Examination of Witnesses (Questions 129-154)
PHIL HOPE
MP AND STEPHEN
HILLIER
19 JANUARY 2010
Chairman: Welcome to the Regional Minister,
Phil Hope—thanks for coming—and to Stephen Hillier,
the Regional Director at GOEM. Stephen, I think this the first
time you have come to the Committee.
Stephen Hillier: Yes.
Q129 Chairman: Your staff
have always been extremely helpful to us, so thanks to you and
to them. Phil, do you know the purpose of the inquiry? It is on
the funding of public services in the East Midlands. You are an
East Midlands MP and—dare I put it this way—you have
been round the block once or twice, perhaps not as much as some
of us, so you know there is a strong view in the East Midlands
that services, in relative terms, are underfunded. Is there any
weight in that? What is your assessment?
Phil Hope: Thank you very much
for inviting us. I am really pleased that the Committee has chosen
this theme. I will be intrigued to see what the analysis brings
and what I will be able to take forward from it.
Before I start, may I say a few words? We lost
David Taylor over Christmas and, before I get on to today's topic,
I would like to put on record our appreciation of the work that
he did in the region as a Member of Parliament. I don't know if
you have already spoken about this. Some of us were at the funeral,
as you know. He was a strong Back-Bench MP who worked for the
constituency and the region, and he did things here in Parliament,
so I would like to put on record my appreciation of him and my
sadness that he is no longer with us. I went to the funeral—as
did many of our colleagues—which was really well-attended.
He was a very popular MP on both sides of the House and hugely
popular in his own constituency and home village where he grew
up.
I also know that some members of the Committee
will not be standing at the next election, so, whichever way it
goes, some of you won't be here. Bob is standing down and I want
to put on record my appreciation of the contribution that you
have made to what has happened in the East Midlands since 1997
and well before that in your role in local council politics. It
has been huge. You are also standing down, Paddy, so there is
a lot of change ahead. There may or may not be changes at the
election, but some changes are guaranteed because some people
will not be standing. Some of them are not on this Committee,
but I just wanted to say that to you.
Chairman: And of course the assistant
Regional Minister is standing down.
Phil Hope: Indeed.
Chairman: He is sitting behind you, so
you might want to say something nice about him as well.
Phil Hope: He is not on the Committee.
That was my dilemma, because there are others who are standing
down. But as you say, my assistant Regional Minister is also standing
down. He is not physically on the Committee—Parliament sometimes
works in strange ways—but yes, I will place on the record
my thanks to him. I also thank Liz Blackman. We have had a good
show of good MPs in the region over the past 13 years—that
is what I want to say. There are going to be a lot of changes
and a lot of faces will be missed, either because they lose their
seat or because they are standing down and new MPs come forward.
It will be a different world in June whichever way it pans out.
I think that this Committee, the work of the region and the work
of our regional MPs is phenomenal. I want to put that on record.
I have been an MP for the region since 1997.
I was a county councillor in Northamptonshire prior to that and
a district councillor in Kettering before that, so I have been
around quite a lot of the discussions about fair funding and the
broad question. May I say a few general words in answering that
question before we turn to the detail?
On trying to track the money, you are the first
Regional Committee to do the type of work that you are doing,
which is fascinating. I have to tell you that other Regional Ministers
and regions are looking quite closely at the lead you are taking.
In fact, as you know, Rosie Winterton, as Minister, has said that
they were so impressed by our evidence that they have asked other
regions to take a look at exactly the same questions about flows
of money from Whitehall to regions and localities within the regions.
As we all know, regarding regional boundaries,
what constitutes a region is not equal—different regions
have different characteristics, and we have our own unique East
Midlands, with its characteristics of urban and rural centres.
Most funding streams, as we know, go straight down to local areas—the
local authorities or primary care trusts. You can then sort of
aggregate and add them up and ask, "What does that add up
to?" But that is not regional allocation, but local allocation,
which is based on national formulae. Most of those formulae for
each Department are based on things such as population and sparsity,
but on particular needs, health, for example, needs a Department
of Health formula and crime needs an analysis on the basis of
police formula.
Over the years prior to 1997, I fought quite
hard for changes to some of those formulae. I thought that a national
formula wasn't getting it right, in different ways, particularly
for local government. I was a county councillor in Northamptonshire,
and I always felt that there was a cliff edge between Northamptonshire
and London and the south-east. We fought for those changes.
Now that we have the new funding formulae, one
of the questions is, "Do we think those new formulae are
right?" I am going to have to think they are as good as they
can be, given political and professional judgments about the right
ways to do them. However, the question then is, "How do you
roll out a formula?" If you say that you got this before
and the new formula says that you should get this, you can't implement
the whole formula the day after, because some areas will then
be catastrophic losers and others will be huge winners. So we
have a damping mechanism to roll the full formula out, with floors
and ceilings, over a period of time. The question for me then
is not, "Has the East Midlands lost out in terms of those
national funding formulae?", unless there is real evidence
in some way that a national funding formula somehow discriminates
wrongly, but "Will the pace and damping of the roll-out of
the formula disadvantage us compared to other regions, which are
also experiencing problems as damping happens?" It feels
to me as though we're getting the share that is right for us,
given our needs, if you are going to compare region to region,
and given that the national funding formulae apply equally everywhere,
even though they create unequal outcomes everywhere—that
is what formulae are for.
Then we get into programme budgets and additional
things other than formulae. Do they seem to work fairly, for example
Building Schools for the Future? How are they allocated? I will
be absolutely fascinated to find out what this Committee unearths
in that sense, because I am not persuaded that there is any evidence—unless
you've unearthed some—that those programme budgets or funding
formulae are in some way targeted away deliberately, or even undeliberately,
and disadvantaging the East Midlands compared with others. It
might be that different parts of the region are getting more or
less, for example, because we have targeted Nottingham to get
a roll-out of some Building Schools for the Future before Northamptonshire,
but that's an internal rather than a inter-regional thing—if
that is the question that we are addressing.
I've had a look at lottery funding, and I would
be interested to hear what the Committee finds out about that.
