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Lord Thurlow: My Lords, before the noble Baroness sits down, as she started off by making some interesting remarks about her grass-roots experience at Greenwich, and as she has a few minutes left of her quota, I wonder whether she would be so good as to elaborate a little on the feelings and comments of those whom she met at Greenwich—the mental health patients now in community care.

Baroness Faithfull: My Lords, I thank the noble Lord for his question. I have three minutes left in which to speak. I met all the mental patients and had a party with them. In turn they were allowed to tell me how they had benefited from going into the community. The mother of one of the 17 year-olds said that her son had completely altered since he went into the community and into a house with only eight patients and a manager. She said that her son was now quite different from the person he had been when he was in hospital and living under a hospital regime.

4.22 p.m.

Baroness Fisher of Rednal: My Lords, I also pay tribute to my noble friend Lady Farrington on initiating this debate in a competent manner. I shall speak primarily about what is called the single regeneration budget. It is one of the cutbacks in government that has a special connotation. The single regeneration budget effectively abolished 57 urban area programmes and brought them under one umbrella. Those urban areas are the most deprived local authority areas.

Not only has the amount of money in the budget been reduced but deprivation as a criterion for funding decisions has been downgraded. The urban area programmes benefited not only the community but also the area concerned. They helped to abolish deprivation. The hidden reductions within the single regeneration budget mean that the problems of socially excluded groups in urban areas must worsen. That is obvious.

I remind the House that after the 1991 population census the Department of the Environment commissioned a team from the University of Manchester to consider relative levels of deprivation in England. The work indicated that Birmingham was the fifth most deprived local authority in England and the most deprived authority outside London. Birmingham is a city I know well. I have lived there all my life. I am an honorary alderman of the city. If one interprets the figures, one can see that 52 per cent. of its citizens live in, or on the margins of, poverty.

If one studies the figures for the single regeneration budget, one can see that compared with Birmingham's funding of £28 million over five years, Coventry and Warwickshire will receive £23 million. Stoke on Trent will receive £27 million and Cannock £20 million. I remind the House that Birmingham will receive £28 million. I am sure that all the places I have mentioned need the funding and I say, "Good luck to them".

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However, not one of those places has a population which is a third the size of Birmingham's. Nor do they have the level of deprivation of Birmingham, resulting from the Government's cutbacks. Therefore it would appear that the city of Birmingham is not receiving its fair share of the new resource. Those of us who live in Birmingham know that it is this Government's most hated local authority. At the previous municipal elections, on the night before the poll, a programme was transmitted about Birmingham. That programme was scandalous. The Birmingham newspapers denounced it as scandalous, as did the population of Birmingham. The programme was completely misleading. However, I shall not go into that now.

At those municipal elections two Tory seats on the local council were captured by the opposition. They were the safest Tory seats in Birmingham. Therefore the programme that was shown did not do any good as it was composed of lies. If my assumption that Birmingham is not receiving its fair share of the resource is wrong, I hope that the Minister will give me the figures to prove it. We, in Birmingham, believe that we are not receiving our fair share.

As regards the quality of overall improvements in the environment, the net impact of the introduction of the single regeneration budget has been to introduce a competitive rather than a needs-led regime. As far as I understand the position, the city of Birmingham is therefore not only bidding for funds for housing investment but is also bidding for those funds from a much reduced pool in which such investment is not seen as a high priority. Housing investment has suffered more cuts than any other public service. The new figures reveal at what great cost that has been done in terms of misery, ill health and homelessness. Local authorities used to have the power to build in their own name, or at least to a certain extent, but that power has been taken away from them. Local councillors see their responsibility on their doorsteps. They meet it day after day and week after week. The people who sit in Whitehall advising the Government do not see the problems and neither do the Government themselves. The Government would not know what those problems were about—this applies in many cases—even if they were hit on the head with them.

Housing investment is suffering as a result of these measures. The Housing Corporation's figures show that the number of dwellings built by housing associations will fall from 60,700 this year to 41,500 next year. An article on housing appeared in the Guardian about 10 days ago. It quoted the comments of Sir Michael Latham. I understand that he is the leading adviser to the Government on the construction industry. The Minister is nodding his head, so the Guardian must have got that right. The article stated:

    "Latham is concerned about the proposed 25 per cent. reduction in social housing grants".

