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27 Oct 2004 : Column 471WH—continued
27 Oct 2004 : Column 472WH
Local Government Finance (Somerset)
3.30 pm
Mr. Adrian Flook (Taunton) (Con): May I say how pleased I am to see you in the Chair, Mr. Deputy Speaker?
Sitting suspended for a Division in the House.
3.39 pm
On resuming—
Mr. Flook : I am delighted to have secured this important debate to voice my concerns, those of county councillors of all political parties in Somerset and those of all the people of Somerset, not just my constituents. All five of us who represent Somerset constituencies are concerned about the implications of the Government's failure to factor the figures from the 2001 census into the formula spending share.
The debate is about getting a fairer grant settlement for Somerset, particularly in view of the fact that the formula used by the Government to distribute money to local authorities is very out of date. One problem is that it is based on old census data; it uses the 1991 figures rather than those collected in 2001. That skews the formulae used to distribute the grant to each local authority. It is difficult to calculate accurately the figure by which Somerset is short-changed. The council has made a fair stab at it and calculates that it is between £3.6 million and £3.8 million.
I pay tribute to County Councillor Bob Little, the local Opposition finance spokesman, who expressed concern in the council about the situation. As a consequence, he drafted a letter that was signed at the end of July by the leaders of all three parties represented on the council. All five of us local Members of Parliament, Conservatives and Liberal Democrats, received a copy.
In the letter, the county council said that it was astounded that the Government made the decision that they did in July, when they announced that the formula spending share for the financial year 2005–06 would not use the census figures collected three years ago. The Government have estimated the loss to county councils alone as being worth some £116 million each year, as the FSS fails to take into account the depopulation of the northern metropolitan areas and the growing populations in the south-west and the south-east.
What does that mean for my constituents? In Taunton Deane there are 8,000 more people than were counted in the 1991 census, while the figure for Somerset is more than 37,000 higher than in 1991. The failure to use the 2001 figures will not even be rectified for the next funding round. That is why we are here.
The Office of the Deputy Prime Minister apparently has a principle—just the one, no doubt—which is clearly stated:
"The Data to be used in grant distribution should be the most up-to-date available".
I am sure that the Minister will comment on what he considers to be the most up to date. However, we all know that the Government are using data from 1991 as the basis for the FSS. That means that the funding for services based on demography and socio-economic
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factors reflects the situation at the beginning of the last decade, rather that that at the beginning of this decade. In the past 13 years, Somerset's population has increased, but the people who have moved into the area tend to be older than those who were there before, and their requirements are different. That is not recognised if one uses the 1991 census figures.
As the population has grown larger, so have the towns. The constituency of Taunton is somewhat larger than it was 15 years ago. That means that the relative sparsity factor in Somerset has increased for those in the rural areas as well. That, in turn, means that we probably do not get the funding that we ought to for rural schools or rural transport. The upshot is that there is inaccurate and inadequate funding for services. All of us know from our constituency mailbags that authorities throughout the country are feeling the squeeze of funding pressures over and above those caused by the fact that the latest census figures are not being used.
Mr. David Laws (Yeovil) (LD): I congratulate the hon. Gentleman on securing this important debate. Is he aware in the past 30 years or so of any precedent for a Government waiting such a prolonged period to incorporate census data into funding figures? Is there not a serious danger that those delays will lead to unfairness not only for Somerset but for county councils throughout the country?
Mr. Flook : The hon. Gentleman makes a good point about precedent. If the Minister does not have the information with him today I would be interested to know at a later date what happened with previous census figures and how quickly they were implemented.
We would all admit that the FSS and its predecessor became even more complicated despite the fact that in the late 1990s the Government said that they were going to simplify the system. Since then, computer modelling has become much more sophisticated and the speed with which answers to questions should be found has increased. As the Minister will find out, and as a number of us were aware in the mid-1990s, a lot of juggling goes on to find the most advantageous solution to the FSS that suits as few councils as possible. It would be interesting for the Minister to write to us about what happened in the early '90s, '80s and '70s, and before that if possible, if he does not have the answer now.
The population in the south-west has grown, and the population mix has changed in that there are more elderly people, particularly in Somerset, which has led to inaccurate and inadequate funding for services. When it first became apparent that the Government were unlikely to use figures from the 2001 census and would be sticking with the 1991 figures, the Office of the Deputy Prime Minister said:
"The ODPM might not have sufficient resources to conduct the analytical work"—
that is very much Whitehall, mandarin-speak—
"with sufficient vigour without"—
and here it sounds like it really has been written by Sir Humphrey—
"jeopardising the overall timetable."
