Local Government Finance (England) Special Grant Reports (Nos. 102 and 104)

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Jacqui Smith: I can shorten my response to the hon. Gentleman's questions by clarifying the fact that the personal social services SSA does not include a series of children's sections. The SSA includes four blocks: children, other adults, and two blocks related to older people. The allocation under consideration is calculated solely on the basis of the children's block.

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Mr. Wilshire: That is helpful, and addresses one worry; the SSA focuses totally on children. However, it also raises the question why, on previous occasions, we could not exclude the children's block from consideration of the elderly. The Minister may exclude everyone but children on this occasion, but when I suggested the other day that others should be excluded from the calculation for the elderly, the answer was that that could not be done. I find that riveting. It can be done on Mondays, Wednesdays and Friday, but not on Tuesdays, Thursdays and Saturdays. Today happens to be a Wednesday, but what the Minister will say when we discuss these matters again under the next statutory instrument, I do not know. She will probably say again that we cannot do it. That is inconsistency of the highest order. It is not good enough simply to say, ''Oh, those are the children's figures.''

For my sins, I served quite a long sentence in local government, and it was my misfortune to have to try to understand local government finance and to be involved in the discussions that introduced the SSA. We went round the course of saying that the previous system of block grants was unfair, unreasonable and unwieldy, and what happened? The new and simpler SSA system was introduced. The formula had fewer parts, and people thought that it would be fine, but now there are again many parts to it. I shall touch on those that relate to children in a moment.

I find it enthralling that the SSA is to be replaced. We are consulting about that. My hon. Friend the Member for East Worthing and Shoreham raised the matter, and I shall be interested to hear the Minister's answer. What representations will she make about the children's element of the grant and how it will be calculated? It is amazing and amusing that we got rid of the old system and introduced the SSA because it would be simpler, but it has now become so complicated in its turn that we shall have to replace it with something simpler. I have heard all that before.

The moral of the story is that when we go simple, we go rough and ready, and unfair. Bit by bit, as more complications are added to the formula, it becomes fairer in most people's view. That is why it is not possible to get away with the comment, ''Oh, children are a separate block.'' We should be considering how the children's block is calculated. What allowances are made for deprivation? We are focusing on the most deprived children in our community, and rightly so, but we must be clear about how we arrive at knowing who the deprived children are and how many there are.

As I mentioned in my introduction, there is a great temptation to say that Surrey, almost by definition, is not as deprived as other places. That might be true in some respects, but it is not true in others. One of the strangest statistics in some people's minds is that Surrey is one of the local authorities with the highest percentage of children who have special needs and are statemented. One would not expect that, but that is how it is. The levels of deprivation among children are not quite as simple as those for the elderly.

Jacqui Smith: I cannot resist this. For the second time, the hon. Gentleman has suggested that special

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educational needs correlate with deprivation. Does he accept that that is not the case?

Mr. Wilshire: That is what I am asking the Minister about. What indicators are being used? If we were debating the health of the elderly, the ages at which people die and the diseases that they die of would be good indicators, but in the case of children, is it the number of children who are abused, the number at risk, the number without parents or what? That is what we need to know. What are the statistics?

Annex A has columns stating the amount of money to be given to each local authority. We are asked to say whether that is reasonable and fair, but I have not the slightest idea how we can make a judgment. The most obvious point is that we do not know the total number of children in each authority. It would be helpful if we knew that. When the Minister gives the definition of deprivation that she thinks we should be using, will she say how many of the total number of children are in the deprived category?

When we talk about whether the distribution is fair, it is much more significant to know the percentage of the total number who are deprived. It is not good enough simply to say that Surrey has a population of X and somewhere else has a population of Y, ergo we can work it out. We cannot do that, and we have no other means of knowing from the tables. For example, we do not know how to make any comparison on deprivation or how many children are fostered in each authority. We need to know that, as well as how many children are in care in homes. How can we make a judgment about the fairness of the distribution? We need to know about the supervision arrangements and to what extent the social services being provided to children can be compared, like for like, between each authority.

Using the standard spending assessment is a recipe for disaster. The Minister should be able to give us hard facts about the numbers and the elements of deprivation that she and the SSA are using. How many children are at risk in Surrey compared with somewhere else, and to what extent is that relevant? We must go through the entire list of possible measures of deprivation before we can say whether the amounts payable to each authority are right, and even if we get it right, it will all be torn up. What will we have then? What assurances can we have for long-term planning? We should not do this on a year-by-year basis; there should be a long-term rolling programme of improvement and investment.