I repeat that he is the Government's adviser. Sir Michael said:

    "The decline has gone far enough and the Government should consider an increase in funding".

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The article added:

    "Efforts by the Housing Corporation to work with the private sector have been superb, but now the going will get harder and harder. Falling levels of grants and reductions in housing benefit are squeezing the system too hard".

I hope that on this occasion the Government will accept the advice of one of their advisers. We do not consider only social housing at that level; we must consider owner occupation. A report was published last week which indicated an increase in the number of home owners with negative equity. It is a hopeless problem.

Does the Minister agree that housing is central to what the Government refer to as the "feel good" factor"? When government cut local authority spending, as other speakers have stated, it generally means cuts for people, children, the disabled, the elderly, ethnic minorities and individuals who depend on services. In many cases, local councillors can do nothing about it. They cannot provide the services because the money is not there, although they are elected to do so.

What a pity that the Government have no trust in the people elected at local democratic level. For some reason, central government find it hard to believe that local authorities can do things well. Public opinion polls show clearly that most people are satisfied with the provision of local services when the money is available and that the services provided are good. The only difficulty is that the authorities cannot provide more.

The Government appear to do all they can to control local government either with an iron fist or with handcuffs. They treat local government as some financial problem rather than an organisation in what we call a democratic state.

I conclude by saying, very sincerely, that even the Greater London Council—I supported that body so I use the phrase in context—at its worst could not have managed the government financial fiasco of the Welsh Development Agency, Canary Wharf, the never-to-be-completed British Library or the international hospital. Although that hospital was built in Scotland by a private developer, it is now being flogged on the market at half the price it cost the taxpayer. No local authority could be as bankrupt in ideas as this Government.

4.33 p.m.

Baroness Thomas of Walliswood: My Lords, I, too, wish to thank the noble Baroness, Lady Farrington, for the debate today. I begin by endorsing a point made by many noble Lords who have spoken, including the noble Baroness Lady Gould. Although not all local authorities have identical problems, we are all limited by capping and capping constraints. When I joined my local authority some 10 years ago it was still possible to take a decision to recommend to local people that by paying X amount more in rates they would receive X amount more in services. Even if we wished to do so—Surrey is notoriously careful with its money—it is not now possible to do so. There is no connection between the willingness, if any, or desire of local people to obtain better services and the ability of local authorities to

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deliver those services. That is the democratic deficit which Government must address one of these days—if not this Government then another.

I wish to concentrate on two areas: highways and social services. Surrey has something like three times the national average of traffic on the roads, a fact that is only partly reflected in the allocation of SSA or borrowing permissions to the highway and transport part of our work. For example, while I much welcome the additional sum allocated for minor works in the settlement for 1995-96—that is to say, highway schemes costing less than £2 million —the £3 million or so available from the national Government combined with the gradual exhaustion of our own ability to provide large sums for highways improvements means that next year we shall still be spending on those schemes less than we did three or four years ago. All those schemes are dedicated to the Government aim of reducing accidents by one third by the end of the decade.

On another aspect of highways, we have set ourselves a target of reducing the percentage of carriageway with a residual life of less than five years to 15 per cent. That is the national average. However, by reason of the constraints upon our capital availability, next year we may not even be able to put into the structural maintenance of minor roads even that amount which will prevent further deterioration of those roads. Our success in achieving our objective—it is a rational objective—will be delayed even further. In Surrey it is generally recognised that the minor roads will receive the greater increase of traffic over the next few years since many of our major roads are already taking as much traffic as they can bear.

I enter into the subject of social services with some trepidation. Indeed, I would not have done so had not our difficulties in coping with our new responsibilities under community care been dealt with in the press and by the junior Minister for Health, Mr. John Bowis, in a most unfortunate, if not in some cases a misleading, way. Like several other local authorities, Surrey County Council has a crisis in its delivery of care in the community. I do not need to rehearse before your Lordships the number of counties which have had problems in that respect. That overspend reflects a sudden surge in clients presenting for assessment under the care in the community programme in the autumn of last year. That occurred to such an extent that there has been a 58 per cent. increase in the number of such clients over the projected number for this current year. It is worth noting that in the first year of care in the community, 1993-94, the inflow of new clients was also unpredictably erratic. It would be of great value if such surges of demand could be analysed and explained. We should then be able to manage our budgets better. The Government would do better to turn their attention to those issues rather than hurling insults at local authorities in the way in which that has been done.