I think of myself, in those terms, as a constituency MP, and we
all do this—we try to get bids in from our constituencies
for the lottery money, and we're more or less successful. As the
Regional Minister, if it seems to me that we're not bidding well
enough, the ambition is not high enough or that we're not putting
enough bids in, could I do a better job—I haven't been doing
a job at all, as it were—of raising awareness and encouraging
bigger bids for the lottery? I feel that I could do something—it
would be the right and appropriate thing to do.
There are things such as transport. We are bidding
for electrification, for example, which isn't done by the funding
formula—there is a pot of money for rail. I think it is
my job, which I have been doing, with whatever success, to campaign
for something for this region. If we get it, I guess another region
won't, because it is a single pot of money, and it's just about
demonstrating the value for money, the environmental gain and
the importance to the region's economy in winning that cash. We're
in the middle of that debate at the moment with transport.
Lastly, you will be getting submissions, and
you've had our submissions. Some of the changes that have been
going on are quite interesting—grant funding for police,
for example. The real terms increase for funding across England
has been about 20% since 1997; for this region it has been 27%.
We have had more than the English average. That is because of
the national funding formula, rolling out locally and then divvying
it all up in a region and seeing what comes out. I do not think
that is because we have lobbied for more money for the police
in the East Midlands. I wouldn't lay claim to that; I haven't
done it and wouldn't want to. It is a national funding formula
that comes out with that figure at the end. We have many more
hundreds of doctors, nurses, GPs than before. We have seen child
tax credits benefiting hundreds of thousands of families in the
East Midlands. In terms of health, we have seen some major investments,
not least in your own constituencies. It is probably true that
in health we have been playing catch-up in the past two years,
as we have seen some of those funding formulae and analyses are
not given to target. There have been significant changes this
year and will be next.
To answer that question, it feels to me as though
the national funding formulae have been applied fairly; we have
received what we might expect to receive, given that those national
funding formulae are based on criteria around population growth,
density, sparsity and so on. Therefore, we have not, as it were,
been disadvantaged as a region by those funding formulae. Indeed,
there are some examples in the statistics where we have a percentage
rise. That doesn't mean that we should not fight for more for
the region, but it is about the appropriate role of the Regional
Minister in doing that, which I don't think is appropriate for
funding formulae in that sense.
That was a bit of a long answer but I wanted
to set the scene about the way that I see it. I am intrigued to
hear the Committee's thinking and analysis on that.
Q130 Chairman: There is a
lot there, as you said. We will take it as read that there has
been massive investment in public services across the board.
We will come to the Midland main line later
on—I am conscious that you have been taking a real interest
in that. Let us return to the funding formula argument. As you
are a Minister at the Department of Health as well, you will know
that there are nine PCTs in the East Midlands. All of them have
a target funding formula—a level to reach—and you
will know that eight of the nine are below that target. That feels
like underfunding to me.
Phil Hope: Whatever the reasons
for the national formula, our PCTs, under the old formula, have
not been getting the figure to target that they should. I am quite
pleased that two years ago the Department looked at that, revised
the formula and, for this year and next, the average across England
is 11.3%; the average for the East Midlands is 12.3%. Indeed,
in Bassetlaw I think the total figure increase is going to be
17%, which is the catch-up if you like, to get us to target against
the needs as assessed.
The trouble is you cannot compare going forwards
and going backwards because there is so much change in terms of
what goes into the formula and the calculations. Clearly, for
this year and next we are getting more now. Therefore, we are
going to reach the target that we should be receiving more quickly.
Particular areas, such as Bassetlaw where this has been the case,
are getting the resource now to meet the health-needs analysis
that the formula provides.
You are right to identify health as something
where there was an issue in the past. I think that has been grasped
and the East Midlands is now making very rapid progress to try
to get to a position where we achieve those targeted amounts.
Q131 Chairman: I accept that
there has been real growth but there is still not a target. I
wonder whether you and your officials might do a little bit of
work—we could do it ourselves—to say, "If we
were at target now, how many extra millions would it bring the
East Midlands?" Clearly, there is a view that there is an
entitlement to that money. That is what the formula produces.
Although progress is being made, it is not actually being delivered
just now for people who, on your own terms, are entitled to it.
Phil Hope: This is about how quickly,
once you have a formula, you move from how it was before to where
you want it to be, so that we get the resources to meet the needs
identified by the formula. The pace of that change speeded up
dramatically over these two years, and a good job too, given that
we will be going into another comprehensive spending round review
and we want to be at the higher base. I think we are in a position
where, while still regretting the fact that in the past we haven't
had a quick enough process to achieve that, we are now making
it right.
I am not going to claim credit for that; the
decision was made back in 2007, before Regional Ministers existed,
I think. If I had been lobbying, it would not have been special
pleading for East Midlands; because this comes down to the PCTs,
it would have been about making sure that we got the allocations
for the PCTs—as it happens in my region—up to a speed,
at a pace and to a level that gets us to the target that we think
is right according to the formula that assesses need in those
areas. We had eight or nine of the nine PCTs that were furthest
away from that target, so it is right that more money is now being
put in by the Department to make that happen, but I am not going
to claim credit for making it happen. It happened because the
Department said that we need to get those PCTs up to the target
level quicker.
Q132 Chairman: One of the
things that we all recognise is that there has been real substantial
investment in public services. As you rightly say, we are not
in the next spending review yet, but it is not very far away,
and there are some who say that we are entering an age of austerity.
It is easier to get up to target when there is money available
than when there isn't. How confident are you that those funding
gaps can be met in the next funding round?
Phil Hope: I think different Departments
will now be in discussions with the Chancellor about the comprehensive
spending review, as we get that process to start later on this
year. It is about not only seeing if we can increase the resources
that are available to get people to target, but using the resources
we have more effectively. You will be aware of the work we are
doing in the Total Place pilots—Leicestershire is one of
them. Those pilots are discovering a number of interesting aspects
of analysis about the amount of public money that is spent, how
it is spent, whether you could join that spending up and look
at what is happening in different care pathways and so on, and
whether we can make better use of existing resources so that we
can both provide better services, care and health for people on
alcohol and drugs—that is one of the themes—and save
money by spending more efficiently. We have talked about a Total
Place approach for one part of the region—Leicestershire—and,
as we go forward, I am also intrigued to think about whether we
could have a regional Total Place analysis.
