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Delegated Legislation Committee Debates

Local Government Finance Special Grant Report No. 114 on the Social Services (High Performers) Grant for 2003-04

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Sixth Standing Committee
on Delegated Legislation

Thursday 20 March 2003

[Mr. Peter Pike in the Chair]

Local Government Finance Special

Grant Report No. 114 on the Social Services (High Performers) Grant for 2003–04

2.30 pm

The Minister of State, Department of Health (Jacqui Smith): I beg to move,

    That the Committee has considered the Local Government Finance (England) Special Grant Report (No. 114) (HC 477) on the Social Services (High Performers) Grant for 2003–04.

I am pleased to introduce this special grant report, which will allow payment of 13 social services grants to high-performing councils. The grants will be free of ring-fencing and completely without conditions: councils will be able to spend the money on whatever they decide will best address local and national priorities.

The special grant report is part of the implementation of a package of significant freedoms that is available to the best councils. As a reward for good performance, the Government are, among other measures, stepping back and devolving power so that councils can choose how they spend their grant money. We can reward councils because the performance assessment framework that we put in place has enabled them to demonstrate that they can deliver high-quality services to local people. However, the special grant report is not simply about rewarding the few but about providing an incentive to all councils to improve performance so that they can share in the increased freedoms. The special grant report covers 13 grants and includes no conditions. High-performing councils will be able to spend the money according to local priorities.

Freedom from ring-fencing will apply to most grants paid by all Government Departments to councils, but the Department of Health has gone a little further in respect of social services grants. The very best councils—those with three stars for social services—will receive their grant money during the first three months of the financial year rather than quarterly or twice a year, as is the case for most grants to councils. That will allow them the greatest freedom to spend grant money on local priorities, because they will have the money in their hands at the beginning of the financial year. Early payment freedom is covered in the special grant report. Furthermore, at the end of the financial year, two-star councils will be able to carry over up to a quarter of unspent grant, and high performers will be able to carry over 100 per cent.

The Department of Health was the first Department to introduce freedom from ring-fencing for high performers, when it piloted the approach for the performance fund grant in 2002–03. Many members of this Committee were present to rehearse the arguments

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about a similar special grant report that the Government presented at that time.

The grant freedoms that the special grant report makes real are only part of the package. High-performing councils will be subject to less form filling and inspection, with excellent councils given a three-year inspection holiday. Some freedoms are related to the overall comprehensive performance assessment of all local government services. Social services is unique, in that some of the extra freedoms are related to the social services star rating alone.

As I suggested, the report is about incentivising all councils to improve; therefore different freedoms are available for each level of performance. For example, a council that improves from zero to one star will be monitored less by the social services inspectorate and will be allowed to apply for beacon status in social services areas. Councils that improve from one star to two will be subject to less inspection and will be allowed to carry over 25 per cent. of grant money. In addition, depending on other services, they could be rated excellent overall because of the way in which the social services star ratings feed into the CPA ratings; as such, they would receive the freedoms that that implies. For councils that move from two to three stars, ring-fencing will be removed from grants, grant money will be provided early in the year, form filling will be reduced and freedom will be given to choose targets within local public service agreements. They are, of course, more likely to be excellent overall, with the freedoms and flexibilities that that brings across the whole of the council.

That means that every council, however it is doing at present, has an incentive to improve, because whenever it improves its star rating, it will be rewarded with more freedom. There are also freedoms available for each level of the CPA, in which the social services star rating carries considerable weight. Performance on social services significantly influences what CPA freedoms a council can access.

For most grants covered by the report there are 25 high-performing councils, which are councils that have received either three stars for social services or a rating of excellent against their CPA for all local government services. The fact that we are extending the freedom from ring-fencing to councils that have either three stars or a rating of excellent means that more councils will receive grants free of ring-fencing for social services than for any other service area.

For one capital grant—the improving information management grant—ring-fencing is removed for councils that are rated either excellent or good in the CPA. That means that 76 councils will receive the money without ring-fencing, although, in line with all resources made available for capital, it must still be spent on capital.

