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10.33 am

The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Mr. Nick Raynsford): I congratulate the hon. Member for Altrincham and Sale, West (Mr. Brady) on his success in securing this debate. By the end of it, he may feel a little less satisfied at having chosen the subject because a great deal of the innuendo and comment from his side of the House has been incorrect, is based on a misunderstanding of what has happened and has no substance in fact, as I shall demonstrate during the next 20 minutes or so.

As we probably expected, the debate has ranged more widely than the SSA element for debt repayment. It might therefore be appropriate if I make some general points before dealing with the specific subject raised by the hon. Gentleman.

This Government have a new agenda for Britain's future and a vision for local government's place in that future. We want to reinvigorate local government in ways that encourage increased democracy, with local people having the chance to have more of a say in the affairs of their council; increased autonomy, with more freedom for authorities to take their own decisions; increased accountability, with elected representatives being more visibly accountable for their actions; and increased partnership between central and local government and between local authorities and people, businesses and groups in their areas. As the hon. Member for South Suffolk (Mr. Yeo) observed, we are issuing a number of consultation papers that focus on those and other matters to encourage a serious debate about how we take forward the future of local government.

As part of the process required to achieve our aims, a review of local government finance is being carried out by our Department, working closely with local government, business and other representative organisations and other departments. Consultation papers on possible changes to aspects of the local government finance system will be issued over the next month or so, as part of the wider consultation on modernising local government.

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The volume of local government business reflects the importance that we attach to local government. The local government agenda will keep us all busy over the current parliamentary term and, I hope, beyond it. We need to make prompt progress. Our agenda is positive. We are a Government who want to be judged on our success in improving the quality of life for all people and by the extent to which we have made a difference. The extent to which local government is delivering services efficiently and in an accountable way to local communities is extremely important to us.

On local government funding, all public expenditure programmes must be examined rigorously each year; local government spending, which accounts for a quarter of all public expenditure, is no exception. Decisions on local government spending must look not only at the pressures on local authorities, but at the scope for greater efficiency and effectiveness within local authorities.

We are committed to working within the public expenditure plans that we inherited from the previous Government. While keeping within existing spending targets, we have reorganised priorities. We have put £835 million more into education, every penny of which will be covered by an extra £835 million of revenue support grant. That is a better, fairer, more flexible settlement than in previous years and has allowed an increase of total standard spending by 3.8 per cent.

We have provided an extra £350 million for community care. We have also provided £1.3 billion for capital spending needs to improve the state of school buildings through the new deal for schools and £800 million extra for housing through the capital receipts initiative.

We are committed to reviewing the local government finance system in future years, but we will continue to expect local authorities to behave prudently and responsibly.

Mr. Gibb: I was interested in that list. How much did the Minister allocate to local government when he heard the July Budget and the announcement that dividend tax credits repayments would be ended? What assessment has he made of the impact that that will have on local authority pension funds?

Mr. Raynsford: The hon. Gentleman raises an issue which was raised in the earlier debate. He will know from earlier discussions that there is no impact in the current year as a result of that change. As the hon. Member for South Suffolk recognised, the actuarial assessment is currently taking place. The Government have always made it clear that as and when that assessment has been made and the net cost--I emphasise the net cost, after compensating savings have been taken into account, rather than the gross cost figures which are misleading and have been unwisely bandied about in recent months--is known, the Government will take those figures into account in framing the appropriate support for local authorities in future years. I repeat that there is no impact in the current year.

Mr. Brady: I am concerned by the Minister's suggestion that there is no impact in the current year. Surely the fact that there has been no actuarial revaluation yet does not mean that there has been no impact in the current year. It simply means that in a future year, when

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the revaluation has taken place, a greater provision will have to be made to make up for this year when nothing has been done.

Mr. Raynsford: The hon. Gentleman fails to understand that local authorities must act on the basis of an actuarial assessment and that their contributions are fixed on that basis until the next valuation. When the next valuation takes place, the impact is taken into account and the contributions, net of savings which may result, will be decided. That is why there is no impact in the current year.

SSAs are the basis for the distribution of revenue support grant. They are based on measures of spending need that apply to all authorities and are discussed with local government representatives. I want to knock on the head one of the falsehoods that have been peddled this morning--the suggestion that the changes have been introduced by stealth and that local authorities had no opportunity to discuss them. That is not true. They were discussed at the SSA sub-group which discusses the local government settlement each year. The issue has been debated on numerous occasions and was raised at the sub-group this year.

The SSAs for 1998-99 were debated in the House on 5 February, and the local government finance settlement for 1998-99 has been agreed. Having said that, we are committed to a fair distribution of Government grant among authorities and believe that there is still scope for improvement in the arrangements in future years. My colleagues and I will look closely at the current SSA system. We will listen to local government views on how SSAs might be improved, both for 1999-2000 and in the longer term.

As the hon. Member for South Suffolk said, changes inevitably produce gainers and losers. Some authorities will plead for changes that benefit them--it is the nature of their role--and others will plead against them because they adversely affect their future prospects. That is why the Government must reach an informed judgment about the balance of merits and disadvantage in deciding what is best. That is what we have done this year and it is what we will seek to do in the future.

Mr. Lansley: The Government felt able to make changes to the SSA methodology for this year, but they failed to live up to their promise to introduce the changes recommended by the Elliott review into the area cost adjustment. Will the Minister give a pledge that the review will be completed in time for changes to the area cost adjustment to occur for the 1999-2000 financial year?

Mr. Raynsford: The area cost adjustment has been debated previously: the hon. Gentleman raised it in an Adjournment debate I answered some time ago. I made it clear at the time that we had undertaken to review ACJ this year before the settlement was reached. The fact that we have not carried out the proposed changes is simply a reflection of the fact that there was a stark division of opinion in local government about the impact. Some authorities--notably the hon. Gentleman's local authority, Cambridgeshire--were keen because they would gain from it. Others who would lose were opposed.

In our discussions, it emerged that there were possible alternatives, including a specific cost option, which had not been researched thoroughly. We believed--it is an

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entirely responsible decision--that that research should be undertaken and evaluated before any final decision was taken on a matter that is inevitably controversial, as it benefits some authorities and damages others. That is in train and we will discuss it further when we have the benefit of the further research on the specific cost option.

If the hon. Member for Altrincham and Sale, West believes that the SSA system does not treat Trafford fairly, I would be happy to examine any proposals he has for different methods of calculation. However, I stress to him--and to any other hon. Member who raises these issues--that any decision has to be universal and the changes must apply to all authorities. We must consider the impact in the round--both the negative and the positive. We want to feel confident that the changes will produce a sounder assessment of need.

Mr. Brady: I thank the Minister for his generous offer to take account of any proposals I may make about a fairer way of assessing SSA for the borough of Trafford, provided they can be taken in the round. The point he made about gainers and losers is important. As a matter of generality and principle, will the change reward or benefit authorities with high levels of debt in the 1980s and penalise those with low levels of debt in the 1980s?

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