend the Member for St. Helens, North (Mr. Evans), and has altered the SSA calculations to take account of those complaints. I especially welcome the economic index, which takes account of unemployment and long-term illness, both of which are prevalent in my constituency.

The resulting standard spending assessment per head of population for my local authority shows an increase of 6.9 per cent.--the second highest increase for any of the metropolitan districts. I believe that our new level of SSA under the new methodology totally vindicates our complaints in the House against the previous SSA. Had the changes been implemented earlier, my local authority would have been spared the losses that it has suffered over the past three years, and would not have been capped in 1990.

However, even with a 6.9 per cent. increase Barnsley is still 32nd out of the 36 metropolitan authorities. The gap between the highest and the lowest SSAs has closed, but it is still quite large. Last year, I used the example of Manchester, and then the difference between my local authority and Manchester was more than 60 per cent. That gap is still 47 per cent. Manchester has an SSA 47 per cent. higher than that of Barnsley to provide a standard level of service. Hon. Members have already referred to Westminster ; last year its SSA was 102 per cent. higher than Barnsley's, and this year it will be 79 per cent. higher.

As I shall explain, the increase in SSA has been completely overshadowed by the capping criteria that caused the existing lower level of SSA to be capped. The changes to the SSA methodology are welcome, but further

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review will be necessary. All the problems with the SSAs cannot be addressed in one year alone, and in future years we shall need further fine tuning.

The capping regime had an impact on the levels of SSA for previous years, which were artificially low. That means that we shall have a low level of spending in the forthcoming year, despite the increase in the SSA. The losses from the past are never likely to be made up. As I have said, the Government want to equate spending to the SSA, using a form of what may be called permanent capping.

The SSAs will never be the fairest method of dealing with local government finance, and further work is still needed in examining the methodology. Barnsley's SSA has increased, giving a possible increase of £8 million, but the authority cannot spend anything like that. Its revenue support grant has been increased by 18 per cent.--£11 million--but that will serve only to reduce the level of local council tax.

I am sure that many of my constituents would be happy for the council tax to remain the same if some of the services that we have lost over the past three years were restored--for example, the excellent music tuition centre, and all the other local government services that have either had charges imposed or been removed altogether. I should especially like to see more funding for special needs education, and the residential care homes that have been closed over the past 12 months in Barnsley being reopened. I should also like to see the reintroduction of the discretionary education awards that were ended last year and have still not been restored. I am sure that the people of Barnsley would like to keep council tax levels as they are and retain those services.

Because of the capping criteria, there will be a shortfall of £8 million in the local authority's budget. The council is meeting now to try to draw up a budget to avoid capping while maintaining as many services as it can, and it is under extreme pressure in trying to achieve that.

I must also mention council tax transitional relief, which was intended to last for two years. I referred a constituency case to the Secretary of State involving a household which on the specified date for the measurement of transitional relief contained an artificially high number of people-- four. When the household was reduced to two people, although their home was in a high council tax band, the family could not take advantage of the transitional relief. Could the relevant date be changed or, even better, could there be some sort of appeal in the mechanism to allow a family who did not qualify for transitional relief when it had more people in it on the specified date, to go back to the local authority and show that their circumstances had changed so that they could take advantage of the relief?

Representatives of the South Yorkshire fire and civil defence authority came to meet Ministers at the Department of the Environment and the Home Office. During that meeting, the chief fire officer admitted that the steps that the authority were taking to save money, difficult though they were, would not prevent it from falling below the Home Office accepted minimum standard. That authority is, therefore, facing a difficult situation. It cannot maintain Home Office standards on its present funding. The SSA for the authority has increased by 5.7 per cent., but it has been capped at 1.75 per cent., despite the fact that the budget has been reduced substantially over the past two years.

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Fire stations in my area have been closed to accommodate a five-year rolling programme and to facilitate the building of a brand-new fire station to serve the area and improve the service. Unfortunately, that plan is now under threat because of the difficulties that the authority faces. Its balances have been reduced to £200,000-- substantially below the balances recommended by the chief finance officer.