I apologise to the Committee for a small error in the special grant report. I was tempted to wait and see if anyone spotted it, but I thought that it was probably better to be up front about it. {**P2**}Mrs. Patsy Calton (Cheadle): I think that I have spotted it. I believe that North Lincolnshire has a star

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rating of two, but a rating of good overall. But perhaps that is a different error from the one that the Minister spotted.

Jacqui Smith: That was not the one I had in mind, but I shall find out whether the hon. Lady has discovered another problem. The error to which I referred relates to the information management grant. There are only 74 councils listed in that respect. Richmond upon Thames and Shropshire are not listed as receiving the grant, but they will still receive the money and it will be free of ring-fencing. We intend to include that in a second special grant report to ensure that it happens.

The councils covered by the report have demonstrated that they can deliver services to local people and that they have the management capacity to improve further. Central Government can step back to a significant degree, give them significant freedoms as a reward for their performance, and be confident that the councils will have the ability to take advantage of the freedoms to improve the services that they provide even further. On that basis, I commend the special grant report to the Committee.

2.37 pm

{**P2**}Tim Loughton (East Worthing and Shoreham): Welcome to the Chair of the Committee, Mr. Pike.

The Minister said that many of us have been over this ground before, and there is indeed a sense of déjà vu about special grant reports. What changes is that the subject gets more complicated with every year that passes. The Government have instituted a complicated star rating system and, in the space of the past year, an Audit Commission inspection system as well. The Secretary of State announced the star rating system in October 2001, and the first stars, or lack of stars in some unfortunate cases, were awarded in May 2002. Then, out of the blue, in November last year, we had the uprated star ratings, or refreshed star ratings, as I believe they were called, which changed the rating of several authorities. That was quickly followed in December 2002 by the Audit Commission coming up with a new comprehensive performance assessment system.

We have an awful lot of ratings—good, excellent, or stars—and things are becoming much more confusing and complicated. With all that, there has been a lot of extra inspection, auditing and bureaucracy. Will the Minister give us an assessment of how much the whole system costs? That money is not used to provide the services that the system is all about, but is purely to support the system. We all support funds getting through to the sharp end to help vulnerable people through various aspects of social services care, but we are less sympathetic to much of those funds being siphoned off to pay for monitoring of whether the Government are happy with the way in which the services are being instituted. {**P2**}Mr. John Horam (Orpington): Further problems and controversy arise over the nature of the assessment system itself and the way in which judgments are made. For example, my local council, Bromley, received not even one star for social services. Despite being rated excellent across the rest of its

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provision, it got no stars overall because of one failure. It is a strange system in which a council can be marked down for one failure even though it has been extremely successful in all the other aspects. A number of other councils—I think that Westminster is one—have complained about that bizarre marking system.

Tim Loughton: My hon. Friend makes a good point. The system is very complicated and many of us are concerned about its accuracy and aspects of the methodology used to come up with the star ratings. We have had some incongruous results in the star ratings under the national audit system. What is even more worrying is that even councils that have come out of one or another of those assessment systems well have been severely penalised in the local government finance settlement. They have been marked down and given very poor settlements. The Government describe an authority such as mine in West Sussex as having an excellent social services department and call it an excellent council overall, but we have the third-poorest settlement in the whole country. That seems a strange way to reward high-performing councils.

I am pleased to see that, despite the Government's fiddling around with the tables, Conservative authorities are consistently the highest starred and highest performing. That comes as no surprise to Members on this side of the Committee. It would be nice if the Minister rewarded them financially as well as with her new-fangled system.

The Minister made the point that the Government are significantly stepping back and giving the councils new freedoms. That is true, but we must put it in context: these new freedoms for councils are from shackles that her Government have imposed in the past six years. The shackles of extra targets, extra tables and extra requirements were all imposed by her Government, so I am sure that she will forgive local authorities for appearing slightly churlish if, given what has been imposed to curtail them during the past few years, they are not that grateful when they receive back some of the freedoms that should never have been taken away from them in the first place—although we greatly favour their return.

The proposals will remove ring-fenced Government grants from the councils involved. Can the Minister give us an idea of how many ring-fenced Government grants remain? I believe that those in the report are just the tip of the iceberg. I believe that the proposals will axe 60 plans currently required from local authorities but, again, that is 60 out of many hundreds of plans. Can she give us an idea of what those requirements are? She made points about that in her statement on Thursday 14 November last year, when she announced the refreshed system.

