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26 Oct 2004 : Column 379WH—continued
Local Government Finance (Lincolnshire)
10.59 am
Mr. Mark Simmonds (Boston and Skegness) (Con): May I say how pleased I am to see you in the Chair, Mr. Sayeed? I am delighted to have secured this important debate in order to voice my concerns, as well as those of many of my colleagues, councillors of all political parties, my constituents and the people of Lincolnshire, about the inadequate and unfair share of Government funding that is given to Lincolnshire local authorities.
I have for some time been drawing attention to the transfer of resources away from Lincolnshire and setting out my arguments about it. Recently, my view and that of my colleagues has been supported by clear evidence in statistical analysis compiled by Lincolnshire local authorities. That demonstrates that authorities in Lincolnshire receive significantly less Government grant support than other local authorities in England. That is grossly unjust.
I hope that the Minister will listen carefully to the facts and arguments and deal with the inequitable circumstances affecting the people of Lincolnshire. The Government need to look carefully at the way in which funding is allocated between local authorities, so that the needs of Lincolnshire—a mainly rural, but fast-growing county—can be met.
In Lincolnshire, we receive 19 per cent. less grant, per head of population, than the English average. That means that our local authorities have £104 less to spend on each person, compared with the average English local authority. The provision of public services has already been put at risk as a result of that underfunding, and I shall elaborate further on specific examples of that.
Mr. Douglas Hogg (Sleaford and North Hykeham) (Con): Does my hon. Friend agree that that effect is reinforced by the fact that the proportion of spending funded by the council tax has steadily risen from 25.35 per cent. in 1997–98 to 31.46 per cent. in 2004–05? That is aggravating the situation that he is so ably describing.
Mr. Simmonds : I am grateful to my right hon. and learned Friend for making that point. I shall repeat that set of statistics later; it is clear that the provision of public services has been put at risk because resources have been transferred away.
The detailed analysis by the Lincolnshire local authorities has revealed some very stark statistics. Funding at the national average for Lincolnshire would allow a 37 per cent. or £15 million increase in spending on the police, a 66 per cent. or £18 million increase in spending on roads, a 4 per cent. or £15 million increase in spending on education, a 25 per cent. or £33 million increase in spending on social care and a 6 per cent. or £9 million increase in spending on waste collection and disposal, recycling, street cleaning, leisure facilities and other local services. Alternatively, council tax could be massively reduced by 28 per cent.—the equivalent of a £315 reduction in council tax for the average band D property.
The Government have assessed Lincolnshire's needs as well below the national average for all services, but the exponential growth of Lincolnshire's population has put great strain on the public services provided by local
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authorities. From 1991 to 2001, Lincolnshire's population increased by 10 per cent. compared with the national average of 2.7 per cent. That figure includes not only people moving to Lincolnshire from the midlands, as they have done traditionally, but those going to Lincolnshire from the south of England to take advantage of the disparities in house prices.
Lincolnshire is predominantly a rural county and the costs of sparsity and access to services in rural areas have not been adequately recognised by the Government. In addition, the Government targets distort priorities, because of inadequate understanding of rural communities. Local authorities, including county, district and borough councils and the police authority, have been left with no option but to increase their share of the council tax to meet the rising costs of public services. The council tax, as my right hon. and learned Friend has pointed out, covers a constantly increasing share of local authority spending in Lincolnshire as the proportion funded by Government grant declines.
The figures that my right hon. and learned Friend gave are correct. In 1997–98, council tax was 25 per cent. of Lincolnshire's funding. By 2004–05, the figure had risen to 31 per cent. That is exacerbated by the fact that there are significant pockets of socio-economic deprivation in Lincolnshire. In comparison with many areas of the country, incomes in Lincolnshire are relatively low. That means that local people pay a higher than average share of their earnings in council tax. Nationally, council tax as a percentage of annual salary is 4.3 per cent. In Greater London, it is 2.9 per cent., but in Lincolnshire it is 5.2 per cent. That is exacerbated by the fact that the average annual salary in Lincolnshire is £5,000 less than the national average salary of £25,000, and £16,000 less than the average annual salary in Greater London of £36,000.