The authority has suggested three possibilities, but even if it maintains its current freeze on recruitment it will still be £1.1 million short of adequate funding. It is £1.38 million short of what it needs to maintain Home Office minimum standards, and £1.77 million short of what it needs to restore its balances to the minimum recommended by the finance officer. It is falling below the minimum standard.

The Minister was asked whether, due to the difficulties with pension payments by the fire authority over the past year, those could be capitalised for this year and the authority given permission for supplementary credit approvals to borrow the money to meet that capitalisation. If permission is given to capitalise that sum, but no credit approval is given, the capital would have to come from existing programmes and the new fire station proposed at Tankersley would be stopped. There would not be enough money in the capital programme to maintain the building and to meet the capitalisation of the pension commitment. The two go hand in hand. I am looking to the Minister to give some sign today that South Yorkshire will be allowed that capitalisation and given the authority for supplementary credit approval. I hope that he will consider that request seriously. 8.48 pm

Mr. Andrew F. Bennett (Denton and Reddish) : The background to the debate is the Government's 1987 claim that they would make local government finance simpler and easier for people to understand. Against that criterion, they have created three major problems for local authorities. First, they have made money more difficult for local authorities to collect. It is amazing to hear Conservative Members go on about local authorities' failure to collect, because they do not recognise that many of the problems were created by the Government. The rates were a simple way of collecting money and most local authorities had a good level of collection. First with the poll tax and now the council tax, the Government have made collection much more difficult.

The second problem that the Government have created is in dramatically reducing the tax base for local authorities. Before the Government started with the reorganisation and changes, local authorities raised about 55 per cent. of their income by local tax, the remainder being made up by the Government. Now local authorities raise about 20 per cent. of their income. The result is that, for a small cut in Government grant, local authorities have to put up their charges by substantial amounts--the ratio is about 1 : 4.

Thirdly, instead of bringing clarity and understanding to local government finance, the Government have made it even worse. There is no way that individual electors can make a judgment about their councillors and their effectiveness in the way that they spend the money on the basis of this extremely complicated formula. It seems to

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me that it is against that background that we must judge the Government's record on local Government finance. It is pretty terrible.

I was disappointed with the Minister for Local Government and Planning who, when he came to the Select Committee, did not accept that most of the decisions on the standard spending assessments are political. He kept trying to claim that they were somehow objective and fair, based on the figures. I do not complain that he makes political decisions, but he should defend them rather than claim that there is some statistical validity in them. One particularly blatant example was the original introduction of extra money for overnight visitors and then, as a result of the outcry from that, the extra money for day visitors. In his introduction, the Secretary of State suggested that, by my objection to day visitors being included, I wanted to take money from London.

I certainly do not. But I want to take money away from Westminster, Kensington and Chelsea and ensure that it goes to places such as Newham, because the money for day visitors simply means that some central city places and seaside resorts do very well out of it. I cannot see any justification for the idea that day visitors automatically add to a local authority's costs. Stockport is one glaring example. It maintains Lyme park, which is within Cheshire. It costs each of the council charge payers in Stockport £5 a year. It is good value, but Stockport gets no compensation from the grants scheme for maintaining Lyme park. The people who benefit are in Cheshire. Many of my constituents like to go to Alton park. It is good value. It is a fun fair. Staffordshire will now benefit from that facility, yet it is almost totally self-contained. It will cost Staffordshire very little to maintain the tourist facilities there, whereas Blackpool fun fair, which is nothing like as self-contained, may well cost Blackpool. The idea about day visitors is nonsense. Some will be a source of revenue for a local authority through parking charges and other aspects from which it can benefit ; some will be a serious drain on its resources. To say that it has anything to do with fairness is a myth. It has to do with where the Government want the money to go, which in this case, sadly, tends to be towards Tory authorities.

