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Mr. David Clelland (Tyne Bridge): Despite the generosity of this year's settlement when compared with those of the previous Conservative Government, several points have been made about the general settlement. Reference was made to the crisis in social services, but we should also remember the unfairness of the population-based calculation, anomalies in education grants and the rules governing them, and late changes to the area cost adjustment, all of which impact heavily not only on metropolitan authorities in general, but on Gateshead council in particular. Has my right hon. Friend any good news to impart in that regard?
Mr. Raynsford: I have a number of items of good news to impart, including the future review of the SSA formula, to which I have already referred. I recognise that areas with declining populations have particular problems, and that savings cannot always immediately be made to take account of such decline. There is a difficulty, in that areas that face extra pressures because of population increases naturally feel such pressures immediately, and want compensation as soon as possible. Given that the impact of such population increases is immediate, devising a system that allows a time-lag before the consequences of population decline are felt clearly involves a funding gap, which must be filled by some means or other. We understand the problem and we will address it in the review, but there is no instant and easy solution to it.
With regard to the area cost adjustment, in that and every other aspect of the settlement we are committed to using the most up-to-date and accurate information. Last autumn, it became clear to us that figures published by the Office for National Statistics in July, which were based on data from the new earnings survey, did not give an accurate picture of the changes, because a significant proportion of the sample was omitted by mistake. When, late in the process, the error came to light, we felt it only right and proper that the figures be adjusted to take account of the correct data. Otherwise, we would have knowingly proceeded on an incorrect basis. We have made similar late adjustments in relation to a number of other factors, and as part of the settlement it is always our policy to implement the most recent, up-to-date and accurate data that we can.
Mr. Paul Burstow (Sutton and Cheam): The Minister will know that the gap between council spending on social services, and the spending that is necessary according to the Government's SSA, has widened in the past 10 years to 12 per cent. What advice can he give to his Labour colleagues who serve on my local authority in the London
Mr. Raynsford: As I thought I had acknowledged, we recognise that there are very real pressures on social services, and we have been discussing them for some time with social services departments and authorities, and with our colleagues in the Department of Health. I mentioned the specific additional finance, some £300 million in total, that was made available last autumnthe bulk of it will take effect in the coming yearto help relieve bed-blocking pressures. We have made it clear that in our view the SSA formula, which has fallen behind in a number of ways, is not an accurate reflection of the current position. It has become increasingly unrealistic in terms of actual spending patterns, and we need to change it. That is why we will conduct an extremely thorough review to try to put in place a better formula with effect from next year.
I hope, however, that the hon. Gentleman recognises that it would have been wrong to rush forward with an inevitably defective stop-gap measure that required further amendment. It is clear that local government should not have to operate according to formulae that change year on year. We need more certainty, and the ability to plan ahead with reasonable confidence in the likely level of support. Obviously, certain variations will be needed to reflect changes in demography, but constant changes in methodology are simply dispiriting to those who must plan ahead.
Mr. Harry Barnes (North-East Derbyshire): The first Standing Committee of which I was a member considered what became the Local Government Finance Act 1987, which introduced the poll tax and the standard spending assessment. We got rid of one of them, and thankfully we are now able to get rid of the other. Will the consequences of that Actit has resulted in cumulative loss in many areas, but a cumulative bonanza in various othersbe taken into account? The position of authorities such as Derbyshire, which were deliberately targeted by that legislation, needs to be corrected.
Mr. Raynsford: We are well aware of the problems that my hon. Friend and his Derbyshire colleagues have encountered. I hope that he agrees that this year's settlement, which, I suspect, gives Derbyshire a more substantial increase than was initially expected, has gone some way towards redressing the balance. Of course, he will recognise that we cannot overcome the legacy of many years of inappropriate calculations at one fell swoop. However, through settlements agreed in the past five years, we are seeking to increase local government resources in general and to redress the balance. During the coming year's review of the SSA formula, we will try to establish a proper and fair basis for the future. There is a difficulty, howeverI will discuss it laterin that everyone expects to do better out of the review. It is the nature of politics that we are all conscious of the defects
Although I have many abilities, I cannot perform magicthe new arrangement cannot magically improve the allocations to every local authority. We will try to devise a system that is fairer, better and above all more comprehensible than the current one. One iniquity of the current scheme is that it is virtually impossible for anyone other than a local government finance anorak to understand how the system works.
Mrs. Theresa May (Maidenhead): On the SSA review, will the Minister clarify one point for hon. Members' benefit? In his pre-Christmas statement on the local government settlement, the Secretary of State said that the revised SSA would come into force from the 200304 financial year. If the review to which the Minister has referred takes a whole year, the new SSA will not be available in time for the 200304 figures.
Mr. Raynsford: I am very happy to put the hon. Lady's mind at rest. The review is already progressing, and will be completed in the course of the coming year so that it can be implemented from the start of the financial year 200304. This time next year, therefore, we will be debating a different formulaa different basis for allocationthat will apply from 200304.
However, this is a complex matter. The hon. Lady will be well aware of the complexities involved. The change will take time, and it will be several months into the year before we are in a position even to begin to consult about the overall framework.
The hon. Member for Maidenhead (Mrs. May) will appreciate that a number of separate components are involved, such as education, social services, the environmental, protective and cultural services block, or whatever. Each of those components has to be satisfactory to the people concerned, and there must be consistency when they are put together. Account must also be taken of the overall impact. All that has to be done in an intelligent way, and models must be designed to determine the consequences. In that way, it is possible to avoid the unforeseen consequences of what might appear, on the surface, to be an entirely rational approach.
The process is complex, and will take time. We are not going to rush it. That is why, as I indicated in my response to the hon. Member for Sutton and Cheam (Mr. Burstow), we did not make a change this year. Any such change would have been rushed, and we did not consider that to be satisfactory.
Mr. Betts: I thank my right hon. Friend for giving way, as I want to return to the issue of social services, mentioned by the hon. Member for Sutton and Cheam (Mr. Burstow). The Government are looking at the problems facing local authorities, but those authorities