Our director of social services has made great efforts to bring the budget back into balance while satisfying his legal obligations to purchase care. At least one of those methods has been controversial. I could go into detail but I am conscious that the debate may continue longer than it ought so I shall leave the detail. Suffice it

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to say, when Mr Bowis was tackled on Radio 5 Live about that initiative on the part of our director of social services, he took the opportunity to suggest that all Surrey's problems stemmed from its failure to spend up to the SSA for social services. In fact some years ago there was a large gap between Surrey's SSA and its spend on social services. However, under all party agreement that differential has been gradually reduced and will be eliminated next year. Therefore in that respect Mr. Bowis' remarks were quite out of line.

Mr. Bowis also claimed—the noble Lord, Lord Dixon-Smith, has repeated the suggestion to some extent—that next year the social services' SSA would be increased by 11 per cent. However, what both the Minister and the noble Lord omitted to mention is that the 11 per cent. increase in social services budgets reflects an increase in the responsibilities which the local authorities are taking on and which will not be incorporated into our SSA until next year. Next year we shall receive a further additional amount of money in order to take on new clients. So it is misleading to compare our spend plus the special transitional grant against our SSA and say that we are not spending up to what we should be spending. We have been spending what we were given.

Interestingly enough, in 1993-94 we served 2,362 new clients and in 1994-95 an additional 1,788 new clients. Most of them were people in high need because, like others, our budgets will only cover services to people who are in high need.

The annual underlying increase in SSA for Surrey, properly put forward, was 2.4 per cent. from 1993-94 to 1994-95 and only 1.3 per cent. from 1994-95 to 1995-96. Surrey has reduced the unit cost of its support for social services clients. The Audit Commission has commended our system of needs assessment as a model for other authorities and it has also commended the relationship which we have established with local health authorities in order to facilitate the transfer of patients and funds from hospitals to local authority care. In those circumstances, I do not think it is helpful that we should be criticised in the way that we have been.

Like the noble Baroness, Lady Faithfull, I support the policy for care in the community. I should, however, point out that early supporters of the approach, such as my own party, never thought that it would be a cheap option. Some of the clients to whom the noble Baroness referred—especially children—require extremely expensive care, whether or not they are in the community. The number of clients is rising faster than expected, as people understand that they may have an entitlement to care under the programme of care in the community. There is a high growth, particularly of the frail elderly in high need. There is also, sadly, a growth in people who are in need of mental health services.

What has happened is that the Government, faced with a high growth in their old demand-led budget to satisfy the needs of those categories of clients, have transferred all new clients from those groups to the care of local authorities, but have cash-limited the budget. It cannot be too often stated that that is the case. I hope that the Minister will pass on to his colleagues in the Department of Health the grave worries that have been

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caused by his response to our difficulties, and, for that matter, the difficulties of other social services departments in other counties. I think that all county councils and county councillors, as well as people who deal with social services in other levels of local government—such as the London boroughs and so on —all of us, of all political parties, take our responsibilities seriously. We want to provide a service which is good value for money. I wish that the Government would recognise that that is the case.

4.43 p.m.

Baroness David: My Lords, I should like to thank my noble friend Lady Farrington for giving us such a clear overall picture of the position in which local authorities find themselves, which is, to put it bluntly, less money available for more duties and responsibilities thrust upon them. How often from the Dispatch Box opposite have we heard, when we point out some problem or inadequacy, that that is a local government responsibility, that that is for local authorities to decide. The local authorities would like to shoulder their responsibilities, but often they just cannot.

