Examination of Witnesses (Questions 280-299)
RT HON
KEITH HILL
MP, RT HON
NICK RAYNSFORD
MP AND RT
HON LORD
ROOKER MP
15 JULY 2003
Q280 Chairman: As far as Milton Keynes
is concerned, how much extra has to be spent to get the schools
and the FE provision into place?
Lord Rooker: It is a fair bit.
It is not just about education. One of the biggest issues for
the continued growth of Milton Keynes is clearly the hospital.
When we make our announcement I sincerely hope we can make proposals.
I am not promising there will be a new hospital. We cannot get
the growth if the infrastructure is not in place and certainly
so far as the extra growth at Milton Keynes is concerned in terms
of education and health, it is fundamental that we have clear
commitments on that otherwise we will not get the growth in housing
as well as the redevelopment and the intensification of the city
centre of Milton Keynes.
Q281 Chairman: At Milton Keynes we
also have the problem of the overhead power lines to the south
that keep moving. Who is going to pay for those to be moved?
Lord Rooker: It is not just in
Milton Keynes, there are one or two areas of the country, particularly
in the London area where you really need to put the cables under
ground. It does open up enormous potential for sites. I cannot
remember the figures I was given when I was being driven round
parts of the Gateway on one occasion. The cost of putting these
power cables under ground is absolutely astronomical. There is
no value in it. You will get the value back by getting access
to the land. Who is going to pay for that in Milton Keynes? I
do not know, but somehow or other it will have to be done if we
are going to fully exploit the growth potential.
Q282 Chairman: How long does it take
to do it as an engineering project?
Lord Rooker: Quite a while. The
Communities Plan is not a five minute fix, it is a long-term plan,
the best part of 15 or 20 years and we have to plan it carefully.
A fair proportion of the expenditure from the initial part of
the tranche outside the Gateway will be for doing some of the
key planning and joining up of what is needed to exploit the full
potential. While some projects are ready to go, clearly that is
what we will be doing on the funding side. Some projects are up
and running, the planning permission is there, they have thought
through all the consequences, but there is still a fair bit of
work to be done on the planning, on aspects of the infrastructure,
whether it is the cables or whether it is the hospital provision.
Q283 Chairman: How soon will there
be a clear road map?
Lord Rooker: I would imagine that
when we make the announcement hopefully at about the end of this
month for years one, two and three there will be an implication
for other bids that we are not funding but which we want the work
to carry on and that some kind of road map would be available
and certainly what we are proposing will have to go through the
planning process in order to change the original planning guidance
for some of these areas. There will be a full consultation and
a full public inquiry over a three or four month period once the
documents are published during August. So I would imagine that
by the end of this year or early next year a road map of the future
growth potential should be available even if each particular scheme
is not signed, sealed and delivered, but the road map of the way
we are going should be there.
Q284 Mr Clelland: Could I ask Nick
Raynsford about the balance of funding review which I understand
has now met twice. I am just wondering what the emerging findings
of the review are and why the process is so slow?
Mr Raynsford: The answer is there
are no emerging findings yet because the review is still looking
at the problem and analysing the foundations for any conclusions
that the review comes to. This is probably the most significant
review of local government finance for 25 years, since the Layfield
Report. It is complex, there are difficult issues, some of them
are mutually contradictory. What we have been trying to do is
working with a very good team of people from local government,
from central government, from academic bodies, from business,
from trade unions, people from a variety of different perspectives,
trying to get a common understanding of the right way forward
in terms of the principles that must underpin any future system
of local government finance. As you may imagine, there is quite
a debate going on about what those objectives and principles should
be. The progress has been good. I think everyone who has attended
this felt that the first two meetings had been constructive. People
have not been grandstanding, they have been working together trying
to bottom out some really quite difficult issues. We have commissioned
research which is going to feed into our next meeting in the autumn.
We are about to issue an invitation—in fact we may already
have issued it, it was due to be issued this week—to people
to respond with their own recommendations and proposals to us
and we are gathering in a great deal of information that will
feed into our discussions. I hope you will understand why it is
taking time, but that does not mean this is an unreasonable delay.
