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7.22 pm

Sir Peter Hordern (Horsham): There was a leak from the Liberal Democrat Whips Office the other day. I am glad, therefore, that the hon. Member for Newbury(Mr. Rendel) is here. Perhaps he can confirm some of the things that were leaked from that office. For example, on Liberal health policy, the document said:

On local government it states:

Mr. Rendel: I am grateful to the hon. Gentleman for giving me a chance to reply. He will realise that the point

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of that leaked document was to bring out the misrepresentations of our policy that we expected other parties to produce. That is precisely what he has done, exactly as expected.

Sir Peter Hordern: I have heard some pretty good Liberal Democrat stories in my time, but I have never yet heard them put out a policy for the sole purpose of arousing Conservative comment, which they can then dismiss. That is remarkable.

To turn to the subject of West Sussex, it is true that the Liberal Democrats have not held office before, and that they have had to play the part of opposition for more than 100 years, which can be a baleful exercise--[Interruption.]--as the hon. Member for North-West Durham (Ms Armstrong) knows from experience.

Last year, West Sussex had an extremely favourable revenue support grant settlement--the second best in the country--and the highest increase in standard spending assessment in the country. Not content with that, the Liberal Democrats proceeded to raid the balances, spend the cash and increase spending by more than 5.5 per cent. in one year. They did it in the knowledge that that sort of thing could not conceivably go on for ever. The public expenditure White Paper forecasts the likely flow of public spending for three years. Nevertheless, they behaved like children let loose in a sweetshop, and started to spend as if there were no tomorrow.

The results are there for all to see. The balances of West Sussex have been run down, and now the Liberal Democrats complain that the outlook is difficult. They complained months before the revenue support grant settlement was reached and wrote to the governors of every school in West Sussex complaining that school budgets would have to be cut by £25 million in the next two to three years--a specific figure.

Naturally, my colleagues in West Sussex were deluged with letters from very concerned governors and parents. There was no basis for their concern. I see that the hon. Member for Newbury--a Liberal Democrat--takes credit for that. It is exactly the kind of behaviour that people in West Sussex will never forget--a false alarm based on duplicitous behaviour.

West Sussex has received another reasonable settlement for the coming year, and it will be interesting to find out just how much of it is spent on education.

Nothing is more annoying to Members of Parliament than to find that, although a settlement is favourable for education and all local authorities are told that they should spend their money on education, they spend it not on that but on other things; and that, where they do, it goes to the local education office and not to the schools. My hon. Friend the Minister and his hon. Friends in the Government will have to find some way of ensuring that the money that Parliament proposes should be spent on education is spent on schools and I hope that he will mention that in his reply.

I do not know the best way to secure that aim, but it is important. One has only to consider the vast disparity between the amount of money that goes to schools and that which is kept by the local education authority in the different authorities. I hope that the Minister will look into that matter, and that, next year, when we return to the revenue support grant, some method will be found of ensuring that the money actually goes to schools.

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There is, of course, no more important authority in the country than Horsham district council. Horsham is a totally blameless authority, with low spending. For many years, it was well below its SSA.

The population of Horsham has increased, and the level of Goverment support has been reduced. I do not complain about that, but matters become difficult if the cap is reduced in line with spending. It is difficult for a local authority to plan its future when it knows that the population is increasing, if it cannot take the total support from the Government in one year as the base for another. If it cannot do that, it is lost in the whims of the total SSA calculation, which no authority can accurately compute.

I do not complain about the SSA system, but low-spending authorities, typically those spending rather less than their SSAs, should not be penalised by the formula and the capping mechanism. My hon. Friend the Minister should examine that.

There is one other small point that appears to be inequitable. What if a council appeals against the business rates and finds that, due to the Inland Revenue revaluation, they are higher than originally expected? Horsham council--correctly, in my opinion--decided that the money should be returned to the council tax payers. After all, they should receive the benefit of a more accurate valuation.

It seems hard that Horsham council should be penalised because it has returned the money to the council tax payers rather than hanging on to it. Assessments should be based on the most accurate estimate of business rates, as corrected by the revaluation exercise. If there is a deficit for that reason, it should be made up in the revenue support grant. Horsham council acted properly in returning the benefits of the revaluation exercise to council tax payers. I ask my hon. Friend the Minister to consider that, especially in determining the SSA for Horsham council next year.

Many hon. Members--especially those outside its scope--are concerned about the area cost adjustment. They say that it is disgraceful. I think that the area cost adjustment is much maligned and fully justified. Not enough of my colleagues from the south of England stick up for it. It is an excellent refinement that accurately reflects the extra costs of West Sussex and other parts of the south. I notice that the chairman of the review body comes from Edinburgh. I trust that he will remember that he is a Scot--at least, I hope he is--and therefore strictly neutral.

Mr. Curry: I hope that my right hon. Friend will forgive me, but the chairman is an Englishman, working in Scotland. The other members of the review panel are a Scot and an Ulsterman. Local authorities in England had difficulty in agreeing on an Englishman to serve on it.

