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Mr. Paul Truswell (Pudsey) (Lab): When is it the intention of my hon. Friend and his colleagues to move to an allocation system that is based more on the funding formula so that forces such as West Yorkshire can receive some of the £14 million that the operation of floors and ceilings this and next year will cost them?

Paul Goggins: I shall say more about that later. However, my hon. Friend is right in that we have moved to a new formula arrangement that more adequately reflects the level of need in his community and throughout the country. There is a balance to be struck between meeting need and providing a stable framework for policing in every community. The answer is that we shall move steadily towards an arrangement that reflects that need. I hope that my hon. Friend will understand that we need also to ensure that stable funding is available for every area. As I have said, I will come on to that later. Perhaps the interventions to which I have responded reflect that if I persevere with my speech, we shall arrive at some of the points that hon. Members are concerned about.

Specific revenue grants will be an estimated £1.356 million, which is an increase of 9.7 per cent. That is mainly because of the establishment of specific grants for pensions. In addition, my right hon. Friend the Home Secretary recently announced an extra £93 million for counter-terrorism in 2006–07, and £145 million in 2007–08. This increases the overall uplift in policing provision to 6 per cent. in 2006–07, and 4.9 per cent. in 2007–08.

The police grant report deals with Home Office general police grant for revenue expenditure. This includes £4.143 million in principal formula grant. The amounts payable to individual police authorities are listed in the report, which has been presented to the
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House. Additionally, police authorities will receive £3.229 million revenue support grant as local authorities. That makes a total of £7.372 million, an overall increase of 3.3 per cent. on 2005–06. Main force allocations were set out in the ministerial statement of 31 January, which was made by my right hon. Friend the Minister for Policing, Security and Community Safety.

In addition, we are providing £193 million in special formula grant, where we have decided to consolidate four specific grants into a single pot for each authority. The amounts payable to individual police authorities are listed in the police grant report. Each authority will receive the actual or estimated level of funding that it currently receives from these grants. We hope that that rationalisation will enable authorities to operate more flexibly. The special formula grant includes the £30 million rural policing fund, £69 million for special priority payments, £48 million for London and south-east allowances and £46 million in forensic grant.

Mr. Elfyn Llwyd (Meirionnydd Nant Conwy) (PC): Will the Minister give way?

Paul Goggins: I will give way in a moment.

We expect authorities to honour commitments and to agree policy initiatives to build on the outstanding successes that have been achieved in these areas.

Mr. Llwyd : In future years, will each component of the new overall grant be shown as a separate entity? For some years, I have taken an interest in the rural policing grant, which has been at standstill for the past five or six years. I should like to see an increase as and when appropriate in that limb. Will the amalgamation of four or five grants into one mean that each heading will be shown differently as a different heading each year?

Paul Goggins: I understand that that will be the case next year, when the settlement will use similar headings to this year's. I cannot confirm anything beyond that, but the hon. Gentleman makes a good point that I shall bear in mind for the future.

Mr. Blunt: Will the Minister make it clear that now that the funds have been amalgamated into one, a police authority will have the flexibility to manage its budget outside those areas, if it wishes? Will he explain why the crime fighting fund has not been put into the pot as well?

Paul Goggins: I shall come to the crime fighting fund in a little while. I wanted to make my final remark before giving way to the hon. Gentlemen to make the point that there will be more flexibility and the money will be handed over to the authorities. However, we anticipate that the work that the money has funded will continue because we do not expect authorities to walk away from it. Clearly, there needs to be more flexibility, so we are happy to devolve more decision making to a local level. However, we expect that the strands of work will continue. They are important, which was why they were funded in such a way.

Once the overall total for spending has been set, it must be fairly distributed to take account of local needs and resources. We have updated the 1995 funding
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formula, which used data from the early 1990s, to bring it in line with modern conditions. The formula changes that have been made are in line with the wider revision of funding formulae for local government services. Police funding has not been considered on its own because it was part of a wider review.

As well as updating the formula, which is 10 years old, we need, as I said earlier, to maintain the stability of funding during a period of major structural change for the police service. We have thus decided to apply a broadly flat-rate increase in general grant of 3.1 per cent. for all police authorities in 2006–07. The increase will enable all police authorities to set final budgets that do not place excessive burdens on taxpayers.