I wish to concentrate on education. The local authorities have faced a series of settlements that seemed designed to reduce education spending in real terms. The Government standing spending figure for education in England of £17,204 million for 1995-96 is 3.87 per cent. below the local authority education budgets for the current year 1994-95. The Government claim that it represents a 1.1 per cent. increase, but in reality it means that the standing spending figure for 1994-95—which itself was inadequate—is not being allowed to increase in line with inflation or rising pupil numbers. Those numbers are rising by 1.5 per cent. a year. So the gap between the Government's assumptions for education spending and the real need to spend will continue to grow. Capping rules will limit increases in the majority of LEAs to a maximum of 0.5 per cent.

We are tired of hearing that the answer to this is in efficiency savings. These have long been used up. Efficiency savings—and I have read the Audit Commission report—of the order sought by the Government in practice mean not only the erosion of important though discretionary local education services, but also a continuing deterioration in the pupil-teacher ratio, leading to over-large classes in schools, probably with less experienced teachers. That is because less experienced teachers are cheaper. Over a quarter of primary school children are now taught in classes of over 30.

I intend to look at some of the effects on my own county of Cambridgeshire. The policy committee has done what it can to help the education committee. For instance, it has handed over £2.5 million for rising pupil numbers. It has given protection for Section 11 work through additional funding to replace the £300,000 withdrawn from the government grant and a further allocation of £0.5 million to address the growing problems of children at risk, especially those who are out of school. In spite of all that, there is no new money

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to fund the teachers' pay settlement or the cost implications of the rapidly rising number of new statements for children with special educational needs.

The rising cost of providing for pupils out of school—a statutory requirement, your Lordships will remember—is something which we should be aware of. If the present trend goes on, the need will be £1 million not the £0.5 million allocated. This could only come from school budgets, meaning larger classes and making it even more difficult to retain children with behavioural difficulties. I hope that the Department for Education is fully aware of the problem that these children create in financial, educational and social terms.

Far from being able to improve the quality of home to school transport, there will have to be charges where there were none before. In September 1995, £25 per term will have to be paid by all new students at post-16 establishments more than five miles from home. A similar contribution will be paid for September 1996 in respect of all new pupils at denominational schools where transport is provided by the LEA beyond the usual two and three-mile limits. Admissions policy will be changed. From September 1996, all autumn-born children will start school in September of the academic year in which they are five, but spring and summer-born children will start in January.

I am particularly upset by what is bound to happen to community education and the youth service. As the Chief Education Officer said to me, there will be misery all round and the real prospect of community education as we know it coming rapidly to an end. As the county where Henry Morris was chief education officer creating community education in the village college, this is very hard to bear. Two million pounds will be left out of a £5 million programme. The effect on the youth service will be vast. At a time of concern about drug abuse and youth crime, we ought to be investing more in the social education which the youth service can offer. I understand that Cambridgeshire will be giving priority to the youth service out of the funds that remain. That is right, but it is devastating for adult education. The budgetary pressures on LEA provision were exacerbated by the transfer of funds to the Further Education Funding Council and the loss of the LEA infrastructure which had supported both adult and further education. I am now speaking generally, not just about Cambridgeshire.

The provision of liberal non-vocational courses has already been vastly reduced as the quantities of letters which I have received from irate, disappointed people over the past few months bear witness. There is outrage that the classes which have given them so much pleasure and made such a difference to their lives have gone or, if they are there, it is at a fee which many, as pensioners, simply cannot afford. Mental health costs may well accelerate.

I mentioned earlier the cost of providing for increased numbers of children with statements, and indeed the cost of providing for rapidly rising numbers of new statements. All who are involved with special needs welcome the recent code of practice. The new arrangements will be challenging, and rightly so. But to

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rise to that challenge will require partnership between schools, LEAs, parents and central government—and adequate financial support. There is plenty of evidence of the former but the Government have failed to address the latter, arguing that the code of practice will be cost neutral. It will not. Without that support there is a danger that we might repeat the mistakes that followed the 1981 Act, which created many desirable duties but never recognised the scale of the costs that were attached to them. Parental expectations will not be fulfilled and disadvantaged children will not receive the support that they need.

DFE figures indicate a gradual increase in the proportion of children with statements to 2.53 per cent. in 1993. Evidence from the ACC suggests that the number now touches 3 per cent. In some authorities it is as high as 4 per cent. As the noble Baroness, Lady Warnock, suggested, we need a thoroughgoing review of the relevant Acts.