This is a very serious analysis and we are giving it the attention
it deserves.
Q285 Mr Clelland: Is it likely that
the review will result in dealing with some of the anomalies which
emerged from the latest change in the financial regime for local
government?
Mr Raynsford: Obviously we are
looking at a whole range of issues, although the main focus of
the review is the overall balance of funding for local government
between central and local sources. The concern about some of the
factors that lay behind the difficulties there have been in terms
of education funding will be considered as part of the review.
Q286 Mr Clelland: Can I quickly move
on to the Comprehensive Spending Review which is this year to
have a number of themes, one of which is devolution and decentralisation.
How will this manifest itself over the next 12 months and what
will it mean for your Department?
Mr Raynsford: Devolution and decentralisation
are very much key themes and at the Local Government Association
Conference just a fortnight ago both the Deputy Prime Minister
and the Chancellor were speaking in very positive terms about
the importance of devolving more decisions to enable both local
authorities and regional bodies, where they are set up, the scope
to be able to make a profound influence on the future development
of their areas. So this is absolutely central to our thinking.
We believe the right framework is one where the Government sets
an overall framework, national targets and expectations, but where
there is more scope devolved regionally and locally for decisions
to be taken in the light of local circumstances and building on
local strengths in order to achieve the best outcomes.
Q287 Chris Mole: What does "new
localism" mean to the Government?
Mr Raynsford: This is a particularly
interesting area for discussion because the principles are exactly
the ones I have outlined, but there are different interpretations
of how those can be applied. For example, when I meet with local
authorities I remind them that decentralisation does not end at
the Town Hall. There are some local authorities who think they
want the maximum devolution of power to the council, but they
do not then see the importance of engaging local communities and
allowing some decisions to be taken at a more local level. So
there is a whole range of options and the different emphasis that
certain people put on certain elements in that tends to produce
the grit in the debate. My view is that the principles that I
have outlined in response to David Clelland's questions are very
much of the essence of new localism, central government setting
over-arching objectives but devolving power locally or regionally
to enable the best outcomes.
Q288 Chris Mole: All of the institutions
that might be proposed to have separately elected boards, whether
they be foundation hospital or police boards and the like, all
sit within a community context. We have a mechanism that works
fairly well for identifying the community's interests through
local elections. Is it not the ODPM's role to promote a role for
local government in these situations? What is the role of local
party politics in providing accountability in all of these institutions?
Mr Raynsford: You are absolutely
right, we do believe there is a crucial role for the local authority
as the democratically elected body that can keep an oversight
of all the issues within its area. Our White Paper published in
December 2001 emphasised the two critical roles of local authorities,
strong local community leadership as well as delivering quality
public services, so that is fundamental. We are passionate in
the ODPM in arguing that, but we also recognise that there is
scope for other forms of participation and there may be a case
for people to be elected to other bodies that can contribute towards
the delivery of services locally. For example, we know the participation
of local communities through the Neighbourhood Renewal Programme
and through a number of initiatives to address areas of particular
deprivation is a very powerful way to engage local people and
we certainly would not want to preclude that. There are people
who believe that there is scope for an extension of these options
in relation to citizen participation in the Health Service or
in measures to tackle crime, all part of this debate. In the ODPM
we believe that there is a fundamental role for a democratically
elected multi-service body, a local authority to be at the heart
of local democracy.
Q289 Mr Clelland: Whilst I very much
support the idea of devolution and subsidiarity, it seems to a
lot of local representatives that this is not working through
them but bypassing them quite often and foundation hospitals and
police boards are two examples. Some of the area-based initiatives
and the way that people are elected onto them seem to be ways
of bypassing the local authority rather than devolving things
to the local authority.
Mr Raynsford: I am not sure that
is the case. I do think that much more effective co-operation
is taking place between local authorities and the Health Service
or between local authorities and the police in terms of initiatives
to tackle crime to improve the health of communities. This is
all to the good and does result in different ways of working than
the traditional ones where local authorities tended to operate
in isolation. I am very much an advocate of authorities engaging
through their local strategic partnerships with a wide range of
bodies and in certain cases working with other groups which may
be elected on a different basis such as the community groups I
have described.
