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Mr. Henderson : People throughout the local authority world believe that this is a very bad settlement. They expected a dreadful settlement. Once the impact of the pay increase is felt, they will probably revert to their original assessment of the settlement. That takes me rather neatly on to the matter of local authority pay. I am indebted to the right hon. Gentleman for leading me in that direction.

I am surprised at the apparent complacency of the Government, especially in the light of further statements by the Treasury today on pay. The Treasury says in its announcements that it assumes that public sector pay bills will still be frozen. Yet, at the same time, sources in the Government say that substantial increases will be acknowledged for certain groups of workers. A figure of 4 per cent. has sometimes been mentioned for the police.

Today the Secretary of State for the Environment said that a teachers' settlement of 2.9 per cent. would be permissible. Is not there a contradiction between the two positions? First, the original financial statement announced in December last year assumed a pay bill freeze, with increases in pay coming only from productivity agreements. Then the settlement compels local authorities to increase the level of remuneration for those categories of workers. Is not there a contradiction, as my hon. Friends the Members for St. Helens, North (Mr. Evans) and for Pendle (Mr. Prentice) suggested? If the settlements become a reality, will they not blow a gaping hole in the assumptions on which the financial statement is based?

Is there still an expectation that the pay increases can be funded by productivity? If so, do the Government accept that redundancies of police officers and teachers are necessary to pay for the increases? If the Government do not believe that, how else do they think that productivity improvements of the order necessary to finance the pay increases can be achieved? Police and teachers will be made redundant just when the Government are saying that their main priority is to protect the community, fight crime and improve education. The Government have to look again at how effective the settlement can be. Do they seriously expect that productivity gains can be achieved? My hon. Friend the Member for Newham, South (Mr. Spearing) referred to the trouble and pressure that had been put on loyal local authority workers such as school cleaners. If the Secretary of State continues with the settlement, is he prepared to ask school cleaners, home helps and swimming pool attendants to accept a pay cut or to take redundancy to finance an increase for a teacher or a policeman? That would be unacceptable and unjust, and it should be discarded. The reason for our difficulty is that the country is in an economic mess. The Government have accepted and, indeed, celebrated a low-capacity economy with high levels of unemployment. The impact of a vicious stop-go cycle, which the Government's economic mismanagement has created and aggravated, means that the economy cannot meet public expenditure obligations because so much money is wasted on financing unemployment. We raise insufficient tax revenue because of under-employed resources. Is not the settlement the price that we have to pay? We cannot meet essential expenditure on improving education, training and capital projects, which could help the recovery and secure our future.

The settlement is not only about the level of grant and council tax. It is also about the assessment of the needs of communities. There can have been no doubt that the previous system was flawed--it calculated Huntingdon as

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more deprived than Chester-le-Street and Cambridge as more deprived than Hartlepool. The new system has some improvements. The inclusion of an economic index that includes unemployment and morbidity factors is one improvement--that argument has been advanced by some of my hon. Friends--but there are still many concerns. The reduction in the additional-needs index is one, as that undervalues the link between deprivation and educational under-achievement.

My hon. Friend the Member for Blackburn was right to say that, even with the improvements in the SSA system, there are still many shortcomings in the all-ages social index, which claims that Hove is a region of greater need than Liverpool, and that Runnymede is a region of greater need than Wolverhampton. Anyone who travels in those regions knows that that is not the case.

Many councils have suffered substantial losses from adjustments in the SSA. The arrangements for lessening the impact are called "dampening". When I first heard that phrase introduced by the Association of Metropolitan Authorities, I wondered what it meant. I thought that it was a rare new initiative by the Prime Minister to restructure his Cabinet, but it is the Department of Environment's term for assisting councils that have suffered from a change in their SSA. Those councils that have marginally benefited from the abatement this year will want to know how long the abatement will continue and whether it will be applicable next year.

The Government claim that the system is fair, but it is no coincidence that the revised system shows that the shire districts have fared best. The Secretary of State may have thought that he was doing himself a political favour when he ensured the achievement of that result, but if last year's county council election results are anything to go by, he is working from an old text book. It did him no good last year and it will not do him any good this year. The Minister for Local Government and Planning has also taken a special interest in the SSA system. He said in an interview with the Local Government Chronicle that the system is so sophisticated that he could work out the SSA for Leningrad. Many authorities in this country think that he has worked out the SSA for Leningrad. In this age of perestroika, the system in St. Petersburg, even with all its shortcomings, is probably more democratic than the system in this country and the system that the Minister wants.

