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The city also believes that the standard spending assessment relating to debt charges should be based on the actual debt of an authority, rather than on a notional debt. I certainly cannot agree. Authorities have discretion over the size of their debt. It is up to them to decide how much debt they redeem. They are required only to set aside a specified percentage each year. Basing the SSA on the actual debt would disadvantage authorities that had acted prudently in paying off debts more rapidly than required by law. Indeed, this is the very point that Labour-controlled Lewisham made strongly when it came to see me.

The hon. Gentleman referred to the area cost adjustment. The area cost adjustment always provokes strong reactions. Authorities that receive it contend that it does not cover all the extra costs which they face through being in the south-east. Those who do not receive it are convinced that it is already over-generous. The hon. Gentleman's point tonight is in complete contradistinction to the point made by the hon. Member for Newbury (Mr. Rendel) not long ago. We look at the matter objectively. We carried out an extensive examination of the area cost adjustment in 1993. We satisfied ourselves that it is, indeed, justified.

In the coming year, we intend to carry out research to see whether the zones on which the area cost adjustment is based can be better founded. It may be better, for example, to base them on travel-to-work areas. We would in any case expect to bring up to date the information on which the adjustment is based. One factor in this will be the revaluation of business premises where the new business rate bills can be reflected in the area cost adjustment for 1996-97. In the end, Liverpool is bound to judge the SSAs by the level of expenditure they reflect. Of the 36 metropolitan districts, Liverpool's SSA per head of population is the third highest. Its SSA is exceeded only by Manchester and by the neighbouring borough of Knowsley. Liverpool's SSA per head is £887 in 1995-96. This compares with an average of £756 per head for the metropolitan districts as a whole.

I believe that this demonstrates that the SSA system already recognises that Liverpool is a city with spending needs considerably greater than most. If the evidence supports changes in the SSA formulas which would allow even more to Liverpool, we would certainly be prepared to consider changes. However, we must retain the objectivity of the standard spending assessments and seek as wide a measure of agreement as possible in local government so that the approach is as fair and open as it can be between authorities. Meanwhile, I urge the city council to consider its priorities most rigorously and to sustain the search for efficiency savings to avoid the notoriety of having the highest levels of council tax in the country, as it did in 1994-95.

Question put and agreed to.

Adjourned accordingly at twenty-nine minutes past Ten o'clock.

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