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Local Government Finance

7.40 pm

The Minister for Local Government (Mr. Phil Woolas): I beg to move,

That the Local Government Finance Report (England) 2004–05: Amending Report 2006, HC 856, a copy of which was laid before this House on 31st January, be approved.

Mr. Deputy Speaker (Sir Alan Haselhurst): If the House agrees, we will also discuss the other two motions on the police on the Order Paper:

That the Local Government Finance Report (England) 2005–06: Amending Report 2006, HC 857, a copy of which was laid before this House on 31st January, be approved.

That the Local Government Finance Report (England) 2006–07, HC 858, a copy of which was laid before this House on 31st January, be approved.

That the Limitation of Council Tax and Precepts (Alternative Notional Amounts) Report (England) 2006–07, HC 859, a copy of which was laid before this House on 31st January, be approved.

Mr. Woolas: On 5 December, I announced plans to the House for grant allocation to local authorities in England, and today I confirm that the Government will provide for a total grant of £62.1 billion in 2006–07 and £65.1 billion in 2007–08: increases of 4.5 per cent. and 5 per cent. respectively. On top of that, some £24.8 billion and £25.6 billion will be grant distributed by formula, which we are debating today, and those are increases of 3 per cent. and 3.7 per cent. respectively. By 2007–08, that will provide 10 years of above-inflation grant increase for councils. Specific grants will total £37.3 billion and £39.5 billion. They are a very important part of the picture because they include the funding for schools, the Government's top priority.

Before Opposition Members rush to contrast this year's formula grant for their education authorities with last year's, they should bear in mind that a fair comparison of figures must include schools funding. All of the figures I quoted are adjusted for changes in function and financing to give a like-for-like comparison. We have also provided a two-year settlement for the supporting people grant programme. Total allocation in 2006–07 will be £1.685 billion. Allocations of 95 per cent. of grant have been announced for the second year, 2007–08, so an authority's allocation will not go below that, and it may indeed be higher.

Peter Luff (Mid-Worcestershire) (Con): The figures that the Minister has boasted about of above-inflation increases refer to the aggregate of a county council settlement. While it is true that the settlement for education has indeed been significantly above inflation, the settlement for other areas has been below inflation, posing real problems, for example, for social services departments and highways maintenance.

Mr. Woolas: I am sure that we shall come on to the specifics during the debate. My point is that if one takes a like-for-like comparison of total allocation for all councils, they have all received an above-inflation grant increase. For the benefit of the House, I shall detail the floor damping levels to which his authority and representations referred.
 
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In allocating grants in advance to every local authority in England, we have put a premium on stability and predictability of funding. Those are vital to councils so that they can plan ahead for service delivery. We have now announced two-year individual allocations of formula grant for every authority, and more than 90 per cent. of all specific grants that can be allocated in advance have been allocated for 2006–07 and 2007–08. With the next spending review period of 2008 to 2011, we will move towards full three-year settlements.

Changes in grant distribution can be disruptive and I intend to minimise the extent to which that is so in the short term. In the interests of stability, we have made grant floors—a minimum guaranteed increase from one year to the next—a permanent part of the system. Further to that, for the next two years we have set grant floors—minimum guaranteed percentage increases—that are high in relation to the average increase available in formula grant. I shall list those floor figures for the benefit of the House. For 2006–07, the floors will be 2 per cent. for those authorities with education and social services responsibilities; 3.1 per cent. for police authorities; and 1.5 per cent. for fire and rescue authorities. As I have already explained to the House, that figure masks the help we are giving by phasing in recovery of the modernisation grant paid in 2004–05.

Mr. Michael Clapham (Barnsley, West and Penistone) (Lab): The Minister's new social services formula has had a very detrimental impact on my local authority, especially as we have had a 24 per cent. increase in the needs of the children of Barnsley and a 67 per cent. increase in the needs of young adults. That has caused great concern. Would the Minister be prepared to meet a delegation from the local authority?

Mr. Woolas: I am always prepared to meet with Opposition Members and my hon. Friends to discuss matters. I shall give further details of the impact of the floors—the authority in my hon. Friend's constituency is paying for floors in other authorities. That is the important point of policy that I am now addressing. I shall explain what the floor figures are for the benefit of all hon. Members, as some authorities have not yet been mentioned.

The floor figure for shire district authorities in 2006–07 will be 3 per cent. In 2007–08, the floors will be: 2.7 per cent for education and social services authorities; 3.6 per cent. for police authorities; 2.7 per cent. for fire and rescue authorities; and 2.7 per cent. for shire district authorities. We shall also phase in the changes for children's and younger adults' social services, with specific formula floors in those funding blocks.

Mr. Eric Pickles (Brentwood and Ongar) (Con): Would the Minister address a technical question regarding the floors? For the first time, supported borrowing is being addressed and, from memory, the scale-back on that is 85 per cent. Those quite desirable capital schemes are included for the first time. That often means that a particular floor can sometimes have a negative value.

Mr. Woolas: I want to deal with supported capital and the impact of the floors because the hon. Gentleman and
 
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a number of delegations I have met during the past few weeks have raised that point. I would argue that it arises from a misunderstanding resulting from the abolition of the notional spending amounts through the old formula spending share criteria.

Consultation on the settlement I proposed to the House on 5 December ran until 11 January, and in the course of that consultation the Office of the Deputy Prime Minister received 336 written representations from councils, right hon. and hon. Members and others. In addition, ministerial colleagues and I met 60 delegations. I shall deal briefly with some of the main points that were raised.

Mr. Bob Laxton (Derby, North) (Lab): As my hon. Friend knows, one of the delegations included me and representatives from Derby city council, which was one of 27 major authorities caught by the miscalculation of population figures by the Office for National Statistics in 2001. Despite the representations made by the 27 authorities affected and the fact that, by my calculations, the sum needed to settle the problem was not large—about £6.4 million—I am disappointed that the ODPM did not see fit to provide that additional sum, as it would have given Derby city council about a third of a million pounds, which would be extremely helpful.

Mr. Woolas: I recognise the point that my hon. Friend makes and congratulate him and his colleagues from the council on their professional representation. I want to make a specific point about the population statistics in relation to comparisons with 2004, 2005 and 2006, so perhaps my hon. Friend will bear with me.

Sir Paul Beresford (Mole Valley) (Con): As the Minister knows, it was generally thought that the standard spending assessment and the formula spending share were equally complicated, but the new distribution system is really confusing and difficult. Could he help by writing to me on this point? In an inner-London council that I know well, the relative needs indicator in the formula for children to social care is 0.00051700040384. That means nothing to anybody expect perhaps a man with a computer, so will the Minister explain what it means and what would happen if he wanted to put more money into that needs sector? How does he know that it will be allocated there and not distributed elsewhere by the formula?

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