Specific examples could, I am sure, be mentioned from all over Lincolnshire, but I want to draw on one in my constituency. Boston borough council has been forced to increase its council tax by 9.8 per cent. this year. The council was unfortunately perilously close to selection for capping by the Government. However, that was not the fault of Boston borough council, but rather of central Government who changed complicated funding formulae without considering the implications. The reasons for that are too complicated to explain this morning, but they involve transfers of revenue support grant and of housing stock. None the less, that is a significant issue, as Boston borough council estimates that it is £496,000 worse off for the next two years as a result, and that it will continue to lose out on a significant scale in the coming years. There is a direct correlation between council tax increases and the transfer of resources away from Boston and other parts of Lincolnshire.
I have written to the Minister on several occasions, highlighting the difficulties facing Boston borough council. On each occasion, he and his colleagues have failed to address the predicament faced by the council. I have the Minister's last response in front of me this morning and I am sorry to say that it is nothing short of a disgrace. I have written to him again asking for a more detailed reply to my initial letter, and the people of Boston and I await his latest answer with great interest.
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I now turn to Lincolnshire police authority, which was singled out for special pernicious treatment as the only police authority in England and Wales to receive a reduction in grant per head. Lincolnshire police received £103.72 in funding per head of population for 2002–03, but only £102.31 for 2003–04. As a result of that inadequate funding from central Government, Lincolnshire police have become increasingly reliant, as have local authorities, on funding raised through council tax. The authority now relies on council tax for 25 per cent. of its funding. In this financial year, the authority said that it needed a 5.3 per cent. increase in Government grant to maintain the same level of service, and yet it received nothing like that figure. Given that Lincolnshire is the fourth largest county by area, and has the second fastest growing population, that is totally unacceptable.
Mr. Hogg : Will my hon. Friend also make the point that in the forthcoming year the police authority will face an exceptional charge on pensions of £1.9 million owing to the fact that an exceptionally large number of officers is retiring?
Mr. Simmonds : My right hon. and learned Friend makes a good point. As I understand police authority funding, the only way in which it could fund those additional pension costs is by a reduction in front-line services. One criticism regularly made at my surgery is the severe invisibility of the police in my rural constituency. The point to which my right hon. and learned Friend referred will have a direct negative and detrimental impact on that provision of service.
The police authority is extremely disappointed by the lack of support from central Government, which will bring further difficulties in policing remote and rural areas. I agree with the chairman of a Lincolnshire police authority committee, Councillor Martin Hill, who summed up the situation as follows:
"While Lincolnshire has continued to suffer a raw deal in terms of financial support, we have succeeded in delivering effective and efficient policing."
Were the Government to provide Lincolnshire police authority with funding at the national average, there could be a £15 million increase in spending on the police force. That could be spent in a variety of areas, including on putting more officers on the beat and on greater visibility and presence, which is what my constituents want. A recent survey conducted in my constituency confirmed that tackling crime was the No. 1 priority for the residents of Boston and Skegness. That underlines the importance of adequate and proper police funding in Lincolnshire.
One of the main differences between Lincolnshire and most of the rest of England is that it is predominately rural and communities are often far apart, which means that we rely heavily on the road infrastructure. That adds to the cost of providing services in the rural areas. However, the road infrastructure in much of Lincolnshire, particularly in my constituency around Boston, is ailing and hopelessly inadequate. There is a real need for a bypass around Boston.
Statistical evidence supports the view that Lincolnshire receives below average funding for transport infrastructure, maintenance and development. If Lincolnshire received
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funding at the national average, there could, according to the Lincolnshire local plan, be a realistic £18 million increase in spending on roads and on improving cycleways and public transport. That could be spent on improving the roads, and could make a major contribution to facilitating a bypass for Boston. Sadly, the problems on Lincolnshire roads, particularly in my constituency, look set to continue while the Government remain in power.
Let me comment briefly on education funding, which comes from the local authority, particularly the county council. I accept that problems in school funding have been a factor in many parts of the country, not only in Lincolnshire. Last year, there was a severe schools funding crisis throughout the country, as many schools' budgetary costs increased as a result of higher employer national insurance and pension contributions. However, the problem in Lincolnshire seems to have continued this year.