Another example of the way in which the system is particularly unfair is the SSA for schools. My hon. Friend the Member for Barnsley, Central (Mr. Illsley) compared Manchester and Barnsley. I do not begrudge the money that goes to Manchester. I have been into the schools there and think that they need the money. But it is amazing that, at the Reddish and Denton end of my constituency, where it comes up to Manchester, there are schools within about a mile of each other : one in Manchester, one in Denton within Tameside and one in Stockport. I cannot see any justification for the difference in the allocation of money to those schools. The Manchester school gets £2, 214 for the primary school ; the secondary school gets £3,106. In Tameside--within a mile--the primary school will get £1,826 ; the secondary school, slightly further away, £2,556. The primary school in Stockport will get £1,776 ; the secondary school, £2,484. Those primary schools are within a mile of each other. The secondary schools are within some three miles of each other.

I am perfectly willing to concede that, between my constituency and somewhere like Moss Side in Manchester, there is a big difference in the problems of teaching children, but there are not those problems between those areas within a mile of each other. Because

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of the local management of resources in schools, Manchester schools get so much more than those in Tameside or Stockport. As teachers' salaries are fixed nationally, the small amount over which an individual school has discretion is a substantial problem for the Stockport and Tameside schools. They are badly underfunded. I can see nothing fair about that. I would argue that the Government must look at the weighting that they give to extra educational needs, to make it fairer.

Other hon. Members referred to the area needs cost. I make no complaint in arguing that, compared to London, schools in the north of England need extra resources. I do not want to take funding away from London schools, because they need the resources, but I cannot see how schools in areas such as Stockport and Tameside can cope with the present level of funding.

If the Government believe in democracy, they must take away the process of capping. Let the electors make the choice--either pay for higher services or not do so. At the moment they are caught in this situation. The financing is difficult to understand. They are not able to make a judgment about whether local councillors or the Government are failing to provide the service that they want. Let us get rid of capping, let local authorities make their decisions and let the electorate make the decision on that. If we want a healthy democracy, we must return democracy to local government. That means that local government needs a bigger tax base. Local councillors should be able to make decisions about the level of tax raising that they impose. The electorate can please themselves whether to support them or not. The present situation is a farce.

8.59 pm

Mr. Colin Pickthall (Lancashire, West) : I am sorry that the hon. Member for Ludlow (Mr. Gill) has gone for a pie and a pint, partly because he is a good lad and was right on Maastricht, but also because he said that he was looking forward to the abolition of the county councils and a future of secure and more clear government. Before the hon. Gentleman left, I handed him a copy of the reply that other colleagues and I have had from the Secretary of State about the court judgment on the Local Government Commission guidance notes, in which we are told

"The Government is not appealing against the court ruling The Government believes that unitary authorities will often be the best way of achieving these objectives They will therefore often provide the best form of local government However there is no national blueprint and the Government does not rule out consideration of two tiers in particular circumstances, with or without changes to the status quo".

I thought that the hon. Member for Ludlow would be interested in seeing what sort of monster is shambling towards Jerusalem to be born. I bet, that as he has an outside chance of retaining Ludlow at the next election, during the next Parliament he will see that what is proposed will have to be undone, with consequent complex financial ramifications.

I obviously have a strong interest in Lancashire, both as a Lancashire Member and as a former county councillor. I am well aware of the problems of fishing in local government revenue support figures and of the ease with which anybody can come up with an old boot. I am also aware that one can hardly make the case for a particular

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authority being hard done by without appearing to wish to disadvantage another authority. Comparisons are odorous, as someone once said.

The only way in which the position in Lancashire can be illustrated is by comparison with authorities of similar size--1.5 million people. The three other counties in that category are Essex, Hampshire and Kent. My main concern is that Lancashire's financial allocations have been deteriorating steadily since 1989-90, during which time Lancashire's standard spending assessment has gone up by 23.7 per cent.; the average shire increase is 29.4 per cent. That is a considerable disparity.

This year, Lancashire's SSA has gone up by 1.43 per cent., whereas the SSA for Essex has gone up by 3.35 per cent., the SSA for Hampshire by 2.97 per cent. and the SSA for Kent by 3.09 per cent. In 1989-90, Lancashire, Essex, Hampshire and Kent had virtually the same grant-related expenditure, as it then was. In 1994, after a period of steadily widening graphs, Lancashire is way lower than the others--£100 million less than Kent. From 1990- 91 to 1994-95, Lancashire's basic credit approval has gone down by 41 per cent., whereas the average county reduction has been 13 per cent. At the same time, Lancashire's budget increased by 58.9 per cent., whereas the county average was 62.1 per cent. Those are general figures against which this year's allocations and this year's difficulties must be seen.

