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5 Feb 2003 : Column 363—continued

Mr. Neil Gerrard (Walthamstow): I appreciate the points that my right hon. Friend is making about the overall level of settlement and how it compares with what we had to deal with for many years before the present Government came to power, but there are authorities facing serious problems. My own authority, Waltham Forest, as a result of the area cost adjustment, is at the floor: 3.5. per cent. Yes, it is an above-inflation increase, but the authority also has to cope with increased national insurance payments and the passporting of money to education, which means that other services face serious problems, because the money is simply not there to passport to education and avoid cuts elsewhere. It will be extremely difficult to explain to people in that borough why they are looking at a possible council tax increase of 20 per cent. at the same time as cuts of £7 million or so will be made in EPCS and social services.

Mr. Raynsford: My hon. Friend recognised that there is an overall 3.5 per cent. increase for Waltham Forest. I hope that the authority will do its best to manage its affairs efficiently. The comprehensive performance assessment has suggested that there is scope for improvement. I hope that the authority will be able to work positively based on the Audit Commission's findings and with the help of our Department. We shall be more than happy to assist in this—

Mr. Iain Coleman (Hammersmith and Fulham) rose—

Mr. Raynsford: I am trying to respond to the intervention of my hon. Friend the Member for Walthamstow (Mr. Gerrard). It will be difficult to make progress if I constantly have to deal with interventions.

We hope that the authority will do its best. As I have said, I understand the pressures, but by no stretch of the imagination can a 3.5 per cent. increase, an above- inflation increase, be treated as a cut.

Mr. A. J. Beith (Berwick-upon-Tweed) rose—

Mr. Raynsford: I give way to the right hon. Gentleman, who has been pressing for some time.

Mr. Beith: The Minister is talking about the services that district councils provide. Does he not realise that their provision is very expensive in areas which have a very sparse population and where the population multiplies many times over during the tourist season? Those are the very factors that have been either taken away or reduced in significance, leading to floor-level increases for district councils like Berwick and Alnwick in Northumberland.

Mr. Raynsford: I hear what the right hon. Gentleman says, but this is the first year in which all district councils have been guaranteed an above-inflation increase. That

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is a step in the right direction. We have included in the formula a factor to take account of the particular problems facing small authorities, because the cost of being in business was not previously reflected. It now is. While I understand that the right hon. Gentleman is disappointed that his districts did not do better, they have at least had increases of at least 3 per cent.

Many respondents argued for more consistency—

Mr. Geoffrey Clifton-Brown (Cotswold): Will the Minister confirm that half the 5.9 per cent. increase is to be taken up by the imposition of national insurance contributions, pension fund payments and an above-inflation local government pay settlement?

Mr. Raynsford: I am afraid that the hon. Gentleman is making rash assumptions. It is for individual authorities to decide on issues such as pay settlements. That is a matter not for the Government, but for local authorities. We take account of the pressures on local government—

Mr. Clifton-Brown: We do not have a choice.

Mr. Raynsford: The hon. Gentleman parrots that phrase, but I am afraid that he is wrong. Local authorities have a choice and they must live with the decisions that they take. We expect them to act responsibly. We do our best to look at and reflect the pressures that individual authorities face. There is an allowance for increases in national insurance, but I am afraid that his figures are wrong, as is the concept behind his question.

Many respondents argued for more consistency across service areas in the measures of deprivation used in the formulae. There was not, however, broad agreement on which measures to use. In any case, I do not think that that would be the right course of action. If the system is to be based on the costs and pressures that authorities face, as local government has consistently said it should be, it follows that the indicators that are used should be reasonably related to the particular service that the formula is concerned with, instead of being a broad generalisation. The factors that are relevant for social services for the elderly are not the same as those that apply to education or highways maintenance.

The more discriminating approach proposed for the area cost adjustment, which better reflects local evidence on pay costs, was broadly welcomed. Of course, those who benefited more from the old and much cruder approach argued for its retention. Set against that is the argument that the ACA should be based only on the actual pay costs of employing staff. However, I am clear that there are recruitment and retention issues that justify setting the ACA differential higher than the level that would derive from the direct costs of local authority pay alone. We have set a threshold to the ACA that explicitly recognises that many local government employees are on national pay scales.

I have made one substantive change to my original proposals and decided that the Isle of Wight should receive the same area cost adjustment as Hampshire. I have accepted the argument that, on balance, the new earnings survey sample size for the Isle of Wight is such

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that its labour costs cannot be estimated with the same degree of precision as those of other more populous areas.

Mr. Phil Woolas (Oldham, East and Saddleworth): Where is he?