I am asking the Government office to consider
whether we could take a look at one of the issues that I have
personally been pursuing as Regional Minister—the PSA 16
area. That is about whether people who are furthest away from
employment or housing—disabled people, learning disabled
people, people with mental health problems and so on—particularly
at a time of recession, find it even harder to get an independent
life and a job. Could we be doing better with the spend at a regional
level, and have a regional Total Place idea of what we might do
to help those groups? I think this is exciting. We have already
got a sounding board that I created at the start of my tenure
with this portfolio. Can I ramp that up to be more than a very
good and effective sounding board, with people talking about each
other's work? Can we take a look at this resource and at what
is being spent, and do more to help those people to get a job
and somewhere independent to live? As well as arguing for more
resources, a key regional job that we might think about doing
is using existing resources more effectively.
Q133 Chairman: You've just
used the phrase "arguing for more resources". How far
do you see your role as Regional Minister as arguing for more
resources for East Midlands? If you do see that as part of the
role, how do you go about that?
Phil Hope: First, I don't see
it as my role to lobby for some regional dimension to a national
funding formula. I think that national funding formulas are there
are to ensure that everywhere around the country gets fair funding
for police, health, schools and so on. If you aggregate that up
and get a regional picture, if there is a regional difference
between two regions it is not then for me to say, "We want
more for our region," because it has been allocated according
to factors such as sparsity and population and so on, so that
different parts of the region get what they want. I do not think
that it is my job to do that. If the Committee sees evidence that
there is a role there, I would be interested to hear both the
political and also the intellectual arguments for why that would
be right. I can't see that argument, if I'm honest.
There are other areas where I do think that
it is right for me to lobby hard for resources. I mentioned electrification
already and that has specifically meant me meeting the Secretary
of State for Transport and the junior Minister responsible for
rail in the Department for Transport, and joining other key stakeholders
in the region—because this is of regional benefit—leading
and lending my name to that, and then having meetings in which
we eyeball Secretaries of State and say, "We want this for
our region." I do think that is, and has been, my role.
If I take the example of regional funding and
the strategy on transport and housing, I have influenced it and
advocated on it. We have had some success, particularly on bringing
forward some of the spend for road building—for example,
the A46. I directly got involved in doing that, talking about
it and making the case and the submissions to relevant Government
Departments, so I think that that is an area where I have been
busy and active, and there has been success. There may be some
more success to come on notification—HS2 and so on—in
times to come.
It is also about getting the regional plan.
What we do on the Regional Economic Cabinet is challenge each
other to step up to the plate on issues that need sorting—most
recently on Cottesmore. We met some of the key people there on
Thursday and a decision is being made. It affects a large chunk
of the region and a large number of people. It is more than the
MPs' job; I perceive it as appropriate in my job as Regional Minister.
I wouldn't see it as my job to intervene in an argument about
a particular building in Nottingham or Lincoln. I make a judgment
and I stand or fall by those judgments. It feels right to me not
to intervene in something that is, rightly, the job of the local
MP, or maybe two or three MPs, to lobby for. However, for something
as big as the change in Cottesmore I think that it is right that
I'm ensuring that the partners—Jobcentre Plus, the RDA,
local authorities and so on—are looking at it in the round
and that it is effectively responded to in the best possible way.
Q134 Chairman: You mentioned
the background, the regional spatial strategy and the regional
economic strategy, and the East Midlands has a fast growing population
and a big housing programme. How far do you think that public
sector resources and infrastructure—health and education—is
following extra demand?
Phil Hope: There is a question
about how formulae are based on ONS statistics. We have been discussing
and thinking about that. At one point five or six years ago in
a previous ministerial role, I might have had responsibility for
the ONS. We base our formula on the 2001 census. It gets updated
with data produced by the Office for National Statistics, and
those updated figures are used to inform comprehensive spending
reviews. The next set of updated data will be available later
this year and will inform the allocations for the spending review
coming, from 2011-12 onwards. We will not actually get the fully
updated new census data until 2011, and even when they are collected
in 2011, people have to do clever things with them and it takes
time before they can inform things. There is always a sense in
which the population data is lagging and getting more out of date.
Even though it is updated by clever people that do that kind of
thing, inevitably there is going to be some lag in some of the
way that the formulae influence some of the spending
It is interesting that in some areas, such
as schools for example, if you build a new housing estate they
do have the ability to say, "We can predict these number
of children and therefore we need a primary school of this size
and if it gets bigger we might need a secondary school."
There is a more here-and-now action response to some aspects of
funding in that sense, but I share the concern that we have to
do this in some way. We do the census every 10 years. In between,
it increasingly needs to be tweaked and updated to reflect population
changes that are going on. Those changes are then fed into formulas
that make a difference.
The only other comment I would make is that
we have the migration impacts fund now and the region benefits
by £2 million or £3 million. We allocate that according
to best use of data for migration impacts on local public services.
So I share your view: if you have a population-based allocation
formula, how often and how regularly should you update that, based
on a census that goes on every 10 years and is then amended? These
are real challenges, but we are doing it as best we can. The Government
are doing the best they can.
Does this region, in some way, disproportionately
suffer from lagging population because we have growth that isn't
compensated for? Certainly, if you have evidence about that I
would be interested to hear what that was and we might, therefore,
take that forward.
Chairman: Let's shift focus a bit. Bob?
Q135 Mr. Laxton: Can I focus
for a moment on your specific role as Regional Minister, your
relationship with regionally based organisations and how that
fits into what I describe as your double-hatted role as a Regional
Minister and a Minister in the Department of Health? I raise that
because the Chairman of the East Midlands Regional Assembly expressed
some concern to us about opportunities to meet with you as a Regional
Minister. I suppose it's fair to say that, whereas you have two
hats, he has four or five hats on—I suspect, I don't know.
He's probably met with you informally, or with different hats
on, but in his role as chairman of the East Midlands Regional
Assembly, he expressed real concern to us that he'd had no opportunity
to meet with you in 2009. Although we are early in 2010, he had
a meeting scheduled with you in February, or something like that,
but that might have been cancelled. How do you respond to that?
