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Mr. Deputy Speaker: Before I call the next speaker, I stress that many hon. Members seek to catch my eye and that, unless contributions are much briefer, many will be disappointed.

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5.58 pm

Sir Paul Beresford (Mole Valley): I was stunned to realise that I agreed with the opening remarks of the hon. Member for Barnsley, Central (Mr. Illsley)--the debate is important, but it has been shortened. I believed that the Secretary of State would follow tradition and present it. That would have been entertaining, if nothing else. However, he ducked out. That is an insult to local government. The debate is perhaps even more important than usual because this year's report, taken with last year's and Government decisions and actions, has taken real government out of local government.

The revenue support grant is a major source of revenue for local authorities. It is distributed by a standard spending assessment system, which, although it was complicated previously, was accepted by independent experts as a fair system based on need. That has changed. The proportion of local government funding that is paid directly by council taxpayers and business ratepayers has increased. That applies especially to some of the key geographical areas of the country.

Last year's RSG funding was blatantly moved out of the home counties and London to the north. The report builds on that action and two points make it particularly galling. First, most of the local authorities that received funding boosts last year--generally, they will be correspondingly better off this year--were among the most incompetent. Secondly, I find the spin that has been put to hard-hit councils particularly unpleasant.

Three authorities operate in my constituency: Surrey county council, Guildford borough council and Mole Valley district council. All have been hit, and hit hard, but I shall use Mole Valley as an example. The real-terms reduction in its grant under this and the two previous reports means that it faces the prospect of effectively all its revenue expenditure being raised locally in the near future. In other words, it faces the possibility of not only a zero increase, but zero Government RSG funding. The local council tax and business rate payers will pay for that as they will be loaded with an additional and increasing local tax burden. If there is a stealth tax, that has to be it.

The Minister said yet again that this is the best settlement since sliced bread. Although she is not present, it is worth quoting a key passage from her Department's letter to the chief executive of Mole Valley district council--which she can read in Hansard--on this year's grant. The last paragraph says:

What a brilliant deduction. It continues:

    "And, provided that there are no significant changes in the key data for your area, you can expect to receive a further real increase in funding next year."

For goodness' sake, that is ludicrous.

The Minister's actions will clearly result in dancing in the streets in Mole Valley. There are not only stealth taxes, but year-on-year rising stealth taxes for my semi-rural area. There will be higher council taxes and higher business rates; care for the elderly, education and police budgets will be squeezed; and police numbers will drop. On it goes. As it is topical, I must add that farmers in my area, many of whom are going out of business, may be helped because the Secretary of State is showing great concern: he is seriously considering flooding Surrey with 90,000 new homes on their land.

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It is worth looking beyond that to what else comes or flows from the report. First, we heard again that Labour promised to remove universal capping. It did that with one hand, but put two forms of capping back with the other. One is arbitrary and decided by ministerial whim; the other is crude and universal, and nothing less than that. Secondly, we were promised in last year's report three years' stability in funding. Tonight's report shows that that expectation was nonsense. This year, there were huge variations in grant distribution, which were generated by deficiencies in last year's income support data. I understand that that is down to another Government computer fiasco. Thirdly, we have all been fed the story that the Government have been converted from high taxation, but in my area in particular the report means that the council tax--a stealth tax--may rise by three times the rate of inflation. If it does not, that will be because of cuts in expenditure by beleaguered local authorities.

Even more deceitfully, there has been a stealthy movement of grants from a fair distribution system based on an assessment of need through the general grant. More and more funding, particularly from the Department for Education and Employment, is being moved to a specific grant system. Those grants are administered by ministerial whim if need be--we have seen examples of that--and linked to ministerial desires. Frequently, absolutely no regard is paid to local decisions. Furthermore, Ministers frequently require matched funding, which can put a squeeze on local authorities as they have to remove money from other budgets that they feel are more important locally.

I understand that funding by specific grant--I think the phrase is "funding by plans"--is in prospect for local government. That is appalling: it presents the prospect of the removal of local democracy, and the introduction of Big Brother patronage. While that may be all right for the Labour party as an organisation, it is not suitable for local government as a whole.

Fourthly, we have increased costs to local authorities purely through Government-imposed statutory obligations involving more bureaucrats and more bureaucracy. Perhaps this is where the Prime Minister is finding his new jobs. For example, the Audit Commission has just announced that the cost of implementing its part of best value for the first part year--hon. Members should note that I said "part year"--for Wandsworth council will be £300,000. The cost to my little Mole Valley will be £40,000. The internal cost to those authorities is likely to be four times as much. That means that Wandsworth will incur a new cost of £1.2 million, as well as £300,000 for the auditors.

Wandsworth is an efficient council, but under so-called "best value", it will have to find £1.5 million in savings just to stand still. The Mole Valley equivalent would be about £200,000. The authority's revenue support grant is only £3.2 million, and it must still take into account inflation on its £0.0 million increase.

