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Mr. David Kidney (Stafford): Having listened to my hon. Friend the new Member for Ipswich (Mr. Mole), I am convinced that he is going to be a formidable debater in our proceedings. I was pleased to hear his praise for his predecessor, a fine man who is sadly missed in this place. I encourage my hon. Friend to retain his zest for modernisation, speaking as a member of the Modernisation Committee with a full agenda for modernisation in this Parliament.

Local government is big business. In this financial year, councils in England are spending more than £61 billion on delivering daily the broad range of services with which we are so familiar. The Government send those councils three quarters of that spending power: half in the form of revenue support grant and a quarter in non-domestic rates. So only a quarter of the spending by English councils comes from the councils' own resources—council tax, fees and charges.

Last December's White Paper says that this imbalance of income is less important to address than what the White Paper calls an imbalance of control. Most directly, this phrase refers to local education authorities passing Government grant through to individual schools. My view is that both are vitally important and that it is time to look at more radical ways of giving councils more control over their income. This is a complex issue, but I would like to see the time come when councils collect a range of taxes that are payable locally and spent locally.

How the Government share out their revenue support grant is of intense interest to all hon. Members and their constituents. The present formula, dating back to 1991, is widely discredited. It comprises an obscure set of values grafted on to outdated standard spending assessments, and causes great disparities in funding between councils. These are disparities that this Labour Government say that they cannot justify.

The case for reform of the system was definitively set out in the Government's Green Paper on local government finance, published in September 2000. In general, the Government hold out the prospect of a fairer system with simplified formulas, floors and ceilings, safety valves and a limit on the use by Departments of ring-fenced grant.

For education in particular, the White Paper published in December promises us a standard pupil entitlement that can be tracked through the system from the Government settlement to the individual school budget. The only enhancements to Government grant for education would be for deprivation and for high costs of recruitment and retention. I would strongly welcome a system such as that for distributing Government grant to councils. It is my profound regret that we do not have such a system yet.

Mr. Mark Todd (South Derbyshire): Does my hon. Friend share my impatience with the slow progress of change? Many of us who represent constituencies that have been adversely affected by the current system have lobbied assiduously for change for the past four or five years. Does my hon. Friend agree that the outcome of the current review is so impatiently awaited that it could be described as a "last chance saloon"?

Mr. Kidney: We have been waiting a long time for change. I am probably more forgiving of the Government's conduct than some hon. Members, because

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I have followed the subject closely and I know the huge scale of the challenge and the sincere commitment of the Government. My right hon. Friend the Minister has been pressed hard tonight to confirm that the new system will begin from next year's local government settlement, and he has said that it will. May I say to my right hon. Friend that, in working out the details of the new system, I hope that the Government will be open with us. Hon. Members have a keen interest in what has been developed, and rightly so.

It would not be correct to say that the Government made no changes to the present system after the 1997 election. In a written answer to me in 2000, the then Under-Secretary of State at the Department of the Environment, Transport and the Regions, my hon. Friend the Member for Stretford and Urmston (Beverley Hughes), informed me that there were 15 changes in the method of determining SSAs for the 1998–99 local government settlement and 20 changes for the 1999–2000 settlement. One of those changes, in respect of children's services within social services, has benefited Staffordshire county council by about £1 million a year.

However, it is in education funding that the greatest dissatisfaction is expressed. That is because of the vastness of the disparities of funding and the importance of the service. Year after year in the 1990s, in the league table of education funding for shire counties, Staffordshire was stuck in last-but-one position. Parents, school governors and teachers would compare our lowly position with the high position every year of Hertfordshire, and would ask why their children's education was worth less than that of children in Hertfordshire.

Many changes have been made since 1997. The Labour Government have increased overall spending on education. The rising tide of funding for capital as well as revenue spending has benefited Staffordshire. For example, in 1997–98 Staffordshire's education SSA was £279.1 million; by 2000–01 it was £336.4 million. In 1997–98, Government grants were £12.9 million; by 2000–01 they were £21.5 million. In 1997–98, capital spending was £7.4 million; by 2000–01, it was £34.2 million.