How do ensure that the regional bodies such as the East Midlands
Development Agency and such as the East Midlands Regional Assembly,
although that is finishing, have sufficient opportunities to meet
with you? Can you give us some indication of how your working
week is split between the health service and regional activity—what
are the proportions, on average?
Phil Hope: We had a brief stab
at this last time I appeared before the Committee; I will see
if I can give you a more factual basis today.
First, since I was appointed as Regional Minister
for the East Midlands in February 2008, my total number of visits
relating to regional meetings is 89. I have been meeting people
and talking to people, hearing cases and dealing with issues.
That figure does not include meetings here with other Regional
Ministers in the Committee of Regional Ministers, or on the Regional
Economic Council. This is just, as it were, me doing my business
as Regional Minister. If you average that out—it is always
difficult—I am doing some kind of regional activity about
once a week. It is not as evenly spread as that. Obviously there
are peaks and troughs, but it is about once a week. Given that
I am Minister of State for Care Services and given the way that
Regional Ministers are currently configured—each Regional
Minister has a departmental portfolio and a regional portfolio—I
probably spend about one day a week, or about 20% of my time,
on it. I think I gave that figure to the Committee last time.
That stands as the way to do things.
On the role and my relationships with people
in that period, I was appointed before the global economic downturn
happened. I originally spelled out a number of priorities and
arranged for regular meetings, not only with the chair of the
East Midlands Regional Assembly, but with the chair and chief
executive of the East Midlands Development Agency. I had a view
of a kind of triumvirate, which had a role relating to not only
economic development, skills and jobs but housing, environment
and so on. I had a complete list of priorities—not everything
was on it, but it was a long list. Then the recession hit us.
Q136 Mr. Laxton: The chairman
said to us that in 2008 he had a series of five meetings on structural
issues and broader structural issues. Then in 2009, there was
a dearth of meetings.
Phil Hope: The agendas for those
meetings were about structure, because we were going through the
sub-national review and thinking about what would replace elected
regional assemblies—leaders' boards, how they would be structured,
who would be on them, how they would get on them and how they
related to the East Midlands Development Agency and the regional
strategy. We looked at the structural change, the spatial strategy
and the economic strategy to see how they would knit together
to form one single integrated regional strategy for the future
and how the two organisations would work. They were not the most
energising of meetings, but we talked a lot about that stuff.
Decisions were made and then those things were no longer needed.
I then broadened my triumvirate into the Regional
Economic Cabinet, because it seemed to me that the task confronting
the region in the downturn was bigger than the three of us could
manage. In other words, we needed other partners to come to the
table, not least representatives of business communities, Jobcentre
Plus and the Learning and Skills Council. I therefore changed
the structure and reduced the number of meetings that I was having
on an individual basis and replaced them with the Regional Economic
Cabinet. I have met Councillor Parsons on many occasions on those
Regional Economic Cabinets, and we have gone together to many
events, such as the launch of the electrification of the main
line. We do things together.
There has been a deliberate change on my part
to move from a small group leading the region into a larger group
leading the region, and playing that leadership role within the
region to reflect what I thought were the new demands of the economic
downturn and the impact that that would have on the region, to
ensure that we did things jointly and with a wider group of players.
In my judgment, that was the right way to proceed.
If Councillor Parsons is feeling a little hurt
that I do not take him out on dates on a one-to-one basis, we
certainly party together as a gang more often that he has possibly
implied.
Q137 Judy Mallaber: Can I
ask for a little information on exactly what the Regional Economic
Cabinet does? When you get together, do you have action points,
or is it a talking shop? Does it lead to concrete results?
Phil Hope: I am reminded that
I am meeting Councillor Parsons on 10 February, so I am taking
him out on a date.
The Regional Economic Cabinet was an innovation.
Every Regional Minister took up that approach when the recession
became apparent, so there are regional forums and they are slightly
different in each region. Some of them are called cabinets and
some are called forums and so on. I have three purposes for the
Regional Economic Cabinet. The first is to gather information
that I can then use when I am informing Government about what
is going on in our region, particularly in jobs, businesses and
skills. I have been hearing and giving regular reports.
We meet and have a dash board of statistics
and graphs that show what has been going on—jobs being lost,
jobs being created and analyses of business growth and so on.
We have views coming from Jobcentre Plus, EMDA and from local
authorities, so we hear what is happening. The business representatives—people
from the CBI for example—will say what they are hearing
from their colleagues in the East Midlands. They say whether something
is going down, or if something has stalled, and whatever else
is going on. We then feed that through so that intelligence is
being taken at the centre about the impact of the downturn on
the region. That is a way of gathering information and passing
it through to Government.
Another point people mentioned was that it
would be helpful, given those problems, if the Government did
the following things. Access to finance was something we have
talked about—in fact, in every Regional Economic Cabinet
meeting, the question of bank lending and of dealing with the
reshaping of banking has been raised. I have sent messages about
the regional experiences we have had, stating that bank lending
has not been what we expected it to be. I have taken action myself
by meeting with the banks, and I will meet them next month as
well, carrying on being the voice of the region, as it were, on
the basis of the information we have been given.
The second major role we play is collaborating
together. A good example that came out of this week's Regional
Economic Cabinet meeting was a discussion about housing. One of
the casualties of the recession is housing, which has come to
a grinding halt—it didn't come to a complete halt, but it
certainly slowed down. The Government intervened and created Kickstart.
A number of new housing projects will now get under way on the
shovel-ready sites we have in the region. We bid for and won substantial
amounts of money to get housing going. The Learning and Skills
Council is working with Jobcentre Plus to ensure that the contracts
that go out for those housing sites insist on apprenticeships
from the region being used and apprentices being employed. It
is that joining up of different players to maximise the outcome
that we have for the region. I can think of many examples of that
kind, but I though I'd give you one tangible example of practical
working we do together.
A third area is when the Government have done
something, and "Backing Young Britain" is a good example.