The Lincolnshire Secondary Heads Association recently said that Lincolnshire schools received less this year than those in most other parts of the country. One college principal in Lincolnshire, whom I will not name, remarked:
"Why are they"—
"not entitled to at least the level of funding that other young people are in similar counties around us? It means that schools can't employ the teaching and the non-teaching staff and buy the equipment they need for a modern educational system."
I entirely agree, and I do not see why the young people of Lincolnshire should be penalised.
Lincolnshire is fortunate enough to have retained grammar schools, which have provided generations of young people, some of whom are from very poor backgrounds, with an excellent education. In the Government's new five-year education plan, however, Lincolnshire grammar schools are under threat. I wrote to the Secretary of State for Education and Skills demanding equal and fair treatment for all schools, including grammar schools, but unfortunately he failed to give a commitment to the fair treatment of selective schools in Lincolnshire, which will be controlled by the manipulation of funding streams. Local authorities have calculated that if Lincolnshire received Government funding at the national average level, an extra £15 million could be spent on education—most of it, I hope, on front-line services in schools.
What can be done? In the short term, the Government could ensure that the grant settlement for next year is based on data available from the 2001 census. Currently, some 1991 census data are being used, to the detriment of authorities such as those in Lincolnshire whose needs are rapidly changing and whose populations are increasing significantly. The grant settlement should also be based on the latest population estimates. The current practice of using data that are at least two years old disadvantages authorities such as Lincolnshire that have rapidly expanding populations.
The ceiling on grants must be reviewed, as local authorities with rapidly increasing needs cannot be fully compensated through the grant system given the current ceiling. Government grant funding arrangements should be simplified and made more flexible. The ring-fencing of grants to specific areas is unhelpful and engulfs an enormous amount of management time.
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I strongly recommend that the Government make funding arrangements more flexible so that local authorities can meet increased needs and demands.
Sadly, such a manoeuvring of resources away from Lincolnshire is not limited to local authorities. To some extent, it is also true of the health service, particularly dentists and the Lincolnshire ambulance service. Despite the hard work of the professionals and those who try to make the public services work, all these Lincolnshire services are suffering from being ignored by the Government. I hope that I have shown that the county of Lincolnshire has consistently lost out under the Government. I fear that this is part of the Government's ongoing and deliberate attempt at resource redistribution. Resources are being moved away from rural shires to the inner boroughs that are the Government's traditional political heartland. I hope that that trend will cease forthwith. I do not ask for special treatment for Lincolnshire or for the people of Boston and Skegness, but I do ask for our fair share. The people of Lincolnshire are not receiving it, and we demand that that changes.
11.14 am
The Parliamentary Under-Secretary of State, Office of the Deputy Prime Minister (Phil Hope) : I congratulate the hon. Member for Boston and Skegness (Mr. Simmonds) on securing this debate on funding in Lincolnshire.
The Government have high aspirations for local government, which we continue to match with proper investment. Before I comment on specific issues raised by the hon. Gentleman, I shall say a few words about the real improvements that we have made to the funding of local government since we took office and which are set out in the latest spending review.
I am pleased to say that we have been able to continue the considerable investment that we have been making in local government since we took office. That investment has seen a real-terms increase in grant of 30 per cent. since 1997. That compares starkly with the 7 per cent. real-terms cut in grant that councils saw in the last four years of the previous Government, of whom the right hon. and learned Member for Sleaford and North Hykeham (Mr. Hogg) was a member.
Mr. Hogg : In that case, will the Minister please tell us why the council tax funded 25 per cent. of spend in 1997–98 and in 2004–05 is projected to fund 31.46 per cent?
Phil Hope : I will come to that point in detail, but the simple answer is that it is because Lincolnshire authorities have been increasing council tax substantially, despite significant increases in grant each year in the past five years. I shall give him those figures in a few moments.
The other bit of bad news for the hon. Member for Boston and Skegness is that, if there were a change of Government, his councils would be in extreme difficulty. We announced our spending plans up to 2007–08 just before the summer. They mean a £7.2 billion increase in general grant for local government programmes by
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2007–08 over 2004–05; 4.8 per cent. more a year above inflation in the level of local authority capital investment; and continued funding for the neighbourhood renewal programme. Funding for local authorities' emergency planning responsibilities will also be increased and there will more money for private finance initiative credits.