How can any local authority be sure that funding will continue if the rules are rewritten? If I understand the consultation document correctly, there will be a serious shift of money from parts of the country such as mine to other parts. That will raise a huge dilemma for local authorities: do they cut services and investment in deprived children or put the council tax up? You will be pleased to hear that I will not debate the council tax, Mr. Hood, but we are putting the continuity of the service at risk if we start tearing up agreements. That is a good reason why we should not use a formula to determine the grants, but instead work county by county, and local authority by local authority, to determine each one's problems and make

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an investment on the basis of what we discover. It is nonsense to use the grand formulae, which include an element of what the fire brigade is doing or what the lending of library books is like, to determine grants. Those are my concerns about the amounts payable.

Annexe A, which I mentioned in relation to fairness, confuses me. Columns 2 and 3 relate to revenue spending and, if I understand it correctly, column 4 relates to capital spending. I was always under the impression that a great rule of public expenditure, finance and local and national Government accountability was that revenue and capital were different and should never be brought together. They raise separate accounting, accountability and revenue-raising issues. Even in allocations to the Department of Health and the Treasury, one column relates to capital spending within the budgets of the UK and the other to continuing revenue costs.

Does the Minister feel that it is right to come to us with a muddled list of figures, in which two columns are one thing and one column is another? How do they relate to repayment of debt and loan amounts? What is the situation regarding that spot of confusion? For example, the various columns on my county of Surrey are as follows: £1.6 million revenue, £0.1 million revenue, £0.1 million capital and a total of £1.9 million. My county's accounts cannot show the figures like that because, of the £1.9 million, some is revenue and some capital. The money must be shown differently, so how can anyone who examines the annual report produced by Surrey get a grip on whether the local authority is following the Government's requirements?

I am also concerned about asylum seekers. Kent was mentioned as having to deal with 1,400 asylum seekers' children—more than the number within the county—plus those coming out of London and placed into homes in the county. What allowances are made for counties such as Kent that have that extra burden? Gatwick airport is another example, though it is closer to the heart of my hon. Friend the Member for East Worthing and Shoreham than to mine. I am more concerned about Heathrow airport. It never ceases to amaze me that some people can put children on an aircraft without any documentation or adult supervision. Lo and behold, major airports suffer the tragedy of young children just appearing and needing to be looked after. Are allowances going to be made for that abomination? They certainly should be.

Another problem appears in annex C on page 9, which deals with ''Use of grant monies'':

    ''Each local authority shall . . . use the grant monies specified in column 2 of Annex A only in the financial year 2002/2003''—

I shall return to that in a moment—

    ''and only for the purpose of implementing the Quality Protects Action Plan number 4''.

That takes us back to ring fencing. The Government are correct in saying that they do not much care for ring fencing. I have never cared for it either, and I used to tell my own Government so. When I was in local government, I used to ask myself why I should be used

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as a contractor, given some money and told that I had no choice over what to do with it. That is not local democracy.

The Government, bless them, keep telling us that they do not like ring fencing—and I congratulate them on that. In that case, will the Minister explain why a ring-fenced proposal is before us? What is the point giving local authorities money when they have no scope to decide what to do with it? On page 9 of the report, paragraph 3(1)(a), (b) and (c) prescribe exactly what the money should be spent on; in each case, it is locked in to what the Government decide is right for local people. That is not proper or democratic. If the Government believed in democracy, they would specify their objectives, encourage and support, but they would allow local people to specify their priorities in the end.

I am not making a party political point—it applies to councillors of all political persuasions—but Surrey county councillors know more about the problems facing the children of Surrey than any Government in Westminster will ever know. We should not be ring fencing, but breaking this down and allowing local democracy to do what it is best at—deciding on local priorities, which will differ from place to place.

If we turn over to page 10, we reach ''Other conditions''. One tries to tie up all such documents, but there is often a sting in the tail. If all else fails, provisions at the end make absolutely certain that any possible freedom that might have escaped the preceding requirements is put back in its cage. Paragraph 7 on page 10 states:

    ''If a local authority does not spend the whole of the grant monies in the financial year 2002/2003, then the local authority shall repay to the Secretary of State an amount equal to such part of the grant monies as the local authority has not spent''.

That is madness, and explains why at the end of every year, someone is told to tarmac the car park; the money has to be used, not given back. It is a wasteful and silly way of trying to help children.

Even at revenue, let alone capital level, many tasks take more than one year to do. The system also militates against starting anything late in the year because the money will not be used up before the end of the year. In any case, councils do not know how much money they will be allotted until three months have gone, so they are already further advanced towards the end of the year than they should be. It becomes extremely difficult to spend all the money in the 12 months.

