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Mr. Waterson: I hear cries of "bad", and I appreciate that we are holding a genuine cross-party debate. Opinions depend on the area that one represents. In East Sussex, we believe that the area cost adjustment is good.
Mr. David Kidney (Stafford): Now that the hon. Gentleman has had a little more time to think about it, will he outline Conservative party policy on the future of the area cost adjustment? He appears to like it. What is his party's view?
I repeat that we will wait and see the sort of mess in local government finance that we inherit after the general election before we make up our minds. The hon. Member for Stafford and I agree that once a mechanism such as the area cost adjustment is in place, people become dependent on it. It is difficult to wean people off such measures, and they become part of the system.
Mr. John Bercow (Buckingham): My hon. Friend made a pertinent remark about the complexity of the formulae. Does he agree that it would be revealing if Ministers were obliged to go into an examination room to answer questions of which they had no advance knowledge, about the function and implementation of section 88B(3) of the Local Government Finance Act 1988, with no guidance from their officials, and declare the results to the public?
Mr. Waterson: My hon. Friend makes a telling point if I only knew what it was. He reminds us clearly and eloquently of the sheer complexity of the formulae. I am sure that we jobbing politicians all rightly rely on officials when we become Ministers. Many Conservative Members are looking forward to that experience in two or three months. However, we will rely more on officials for guidance on local government finance than for any other subject.
At least Conservative Ministers tried; they saw a constant stream of delegations about local government finance. I have taken delegations from Eastbourne and I am sure that other hon. Members from all parties have done that for their local councils. The Labour Government are much less willing to receive delegations from councils. I do not claim that our Ministers always gave councils the answers that they wanted to hear, but at least they were prepared to listen and to take account of people's comments.
I was making a point about reflecting the real costs to councils. If costs have genuinely increased in a specific local authority area, they should be reflected in the area cost adjustment, as long as that system remains.
As the hon. Member for Stafford pointed out in slightly unguarded but acutely observed correspondence, most local authorities will lose out. A few will benefit from the floors while 12 will suffer from the ceilings. I suspect that the Government are simply trying out a new weapon. However, the mass of local authorities in the middle will continue to lose out because of the mechanism. I challenge Ministers to challenge that statement. We will watch future developments with great interest.
I shall finish on our general worries about the floors and ceilings concept, particularly the fact that it is being introduced at this stage, when we are meant to be having a freeze on any such changes. The Local Government Association Conservative group, which is well on its way to being the dominant group in the Local Government Association, states:
I want to follow the comments of the hon. Member for Eastbourne (Mr. Waterson) about floors and ceilings. I was surprised, when reading the report, to find that my local authority did not come within the SSA reduction grant, in view of the 1991 census information. I recall speaking in previous debates on this issue, and drawing attention to the fact that, even with the changes that had taken place, we lost revenue support grant in the same way that we have under this settlement. In this case, we have lost revenue support grant through data losses.
The report relates mainly to ceilings and floors. My local authority, Barnsley, is at the floor level of settlements throughout the country. It received a 3.2 per cent. increase in revenue support grant, which is at the lower end of the scale. I appreciate that other amounts of money have been received in relation to the neighbourhood renewal fund and to education. Unfortunately, those amounts of money are not adequate to address the problems that we face as a result of the low settlement.
There are restrictions on how the neighbourhood renewal fund money can be used. It cannot simply be transferred across into other sectors, in which my local authority is currently struggling to meet its responsibilities. In fact, Barnsley remains 30th out of the 36 metropolitan authorities in terms of its level of RSG funding. The data changes, and the area cost adjustment factors, have resulted in a loss of some £2.2 million, and the ceilings and floors have resulted in a further loss of some £100,000.
The effect on Barnsley's budget, as my hon. Friend the Member for Barnsley, East and Mexborough (Mr. Ennis) pointed out, is that it will lose £11 million over the next two years. That is nothing new for our local authority, because it has faced many cuts since the SSA methodology was introduced in 1990. It was capped in 1990, together with 19 other authorities, one third of which were in coal-mining areas. The SSA methodology simply does not address the difficulties of coal-mining villages, because they are always equated with rather nice villages with duck ponds and village greens, which are doing quite well. We tend to lose out as a result.
There will undoubtedly be redundancies in Barnsley as a result of the settlement. The local authority has already issued compulsory redundancy notices to the employment department. That will obviously cause some difficulty, in particular because the local authority does not have the money to fund the redundancies that are being imposed on it as a consequence of the local government settlement.
My hon. Friend the Member for Barnsley, East and Mexborough asked whether the Government would consider a supplementary credit approval for £1.8 million, to cover the difficulties that the local authority will encounter in funding those redundancies and employment cuts. My hon. Friend mentioned that the job losses could be equivalent to about 225 full-time posts. The local authority has issued an HR1 notice that calls for 450 redundancies. That is a substantial number of job losses.
The methodology used for the ceilings and floors is rather flawed, as was mentioned earlier. The proposals rely on the scheme being self-financing, which has the perverse effect of penalising those authorities that have already lost resources through data changes. Authorities such as mine have, therefore, lost twice: once through the data changes, and again through the ceilings and floors mechanism.
Ms Armstrong: There are one or two misapprehensions about this matter. My hon. Friend's local authority will contribute to the special grants that we are debating. Those special grants are top-sliced from the settlement, and he does not, therefore, know how much his authority will contribute to them. Had that money not been top-sliced, it would have been distributed through the general grant. By opting for that system, we have simply made more open the contribution from each authority. However, instead of that contribution coming from the authority's base grant, according to the scaling factor, and the floors and ceilings, the contribution is only part of the increase that it is receiving. Barnsley is, therefore, contributing less, because we have calculated the amount using floors and ceilings, than it would have done if we had done this by top-slicing, through a special grant.