Sir Peter Hordern: It would have been much better if a member of the review panel had come from Sussex. It should be strengthened by someone whose area gets the area cost adjustment. The panel will naturally proceed on its way with all due academic detachment, but it would have been better if it had been able to take into account the views of local authorities in the south which benefit from the admirable instrument of the area cost adjustment.

7.33 pm

Mr. Harry Barnes (North-East Derbyshire): I want to discuss the standard spending assessment for North East Derbyshire district council. There are certain peculiarities

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about North East Derbyshire that need to be described. Sometimes, the worst case should be considered to test a formula. The SSA formula is inadequate and hits North East Derbyshire in almost every respect.

One problem with the formula is the shape of North East Derbyshire. It is a sort of C-shape that wraps round Chesterfield, which creates problems. It is accepted by the boundary commission as a sensible and viable authority, but the formula creates some difficulties. For instance, the head offices of North East Derbyshire district council are in Chesterfield, which is in another district. That means that standard spending assessment drifts into Chesterfield, even when the councillors and officials of North East Derbyshire work there. That shows that the formula is nonsense.

In North East Derbyshire, many of those fortunate enough to be in employment go to neighbouring authorities such as Sheffield and Chesterfield to work. The net outflow of population is 18 per cent., which is high. We have heard that Westminster has a net inflow of 81 per cent. and gets all sorts of SSA moneys as a result. We are at the other end of the spectrum but there does not seem to be any link between the figures that are taken into account for what is called enhanced population and the services that have to be provided.

The services of a district council chiefly involve people who live permanently in that district, although they may travel for work or entertainment to other areas. Council planning, housing, refuse collection and other costs tend to relate to the services that are provided not for the transient population but for the fixed population.

North East Derbyshire is a socially mixed area. There is a clear distinction between the western and eastern sides. The east end is more working class than the west end. Classically, when Conservatism was strong, the west of the constituency was a strong Conservative area and the east was strong Labour. This affects the operation of SSA because the wealthier elements on the western side are placed upon the backs of the poorer people in the eastern side when the formula is being worked out.

What my hon. Friend the Member for Holborn andSt. Pancras (Mr. Dobson) said about Westminster has been attacked by some Conservative Members as being obsessive. That case is fascinating to us in North East Derbyshire because Clay Cross, where councillors were debarred and surcharged, is there. The scandal in Westminster involves £29 million. The Clay Cross case involved expenditure on behalf of its residents that amounted to something like £60,000. The second group of 11 Clay Cross councillors were debarred over an amount of just over £2,000. They had to be dealt with jointly and severally.

We in North East Derbyshire are very interested in what goes on in Westminster. That case involves£28 million, while the SSA for North East Derbyshire district council is £7.3 million. A bit of that, handled properly and sent to a needy area, would have been used very well by us.

The formula for the standard spending assessment is covered on page 53 of the booklet, "Local Government Finance Report (England) 1996/97". The formula first considers population, which I have already discussed. North East Derbyshire's total resident population is 99,180. That gives, under the formula, a standard spending assessment of £8.4 million. As I have said, when

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the sums are worked out, the amount shrinks to£7.3 million. To start with, we lose £368,000 because of the population's movements during the daytime into surrounding areas. We receive little in terms of night stays and day visitors because, although we are near to national park territory and a bit of such territory clips the end of the district, the region is not used greatly for such a purpose. People from outside use certain facilities: they come from surrounding areas to go out for evening meals in Dronfield. Generally, however, the region is not able to supply the type of facilities that draw in such extra revenue.

The next factor to consider is population density. That is considered within "enumeration districts". North East Derbyshire is not doing as badly as it has in the past. Previously, wards, not enumeration districts, were taken into account. Because North East Derbyshire region was a C-shape and the wards cut across it, we managed at one and the same time to finish bottom of a table of population density and bottom of a table of population sparsity of comparable authorities as provided by the Audit Commission. The system made calculations on that basis, but dustbin collection is difficult both in rural areas and in highly concentrated urban areas. We probably had more problems in dustbin collection than many other areas because of the region's shape and we had the costs that went with them.

Thankfully, there has been some adjustment in both the sparsity criteria--although we are worried that some of that will be dropped--and in the density criteria. It shows that one can change the formulae to make slight improvements. Those, however, are minor compared with the Herculean task that we face when presented with the consequences of the formula.

The next set of criteria is the social index. Under that index, North East Derbyshire loses £1 million. We do not score well in terms of the proportion of persons sharing accommodation, with more than one person per room or the proportion of people living in flats. The building, especially by Clay Cross urban district council, of decent council housing in the region has meant that resources to tackle its problems are not available.

North East Derbyshire does not score either in terms of the proportion of residents who were born outside the United Kingdom, in the Republic of Ireland, the European Community, the Commonwealth or the United States of America because it has one of smallest ethnic minority populations of any district in England. I do not question the criteria of ethnic provision being considered, but we do not gain anything from such criteria, which are surmounted by other problems that people face. That is not taken into account. The homelessness provisions are based on the 1991 census, but it is getting worse. The current homelessness level is not being considered.

