Examination of witnesses (Questions 140
- 159)
TUESDAY 9 MAY 2000
MR JOHN
BALLARD, MR
HENRY DERWENT,
MR MICHAEL
GAHAGAN and MR
MARK LAMBIRTH
140. Are you going to continue to pay schools
through the local authorities or are you going to hand the money
over to the Department for Education and Employment and let them
fund schools directly?
(Mr Lambirth) I do not think I had better answer on
behalf of the Department for Education and Employment on their
policy areas.
141. They have got their eyes on your money,
have they not?
(Mr Lambirth) I have heard their ministers say in
terms—and this must be true—that the idea of establishing
a direct funding relationship between the DfEE headquarters and
estimates vary but 27,000 individual schools in England is a complete
and utter non-starter and could not be done. What was agreed at
the Central Local Partnership on 22 March was that the Local Government
Finance Green Paper in the summer should actually deal explicitly
with the funding of schools and the funding of education on the
basis also of a clear view of what it is that government wants
from local education authorities. So that is what we are working
on between now and the publication of the Green Paper. Ministers
have also said in this as in other areas they are expected to
produce a very "green" Green Paper. So they will obviously
rehearse both the plan-based grant distribution option and formula
distribution option and different options too in relation to how
local government's education responsibilities are funded.
142. Can you take me through then a problem
that exists in my constituency. Part of it is in Stockport and
part of it is in Tameside and right against that boundary is Manchester.
As far as primary schools in Stockport and Tameside are concerned,
they tend to get around £200 per year per pupil less than
the schools just across the border in Manchester and so far as
secondary schools the difference between Stockport and Tameside
and Manchester is over £500. That cannot be fair, can it?
(Mr Lambirth) In that area of the country it cannot
be attributable to the area cost adjustments so I presume it is
attributable to the additional educational needs under the existing
SSA formula. Like other aspects of the SSAs the way in which that
works is regression analysis. What is done is to look back at
variations in expenditure between different local authorities
back in the base year 1990-91 and then try and find factors which
explain variations in expenditure between different local authorities.
Mr Olner
143. You are just admitting you are working
on 1991 which was, quite frankly, very distorted indeed with the
introduction of the poll tax.
(Mr Lambirth) Different authorities argue that 1991
was distorted by a very large number of things.
144. But the problem is you are still using
that distorted base figure.
(Mr Lambirth) Unfortunately the problem is such that
even if we moved to a later year the whole way in which capping
was handled by reference to SSAs under the previous administration
means that we would probably not find any significant difference
from what we find when we go back to 1991. There are big problems
in sticking with a formula based system, particularly one based
on regression analysis. It does not look at the circumstances
of individual authorities or what they are trying to achieve.
It does it on the basis of this national regression analysis.
That is why there is a difficult choice to be made.
Chairman
145. If you talk about going to a planned system
then the problem for Stockport and Tameside is that their plan
would be based on the money they got under that regression analysis
system which you say was not satisfactory.
(Mr Lambirth) I do not think that that is to do with
the move to plan. It is to do with the principle, if it is endorsed,
of floors and ceilings on grant increases. If you took that out
there is no reason why you should not start with a completely
clean sheet of paper on a plan and there is no reason why you
should not get a 20, 30 or 40 per cent increase in grant. Realistically
no grant system has delivered huge increases or decreases in people's
SSA and to the extent it has down at the district council level
it has made financial management and forward planning extremely
difficult for them. I go back, as I said earlier, to strong demand
from local government for greater predictability and stability.
That has to be balanced against the concern you have just voiced.
146. So you are saying that the plan system
might produce extra money for schools in those two areas. Presumably
it would also then mean that schools in some other areas of the
country might lose quite substantial amounts of money?
(Mr Lambirth) I think that both the plan-based and
formula-based systems operate in what is called a zero sum game
in the sense that once government has decided how much grant it
is prepared to pay in total to local authorities over the coming
three years, by definition any grant distribution system is merely
about how the cake is cut up. That is true of both of them.
147. Both systems would allow the minister to
carve the money up as he or she likes rather than to base it in
any scientific formula.
(Mr Lambirth) Proponents of the existing SSA system
claim it is a very scientific formula. Opponents say it is trying
to do too much by science.
148. Do you agree that it is a scientific system?
(Mr Lambirth) I think it exaggerates what is achievable
by statistical analysis.
Chairman: John Cummings?
Mr Cummings
149. How would your Department reconcile the
proposals for "frontline first" funding with the social
exclusion report on neighbourhood renewal which suggests that
councils must have a key role and greater local flexibility to
secure regeneration of deprived areas?
(Mr Lambirth) Press reports aside, I am not sure what
frontline first proposals are in relation to local authorities.
150. You could be talking about monies paid
direct to schools, as has already been mentioned, monies paid
by local authorities direct to health authorities for care of
the elderly.