Mr. David Heathcoat-Amory (Wells) (Con): Is my hon. Friend amazed, as I am, at the ODPM's pathetic excuse that it does not have enough officials to deal with the update, when the same Department is spending a great deal of money and management time on engaging with the unwanted and unnecessary regional assemblies? We suffer from one such talking shop in the south-west. Does he agree that if the Government redeployed some of the civil servants trying to impose an extra layer of bureaucracy on us in the shape of regional assemblies and made them work on updating those figures, we might have a more equitable funding settlement and meet his quite legitimate concerns?
Mr. Flook : My right hon. Friend makes a good point. Just the other day, he was showing me an advertisement in the local newspaper for six new jobs to help to back up the regional assembly. That is funded by the taxpayer, and the money has no doubt come from the ODPM. It is fair to make the point that money is being allocated to the regional assemblies, but I do not wish to go down that avenue, as we are not here to debate that subject. However, if that money had been reallocated to number-crunching civil servants, we might have received the figures more quickly.
The Minister will say that that is in fact down to the Treasury, and I will come on to that point, but we are discussing how £46 billion is allocated—or misallocated, as the figures are seemingly so out of date—throughout the country. That misallocation is hardly surprising, as the figures are 10 years out of date. The Government say that it is all right because, according to the letters that the Minister sent to Members of Parliament, there is a freeze on the formulae so that the ODPM can provide every council with funding stability. That freeze locks in the advantages for those who benefit, but it locks in the disadvantages for those who suffer. Those who get too much continue with the luxury of having too much, while the others can just waddle along calm in the knowledge that they are being officially short-changed by central Government.
There is still hope that the Government may find some resources to crunch the numbers in time for the figures from the 2011 census, but we now know from the announcement made on 21 July that they will definitely not be ready for next year.
So, let us think about the amount by which council tax will have to rise in 2005–06, the next financial year. In Somerset, council tax has risen considerably in recent years because of a combination of Government failure and perhaps—how can I put this?—the way in which the council has been run. In the forthcoming increases, at least 2 per cent. of the rise that the taxpayers of Somerset will have to pay can be put down to what can be described at best as an administrative failure and at worst as a political ploy by the Government to help their friends in the north.
Is that a coincidence, just ahead of next year's election? The Minister shakes his head. Is it a coincidence that the new figures with all the adjustments will not be needed because there has been a freeze, or is it by design? However much the Minister may protest, he must know that perception is everything in politics, and public opinion on the matter in Somerset, and I am sure in the south-west as a whole, is not on his side.
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I am sure that the Minister will tell me that to incorporate the 2001 figures into the formulae is not a simple task, but what Government function is? He will tell us that if he were to incorporate the figures, it would break the funding freeze and cause large changes to the distribution. That is precisely what the people of Somerset, the county council and the district councils need and want. The Government are putting off a proper response to an ongoing trend. I am worried for the Minister's role. It is logical and it should be obvious that when the Government do get around to using the new census figures from 2001 in the formulae, the end result will be even further removed from where they would be if they used them for next year. But then again, there is unlikely to be an election the year after next.
We know that the 21 July announcement was made three weeks before the end of the Government's public consultation on local government finance amending reports. It is fair to ask the Minister why he had a consultation so early in the process if there was no intention of taking any notice of it.
Furthermore, the Government claim that they did not have a full set of the 2001 data because the Office for National Statistics released the data only in stages. I am sure that that will be the crux of the Minister's defence. What representations did the ODPM make to the Treasury—not because the Treasury is the paymaster, but because it is the Department responsible for the census—about when all the figures from the 2001 census would be available? I hope that it, too, is not involved in the largesse that ends up with the metropolitan counties of the north doing so well.
If the figures were to be used, the south-west would gain £35 million and the south-east £49 million. London would lose £50 million. Yorkshire and the Humber would be £14 million lighter, and, surprise, surprise—I am sorry to say this Mr. Deputy Speaker, because I know that you represent a constituency in the area—the north-east would be £24 million the poorer.
So, the shire counties are £116 million worse off, the south-west £35 million and Somerset £3.8 million. That would fill in a lot of potholes in Somerset's roads, buy a lot of library books, and provide quite a number of teachers and a lot more care for the elderly. The county council has called it incompetence. As a Member of Parliament, I do not think that I would go that far. However, householders in Somerset say that the £18 that they are being robbed of is yet another stealth tax. Whatever it is, Somerset deserves a full and proper explanation for that shortfall.