To make a similar point to one I made last year, we are discussing today a grant report for the financial year 2003–04, yet that year is due to start in just over two weeks. Given the enormous amount of financial planning that council departments need to carry out, it seems very late in the day to confirm these figures—if they are confirmed by the vote of this Committee today—with only two weeks to go before they come into effect. Why are we, yet again, debating such grants so near to the new financial year?

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I should like to raise some specific points. The star ratings refresh, to which the Minister's press release of 14 November refers, announced 18 changes. The former president of the Association of Directors of Social Services, Mike Leadbetter, said that he was

    ''worried about both the quality of data and the 'simplicity of single judgments' that lay behind the star system.''

Has he not been vindicated by the number of authorities that have had their ratings changed? Eighteen out of 150 were changed, but how many appealed? Presumably, those 18 authorities did not like the star rating that they were given, and therefore appealed to the Government, but how many others appealed and were not successful in having their rating changed? Even without that figure, 18 out of 150 is a large number and does not reflect well on the accuracy of the initial assessments.

What happens to those councils that just missed out on a star or category under the national audit system, are poor, or have previously been equivalent to a three-star or excellent council but are lower down this year? What happens to the failing zero-star councils? Four failing councils—North East Lincolnshire, Birmingham, Coventry and Walsall—were told that private consultants would be sent in to improve standards. Six other councils were threatened with intervention if their performances had not improved in six months. I believe that that involves the drafting in of hit squads of high-flying private sector management consultants from Arthur Andersen, KPMG and so forth.

What has happened to those councils and the consultants' work? Have the councils improved so that they will feature in the tables? What type of reporting has there been to the Department? Is there, or has there been, any extra funding allocated to those councils to fund the private consultants' fees? How are they paid for? It would add insult to injury if those councils, which are already short of funds and cannot direct the resources to the right places as they see fit, had to pay for the luxury of consultants drafted in by the Government.

I refer the Minister to page 6, paragraphs 4 and 5 of annexe B of the special grant report. Why is there a division between ''excellent'' and ''good'' in spending grant funding allocations? Why is there apparently greater leeway in paragraph 5 on capital grant allocations for excellent or good councils, but extra leeway for revenue grants applies only to excellent-rated councils? Will the Minister state the reasons for any apparent anomaly?

Why will three-star councils receive 100 per cent. of their grant in April, while other authorities are paid in instalments? Will the Minister give the reasoning behind that? What effect does she think the two payment structures will have on the local authorities' finance planning? What are the limitations of giving greater freedom to those councils to carry over 100 per cent. of their grant from the coming financial year? Presumably that has to be spent in the subsequent financial year—or can it carry on indefinitely? Can she give us more details? What discussions has she had

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with local authorities about the payment structure? What was their reaction to it, and did they have any input into the setting of payment dates? How does she expect other authorities to implement new initiatives when they are paid in instalments? They may worry that funding will discontinue if they drop down the category rankings next year.

In annexe A there is a very precise amount of grant allocation funding to which local authorities will be entitled. My authority of West Sussex has been allocated £2,495,268 in column 2 for access and systems capacity grant. I am sure that the Minister can tell us exactly what that applies to—it is an odd phrase. Does it mean that West Sussex will have to spend exactly that amount on the allocated service, or can it take the money from other columns and grant services? What if the local authority wants to spend the grants on other issues that are not covered in the columns in annexe B? Exactly how much leeway does it have? Perhaps the Minister could elaborate on that.

Column 10 deals with young people's substance misuse planning. Why is West Sussex—along with Camden, Cheshire, Hertfordshire, Kent and Leicestershire—shown as having zero funding? That appears to be the only column with so many zero entries. Finally, given the slight—no, not slight—the enormous complication of the new rating system, will the Minister explain how it will operate in future? When will the next inspection of social services departments by the SSI and the Audit Commission take place? When will they begin, and when will the results be published?

Is it the Minister's intention that switching around extra leeway for various councils that have performed will take place annually? If so, long-term financial planning for those councils will be rather difficult, with the threat that the shackles that the Government imposed on them earlier will be re-instituted in a year's time. Perhaps she can give us more information about the future intentions on that score.

2.51 pm


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