Frustratingly, the disparity with our friends in Hertfordshire has not closed; it has not even stayed the same, but has continued to grow.

Mr. Mark Prisk (Hertford and Stortford): As a Member representing a Hertfordshire constituency, may I ask the hon. Gentleman to recognise the simple fact that because of higher housing and salary costs, Hertfordshire's local education authority has higher costs?

Hon. Members: Rubbish.

Mr. Kidney: As the hon. Gentleman will have gathered from many sedentary comments, there is not much sympathy for that argument. If the new system is developed according to the Government's intentions, it will include a factor for recruitment and retention costs, which are higher in some parts of the country than in others.

David Taylor (North-West Leicestershire): My hon. Friend rightly referred to Staffordshire's ever present bottom-but-one place in the league table for primary and secondary school SSA. I regret to say that Leicestershire

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has had an ever present place in the bottom slot. Does he acknowledge that the problems that he described in Staffordshire are even worse in Leicestershire?

Mr. Kidney: There is some variation each year, although Staffordshire and Leicestershire are among those counties that often appear at the bottom of the pile, as my hon. Friend says.

Two years ago, the 40 worst-funded local authorities decided to band together to draw attention to the injustice of the disparities and to the discontentment across the country, and to campaign for a fairer settlement. Whether metropolitan or shire, unitary or non-unitary, and whatever their shade of political control, the authorities formed a fair funding forum. They called themselves F40 for short.

Inside Parliament, I have been willing to make contact with hon. Members from both sides of the House who have constituencies within the boundaries of F40 authorities. Together, those hon. Members and authorities have mobilised a strong force for change. That was vividly shown by the 14,402 representations that the Government received from F40 campaigners in support of the case for change set out in the local government finance Green Paper.

I believe that the F40 campaign has been the stimulus for changes that have already taken place. There has been the Green Paper proposal for a new pupil entitlement, the introduction of floors and ceilings into last year's and now this year's settlement, and the introduction of flat rate payments to all schools.

I pay tribute to all those who have helped to organise the F40 campaign, and to those who have supported it. I also pay tribute to Ministers who have given us a fair hearing, and have acted when convinced of the justice of our cause. Things are changing. I described Staffordshire's perennial position next to bottom of the funding league table for shire counties. I see from a written answer on 15 January that we are now seventh from the bottom.

Tomorrow I face an audience of 400 angry parents, governors and teachers in Stafford. They will tell me that all this is too little, too late. When I say to them that a fair, fully funded new system will be in place for next year's local government settlement, I sincerely hope that the Government do not subsequently let me down. More importantly, I hope that they do not let down those parents, governors and teachers who have waited so long.

8.56 pm

Sir Paul Beresford (Mole Valley): The previous two speeches—my right hon. Friend the Member for Skipton and Ripon (Mr. Curry) is about to skip out as fast as he can—brought back memories. My right hon. Friend and I looked after local government under the last Conservative Government, although that way of putting it is debatable. I can remember much the same complaints and points being made then by different Members representing different parts of the country. I look forward to this breath of fresh air: this new idea that is brightly being proposed. However, if the formula has any indicators or recognition of need—I certainly hope it does—we will have exactly

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the same thing all over again. I suspect that the sign of the albatross may be appropriate given some of the Minister's comments. I must say that they caused a smile.

My right hon. Friend the Member for Skipton and Ripon has stolen some of my thunder, especially on social services. In Surrey, social services are at crisis point, particularly the care of the elderly. Reference was made to the value of property in the south-east. Many of the elderly in Surrey are looked after in large, old, high-value homes. They require changes to be made to comply with new regulations, so many of them have closed. It is of more value to the owners to sell them and to use the profit to move to a better life, perhaps in another country with more sunshine—that was said with a touch of bias on my part—than to pay for the necessary changes.

I was intrigued by the fact that the Minister went on at some length about the size of the announced increase. At 7.5 per cent., it is a considerable increase, but that does not necessarily mean that all is simple and clear. Underneath the Minister's smile and spin presentation are some nasties. The obvious one is the specific grants, which have increased annually and been top-sliced. Funds are specifically designated to selected local authorities, apparently at ministerial whim. The volume of specific grant allocation has tripled since 1997, and the Government have voiced woolly aspirations to reverse the trend.