3.53 pm
The Parliamentary Under-Secretary of State, Office of the Deputy Prime Minister (Phil Hope) : I congratulate the hon. Member for Taunton (Mr. Flook) on securing the debate. It provides a useful opportunity to discuss the issue of using the 2001 census data in the local government finance settlement for 2005–06. I welcome the opportunity that he has given us to expand on the issues that have been raised by a number of local authorities in shire areas and their representatives. He has expressed particular concern about funding for local authorities in Somerset and about the decision not to use the 2001 census data. I am very aware of the strength of feeling about the issue, as he has just been describing it, in Somerset and other shire areas.
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Before I comment on the specific issues raised, it may be helpful if I provide some background on the system for distributing grant to local authorities, and on the improvements that we have made to the funding of local government since we took office. In local government finance settlements since 1997 we have increased the amount of Government grant given to local authorities by £19.1 billion. That is a 30 per cent. increase in real terms—above inflation—and compares with a 7 per cent. cut in the four years before 1997–98, when the hon. Gentleman's party was in government. The spending review 2004 goes further: it provides significant and continued extra investment in local government, with £7.2 billion more than this financial year in general grant for programmes by 2007–08. That is an annual increase of 2.7 per cent. in real terms.
I admire the hon. Gentleman for coming to the House to plead for more money for his authority in Somerset, as the right hon. Member for Wells (Mr. Heathcoat-Amory) and the hon. Member for Yeovil (Mr. Laws) have done for their authorities. I have no doubt that on many occasions over the coming months, Opposition Members will stand up to demand more money for their local authorities. As well as coming to the House to demand extra resources, the hon. Member for Taunton might want to have a quiet word with the shadow Chancellor, who has announced that if the Conservatives get into power, there will be a cash freeze for local authorities—not a 2.7 per cent. increase above inflation, but a cash freeze. Perhaps he and his colleagues should have a debate within their party about the impact that such a decision would have on services and council tax increases in their areas.
Of course, our priority funding areas have been education and personal social services. The latest settlement, in 2004–05, is a cash increase of 6.9 per cent. for those services. There can be little argument that we have provided significantly greater investment since 1997–98, and there is general agreement that recent settlements have offered welcome improvements in the money going to local authorities. The average full grant increase for Somerset since 2002–03 is 6.2 per cent. Inflation was way below that. Somerset county council then chose to increase the council tax by 10.2 per cent., which is regrettable for the taxpayers of Somerset, but at least they got a good deal from the Government with the grant. Taunton Deane borough council had a 3.9 per cent. increase in grant, while West Somerset district council had a 5.4 per cent. increase.
I now turn to the settlement specifically for Somerset county council. Somerset has benefited from the extra money of which I spoke. In 2004–05, it received an extra £287 million in general grant. That is an increase of £16.5 million, or 6.1 per cent., on a like-for-like basis compared with 2003–04. Over the past seven years, we have provided Somerset county council with an average annual increase in general grant of 4.8 per cent. in cash terms. That is not what I would describe as a case of Somerset being short-changed in the way in which the hon. Gentleman alleged.
The current grant distribution system was introduced in 2003–04 after a full-scale review and consultation. The system is designed specifically to take into account the relative needs of different authorities, and to determine grant on that basis. The general principle behind the calculation of grant allocations is to provide
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a basic amount per client—per primary school pupil, for example—or per kilometre of road and then to add top-ups to recognise the extra costs incurred in certain areas. The main top-ups are for deprivation and area costs, but a wide range of factors determines the amount of grant that individual authorities receive.
The hon. Gentleman is right to say that, in order to provide stability to local authorities, it was announced in the 2001 White Paper that following the introduction of the new system in 2003–04, no further changes would be made to the formulae until 2006–07 at the earliest. That decision has been known about since 2001, so the 2004–05 settlement was made on the same formulae as last year, 2003–04, and we intend to maintain the freeze for 2005–06.
Although we have frozen the grant distribution formulae, something that local authorities were pleased about because it gave them stability and certainty over a three-year period, we have endeavoured to use the most up-to-date data available each year for grant calculations. However, we have updated the data used in settlements only where it has been possible to do so without changing the underlying formula. I stress that point. Let me give examples of that, because it has been put around by so many shire authorities in a way that has been unhelpful and inaccurate, and I should like to get it absolutely clear. To give an example of where the data have been upgraded, when we calculate the older people's social services FSS each year, we use updated figures for the population aged 65 and over in each area, and we use the number of older people that each authority supports in care homes. We also update the proportion of older people claiming income support or disability living allowance in each area. Those are two of the deprivation indicators in that FSS formula.
However, where data change greatly it is generally not possible to use them to calculate FSS without amending the underlying formula. Two census-based deprivation indicators from the children's social services formula illustrate that point. Information from the new census tells us that the number of children living in single-parent households increased by 45 per cent. in England between 1991 and 2001 and that the proportion of children living in flats varied widely across the country, falling by 38 per cent. in the north-west but standing still in London and the south-east. Given those large changes in the data, it is clear that the relationship that we observe between the relative need for children's social services and the 1991 census data will not hold when the new census data are applied. In short, we would no longer be confident that the children's social services FSS was being directed to the authorities with the highest need.