We launched "Backing Young East Midlands", which was
when the regional cabinet and I said, "Right, young people
are likely to be worst hit by the recession, and these are the
ones that find it difficult after leaving school or college to
get a job, so let's have a call to action for all private companies
and third sector and public organisations to take on young people
for work experience, internships, voluntary work and apprenticeships."
That way, we will not have a lost generation, which is what happened
in the 1980s, when there was nothing for young people and they
just moved from being out of a job to being workless and then
to never working. We still see some of the consequences of that
failure even today.
We must stop that failure happening. I am delighted,
because all the bodies that sit on the Regional Economic Cabinet
are united behind that campaign and are taking that out through
all their networks to encourage people to take opportunities.
I am just giving an example—this is not a comprehensive
list—of the three ways we work as a regional cabinet.
Q138 Judy Mallaber: I'm diverting
you slightly, but in all of that do you get complaints about funding
in the region? Has that just not featured in all the discussions
you have had on the economy, because they obviously cover the
broad range and would touch on almost all the areas we have been
looking at in terms of funding?
Phil Hope: The agenda is about
what the needs of the region are, so we construct the agenda for
the Regional Economic Cabinet based on what its members say is
of concern to them. I know this session is about public funding,
but what we have been really focused on over the last year is
the banking system. It is about providing financial help for families
in terms of mortgages and repossessions, but primarily it is about
businesses not getting the loans and extensions of loans they
need during the downturn. We have done a lot of work and made
a number of representations, and I have had meetings directly
with banking representatives from the region. I have now appointed
a representative from one of the leading banks in the region to
sit on the Regional Economic Cabinet, because the biggest concern
people had, in terms of bidding for money, was not so much about
public sector money, but about the private sector—the banking
system—pulling away from businesses.
The Regional Economic Cabinet meets every month,
and at the meeting on Monday a particular concern was raised by
businesses. The evidence shows that we are now going into recovery,
but it is fragile, and one of the businesses representatives on
the cabinet made a very strong plea that we sustain public sector
funding in the period ahead because so many businesses are surprised
to benefit from that level of public sector spend. We could easily
jeopardise the recovery by making the wrong decisions. That is
an important message that I am taking back to Government as a
result of that discussion on Monday.
I want to be very clear, on the question of
whether we sit down to discuss police funding, health funding
or housing, that we have not yet discussed police or health or
local authority funding in that way. We did discuss housing on
Monday. I specifically asked about that because I was worried
about the effect of the downturn on housing. I was pleased that
we have won extra money for housing because this region got its
act together. We were able to demonstrate to DCLG that we had
got these sites and they were ready to go. We put in bids for
the Kickstart Housing Delivery programme, rounds 1 and 2. I am
not sure whether your constituencies have benefited from that,
but I know that many have. As a result of being ready and able,
we were able to win more resources than other regions comparatively,
not because of a formula that allocated them, but because we had
our act together.
Q139 Chairman: It will not
surprise you to know that we have been looking at public spending
per head in the East Midlands compared with England and the UK
as a whole. In almost every spending area, the East Midlands gets
substantially less per head spending than England, and certainly
than the UK as a whole. On the face of it, that does not seem
right.
Phil Hope: The difficulty of taking
any geographical area, drawing a line around it and asking, "What
does this area get?" is that whether or not the amount per
person is more or less than an average across the whole country
depends on where that line is drawn. It comes back to the intellectual
argument. Is it because there is something wrong with the funding
formula, which is discriminatory in some way; or is it because,
when a fair funding formula is rolled out—after taking into
account population growth, size and sparsity and the other such
things—given our geographical boundaries and the fact that
we are all part-urban, it adds up in our region to an amount per
head that is different from another region? I suppose the question
I am asking is: is there a problem? If it feels as though there
is, I would be interested to hear the intellectual case for arguing
for regional weighting, which is I guess where this takes us.
If there is regional weighting, what would be the justification
for it?
Q140 Chairman: Let me give
you an example of regional weighting. Public spending per head
in the East Midlands is £6,827, which is 32% less than in
Scotland where it is £9,032. Both you and I knock on a lot
of doors. People in Hopwell, for example, and I guess in Corby
would say, "On the face of it, this doesn't seem right. Why
are our relatives Scotland"—and there is a good connection
between Corby and Scotland—"getting more Government
money spent on them?"
Phil Hope: You have conflated
two issues, which I would like to separate out. One is the Barnett
formula, and as a Regional Minister I don't have a view about
that.
Chairman: Everybody else does—go
on.
Phil Hope: The Barnett formula
is the way that we allocate block grants to Scotland and Wales,
and the rest is rolled out by a national formula for England.
There may or may not be a case for arguing for changes to the
Barnett formula, but you will forgive me if I do not enter into
that territory. That is way beyond my ministerial brief.
That is different from the question why, if
you take a geographical patch and add up all the spending in that
patch, the per head figure is different from the figure for another
geographical patch. That is because those funding formulae take
into account the size of the population and factors such as sparsity
and so on when they arrive at their amounts. In that geographical
patch, in this case the East Midlands, it adds up to an amount
per head. Is that in itself a problem? One might ask, "Why
do they get more in that region than in that region?" but
that is because, given the population and the way the formulae
are allocated, that is how it works out. It is not because there
has been regional discrimination. There has been a fair national
funding formula. People might want to argue that the funding formula
is not fair, and that is fine, but is it unfair for those reasons?
I don't see evidence of it being unfair for those reasons.
Stephen Hillier: I was going to
add a gloss to that from one service that I know quite well from
my background, which is schools. I want to mention the London
effect. When you look at an England average and compare all the
regions to that, the England average is always heavily inflated
by the uplift for London. If you look at figures for schools in
all the regions other than London, they are bunched around £4,100
per capita to £4,300. The London figure is £5,260, which
inflates the England average to nearly £4,400. So actually
the East Midlands are not doing too badly compared to other regions,
but we are all doing badly compared to London, for reasons everybody
will understand.
Q141 Chairman: Let's just
pursue that for a minute. Let's stick with education. We've had
evidence from Leicestershire county council, which says, "The
amount per pupil received by Leicestershire is 5.4% less than
the average of neighbouring counties, 6.2% less than average of
shire counties, 11.6% less than the average of England, 7.7% less
than Rutland and 13.5% less than the City of Leicester."