I know that the Minister for Local Government and Planning has looked at the figures, because we discussed them at a meeting with a deputation a few weeks ago. He assured us that he had no ideological or theoretical objection to changes in the methodology of allocation and that he was open to persuasion about the mechanics. Lancashire can show itself to be underfunded on at least six counts : the area cost adjustment, the special transitional grant, interest receipts, the education of under-fives, capital financing and the further education transfer. Lancashire estimates the total shortfall to be about £56.2 million. I am talking not about a wish list but about significant, punitive or partial calculations. I shall pick up three aspects of that.

As the Minister knows well enough through his knowledge of his own local authority's finance control--he comes from the right half of the country-- the area cost adjustment is a major source of justified complaint among authorities outside the south-east. About £1.6 billion this year is skewed south-eastward by that device. After all the vigorous representations from local authorities and their associations over the past few years, it came as a slap in the face to find that this year the ACA has been increased by 15 per cent. The Association of County Councils has argued for its redistribution among all authorities ; pro rata, that would mean £15.9 million extra being allocated to Lancashire.

I listened carefully to the exchanges earlier today between my hon. Friends who represent London constituencies and the Secretary of State. Anyone in Lancashire--I am sure that my hon. Friends the Members for Pendle (Mr. Prentice) and for Burnley (Mr. Pike) agree--can understand the need for extra provision for London because it has extra and special problems. However, no one could persuade people in Lancashire that Kent, Sussex, Berkshire and some of the other leafier areas around London required the same provision--

Mr. Bennett : The Isle of Wight.

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Mr. Pickthall : Or the Isle of Wight. I cannot believe that they require that skew.

The element allowed for the pay of higher education teachers, police and firefighters should be assessed by reference to London weighting allowances which are actually paid rather than by reference to a new earnings survey. The Department's own paper, No. 93/51, which was considered by the SSA sub- group last summer, described the ACA approach to those worker groups as dubious. It recommended actual London weighting, the incorporation of which into the SSA would make the ACA factors correspond more closely to the real world. It was the Minister's own Department which said that.

Authorities disadvantaged by the ACA are, therefore, especially aggrieved by the inclusion of areas around London that they believe should not be included. I can quote a specific example of the effect of that exclusion by reference to primary and secondary SSAs in 1994-95. Each primary child is worth as follows : in Essex £1,972, in Kent £1,961 in Hampshire £1,929 and in Lancashire £1,867. A Lancashire primary pupil is allocated £94 less than a Kent contemporary. Annually, a typical school of 100 pupils in my constituency receives £9,400 less.

In secondary schools the same thing applies, but on a greater scale. A Lancashire secondary school student is allocated £145 less than an Essex contemporary. That means that in a typical school of 800, a Lancashire school receives £116,000 less than it should. Schools in each of those four authorities face similar costs, certainly in wages, and no one can possibly imagine that such disparities are remotely fair.

I shall cut my speech short because my hon. Friends are dying to speak on similar matters and I shall mention only briefly the standard spending assessment funding for under-fives' education. In view of the Prime Minister's recent discovery of the importance of nursery education and the fact that the Secretary of State for Education grudgingly agreed with him not too many days ago, it is absolutely preposterous that the SSA element for under-fives' education is judged on the population of an area rather than on the provision. That basis specifically discourages good providers such as Lancashire from improving and it specifically discourages bad providers from improving their performance. That could be changed without, in the first instance, any implications for the overall allocation. It is a matter of adjustment. I shall allow somebody else to jump in.

9.6 pm

Mr. Gordon Prentice (Pendle) : I shall be brief because my hon. Friend the Member for Newham, North-West (Mr. Banks) is straining at the leash in his desire to get into the debate. The settlement is a bad one for local government. We were told that there would be a 2.3 per cent. increase, but the figure represents a 1.2 per cent. cut on the current year's local authority budgets.

