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8.20 p.m.

Lord Williams of Elvel: My Lords, the House is grateful to my noble friend Lord Varley for raising this question, which is not entirely about the East Midlands, though I recognise the strength of the case made by my noble friend. Important issues are raised in relation to what I believe the noble Lord, Lord Kimball, referred to as "a share of the cake". We are not asking for more cake; we are asking for a "share" of the cake.

As the noble Baroness, Lady Hamwee, said, it is important in this House, as it is in another place, that there should be more transparency as to how the cake is shared out. Since the resolution of the poll tax fiasco--I am sorry to introduce a slightly party political atmosphere into the debate--there is no doubt that central government have much more influence over the distribution of the cake than they had before. We are

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now talking of something like 80 per cent. of local authority revenues which come from central government. It is therefore even more important that in your Lordships' House and in another place we are quite clear about the ground rules as to how that will be shared out.

The original SSA formula was designed--and still is designed--to allow each local authority to provide a standard level of service. We must accept that there must be a formula on which the cake is shared out. But I wonder whether the present SSA formula, with the adjustments to which I shall come in a moment, is something at which the Government should look again. After all, the major objections to the formula are: first, that Whitehall knows best; Whitehall knows what the standard service is. Whether one is talking of Lincolnshire, as was mentioned by the right reverend Prelate, Northamptonshire or Derbyshire, Whitehall knows what the standard level of service should be. That in itself is a questionable assumption.

The second problem with SSAs, as was confirmed today in the Secretary of State's Statement, is that they are the fundamental fulcrum for determining local authority expenditure. If a budget in this financial year--this has now been confirmed--is above a SSA by 12.5 per cent., it is regarded as excessive unless it is no greater or less than last year's expenditure; but that is irrelevant.

The third major problem with SSAs is that until the 1993 review they were largely based on the 1981 census. Now we have the 1991 census, which is a broad national picture and does not reflect the needs and specific circumstances of the counties about which noble Lords have been talking in the debate this afternoon.

I accept that there have been improvements to the formula. I welcome the inclusion of economic deprivation, stronger weighting for sparsity of population, recognition of community care and so forth. Nevertheless, as of this afternoon we know that local authorities are to be squeezed again. These are general points I am making. Leaving aside the police, there will be a 2.2 per cent. increase--a figure mentioned by the noble Lord, Lord Kimball--in local authority spending, including community care and the costs of local government reorganisation. That means a net cash increase of around 0.8 per cent.--again a figure mentioned by the noble Lord, Lord Kimball. On any measure of inflation or services, that is a cash squeeze on local authorities.

I turn now specifically to the East Midlands, referred to by my noble friend Lord Varley and other noble Lords. Even given the cash squeeze which is about to hit that area, is the East Midlands getting its fair share? I turn also to the area cost adjustment--a definition of which I believe to be,

    "a formula attached to the basic standard spending assessment to allow for the higher costs of providing services in London and the South-East".

When the SSA formula was reviewed during 1993-94 for the current year 1994-95, the result assumed much higher costs for an equivalent level of service in London and the south-east. But given that nearly 90 per cent. of

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local authority expenditure (after debt charges) goes on wages and salaries, and that both salaries and debt charges--leaving aside London weightings--are determined nationally, what is the justification for the more generous area cost figures for the south-east? Logically there can be no justification whatever.

In the same review, weightings were altered. In relation to additional educational needs, under the new formula the amount to be distributed fell from 21 per cent. to below 17 per cent. That will disadvantage those local authorities which have ethnic problems, statemented children and all those matters with which the East Midlands is concerned. It appears to us that some of the adjustments favour the leafy suburbs rather than the areas with genuine needs to which my noble friend referred. Furthermore, there are some adjustments to SSAs for districts. For example, extra money is provided for buildings for day visitors. That is a clear advantage to London and not a clear advantage to Leicester, Northampton, Lincoln or any of the other counties to which my noble friend referred.

