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28 Nov 2002 : Column 585continued
The Parliamentary Under-Secretary of State, Office of the Deputy Prime Minister (Mr. Christopher Leslie): I genuinely congratulate my hon. Friend the Member for South Swindon (Ms Drown) on securing this debate. There is much competition between many hon. Members throughout the House for a debate on this issue. It is the mark of a dedicated and conscious Member of Parliament to argue in such detail about technical and funding matters that obviously affect all our constituents so significantly.
My hon. Friend has given me a very long list of issues to cover, so I shall press on and try my best to address some of them. Hon. Members will be aware that the Leader of the House confirmed earlier today that the announcements on these matters will have been made by this time next week, so we do not have long to wait. In the meantime, however, I can certainly reassure her that the points that she has been making have, along with all other responses, been taken into account in making the final decisions. This debate also follows the announcement made earlier this week about setting up a voluntary arrangement with Swindon borough council following a request from the authority for help in improving public services, which are facing difficulties in the area.
My hon. Friend is especially concerned about funding for schools. She registered her support for the proposals made by the F40 group. I assure her that I am well aware of the strength of feeling not only in Swindon, but elsewhere in the country, which the group has made plain. I am pleased that my hon. Friend the Minister for School Standards has been able to meet a delegation of representatives. I know that there was a helpful exchange of views.
On the options in the education formula, it is worth reiterating that the considerable increases in funding for education that the spending review has provided over the next three years mean that we have been able to give the commitment that no authority's schools will lose out in real terms in moving to the new formula. We want a fairer, clearer system that is justified by the educational needs of children and based on the most up-to-date evidence of relative cost and need. Any formula will need an element for deprivation, known as additional educational needs, and an enhancement for areas where schools need to pay more to recruit and retain staff.
The F40 group has proposed a change to the formula, suggesting that money be taken out of the factor specified in the formula for deprivation and put into the basic allowance per pupil. That would have an impact on authorities with high levels of deprivation. In working out a new funding system, we need to consider how changes will affect all authorities, not only those in the F40 group. However, I can assure my hon. Friend that we have been considering all the responses very carefully, including those from the F40 authorities.
My hon. Friend mentioned some specific points that I shall try to address. In respect of how the education formula will treat issues relating to deprivation, the indicator that we choose is clearly very important. I appreciate that Swindon has some disadvantaged areas with residents in low-paid work. Among the proposals for the new funding formula are two options in which the main indicator for deprivationthe number of children of parents on income supportis supplemented by the number of children of parents in receipt of the working families tax credit. That option picks up children whose parents are in low-paid work and aims to reflect a wider definition of poverty. As I said, we will see the outcome very shortly.
On the complex question that my hon. Friend asked about the threshold for additional educational needs and how it works, the consultation options all use thresholds for assessing top-ups. For example, the threshold of 30 LEAs would give all authorities funding as if 13 per cent. of their pupils were deprived. If 15 per cent. of an authority's pupils are deprived, it would receive additional funding for the 2 per cent. of pupils above the threshold, but if that authority has a level of less than 13 per cent., it would receive funding as if it had a 13 per cent. level.
I appreciate my hon. Friend's concerns about the level of the threshold and how it might affect Swindon. Although the threshold is relatively easy to convey in a general sense, I can sympathise with her about the difficulty in assessing how the different threshold levels will affect individual authorities. In making decisions, we are considering the pros and cons of high and low-level thresholds for additional educational needs.
Let me deal with the way in which the current system reflects the extra costs through area cost adjustment. It takes account of the extra costs of recruiting and retaining staff in some areas, especially London and the south-east. The options in the consultation paper are based on evidence that suggests that authorities with significant deprivation and additional staff costs need to spend more to achieve the same results for their children. I accept that there is scope for judgment about the evidence, but the four options reflect that.
To make a wider point about the area cost adjustment, I note that my hon. Friend supports options ACA2 and ACA3, and that on balance she prefers options that are based only on wages in the private sector. Although we understand the rationale for using only private sector wages, there are arguments against doing that, notably the reality of lower wage flexibility in the public sector. We must weigh up those issues carefully.
My hon. Friend seeks assurance on several other formula issues. She mentioned the elderly personal social services formulae. There are two main choices. One option is to use the total resident population, which includes those in households and residential care. The alternative is to use the population in households plus the number of people in residential care that the authority supports. My hon. Friend was clear that she supports the latter. Both options include people in residential care, but the second approach recognises that authorities place people in care in other authorities. However, the matter is more complicated and it is difficult to go into great detail. We have been carefully considering the balance as we finalise decisions.