The Secretary of State said that the teachers will get a 2.9 per cent. increase. How will that be paid for? The Evening Standard headline said that it was "an inflation busting increase". As my hon. Friend the Member for Blackburn (Mr. Straw) said, it will be paid for only by employing fewer teachers, by having fewer local government employees and by having bigger classes.

The Secretary of State also said that the predictions of massive job losses this year would not materialise. That is

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wrong. On the authority of the Local Government Management Board, 50,000 fewer staff were employed in local government up to September in the past year. The hon. Member for Ludlow (Mr. Gill), who is not in his place, talked of motivating people in local government. One does not motivate them by sacking them. The Secretary of State, as always, has dealt in assertions, just as he used to assert that the poll tax was a fair tax and that there was no way that a property tax could ever be fair.

In 1988 or perhaps before, I remember the right hon. Member for Mole Valley (Mr. Baker), who was then the Secretary of State for the Environment, likened the system of local government finance to stumbling about in a bog in a fog. The report of the Select Committee on the Environment, which came out a couple of weeks ago, said that the system of local government finance was difficult for the expert to understand, hard for the councillor to follow and almost impossible for the non-expert voter to use to make judgments. That is certainly true.

In north-east Lancashire, there is a feeling of absolute bewilderment at the savage nature of the settlement. We met the Under-Secretary of State, the hon. Member for Banbury (Mr. Baldry), a few weeks ago and he listened politely enough, but we got absolutely nothing at all from our discussions.

My hon. Friend the Member for Lancashire, West (Mr. Pickthall) touched on nursery provision. We were told in November by the Daily Express that the Prime Minister was committed to a drive to give every three-year-old a place in a nursery school. That message was plastered across the front page of all the Tory-inclined tabloids. The reality is that Lancashire county council already provides more nursery provision, but it is discrimated against because the SSA formula is based on the under-five population and not on the under-five population in nursery schools. Lancashire is doubly discriminated against. It has a much better record than North Yorkshire, which includes the constituency of the Minister for Local Government and Planning. However, North Yorkshire receives more money than Lancashire.

My hon. Friends the Member for Lancashire, West and for Denton and Reddish (Mr. Bennett) referred to the massive injustices in the education SSAs. I have two examples to underline those points. Why should a primary school child in Lancashire receive £119 less than a primary school child in East Sussex? Why should a secondary school pupil in Lancashire receive £208 less than a secondary school pupil in the Isle of Wight? People are bewildered by that.

In my district authority of Pendle, the SSA per head has slipped from 70th to 150th. The unviersity of Bristol tells us that we are 55th out of 366 districts in the university's deprivation index. Our SSA is declining from £9.1 million this year to £8.4 million from April. That is a 7.1 per cent. reduction.

A similar story can be told in respect of all the local authorities in my neck of the woods. There is a 11.5 per cent. reduction in Blackburn, a 9.6 per cent. reduction in Burnley and an 8.6 per cent. reduction in Hyndburn. However, Lancaster's SSA is to increase by 11.7 per cent. Now we know why the hon. Member for Lancaster (Dame E. Kellett-Bowman) was gyrating at the beginning of the Secretary of State's speech.

People in Pendle do not understand why our SSA is dropping from £106 per head to £98 while it is rising in Bath--with all the deprivation there--from £102 per head

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to £106. That is an increase of 4.5 per cent. On the social index, to which other hon. Members have referred, Pendle is ranked 92 while Bath is ranked 72. Bournemouth is ranked 40, but Bournemouth is receiving an SSA per head of £114. I do not know how the figures are calculated. A basket of measures are used which are not an accurate reflection of deprivation. We must change that process.

Pendle has the second-highest Asian heritage community in the county. The changes to the ethnic definition impact adversely against my local authority. The factors must include reference to social class. In Bournemouth, 19.9 per cent. of people are skilled manuals while 27 per cent. are skilled manuals in Pendle. Twenty per cent. are class 4 in Pendle while 14 per cent. are class 5 while 4.5 per cent. are class 5 in Bournemouth. The construction of the social and economic indexes must be placed under the microscope once more. I welcome the Secretary of State's assurance today that he will examine the SSA reduction grant. He said that the grant may not be a one-year one off and we may have to return to it. My authority will receive £726,000 next year, but if the grant vaporises the year after that, the impact on our council tax payers would be severe indeed. In addition, our transitional relief has been cut by 70 per cent. It has collapsed from £1 million to £300,000. That will have an absolutely cataclysmic effect in Pendle where we have so many of what were previously low-rated properties. No one in band A to band C properties will receive any help from the transitional relief scheme and 77 per cent. of the properties in my constituency fall within bands A and B.

