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Mr. Woolas: It seems that I have confused the hon. Gentleman with the simplicity of the formula. The abolition of the FSS, whose predecessor was the SSA, has caused some difficulties for local authority officers when advising Members on like-for-like comparisons, but as I said on 5 December, our view was that the FSS no longer served the purpose for which it was designed, if indeed it ever did. That in itself caused great confusion and, as I shall say when I set out my four clear principles for the determination of grant distribution, we have the basis for a much greater understanding of local government finance as we move through the rest of this year and the important debate, in which the hon. Gentleman has a part, on future financing.
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David Howarth (Cambridge) (LD): Will the Minister give way?

Mr. Woolas: If I may, I shall go through the principles, after which the hon. Gentleman may be informed of the beauty and symmetry of the formula. Although beauty and symmetry are not words that come to mind that often when dealing with him, I hope that he will bear with me.

Given that we had proposed to phase in change quite slowly, it is not surprising that many local authorities commented on the impact of the damping. A number of authorities on the grant floor complained that they had gained no extra grant above the floor; for example, for capital projects. I reject that argument because the floor gives such authorities more grant than they would receive after the grant formula calculation. Other local authorities above the floor—we have heard about some of them already this evening—complained of the extent to which their grant increase was scaled back to pay for the floor applied to other authorities.

First, of course, the floor has to be paid for, and ultimately one has to strike a balance between the need for stability and allowing larger grant changes to come through. As I have explained, the overwhelming principle in the settlement is to favour stability. Secondly, it is important to note that the real-world pressures on local government exist irrespective of formula changes and are not new, although they may be more transparent—as has been outlined.

We have reformed the grant calculation system and some respondents found that difficult to understand. I readily concede that the system is still complex, but in the past we found that some local authorities were not happy with the idea of a simple system, as in their view it would reduce fairness. My policy is to make the system simpler. For the present, the new system has the advantage of removing the old assumptions about spending and tax levels—the FSS—thus devolving more accountability to local authorities, a policy that Opposition Members say they favour.

The new system is simpler in principle. Apart from the damping that I have already described, grant distribution is determined by three things: first, a relative needs formula; secondly, an amount relative to the tax that can be raised locally based on the property profile in the local authority area; and thirdly, a central allocation per head of population.

The relative needs and resource elements should be broadly familiar to Members, as the system has long contained formulaic estimates of relative need and of relative ability to raise council tax. The central allocation makes explicit what was always implicit in the system—after taking account of differences in relative needs and resources, some of the grant is allocated on a per capita basis. Fuller explanations are of course available to authorities, and to Members, in the supporting information we have provided.

David Howarth: Following the point made by the hon. Member for Mole Valley (Sir Paul Beresford), can the Minister explain how the basic amounts for each block are calculated? Is it part of the needs index or, as it appears to be, a political judgment about the balance between different spending blocks?

Mr. Woolas: The formula allocations of the seven funding blocks are based on an assessment of needs, but
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the overwhelming determinant is the amount of formula grant available for distribution, as the hon. Gentleman knows. That is inherent in the system; we can only slice the cake in so many ways. If I may, I will take this opportunity to lay to rest the accusation—although I realise that the hon. Gentleman is not making it—that the allocation, the calculations based on need in the funding blocks and the simpler system cause an unfair distribution, either due to the type of local authority or between regions in England.

In the settlement, we use population projections and estimates supplied by the ONS, as those are the best figures consistently available. Several authorities are pursuing issues about the figures with the ONS, which is the correct course of action, but the change in the methodology for calculating population received majority support in the consultation and provides a better look ahead as well as an assessment of historical trends in population statistics.

Mr. Mark Lancaster (North-East Milton Keynes) (Con): Milton Keynes council benefits from a projected population figure, as we are expanding rapidly, but what the Minister gives with one hand he takes away with the other—87.5 per cent. of what we receive is lost through funding the floor settlement, which will amount to £3.5 million next year and £6.5 million the year after. Is not it the case that the floors policy is being funded at the expense of the sustainable communities policy?

Mr. Woolas: My experience of these matters is that Opposition Members who benefit from the floors policy tend to remain mute, while those whose local authorities would gain more money, in addition to the extra money that they have been allocated—let us not forget that point—are scaled back by the need to pay for the floor, as he says, which is why the decision about stability in the system is so important.

Mr. David Burrowes (Enfield, Southgate) (Con): Does the Minister concede that there is great concern about the disparity in the ONS estimated population rates, which are not reflected in authorities such as Enfield, where numbers in all categories are increasing? The number of asylum seekers and refugees has risen, as has the number of properties. Traffic growth has risen. The number of housing benefit claimants has risen. School numbers are up. None of that is properly reflected in the ONS figures, which are based on what is now accepted to be flawed methodology—for example, in relation to port of entry questions and the figures for GP registration, which are, as the ONS itself admits, inadequate. Is not a new approach needed, which would take on board the Local Government Association's suggestion that a commission for statistics should be set up? We need an approach whereby Ministers take responsibility rather than merely conceding that there is a problem.

Mr. Deputy Speaker: Order. This is a strictly time-limited debate, in which many hon. Members are seeking to participate. Of course interventions are the stuff of debate, but they must be short.

Mr. Woolas: Thank you very much, Mr. Deputy Speaker.
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The population statistics provided by the ONS are the best, most consistent figures available to us. A number of authorities have made points during the past and the current settlement about the accuracy of the figures, and a number of consultations and debates are going on between local authorities—including, I believe, the hon. Gentleman's—and the ONS.

Several authorities have queried the funding of the new free bus travel for the over-60s and the disabled. I have therefore re-examined the proposals for the distribution of the additional money, on which we consulted extensively last summer. However, I have not found that those proposals were particularly unfair to any type of authority, nor that the extra cost of free fares, in so far as they can be estimated at this stage, place a burden out of proportion to existing public transport spending on any authority. I have therefore concluded that the settlement reflects the fairest way available to share out the money. It takes account of factors that reflect support for the disabled and the needs of areas where take-up is likely to be highest. With colleagues in the Department for Transport, we will monitor the effects and consider issues of the efficiency and effectiveness of the current arrangements for bus travel in the future.

Mr. David Anderson (Blaydon) (Lab): On Wednesday, during Deputy Prime Minister's Question Time, my hon. Friend the Member for Tyne Bridge (Mr. Clelland) specifically asked whether discussions were ongoing about free travel in Tyne and Wear. We were told on Wednesday that those discussions were still ongoing. Unless I have got it wrong, my hon. Friend now suggests that they are not. Can he please advise us?

Mr. Woolas: Discussions are still going on with the passenger transport executive and other authorities. My remarks relate to the funding formula distribution. My hon. Friend's area faces the problem because it involves a cluster of five local authorities with a passenger transport executive, and discussions are taking place there. We have been able to find £1.7 million for the metro in Newcastle upon Tyne, but that is a separate subject.

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