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The Secretary of State for Transport, Local Government and the Regions (Mr. Stephen Byers): Last Tuesday, the Government published their White Paper on local government, setting out a radical programme of reform and modernisation based on new freedoms and greater accountability. In addition, I can inform the House that, in the light of representations received from some hon. Members and some shire districts as part of the on-going consultation on the 200203 financial settlement, I shall introduce an alternative baseline for 200102, which, in effect, adjusts only for the transfers of service for which shire districts are responsible. In order to guarantee a minimum 2.3 per cent. increase for shire districts, I will give each district whichever increase is greater2.3 per cent. on the original baseline, or 2.3 per cent. on the alternative. I believe that that will meet their concerns.
Mr. Soley: I very much welcome that reply, but I urge my right hon. Friend to keep going with the reform of local government. Many people in all parties want local authorities to be returned the power and responsibility that was whittled away in the 1980s and 1990s. We must return that power and responsibility to locally elected people. As we do that, will my right hon. Friend consider giving more financial power to local authorities which must, at the same time, be held responsible by the electorate? I know of no better way of ensuring greater interest in local democracy than by linking financial responsibility with accountability to the electorate for how the money is spent.
Mr. Byers: I strongly endorse the principles that underpin my hon. Friend's comments. That is why we have always stressed that the White Paper that we published last week is about modernisation and reform. It is also, however, about greater freedoms based on accountability, which must be at the heart of effective local government.
When we published the White Paper, I tried to make it clear that it represented a change in direction in terms of central and local government relations. The interface between local authorities and central Government is never easy, but we must accept that we in this place and the Government do not have to control everything and that we have to believe in the strengths of local democracy. That is why we want to give new freedoms and flexibilities to local authorities. The White Paper outlines how we can do precisely that.
Mr. Mark Prisk (Hertford and Stortford): In the Secretary of State's attempt to decentralise power from the centre to local government, will he guarantee that the future of county councils is safe in his hands?
Mrs. Anne Campbell (Cambridge): Is my right hon. Friend aware that his proposals for the reform of local government finance have been welcomed in my constituency? They are certainly more welcome than the actions of the Conservative Government in the 1990s which led to an unfair and inequitable system of distribution. However, will he ensure that when he
Mr. Byers: I am aware that Cambridgeshire county council has, for a long period, argued for a change in the regime by which we allocate funding to local authorities. It will welcome the fact that we will abolish the standard spending assessment that bears no relation whatever to the levels of services provided or to the needs of a local authority. It was, of course, introduced by the Conservatives when they were in government and it affects Conservative-controlled county councils and many other local authorities.
We shall see the end of the standard spending assessment regime and, instead, we shall have a system of distribution based on needs and the levels of services provided. There will be dramatic changes as a result of that, and it is only right and proper that we have a system of transitional arrangements to make sure that we do not adversely affect the provision of services and to ensure that those areas, such as Cambridgeshire, that may benefit will receive the benefit of the changes as soon as we can possibly introduce them.
Mr. Malcolm Moss (North-East Cambridgeshire): Last year, three quarters of local authorities spent above their SSA for social services, with a total overspend of £183 million. Based on this year's financial settlement, local government bodies are already saying that the overspend could be nearly £1 billion. No amount of tinkering with local government reform will substitute for the proper funding of local authorities to provide the necessary level of social services to the old, vulnerable and weakest in their societies. Does not the Secretary of State have any shame that his Government are presiding over the near collapse of social services, over bed blocking on a massively debilitating scale and over a cruel and insulting level of services for elderly people?
Mr. Byers: Well, this is the party that introduced the poll tax into local government and that decimated council services year after year by cutting spending. This is the party that, when electors voted for Labour councils, abolished those councils because it could not tolerate real local democracy.
The reality is that this settlement gives 6.4 per cent. to personal social services, which is way above the rate of inflation. In addition, my right hon. Friend the Secretary of State for Health is providing an extra £200 million specifically to deal with bed blocking in the national health service, from which many local authorities will benefit. That is what the Government are doing, and we will continue to deliver good services, whether it be for the elderly or children at risk who know that for too long they have been denied the level of service that should be theirs. This Government are delivering. The people out there know that we believe in local democracy and local government, which is why we are providing the resources to ensure that services are delivered at last to those in greatest need.
7. Richard Burden (Birmingham, Northfield): What assessment his Department has made of the need for a deprivation factor in the formula used to distribute central Government finance to local authorities. 
The Minister for Local Government (Mr. Nick Raynsford): Deprivation indicators are included in a number of the standard spending assessment formulae used to distribute grant to local authorities. For example, the education formula includes indicators of lone parents and income support. However, we do not believe that the SSA system adequately reflects needs. That is why we introduced the neighbourhood renewal fund, from which Birmingham has received £11 million in the current financial year. It is also why we are currently reviewing the grant distribution formulae, with a view to creating a fairer system in which, among other considerations, deprivation is properly reflected. The work is still in its early stages, and we have not yet reached any conclusions.