I will finish now because I know that my hon. Friend the Member for Newham, North-West wishes to speak. However, the settlement is bad for north-east Lancashire and it is bad for the country. It is another of the sleights of hand that we have come to expect from the Government.

9.14 pm

Mr. Tony Banks (Newham, North-West) : I am grateful to my hon. Friend the Member for Pendle (Mr. Prentice) for giving me six or seven minutes to cast a few pearls before the Conservative Benches. My hon. Friend ought not to worry too much about the fact that all of this does not make sense. I do not think that anyone--even Ministers--understands how the system works. When one allows civil servants to come up with formulae that are punched into computers, all the discrepancies and all the injustices are churned out. We could have spent the entire night demonstrating the inconsistencies and the unfairness in the system. This is the price that we are paying for a Government determined to centralise everything and unwilling to allow local authorities elected by local people to raise their own funds to meet their own needs. Only we--I refer to people on all sides- -really know where the shoe hurts, and it should be possible to deal with the matter through local accountability and local democracy. But local accountability and local democracy are being dismantled--destroyed, indeed- -by the Government, as also happened under their immediate predecessors.

The Parliamentary Under-Secretary of State met a deputation from the London borough of Newham and, as my hon. Friend the Member for Newham, North-East (Mr.

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Leighton) indicated, we put the case to the Minister. It is difficult to know what more we could have said. We came on behalf of a united community--a community represented or supported by local businesses, through the chamber of commerce, the Newham Recorder, the local Conservative party and the local Liberal party--and we put the case to the Minister, but he did not give us any satisfaction. He was polite. I was fascinated by the great fat Waterman pen that he was using, and even more fascinated by his big, fat gold cufflinks, but in the end I was not pleased at the fact that he gave us nothing. There was no fat reward from the cerebral Minister. I suppose we ought at least to be grateful that he listened to us before throwing us out of his office.

We in Newham have appalling conditions brought about by circumstances well beyond our control. I hope that, even at this late stage, the Minister will look more carefully at our needs if the urban conditions index being developed by his Department in conjunction with Manchester university is accepted and puts Newham at number one--a position that we do not want to be in--in the league of deprived local authority areas in the country, and I hope that he will be far more sympathetic next time Newham Members go with representatives of the local authority to see him.

I appreciate the fact that Opposition Members now seem to understand the problems in London as a whole and I address my remarks essentially to my own colleagues when I say that Members of Parliament, especially those representing constituencies outside London, regard the capital in terms of its centre. They work in Westminster and go to their flats in Dolphin square or wherever else they can scrounge a bed for the night--all well above board, of course, as I know that there is no hanky-panky from Opposition Members. Non-London Members do not see just how bad the situation is in places like Southwark, Haringey, Islington and Newham. They are showing more understanding, but it is still far from complete. Even in Tory-controlled Brent, the problems are just as bad as those elsewhere.

Today, there are 30,500 families in temporary accommodation. That represents 62 per cent. of all homeless families in England. London has nearly 500,000 unemployed people--the largest concentration of unemployment in the United Kingdom. Of all refugees, 90 per cent. ultimately settle in London, putting enormous strains on the services of our boroughs, whether Tory, Labour or Liberal.

I know that my non-London hon. Friends have some understanding of London's problems. We are dealing not just with the Westminster area. My hon. Friend the Member for Brent, East (Mr. Livingstone) once talked about the bars and brothels of Westminster, causing considerable offence to those who know where neither the bars nor the brothels are and who, despite assiduous questioning, have not been able to find out. I do not know whether people were offended because no one had told them or because that is not what Opposition Members do. At any rate, it must be understood that the capital city has enormous problems.