That contrasts with the shadow Chancellor's position, which is to impose a cash freeze in the first two years of a Conservative Government, were one—heaven forbid—ever back in power. A cash freeze on the local authorities in Boston and Skegness would wreak havoc on the services that the hon. Gentleman has so eloquently and rightly defended. He would like further increases in grant. As well as securing a debate in this Chamber, he might like to secure a debate in his own party about its policies on local government finance.
We hope shortly to announce the provisional local government finance settlement for 2005–06. That will include decisions on floors and ceilings. I will come back to the specific point about Boston. Local authorities will know that we are considering the operation of the ceiling for next year in areas of rapid population growth. I can confirm that the latest population estimates provided by the Office for National Statistics—those for mid-2003—will be used in the grant settlement. In addition, the ONS has released revisions of the mid-2001 and mid-2002 population estimates that were used in the 2003–04 and 2004–05 settlements respectively. We are committed to amending the grant distribution in those settlements to take account of the new figures.
We have also announced that the 2001 census data—other than on population—cannot yet be used in the settlement. That is because using updated data would require the recalculation of many of the formulae used in the settlement, which would break the formula freeze to which Ministers committed themselves following the formula grant review in 2002.
Authorities in Lincolnshire have benefited from the extra money that we have made available since taking office. Lincolnshire county council received a grant increase of £30 million, or 7.8 per cent., in the 2004–05 settlement, which is above the average for county councils. The district councils also received good grant increases, with most authorities receiving grant increases well above inflation.
Mr. Hogg : Must the hon. Gentleman not also address the absolute figures? He will know, for example, that the North Kesteven rate support grant per head of the population is £122 less than the national average. Those are the absolute figures.
Phil Hope : The right hon. and learned Gentleman refers to the North Kesteven settlement. General grant to North Kesteven council has increased yearly between 2001 to 2004–05 by 6.3 per cent. That is the average yearly increase and it is well above inflation. The council has introduced council tax increases of more than 6 per cent. a year. So, it has had a 6 per cent. yearly increase in grant over the past three years, and has raised council tax by 6 per cent. over those three years. Given those figures, it is difficult to understand the statement that the council has not had sufficient resources to provide services.
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I remind hon. Members that Boston borough council received an increase in 2004–05 over 2003–04 on a like-for-like basis of 6 per cent. There were also increases of 4.2 per cent. for East Lindsey district council; of 3 per cent. for Lincoln city council; of 5.9 per cent. for North Kesteven district council; of 5.2 per cent. for South Holland district council; of 4.5 per cent. increase for South Kesteven district council; and of 7.7 per cent. for West Lindsey district council. All but one authority in Lincolnshire received grant increases of above the average for similar tiers of authority in 2004–05.
The hon. Member for Boston and Skegness is right to demand more money for services in his area. However, I say to him that since the Government were elected in 1997 we have provided those extra resources on a consistent basis. The past three years have seen substantial increases in grant to his authorities. He is right to come to this Chamber to demand more, but I hope that he appreciates that the figures demonstrate that those moneys have been given.
I shall now deal with some of the specific points that the hon. Gentleman made about particular areas. He has written to me about various complicated matters concerning formula and, in particular, about the impact of large-scale voluntary transfers. This week, he will again receive a letter, to clarify some of the issues that he has raised in correspondence with me.
Let me make it clear, however, that whatever the system for distributing formula grant to local authorities, we can only distribute a fixed pot, because there is only a certain amount of money to give out to local authorities. Distribution formulae do not confer entitlements to exact amount of grant. Decisions have to be taken on how to make the formula system work with the amounts available, and floors and ceilings are one way of doing that. However, even if we did not have those, it would remain true that in the circumstances of any particular year, a council could not rely on the formula to deliver a particular amount of grant.
We introduced floors and ceilings in 2001–02 for education authorities and then extended them to cover all authorities in 2002–03. We have reviewed their operation each year. We have always calculated floors and ceilings to provide an increase based on the actual grant received by a council in the previous year, after allowing for changes in funding and function. We have made two refinements since: one on schools funding, and one that relates to shire districts by adjusting the base position to allow the revenue grant consequences of recent capital investment allocations to come through over and above the ceiling or floor. We did that because we took the view that capital investment deserved special treatment.