We have the most centralised system of local government finance in the western world. That undemocratic system is based on the draconian practice of capping local authority budgets. Capping denies a local community the right to decide on the level of service that it wants and on how resources should be raised to pay for it. Capping has been condemned as inappropriate in a modern state if the balance of influence and democracy is to be retained between central and local government.

In justification of the financial settlement, the Secretary of State said that the proposal

"represents a package which the country can afford."--[ Official Report, 2 December 1993 ; Vol. 233, c. 1176.]

That is not a widely held view. The country cannot afford a package that ties down resource allocations exclusively to the statistical whims of officials in Marsham street. The country cannot afford its democracy to be undermined by the evils of capping ; it cannot afford to accept a capital programme for local authorities that will not rebuild our crumbling schools, repair our leaking roofs or re-equip our

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aging transport systems and that leaves our roads in decay [Interruption.] --as well as those of the hon. Member for Harrow, West (Mr. Hughes)--and does nothing to renovate and build homes for rent. The country cannot afford a revenue settlement that undermines our teacher-pupil ratios, damages our fire-fighting capacity, threatens our ability to combat crime, puts the vulnerable more at risk and deprives us all of a sound and safe community. The country cannot afford its public services to be endangered any longer by this clapped-out Government. The House should reject the orders. I say to the Government what Oliver Cromwell said to the Long Parliament : "You have sat too long here In the name of God, go!"

9.40 pm

The Minister for Local Government and Planning (Mr. David Curry) : The hon. Member for Newcastle upon Tyne, North (Mr. Henderson) began and ended with a peroration and there was nothing in the middle ; it was like a meal which started with a souffle and went straight on to the meringue.

The Labour party would like to say that the system is rigged. Labour Members hint at that all the time and occasionally say so. They say that it is the invention of some demonic civil servant, but they should look at the figures and at what the Select Committee said. They know that they cannot sustain that case.

Let me demonstrate--the local authorities with the highest spending assessments are almost uniformly Labour, with the odd sprinkling of Liberal Democrats. The top 10 authorities with the highest damping grants are predominantly Labour controlled.

If I wanted to rig a system I am bright enough to be able to do so, but the system is not rigged, it is scrupulously fair. When I am asked where I use my judgment, I answer, "In as few places as possible." In every case where a choice was laid before me in which analysis had demonstrated a clear indicator, I took that indicator. It would have been convenient for me-- representing North Yorkshire--to say that we do not want the area cost adjustment because we cannot sustain that.

Mr. Gummer : We did not do so.

Mr. Curry : No, we did not take that course because the evidence showed that the opposite was true and Opposition Members should make up their minds whether they like it or not, because they cannot face both ways simultaneously.

The Select Committee made an interesting and helpful contribution to the debate and its report was studied. It began by saying that the discussion had been open and it was. Throughout, our intention had been to tell everyone--I tell the hon. Member for Newcastle upon Tyne, North the same-- that we can argue about the amount of money available as that is perfectly legitimate and the stuff of political argument, but we ought not to argue about how we distribute the money. We have a common interest in trying to ensure that that is done in a way that is as up to date and fair as possible. Of course, we must make continued improvements and one cannot say that one has reached the definitive point--the system will evolve from year to year. However, I want the argument where it belongs rather than concentrating on the attribution of Machiavellian motives to a genuine attempt to deliver the best possible formula for redistribution.

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Mr. Kilfoyle : In that case, can the Minister explain why there was a further cut after the delegation from Liverpool met him? No one in the city of Liverpool understands why another £100,000 was taken from the support grant.

Mr. Curry : I do not know whether Liverpool is one of the cities from which the overpayment of previous grant has been clawed back. If that is the case, it has had an interest-free loan for a couple of years and we ought to have had it back.

Liverpool has some difficulties because of its relatively low ethnic population. Newcastle upon Tyne has a similar characteristic. There is a strong weight for ethnicity in the indicators. I know that the hon. Member for Coventry, North-East (Mr. Ainsworth) has intervened. Coventry wishes me to use a certain form of sampling to identify children who came from families on income support. We have sampled at 1 per cent. and we have recently changed to 5 per cent. sampling. We now have two quarters at 5 per cent. and two quarters at 1 per cent. sampling. Coventry would have benefited had we moved straight to 5 per cent. sampling. I did not do that, because I do not consider that we can base our sampling on only two quarters.