I know that the standard spending assessments with regard to highway maintenance in London have been increased, but they are still woefully inadequate. Have hon. Members--Conservative or Labour--seen the chaos on London's streets at the moment ? People are calling it "Polo City" because in the middle of every street there is

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a bloody great hole. It is appalling. There are almost more cones on the streets of London than there are people walking around. Why are Ministers not able to co-ordinate the way that undertakings are simply digging up the roads willy-nilly ? It is probably easier to get out of Sarajevo than the east end of London at present. Someone is working on the Rotherhithe tunnel, so they have decided to work on the highway that links to it, and they have coned off the A13, the Commercial road. People can see this happening all over the place. Albert bridge is closed and Lambeth bridge is about to close. Who the hell is co- ordinating all this ? The answer is no one. But someone should be doing something about it. If Minsiters had to travel in rush hour in London, whether on a bus or in a private vehicle, they would do something about it. However, they live in their ivory towers with chauffeur-driven cars to take them from one reception to another at most convenient hours, where they drink champagne, eat caviar and show no regard whatever for the people of London.

9.20 pm

Mr. Doug Henderson (Newcastle upon Tyne, North) : As someone who gets caught on the bridges of London when coming to the House in the morning, I cannot but agree with all the remarks of my hon. Friend the Member for Newham, North-West (Mr. Banks).

Does not this debate demonstrate again to the British people that the Government have lost their commitment to improving our public services? The Government will be shown to have misled the British people about council tax levels. They are both unwilling and unable to dissociate themselves from malpractice and corruption in Tory-controlled boroughs. They are torn apart internally by their own contradictions. They are devoid of new ideas and direction. As will be shown in May and June this year, the Conservative party has lost the trust of the British people.

We have had a good debate today. Hon. Members on both sides of the House have expressed strong views about both the system of financing local government and the amount of finance that is available to councils. In a speech of the highest quality, my hon. Friend the Member for Blackburn (Mr. Straw) made a number of important points, the central one being that, even with all the reviews that have taken place, standard spending assessments are not being used for their original purpose. They were originally intended to distribute the amount of local government grant. However, they are now being used to limit the amount of local authority resources, and that offends any sense of democracy.

Another important point that my hon. Friend made was that there is little use in introducing the capping system because it does not control the level of expenditure. Councils that face a cap inevitably spend up to the capping limit. Therefore, examining the matter from an aggregate point of view, there is little saving. The impact of the capping regulations on constituencies was expressed forcefully by my hon. Friends the Members for Denton and Reddish (Mr. Bennett), for Lancashire, West (Mr. Pickthall) and for Newham, North-West. My hon. Friend the Member for Newham, North-East (Mr. Leighton) gave considerable emphasis to the potential cuts in his constituency arising from this settlement and to the threat to important local authority public services such as swimming pools and libraries. Although the

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Government agree with his local authority that more money should be spent on education, money is being diverted from the education budget to meet the council's statutory obligations to the homeless. That is a ridiculous situation. My hon. Friend the Member for Barnsley, Central (Mr. Illsley) said that in his local authority there would be cuts in the discretionary grants available for education because of the impact of the settlement.

Tory Members made some points with which I think my hon. Friends agree. The hon. Member for Brentwood and Ongar (Mr. Pickles) was pleased that the level of unemployment was a more important factor in the calculation of SSAs. It was not a matter of north and south--it was something that could affect the whole of the country. Many of my hon. Friends agree with that and, indeed, my hon. Friend the Member for Barnsley, Central said so. The hon. Member for Isle of Wight (Mr. Field) believed that there should be more openness and transparency in the SSA system. I think that few of my hon. Friends would disagree with that.

The hon. Member for Ludlow (Mr. Gill) said that he supported subsidiarity. There is considerable support for that among my hon. Friends. I am not sure whether my hon. Friends agree with the rest of the hon. Gentleman's speech, but I always say that we should be satisfied with the little that is good. My hon. Friend the Member for Lancashire, West said, after the hon. Member for Ludlow left the Chamber, that he could not address the hon. Gentleman directly, as he seemed to have gone for a pie and a pint.

