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Sir Brian Mawhinney (North-West Cambridgeshire): I am grateful to be allowed to intervene before the Minister leaves this part of the speech. I do not seek to make a partisan point, because we both know the difficult problems that are associated with the increasing pension contribution. The Minister will know that the previous Home Secretary, my right hon. and learned Friend the Member for Folkestone and Hythe (Mr. Howard), had discussions with the police about that matter. I assume that the Minister and the present Home Secretary are also having discussions.
The problem must be addressed soon, because it is already of significant proportions. Could the Minister say a little about his thinking on the issue and tell us when we might expect some proposals for discussion and consultation?
Mr. Michael: I am grateful to the right hon. Gentleman for the way in which he raised the issue. He is right, and I raised the issue several times in rather the same manner when we were in opposition and the matter was being debated. We hope to be able to report shortly our views on the pensions element. The right hon. Gentleman will know as well as I do that there is no magic wand that can be applied to the problem. For example, a fully funded scheme would require about £20 billion. I think that that figure has been mentioned. That is not the sort of money that grows on rose bushes, but we shall introduce proposals in relation to both the police service and the fire service, where similar problems exist. What we have done this year is to increase the proportion of grant and SSA that is distributed under the pensions component, so that the greater burden in the coming financial year compared with this financial year is reflected at least realistically in the figures.
Out of interest, I found out what the percentage increase would be if we netted out the additional cost of pensions. If we took out the extra money for the extra burden of pensions, the overall increase of 3.7 per cent. in the finance available for forces would go down to 3.5 per cent. We have been realistic; it is still a realistic settlement and realistic increase. We shall debate the matter again in the near future, because we need to establish a way forward for the long term, although, as I say, I would not like to promise that a magic wand can be waved and immediately remove the problem.
Returning to the formula as a whole, I believe that, with the reduction of that historic element--the amount of funding that is based on police force establishments--there is increasing confidence in the needs-based formula. The Association of Police Authorities has welcomed both the measures to change the funding formula.
We are making two further changes from last year. We are abolishing two of the additional rules that were introduced by the previous Government: 1 and 3. Both those rules, which sought to guarantee minimum increases in funding and spending for all authorities, served simply to distort or to override the application of the formula.
We understand the reason for the rules: to smooth the impact of changes where they mean that authorities are losers rather than gainers, and any change in a system is bound to produce losers and gainers. The problem is that the rules distorted expectations.
For example, one police authority that came to see me, which had received additional money under the formula to try to help it over the impact of last year's settlement, said that it expected that the assistance would continue year on year, rather than being a one-off to smooth things over. It is clear from what the previous Home Secretary said that the assistance was not to be given year on year, but was a one-off. Police authorities have been confused, so it is important that we have a simple system that everyone understands.
The APA has welcomed the measures, although one or two authorities have suggested that additional rule 1 funding should be phased out over more than one year.
However, against the background of a needs-based formula, it is difficult to justify the continuation of the special funding that the rule provided. We shall therefore remove it completely in 1998-99.
Applying the formula without those additional rules inevitably means that, as well as winners, there will be some losers. A formula that provides winners and losers will never enjoy universal acclaim. It is funny how the comments on the formula come largely from the losers, but that is only natural. It is important that the formula is intrinsically sound, and applied as far as possible without distortion.
Many chief constables and police authorities have said to me that, more than anything else, they want to know where they stand, not just for one year, but over successive years, so that they can predict where they will have difficulties and plan for them. We are trying to assist by giving them a predictable future. We believe that the system is essentially sound, but we shall continue to review and refine it in consultation with police authorities and ACPO.
The effect of the formula and capping principles to be applied by my right hon. Friend the Deputy Prime Minister unfortunately means that two police authorities--Surrey and Lincolnshire--will be disappointed by the settlement. To be blunt, they are disappointed by it, and have said so.
The chief constables of those forces came to see me with representatives from the police authorities to express their concerns over the Government's funding proposals for 1998-99. I listened to them carefully, but my view remains that the special funding that they were given in 1997-98 cannot continue.
Tough choices are sometimes necessary for the greater good. The Government stand by their tough decisions in respect of Lincolnshire and Surrey. In doing so, I fully acknowledge that both forces are efficient and effective organisations. This is not a question of penalising inefficient forces. It is simply about allowing the formula and the capping limits to apply without the intervention of additional rules to distort the needs-based system.
Another issue that has been raised in several quarters is that of sparsity, which affects forces that have to police rural areas where distance makes their problems slightly different from those of metropolitan areas. They complained that the formula does not recognise the costs involved in policing areas of rural sparsity.
The previous Government introduced a sparsity element into the formula without objective evidence to justify it. We have left it in place for 1998-99, but we want to ensure that the pressures of policing rural areas receive fair consideration. Equally, I want to be sure that the formula takes account of the cost implications of policing densely populated urban areas. I am therefore commissioning independent research into the costs of policing areas of rural sparsity and urban density, in the hope that it will give us an objective method of judging the way forward on this argument which, as hon. Members will know, has arisen annually. We need to put it on a factual basis, and I hope that the research will assist us in doing that.
I shall refer briefly to capital expenditure for the police. We will be supporting £179 million of capital expenditure next year. We have inherited a difficult situation from the previous Government on police capital provision, a matter that we have debated over the past two years. Funding
has in fact been cut over the previous three years. However, all funding for the major police building programme is being maintained for next year as ACPO and the authorities wanted. The majority of forces will benefit from that funding.
Maintaining funding for the major building programme has meant a reduction of 4 per cent. across the board in allocations for minor capital works. That is a much smaller reduction than in the two previous years, when cuts of 17 per cent. were imposed. Spending on minor works, vehicles and equipment needs to be efficient and provide value for money.
The private finance initiative offers forces an opportunity to extend their capital needs and remove investment backlog. We have removed the barriers to successful PFI projects. New arrangements introduced by the Treasury and the Department of the Environment, Transport and the Regions at the end of last year will help police authorities and the private sector to develop projects more quickly and with greater certainty.
Revenue support in the form of PFI credits will be available to forces that sign PFI contracts, where the commercial viability of the project has been signed off by the new Treasury task force. We expect around four more police PFI contracts to be completed next year.
Mr. John Greenway (Ryedale):
At best, this police grant settlement represents a standstill for the police service in England and Wales; at worst, it will mean budget cuts for several police authorities, leading to fewer police on our streets.
Year after year, Labour criticised the Tories for not spending enough on the police service, yet what do we find now? In his press statement on Monday, the Home Secretary admitted with refreshing honesty:
Three years ago, when Labour voted against the grant settlement, the current Home Secretary gave four reasons. First, he claimed that manifesto promises on police numbers had not been kept. Secondly, he said that some police forces would have to cut their numbers. Thirdly, he said that the funding formula was not sufficiently objective and that the apportionment of grant had been arbitrarily fiddled. Fourthly, he said that the grant settlement lacked the necessary flexibility to deal with public crises arising from national political matters that placed a strain on local police budgets--the House will recall, for example, the animal welfare demonstrations at Shoreham at the time.
"The police are the only local authority service to have had an increase greater than inflation in each of the last 4 years."
What an admission--it must be the first time a Minister has tried to excuse not giving enough money by suggesting that the Tories gave too much. It is hardly the background against which Labour should complain of a poor inheritance.
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