Had I exercised the judgment for which people had asked, the consequence would have been a £2.5 million further cut for Liverpool. That shows how the indicators can work and their possible impact. Where I have to exercise a judgment, of course I am conscious of particular needs of communities.

Mr. Robert Ainsworth : Is it not the case that Coventry has pointed out for two years now that the method of counting the children of claimants is absolutely wrong? The Minister's own officials accepted that it cannot be right, yet for two years he refused to do anything about it.

Mr. Curry : That is not correct. Until recently, the available statistics have been based on a 1 per cent. sample. A 5 per cent. sample will be more accurate and a 50 per cent. sample will be more accurate still. We are now incorporating statistics based on 5 per cent. for two quarters and 1 per cent. for the other two quarters. Next year, the statistics will be based fully on a 5 per cent. sample and I have no doubt that Coventry will benefit. However, the swings and roundabouts of the system mean that Liverpool, because of its characteristics, may be penalised by that methodology. There cannot be winners all the way round.

Several hon. Members mentioned area cost adjustment. The area cost adjustment is in the index because it is justified and because it stood up to analysis. However, I am not yet satisfied with parts of it, particularly the way in which area cost adjustment plays out towards the borders of the south-east region. Of course there are anomalies at borders. For example, one can find schools within a mile of each other, one each side of a village. We do not yet have the information to consider effectively how it should be tapered, but we will accumulate that. I have asked authorities to join us in carrying out further analysis on area cost adjustment.

I am already committed to explore with the Department for Education the extent to which we can update the statistical information about children in school. It is collected in January now; therefore, it is 15 months behind the statistics. If we collect it in September we shall bring it much more up-to-date. I want the most up-to-date

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statistics available. That will give us a more contemporary account and make the figures more relevant. It does not mean that the previous system was not fair ; it means that we shall be using more up-to-date figures where they stand up to analysis.

I should like to say a word about London because there have been some suggestions that we should take it out of the system. I welcome the explanation from my hon. Friend the Member for the Isle of Wight (Mr. Field) of what the Select Committee had in mind when it made those points in its report. The Select Committee asked me to declare where there is a judgment to be made.

If we were to take London separately, I would have to make an enormous judgment before even beginning the process of how much money to take out of the system to dedicate to London. That would be a political judgment which I do not want to make.

I should prefer a universally applied system that seeks genuinely to define where councils have to spend money. That would be much better than having a London index, another for the north-east and another for Merseyside, which also has special problems. Before we know where we are, we would have fragmented the system, and it would no longer have the integrity of universal application.

Mr. Robert B. Jones : I understand the problems that would occur if London is separated out and no arrangements are made scientifically to determine the distribution between London and the rest of the country. My hon. Friend would need a formula for distributing between London and the rest of the country. That does not undermine the case that if we vary any part of the London distribution, we shall end up with huge swings in the rest of non-metropolitan Britain and that is the real problem.

Mr. Curry : I take my hon. Friend's point. As with all the Select Committee's recommendations, we are willing to examine the options. The Committee identified a number of aspects that, in its view, should be investigated further ; it is only fair to add that the Committee itself found it difficult to come up with positive alternatives.

Work will be necessary on major issues such as the police and the fire authorities this year, as well as on the problem of sparse education provision. The five matters that I have mentioned--along with the counting of pupil numbers and the area cost

adjustment--constitute a significant menu. I do not intend to engage in the sort of radical review that has just taken place ; people need stability, and they cannot cope if the system is tossed in the air every year. We must, however, ensure that there is a constant process of modernisation.

A number of Newham Members spoke. It was suggested, for instance, that the capital financing SSA should be based on the actual pre-1990 debt, rather than the notional debte. That, however, would penalise authorities that had used capital receipts to repay the debt, and reward those that had spent those receipts. The system is currently based on the principle of notional amounts, and I think it better for that arrangement to continue.

Newham's SSA for 1994-95 was £1,143 per head, way above the average for the outer London boroughs : it was the fifth highest in London. Newham also receives £13.3 million of reduction grant. I understood what the hon. Member for Newham, North-West (Mr. Banks) said about homelessness, and I am willing to give a detailed

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explanation of the way in which the homelessness indicators are calculated. That would, I think, be more helpful than an abbreviated explanation now.

This year, we have introduced indicators relating to unemployment and morbidity, or ill health. I pay tribute to the Webber Craig authorities, which have pressed for such indicators for some years. They convinced me : the case stood up to analysis, and then to further analysis. However, certain people cannot congratulate us on introducing economic indicators, and then complain about adverse effects on other authorities.