We should reflect on the fact that this year there has been a 40 per cent. increase in educational specific grants, and a 100 per cent. increase in Department of Health specific grants. All those are tied closely to defined expenditure in uniquely prescribed modes, with all the accompanying bureaucracy and expense of guidance, conditions, reports and audit.

The grants are designed in such a way as to knock flat the Government's claim of increased stability and predictability in local Government finance. Local authorities are being forced to rely increasingly on major specific grants that can be withdrawn at any time. Major grants are now to be attached to local public service agreements. Most major authorities are negotiating on those grants now. They will be heavily dependent on fairly unpredictable factors such as road accidents, graffiti and, perhaps, the examination results of small groups of pupils. I suspect that that could present the Minister with another albatross.

The Minister has said quite frequently, as did his predecessor, that freezing the SSA methodology brought stability. That has been questioned by Members on both side of the House today. Many of us think that the Government have refused to consider any desirable changes suggested by local authorities and introduced their own changes, necessitated by their own policies, while pretending that they are data changes rather than methodology changes. As we are well aware, authorities are now faced with the complete unpredictability produced by the new grant formula.

There is no doubt that the Government's paranoid obsession with central control has landed local authorities throughout the country with enormous volumes of regulations and requirements. Along with my right hon. Friend the Member for Skipton and Ripon, I served on a Committee that warned the Government about the so-called best value regime. We told them that the costs would be astronomic, and would not be justified by the results. That warning has been proved correct.

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I believe that last year the cost of installing the best value system, with its myriad officials, meetings, consultations, audits and auditors' reports, swallowed many authorities' grant increases. The size of the Audit Commission has more than doubled, the extra being funded by local government. As I said yesterday, I understand that the internal costs of the monitoring of councils by the Department's officials has risen to £600 million, charged to the taxpayer. Local authorities' extra costs have been increased by the replacement of the traditional clear, open committee system with a choice of systems. The Minister said yesterday that there was a choice, but no one wanted it. It was a choice between three bad options, the fourth having been withdrawn. While adding dramatically to authorities' costs, that has led to a diminution in the transparency of decisions and a general reduction in council tax payers' interest in the activities of their local councils.

This extraordinarily centralistic Labour Government purport to be a friend of local government, but clearly are not. I have no doubt that if the trend continues, next year's local government finance report will make sad reading.

Underlying the setting of council tax is the way in which local authorities use the position in relation to the services they provide. They have opportunities to make distinctive economic changes, which the hon. Member for Torbay (Mr. Sanders)—who is not here now—failed to recognise. I do not think he has heard of the word "efficiencies". I am sure that, on average, Conservative councils will end up charging council tax payers less, but I am also sure that the Minister will ignore that and turn to the percentage argument.

Year by year, Labour Ministers choose to ignore the fact that a small increase in a small council tax may be large in percentage terms and, conversely, a large increase in a huge tax may be small in percentage terms. The percentage argument does not work; what counts in the end is the quality of service received by the public, and the size of the bill that arrives through their doors.

A very simple example has come up. In times gone by, the media regularly took part in the sport of comparing Wandsworth with Lambeth. Interestingly, that comparison is still valid. The cost of a quality household waste collection in Wandsworth is approximately £24 per household. There is a poorer contrast next door because the cost in Lambeth is approximately twice as much per household.

I am not alone in making that comparison. This afternoon I was handed a copy of a cutting from the South London Press. It details a visit from the hon. Member for Vauxhall (Kate Hoey) to the south London Patmore estate. That estate is split by a boundary line. Part of it is under Labour-controlled Lambeth and part of it is under Tory-controlled Wandsworth. She explained to the South London Press:

Labour Lambeth.

We must remember that the public, the council tax payer, the firms that pay business rates, are footing the bill. There is not enough recognition by the Government of the need to take the load off local government and to give democratically elected members the opportunity to

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produce quality services without myriad auditors and other people peering over their shoulders at their every move.

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