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Mr. Kidney: The hon. Member for Eastbourne (Mr. Waterson) could not say that, as a matter of policy, the current area cost adjustment should be reformed. Will the hon. Gentleman at least say that the Liberal Democrats believe that it should?

Mr. Foster: I say absolutely categorically that the area cost adjustment should be reformed. I entirely agree with the hon. Member for Barnsley, East and Mexborough that we need a simple, fair funding system that takes account of local need.

A redistribution mechanism is necessary, but other proposals would make life much easier. For example, why cannot local councils raise a far greater percentage of the money that they spend, with a corresponding reduction in national income tax, so that the local piper can call the local tune? Why has the current, unfair council tax been continued? Elderly people, for example, live in much larger houses, which are more expensive, yet their income is much lower. Why do not we adopt a much fairer system of local income tax? As other hon. Members have said, why is local government expenditure capped in any way? Why must we have this so-called sophisticated system under which the nearly poor pay for the really poor?

I welcome the introduction of floors because it makes sense to ensure that the councils that will lose money are given time to prepare, but why do ceilings need to be introduced? Surely that means that councils with real and immediate needs will not be provided with the support that they require.

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The net effect is that, after four years of a Labour Government, Whitehall's tanks are still on our town hall lawns. The tanks may have changed colour, but they are still as heavy and powerful as ever. Local people want to feel more, not less, in control of the issues that are important to them. If all the decisions that count are taken hundreds of miles away, is it any wonder that people lose interest in the political process?

7.26 pm

Mr. Jim Cunningham (Coventry, South): The time allocated to this motion is pretty short to say the least, which is a shame because this was developing into an interesting debate. Both sides of the House have their positions to defend; nevertheless, my hon. Friends have not been afraid to say where we would like to see improvements and, for that reason alone, this has been a useful exercise.

The Opposition say that the Government have somehow used the area cost adjustment for political purposes, but I seem to remember from my time in local government that we could have argued the same way when they were in government. I met various Ministers to discuss the issue. In fact, I used to deal with someone who now sits on the Opposition Benches.

I agree with my hon. Friend the Member for Barnsley, East and Mexborough (Mr. Ennis) that the SSA issue must be addressed. I am glad that the Minister says that she is doing so, but I urge a little caution. Anyone who knows anything about the formula--no one knows everything about it because it confuses everyone--says that any change in the SSA must be dealt with carefully. We must be careful, and people both inside and outside local government have debated that often.

I sometimes think that it is dangerous to come from a local government background, certainly when debating the issue in the House, but I am struck by the fact that, even with the best of intentions, those in local government, especially the employees, feel constantly under attack. More should be done to improve the morale of local government employees. A bit of dignity should be reintroduced, because they have all been at the butt of competitive tendering by successive Governments. We have all seen the experiments of the past 20 years, and it is about time that they were called to a halt.

It is time to build up public confidence in our local services because, in one way or another, most of the major political parties are committed to public services. Whether we are talking about teachers' bargaining rights or ordinary local government workers' concerns about the Transfer of Undertakings (Protection of Employment) Regulations 1981 and being transferred into the private sector, we must rejuvenate public confidence in local services. Those are some of the issues that concern me.

Having said that, I welcome the Government's £8 billion increase in local government expenditure, but there could still be a £3.5 billion shortfall. The Government cannot put such matters right overnight, and we must bear in mind that there are still major problems. For example, during the past two or three years, the social services department in Coventry has found itself with a shortfall of £4 million or £5 million. The projected shortfall is £5 million and £6 million for the next year or two.

There is a trend to move social services away from local government control. We must give social services, especially the personal service aspects, more serious

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consideration than we have given them in the past. We must consider the impact on services for various age groups, including those for children and elderly people, and the fact that it is difficult to recruit social workers and people to provide other services, such as home care for the elderly.

I return to a point that I made earlier. We must stop knocking local government and start supporting the people who work to deliver the services. I draw my hon. Friend the Minister's attention to the problems in Coventry, which have created two or three crises in the past two or three years in the delivery of social services. The increase in the assistance that Coventry has received for social services is about 2.6 per cent. below the national average. I readily acknowledge that the Government have provided assistance, but we must deal with such problems.

I welcome the £6 billion for capital investment. That will help to some extent. Although I know that things cannot happen overnight, I would like to see more done.

I also welcome the £52 million that will be spent on teachers' salaries to aid recruitment. As a trade unionist, I have always thought that teachers should have the same negotiating rights as everybody else. I know that the review body is due to report shortly, but I hope that it will consider not only salaries, but negotiating rights and the way in which performance-related pay is working in practice and affecting teachers' morale.

Time is short, but I want to say in concluding that we must do more about training in local government and about capital investment for data changes and computer equipment. We should want everyone to participate in service delivery. I would have liked to mention a range of other issues, but I know that other hon. Members wish to speak.

7.31 pm

Mr. David Curry (Skipton and Ripon): This has been the year of the sticking plaster. The fact that the Government have had to put so much sticking plaster on to their original settlement should not disguise the real thrust of the settlement. The hon. Member for Bath (Mr. Foster) was right: there has been a remorseless advance in direct grants at the expense of unhypothecated expenditure.

The Government proclaim that they like local government and local government freedoms. They say that they are giving more liberty to local government, but every year the amount of money that is directly controlled by the Government increases as a proportion of the settlement. As the hon. Gentleman said, it has increased by £2.6 billion for education alone this year, so the Government's proclamations of independence for local government are entirely hypocritical.