Very important is what happens at 16-plus to children with special needs. There is a grey area of responsibility between the LEAs and the FEFC. The FEFC is responsible for funding courses to teach people with learning difficulties independent living and communication skills which prepare them for entry to other courses. But it looks for evidence of progress to justify its funding. Many are unlikely to be able to demonstrate such progress, and that leaves the LEA to pick up the bill. How are they to do that, considering the spending restraints that are placed on them and the transfer of the bulk of the money to the FEFC?

Another difficulty occurs when those young people transfer to the independent or voluntary sector. Funding responsibility can become complex. LEAs can be left with a bill for which they believe the funds have been transferred to the FEFC. The Tomlinson Committee, in looking at these problems, will have a lot to consider. There is no doubt that the provisions of the 1992 Further and Higher Education Act for students with disabilities or learning difficulties have not, in practice, created a clear entitlement for the student or a clear demarcation of responsibility between the FEFC and LEAs.

Finally, I turn to nursery education. The Prime Minister, the National Commission, the Social Justice Commission, Sir Christopher Ball et al have all made the case for good quality nursery education as underpinning the work of schools and of continuing education post-school. It helps reduce the incidence of pupils with special needs. Local authorities, despite tight spending settlements, have been increasing the availability of places for three and four year-olds. Government rhetoric encourages hopes for further expansion. But the spending settlement must dash these hopes.

The Government appear to be agonising not simply on how to find the resources but also on how to reconcile any development with their doctrine of choice and diversity. The simple answer is to allocate to LEAs whatever resources can be found, with the discretion to develop local solutions in the light of their knowledge of local circumstances. The wrong approach, with this

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as with everything else, is to run round creating expectations while cutting resources so that the reality is less or worse, rather than more or better.

4.53 p.m.

Lord Harmsworth: My Lords, I, too, would like to thank the noble Baroness, Lady Farrington, for introducing this debate. On 15th December the local government commissioners for England made their final recommendations for Dorset. I believe that Dorset local authorities would face many problems in providing the services that Dorset communities need if the county were to become four unitary authorities. I hope that noble Lords will not mind my dipping a little into the future for the county, narrowing the focus of the debate for the time being.

After 33 years of travelling down to Dorset, I still regard myself as a foreigner there. I was born within earshot of Bow Bells. Although the war almost instantly resulted in my becoming an evacuee for most of the next five years, I suppose that in reality I am a true Londoner. I am certainly neither tired of London nor tired of life. If the famous saying of Dr. Johnson in 1777 needs any adjustment, it is probably to the extent that London no longer offers exclusively all that life can afford. I still find it odd that in the past six years of having my principal residence in rural West Dorset, I have possibly watched less television and have gone to more concerts, theatres, pantomimes and events, and visited more places than I did in the previous six years while I was in London, or in the six years prior to that.

I am strongly in favour of retaining the status quo for Dorset. I am no local government expert, but I am a passionate advocate of what I believe to be in the best interests of a beautiful and successful county. I speak very much as a layman. Not to put too fine a point on it, I really do believe that the recommendations that were made for the county of Dorset by the commissioners, through no fault of their own, represent a dreadful mistake. The commissioners had an almost impossible remit. But the splitting of a small to medium-sized county into four will make it hopelessly cost-ineffective and will result in a "them and us" position (rural and urban; east and west) which is wholly unwelcome—not to mention the higher cost of important county-wide services and the loss of, and difficulties for, some of the specialist services that are presently enjoyed, and to which my noble friend Lady Faithfull referred, as did the last speaker, the noble Baroness, Lady David.

The story is well known. The commissioners' draft submission recommended three unitary authorities, roughly comprising Bournemouth, Poole and rural Dorset, in what is a fairly narrow and long county. At the time the commissioners expressed reservations about a four-authority option, about basing the east-west split of rural Dorset on general arguments about orientation rather than on geography or identity. Concern was expressed about the fragmentation of this small county, where the transitional costs might never be recovered. The commissioners also took into account the view of the business community; namely, that one county-wide

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authority, or one unitary authority, representing the integrity of the eastern conurbation and another serving the remainder of Dorset, would be best.