That's not right for kids who go to Leicestershire schools, is
it?
Stephen Hillier: I would go back
to the discussion that we've had so far, which is that that would
be based on national formulae. There would be a whole complex
range of factors—the way in which deprivation is measured;
all of these things are consulted on, on a regular basis. Authorities
make their representations. Generally the LGA has been very supportive
of the way these different formulae have come out, and the one
thing I would say about the school service is that I think it's
better at dealing with the population lag than some of the other
services, because there are these annual surveys of pupils, which
keep that reasonably up to date.
Q142 Judy Mallaber: Can I
please get you to acknowledge that the fact that you have a national
funding formula based on consistent regression analysis over a
very substantial number of factors does not necessarily mean that
you therefore have to say that that is fair? I say that from a
position in Derbyshire where we made our comparisons on education,
when I was first elected, with southern counties of a similar
nature. Indeed, our gap with them has narrowed substantially in
a way I think Leicestershire's may not have. You surely are not
saying that just by virtue of the fact that there is a national
formula it is therefore fair; because it totally depends on who
won the battle between Government and the LGA, and within the
LGA, on which of the factors have the highest weighting. So you
must accept that is the case, and I say that because we have had
considerable success in Derbyshire in closing the gap.
Stephen Hillier: I think you can
say that the word "fair" is maybe a word best avoided,
so apologies if I introduced it, but the thing about national
formulae is that they are transparent. They are consulted on;
people can have their say. There will always be some people who
will feel that the end result is not quite right. That's inevitable
in any process of this sort.
Q143 Judy Mallaber: You might
accept, maybe, that it's not that transparent, because you have
so many factors; and for the lay person—and I remember your
point that there were only three people in the UK who could understand
the local government finance system—I just want to unravel
that we don't have on the record something that suggests that
just by virtue of having a national funding formula there is therefore
not necessarily a case for grievance, which we might wish to express.
Phil Hope: The point I want to
make is because there are differences in the region. I think Leicestershire's
argument makes the point, because it was pointing out that within
the region there are differences, because of the way national
funding formulae work. And you can argue whether they are fair,
and that is the key point; that isn't a regional debate; that's
a national debate about weightings and so on, based on poverty
or deprivation, population size and sparsity, and if that's right.
Indeed, I've certainly argued in the past, before
I became a Member of Parliament, that the funding formula that
existed then was desperately unfair, particularly for the county
that I was then an elected county councillor for. We've changed
a lot of the funding formulae as a Labour Government, and I think
we've made the funding formulae fairer than they were. We then
can question the pace of roll-out of those funding formulae.
The point I'm trying to make is that you've
mentioned difference between somebody in Corby and somebody in
Scotland—well, what about somebody in Rutland and somebody
in Leicestershire, which I think is the example given by Leicestershire?
Exactly the point. These are funding formulae that have a differential
impact on different areas within the region, as well as between
regions. If Leicestershire is saying it thinks the national funding
formula is unfair, that is one thing. That's not the same as saying
the East Midlands, for which I have regional responsibility, is
in some way disadvantaged by those national funding formulae,
because those roll out within the region differentially as well
as between regions.
Q144 Mr. Laxton: Can I just
chuck into the debate something that is not an issue of Rutland
against Derbyshire, Leicestershire or whatever: the totality of
funding—fair funding—formula for police authorities?
Chairman: We will come to police
authorities.
Mr. Laxton: Okay. We're going
to come to that.
Phil Hope: I'll wait until we
get to that.
Q145 Chairman: I know we're
running out of time, so let me just check this with you. We're
going to talk about Midland main line and police authorities and
we may run slightly over, so I just wanted to check you are happy
with that. Before we leave this point, I know of twins who live
in the city of Nottingham, one of whom goes to a city school and
one of whom goes across the border to a school run by Nottinghamshire
county council. The variation in funding per head is 20%. That
does not seem right. Whatever you say, Stephen, about the formula,
this looks slightly bizarre.
Stephen Hillier: In years gone
by, I have been responsible for school funding formulae, although
we are going back quiet a few years. I will not take personal
responsibility for the current system, not because I don't think
it's good, but just because that would be wrong. Whenever we tried
to work on the idea of a national funding formula or a common
funding formula, on which we were trying to work many years ago,
there were always problems concerning the objectivity and transparency
of formulae.
I agree in many ways with the proposition that
it is a private view, not a Government view. Sometimes the formula
gets too complicated and some of the factors can cancel each other
out. But, in a way, the more rudimentary the formula, the more
you get winners and losers. Coming back to your earlier point
about the physical climate that we are going into, if you can
deal with losers because there is plenty of money, that is one
scenario. If there isn't so much money, dealing with winners and
losers becomes a big problem and you get back into damping and
other things. Whatever the intellectual arguments, with which
I am very familiar from personal work on the national funding
formula or the common funding formula, there are always practical,
often political—small `p' and big `p'—issues that
have to be confronted. Such issues are very messy and difficult.
Phil Hope: One final point about
the twins. Are the two schools the same? Does one have a sixth
form or does it have a special needs allocation? How many children
with statements go to that school? We know that the amount per
pupil may vary because of some very good reasons of the kinds
I have just listed. We don't know about such factors. On the face
of it, that may sound strange or unfair, but when you look at
the detail, maybe it is or maybe it isn't.
Ultimately, what's most important is that since
1997, revenue funding per pupil in this country has gone up by
39%. There is much more resource going into our schools on average—there
may be variation between schools for all the reasons we have just
been talking about—and that's what's important to the mum
or dad of those twins. These schools are incomparably better.
Practically every school I know has had some kind of capital investment
or rebuild. I know we are here to look at issues around fairness
of funding, but we should not lose sight of the huge and substantial
increase in funding. I think you made the point earlier, but I
didn't want to let the matter go without making it again.
Chairman: Let's talk about something
you have been keen to talk about all afternoon: the Midland main
line. We're keen to talk about that and to see the success of
the campaign to electrify the Midland main line.
