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Mr. Richard Benyon (Newbury) (Con): The few words I wish to say may sound a little parochial, but many right hon. and hon. Members across the country will identify with them.

The change to a new system of local government finance will have two main effects including, first, a continued shift of resources from constituencies such as mine in the south-east to other regions. Secondly, a system has been created that seeks to disguise—[Interruption.] I hope that the Minister is listening, because that system seeks to disguise the unfairness that the shift causes in the provision of vital services by the councils that lose out.

Mr. Woolas: I think that the hon. Gentleman was in the Chamber when the right hon. Member for Skipton and Ripon (Mr. Curry) confirmed that there had not been a shift in resources from constituencies such as the hon. Gentleman's to constituencies further north.

Mr. Benyon: I will prove to the Minister that there has been a shift from areas such as West Berkshire. Whether those resources have gone north, south, east or west, I shall leave the Minister to work out, as his Department has contrived a very confusing system.

My right hon. Friend the Member for Skipton and Ripon (Mr. Curry) is quite right—we cannot look at the issue properly if we include the schools money, and the figures that I will use are for non-schools grant. Many authorities receive two and, in some cases, three times as much grant per head as councils such as West Berkshire that do worst in the system. As if the situation were not iniquitous enough, some authorities enjoy annual increases far above those received by West Berkshire. Middlesbrough, for example, has received a 5.7 per cent. increase; Stockton-on-Tees, 4.9 per cent.; Hull, 4.8 per cent.; and Hartlepool, 4.2 per cent. West Berkshire, however, must make do with a below-inflation settlement of 2.1 per cent. In short, a system that is already grossly unfair has been made more unfair with each passing year.

The predictable reaction to that unfairness from the Government is to claim that those disparities are simply a reflection of greater deprivation elsewhere, but that argument is flawed. If we use the indicator of average weekly income, the Government's own statistics show that average income in a relatively well-off area such as West Berkshire is 50 per cent. higher than in council areas with the very lowest incomes in the country. How can that disparity justify Government grant levels 300 per cent. higher in other areas?

The change to the new funding system has hit West Berkshire and a number of other south-east councils particularly hard for another reason. For many years, West Berkshire council, along with neighbouring councils such as Wokingham, were short-changed by a system that imposed ceilings on grant levels. Although demographic trends meant that the Government calculated that West Berkshire required large increases in grant to meet service needs, those were curtailed to pay for grant increases to other councils. Last year, as hon. Members will recall, the grants ceiling was removed for one year. West Berkshire received an overall increase in grant of 11 per cent., and it began to
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offset the years of bad settlements that it had previously received. A year later, under the new system, West Berkshire is no longer at or, indeed, above the grant ceiling, but is on the floor, with a below-inflation increase in its non-schools grant of 2.1 per cent. How can a council be assessed as requiring a massive increase in grant one year, but receive a grant below inflation the next?

I try not to be cynical, but one can understand why people ask if it is more than a coincidence that the funding system has been changed just as it was finally about to start to address long-term inequalities in funding for some authorities in the south-east, where the Labour party has virtually no presence.

There is a final aspect to the changes in this year's funding system that should not go unnoticed. We live in the world of the relative needs formula. The effect of this change is to render an already complex and opaque system virtually unintelligible. That is helpful, if the system is designed to move resources from one area to another without any genuine justification or accountability. Despite half-hearted Government protestations to the contrary, the old system of formula spending share effectively set out what the Office of the Deputy Prime Minister thought local councils should spend in cash terms on various services.

Not surprisingly, the old system produced some uncomfortable statistics for the Government. The last set of figures for social services FSS in 2005–06, updated for the last time in this year's release of information, showed that West Berkshire came 146th out of 150 authorities in the amount of funding the Government expected it to spend on social services per head. Effectively, the Government expected West Berkshire to provide social services by spending just £197 per head of population, compared with up to three times that sum in other councils.

Clearly, that was always nonsense, brought about by the inequity of the funding system. West Berkshire has the same demographic pressures as other councils, with an ageing population, increased cases of dementia, and so on. The needs and unit costs of social services clients are not radically different because they live in West Berkshire rather than in inner-London or places further north. Why should services to some of the most vulnerable people in our society be underfunded by the Government simply because those people happen to live in an area which, by Government calculations, is moderately better off than other areas?

The truth is that an elderly or disabled person in need of social services provision living in Newbury has just the same requirements as someone in a similar condition living in Newcastle, but the Government believe that my constituent is only a third as important as somebody living in another area. Unsurprisingly, the new system of relative needs formula provides no monetary statistics. The Government say that is because the old system was misrepresented, but it is precisely because the old system exposed such unfairnesses that it has been changed.

There are two other areas that are worthy of consideration in such a debate. First, West Berkshire receives back far less in business rates than it contributes. That is another example showing how resources are shifted surreptitiously from one area to another. It is not a system that is understood by the
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electorate out there. Secondly, the people of West Berkshire have thankfully taken the only course of action open to them that can mitigate the effects of Government underfunding: they have elected a Conservative administration, which in its first year—[Interruption.]

