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Mr. Gummer: The hon. Gentleman is mistaken. Birmingham city council wanted to discuss two issues relating to Frankley. It wanted us to treat primary and secondary school children differently, and, in that connection, presented me with a figure for the large loss that it expected to make. When we examined the position in more detail, however, the council agreed that the action that it had proposed would not result in the savings that it had identified. It acknowledged that, in that instance, the methodology did not have the effect that it had assumed it to have.

More generally, the council wanted a complete change in the system, to overcome the difficulty encountered when we move from one year to another at a time of boundary changes. One area has to be moved into another, as it were. To do that, we would have to change the method that we have agreed with the local authority associations. We cannot act unilaterally, because that would be wholly contrary to the way we operate. We have told Birmingham city council that, if the local authority

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associations felt that there was a better way of dealing with the matter, we would adopt it if we possibly could; but the local authorities feel that difficulties are involved in moving at such speed.

This is not a matter on which the Government should act unilaterally. Like previous Governments--I claim no particular credit for it--we have acted after lengthy negotiations with local authorities. The hon. Member for Birmingham, Northfield (Mr. Burden) should address his question to other local authorities, and, if they support the methodology, we can make progress. [Interruption.] The hon. Member for North-West Durham can moan as much as she likes, but that is not only my view; it is shared by many Labour local authorities, as she will gradually come to realise.

Mr. Clive Betts (Sheffield, Attercliffe) rose--

Mr. Toby Jessel (Twickenham) rose--

Mr. Gummer: No, I will not give way. I wish to continue my speech.

We pay heed to local government in considering possible changes in the various methodologies. Most of this year's proposed changes flowed from suggestions from those in local government. They encouraged us to make distinct provision for rent allowances and for levies of the national parks; they asked us to look again at the way in which we reflect special educational needs and support services, following the ending of recoupment last year; and they asked us to look again at the pensions element in the formula relating to the police.

We have responded to those representations, and also to the concern expressed in many areas outside the south-east about the area cost adjustment. The review that we set up, chaired by Professor Elliott of the university of Aberdeen, has already begun discussions with local government. Tenders have been invited for research specified by the review team. We have asked the team to report by June.

Sir Peter Hordern (Horsham): Reverting to education, what does my right hon. Friend think of the conduct of the Liberal Democrat-controlled West Sussex county council, which wrote to the governors of every school in West Sussex, long before the revenue support grant settlement had been announced, telling them that their spending would have to be cut by £25 million in the next two years? It did so without any evidence. When the settlement was announced, it was found to be far more favourable than it had predicted, but it made no apology, nor has it approached any of the schools to tell them about the improvement that the Government announced in the revenue support grant, which should go straight to the schools.

Mr. Gummer: The only thing I have to say about West Sussex Liberal-controlled council is that it did not undertake much independent research on the matter, but merely took the whip from Liberal-controlled councils throughout the country. There was nothing special about that. A deal was done that they would frighten parents and governors in advance by writing such a letter without any basis.

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They did so early enough for a basis not to have been possible. Often, they used examples of how many teachers might have to go, how many books could not be bought and what would be the effect of cuts of 5 per cent. in each school. Stereotype letters were sent to Members of Parliament. They were handed out to Liberal Democrat activists and to some Labour people--happily, some of the latter felt that the letters were a little extreme, even for them.

I have heard of no example of a Liberal Democrat-controlled council that has since written to the governors to say, "We are sorry there was undue alarm. The figures are as follows, and we are hoping to passport this through to you as rapidly as possible, and that you will be able to use it effectively." I will happily give way to the hon. Member for Newbury, if he can cite a single case in which Liberals have apologised for the letter that was sent out, or for the letters that went out from Labour councils.

Mr. David Rendel (Newbury): Perhaps the Secretary of State would like to tell me how many of those authorities are already spending more than the Government now say they should spend.