Q146 Mr. Laxton: Yes, do you
have any idea when a decision might be taken on the electrification
of the Midland main line? Are you able to give a bit of a taster,
hint or nudge as to when that may happen? Of course, the backdrop
to all that is the current economic situation. Is that likely
to impact on a decision?
Phil Hope: The first thing to
say is how hugely encouraged I was by the statement made by Lord
Adonis at the campaign launch only a few weeks ago. I was very
pleased to hear him say that electrifying the Midland main line
isn't a matter of if; it's a matter of when. That, for me, represented
a massive win for the whole campaign. Clearly, he is persuaded
of the fact that it is the one remaining area of track that he
would like to see going to the electrification programme. I think
we've been very persuasive about the wider economic case: the
benefits it would bring, the impact on businesses, the impact
on individuals, the environmental impact and so on. Now it's when
rather than if, we should regard ourselves as having won a major
victory.
When might the decision happen? The impression
I got from Lord Adonis was that he's keen to do this as soon as
he can, given resources within the Department and the negotiations
that he's no doubt having with the Treasury. I see my role and
the role of the whole campaign in the region as giving him as
much backing as possible, to give power to his elbow when he's
making those arguments within his own Department and with the
Treasury. I don't know—that is the short answer to the question
about when he might make the decision. I think it's our job to
do two things. One is to maintain a general campaign among all
the players. Also, specific issues may need to be addressed, such
as replacement of rolling stock, calculations that are made about
when that should happen and the costs and benefits of it, the
fact that we seem to have too many bridges—well, we don't
have too many bridges; we have the right number of bridges. I'm
talking about the detailed assessments and costs that you have
to deal with if you're going to electrify the line. The more we
can look at these issues, address them and persuade those we need
to persuade that they are fully understood, costed and put into
our proposals, the more likely we are to get an earlier answer.
Q147 Mr. Laxton: So, as the
Government Minister, you are four-square behind it.
Phil Hope: Absolutely.
Q148 Mr. Laxton: And you accept
completely the economic benefits referred to in the case for electrification
for the region.
Phil Hope: I think the argument
is compelling and I think that's why we got the answer we got,
which was so pleasing—it's not a matter of if; it is just
a question of when. This is a good example of when we are in competition.
It isn't based on funding formulae and things that I feel I can't
influence. It is about making that case, campaigning and persuading
the people who need to be persuaded, both in the Department for
Transport and in the Treasury, that electrification will have
direct and positive economic benefits; indeed, it will save money—if
we take the full lifetime costs—for the Government. It's
an investment; it's not a case of money that's spent and then
we do not see a financial return on it. I think we have a very
good case.
Q149 Mr. Laxton: You were
talking earlier about your engagement and involvement in the issues
of the A46 dualling etc. Have you any views on the case for road
schemes vis-a"-vis electrification—those sorts
of choices about cost-effectiveness? There's something buzzing
around in my head about the fact that the sheer cost of widening
the M1 is in the zillions to achieve what would probably be not
much improvement ultimately in journey times by road, compared
to the impact that electrification can have on journey times on
the rail network.
Phil Hope: In general terms, for
environmental reasons if nothing else, we do want to switch to
more freight by rail and more journeys by rail. Indeed, the statistics
tell us that even without electrification of the Midland main
line, that is exactly what has been happening—and, to an
extent, across the whole of the country. Do I think it is either/or?
Probably not. I think it is probably both—and. We know the
benefits that that road construction in terms of the A46 will
bring to Nottingham—for example, the impact on the tramway.
These things are all interrelated. These are complex rather than
simple arguments to make. My job is to champion the needs of the
region, and I am convinced we need to have this electrification;
I think it will make a huge difference. I am also convinced there
are road schemes—I've talked about them—that will
also bring economic benefits and some environmental benefits by
reducing congestion. I don't think it's a simple case of one or
t'other. I think it's about having a regional plan with clear
priorities that we then make the case for when we argue for regional
funding allocations and so on with the Department for Transport.
Q150 Mr. Laxton: That's very
helpful and positive. Thank you. Sticking slightly to the railways
but moving a little bit off electrification, EMDA is tomorrow
launching a report that talks about industrial matters very close
to my home and my heart—Derby. To paraphrase, it's about
trains, planes and automobiles, and the success story around Toyota,
Rolls-Royce and Bombardier.
I have not seen all the report, but I guess
that some of it is technical. I think there are some health warnings
in it. One health warning is the issue of Bombardier and its bid
for rail contracts. I had a little something to say about the
IEP business when contracts were awarded to Hitachi rather than
Bombardier. The options now are between Siemens and Bombardier
for the Thameslink contract. There are dangers, because I suspect
that if it does not win that, it will end up with no work, and
that would pose all sorts of problems, and put at risk 2,500 jobs
in Derby and, importantly, would affect 10,000 people in the supply
chain throughout the whole region.
You said earlier that you picked issues that
you intervened on when you thought that they were strategic and
important enough. This might be one that is worth considering
in terms of doing some work, perhaps with the Department for Transport
on behalf of the region, on how it is important that some of the
works are for UK plc. If Bombardier goes, we will not be building
any trains in this country per se.
Phil Hope: There are two answers.
First, EMDA's work in producing this analysis has been extraordinarily
helpful. In fact, I think I regard it as one of the most successful
regional development agencies in terms of its investments to returns.
For every pound, we get £9 to £15-worth back from EMDA's
work. I think we can be very pleased. The report that it is publishing
tomorrow highlights opportunities for transport in terms of trains
and so on, and signals for us some areas where we were at risk.
In accompanying that, that for me sits within a broader strategy
about new industry, new jobs. We discussed that on Monday at the
Regional Economic Cabinet. We are trying to identify, not winners,
but areas where investment will give us the ability to attract
inward investment, sustained economic growth and job-rich growth,
and which will give us a platform for competition globally in
advanced manufacturing, the digital industry, low-carbon industries,
and green manufacturing.
As a region, we are well placed with some excellent
existing facilities, and we must connect up the business community
with the universities and those involved in inward investment
and infrastructure to make sure we make the most of these four,
five or six areas for growth and development. EMDA not only leads
that in the region, it chairs the region of regions at the moment,
and is leading the whole strategy nationally as well and doing
an excellent job.
