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Ms Rosie Winterton (Doncaster, Central): Is my hon. Friend aware that Doncaster metropolitan borough council faces difficulties similar to those that he is describing? However, it might be possible to alleviate some of the service cuts this year if the rate capping limit was altered to allow the council to use its collection fund. That fund has been accumulated from a successful council tax collection scheme.
The use of that fund would not alter the amount ultimately paid by council tax payers, nor would it affect the public sector borrowing requirement. Does my hon. Friend agree that, if Ministers were to take that matter into consideration when setting rate capping limits, it could improve the position of councils that have collection funds?
Mr. Healey:
My hon. Friend makes a good point. According to her analysis, efficient local councils are being penalised by being more efficient than the targets set for them. I hope that the Minister will bear that point in mind when he replies.
The second point on my priority list for change is how an area's population is counted. It is simple enough. Tourists and commuters are added to the resident population, but they are added on the basis that two tourists staying in an hotel place the same burden on a council as one resident, and six commuters cost the council the same as one resident. We can guess who wins on that basis.
Mr. David Watts (St. Helens, North):
Does my hon. Friend agree that people in our constituencies are expecting a radical change in the SSA system this year? In particular, we want the Kent and York studies to be part of the review. We are well aware that they are not perfect, but the present system is an absolute scandal. St. Helens and Westminster have the same population, yet Westminster receives £995 in grant per person, while St. Helens receives only £583.
My council, like my hon. Friend's, has had to make tremendous cuts over the past few years. Since 1993, it has made cuts totalling £16 million, but it still had the highest increase in council tax in the north-west last year. Is it not crucial that, even if the two studies are not completed and
are not perfect, some dramatic change must take place this year if we are to avoid serious cuts in our education and social services, as well as other council services?
Mr. Healey:
If I did not know my hon. Friend better, I would have thought that he intervened while I was in full flow in an attempt to stop me attacking Westminster council. He made an important point. He said that some councils were expecting radical change, but I am not as confident as my hon. Friend, as I believe that the scope for radical change this year is relatively limited. However, my hon. Friend mentioned a matter which is on my list of five priorities--the studies on care services.
I shall return to the theme that I was warming to before I was interrupted--the question of who wins when, for the purposes of grant, we count commuters and people who are staying overnight in hotels. Westminster wins handsomely. Some 81 per cent. is added to its resident population for SSA purposes, while 12 per cent. of those staying in hotels are assumed for grant purposes to be staying in overcrowded accommodation.
The upshot of those tricks in the Tory system is that this year's SSA for Westminster is £249 million, while its budget is just £215 million. In other words, this year Westminster is spending 14 per cent. less than the Government say it needs and are giving it in grant. That area is ripe for action by a Government determined to restore some fairness to the local government financing system.
Thirdly--I promise not to mention Westminster again--let us consider two serious academic studies, both mentioned by my hon. Friend the Member for St. Helens, North (Mr. Watts), designed to rebate SSAs for two critical areas of service: children's social services and residential care for elderly people.
York university and the Department of Health have studied children who come into contact with social services and what characterises their background areas. They have extrapolated the data nationally to produce a new formula. The methodology and the model are accepted, and the main research and work was completed a full 12 months ago.
Kent university has produced a soundly based, independently developed model for elderly people in residential care. It looks at the circumstances of people before they move into residential homes. The present SSA for elderly care predates community care. It is rooted in the 1980s, when local authorities were responsible only for financing and maintaining people in their own residential homes, whereas they are now responsible for all community care provision. That prospective SSA gives us an important and proper indicator of likely need.
I recognise that there are subsidiary questions about weightings, costings and the use of particular proxies within the equation, but with both those options for reform, the models are sound, well researched and overdue. I hope that Ministers will have the courage to introduce them in this year's settlement, even if we have to fine-tune them for future settlements.
Fourthly, I want briefly to discuss capital SSAs. Unlike many other SSAs, that critical SSA is based not on patterns of past spending, but on notional totals introduced in one big hit in 1990.
That means that urban authorities such as Manchester, Birmingham, Sheffield and Rotherham, which invested heavily in large-scale city centre regeneration, were
clobbered. Rotherham still has a £6-million-a-year gap between the cost of actual borrowing and the level of notional borrowing used to determine the capital SSA. Again, like many other SSA blocks, the commitment to service capital debt cannot be varied by councils year on year; it cannot be cut by policy change or by reductions in service.
Two options for change in that area have been developed by the Department's settlement working group--one to move from notional to actual capital commitments for individual authorities, and the other to move to an actual base for classes of authorities. I urge the Minister seriously to consider either of those changes for this year.
Fifthly and finally, I want to talk about the interplay between the SSA and the cap. An increase in SSA does not help areas such as Rotherham to meet local needs if there is not a pound-for-pound increase in the cap. We expect an announcement on and confirmation of the capping rules for next year at the same time as the announcement of the provisional SSA, which simply underlines the integral link between the two. As Ministers reach their final decisions over the next fortnight or so, I simply ask them to bear that matter in mind.
