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1.20 am
The Parliamentary Under-Secretary of State for the Environment (Sir Paul Beresford): I congratulate the hon. Member for Glanford and Scunthorpe (Mr. Morley) on securing this Adjournment debate, in spite of the hour, and the fact that he has left me only a few minutes to reply. Of course, he has taken one side of the argument. The matter is not in our hands alone, and, in fact, we have reacted. He is correct to say that we met a deputation that included my hon. Friend the Member for Brigg and Cleethorpes (Mr. Brown) on this matter, which we took extremely seriously.
As the hon. Gentleman said, we accepted the proposal to abolish Humberside county council and to set up four unitary authorities, of which North Lincolnshire is one. As well as inheriting county functions from Humberside, it will take over district functions from the boroughs of Scunthorpe, Glanford and, in the area of the Isle of Axholme, Boothferry. Reorganisation will take place on 1 April this year, but there has been a shadow authority since last May.
I accept that, inevitably, there will be difficulties in the transition from one system to another. That is true across the country where such steps have been taken. We have taken steps to help North Lincolnshire and the other reorganised authorities to deal with those problems.
When a county is abolished and its responsibilities transferred to successor authorities, we need to work out a base budget for each new authority that must reflect its share of the county's budget and the pattern of spending in the area. We have made a similar calculation if the area of a district is split. This disaggregated budget--known as the notional amount--provides a baseline for the new authority as it prepares to take over its new functions, and serves as the capping baseline for the year after reorganisation.
The budget disaggregation exercise proved straightforward in Humberside and was agreed locally. North Lincolnshire's inherited 1995-96 budget is about £118.6 million. That was confirmed when the House agreed the relevant notional amounts report on31 January. We also worked out what each authority's standard spending assessment--SSA--would have been in 1995-96 on the reorganised boundaries. North Lincolnshire's indicative 1995-96 SSA was£105.7 million.
Those figures show that the county had been spending more in North Lincolnshire relative to our assessment of its need to spend. In effect, it had been cross-subsidising services in one area at the expense of taxpayers in another.
The figures allowed us to work out the direct council tax effect of reorganisation--essentially, the difference between what council taxes were in each borough and what they would have been in 1995-96 on reorganised boundaries. That shows significant increases in the three areas that make up North Lincolnshire: an increase of £136 at band D for taxpayers in Scunthorpe; £161 for Glanford; and £166 for the Isle of Axholme area of Boothferry.
We have decided to provide transitional assistance to council tax payers who face unacceptable tax increases directly attributable to reorganisation. We will damp increases that exceed a threshold of £104 at band D--£2 a week. I stress the words "directly attributable to reorganisation". We do not propose to damp the consequences of an authority's own spending decisions, which I think is understandable.
North Lincolnshire is the only authority to qualify for that transitional reduction scheme. It will receive an additional grant of £2.18 million in 1996-97 to benefit local taxpayers. Our 1996-97 grant settlement for North Lincolnshire gives it an SSA of about £110 million--an increase of 2.4 per cent. over the equivalent figure for 1995-96.
Like many authorities, North Lincolnshire has argued that its SSA is too low. It argues, in particular, that the SSA somehow fails to provide for the higher concentration of need in Scunthorpe compared with the more rural parts of its area. However, the position is that the SSA calculation takes account of the aggregate needs of the area as a whole, both rural and urban.
It is for North Lincolnshire to decide the level of its budget for 1996-97, and it is not required to budget at SSA. Indeed, our provisional capping rules would allow it to set a budget as high as £123.8 million. After allowing for care in the community changes, that would mean an increase of 2.8 per cent. over 1995-96. If it budgeted at our provisional cap, North Lincolnshire would be 12.5 per cent. above its SSA--the level which our capping rules consider "absolutely excessive". That is very high, and it offers considerable scope for the authority to make savings over time.
We anticipate that the reorganised authorities will use the opportunity to cut costs and to improve efficiency--and they accept that. However, we recognise that there may be some one-off, transitional costs associated with reorganisation. So we have put in place a scheme for authorities to bid for supplementary credit approvals, allowing them to defer the impact of those transitional costs until the associated savings are achieved. We made £50 million available under the scheme for 1995-96, and a further £100 million for 1996-97.
North Lincolnshire bid for £5.6 million for 1996-97, including just more than £1 million for redundancy costs. Before Christmas, we allocated it £3.5 million, which includes a ring-fenced £1 million for redundancy. That makes a cumulative allocation of £5.3 million. The authority submitted a bid for a further approval of£6.55 million. As the hon. Gentleman may be aware, North Lincolnshire has suggested looking at capitalising some of the spending, and that is being considered at this stage. However, the bid for £6.55 million is additional to the support already available.
I think that the hon. Gentleman will accept that North Lincolnshire is a new authority, and as such, it has the chance to do things differently. It need not be constrained by the decisions and practices of its predecessors. I know from personal experience--in taking over from the Greater London council and then the Inner London education authority--that there is room for fast action to make considerable savings, rather than cuts, and that the reorganisation offers scope to make significant savings, which will not be as painful as the hon. Gentleman suggests. In light of that, I do not feel that there are exceptional local circumstances that would justify giving North Lincolnshire yet more by way of SSA.
Mr. Morley:
I do not dispute the fact that the new authority may well be able to find efficiency savings--the authority itself does not dispute that fact. The issue at stake is that, from day one, year one, the authority must take over the staffing and the services from the predecessor authorities. Even according to the Department of the Environment's guidelines, 90 per cent. of staff must be taken over. The scope for finding savings in year one is very limited. Those savings may well be achieved in year two, year three and subsequently, but the real crisis will occur on 1 April.
Increased council borrowing would allow the authority to mitigate that problem, find the savings and repay the borrowed money to the Department of the Environment over time. That seems to be a perfectly reasonable and sensible policy, and I am sure that the Minister will agree that the authority cannot find savings from day one, year one.
Sir Paul Beresford:
I do not agree with the hon. Gentleman--and I speak from personal experience. There has been a shadow authority since May this year, which has done the planning to allow the new authority to move forward. It will inherit control from its predecessors, some of whose expenditure was quite excessive.
We have recognised its difficulty--that is why the authority has an SSA of £718 per head, and why the cap has been set at 12.5 per cent. above SSA. That is why it has damping of £2.2 million--it is the only authority which has it--and that is why the supplementary credit approvals have already been given for 1995-96 at£1.8 million and for 1996-97 at £3.5 million. We accept that there have been difficulties; they have been recognised. We are considering the argument made by North East Lincolnshire. If we accept that, it may be acceptable for North Lincolnshire.
Ultimately, however, we have considered the matter carefully and produced considerable funds. The opportunity exists to make savings from an early stage, and I am sure that they can be achieved. I say that having
been, as a council leader, through two such processes--admittedly in profligate authorities, but not quite in the same class as those of Humberside.
I am sure that, when it sets its mind to it, the new local authority will be extremely successful; it will produce the services, it will produce savings, it can do it efficiently, and it can start soon. Approximately 80 per cent. of the
staffing level will pass over as a standard order under TUPE-type conditions, but there is ample opportunity for the authority to make savings and reorganisations very early, especially--to leave the chalk face and the social services face--in administration behind the scenes. I am confident that the councillors will be able to do so, in spite of the scare tactics that have been displayed this morning.
Question put and agreed to.
19 Feb 1996 : Column 155Adjourned accordingly at half-past One o'clock.
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