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Mr. David Clelland (Tyne Bridge) (Lab): It is a great pleasure to follow the right hon. Member for Skipton and Ripon (Mr. Curry). He has some knowledge of these issues, and I recall that he was one of the better Conservative Ministers for local government. However, what he has just said has demonstrated that, while Ministers and Governments may change, the civil service trundles on, and what he said about inflation was astounding in its audacity. I remember him and other Ministers standing at the Dispatch Box saying exactly what our Minister has said today, reading from exactly the same script. They said that local government had
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had a bigger-than-inflation increase and that there should therefore be no problem. I have been hearing that speech for the past 20 years, and it has not changed.

Michael Jabez Foster : This is only a suggestion, but were not the Ministers wrong on those occasions? In those days, they were cutting public spending.

Mr. Clelland: I accept what my hon. Friend has said, and also what was said by my hon. Friend the Member for Wigan (Mr. Turner). At least local government settlements have gone the other way since 1997, and authorities have benefited from some improvements.

My hon. Friend the Member for Wigan also spoke of inequalities in the system, and those are what concern us in the north-east. The system is based on a flawed formula: we know that, because the Government commissioned the Lyons report in an attempt to come up with a different system and a new formula. The north-east continues to come out worst whenever a settlement is announced. This year the Minister has announced an average settlement of 3 per cent.; the average settlement in the north-east is 2.7 per cent. Along with that, we have to compete with our next-door neighbours in Scotland, who benefit from the Barnett formula. It is somewhat ironic that the Federation of Small Businesses in Scotland produced a report today showing that the north-east of England is at the bottom of the league according to a series of key social indicators, while in most instances Scotland is above the average.

The Minister has announced a 3 to 3.5 per cent. increase, but Gateshead in the north-east has ended up with 2.5 per cent., even less than the north-east average—although according to all the indicators it needs support from central Government, and although it is a beacon council that the Government constantly cite as an example of good local government. Westminster, with all its high-value properties and high incomes and all the advantages of the lucrative business that surrounds it, has received an increase of 2.9 per cent., which is set to rise to 4.6 per cent. next year. Gateshead's increase is set to rise to only 2.7 per cent. How can that possibly be equitable or right?

Ministers have tried to resolve some of the problems. They have made adjustments in an attempt to iron out some of the anomalies. As the settlement demonstrates, however, the inequities have not been removed. I believe that that is because Ministers have found the system to be so skewed that ironing out the unfairnesses in one fell swoop would require a huge shift of resources from authorities that were favoured under Tory Governments in the past, with all the political consequences that would ensue.

Ministers have therefore introduced what my hon. Friend the Member for Wigan describes as damping. The aim was to avoid the political fallout, but it also means that the full benefits of a fairer system, and of the changes that Governments have made, are not passed on to the local authorities that need them most. It is estimated that that has cost metropolitan authorities £250 million in social services funding alone, and a further £180 million has been lost to metropolitan education services.

Those inequalities have been further aggravated by a new factor in the formula: households with residents aged over 90. Unfortunately, the north-east is very low
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down in the league when it comes to health inequalities, and few of our households contain residents over the age of 90. We therefore cannot benefit from that change in the grant, but our old people still need support. Indeed, they may need even more support because of the health equalities to which I have referred.

Young people are also affected. After all that the Government have said about "Every Child Matters", how can it be right for councils in London to receive up to three times more for each child than those in the north-east? What possible justification can there be for that?

The right hon. Member for Skipton and Ripon mentioned the population issue. It is a key factor in grant distribution, but it too can work to the disadvantage of the areas in greatest need. If half the people move out of a street, we do not see half the paving stones being removed or half the street lights being turned off. The same services must be provided, even if the population has been halved. Falling populations are tied too closely to the allocation of resources, and too little consideration is given to the continuing need for services even when a population is in decline. Indeed, the need may be greater in such circumstances: it is often the economically active and the skilled workers who depart, leaving behind vulnerable people who require even more support.

The projected figures show that the population in the north-east is actually rising by 2,000 a year, but according to figures from the Office for National Statistics—as was acknowledged earlier, they are incorrect—the population is falling. So as a result of the population factor, we are suffering yet again in terms of grant allocation.

The other issue, which I am afraid the Government have ducked, is revaluation. Revaluation is important in an area such as mine. Ministers often talk about the difficulties of being in government—about how being in government is about making tough decisions and not being afraid to make unpopular decisions—but they backed away from revaluation only too quickly.

The Minister mentioned the free bus travel scheme that is due to be introduced in April—an issue that I have raised in the House several times. The Chancellor of the Exchequer announced a £350 million fund to pay for the scheme and, by all accounts, that should be enough money to finance a free bus fare system across the country. However, some genius decided that the money should be distributed through the revenue support grant system, which is in no way related to the specific issue of the concessionary fare-travelling public. I do not know which civil servant made the suggestion or which Minister took that advice, but both should be surplus to requirements. The result was that this issue got lost in the system, and areas such as Tyne and Wear, where the population is relatively low but the use of public transport and concessionary travel is relatively high, therefore lost out. However, areas with greater car ownership—where more people travel by car and fewer travel by public transport—got more money than they need to run free bus services. Tyne and Wear ended up with £7.5 million less than it needs to run the scheme.
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I have raised this issue with the Minister in the past few months and, to be fair to him, he has listened carefully and done the best that he can to resolve it; however, it has not been resolved. He referred earlier to the extra £1.7 million that Tyne and Wear has been allocated by the Department for Transport, which will help to provide free fares on the metro light rail system. We cannot have free fares on buses and not on the metro, because if we did, the metro would suffer a loss as a result of people switching to the buses. Secondly, a lot of people, particularly in the east end of Newcastle, rely on the metro rather than the buses, so it would be unfair to them if they had to pay and others did not; the situation has to be equal.

Funding free travel on the metro cost £1.7 million, but we are still more than £5 million short of the money needed to run the free bus service. That means that at next Wednesday's budget meeting, the passenger transport authority will have to cut concessionary fares for young people generally, and specifically concessionary fares for those attending college. I have been a Member of this House for 20 years and a public representative for some 34 years. I do not know how many advice surgeries I have run in that time, but it is certainly a lot. Last Saturday, for the first time ever, at two separate advice surgeries two completely different representations were made on the same issue by people who were completely unconnected. They were pensioners, and they told me that they did not want something that the Government were going to provide: they did not want free bus travel in Tyne and Wear to be provided at the expense of concessionary fares for young people. However, this is what we are having to do because the Government have failed to resolve this issue.

I appreciate what the Minister said about the legal problems that the Office of the Deputy Prime Minister faces in trying to dish out money to different local authorities. I said some time ago that if Ministers cannot resolve this issue, we will ask the Prime Minister to do so. He has responsibility across the whole of government, and not just for one Department. But I am now told that I cannot speak to the Prime Minister because discussions are ongoing. Well, I hope that the Minister can resolve this issue, because so far as I am aware, discussions that might resolve it are not in fact ongoing. The ODPM has given us the definite answer that no further money will be forthcoming. The problem therefore remains, so I hope that the Minister will unblock the situation and allow us to have our meeting with the Prime Minister.

The Government hope that the Lyons review will point the way in solving the problems associated with local government finance. However, there is absolutely no way that any review can come up with a solution that will produce a fair system that does not involve a massive shift in resources between regions, nations and local authorities—that is, unless the Government provide huge extra resources to correct the anomalies that have been allowed to build up.

I await with interest the outcome of the Lyons review, but I am not optimistic that Ministers of any Government will ever have the guts to do the right thing.

9.25 pm

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