Labour Members have been wailing about the area cost adjustment, but when the Minister and the right hon. Member for Holborn and St. Pancras (Mr. Dobson) were in opposition four or five years ago they told us how easy it would be to sort out the area cost adjustment. They said that it was a matter of lack of will on the then Government's part and that anyone who applied a couple of iotas of intelligence to the matter would soon sort it out. After four years of a Labour Government, the solution has not advanced by a single comma. We have had a series of fertile little ruses--a sort of "petite astuce"--to make the settlement work.

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Of course, the settlement does not work, which is why we have had improvisations. No one would object to additional money for neighbourhood renewal, except for the fact that that money has not had to be bid for; it is allocated at the Minister's pleasure. As several hon. Members have pointed out, it is curious to see the local authorities to which it has been allocated.

No one would object to additional money to meet the teachers' pay settlement. In the inner cities and London in particular, retaining teachers is a gargantuan problem. If the pay increase is to be 3.5 per cent. or thereabouts, it will go only a tiny way to helping with that problem. In addition, no one objects to helping local authorities to deal with asylum seekers.

Another bit of sticking plaster is the attempt to deal with the problems of the Environment Agency and the cost of flooding. The Government need to do a little more, and it is not just a question of money. They have failed to address the issue correctly in three respects. First, the Bellwin scheme comes in only when spending is 0.2 per cent. of the whole of an authority's budget. It is a curiously perverse phenomenon that the mass of teachers' salaries governs how much an authority would receive from the Bellwin scheme. Secondly, no help has been given to make good the damage to roads and bridges.

Thirdly, the increase in the Environment Agency levy is accounted for not in the year in which the increase bites, but subsequently. Thus there is a cash-flow hit on local authorities that can only come out of the council tax or services. That is particularly true of my authority of North Yorkshire. Of course, we are pleased with the additional money, which has meant that the demands on the council tax will be rather less than they would otherwise have been, but the announcement was about meeting historical costs, and the Government have to do that in any case. The sum is £500,000 short of the cost, and it is not all new money. The Government are recycling £2 million of the £51 million, and there is no provision for future investment.

The commitment to increase the rate of grant support for new capital works to 65 per cent. is welcome. However, the need to carry out enhanced maintenance as a result of the floods and to fast track capital schemes in areas that have been flooded not once but twice means that more cash is needed. The Government must pay attention to that problem and I draw their attention to the report published today by the Select Committee on Agriculture, which deals with it.

In the little remaining time that I have left, I wish to focus on the crisis facing social services departments. The Government have fast tracked and tried to passport money into education departments over a number of years. That is part of the business of untying the non-hypothecation of local government funding and making sure that Ministers control the money. However, the ragbag at the end of that process has been personal social services departments that have been asked to co-operate with health authorities and which have faced new demands from the housing authorities. It is no surprise that the members of personal social services departments are deeply demoralised.

As the hon. Member for Bath said, the Local Government Association has made calculations about the national scene, but the position in North Yorkshire is even worse. In North Yorkshire, a third of the elderly people who go into care have put themselves into care.

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They become a charge on the local authority when they run out of money, and no account is taken of that charge in local government funding. That is entirely unfair, and we know about the consequences that it has for bed blocking.

In my local authority, there is an overspend of £300,000 on children's services, and the costs of placements in foster care and secure accommodation are 29 per cent. over the SSA. The overspend on the placements of adults and older people in residential and nursing home care is £1.3 million. There is a £1.6 million overspend and a funding gap of £3.5 million in personal social services. That is not because the local authority is inefficient--the inspectorate said that it was rather good at delivering social services--but because the Government do not take account of demography and the increasing propensity for some social workers to err on the side of caution for reasons that we all understand in the face of the habitual barrage of criticism that they receive.

Therefore, there has been a 10 per cent. increase in the number of children who must be looked after. We have lost £600,000 in the children's SSA to fund the leaving care grant. As I said, 30 per cent. of older people who are newly referred for assessment have placed themselves in homes and reached the capital limit. That limit will rise, which will place an additional burden on local authorities.

The health service is demanding speedy discharge, because the number of blocked beds obviously causes concern. However, a couple of weeks ago, 108 older people were waiting for placements because of the phenomenon to which I have referred.

On the costs of rural care, a community councils network study, which was undertaken this year, considered the cost of delivering domiciliary care and suggested that North Yorkshire could justify an additional 2.8 per cent. of funding--or £600,000--for these services.

The social services department is under strain; there is no point pretending that it is not. Of course, the settlement is higher than previous settlements and money is being passported to education, but when that happens the focus inevitably shifts. For the same reasons that demographic changes make life difficult for the health service, they are also making it more difficult for personal social services departments. The Government rightly wish to see the two integrate much more effectively, but the pieces of sticking plaster are tinkerings with the system. They do not deal with the fundamental distribution problems and the Government have backed off from giving councils more freedom. Despite all the rhetoric, the apron strings are being tied tighter and tighter.

The Government claimed that they would provide more freedom, but the settlement is more interventionist. They said that the settlement would be simpler, but it is more complex. They said that the settlement would be fairer, but, as result of the famous topping and tailing, it is more arbitrary. We have a veneer of generosity, and the reality of prescription and inadequacy.

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