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Mr. Gardiner: Will my hon. Friend give way?

Mr. Watts: I hope that my hon. Friend will forgive me if I say no.

The introduction of factors such as poverty, unemployment and health into the equation is long overdue. One of the worst things that the previous Government did was to ignore unemployment and poverty. I hope that this Government's review will take such factors on board.

The present system means that many councils have high levels of council tax and poor levels of service, for no other reason than that the SSA system does not work in their favour. I hope that my hon. Friend the Minister for Local Government and Housing will consider three requests. The first--which I was pleased to hear has already been conceded today--is that the Government come back every year to report on the progress achieved in the reviews that have been set up. The second request is for an assurance that the review will be completed and implemented in three years. I am aware that there will be

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an election coming up around that time, and that it is probable that the issue will be left until afterwards: I should be grateful for an assurance to the contrary.

My final request has to do with housing benefit subsidy. My hon. Friend the Member for Wentworth (Mr. Healey) asked how many people supported the Government's proposal on housing benefit subsidy, and how many opposed it. The answer to the first question was none, and to the second that all the letters would be placed in the Library. I believe that there is a substantial number.

Mr. Simon Burns (West Chelmsford): How many?

Mr. Watts: I do not know exactly how many; perhaps the Minister can enlighten us.

Some assurances would give authorities such as St. Helens some confidence that we will make progress. I do not underestimate the problems that any Government would have in trying to clear up the legacy left by the previous Government. However, I hope that my suggestions can be taken on board, and that there will be substantial progress as quickly as possible. I certainly hope to see changes within the next few months.

5.50 pm

Sir Paul Beresford (Mole Valley): I always enjoy the Secretary of State's presentations on local government finance. He is bluff, and he raises a smile. He also tries to cover up the underlying trends. The hon. Member for St. Helens, North (Mr. Watts) picked out one of those trends, and my right hon. Friend the Member for South-West Norfolk (Mrs. Shephard) noted it too. That trend is the tendency to move money out of London and the south-east in spite of difficulties there.

Last year, that movement was pretty blatant, and I was intrigued to find in this year's small print that it is even more blatant this time. Standard spending assessment was defined until this year as


However, paragraph 3.2 of "The Local Government Finance Report (England) 1999/2000" refers to the SSA calculation as follows:


    "The calculation makes use of information reflecting demographic, physical and social characteristics of each area."

In other words, SSA means whatever Ministers want it to mean in the month in which they set the assessment. I should, of course, have expected that. The same subjective approach has been taken towards capping.

When the draft reports were announced, the Secretary of State took great pleasure in informing me that there would be an above-inflation increase for Surrey. By that, he meant Surrey county council, not the districts, and he neglected to point out a few disturbing factors. Almost all the increase went into the education SSA, and we have had letters pushing for effective hypothecation of that grant.

The Secretary of State did not say that the social services grant in Surrey has been severely damaged, and other hon. Members have noted the same for their areas. The community care grant has been cut by £6.5 million

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this year, a cut that entirely fails to recognise projects set in train this year that have continuing commitments into next year, and possibly beyond.

The grant changes have been offset to some degree. The means by which the Government are covering the trend is by a one-off, larger-than-usual distribution from the business rate pool for the district councils. That offset is a just one-off, however.

Even given the SSA for education, authorities will have to find money for such matters as class size increases. The Government want class sizes to reduce, but the school population increase counters that. Money will also be needed for the pay increase for teachers.

Surrey county council is a major preceptor on the districts that collect the council tax. Despite Surrey's enormous effort to find efficiency savings, the county's precept looks likely to rise by 8 to 9 per cent. That precept will be loaded on to districts in Surrey that have already been clobbered with a dramatic loss in real terms. Mole Valley district council's revenue support grant has gone down by 28 per cent. That reduction is covered this once by the increase in the business rate grant, but the prospects are bleak for the years after the one-off offset.

Surrey county council is not the only preceptor: Surrey police take a precept too.

The Minister for Local Government and Housing (Ms Hilary Armstrong): Will the hon. Gentleman give way?

Sir Paul Beresford: I will not. I hope that the Minister does not mind, but I have only 10 minutes.

Surrey police have been hit quite severely. They got a nil cash increase. The increase that they got resulted from boundary changes in respect of the Metropolitan police authority's introduction. However, they have had to continue facing the pressures that were placed on them previously. The precept increase for the police alone is likely to be 13 to 14 per cent.

The Surrey police suffer from a unique and topical addition to those pressures. If the House of Lords decision goes the way that the Government appear to want in respect of a certain guest in this country--General Pinochet--Surrey may have to find an extra £1 million for his guest residency there. Perhaps we could move him somewhere further north. Pleas to the Home Office fell on deaf ears.

It is London where the particularly inspired activities have been going on. Underneath, London has been hit hard on the draft grant. As the hon. Member for St. Helens, North said, there were screams; that is an understatement. As a consequence, we got a special grant but it appears to be for only one year. The long-term prospect is grim.

Again we have difficulty in respect of precept. This goes back to the Metropolitan police. The Metropolitan Police Committee, now expanded by the Home Secretary's addition of Labour Councillors, got a report from the official receiver to the Metropolitan police on the Met's financial affairs. To keep a tight budget, the Met is introducing efficiency changes; I understand that there will be between 400 and 500 fewer policemen in the next financial year, including reductions in the special constabulary. As a result, the committee recommended a

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precept increase of between 0 and 4 per cent. That did not appeal to the Home Secretary who, through the official receiver, requested a 9 per cent. increase.

