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5 Feb 2003 : Column 391—continued

Mr. Ian Liddell-Grainger (Bridgwater): Will my hon. Friend give way?

Tony Baldry: Sorry, but I am not going to give way. I have only a limited time.

Even more staggeringly, the same Green Paper claims that the business rate is

Under all the projections for Oxfordshire's budget, the business rate and council tax will have to rise significantly to cover up shortfalls in Government funding. One can only infer that the Government believe that it is acceptable to use those local council tax hikes as a substitute for proper, sustained Government investment in local services.

The business rate rise is bad news for small businesses in north Oxfordshire. The council tax rise is bad news for everyone living in Oxfordshire. We are told that the Government grant floors will delay the impact of the changes to grant in Oxfordshire, but that is not a solution and floors do not produce fairness. Delay does not enhance stability.

Then there is the so-called resource equalisation. That term is intended to sound good, but it does not mean what it suggests. The Local Government Association explains resource allocation as

Put that mouthful into practice for Oxfordshire and it sounds much less promising.

Let us consider the last financial year for Oxfordshire county council. The current formulae dictated that it had to spend £20 million more than it was allocated. Council tax was then increased by an average of 10 per cent., as this "resource equalisation" suggests, but there was still an £11 million funding shortfall. In short, resource equalisation simply is not an escape route from the Government's failure properly to invest in local services. If that is what happened under 2001–02 conditions, how on earth would resource equalisation sustain services when council tax increased by nearly 14 per cent? It would not do so.

I remain cautiously optimistic, however, on the area cost adjustment. Under certain scenarios, Oxfordshire county council can lessen the impact of grant losses through top-ups via the ACA. However, that is dependent on Oxfordshire county council convincing the Government that the cost of living in Oxfordshire is as high as in the rest of the south-east. I can tell Ministers that it is. The Land Registry's latest quarterly

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survey showed that house prices in London are rising at a slower rate than those outside the capital in the south-east region. They are still increasing in Oxfordshire.

I am concerned that, in the past, the Government's local government finance arrangements have shown no intention of adjusting for the higher cost of living in the south-east compared with the rest of the United Kingdom. The ODPM might say that that was the reason for the review, but if that was the Government's policy, I am slightly at a loss to understand why pay for teachers, police officers and NHS staff recognises only the high cost of living in London and not the high cost of living in counties such as Oxfordshire.

I submit that it is irresponsible of the Government to present options that might lead to massive cuts in budgets for services. Elderly care will be destabilised and youth groups put under threat, and foster carers do not know where they stand. Not a single vulnerable group that depends on the support of social services provided by counties such as Oxfordshire can feel reassured that their lives will be made more stable or secure by today's announcement. This is not a fair formula. Sadly, it will often be the most vulnerable and the weakest in our communities who will suffer as a consequence of the Government's unfairness.

7.26 pm

Mr. Clive Betts (Sheffield, Attercliffe): Listening to all the gripes and grumbles from Opposition Members, it is difficult to believe that we are in the Chamber deciding how to divide up a bigger cake, but that is what we are doing. Only a few years ago, we were not discussing how much bigger the cake was, but scrambling around to see if we could get the biggest crumbs that had fallen on the floor after the slices had been taken out of the cake. That is the fundamental difference between today and the 1990s under the Conservative Administration. Conservative Members complain that their local council has received an increase of only 3 or 3.5 per cent., but their complaint is not about the size of the increase, but about its size compared with the increases of 8 or 9 per cent. that other authorities have received. They forget that when they were in power, a 3.5 per cent. increase would have been the envy of most councils in the country, because most got increases of less than that, or even negative increases.

The Conservative Front-Bench spokesman says—without breaking into a smile—that his party would introduce a fairer and less party political system. It was difficult to listen to him. When he was pressed about what that fairer and non-party political system would be, we heard not that he had a system, nor even that he had a commission searching for a system. He could not name the members of his commission, but said that at some stage he would appoint a commission, whose members could be anyone, to try to devise a system that he had already concluded would be fairer and would give more to his Back-Bench colleagues, although at whose expense he would not say. That was an incredible statement: after all the time they have spent looking, the Opposition have not even set up a mechanism to find an alternative. When we get the commission and its great works are performed, no doubt its first job will be to decide how to work a grant distribution formula within a policy of a 20 per cent. overall cut in public expenditure. It will be interesting to see how all councils can benefit and get more under such a regime.

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Then we come to the Liberal Democrats. They are nothing if not consistent. They never have a policy or say how much they would spend. They always wait for the Government to say how much more they will spend, then say that they would spend even more. Theirs is a wholly consistent approach. It is not really a policy—more an abdication of policy—but at least we recognise where they are coming from.

Anyone who believed at the beginning of the process that we would somehow come up with a settlement that would determine how to distribute billions of pounds to local authorities and that anyone in the street could understand immediately on first reading was living in an unreal world. Everyone knew that whatever settlement we came up with would be relatively complicated. We wanted a system that was fairer and that could be explained more easily—I think that Ministers have been able to do that—but we knew that it would still be complicated. There is always a trade-off between fairness and simplicity: a really simple system will contain more elements of rough justice—at least the hon. Member for Banbury (Tony Baldry) acknowledged that. Everyone recognises that a degree of fairness requires a degree of complication. Either those Opposition Members who criticised the complexity and lack of simplicity are extremely naive, or they were speaking with party political tongue in cheek.