Mr. Jim Cunningham: When my hon. Friend fixed the West Midlands police budget, did he take account of the amalgamations? If so, can he identify how much will be available?

Paul Goggins: It will be possible to identify how the grant works out in each case. I will be happy to write to my hon. Friend to give him the specific information that he requires.

Michael Fabricant (Lichfield) (Con): The hon. Member for Coventry, South (Mr. Cunningham) raises an important point. The Minister said about 10 minutes ago that £125 million will be made available for the mergers, but many senior police officers estimate that they will cost in the region of £500 million, so forces such as Staffordshire, Warwickshire and West Mercia—if they can be persuaded to go in with West Midlands police—will have to cough up the rest. Does the Minister think that that is fair?

Paul Goggins: I refer the hon. Gentleman to the comments that I made earlier. It is not as simple as that. The £125 million investment will be made. Existing plans will need to be reshaped to reflect the new structure, which will involve a substantial amount of money. I do not deny the fact that an additional amount will need to be found locally, but that is where the benefits of the investment will be felt due to the greater efficiencies that come through—[Laughter.] The hon. Member for Somerton and Frome (Mr. Heath) scoffs, but it stands to reason that if four police forces that were running four human resources departments come together and have only one such department, there is the possibility of making efficiency savings—that is common sense.

Mr. Gordon Prentice (Pendle) (Lab): On the point about the cost of restructuring, we heard today that Lancashire constabulary will merge with Cumbria. Lancashire police authority has done some modelling work and tells me that Lancashire council tax payers will pay for the merger with the police element of their council tax going up by 13 per cent., although council tax payers in Cumbria will get a reduction of 22 per cent. I just wonder how that will be equalised out. It would be wholly unacceptable for Lancashire council tax payers to be paying through the nose for that merger with Cumbria.

Paul Goggins: I know that there is a lot of speculation about how much the proposals will cost in different
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areas. The figures will bear greater and closer scrutiny. My right hon. Friend the Home Secretary has established a working group of all the key partners—the Association of Police Authorities, ACPO, other Departments and other professional experts—to look very carefully at the figures. My hon. Friend is correct, however, to say that as forces come together, clearly there will have to be some process for equalising the precept over different authorities, and that will need to be done in a careful, thoughtful and planned way. The announcement that the Home Secretary has made today about the north-west and other areas is a basis for further discussion throughout those areas. Discussions will continue in the search for a way ahead on which everybody can agree. As with all things, consensus would be the best way forward.

I intend, in the limited time that we have for debate, to make some progress and allow time for other hon. Members to contribute. I say in response to the comments by my hon. Friend the Member for Pudsey (Mr. Truswell) that authorities that have had their grants scaled back from what the formula alone would have offered may feel that they are not getting their full share of the pot. However, we have had to take full account of pressures right across the board to ensure that all authorities can keep police precepts at sustainable levels next year, and that policing services are maintained. We have done everything possible for next year to maximise the increase in general grant and to increase the scope for police authorities to determine their own spending.

The broadly flat-rate increase will benefit 24 police authorities, which will receive over £137 million more than they would have done under the strict application of the new funding formula. Although some authorities, such as the one that serves my hon. Friend's constituency, are losers from this, there are in fact more gainers than losers because we are trying to provide stability. Indeed, three of the Welsh authorities will benefit to the tune of £9.3 million in special Home Office grant.

The settlement continues to take account of our commitment to improve efficiency and effectiveness in the police service. We expect the police service to build on impressive efficiency gains of some £316 million in 2004–05 and projected gains of £360 million in 2005–06, on the way to delivering on a target of over £1 billion of cumulative gains by the end of 2007–08.

Increasing the proportion of time that police officers spend on front-line policing is, of course, one of the ways forces can demonstrate efficiency gains so that skilled trained police officers are free to make the most effective use of their time. Reducing bureaucracy, exploiting new technology, more effective deployment of officers and more effective use of support staff will all help to increase the amount of front-line policing. We expect other efficiency gains to be delivered through more efficient working and commercial practices—for example, through collaborative procurement and shared services for human resources and finance.

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