Q290 Mr Clelland: My experience of
local authorities was not that they worked in isolation but where
they were very much involved. I am going back a long time, but
we had the police boards, we had local authority members on the
health boards and we had the public health officer who was a member
of the local authority and it was not a question of working in
isolation, they were part of the overall structure. What we have
done is created all these little pockets which they might be represented
on but they are not part of any more.
Mr Raynsford: My own feeling is
that the greater local participation in neighbourhood renewal
areas and in community initiatives of that sort has been a thoroughly
good thing. In the past some of those communities have felt excluded
and that the local authorities took decisions that did not fully
take account of their local concerns. When I said in response
to Chris Mole's question that I believe that devolution does not
stop at the Town Hall, it also involves local communities, this
is part of the whole localist debate and finding the right balance
which does, rightly, emphasise the critical role of democratically
elected local authorities but does not preclude other ways of
engaging people is the right way forward.
Q291 Mr Betts: On underspends, when
we had your officials before us a short time ago we were told
that the Department last year reduced its underspends by four%
and had a target of another 5% improvement this year but was concerned
that it would be a real challenge to spend the additional money
that had been gained in the 2002 Spending Review. Are you satisfied
with that situation?
Mr Raynsford: Perhaps I can kick
off while my colleagues decide who is going to respond to that.
In the local government area there has not traditionally been
a significant problem of underspend. That is not something to
take particular credit for, it is because the nature of the operation
involves us ensuring that funds are transferred to local authorities
who themselves are responsible for the spending. The areas in
which underspends have occurred in the past have primarily been
in relation to other areas of the Department's operations and
at this point I turn to my colleagues.
Lord Rooker: I cannot put my hands-on
it. I think my note said to refer back to what Mavis McDonald
said, our Permanent Secretary who is the Accounting Officer.
Q292 Chairman: But that was not encouraging,
that is why we are pursuing it.
Lord Rooker: Underspends are as
bad management as overspends. In some ways I touched on this earlier
on when I said, in terms of some of our programmes, we are programming
on the basis that we know that underspends occur for the best
of all reasons, there can be unforeseen delays in projects taking
off for various reasons and therefore we are allocating funds
on the basis of making surely we actually spend the budget. I
know the Housing Corporation did this in respect of the Challenge
Fund, for example, in order to guarantee that we spent £200
million in the first year on the Challenge Fund. I think the allocation
was something like £280 million. We can send you a note on
this. We have some figures that show we are on track to do better
this year than last year in terms of underspend. Following the
re-shuffle—it was not the reason—we did have a departmental
"pow-wow" for an evening and a morning and certainly
the financial information given to us showed we were going to
do better this year than last year.
Keith Hill: I think I can probably
help on that, I have found the figures. In 2001-02 the total underspend
was 14.2%. The following year, 2002-03, it was down by almost
four% to 10.5%. The aim is to reduce the underspend by at least
a further 5% this year, to bring it down to about 5%.
Q293 Mr Betts: That is a pretty incredible
target. The Government is planning to underspend the extra money
which everyone realises is needed to be spent on important projects
by 5%.
Keith Hill: I agree with you.
It is obviously unsatisfactory—
Q294 Mr Betts: And we were told that
would be a challenge.
Keith Hill: —if you do not
hit the figures on the nail. Obviously I have talked to officials
about their experiences in various programmes. I think the truth
is that we began two or three years ago with rather ambitious
programmes in terms of how fast these programmes could hit the
road. There have been underspends in a number of areas in the
first year or two of the schemes coming on-stream, but across
the board we are now getting very close to the spending figures
that we should do and of course we can carry over some of these
underspends and ensure that we are spending as much as possible.
For example, on the Starter Home Initiative we found that there
was a £45 million underspend on that scheme. We have taken
various measures and we certainly intend to be spending the SHI
in full by the end of the current financial year.