Richard Burden: I thank my right hon. Friend for that reply. An accurate reflection of deprivation is obviously important to ensure that local authorities receive a fair allocation. However, does he agree that all too often the problem is that deprivation is assessed across broad areas, which averages those areas out? Pockets of deprivation may exist alongside areas of relative affluence and often do not get the attention that they deserve. Does he also agree that there are two solutions? The first is for the formula to reflect local circumstances much more exactly. The second is to ensure that local authorities, especially larger bodies, devolve their management so that local circumstances are adequately reflected. Further, does he welcome the moves that Birmingham recently made to achieve such devolution?
Mr. Raynsford: There are three points to make. The first is that our review of the grant distribution formulae for local government should help to ensure that we pay proper regard to deprivation as part of the general process of allocating funds to local government. Secondly, our neighbourhood renewal programme has been geared towards ensuring that additional funding helps the most deprived areas. My hon. Friend knows that Birmingham qualifies as one of the 88 authorities that are in that programme. The third point is that it is important to consider initiatives that help to establish more effective responses to particular communities. In proposing a framework to devolve more say to local areas, Birmingham city council is developing an interesting initiative that will be considered by many other authorities. I suspect that a great deal will be learned from that valuable experiment.
Miss Anne McIntosh (Vale of York): As part of the review, will the Minister consider pockets of rural deprivation, in particular in those parts of North Yorkshire that have suffered from a dreadful downturn in the agricultural economy? Does he accept that there is social exclusion in areas that do not have an advanced network of public transport, and that factors of rurality and sparsity of population should be taken into consideration?
Mr. Peter Pike (Burnley): Does my right hon. Friend accept that the taskforce report on the disturbances in Burnley in June this year identified that deprivation and housing were the two biggest factors? Does he recognise that the report also states that although Burnley has inner-city problems, it is a shire district council and does not have the finance to tackle the problems that it faces, and that it needs Government help urgently?
Mr. Raynsford: My hon. Friend makes an extremely important point about the particular needs of his community in Burnley. He will know that, having visited the area a year or so ago, I am familiar with the problems that he mentioned, including the housing problems. He may be interested to know that I have just come from a round table discussion at the Local Government Association which looked specifically at the lessons to be learned from the reports on the disturbances in Burnley and other cities. We take those reports very seriously indeed, and we want to ensure that we learn from the conclusions, to help authorities such as Burnley respond more effectively to the serious challenges that they face.
Mr. Nicholas Winterton (Macclesfield): On the subject of housing, which featured in the Minister's reply, does he accept that some Government policies are making it very difficult for those on low incomes to rent property, particularly in affluent areas that traditionally have high rents? Even in affluent areas, there are people on low incomes. Does he agree that there is a problem, and will he turn his considerable energies to doing something about it?
Mr. Raynsford: The hon. Gentleman must appreciate that I am now responsible for local government, and my noble Friend Lord Falconer is responsible for housing, along with the Under-Secretary, my hon. Friend the Member for Northampton, North (Ms Keeble). Having said that, let me assure the hon. Gentleman that we take very seriously issues of need, and the Government have been putting substantial additional investment into the provision of affordable housing in many areas, including his own. We are committed to expanding opportunities for people who currently have difficulty in securing housing, after years and years in which the housing budget was remorselessly cut by the party that he represents in the House.
Fiona Mactaggart (Slough): Does the Minister accept that the experience of deprivation in a number of areas is not properly reflected in their financing? For example, Slough is in the top 10 areas in the country for deaths from heart attacks and in the top 20 local authorities for ethnic minority populations, but that is not reflected in the resources that we get. Can he please consider those authorities where there seems to be a mismatch between need and resource, to see whether the sums are being done correctly?
There is a tension, however, between fairness and simplicity, and if one tries to take into account too many factors in order to create a fairer system, there is a risk that one will end up with a system that is opaque and incomprehensible, and no one will know how it works. That is the situation that we got into with the system that we inherited from the Conservative party. We know that we can do better, and our review will seek to improve on that system.
Mr. Geoffrey Clifton-Brown (Cotswold): Despite what the Secretary of State said a moment ago, does not last week's announcement on the change in the local government finance formula amount to a huge centralisation by Government over local authorities? Or is it a new departmental policy of endorsing failurea reward for the failure to run a proper railways policy, a reward for the failure to sort out the muddle in the tube and, above all, a reward for failing Labour councils? Or is it just the Secretary of State himself who is failing?
Mr. Raynsford: I have to say that the test of the electorate shows that the Conservative party has failedtwice running. Last week, we announced that we are giving local government a generous settlement, with real-terms increases, guaranteeing increases between two and three times the rate of inflation for all education and social services authorities, and with a minimum 2.3 per cent. increase for all authorities.
That should be contrasted with the experience of the years in which the Conservative party was in government, when local government faced real-terms cuts in its allocations year after year. There has been a sea change under this Governmentwe are offering freedom, more money, greater responsibility and greater opportunity to local government, and local government knows which party has its interests at heart.