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Mr. Deputy Speaker (Sir Alan Haselhurst): Order. I now have to announce the results of the Division deferred from a previous day.

On the motion on Social Security, the Ayes were 382, the Noes were 138, so the motion was agreed to.

[The Division List is published at the end of today's debates.]

31 Jan 2001 : Column 382

Local Government Finance (England)

8.2 pm

The Minister for Local Government and the Regions (Ms Hilary Armstrong): I beg to move,

To complete the picture of local government funding, we need to tackle two other issues, in addition to those covered by the previous motion. These are any substantial continuing effect on a local authority's grant entitlement arising from past changes in the method of calculating the grant distribution formula; and the arrangements to provide a measure of funding stability for other authorities, such as shire districts, not covered by the floor and ceiling arrangements.

The special grant report covers three special grants: standard spending assessment reduction grant--SSA review; SSA reduction grant--police funding review; and central support protection grant.

The SSA reduction grants deal with past changes in methodology. As there have been no methodology changes to SSAs or to the police grant formula since 1999-2000, other than some minor changes to reflect the introduction of the Greater London Authority and the transfer of nursery grant funding into SSAs, the number of authorities receiving these grants has been diminishing over the past few years. This year, only one authority remains protected by these grants--the City of London. The total cost of the grants has consequently reduced from some £16 million in 2000-01 to less than £2 million this year.

Mr. Patrick McLoughlin (West Derbyshire): I am grateful to the Minister. She said that there had been no substantial changes in SSA over the past year. Can she tell us whether there have been substantial changes over the past three years?

Ms Armstrong: I said that there had been no changes since 1999-2000. [Interruption.] As the hon. Gentleman knows, we have maintained SSA methodology over a three-year period. I read to him the areas in which we have changed methodology over the past three years.

On a like-for-like basis, the grant guarantees that no shire district authority--no relevant authority--will receive a reduced general grant from central Government.

Mr. Christopher Chope (Christchurch): Will the Minister give way?

Ms Armstrong: The number of relevant authorities receiving the grant this year has again declined as a result of the more generous funding levels for shire district councils.

Mr. Chope: Will the Minister give way?

Ms Armstrong: Ten shire districts will receive central support protection grant this year.

Mr. Chope: Will the Minister give way?

Ms Armstrong: The cost of this grant for relevant authorities--

Mr. Chope: Will the Minister give way?

Ms Armstrong: Mr. Deputy Speaker, I am seeking to uphold your injunction to keep my introduction brief. However, I give way to the hon. Member for Christchurch (Mr. Chope).

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Mr. Chope: I am grateful to the Minister. She just said--if she looks back at her notes, she will be able to read it again--that there would be no reduction for shire districts on a like-for-like basis. Taking into account the additional burden placed, for example, on East Dorset district council, which features in the report, does she agree that a new burden has been placed on East Dorset as it now has to pay for concessionary fares, so there is not a like-for-like basis for comparing this year and the coming year?

Ms Armstrong: We are dealing with SSAs. There is no substantial change in SSAs this year. However, additional funding has been put into the settlement, in order to deal with the matter that the hon. Gentleman raises. We are comparing SSAs on a like-for-like basis.

There are only 10 shire districts that will receive central support protection grant this year. They are listed in the report. The cost of this grant for relevant authorities has consequently fallen from more than £4 million in 2000-01 to £1.4 million this year. The reductions are reflected in the overall grant settlements that we discussed in the previous debate.

The report completes the Government's allocation of general grant to local authorities for the year 2001-02. It will help to provide stability of funding so that the authorities affected can plan ahead for better service delivery. It is therefore an important part of our commitment to public services. I commend the special grant report to the House.

8.7 pm

Mr. Nigel Waterson (Eastbourne): As the Minister said, we are discussing special grant report No. 72, which covers SSA reduction grant, SSA police grant and the central support protection grant.

On one view, the report is narrow and technical. It deals with transitional grants for the authorities concerned. Essentially, it deals with anomalies that may affect certain local authorities.

Part of the report deals with the City of London. As I understand the position--the Minister is welcome to correct me if I have it wrong, as I am sure she would be the first to agree that, for anyone without a degree in mathematics, it is difficult to follow some of the formulae--the City of London is sensitive to demographic changes, and so may require extra grant attention at this time in the cycle.

The main issue, as far as I can see from the report, involves certain shire districts which are not eligible through the relevant mechanism for the new floor arrangement. We debated the matter earlier this evening, but the report raises general as well as specific issues.

As I said, the report is limited to specific authorities and the anomalies that apply to them. They are set out in detail. The report highlights all the distorting effects of the new floors and ceilings that the Government have introduced. It is strange that we are debating the effects on the authorities of floors and ceilings when the Government claim that there is a freeze on standard spending assessment methodology and that they are still considering the thousands of responses to the Green Paper on local government finance. It is odd that the Government are embarking on piecemeal reform of local government finance and a sticking-plaster approach--as

31 Jan 2001 : Column 384

my right hon. Friend the Member for Skipton and Ripon (Mr. Curry) described it in the previous debate--when they are in the process of thinking the unthinkable about local government finance and future mechanisms.

Comments from Liberal Democrat Members, Conservative Members and Labour Back-Bench Members in the previous debate made it painfully apparent that there is much dissatisfaction with the operation of existing mechanisms. Some local authorities are on the wrong side and others on the right side of the area cost adjustment fence. No matter how the mechanism is supposed to operate, some councils always seem to be bottom of their given league table. I do not expect the Chamber to fill up with hon. Members whose local councils are more than happy with their allocations, but plenty turn up for the opposite reason, doubtless after being lobbied by their constituents.

It is odd that the changes are to happen this year of all years, when there is supposed to be a freeze and what the Minister insists on describing as stability and predictability--as if those two things can be intrinsically good when the basis for calculating the initial figure is unfair in relation to some local authorities. There will be a clear change in the operation of the formula for some councils. The Government argue that, without some change, the existing formula would result in, to paraphrase the Minister, an unacceptably wide range of outcomes next year. Some authorities, especially in the south-east and London, would receive larger increases because of population movements and higher living costs. Hence the Government have devised a system of floors and ceilings on grant increases for authorities with responsibilities for education and social services.

The minimum floor increase for an individual authority will be 3.2 per cent., and the maximum ceiling will be 6.5 per cent., as the Minister said earlier. The debate is about authorities other than the City of London precisely because they do not provide education or social services. Left to themselves, they would not benefit--if that is the right word--from the new ceilings and floors. In a nutshell, that is the theme of the report.

However, neither the report nor the Minister explained why the Government believe that the system should be introduced now. As hon. Members know from the previous debate, we have three basic objections to the introduction of ceilings and floors at this stage. First, they distort a system that is already complex. A constant theme of such debates is the difficulty of understanding the formulae. It is no good Ministers complaining about the complexity of the system and the difficulty of explaining it to the taxpaying public--I presume that that is why they are considering other methods of calculating the amounts that local councils should spend--while simultaneously introducing an extra distortion to the system.

Secondly, the Government were presented with statistics, especially the new earnings data, for many authorities in the south-east and London, which suggested a substantial increase in the area cost adjustment. That is why they face a difficulty this year. Whatever the arguments for or against that mechanism, whether it is good or bad--

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