Mr. Gummer: The interesting thing is that the hon. Gentleman does not explain that any of those authorities has written to apologise. They all said that there would be large cuts. That will not take place, unless the Liberal authorities do not pass on the money that is now available to them.

Mr. Jessel: On the subject of spending by Liberal Democrat-controlled councils, when my right hon. Friend visited Richmond on Thames and was shown the slides about which he was kind enough to tell us, did he notice a rather small, new town hall called a civic centre--the building is rather small for a town hall--on which the Liberal-controlled council spent no less than £12 million, as it is of extremely extravagant design? The people of the borough are still paying the hire purchase on that, which is one reason why, in the last council elections in the London boroughs in May 1994, the Liberals lost four seats to the Conservatives in Twickenham.

Mr. Gummer: I was surprised at some of the things that were included in the slides. Now, I am even more surprised about some that were excluded. Although no doubt the Liberal-controlled council is proud of its new town hall or civic centre, it did not feature. No photograph was included, nor was there any reference to the cost. Indeed, it was not mentioned during the discussion. No doubt my hon. Friend would like to give me further information, so that I can ask for a few more particulars.

Mr. Betts: The Secretary of State has attacked virtually every Labour or Liberal council in the country. How does he respond to the chairman of a council policy and resources committee who told the Government:

He wanted another £2 million to spend on education. On top of the cuts, it seems that that council will have to increase council tax by up to 9 per cent. to make up the shortfall in Government grants. That was the chair of the

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policy and resources committee of Buckinghamshire county council, one of the few--endangered--Tory county councils left.

Mr. Gummer: No council can escape the need to make savings and run itself efficiently. The money that has been provided for Buckinghamshire, as for the rest of the country, is consonant both with its needs and with what the country can afford. There is no other way. [Interruption.] I am even-handed, unlike the hon. Gentleman, in what I say, whatever party is involved.

Local government has received a significant increase in the money that is available. That money needs to be spent on education rather than elsewhere. The hon. Member for Attercliffe is almost the last person in the House to lecture anybody on running local authorities. His local authority is an example of appalling local government. He was in charge of a local authority that could not teach anybody anything about running authorities except how to run up debts. He must not address the House as if he knows anything about the matter.

During the consultation period, we have received representations from authorities about our proposals, and have considered them carefully. We have responded to many of the representations about the data that we propose to use in the calculation of SSAs. Some of those representations brought to light the need for amendments, and in those cases, we have been able to make corrections. We shall continue to discuss SSA methodology with the local authority associations.

I said in November that I would continue to pay a special grant to compensate authorities that have lost more than 2 per cent. of SSA as a result of methodology changes for 1996-97 or for 1994-95 and the incorporation of 1991 census data. That is a fair arrangement that recognises the special problem of a sudden drop in SSA, while also recognising the need to phase out such support, so that grant can be redistributed elsewhere. The Special Grant Report (No. 16) will establish that grant for 1996-97, and some £128 million will be distributed to local authorities in that year.

I announced a scheme last November to damp unacceptable increases in council taxes directly attributable to local government reorganisation--a point that was raised earlier. I do not propose any changes to the scheme, which will apply to areas where the direct council tax effect of reorganisation exceeds £104 in band D. Taxpayers in North Lincolnshire will therefore benefit from a grant of about £2.18 million. I shall lay regulations to implement the scheme before the House in a few days.

The capping of local authority budgets is the means by which Government ensure that local authorities play their part in controlling public expenditure. I set out in my statement in November the capping criteria that I had in mind to apply for the coming year. I have now considered carefully the representations made by authorities, and I wish to reaffirm that I still intend my original criteria to apply. A table of provisional cap limits based on those criteria will be available in the Vote Office after I sit down.

Capping is an essential tool for retaining effective control on overall spending. It is an open secret that I would like to be as free as possible with capping, but the reactions of local authorities so far make that stance difficult to maintain. We shall consider carefully how to deal with that.

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The capping criteria are necessarily provisional.

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