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Dr. Alan Whitehead (Southampton, Test): I am somewhat puzzled. Is the hon. Gentleman saying that, somehow by magic, the formula on which the settlement is based has surreptitiously been changed without anyone noticing, or that the method by which the SSA is formulated is the same as it was under his Government? Therefore, provided the rules have been kept to, the Government are simply carrying out the formula. While he is at it, is he not saying that, if it were not for the fact that there is more money from the business rate, there would be less money? That seems a strange method of opposing a settlement.

Mr. Waterson: Yes, I am saying that in the first year of the three-year process, the goalposts were moved. The point about the business rate is that, were it not for the surplus from last year, the Government would be looking at real cuts in grants for certain councils.

Let us do a political analysis of the real-terms increases in both SSA and TES for councils and look at the party political control of the councils. The TES increase as a percentage of the SSA increase--a crucial part of the formula--for Conservative-controlled councils is 55.3 per cent., compared with 62.6 per cent for Labour-controlled councils. If it is any assistance to the Government's friends on the Liberal Democrat Benches, the equivalent figure for Liberal Democrat-controlled councils is 53.5 per cent., so they might have something to say about the way in which the councils that they temporarily control are treated by the Government in one or two of those Cabinet Committees.

Therefore, a smaller percentage of the SSA real-terms increase of Conservative and, incidentally, Liberal Democrat-controlled councils will be matched by a TES real-terms increase. As I have said, that lays the groundwork for higher-than-average council tax increases in those councils, even though the Minister went out of her way to suggest that it was nothing to do with her.

As we have heard, the methodology was not altered this year. We are part of a three-year cycle. There are 21 authorities whose total SSA in 2000-01 will be lower in real terms than in 1999-2000, assuming inflation of 2.5 per cent. One of the them, Tewkesbury, will suffer a fall in SSA. The reason why most--in fact all, except the London borough of Merton--of the councils on that list are shire district councils is because the increase in funding to local government was directed primarily at education and social services. That is a major reason why those councils have been treated unfairly.

The other point, which I think is accepted by the Minister, if I understood her properly, is that the year-on-year changes are data driven. They are based on size, composition of population and so on. They have nothing to do with decisions by Ministers. That is one of the pitfalls of having a three-year period in which no changes are made to SSAs, and in which Ministers have said that they are unwilling to receive representations other than in writing from local councils.

Additionally--this point was made earlier in the debate--some police and fire authorities are receiving a below-inflation increase: Merseyside and West Yorkshire are two examples. That also will have a serious knock-on effect in the areas affected.

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A moment ago, I touched on the question of representations. The other day, in answer to a question of mine, the Under-Secretary of State for the Environment, Transport and the Regions, the hon. Member for Stretford and Urmston (Ms Hughes), listed eight authorities that had made requests in writing for meetings to discuss the financial settlement for the coming year. She makes it clear--because this is the basis on which they entered the process--that

although Ministers did receive representations in writing and from the Local Government Association and other bodies.

Again, however--I have made the point before, but I happily make it again--it really cannot be right to have a system that allows Ministers to avoid the necessity of meeting delegations from local authority areas to discuss whether they have been fairly treated. When the previous Government were in power, Ministers regularly met such delegations--I led delegations myself, from Eastbourne--and they listened patiently and courteously to those representations. That is, in part, what Ministers are for.

It is really quite a difficult concept in a parliamentary democracy to have Ministers who refuse to have that type of consultation.

Mr. Watts: I took part in delegations to see the previous Administration about various problems, but we were shoved through one door and out the next. Very rarely did anything come from those meetings; they were pointless. Often, the Ministers did not understand the issues that we were raising and showed very little interest in the problems facing local authorities.

Mr. Waterson: Perhaps it had something to do with the leadership of the delegation. My experience is that Ministers were unfailingly courteous, and--in the shape of my hon. Friend the Member for Mole Valley (Sir P. Beresford), who is in the Chamber--extremely knowledgeable indeed, having been leader of an extremely well-run local authority.

Sir Paul Beresford: There is a contrasting view, as Ministers sometimes had to recognise that those who were in a delegation did not understand the points that they were trying to make. Occasionally, graphs we were given were filled in upside down. When it was pointed out to them that the axes had slightly changed, their whole argument would collapse. However, that said, there was much positive gain from receiving those deputations. In the final year of the previous Government, my fellow Ministers and I saw about 92 delegations, which was beneficial.

Mr. Waterson: Perhaps I can draw a line under this particular part of the debate by admitting that there were occasions when I was present when I had the eerie feeling that no one in the room understood the point that was being discussed--but perhaps that is the nature of SSAs. We are hoping that the Minister will come up with a whizz-o, easy-to-understand new system; we shall see.

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There are other ways in which the Government, through the local government finance system, are trying to impose their own agenda on local government. One of them is the growing use of specific grants. Conservative Members are friends of the block grant. We think that, in the past, our Government, too, were guilty of having too many specific grants, in which the Government think that a particular priority is important and impose that sense of priorities on local government.

The figures on specific grant are quite significant. [Interruption.] For education--[Interruption.]

Mr. Deputy Speaker: Order. I am sorry to interrupt the hon. Gentleman. Could I persuade the right hon. Lady the Minister that a running commentary is not helpful?

Mr. Waterson: I have learned not to listen, Mr. Deputy Speaker.

The figure for education specific grant, in 1997-98, was £302 million. In 2000-01, the outturn is £1,475 million. For personal social services, it goes from £193 million to £611 million. Those are very significant changes.

Mr. Loughton: The issue is not just specific grants the purpose of which is controlled by central Government. Grants are being phased out and the majority of the additional money available to local authorities is through loans. That gives the Government even greater central control over the use of the money, regardless of local needs and the democratic wishes of the people who elected the councillors.

Mr. Waterson: My hon. Friend gives another good example of how local decision making is being constrained.

If the Minister does not want to accept what I am saying, she should listen to the Labour-dominated Local Government Association, which has said that non-police specific grants have doubled as a proportion of aggregate external finance since 1997-98. Combined with more indirect forms of hypothecation such as passporting and ministerial exhortation, that has led to a significant erosion of local financial accountability. Given the usually restrained language of the LGA, that is a serious allegation.

Then we come to teachers' pay. The LGA has expressed concern that the 3.3 per cent. pay settlement announced only a couple of days ago could mean fewer staff and larger classes if the Government fail to give local education authorities extra resources, because most LEAs have put aside 3 per cent. or less for pay rises. There is a shortfall across the board of £110 million. I do not necessarily expect the Minister to accept that from me, but she must listen to Councillor Graham Lane, the Labour chairman of the LGA's education executive, who has said:

That is the voice of Labour local government. My hon. Friend the Member for Hexham (Mr. Atkinson) told us in stark detail of the repercussions of the settlement for Northumberland, in particular the fact that the county is going to have to cut its education budget.

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Another disturbing development has just come to light.

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