One of the new system's fundamental achievements is, as I said in an intervention, that it is so much fairer. Its only remit is to take the amount of money that the Government believe is appropriate to spend on local authorities and to decide how to distribute it. I accept that there can be different views about whether it achieves that fairly, and some hon. Members will feel that their authorities are not being treated as fairly as they should be, but it is fundamentally different from the previous system, which not only sought to distribute grant but had the additional objective of specifying the level of spend for every local authority as determined by the Government, and, if those authorities overspent, to bring in a system that has varied over the years to penalise or cap them. It was a system of central Government control over local councils, local democracy and local expenditure. This system does away with that and that is why it is so much fairer and more democratic, and puts life back into local democracy in Britain. I welcome that.

I want to make one or two suggestions about certain elements of the new proposals where some difficulties remain. The Select Committee, of which I am a member, made some criticisms and it is fair that we should deal with them. I have one or two slight reservations about the area cost adjustment, but it is remarkable how few people today have slammed that. Year after year I have listened to debates in the Chamber where virtually every hon. Member has said that the system is unfair, unacceptable and must be changed. Let us at least give the Minister a little credit for going some way—I think quite a long way—to resolving that real problem, which has been fundamental to many criticisms of the system over the years.

The census is not directly the Minister's problem, but it is not right. There are problems. Everyone can feel that instinctively. Sheffield has even lost some of the data and does not know how many forms were returned, so it cannot calculate the under-reporting. It has had to

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do an estimate based on other authorities. We suggested Nottingham and Leeds, but it took other authorities further afield, including Darlington, for its comparisons, and we think that it is at least 2 per cent. out on its estimates, which can mean a lot of money in terms of grant to Sheffield. There clearly are problems with the system, and we must carry on trying to solve those.

The issue of ring fencing remains. I recognise and respect the Minister's commitment to reduce ring fencing but, with the apparent changes of definition, it is sometimes a little difficult to understand whether it is being done. I simply ask the Minister please to keep on with that. It is important if local authorities are to have that extra freedom and local democracy is to have that extra rejuvenation that I mentioned previously.

Some difficulties clearly remain about the relationship between the Office of the Deputy Prime Minister and the Department for Education and Skills. Passporting is not totally unacceptable because the Government have made it clear that education is their priority, so getting money into schools is something that we should welcome. If the Liberal Democrats want to argue for less money to my schools in Sheffield, I am happy, as I said before, to put it on the leaflets and explain where they are coming from, because that seemed to be the end result of what they were arguing for earlier. However, I accept that there has to be a little more evidence of joined-up thinking between Departments.

I thank the Minister for clarifying one particular issue on which the Select Committee spent quite a lot of time, and that was whether there was a requirement to passport on the increase from SSA to FSS in social services. I accept that that is a formulaic increase, which is putting more spending into the resource equalisation procedure, and it is not meant simply to be passed on. Certainly authorities could not have done that within a realistic council tax increase. It is helpful that the Minister and the Secretary of State have now made that clear, as have Health Ministers. I thank the Minister for that. I thank him even though Sheffield has had only a 4 per cent. increase for social services. We were told that there has been a switch within the social services formula from funding the elderly to funding children's services. It happens that Sheffield has a large number of elderly people and therefore loses out on that. Nevertheless, even though we were disappointed with that 4 per cent. increase, Sheffield still has a little money to begin the process of putting money into aids and adaptations, to do away with the horrific policy of the previous Liberal Democrat-controlled administration in Sheffield, whereby elderly people who could not get in and out of their bath and wanted a little financial help for a shower, were told that if they could manage a strip wash such help would not be available. That sort of policy is a throwback to the era when the last Liberal Government were in power, and we should not have such a policy in this century. A little money has been made available to begin the process of ending that arrangement, and we can welcome that.

In the end, for all the arguments about passporting or about amounts, Sheffield will get a 6 per cent. increase. That is slightly below the metropolitan average and slightly above the national average, but it is double the inflation rate. The council tax settlement will probably result in increases of about 7 per cent., which is less than

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the 9 per cent. about which the Liberal Democrats were arguing. We can argue that other authorities will receive 8 or 9 per cent. extra, and Sheffield would have liked such an increase, but 6 per cent. is a good settlement and the national settlement is also good.

I come now to the funding review. The crucial issue is giving local authorities more responsibility and more power to raise their own revenue. That is another key element for local democracy. I ask the Minister to be brave in the review. I would love it if the Government set an objective of raising locally at least 50 per cent. of the money spent by councils. Ministers say that they want the review to achieve that. I ask that it is not prescribed in its thinking. Let it take a genuine blue skies approach; let it think the unthinkable. It simply should ask, "How can we raise the extra money?" If we start with prescription, we will end up with a review that addresses only the margins, and that will not achieve the fundamental change in funding arrangements that I would like.

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