The Metropolitan police has in many ways run a tight budget, particularly in respect of its balances, which it has successfully kept low. Now the official receiver tells us that the precept needs to be increased by 9 per cent. to put another £40 million into the balances. The excuse is that it is suddenly possible that a large number of middle-aged policemen--out of the blue if hon. Members will excuse the pun--will rush to retire. That is not reality. The probable reality is that this is the last opportunity for the Home Secretary to use a precept on the home counties, including Surrey, before the boundary change. It is also an opportunity for him to stuff the balances so that the mayor and the Greater London authority will have large funds sitting there at the expense of the people of London.

Time is short but the accusations against the Government of manoeuvring figures to suit themselves seem to be corroborated by the report before us, which I will emphatically oppose.

5.58 pm

Mr. Hilton Dawson (Lancaster and Wyre): It is with some reluctance that I join this debate, which is essentially a debate with good friends. I would rather be applauding, but it is important to bring to the House's attention the serious situation in Lancashire county council and to welcome the opportunity for review that lies ahead.

I confess an interest in that I worked for Lancashire county council for 15 years. I am pleased that my hon. Friend the extremely honourable Member for Liverpool, Riverside (Mrs. Ellman) is in her place. For some 16 years, she led Lancashire county council magnificently during--and this context is important--the most terrible times for local government. Local government was under sustained assault and public services were under threat. Lancashire county council held up a shield and strove to preserve decent standards, using balances and all sorts of devices, wit and ingenuity to support places of education and inspiration. It regenerated rundown industrial sites and paid for bus services to rural villages where no private company would go. It sheltered vulnerable people from the contemptible policies of the Conservative party.

Lancashire county council paid dearly for its actions. It was hammered with regular above-average reductions in grant-related expenditure assessments and SSAs, and then suffered an act of calculated malice. The worst of all possible reorganisations removed Blackpool and Blackburn, and left behind 11 districts and an incoherent structure that lacked any real identity. The reorganisation left the remnants of a shire county that was far removed from the typical profile, with large areas of real urban deprivation, as well as extensive rural areas with problems of neglect and sparsity. The county was forged in the industrial revolution and has an aging communications network, and bridges and moss roads that require fundamental reconstruction.

Lancashire has had long-standing financial problems in the past 10 years. It saw increases in SSA and grant-related expenditure assessment of 53 per cent., compared with 61 per cent. for the average county and 72 per cent. for England as a whole. Despite having a social

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profile more akin to that of metropolitan boroughs, the shire county had an SSA of £764 per head of population rather than the £862 of metropolitan districts. That is a long-winded way of saying that, despite last year's above average increase, the increase of £25 million in this year's education SSA and this year's increase of 4.5 per cent. against the shire county average of 5.2 per cent., we do not have enough funds to do what we desperately want to do. It is not enough to make up for the loss of grant and the previous use of balances, which are now completely depleted. The county, which was hammered during years of Tory Government, is in a desperate financial situation.

I would like the review to address the ways in which the calculation of SSAs seriously disadvantages Lancashire. For example, we would like to see education SSAs calculated and weighted according to pupil and school numbers. The educational needs index should take more account of low attainment and reduced variation between pupils. We would like to see interest receipts SSAs based on actual past interest receipts, rather than on the size of SSAs, because balances are so low.

I agree with many hon. Members: we would like to see a fairer resolution of area cost adjustments. I think that there is a real danger that the current methodology overstates the actual burden facing authorities in areas with higher labour costs. Without some changes, we will have a council tax of some £730 at band D--which is 37 per cent. higher than council tax for standard spending--and a council tax increase of 8.5 per cent., which means that we could lose £1 million in council tax benefit subsidy. I ask the Government to re-examine that issue.

We have seen cuts in the number of fire engines, and in resources and support for statemented pupils. There have been cuts in highway maintenance--road gritting was reduced this winter. We face possible cuts in the youth service and a consultation document contemplates breaking the long-standing principle that even the smallest rural schools should have at least two teachers. I deplore such proposals, as I deplored the cuts this financial year in the number of homes for older people.

That does not provide best value for local people, as taxpayers or customers, and it is not the quality of service provision that we should achieve under a Labour Government and a Labour county council. At a time when education in this country is being afforded the most wonderful opportunities in decades, I deplore the fact that a letter is circulating in Lancashire schools offering only the prospect of no change. Thanks to years of Conservative depredation, people working in the public services are desperate for change. I ask the Government to do more for Lancashire.

I also want Lancashire to do more for itself. There is an urgent need to modernise, to reduce bureaucracy, to decentralise decision making and trust some of the excellent people working at the coal face in public services, to listen to people and to respond to the real needs of the community. Lancashire needs the scrutiny that a great reforming Government, committed to improving standards, will bring. The task of modernising Lancashire and improving public services would be far easier, the crucial message about the Government's commitment to education, social services and other public services would be far clearer, and the great opportunity

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that the Labour Government present would be seized far more readily if the people of Lancashire had a little more help now.

6.6 pm


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