Mr. Raynsford: My hon. Friend asks where the hon. Member for Isle of Wight (Mr. Turner) is. I am sorry that he is not here to hear the good news about his local authority.

The Isle of Wight's sample size is no larger than those of other unitary, metropolitan or London boroughs that we have combined with other authorities for the purposes of the ACA in order to avoid small samples. By making the change, I believe that we are treating all authorities more consistently.

Mr. Chris Mole (Ipswich): I thank my right hon. Friend for giving way. In the past, we in Suffolk have had to accept a funding discrepancy of about £180,000 between a high school in south Suffolk and one in Essex. The changes that he has made to the area cost adjustment approach in spreading it out more gently outside London has gone some way to reduce that disparity. I am sure that colleagues in Suffolk and beyond will welcome that change.

Mr. Raynsford: I am grateful to my hon. Friend for his entirely sensible observations. I am pleased that we have been able to assist and I am sure that he is extremely pleased with a settlement that ensures an increase of more than 6 per cent. for Suffolk county and more than 11 per cent. for Ipswich district.

Mr. Andrew Love (Edmonton): I thank my right hon. Friend for giving way. When Enfield's three Members of Parliament visited my right hon. Friend in a delegation, we told him that Enfield was directly affected by its being placed in east London, rather than west London, and said that that had gone down very badly locally. We also pointed out that, as a result, Enfield had received an overall increase of only slightly more than the floor level. That has left the borough in a very difficult position in managing its budgets. Even at this late stage, will he look again to see whether the Government can do something in that regard?

Mr. Raynsford: I acknowledge my hon. Friend's concerns about the impact of the changes in the area cost adjustment. As I said, the authorities that benefited from the cruder previous system were obviously unhappy about the change. Following the representations that he and his hon. Friends made, I looked closely at all the factors affecting Enfield. I am afraid that I could not justify making a change simply because, looking at the evidence, there was no objective basis to justify a different allocation of authorities in the various blocks. Of course I should be happy to have further discussions with him about future years' settlements, but I am afraid that I cannot change the settlement that has been presented to the House today.

There has been much lurid publicity in recent weeks about the claim by certain councils that I am robbing the south-east or cutting the amount of grant received by councils in the south. That is simply untrue. The whole

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south-east will receive an extra £255 million—4.5 per cent. more grant in 2003–04 than in the current year. That is not a cut by any stretch of the imagination.

Mr. Brazier: Will the Minister give way?

Mr. Raynsford: No, I will not.

The hon. Member for Brentwood and Ongar has been sounding off in recent weeks to the effect that I am mugging middle England. May I ask him therefore when he last came across a mugger who not only gives his victim a sum equal to the entire contents of his wallet, but adds an interest bonus of at least 3 per cent. on top? He has not encountered any mugger like that in the past; I hope that he does in the future, and his authority should be grateful for the increase that we are paying it.

As we said in the December 2001 White Paper, we do not expect to make major changes in the formula grant system again for a time—at least not in 2004–05 or 2005–06. We will however make adjustments where necessary to incorporate the latest data, or to reflect changes in the function or funding of local authorities. This period of stability will make it easier for councils to plan ahead. I recognise that it will not be popular with those who think that their efforts are better directed at continuous attempts to change the formula in their favour, but I do not share that view. Stability and a degree of certainty are vital to enable councils to plan ahead with confidence.

As councils now finalise their budgets, I suppose that it is only to be expected that some will seek to deflect criticism by claiming that the Government are responsible for large council tax increases. I have no doubt that we will hear exactly that refrain from the Opposition, so I pose three simple questions to Conservative Members. First, when in all their 18 years in office did they deliver a settlement that gave an above-inflation increase to every council in England? I suggest that the House will wait a very long time for an answer.

Secondly, if the Opposition believe that the settlement is inadequate and claim that council taxes will rise unduly as a result, how much more money do they believe should have been provided by the Government on top of the £51.2 billion that we are making available? Thirdly, where would that money come from? Without an answer to those questions—again, I suspect we will wait in vain for one—their rhetoric and posturing will be rightly seen as just that.

This year's grant settlement is excellent. It continues a sustained and consistent improvement in local authority funding under this Government. It removes the anomalies that undermined confidence in the old SSA system. It takes account of today's circumstances and, indeed, brings the whole process up to do date. It gives proper emphasis to the needs of deprived and disadvantaged communities. It gives an above-inflation grant increase to every council in England. In sum, it is a much fairer system, which underpins the delivery of better performance from local government in future years. I commend the settlement to the House.

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