My hon. Friend also questioned the reason for including deprivation in police option 5. It has a separate deprivation factor, which was included in the consultation document to seek views on whether that would be an acceptable method of helping to implement the Government's agenda to help people out of deprivation.
My hon. Friend also asked whether the £30 million rural policing fund would continue next year. I appreciate that she spotted that the national policing plan, which the Home Secretary launched, will continue in its current form outside the funding formula.
My hon. Friend believes that working families tax credit data should be used in the block of services that is catchily entitled EPCS, or environmental, protective and cultural services, in addition to assessing deprivation based on benefits data.
Low wages are clearly an aspect of deprivation that is not well covered by benefits data, but is that the right indicator for EPCS? Is that set of services in as much need of deprivation weighting as, for example, education or social services? Decisions will be made, announced and explained next week, but we are all grappling with those questions.
Let us consider fixed costs for authorities. All authorities, whatever their size, must have specific functions, for example, a chief executive, a director of finance and so on. Those basics constitute bigger issues for small authorities. However, it is debatable whether much can be achieved through a fixed-cost element for larger authorities such as police authorities or fire authorities. Nevertheless, we are carefully considering all the arguments.
My hon. Friend mentioned population growth and the extent to which the formula should recognise it. We have received many comments on that. We understand the anxieties of rapid growth areas about their increasing population. The consultation paper contains an option of making a targeted grant that is top-sliced off the total formula grant to avoid the complexity of including it in the formula. The results of the 2001 census highlight some of the difficulties of simply projecting forward past population trends.
My hon. Friend proposed a more radical approach for the fire service formula to get rid of the perverse incentive of the fire calls indicator. I assure her that we have looked closely at all the formulae to ensure that they no longer include the perverse incentives and inadequate indicators that many of them contained.
On non-domestic rates, the Government have said in the pre-Budget report that we will explore how some of the increased business rate revenue derived from growth and regeneration might be retained by councils. We will be consulting on any proposals next year.
The formula grant review is, of course, about the distribution between authorities of a fixed pot of money. However, it is worth reminding the House that we have significantly increased the funding for local authorities overall since we took office, with Government grant increasing by 20 per cent. in real terms, compared with the 7 per cent. cut in real terms over the last four years of the previous Conservative Administration. The spending review ensures that councils will continue to see increased funding. I have repeated the good increases in grant for local authorities generally in previous Adjournment debates that have taken place recently in the House, and I do not wish to take up too much time in this debate repeating all the good news for local authorities.
My hon. Friend has called for even bigger increases in funding over the next three years, in particular for social services. We looked carefully at all the pressures facing local authorities, at the improvements in service we want to see made, at the room for greater efficiencies and at what the country can afford when setting the spending plans for the next three yearsplans which provide now for a real-terms growth in funding for personal social services of 6 per cent. a year. We believe that we have been able to ensure that the people will be able to see real improvements over the next few years in the priority areas such as personal social services.
My hon. Friend has also asked for clarification on the Government's commitments on the level of grant increase next year. We have said that we will ensure that no local authority receives less grant than it did last year on a like-for-like basisthat is, if the composition, nature and functions of the local authority do not change significantly. This is a cash grant increase pledgenot in real termsbut we hope to do much better than this in the announcements that we make this time next week.
My hon. Friend has also asked for floors to be set for all three years of the spending review. We want to ensure that local authorities have greater certainty about future funding. We have said that we intend to keep floors and ceilings as part of the new system, and they will therefore feature in the local government finance settlement for at least the next two years. However, we cannot provide information on the levels of floors and ceilings for future years, as there are too many variable factors which can affect decisions on the floor. Given that, we are unable to provide this information much in advance of the provisional settlement for each year.
It is worth looking at how Swindon has benefited since we took office. It has received an annual average increase in standard spending assessments of 5.2 per cent., compared with an increase of 1.5 per cent. in the last four years of the previous Conservative Administration. Swindon's education SSA has increased by nearly £21 millionmore than 37 per cent.over five years. Its standards fund allocation has increased significantly, and it has received more money for capital, including the £58 million private finance
A wide-ranging review is under way. There is, of course, a difficult balance to be struck, but we are considering carefully all the points that have been made, particularly by hon. Members who have spoken and