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24 Oct 2002 : Column 422—continued

Mr. Patrick McLoughlin (West Derbyshire): Will the hon. Gentleman give way?

Andrew Bennett: I shall not do so; with only eight minutes, it is hard to get my points across.

I have to say to the Government that the present system is unfair and very difficult to understand, but we have to recognise that it is a legacy of the poll tax. That is when the spending started to come down, and when local authority control of spending changed so dramatically: local government finance changed from about 50 per cent. coming from local funds down to a very small proportion.

I pay tribute to the work done by Coventry in demonstrating that, of the extra money that has been going to London for education, about half seems to be spent on schools—which is great—but the other half is being spent on bringing down the council tax in London. That is grossly unfair.

My plea to the Minister is for a new, buoyant source of local government funding, and, until we have one, we will be in difficulty. I know that we have the business improvement areas, but that is earmarked money. It might also be possible to put a tourist tax in place, but if the Government cannot come up with a new form of funding, let them at least return the business rate to local authorities.

I also make a very strong plea for the Government to look at the council tax bands. I know that, if we have lots and lots of bands, we shall be going back to the old rates system, but the old system was far fairer than the present council tax system in areas such as mine. We need at least to have bands A, A- and A* at one end of the range, and we probably need more bands at the higher end as well. We need more frequent valuations, and we need to question how much money is going to the Audit Commission. There is no point in having huge numbers

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of inspections if local authorities have not got the money to deliver good services. The Audit Commission is getting far too expensive.

I would also make a plea for us to think about taking education funding out of local government finance. It seems sad that we should have such a complicated mechanism, rather than a much simpler per capita payment. If we have a class of 30 children, for example, we need a substantial amount of money for that. The variations for particular education needs should be much smaller.

I would simply plead with the Government in these terms. We need to take a much more fundamental look at local government finance. We need to restore local government, as opposed to local administration. Only if we can get a full, fundamental review in place will we restore people's confidence in local democracy. I applaud the efforts that the Minister has made, but I fear that, so far, he has lost.

1.27 pm

Sir Paul Beresford (Mole Valley): It is delightful that we have longer for this debate than we anticipated, but it is sad that it is still so short. This could have been an opportunity to explain to the Chairman of the Select Committee, the hon. Member for Denton and Reddish (Andrew Bennett), that competent authorities can get their expenditure down and the quality of their services up, and that that might be reflected in the differences in council tax.

The final figures will tell us whether the scheme works, and the final figures will be the real test over time. I hope that, after what he has said today, the Select Committee Chairman will agree that we need to launch an inquiry, presumably mid-way through next year after the grants have been confirmed and the council taxes settled, but before Ministers' minds are set on the following year.

Many Conservative Members smiled sweetly and knowingly when the Minister said that he was setting out on this venture. He has told us repeatedly that standard spending assessments were terrible, complicated and unfair, and he promised us a better, simpler system that would be more intelligible and based on formulae. Last week at the seminar, the brave man repeated that. I have not yet found a council treasurer, even a tame one, who agrees with him. Of course, the Minister will say that we need to wait for the result, and there is a measure of truth in that.

The Minister has made some personal progress. His bravado has diminished a little, and he said at the seminar that he recognised that not every council would be pleased; in fact, he said that it was possible that not a single council would be pleased. As many of us know, under the standard spending assessment method, the winners kept exceptionally quiet—except for the occasional moan to save face and set markers for the following years—and the losers complained. They said that the system was unfair, too complicated, and so on. That is exactly what we have been hearing from the Liberal Democrat Front-Bench spokesman this afternoon.

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The Minister has accepted, however, that the basis of distribution must be ascertained using some form of need factors and, promisingly, he has assured us that there will be a reduction in the enormous proportion of subjective grants that have grown up under his Government. At least there is a veneer of needs, but it looks a little thin when we inspect the environmental protection and cultural services block that is so vital to district councils. It used to have an at least plausible link to expenditure, but not now. In this and several other areas, any link seems to have been abandoned in favour of subjective judgment—otherwise known as ministerial whim.

The Minister has almost always promised simplicity. That is a bold gesture, but as we heard from the Liberal Democrats, the problem is that, with so many variations nationwide, simplicity results in crude, ineffective and in some cases unfair decisions and judgments. However, as the Minister said last week, some rough justice is inevitable. Rough justice can be removed and fairness introduced only through more complexity. A scheme involving the division of funding by needs factors is either simple—with areas of perceived and perhaps genuine injustice—or fairer but consequently more complicated.

The Minister has more complications to deal with than we had when in government, because he has lost control of many of the levers to many other Departments: the Department for Education and Skills, the Department of Health, the Department for Environment, Food and Rural Affairs, and goodness knows which others at the rate things are progressing. Each has its own indicators, and each, seemingly, its own floors. None appears to have any relationship to the other Departments; and sometimes there is not much relationship to the local area.

As everybody will know, many councils are panic-stricken by the options. Some anticipate huge—really huge—council tax rises, just to stand still. The Minister has helped. His promise that nobody will lose formed the basis for his reintroduction of the use of floors. That promise has brought some relief, but it is also viewed with some cynicism. Many are worried about whether specific grants will be taken into account. Last Wednesday, under pressure, the Minister helpfully explained that he expects the floors to be high enough next year to at least cover such losses. I hope that he is right. If this promise is not fulfilled, Surrey councils, the south-east and London will be hit hard. A floor involving a zero increase in grant to Surrey could mean a nigh-on 20 per cent. increase in council tax. That estimate ignores any little events such as the firefighters' pay rise.