That loss of £1 million is serious to North East Derbyshire and is not justified by the circumstances and conditions there. There must be an adjustment in the formula.

Then there is the economic index. At one time, such an index did not exist and issues such as unemployment were not considered. In areas such as Gosforth Valley, which is part of Dronfield, and Ashover, which is a big rural

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area, the unemployment level is down to about 4 per cent. In Danesmoor, Clay Cross, Renishaw and Holmewood and Heath, however, it is 20 per cent.

Criteria involving unemployment and long-term unemployment, housing benefit claimants, lone parent families and the mortality rate of people under 75 score highly on the eastern side of the district, but the numbers are diluted considerably in the western area. Therefore, we lose on those criteria as well, even though strong needs exist in the eastern district.

After we work through the above calculations, we come to something like the figure that we started out from: an £8.5 million SSA. However, as with all other authorities, North East Derbyshire is subject to the scaling factor. The figures are multiplied by 0.93021227385--the scientific precision of the Government's scaling factor is incredible. It is worked out in terms of how the authority fits the formula into the total amount that will go towards the differing areas. The figure is multiplied--or reduced because the multiplication is by a figure under 1--by 0.93 rounded up, which means that the amount drops to about £8 million.

Last year, the scaling factor was 0.9979, which was reasonable. Why suddenly has the scaling factor been chopped by such a dramatic amount, leading to considerable cuts? Other cuts arise because, in the formula, amounts of money are transferred to the county council from the district council. Some extra money comes in from rent allowances and interest receipts, but, in the end, we have an SSA of £7.3 million, which is a serious cut on the level that existed the previous year. It is a 7.3 per cent., appropriately, cut on last year's figures.

That figure does not take inflation into account. At no time have the Government produced any of the figures that we are discussing in terms of their real value, comparing one year's monetary values with another. They say things about Derbyshire such as, "It has done very well in terms of education. It has had a 4.7 per cent. increase". But that is not true because the inflation rate has been 3.2 per cent. After doing the maths, the real increase is I think about 1.1 per cent. Even taking that into account, other reasons exist for criticising the Government. Derbyshire is already spending beyond that level on education. That means that, with the Government's figure, there will be no increase in the education budget, which is part of the county council's provision.

North East Derbyshire is suffering an 11 per cent. cut in its SSA--the amount that it is expected to spend. The new provisional capping levels produced in the documents today are only marginally above the SSA for last year--the figures are almost identical. That means that, even if the authority pushes up the council tax considerably, it will reach only last year's figures, which do not mean the same this year because they have been eaten away by inflation.

What are we supposed to do? We are supposed to get a bit of money from the business rate. After inflation, the business rate provision is much the same. In the connection with the business rate, the formula works in that way.

The rate support grant is down by £621,000--nearly 30 per cent., taking inflation into account. That is a ghastly position, and it is well worth contrasting with that of Westminster. If the funding formula that operated for

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Westminster had operated for North-East Derbyshire, instead of charging council tax we would return £759 to each home.

What are we to do? We must try to make good the shortfall by increasing council tax. If we do so at the level that the standard spending assessment suggests, we shall nevertheless fall short by about 11 per cent.

I am sorry that I have had to produce so many figures, but they are worth producing to show the way in which the formula operates. We have known for a long time what is wrong with the formula as it applies to North-East Derbyshire. The enhanced population is a reduced population. The economic and social factors do not take into account needs in the area. Greater flexibility and movement are needed in the operation of the formula.

We suffered previously from the nonsense of the sparsity and density factors. Even if those problems had all been overcome, they would continue to affect us from the past, because all sorts of services have had to be cut or increased revenue has had to be raised by the council tax and poll tax, simply because of the pressures that existed on us. We need to be able to recover from the position in which that nonsense has placed us.

No one could accuse North-East Derbyshire of being a profligate authority. It is the successor authority to Chesterfield rural district council, Dronfield urban district council and Clay Cross urban district council. Clay Cross urban district council, which I fully supported in its battles, could be regarded as seeking to defend its community. If that council was regarded as profligate, North-East Derbyshire has not acted similarly. North-East Derbyshire has sought to operate respectably. It has been obliged to operate fully within the rules and has not at any time created any problems that might be used by the Government to denigrate its activity.

The Government denigrate Derbyshire county council with great exaggeration. I wish that I had the time now to go through the accounts of Derbyshire county council and the criteria that are taken into account when calculating its standard spending assessment, because only part of its provision is covered by what I have said. Different considerations apply to the police and education.

Police is a problem. Derbyshire police authority is asking the appropriate Minister to visit the area, because we need our certificate of competence returned and we need the resources to achieve that.

I wish to place on record the importance of North-East Derbyshire. The Government should consider it closely to rectify the nonsense of the formula that is applied to it. Although we do not have destitution throughout the area on as wide a scale as might exist in other areas, the formula does not fit us in any way and tells against us time after time.

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