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24 Oct 2002 : Column 462—continued
3.51 pm
Mr. Harry Barnes (North-East Derbyshire): In one sense, I have waited 15 years for this debate, and I nearly missed it because I was dragged out to maintain the quorum in the Northern Ireland Grand Committee. Luckily, I have been able to return. The first Standing Committee on which I served dealt with the Local Government Finance Act 1989, which is the measure that got us into the situation we face today. It has caused the massive problems to which we need to respond. It might have been better if we had moved more quickly, so that fresh legislation could be put in place, but I am glad that we are now tackling the issue.
The 1989 Act introduced the poll tax, but that is the only element that has really changed since. The poll tax became the council tax, but that was only a minor shift in the Act's functioning and operation. It was, and still is, a flawed, fiddled funding formula that has created massive difficulties in many parts of the country. We need to adjust it to a more reasonable approach, but some councils have been granted moneys that they have spent and we cannot just automatically transfer funds from one area to another. Serious efforts have to be made to tackle the massive problems.
Since 1997, the Labour Government have taken several steps. They have increased the total percentage of revenue support, so that areas that were deprived have received money from the pot. Formula adjustments have been made, but some of those adjustments have been upwards and some have been downwards, resulting in great confusion. Some money has come from other sources to assist areas badly done to, such as the range of grants provided by the Department for Education and Skills for areas in greater need. Those have helped to adjust the picture slightly.
The overall picture can be hard to understand fully. If moneys come in from sources other than SSA provision, the Government should undertake research to show who gets what. That information is important to help us understand where we are going.
The consultation paper mentions top-up provisions. We must ensure that top-ups for some do not become take-offs for others. In one sense, any top-up in one area will be a take-off in another area, because top-ups will come from the general amounts available. However, in some cases under the present legislation, top-ups have been deliberately linked with take-offs. The enhanced population figure, which especially affects district council figures, creates problems in many areas.
In North-East Derbyshire, 4.8 per cent. of the SSA is lost because of that figure. People have moved out to work in Sheffield and other areas, or are only day visitors to the area for entertainment and other purposes. There is nothing wrong with some money being moved to cater for that, but the weighting given to the various factors needs to be revised. In practice, more than 4.8 per cent. of the SSA is lost, because the enhanced population figure—or reduced population, as it is in North-East Derbyshire—is used to calculate other factors, leading to further losses.
Under the EPCS provisions in option EPC3, North-East Derbyshire would gain a #1.7 million increase. It is difficult to understand all the provisions in the document, because although it tells us what factors were considered in drawing up the options, it does not tell us what weighting is given to them. We cannot calculate for ourselves the effect of the changes. It would be helpful if we knew what weight has been attached to what factor, because we could then detect any strange anomalies in the provisions.
Mr. David Heath (Somerton and Frome): Will the hon. Gentleman give way?
Mr. Barnes: I shall carry on for the moment, but I may give way later if I have time.
Another element that I wish to stress is the area cost adjustment. It accounted for 1.8 per cent. of SSA in 1989–90, but now accounts for 4 per cent. That shows the excessive weighting given to the ACA, which needs to be taken seriously into account. If it is intended that no one area should lose in cash terms, that will seriously limit the gains that other areas should make.
We need to change council tax banding. The argument has already been made for extra bands at the lower and top ends of the scale. Extra bands at the top end would allow more money to be raised locally through taxation, and that could be taken into account when considering allocation of funds under the ACA. The value of properties at the top of the bottom band is eight times lower than that of properties at the bottom of the top band, but the taxation figure is only three times lower. That should be changed, as what was known as the Mates amendment sought to change the same problem with regard to the poll tax. Only a limited change has been made so far.
Fundamental review is necessary, and quickly. It would have been helpful to examine many other areas, such as education and police funding, but time has caught up with me. I was allowed only half a minute for every one of those 15 years.
3.59 pm
Mr. James Clappison (Hertsmere): In the brief time available to me, I shall endeavour to correct the misapprehension that some people have about Hertfordshire, and about my constituency in particular. Labour Members should know that, although my constituency and Hertfordshire as a whole contain some areas that are affluent by national standards, they also contain poor areas. At least four wards in my constituency qualify for funding from the single regeneration budget. People there receive local government services as well, and they pay taxes. My fear is that the overall effect of the proposals for them and for my other constituents will either be a reduction in services for the same level of funding, or a very big increase in council tax bills.
Ministers have condemned the existing SSA system for failing to deliver a standard of level of service for a standard tax. However, from the outset it is clear that the funding to be made available for Hertfordshire will not provide a standard level of service—not least as far as the police are concerned.
The police service is one of the most vital social services. The effect of the proposals on policing in Hertfordshire is clear cut and stark. Hertfordshire loses out significantly under each of the five options set out for consultation.
In response to the formula grant distribution paper, the chairman of the Hertfordshire police authority wrote to Ministers to express his concern at
- Xthe damaging effect that the proposals in the Formula Grant Distribution Paper will have on policing in Hertfordshire. In the worst case, Hertfordshire could lose some #8.8 million, or 7.2 per cent. of funding, which is equivalent to over 300 Police Officers. This would have a dramatic impact on our ability to meet local and national policing priorities."
Moreover, police numbers in Hertfordshire have fallen since the last general election. They have barely risen since 1997, even though the Hertfordshire force has assumed responsibility for a much larger area. The last thing my constituents want is a reduction in the resources available to the police in Hertfordshire.
The same picture applies to other vital public services. Some hon. Members have described an overall shift of resources away from the south-east and counties such as Hertfordshire, and they are right to do so.
Ministers respond by saying that there will be a system of floors and ceilings, but the only guarantee given so far is that no authority will face a cut in grant. Account must be taken of the pressures of inflation and of the pay pressures that will be inevitable. The latter will include the effects of the increase in local authority employers' national insurance contributions. We shall wait and see whether the floor will be higher than has been set out, but the Hertfordshire local authority fears that if it is anything like what it forecasts residents will face a substantial council tax increase.
My right hon. Friend the Member for North-West Hampshire (Sir G. Young) mentioned previous systems of local taxation. I well remember what was said about the implications of having floors and ceilings when the community charge was introduced. I was a parliamentary candidate in a by-election in the part of the world that the right hon. Member for Birkenhead (Mr. Field) represents at the time when the poll tax was introduced. I tried to argue that the effects of the poll tax would be mitigated by the provision of a floor. If Ministers and their parliamentary election candidates want to go down that road, I wish them more luck than I enjoyed on Merseyside.
The hon. Member for Bath (Mr. Foster) took us back to 1734 for an example of the outcry that he thinks could arise as a result of the proposals, and he mentioned the excise tax. I hesitate to say so, but that tax was introduced by Sir Robert Walpole, one of the hon. Gentleman's spiritual predecessors. It was opposed by the Tories of the time, but the example shows what local outcry could go up as a result of local taxation changes. In its own way, this set of proposals could produce a similar outcry when its implications are realised by people in the worst affected counties.
One of those counties is Hertfordshire. A very substantial shift in resources is taking place. My constituents, and others, are faced with the prospect either of reduced services or of a considerable increase in council tax bills to provide a standard level of service. I warn Ministers that those people will be very interested in Ministers' view of the proposals. They will want to see how Ministers respond to the considered and proper concerns expressed by the Hertfordshire local authorities, including Hertfordshire county council.
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