Even though he has not been a councillor, the Minister will doubtless recognise that cutting budgets and adjusting services, especially through efficiencies, takes considerable time. This year, local authorities have been left at sea; they have been given absolutely no indication of floor levels, even when the Minister was pressed on the matter last week. However, the fact remains that, if his formula is as accurate as he says, the floor that protects loser councils this year will be progressively lowered. In some cases, potentially great pain will be caused to their residents and businesses. I accept that there are huge possibilities in terms of efficiency savings in local government expenditure, and

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as a taxpayer and an ex-councillor, I wish that the Government and local government would exercise their minds much more in this direction. I am sick and tired of standards in public services being judged on the amount of other people's money that is spent on them.

The Minister had many complaints about SSAs, but they are coming back through his scheme. It is based on factors of doubtful definition, multiplied by weightings of dubious origins. It is further complicated by floors and ceilings, and although it is not called an SSA, it is rapidly looking like a sibling or twin.

1.33 pm

Mr. Neil Turner (Wigan): My right hon. Friend the Minister rightly stressed the importance of getting the formula right. If we do not, the Government will not achieve their aim of tackling and eradicating the inequalities to which deprivation and social class give rise. I want to concentrate my remarks on the education block, not just because it is such a high priority, or because it constitutes a large amount of local authority expenditure, but because, if we do not get it right, we will deny the opportunities that a good education can give to all our children in terms of breaking the cycle of deprivation that scars so many of our communities.

The excellent Department for Education and Skills document XInvestment for Reform" sets out the problems starkly:

Later, it states that

Those quotes are apt descriptions of Wigan, and they are apt descriptions of many towns and boroughs in the north-west, the north-east and the midlands, where heavy industries have declined or vanished. But they could equally describe towns in the south-east, the south-west and London. This is not some sterile and divisive debate about town versus country or north versus south; it is about trying to make sure that we eradicate deprivation throughout the country and achieve a fair society for all our children.

Wigan has high levels of deprivation; 90 per cent. of its wards are included in the 20 per cent. most deprived in the country. We have low staying-on rates for pupils moving into further education. Crucially, we have had low levels of funding over many years under the existing standard spending assessment formula. The council and the local education authority have not used that as an excuse for poor performance. They have risen to the challenge, managing to produce better results than the socio-economic make-up of the borough would lead one to expect. The council has intervened successfully where schools have been seen to be failing, such as Kingsdown high school where support from the LEA, other schools and the council has resulted in a 400 per cent.

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improvement in just two years in its GCSE results. It is small wonder that the authority achieved a three-star rating from Ofsted.

The solutions to such deprivation that are proposed in the consultation paper are all detrimental to Wigan, and to the north-west as a whole. How can one of the most deprived boroughs, which already spends #6 million more on education than the current SSA level to correct the faults inherent in that system, be deemed to be in need of less? It is bizarre, and it is perverse. The application of a simple Xreality test" would have shown that each of the options failed to achieve the targets that the Government had set out to achieve, and therefore contained fundamental flaws.

We need to be absolutely certain that the proportions within the overall additional educational needs block accurately reflect the need to spend on those elements, and I would hope that serious questions will be asked about that and the possible consequences of getting it wrong. More specifically, I believe that that there are three areas where changes need to be made if we are to get a positive result to the application of that reality test.

First, we need a broader and more accurate definition of deprivation. The use of income support and working families tax credit alone does not pick up many of those in need. The Department for Work and Pensions investigations indicate that there are large regional variations in those claiming income support, as those on incapacity benefit and disability living allowance do not claim that benefit. The DWP basket of key benefits—including jobseeker's allowance, incapacity benefit, disability living allowance and severe disablement allowance—has a 95 per cent. correlation with child poverty, a much higher correlation than any other measure. The use of that as the basis—or a measure of the economically inactive—will pass the Xreality test", as it will achieve what the Government set out to achieve.

Secondly, a radical rethink of the area cost adjustment is needed. Nobody doubts that there is an extra cost involved in employing people in certain parts of the country, or denies that those authorities need additional money to reflect that extra cost. The proposal in the initial consultation to use house prices would be wholly wrong; they are far too volatile and, in any event, people do not pay mortgage on the increase in value of their property. More importantly, fuelling the demand side of the equation without tackling the supply side merely adds to price increases, thereby leading to demands for more ACA money; and so the spiral goes on and up. Surely it would be more effective to use public and private sector pay, capped at the public service level, to ensure that the area cost adjustment bore much more relation to the amount required by the authorities, so satisfying the reality test better.

Thirdly, we need to factor in an element that affects the current lack of adult literacy and numeracy skills. I know the argument against this—that we need to have a measure of the problems of the children, not those of the parents—but that is an academic, angels-on-a-pinhead type of argument. Of course, there are children from working-class backgrounds who manage to break out and go to universities—many of my hon. Friends have done so—but we should remember what the

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XInvestment for Reform" document said about the link between social class and lack of educational achievement. It can be broken, but in most cases it is not.

The child from a home that is without books because the parents have weak literacy skills will always be at a disadvantage. We should set aside the intellectual argument and recognise the reality of life in many homes. Far too often, teachers have to start from scratch with children from such backgrounds and despite their best endeavours they never catch up. If the formula does not recognise that simple, self-evident fact, so well described by the Department for Education and Skills document, we will not achieve our objective of closing that great class divide.

The current options fail to deliver what the Government want. If the specific changes that I have outlined were incorporated—widening the definition of deprivation, ensuring the ACA properly reflects real costs, and recognising that parents with poor literacy skills will have children with poor literacy skills—we would give local authorities a fairer distribution and allow them to tackle the problems of despair, crime, and lack of ambition and opportunity that come from deprivation.

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