(Mr Lambirth) I have already addressed the issue of
money paid direct from central government to schools. I do not
think that is a feasible option and nobody regards that as a feasible
option. I think the same is true of any other attempt by central
government to provide money direct to frontline service providers.
Local authorities across the whole range of their responsibilities
have a vital role to play not just in joined-up government but
also in relation to balancing funding priorities.
151. Are you saying that the government is not
currently considering proposals to channel funds directly into
services such as health, education and employment without the
involvement of local authorities? Because the term "frontline
first" has been coined to describe such a government approach.
(Mr Lambirth) Education is a local government responsibility
and I have being trying to confine my answers to that. Health
is one of those areas, and obviously the health authority is not
responsible in any sense to the local authority and what is needed
between the two is the sort of joint working that is required
in the areas of provision of the social services for the elderly,
for instance. That is supposed to be achieved by co-operation
between the authorities and is addressed in the provision we have
now made for pooling of budgets.
152. So you are aware of the terminology "frontline
first"?
(Mr Lambirth) I have heard the terminology of frontline
first, the problem is it has been broadened out from a very clear
commitment on the health field into speculation about how it might
apply in lots of other fields. In relation to education in particular
I said I am aware of no support whatsoever for direct funding
that bypasses the local authority.
153. The Local Government Association has expressed
concerns to the Department.
(Mr Lambirth) I explained earlier that it was agreed
at the Central Local Partnership that funding options for education
should be set out in the Green Paper to be published this summer.
It was agreed that there should be another piece of work done
under the aegis of Central Local Partnership, so the LGA are being
fully involved in it, so they will know exactly what is happening,
what is proposed and why. One thing that it is not about is creating
a direct funding relationship between central Government and individual
schools.
154. So you are saying that the Department does
not have a co-ordinated approach to this particular aspect of
funding?
(Mr Lambirth) I am saying that we are tackling this,
as in other issues, on the basis of a Whitehall-wide collective
cabinet responsibility. The review involves DfEE, it involves
us, it involves the Treasury.
155. It is interesting to know that, perhaps
the Committee has been given evidence of which you have no knowledge.
The Committee is led to believe here that concerns have been expressed
by the Local Government Association and others that such a move
would run counter to attempts at joining services up. The recently
published National Strategy for Neighbourhood Renewal prepared
by the Social Exclusion Unit of the Cabinet Office criticises
the imposition of centrally determined targets for the failure
of services in deprived areas. There is obviously someone giving
it some serious consideration.
(Mr Lambirth) I agree with what they say that direct
funding to schools would be a very serious source of concern,
but there is nothing in what you have just read out to suggest
that they said that somebody was doing it or proposing it, that
is not the case.
Chairman: I think we had better move on to social
housing if we are going to complete our time schedule.
Mr Cummings
156. The Department recognise that local authorities
face a significant backlog of repairs in their housing stock.
Does the Department believe that transferring this stock to Registered
Social Landlords is the most realistic option for securing the
required investment?
(Mr Gahagan) I think increasingly it is only one of
a menu of options. It is certainly an option, it is an option
that a number of authorities find attractive, but there are other
options. If they retain the stock there is more money available
than there has been, there is more money this year than last year
and more money next year than this year. There are also the Private
Finance Initiatives where eight authorities are going down that
route. Then in the Green Paper the new arms length companies which
a local authority can establish were announced. There is now a
range of things that a local authority can do to tackle its backlog.
When they develop their housing strategy we expect them to look
at those options and not go just hell for leather for one.
157. So you are of the opinion that arms length
companies really do provide a solution to the investment?
(Mr Gahagan) None of those will provide a total solution
but they provide a part of the solution, or they will do. They
were only announced a month ago in principle so there is a lot
of working up to be done. They will provide part of the solution.
158. How many new arms length companies per
year do you envisage? How much additional borrowing is likely
to be granted?
(Mr Gahagan) We do not know. That is being discussed
at the moment through the spending review, it is being negotiated
at the moment. What I do know is that there will be pretty severe
tests on any authority that wants to go down that route, as was
spelt out in the Green Paper. They have to have set up the arms
length company, they have to have a good quality business plan
and they have to have had an excellent rating from the Housing
Inspectorate before they are eligible. There are hurdles there.
159. How many local authorities do you believe
will be able to qualify to have an impact?
(Mr Gahagan) I honestly do not know. As I say, the
announcement was only made a month ago. The local authorities
themselves have got to adjust to it. They have got to decide whether
they want to put their stock into an arms length company in the
way proposed. There are some that already have but there are a
number of others looking at that option. As I said, they need
to look at that on the basis of their housing strategy. I think
they will also need to look, following the spending review, at
what the overall envelope is within which they will be working.
I do not think the authorities themselves know yet and we certainly
do not.
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