As other noble Lords said, today's announcement--in so far as I was able to digest that monumental tome--will do nothing either to help the generality of local authorities in England or to help the local authorities referred to by my noble friend. With a net cash increase of 0.8 per cent. generally and capping criteria very severe, I am not convinced that the new arrangements for the business rate will help the East Midlands.

I am most grateful to my noble friend Lord Varley for raising the matter. I suspect that this kind of debate will come up more often in your Lordships' House because, unless the Government are absolutely clear--and, as the noble Baroness, Lady Hamwee, said, absolutely transparent--in how the cake is to be shared out, there will be a natural suspicion (if I may put it like that) in the minds of noble Lords from counties or districts who feel they are disadvantaged or indeed noble Lords who may think that there is some party political rigging going on. There will be a natural desire to have debates on this matter. I have deliberately abstained, unaccustomedly, from making this a partisan debate. I believe that my noble friend was right in introducing it as a non-partisan debate. But I believe that the Government have a case to answer.

8.33 p.m.

Viscount Ullswater: My Lords, this has been a very timely debate, coinciding as it has with the publication of the finance figures for local government. The noble Lord, Lord Varley, although he himself kept his remarks entirely to the East Midlands, has raised important and topical matters. I am pleased to think that the noble Lord, Lord Williams of Elvel, has dealt with it on a non-partisan basis. I believe that the debate is improved for that. The noble Lord, like all other noble Lords who have spoken, indicated that he was not really worried

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about the level of the expenditure but about the share of the cake, except perhaps the noble Baroness, Lady Hamwee, who said that it was not enough.

Lord Williams of Elvel: My Lords, I do not wish to give the noble Viscount the impression that I am satisfied with the total cake.

Viscount Ullswater: My Lords, I was indicating that this debate is more about the share of the cake than it is about the total cake.

Perhaps I may spend a minute or two on the settlement. We have decided that the appropriate amount for local authorities in England to spend in aggregate in 1995-96 will be £43.511 billion. Central government support for this spending will be £34.672 billion, of which some £11.4 billion will be redistributed non-domestic rate, £18.2 billion will be revenue support grant and £5 billion will be grants for specific purposes.

For the standard spending assessments, we propose changes relating to the police element of the formula. This begins to base the formula on the underlying need for expenditure, rather than wholly on the side of the police establishment. In the bulk of the SSAs, there will be only limited change. The consultation documents which have been made available to this House set out the proposed changes.

We have announced our provisional capping criteria for local authority budgets in 1995-96 and our intentions for "notional amounts". These are necessary to calculate a base budget for capping; for example, in the case of shire counties which will lose responsibility for the police service after this year. The criteria set out in full in the consultation papers are necessarily provisional as legislation allows final capping criteria to be set only after the deadline for local authorities to make their budgets.

The noble Lord, Lord Williams, said that the settlement reflected a squeeze on local government. I believe that the proposals which my right honourable friend the Secretary of State has announced represent a balanced and reasonable response to the conflict between the pressure to provide ever more resources for local government and the need to control public spending. I believe that they represent a package which the country as a whole can afford.

My right honourable friend's statement concerns national aggregates and changes to the standard spending assessments, which will affect authorities at large. The noble Lord, Lord Varley, has drawn our attention, in particular, to the circumstances of the East Midlands. He argues that the authorities of the East Midlands stand at a disadvantage to those in other parts of the country in their standard spending assessments. I think it would be helpful if I summarised the position of the East Midlands, following my right honourable friend's statement.

The East Midlands can truly be described as "middle England", so far as concerns the standard spending assessments. The SSAs per person proposed for 1995-96 are almost identical to the national average for the shire areas. The average for the East Midlands is £718.36; the

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average for England is £717.77. The picture is the same if we consider each class of authority separately: the county councils; the district councils; and the police authorities. I would say to my noble friend Lord Boardman that the shire county SSA for Northamptonshire is £584.64 whereas the average for the East Midlands is £572.06. The average for England on the whole is £572.15. All these figures are very similar between the individual counties. The right reverend Prelate mentioned the county of Lincolnshire. There is a figure of £573.92 for that shire county. Therefore, the figures are very similar to the average for England.

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