My hon. Friend the Member for Wellingborough (Sir P. Fry) made two points, which I think I have answered. I am sure that he will subsequently wish to raise the question of what I understand to be between 12,000 and 13,000 surplus school places in Northamptonshire : he suggested that there was a debate to be had with the county council.

The hon. Member for Newbury (Mr. Rendel) made a speech that I can only describe as sub-charismatic. He supplied his own excuse, suggesting--if I understood him aright--that Madam Speaker had said that it would help the House if he did not speak for too long. If that is true, it is one of the rare occasions in recent parliamentary history of a mercy killing. This was not a dance of the seven veils--the Liberal Democrats usually have seven policies to correspond with the broad economic regions of the country. Here was not even a single veil, but a gossamer thread. Boiled down, Liberal Democrat policy amounted to adjusting the area cost adjustment for West Berkshire. That is what will be laid before the people of Britain : "We shall adjust the area cost adjustment for West Berkshire, and that will solve our problems." I am grateful for brevity at least. The hon. Member for Islington, North (Mr. Corbyn) said that although the housing benefit case-load figures had been adjusted to take account of dwellings owned by another authority, adjustments had been made only for authorities that had made representations. We have made such an adjustment, in response to the strength of arguments advanced during consultation ; we did not have enough information to make an accurate adjustment for all authorities, and we therefore produced estimates for the authorities that were most affected. We have, however, said that the issue will be discussed with local authority associations with a view to gleaning better figures for 1995-96.

Mr. Corbyn rose --

Mr. Curry : No, I shall not give way because the hon. Gentleman was not listening to the greater part of my remarks.

I now wish to respond to the hon. Member for St. Helens, North (Mr. Evans) who compared St. Helens with Westminster. The truth is that parts of Westminster are socially deprived. A feature of much of the housing in the north of England is that it is more solid than that in parts of the south so housing conditions are sometimes better in the north. Westminster is fourth on the revised social index and St. Helens is 241st. However, if the economic indexes are included, the figures are turned around and St. Helens becomes 39th whereas Westminster is 83rd. If one takes into account the number of households sharing housing and the number of householders living in rented flats, overcrowding, ethnicity and homelessness, it is clear that there is a very good case for considering Westminster as

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socially deprived. If that is what the system reveals, we abide by it because we must have an objective system. I am not going to tweak it here, twist it there and bend it the other way.

I shall,of course, respond to the invitation issued by my hon. Friend the Member for St. Ives (Mr. Harris) and write to him about the Isles of Scilly. As he knows, the Isles of Scilly have an especially high SSA per head. It is £1,231 which is almost double the national average, but I am perfectly willing to discuss specific issues with him in detail.

The hon. Member for Lancashire, West (Mr. Pickthall) mentioned education for the under-fives. The provision of such education is not a statutory duty and it would not be right to base the SSA on the number of places for the under-fives because that would lead local authorities to write their own cheques--

Mr. Deputy Speaker : Order. I am having great difficulty hearing the Minister. Members of all parties are chatting away. I should be grateful if the Hosue would settle down and listen to what the Minister has to say.

Mr. Curry : The hon. Member for Blackburn (Mr. Straw), who opened the debate for the Opposition, committed himself to two things on Labour's behalf. We can say that he committed himself because he made his commitments in the House and, according to the dictum of the hon. Member for Dunfermline, East (Mr. Brown), they count as pledges, unlike off-the- cuff remarks which I understand constitute the other category of pledges made by the Labour party.

The hon. Member for Blackburn made two promises. First, he said that he would abolish capping. He did not say over what time scale or for whom. Would it be done all at once in the first year? He was not quite sure whether it was linked to the introduction of elections by a third, a third, a third. I know that the hon. Member for Dunfermline, East has made that connection. He wants to have that control of a third, a third, a third and he would intervene in the election cycle to obtain it. In any event, the hon. Member for Blackburn would abolish capping. In other words, there would be a series of very large tax increases under Labour. All council tax payers will wish to know that that is what would happen.

Mr. Straw rose--

Mr. Curry : I have three minutes left. I shall give way when I have dealt with the second pledge.

The hon. Gentleman's second pledge was to abolish compulsory competitive tendering. Does the House seriously believe that, given the choice between putting services out to tender and building town hall bureaucracies, Labour authorities would opt for CCT? We should soon see local authority employment going through the roof and passing the 2 million mark.