I hear a scoff from the Liberal Democrat Benches. The Liberal Democrats controlled that local authority, and they were happy to see the people of West Berkshire caught in a pincer movement between a Government who fiddled the funding and imposed the Chancellor's savage stealth taxes on them, and a Liberal Democrat authority that ramped up council tax year on year to pay for ridiculous spending and pet—[Interruption.] I certainly blame both, because I had to live under them for too many years. I am happy for the Liberal Democrats to see our figures.

The people of West Berkshire have now elected a Conservative administration which, despite the appalling settlement that it has received, has identified pensioner poverty as a major problem that is being exacerbated by council tax. The administration wants to keep council tax down. It has recognised the effect of council tax on young families as well. It has managed to achieve a record settlement, even in the climate that the Government have created. I am enormously proud of the Conservative administration running West Berkshire council. It is doing its best to provide quality services within a system of Government grant that is unaccountable, whose logic is untenable and which creates a disparity of funding that is totally unfair.

9.59 pm

David Howarth (Cambridge) (LD): I want to raise two topics with the Minister: first, the supporting people programme, the grant for which has fallen by 1.7 per cent. nationally; and secondly, the transparency and rationality of the grant formula.

As the hon. Member for Brentwood and Ongar (Mr. Pickles) said, the supporting people programme is admirable. Its aim is to help people to live independent lives at home. They include those who have been homeless and rough sleepers, ex-offenders, people with disabilities, people at risk of domestic violence and people with drug and alcohol problems, as well as several other vulnerable groups such as Travellers and people with HIV and AIDS. The programme provides funds in order to, for example, help people to access their correct benefit, ensure that they have the right life skills to maintain tenancies and provide advice on home security. Finding a place for someone to live is often not enough: unless they are given help in maintaining a new and stable lifestyle, they may be in danger of slipping back into their former lives.

The problem is that funding for the supporting people programme was cut last year, is being cut this year and looks as though it will be cut again next year. The origins of the cuts lie in the Treasury's belief that the programme is too expensive. However, the cost to the public purse, through the health service, the criminal justice system and the benefits system, of failing to reintegrate vulnerable people is also very high.

I understand that the Government are consulting about the future of the supporting people programme, and I hope that they will decide to give it the funding
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that it deserves. I have two comments for Ministers to consider in the course of that consultation. First, as the hon. Member for Wigan (Mr. Turner), said, there is an interaction with health spending. That is particularly true of mental health spending. There is a serious problem with the provision of mental health services in many areas. In my own constituency, cuts of 13 per cent. in mental health funding have been proposed. Some of those cuts—to day centres, for example—affect precisely the same people as cuts to the supporting people programme. All I ask is that the Department of Health and the Office of the Deputy Prime Minister work together to ensure that these most vulnerable people are not hit twice by separate Government policies.

Secondly, there is an interaction with spending on homelessness. I note from the figures before us that the special grant for tackling homelessness is rising just as the special grant for the supporting people programme is falling. That rise is welcome in itself, but Ministers should remember that the homeless are among the most important of the groups that are helped by the supporting people programme. I would like an assurance from the Government that they are not merely shifting resources around from long-term help in supporting people to short-term help for the homeless. The supporting people programme is a crucial part of dealing with homelessness. The policy of moving people through gradations of housing until they are able fully to support themselves is absolutely right, but it will not work unless people are helped to stabilise their lives. Emergency services for the homeless usually win more headlines, but long-term success depends on such programmes, and they need to be maintained.

The other issue that I want to raise is that of the lack of transparency in the system of calculating grants for local authorities. In December, the Minister said that the settlement was purely cash based and did not involve any assumed council tax levels for each authority, as in the past. That caused much amusement in local authority circles. No system for the allocation of grant to local government can be purely cash based, because all systems start with the national control total and work backwards. The formula is a way of distributing a fixed budget. Anything else would cause chaos in central Government finances. If one proceeds as the Government have, all that one does to get the figures to add up is to introduce a bit of trial and error by running the formula repeatedly, using slightly different figures, until the right totals appear.

The Government's purpose in shifting to the new system appears to be purely to avoid having to publish the assumed council tax figures for each local authority. They complained that the figures were misunderstood and that local authorities were using them for inappropriate purposes. The Minister mentioned standard spending assessments, which were misused. That is true but they were mainly misused by central Government. The SSA constituted a method of working out the share of the national total but it was used to criticise local government for spending too much or too little.

It was the other way around with assumed council tax. The assumptions were understood only too well and the Government appeared desperate to disguise them. To do that, they produced a system that is, according to
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the Chartered Institute of Public Finance and Accountancy, more complex and much less transparent than the previous system. However, it is not clear that the Government have even succeeded in hiding their assumptions about council tax amounts and the way in which they calculated the figures. Finance officers in councils throughout the country are busy working out what the Government's assumed council tax for their council must have been.

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