I am aware, from correspondence and other mechanisms, that Boston would have wished us to exclude from the grant ceiling formula grant increases that resulted from a transfer of housing stock under the previous arrangements. In principle, it would have been feasible to make other adjustments for other cases, and we did consider adjusting for the result of voluntary housing transfers. We took the view, however, that the benefits of making many further adjustments did not outweigh the considerable disadvantage of greatly complicating an already very complex grant system.
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The hon. Member for Boston and Skegness also raised questions about funding for Lincolnshire police. I assure him that ensuring that there is good and proper funding for the police service remains a top priority for the Government. Lincolnshire will receive a general grant allocation—Home Office police grant, revenue support grant and redistributed business rates—of £60.6 million, which is a cash increase of £1.9 million over last year. If the funding formula alone had been applied, Lincolnshire would have received a grant of £60.1 million, but because of the floor of 3.25 per cent. on top of last year's grant, it will in fact receive £60.6 million—£500,000 more. The operation of the floor in the case of Lincolnshire police has benefited them to the tune of £500,000. That is a significant contribution to delivering better police services in the hon. Gentleman's constituency.
The Lincolnshire force will continue to benefit from additional resources from targeted programmes. Lincolnshire will receive resources from the crime fighting fund, the rural policing fund and the basic command unit fund, and money for Airwave, for the DNA expansion programme, for special priority payments, for community support officers and for capital grant—an additional £7.65 million. Most police authorities receive a similar range of grants. The hon. Gentleman is right to press for resources for better policing in his constituency and we are right to have delivered it to his police authority in the past few years.
The hon. Gentleman also raised the matter of education funding. Lincolnshire has had an increase in total recurrent funding of £880 per pupil in real terms since 1997, which is a huge investment in children's education in the county, and the Government are proud of that. Lincolnshire's schools formula spending share increase this year is 6.1 per cent per pupil, which is above the national average. Lincolnshire also receives transitional grant of £600,000 this year—and a further £300,000 in 2005–06—to help schools in the greatest difficulties, which the hon. Gentleman described, to balance their budgets by 2006–07. We recognise the difficulties that can occur, even with the extra money, and have responded positively.
The measures that we have introduced for 2004 to 2006 have restored confidence in the school funding system. As part of the funding settlement for next year, we have guaranteed all schools a minimum per-pupil increase of 4 per cent. for secondary schools and 5 per cent. for primary and nursery schools. That will promote continued stability and certainty for schools, and it has been welcomed by representative teachers, head teachers and school support staff on the work force agreement monitoring group.
Mention has been made of council tax. Our spending plans will provide overall above-inflation increases in funding for local authorities. In common with the rest of the public sector, councils need to be more efficient and we expect local government to contribute significantly in that respect, delivering at least £6.45 billion-worth of efficiency gains. Putting aside party political points, I suspect that there is agreement on both sides of the Chamber on the need for greater efficiency in public services, including local government services. I am pleased that the Local Government Association is committed to delivering those savings, which can and will be invested in front-line services.
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There is considerable variation between authorities in their scope for making future savings, but in local government as a whole there is scope for efficiency savings of about 2.5 per cent. a year in procurement, back-office reforms and so on, which is 7.5 per cent. over the next three years. Those savings are possible because they have been demonstrated by some innovative partnership agreements set up by local authorities, and by some local e-government initiatives for which I, as Minister, have been responsible. We will work closely with local government and with the Audit Commission to ensure that those gains can be achieved and delivered to improve front-line services.
We have worked hard to improve the local government funding formula and taken steps to ensure that all local authorities receive sufficient support and to provide a stable financial climate, as I hope I have shown in the debate. I hope that I have not been too robust, but I feel strongly about the matter. Lincolnshire county council and the district authorities in the area have benefited directly from this Government's extra investment in local government. We want local authorities to continue to improve local services. We set out in our latest spending review the framework for delivering them, while allowing local authorities to ensure that council tax increases are at an acceptable level. I cannot emphasise too strongly that we expect next year's council tax increases to be in low, single figures. Authorities will need to play their part through continued efficiency savings, but we will work with local government to help them to do so.
11.29 am
Sitting suspended until Two o'clock.
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