Mr. Straw : I have two questions for the Minister. First, will he explain where the completely bogus claim that the abolition of capping and CCT would cost £800 million came from? Secondly, why is he rejecting the policy of not having capping and not even counting local authorities' self-financed expenditure which the Prime Minister proposed in a White Paper when he was Chief Secretary? It is still our policy, although he has changed his mind.

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Mr. Curry : Even for someone as mathematically challenged as the hon. Gentleman, the idea that one can liberate capping without tax increases is incomprehensible. I do not think that council tax payers will agree with him. He should consider the impeccably Social Democrat Governments in Scandinavia--in Denmark--and in Holland, where local authorities are being brought under tighter control because local authority expenditure is part of public expenditure. We know what the Labour party would do in Government. We will find that Labour's ten commandments are tax, tax, tax, tax, tax and tax again. The taxes will not be collected and the rents will not be collected and the council tax payer will suffer. That is Labour's policy. The hon. Member for Blackburn is the Wilfred Pickles of local Government. "Give 'em the money, Mabel" is his policy--"Give 'em the money and the council tax payer will pay." The council tax payers had better beware if that is what they get.

I commend the reports to the House.

Question put :

The House divided : Ayes 304, Noes 261.

Division No. 107] [10 pm

AYES

Ainsworth, Peter (East Surrey)

Aitken, Jonathan

Alexander, Richard

Alison, Rt Hon Michael (Selby)

Allason, Rupert (Torbay)

Amess, David

Arbuthnot, James

Arnold, Jacques (Gravesham)

Arnold, Sir Thomas (Hazel Grv)

Ashby, David

Aspinwall, Jack

Atkins, Robert

Atkinson, David (Bour'mouth E)

Atkinson, Peter (Hexham)

Baker, Rt Hon K. (Mole Valley)

Baker, Nicholas (Dorset North)

Baldry, Tony

Banks, Matthew (Southport)

Banks, Robert (Harrogate)

Bates, Michael

Batiste, Spencer

Beggs, Roy

Bellingham, Henry

Bendall, Vivian

Beresford, Sir Paul

Biffen, Rt Hon John

Blackburn, Dr John G.

Body, Sir Richard

Bonsor, Sir Nicholas

Booth, Hartley

Boswell, Tim

Bottomley, Peter (Eltham)

Bottomley, Rt Hon Virginia

Bowden, Andrew

Boyson, Rt Hon Sir Rhodes

Brandreth, Gyles

Brazier, Julian

Bright, Graham

Brooke, Rt Hon Peter

Brown, M. (Brigg & Cl'thorpes)

Browning, Mrs. Angela

Bruce, Ian (S Dorset)

Burns, Simon

Burt, Alistair

Butler, Peter

Butterfill, John

Carlisle, John (Luton North)

Carlisle, Kenneth (Lincoln)

Carrington, Matthew

Carttiss, Michael

Cash, William

Channon, Rt Hon Paul

Churchill, Mr

Clappison, James

Clark, Dr Michael (Rochford)

Clarke, Rt Hon Kenneth (Ruclif)

Clifton-Brown, Geoffrey

Coe, Sebastian

Colvin, Michael

Congdon, David

Conway, Derek

Coombs, Anthony (Wyre For'st)

Coombs, Simon (Swindon)

Cope, Rt Hon Sir John

Cormack, Patrick

Couchman, James

Cran, James

Currie, Mrs Edwina (S D'by'ire)

Curry, David (Skipton & Ripon)

Davies, Quentin (Stamford)

Davis, David (Boothferry)

Day, Stephen

Deva, Nirj Joseph

Devlin, Tim

Dickens, Geoffrey

Dicks, Terry

Dorrell, Stephen

Douglas-Hamilton, Lord James

Dover, Den

Duncan, Alan

Duncan-Smith, Iain

Dunn, Bob

Durant, Sir Anthony

Dykes, Hugh

Eggar, Tim

Elletson, Harold

Emery, Rt Hon Sir Peter

Evans, David (Welwyn Hatfield)

Evans, Jonathan (Brecon)

Evans, Nigel (Ribble Valley)

Evans, Roger (Monmouth)

Evennett, David

Faber, David

Fabricant, Michael

Fairbairn, Sir Nicholas

Field, Barry (Isle of Wight)

Forman, Nigel

Forsyth, Michael (Stirling)

Forth, Eric

Fowler, Rt Hon Sir Norman

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