I cannot address the hon. Member for Wellingborough (Sir P. Fry) as he is not in his place. As the hon. Gentleman was wearing a dinner suit before he left the Chamber, we can only assume that he is having his pie and pint in more salubrious surroundings. I use dinner suits only for official occasions.

The hon. Member for Ludlow said that teachers had been made redundant in his constituency. If the hon. Gentleman had been in his place now, I would have been able to say that my hon. Friends and I agree that that is damaging to his community.

The Secretary of State made a lengthy speech and I must congratulate him on being generous in giving way. I cannot extend those congratulations to the generosity of his responses, but I can say that the right hon. Gentleman did try. It was noticeable that he made little mention of the impact of the overall settlement and what it would mean for local authorities throughout. Perhaps that is not surprising, as the House will appreciate the difficulties that the Department of the Environment has in persuading the Treasury each year of the efficacy of its submission on the financial settlement. Successive Secretaries of State have trooped along to the Chancellor to make their case. Some have been known to flag up the occasional victory, but that is not the case this year. I have sympathy for the right hon. Gentleman. Not only has he been spurned by the Prime Minister on the local government review, he has now been spurned by the Chancellor on the financial settlement. The only flag flying this year at the Department of the Environment is a white flag.

It is interesting to compare the approach of the Secretary of State with that of his predecessor. I remind the House that the previous Secretary of State for the Environment, the right hon. and learned Member for Folkestone and

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Hythe (Mr. Howard), wrote to the Chief Secretary in May 1993. I am fortunate enough to have a copy of that letter, which stated : "You asked me to let you have my initial views on the forthcoming Settlement, as a preliminary to this year's Survey discussions In aggregate, it suggests that an increase of 5.2 per cent. in TSS for 1994 -95 is needed in order to protect local authority services." The same correspondence contained the Treasury's response, which shows that a level of settlement of around 3.5 per cent. is as far as it was prepared to go.

The right hon. and learned Gentleman showed some skill as a negotiator. He knew when he was beaten and he was prepared to recommend that level of settlement. However, where are we now? In a statement to the House, the present Secretary of State said : "my proposal provides for a 2.3 per cent. increase in local authority spending year on year."--[ Official Report, 2 December 1993 ; Vol. 233, column 1173.]

The settlement that has been accepted by the right hon. Gentleman is less than the Treasury deemed was necessary last May.

In the correspondence between the right hon. and learned Member for Folkestone and Hythe and the Treasury, the right hon. and learned Gentleman gave a dire warning of the consequences of the settlement falling below 3.5 per cent. He said in the same letter :

"local government should not be singled out for specially harsh treatment A TSS settlement for next year which was lower in cash terms than local authority budgets in the current year would, in my view, be impossible to defend."

Is not that exactly what the Government are asking the House to support tonight? Is not that what is contained in the settlement? That is why the Secretary of State and his hon. Friends have been so quiet on the overall impact on local government services of the settlement. Are not we being asked to defend the indefensible? Does the right hon. Gentleman understand that he is asking the House to vote through measures that will lead to a 1.2 per cent. cut in local authority resources? Does he understand that those calculations are based on a local authority pay bill freeze and that, if cuts in services are to be avoided, substantial council tax increases could result? If the Secretary of State understands all that, is not his advocacy of this year's settlement abject surrender to the Treasury? Perhaps the Secretary of State should listen to the Minister for Local Government and Planning, who seems to be developing a section on the needs of local authorities of all colours. The Minister wrote to all English Members of Parliament on 2 December saying : "The Revenue Support Grant Settlement for 1994-95 is necessarily challenging I recognise that a number of authorities will be disappointed with the outcome."

It is clear from the debate this evening that more than a small number of authorities are disappointed with the outcome.

Mr. Gummer : Does the hon. Gentleman agree that it is widely thought by people in local government circles that the settlement is considerably better than they feared and something that they can work with? I refer him to the comments in most of the local government newspapers and magazines, which say clearly that people thought that it was going to be a darn sight worse. In those circumstances, could not the hon. Gentleman be grudgingly generous to us rather than so universal an opponent?

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