I have spoken at length about those examples to show why sometimes we use certain data, and sometimes we do not use other data because they would necessitate amending the fundamental underlying formula, and we have a policy decision to freeze the formulae for three years to give certainty and stability. I understand the hon. Gentleman's desire to see the 2001 census data incorporated into the formulae for the grant system as soon as possible. I have given examples of where we do that and where we do not, and why. However, I want him to understand that we have had to make difficult
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decisions, of which those examples are just two, on whether to include the latest data available—the 2001 census data—or retain the formula freeze and provide the stability that we believe authorities require. Having balanced those arguments, we decided not to use the 2001 census data in the 2005–06 settlement. That decision was announced on 21 July.
Having reached our conclusion, we felt that it was better on balance to announce the decision as early as possible to enable authorities to make informed decisions for their 2005–06 budgets. I know that the consultation exercise was still ongoing at that time, but we decided to move early once we made that decision, to give local authorities more time to take the changes into account.
I am aware of concerns expressed by the County Councils network that the new data were not incorporated into this year's 2004–05 settlement because of lack of prioritisation of Government resources. I understand that that is the point that the hon. Members for Taunton and for Yeovil were debating earlier. In fact, we could not have incorporated the new data in 2004–05—this year—even if it were technically possible to do so because we did not have the full set of 2001 census data. In fact, we received the last set of data that we needed from the ONS only on 21 October, a few days ago. I therefore hope that I have been able to set that matter straight for the hon. Gentlemen.
As I have already said, it would be technically incorrect simply to introduce the data without first amending the statistical models underlying the FSS formulae.
Mr. Laws : Is there any technical reason why the Minister could not incorporate the 2001 census data into the 2005–06 settlement?
Phil Hope : I have already explained that where the data would affect the underlying formula, we will not incorporate them because we have chosen to freeze the formulae for the three years 2003–04, 2004–05 and 2005–06; otherwise there would be unintended consequences—the money would go to the wrong place. Changing the formulae in that way would end the freeze, which is designed to create the funding stability that local authorities require. Further research is being undertaken on the formula changes needed to incorporate the 2001 census data into the whole FSS for several services, in particular personal social services and the police. That research should conclude in time to allow us to introduce the 2001 data in 2006–07, not 2005–06. As the research is ongoing, it is not possible at this time to estimate what amount of grant any authority would receive if the 2001 data were to be incorporated in 2005–06.
In the few minutes that remain, let me just say a few words about the figures that the hon. Member for Taunton mentioned. He said that Somerset will lose £3.8 million because we are not using the 2001 census data to calculate the 2005–6 settlement. It is not actually that easy to say what the impact of the data would be, or to come up with a figure. I understand that the figure of £3.8 million—indeed, the hon. Gentleman mentioned £116 million as the gross figure for all shire counties—
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was taken from a technical paper that was discussed at official level by the settlement working group. That paper illustrated what would happen if we were simply to use the 2001 census data in the current formulae. It was also based on only a partial update of data, as not all the data were then available.
Local authority experts, including the County Councils Network, agreed that that was the wrong thing to do. Therefore, the £3.8 million and £116 million that the hon. Gentleman quoted do not accurately reflect the effect of updating the census data in the funding formulae. I regret that the figures simply are not accurate, although they seem a useful explanation for what many have dubbed the missing millions.
Mr. Flook : In which case, what is the figure?
Phil Hope : The point is that we cannot give figures at present, as they are being calculated. The scaremongering by the shire authorities—and the Members who make their case in this Chamber—simply will not do, when they themselves have been at the table to discuss these matters.
We have worked with local government to establish the best way to use the new census in the funding formulae. It is clear that incorporating the new census data will require formula changes, particularly for the social services and police, that would best be made as part of the formula review that we are undertaking.
Time is not on my side, so I shall just conclude by saying that, despite the robustness of the debate this afternoon, I fully understand the points that the hon. Gentleman raised. The Government have carefully considered the case for incorporating the 2001 census data in the settlement for next year, but in order to provide authorities with the funding stability that they have welcomed overall, we decided to maintain the promised formula freeze next year. This has been a good opportunity to debate the matter. It builds on the work of the officials' settlement working group, in which all the issues are discussed, perhaps in a slightly more collaborative way than we have managed today. We shall continue to work towards incorporating the 2001 census data in the settlement for 2006–07 as part of our wider review of the distribution formulae.
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