On the specifics of bids for particular contracts
by a particular company, I must be careful about getting involved
in commercial negotiations and discussions, because it would be
inappropriate to try to influence a commercial decision. You have
just alerted me to this particular issue, Bob, and I will go away
and look at it. I met Bombardier at the time of the original decision
and the difficulties that it might have created for it. It is
certainly my job to know about these things and to meet the people
involved, and if there is an appropriate role for me to play,
because of the potential size of the impact, positively or negatively
depending on the outcome, I am happy to try to play that role.
That is appropriate.
I cannot be involved in commercial decisions
made by a Department when issuing a contract. As long as I can
identify an appropriate role to play with something that will
have such a big and strategic impact, I will do that.
Q151 Chairman: Phil, because
you have followed this, you know that the key to improvement on
the Midland main line is a freight loop at Desborough, and straightening
the line at Market Harborough. Network Rail has done some work
on that. The freight loop would cost £10 million, and the
work at Market Harborough would cost £17.5 million—£27.5
million together. Taking that £27.5 million with the work
already committed to the Midland Main Line, would it surprise
you to learn that that amount is less than the amount being spent
on improving car parking on the west coast main line?
Phil Hope: These are new figures
to me, Chair. That's exactly the point I'm making about issues
to do with transport, where I think we, as a region, need to be
clear about the priorities and then articulate and advocate them.
I know Daventry and Market Harborough well and I know the routes.
I don't know the detail of the engineering works that require
doing, but certainly it's a good case of where, perhaps, relatively
small investments in terms of train spend can have bigger impacts.
We have to make the case for that cost-benefit analysis, because
where we make it well we win. In my job I have to make a judgment
about that. As a Minister I can't take up every small project
across the whole region. That's why the Midland electrification
is an appropriate thing to do. In terms of particular issues like
that, local Members of Parliament might get involved too. As I'm
not far away from Market Harborough I might take that thought
away as well.
Chairman: I might take you to Market
Harborough station. Next time you're there, have a look at it
and you'll see that the new buildings are laid back out of line
so that the line can be straightened. That work was done 30 years
ago by the last Labour Government, in preparation. It would be
a good photo opportunity for the general election campaign.
Finally, let's turn to the police, which, as
you know, is a pressing issue.
Q152 Judy Mallaber: Just before
doing that may I comment on how sad it is that—as part of
what we've lost—Butterley engineering works, which did all
the wonderful ironwork at St. Pancras station, from which we seek
our wonderful high-speed train, has gone? How sad it is that those
things go hand in hand.
Bob's keenness to jump in on policing, as you
know, reflects the screams that come from within this sector in
relation to funding levels and fairness. Although different police
authorities scream to greater and lesser degrees, it is a region-wide
issue and not just one authority against another. We can go into
more detail on this, but what's your response to the assertion
of East Midlands police authorities on the region not being sufficiently
funded in terms of policing—although they acknowledge that
there has been an increase in funding—and that that is not
fair?
Phil Hope: First, the amount of
funding for police has gone up, as we know, in the region. Overall,
across England since 1997 there has been a 20% increase in funding
in real terms and, in the region, a 27% increase in funding in
real terms. I do not want to argue, and I am sure that you do
not, that therefore we should now be taking cuts in police funding,
given that we've had 7% more than the average, because that is
just the way that the funding and allocation formulas have happened
to work out for us in the region. It's difficult to argue, therefore,
that we have been disadvantaged regionally, given that comparison,
if there's a regional concept about funding. I've already given
you my doubts and concerns about thinking in those terms. On the
other hand, on the question about the formula rolling out over
a period and the damping and the floors and ceilings, and the
fact that every police force is guaranteed at least 2.5%, we are
talking in the region of 3.1%—I think I've got my figures
right there—so we're getting more, but the size of the damping
is quite small and it takes longer to get the roll-out of the
formula to apply.
I'm not sure I can share an analysis that says
there's a regional problem, but different police authorities in
the region may be receiving differences that they are unhappy
about, because of the way that the national funding formula works.
I am aware that there's a police allocation formula working group
with which I would hope that those police authorities would engage.
I have told my staff at the government office to make absolutely
clear how and when they can make the representations that I don't
think they have been making, from what I read from their submission,
prior to this.
Chairman: We'll take one more question,
we'll answer it and then we'll adjourn the meeting.
Q153 Judy Mallaber: There
are two issues here. One is that the formula has been done on
the basis of what police authorities in the East Midlands needs,
in comparison with similar police authorities and with requirements
elsewhere. The difficulty with the damping formula is that the
cuts will never reach the levels set out, because they are creeping
up to them so slowly. The new police allocation formula working
is a further stage; we'll never catch up with what has been acknowledged
as the problem. Would you not accept that that creates a considerable
difficulty?
Phil Hope: For me, this does not
feel like a regional problem, because it affects every police
authority across the country, not just in the East Midlands. If
they had applied a different damping formula to the East Midlands
and the West Midlands and that had felt unfair and wrong, it would
have been appropriate for me to argue the case you make. They
haven't done that; they've applied the funding formula in a way
to reflect—
Q154 Judy Mallaber: But it
has applied across all the East Midlands authorities and it totals
£19 million annually.
Phil Hope: But it is applied across
all the other police authorities in other regions as well.
Chairman: Sure, but against their target,
they are underfunded.
Phil Hope: That is why the funding
formula is there, but the damping mechanism slows the pace at
which it is applied. It does that because there is no extra money;
it you put a floor in, there has to be a ceiling to pay for it.
The height of the floor—it is 2.5% to protect police services
and help fight crime in other areas—has created this long
and slow roll-out of the formula to achieve the formula funding
that we should be getting.
Judy Mallaber: And we're not going
to reach it while cutbacks in public spending are coming along.
But I do contest your point that this is not a regional problem,
because the mechanism has affected authorities across the region.
Phil Hope: It has affected—
Chairman: We will take that as a statement.
I thank you and Stephen for coming. Again, I repeat our thanks
to the officials from the Government office for the region. You
offered many of us good wishes, and I wish colleagues of whatever
political party who are standing again in the East Midlands—particularly
in Corby—the best of luck.
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