Not only are the Government being silly in saying that the money must be spent in a year, but the fact that they knock out the first three months of the year before anything is certain makes things doubly difficult. I beg the Minister to plead with the Treasury for some common sense, if the proposal is Treasury-inspired—and most such proposals are. Provided that the money allocated is used within a sensible framework and timetable—that will vary from place to place and from circumstance to circumstance—and with a reasonable sense of urgency, there is no need for a provision stating that it must all be spent this year. However, if the Government insist on such a proposal, the car park

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in every children's home is certain to be splendid, but probably not the services inside it, because that is how people will be forced to operate.

I want to add to what the hon. Member for Cheadle said in respect of paragraph 6, which says what happens if

    ''a local authority fails to comply''.

Have any local authorities failed to comply? What are the definitions of failure? It is easy enough to write along the lines of, ''If you don't do what we tell you, we want the money back,'' but exactly how will that be measured? What criteria will be used?

That sort of penalty worries me. I can understand why it is sometimes necessary to intervene because, sadly, from time to time we fail children, and part of the blame can be put on the local authority. I do not dispute that; it is human nature, it is regrettable, but it happens. I do not have any difficulty, therefore, with the Government or an inspectorate saying that they must have a reserve power to intervene if things get out of control. But to demand repayment is in effect to fine the authority for its failure, because that would come to light only after the money had been spent and the aim of the expenditure had not been achieved.

Intervention would almost certainly be after the event rather than before it. The money will have been spent, the Government will have intervened and demanded repayment, but that money will no longer be available. So how will the local authority get the money, halfway or three quarters of the way through a year? There is only thing it can do: cut some other service to pay the money back. Although I support the principle of a reserve power to intervene, using what amounts to a fine is a very clumsy way of safeguarding the interests of the children and of the taxpayer.

Paragraph 8 refers to a local authority that has used its money to buy capital assets. When these are no longer used or are disposed of, it is sensible to provide for the Secretary of State to say, ''Hang on a minute. If you buy a load of IT equipment and then do not use it while it is still ring-fenced, something must happen.'' But I am nervous about the term ''full market value'' in paragraph 8. It does not sound unreasonable provided that the stuff is actually sold. But the paragraph says that full market value

    ''shall be determined by the Secretary of State''.

I cannot call to mind any Secretary of State in this or any previous Government who was a valuer. Why on earth should the Secretary of State determine the market value of anything? He is probably the last person to do so, as he has no relevant qualifications whatever. I suspect that whether the value was high or low would depend on what the Secretary of State felt about the authority; the scope for gerrymandering is huge. I ask the Minister to consider including a sentence stating that the market value will be determined by experts who understand the market values of the equipment concerned. Then there might be some justice in the proposition, which at present depends on a political whim.

Annex D refers to regional development worker grant. I have rummaged about a bit and I cannot find

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the information that the Committee needs. I have not been able to find an explanation of why those authorities have been specified. I puzzled over whether some geography was involved, but they do not seem to be concentrated in any particular region; there almost seems to be a national arrangement.

It then occurred to me that either those might be very good authorities, which represent good practice that we are working to spread around, or they might be failing authorities, which need some extra help. So what do the star ratings tell us about them? Not to put too fine a point on it, not a lot. Brighton and Hove is a one-star authority, Westminster city council is a three-star authority. Clearly we cannot take this either as a list of best practice or a list of bad practice. I simply ask the Minister: what is the significance of this wondrous little collection? Even politics does not help us, because the political control of these authorities is spread far and wide. We have dates and figures, but for some unfathomable reason Gateshead metropolitan borough council requires a reference all of its own. Why? Is it the only council in the country that has a different accounting year? What is going on? Are we trying to cook the books to give Gateshead extra help that we hope Parliament will not notice? We were owed an explanation at the beginning.

It is tempting to say that these are not particularly important points, but they might be extremely important. This is what my bones tell me. There is a reference to needing to invest the money in order to deliver the change required. If those authorities need to deliver more change than elsewhere, I am worried about the way in which that is being done. I estimate that the total sum of money made available to help children is being top-sliced. A considerable amount of money is being taken away from what is generally available for distribution under annex A, and taken across to annex D to be given to those authorities. If those authorities have problems with their children's services, the Government are rewarding failure rather than excellence. That worries me. If Surrey does not figure here because Surrey is good and they are bad, why should Surrey get less help? There should be a different way of dealing with failure. There should be a different way of making extra change rather than penalising the rest of the country by giving us less.

These are serious matters. As I said at the beginning, the principle is absolutely right. I am totally behind the Government in their wish to do more to help the children in our society, particularly the vulnerable. On the other hand, we should not turn our backs when it is done unfairly, using a formula that we do not understand, and which we would not like if we did, when we cannot make comparisons and a quarter of the year goes by before the process can start. We should not turn our backs when it is done in a way that is, frankly, second rate, and when it could be done in a far better way if only the Government thought harder.

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