Mr. Jeff Ennis (Barnsley, East and Mexborough):
My hon. Friend has outlined many of the inadequacies of the current formula-funded mechanism. I am sure that he agrees that it cannot be right for there to be an 80 per cent. expenditure differential per head between the winners and some of the losers--such as the Barnsleys, the Doncasters and the Rotherhams of this world--under the SSA formula.
I accept, as I am sure my hon. Friend accepts, that there will be winners and losers under any formula-funded mechanism. Because of the enormous differential, does he not agree that the Government--if they cannot radically overhaul the SSA system this year--should consider introducing some form of damping mechanism to reduce the current gap between the winners and the losers?
Mr. Healey:
My hon. Friend is absolutely right. A damping element will be crucial in the impact that any changes to the SSA system will have in subsequent years on both winner and loser authorities. He also cited figures that some hon. Members are familiar with and that many of us have used. That list of figures shows how, throughout the Tory years, some authorities consistently won and others consistently lost, and the list is endless. I got fed up looking at league tables in which Tory authorities were consistently on top and authorities in strong, traditional Labour areas--such as South Yorkshire--were consistently near the bottom.
The prospects for next year are good. At last, it looks as if we have a Government who are ready to act on the injustices that we inherited from the Tories--although Ministers are determined to make councils argue their case. The SIGOMA group accepts that challenge, because its case is strong.
The Minister for London and Construction (Mr. Nick Raynsford):
I congratulate my hon. Friend the Member for Wentworth (Mr. Healey) on his success in securing this debate, and on providing us with an opportunity to discuss a subject that is of particular concern for many local authorities, whose interests within the Local Government Association are represented by the Special Interest Group of Metropolitan Authorities (outside London)--or SIGOMA, as it is commonly known. As my hon. Friend said, that is an unattractive acronym, but it encompasses many authorities that have very real needs, of which the Government are extremely mindful.
I congratulate my hon. Friend the Member also on his generosity in willingly allowing so many interventions in his speech by other hon. Members. I will attempt to do justice to the comments made in the debate by him and by my hon. Friends the Members for Doncaster, Central(Ms Winterton), for St. Helens, North (Mr. Watts) and for Barnsley, East and Mexborough (Mr. Ennis).
My hon. Friend the Member for Wentworth will be aware that we are in the process of finalising our proposals for the local government revenue finance settlement for 1998-99. My right hon. Friend the Deputy Prime Minister will make a statement on his proposals later in the autumn.
We have considered whether it would possible to be more helpful to the House and to local authorities by making the statement earlier than usual. However, I hope that hon. Members and local authorities will understand that we must use the most up-to-date data to ensure that the distribution is as fair as possible. Moreover, we must spend time ensuring that we get the very detailed calculations right. Authorities might like to note that, despite our best efforts, it seems unlikely that the statement will be made before December.
As we have not announced the provisional settlement, the House will appreciate that I am not in a position to give a detailed response to the matters raised by my hon. Friend the Member for Wentworth. SIGOMA will no doubt wish to consider its concerns in the light of our proposals. If he and other hon. Members would like it, I should be very happy, during the consultation on the settlement, to meet a delegation from SIGOMA.
Although I am not able to give detailed responses, I should like to reassure my hon. Friend the Member for Wentworth that we are very well aware of the concerns that he has articulated in this debate and that have been brought to our attention by many authorities both inside and outside SIGOMA. We promised a fairer distribution of Government grants to local authorities, and, later in my reply, I will explain the work that we have undertaken with local authorities to ensure that we deliver on that pledge in the coming settlement.
First, however, I should like to explain the far-reaching programme of work that we have initiated to review local government finance, because the conclusions of that review will have important implications for all local authorities. The review--which was announced on 24 July 1997, in parallel with the comprehensive spending review--is being conducted by task groups comprising officials and representatives from the Local Government Association.
One of the review's key elements is to examine the rationale for and effectiveness of measures to reduce needs and resource inequalities. That part of the review will examine more fundamental issues in relation to the future shape of SSAs.
We intend, for example, to commission research to investigate the scope for SSA formulae based on data other than historic spending by individual local authorities. One piece of work is expected to examine the extent to which the technique used by York university in its review of the children's social services formula--to which my hon. Friend referred--might be used for other SSA elements. Another project is due to examine whether the statistical technique that underlies most existing SSA formulae can be usefully applied more widely to non-expenditure data.
Those involved in our review of local government finance are also standing back from the technical detail to consider whether SSAs should be made more detailed, to deal more accurately with some of the spending needs that currently are reflected only implicitly. I should say, however, that others believe that the current system is too opaque and incomprehensible, and that changes should be made in the other direction, so that SSAs become easier to understand.
That provides a classic illustration of the dilemma facing any Government, and certainly this Government, in trying to ensure that we create a system that is not only fair but not totally incomprehensible, and so detailed as to defy understanding.
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