This gerrymandering Government should be ashamed, but I imagine that they will continue to believe their spin doctors. Meanwhile, the public will receive fewer services at greater cost.

3 Feb 2000 : Column 1294

6.6 pm

Mr. Barry Gardiner (Brent, North): I think it was the Duke of Wellington who said of Field Marshal Blucher, the Prussian who arrived too late at Waterloo, "Better late than never." I now know how he felt. I have waited two hours to speak today, but in truth I have been waiting since 4 pm on 4 February last year, the occasion of the debate on the three-year funding settlement. I did not manage to speak then, so I am pleased to be doing so today.

This year's local authority financial settlement was set within the parameters laid down in the three-year framework for stability in local government outlined by my right hon. Friend the Secretary of State last year. Stability is to be welcomed when the status quo is benign; unfortunately the situation in Brent, my own borough, was malign, and that malignancy has been locked in by the three-year approach.

Last year, Brent received the worst settlement of all 150 upper-tier authorities as a result of the change in the calculation of children's personal social services SSA. The decision to abolish the ethnicity criteria wiped out at a stroke a staggering 25.66 per cent. of Brent's children's social services SSA. Brent's children lost £7.5 million. The criteria were changed following research by the university of York, an institution of learning for which I have the highest regard.

When I help my children with their homework--particularly maths--I always say to them, "Look, darling, apply the formula, work out the answer, but always check it against common sense." That is a rubric that the professors at York would have done well to observe. The common-sense check cannot have been applied to a formula intended to reflect need in social services that has resulted in a 25.7 per cent. increase for Bromley, a 49 per cent. increase for Bexley and a 164 per cent. increase for the City of London, while cutting the social services grant for Camden, Lambeth, Newham, Hackney, Haringey and Brent. Those six of the 33 London boroughs contained more than 50 per cent. of London's ethnic population, and had to bear more than 75 per cent. of the £47 million that London boroughs lost in children's personal social services SSA.

On 25 November, when the provisional settlement was announced, I reminded my right hon. Friend the Minister for Local Government and the Regions that my borough of Brent was one of the most ethnically diverse in the country. A total of 106 different mother tongue languages are spoken in our schools and 61 per cent. of our children speak English only as a second language. In one school reception class that has a total of 29 pupils, 21 different first languages are spoken as the mother tongue. For those children, the settlement has not been fair.

Last year, Brent received £4.2 million in damping grant to afford some protection from the effect of the settlement on children and other vulnerable people in the borough. This year, that £4.2 million cushion has been reduced to just £197,000. The loss of more than £4 million from the aggregate external finance means that the grant that Brent will receive in the 2000-01 financial year is just 1.5 per cent. more than in the 1999-2000 financial year. For the average London borough, the increase is 3.52 per cent. Brent has just three sevenths, or 42 per cent., of not the best, but the average increase. Brent has the 25th lowest grant out of 33 London boroughs, yet it is the 20th poorest authority not in London, but in the entire country.

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I understand that these two years have seen the best settlement for local government throughout the country for more than a decade. I recognise that the stability of the three years of the comprehensive spending review has been welcomed by councils, which have been able to plan on the basis of that basic formula. Even my council has welcomed that stability of planning. In her opening speech, the Minister said that the Government had promised that they "would not change formula, but we would change data." One of the issues that I would like to raise with Ministers is their failure to change data with regard to Brent.

On 1 April, Torah Temimah school will transfer to Brent--a school is transferring from the private to the public sector, and I am sure that the Government will welcome that--but the transfer has not resulted in any increase in our overall funding for 2000-01. Brent will receive the damping grant in line with central Government policy, which ensures that all local education authorities receive at least a 1.5 per cent. increase in overall funding; we do, just. However, we would have received that amount if the school had not transferred and therefore must now fund the additional £480,000 that is needed for the school from our already diminished and depleted resources. I ask Ministers to look carefully at that situation and ensure that, as the commitment was given, data will be changed, even though the formula will not.

I shall try to observe your stricture to be brief, Mr. Deputy Speaker, because I appreciate that many Back Benchers want to speak in what is an important debate. On the council tax benefit subsidy limitation scheme, the model that the Department of the Environment, Transport and the Regions has provided suggests that, if Brent sets a budget at SSA for 2000-01, our local residents will incur £817,000 in clawback. In Brent, that is the equivalent of £9.01p at band D level council tax.

It seems unjust that councils, such as my own in Brent, that have traditionally spent below the SSA--the standard spending assessment; the level at which the Government say that councils should be spending to provide a standard level of services--should be penalised if they spend below the level that the Government recommend for the current year. With some other Labour Members, I urge Ministers to look once again at the penal way in which the clawback scheme operates.

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