Q295 Dr Pugh: You will be aware that
there has been a little difficulty this year with regard to school
funding. When the ministers from the DfES were interviewed by
the Education Select Committee they complained about the difficulties
they had with the modelling of how it is going to pan out for
different authorities. Was that because the Formula Spending Share
and the new arrangements are really rather opaque and complex
or because they were particularly dim?
Mr Raynsford: I think it was because
this year a number of separate issues all came together in an
interrelationship which had not been anticipated but which did
cause problems in some areas. Let me just take the main changes.
There was obviously the overall change in the local authority
funding system and that did create a wider range of different
outcomes for local authorities than would happen in a normal year.
Secondly, there were significant changes to the education of grant
funding, there was the ending of some standards funding which
had a particular impact on individual schools particularly in
deprived areas. There was also the impact of a transfer of some
standards funding from a ring-fenced fund into general funding
which again had distributional consequences. In line with our
overall approach that I have spoken about already to try to get
local authorities greater discretion but with distributional consequences
there were the particular factors relating to the costs particularly
of teachers' pay, pensions and the National Insurance increase
which again were particularly acute this year. There were further
problems relating to local authorities' spending on special educational
needs, on pupil referral units and other central expenditure requiring
spending by the local authority on education rather than the money
being transferred to schools and there were other factors as well.
I want to shorten my answer which otherwise would be very long.
When all these factors are put together the consequence is some
distributional outcomes which we were very unhappy about indeed
and which were curious and surprising to us because overall the
settlement was a good settlement, a 5.9% increase overall in terms
of general grant, 8% by the time special grants were included,
with some £2.7 billion extra available for education specifically.
My colleagues in education had not anticipated the problems that
actually happened.
Q296 Dr Pugh: I think a lot of this
would be conceded because the complexities are well documented.
Is your Department doing anything to make the outcome for next
year more predictable or less problematic or both?
Mr Raynsford: There has been no
issue which has been higher up my agenda for the last two months
and there have been many issues which have been very high on my
agenda for the last two months. We have been working very closely
with colleagues in DfES and I expect the Secretary of State for
Education and Skills to make a statement on Thursday in which
he will outline the progress we have made in trying to find a
way forward for next year which will avoid the problems that have
occurred this year.
Q297 Dr Pugh: Can I confirm that
local authorities will still have their current role in the distribution
of funds to schools?
Mr Raynsford: The answer is yes,
we expect local authorities to continue to play the role they
currently play in relation to funding. There will be changes to
the systems to ensure that some of the difficulties that have
arisen in the current year are not repeated. For example, we are
trying to bring forward the time at which certain decisions are
taken to give a greater degree of certainty and that involves
an improvement which is quite challenging because there are tensions
here. As you will know, one of the latest sets of data to become
available are the secondary school rolls. We only know those in
late October by the time they have been processed because the
schools only know those figures in September and there are various
validation checks that have to be carried out. If we are to use
the latest data that local authorities, rightly, want us to do
because it does have an impact on distribution, then that is a
major constraint on the speed with which we can announce the provisional
settlement. There are real tensions and difficulties there but
we are working to try and give greater certainty at an earlier
stage.
Q298 Dr Pugh: In the Department of
Education is there an intention to make sure that as much money
as possible goes to schools by right? Your concern is going to
be what is going to be the effect on the council taxpayer. Are
you looking at a situation next year where council tax will go
up quite appreciably simply because the money finds its way more
effortlessly to schools?
Mr Raynsford: I do find a slight
paradox in a position where in the current year when we have one
of the most generous settlements we have had in recent history
with an overall increase of the order that I have described, with
every authority getting an above inflation increase, we did see
the largest council tax increase for many years. I find that slightly
paradoxical. We obviously want to see—
Q299 Dr Pugh: So the money did not
go to the schools. Where did it go?
Mr Raynsford: —a lower level
of council tax increase next year for very obvious reasons. The
public will not be amused, frankly, with continuing increases
of the order we have seen recently and I think we should all take
that very seriously. We want a framework which ensures that authorities
do have the ability to meet their full range of responsibilities
while at the same time ensuring that education does get the additional
funding which has been allocated for education, which is a very
high priority.
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