In the county council response to the draft recommendations, it is stated that a large number of residents and some local organisations expressed disappointment that the commissioners' household leaflet did not include the existing structure as a specific option.

The commission then undertook to ascertain the level of public support for its preferred structure of three unitary authorities, and also for an alternative structure of four unitary authorities, and to assess the wishes of the people of Christchurch and the parishes around Poole. They did so. MORI was commissioned to undertake a survey of 2,518 residents. That survey indicated that in all districts except for Bournemouth there was a higher support for no change than for either (the three or four) unitary options. It is interesting that in an exercise that has induced on the whole little but apathy on the part of those responding to inquiries as to wishes, the only significant figures relate to the plumping for the status quo, the highest percentage seeing no need for change being Christchurch at 43 per cent.

Last week I visited the headmaster of Colfox School in Bridport, in West Dorset. The school, one of the first comprehensives, is at last at the front of the queue for capital funding. It is in a dreadful state. It was built for 600 pupils. There are 900. Twenty per cent. of the classrooms are temporary huts held up against the wind by braces and warmed by headache-making paraffin heaters. It is a television producer's joy. When the winds blow at 50 to 55 miles an hour, or when the temperature drops below 65 degrees Fahrenheit, these huts must be evacuated. At last the county council has placed the £7 million rebuilding cost for the school at the top of the list. The children will get a new building which will cost the same as trying to put the present one right. The Government's annual capital guideline for the whole of Dorset local education authority in 1995-96 is £3,340,000.

If the county becomes four unitary authorities it is almost certain that Colfox school will lose this funding, as may such projects as the Weymouth relief road costing nearly £30 million—and that in one of the two counties of England with no external debt. Your Lordships will know that without external debt the council can apply all of the proceeds of its sales of surplus land and buildings to new capital projects rather than have to set aside half the proceeds to pay off debt. Furthermore, the council's capital programme is not constrained by government guidelines or the issue of permission to borrow from central government, all of which make a dramatic difference to the size of the council's school-building programme.

All of my children started their education in state primary schools, the youngest at an excellent one in the small rural village of Broadwindsor in West Dorset which had about 70 pupils. Rural primary schoolchildren cost roughly twice as much to educate as their urban counterparts. What will happen if Dorset's rural area is split into two of the four unitary authorities?

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In my view, it is a racing certainty that rural primary schools will close and that, dotted about the countryside in small communities, the commotion—not least in the reorganisation of school transport already referred to—will be all-pervasive. If I may make a political point, this will come at a time that may be thoroughly inconvenient to the Government.

In my opinion, reorganisation of any long-standing and complex organisation in which many important personal relationships have been carefully nurtured over many years should be done only in cases of clear need for change. Already the exercise has put many of these relationships into difficulty. No very obvious upheavals in the county merit the disruption of a time-tested, adaptive mechanism to deal with local, supra-county and inter-county problems. Perhaps your Lordships' House provides an example of an institution that has adapted over time to need and, by any yardstick, represents a supreme piece of legislative and judicial machinery. So is the current set up in Dorset. It is not perfect. It is not so old. But it is quite clear from the consultation documents issued in this exercise that whatever option my right honourable friend the Secretary of State takes there are advantages and disadvantages in each. The present system works and the people canvassed by MORI want no change. My view is that the status quo provides a good answer to the different management requirements of the county and will preserve the delicate balances in and the delightful character of a precious part of rural England.

Even if there are examples of major changes that have taken place in Dorset since 1974 perhaps they illustrate the benefits of the status quo. Since the publication of the commission's draft recommendations the Government have announced the closure of the Royal Naval Air Station at Portland in addition to the naval base. The commission has stated that Weymouth, Portland and the surrounding areas are suffering from the decline of the defence industry and that the area's future prosperity and economic development are likely to depend upon reducing its isolation. The maintenance of the status quo will allow the strategic application of capital funding for the area in a way that fragmentation into four small unitary authorities can never do.

Another major change that has taken place in Dorset in recent years is the success of the harbour facilities at Poole. The roads to the north of the harbour will be much better planned under the status quo where competing priorities for funding play less part. There are other areas where disruption and disadvantages are plain: waste disposal, minerals, library facilities, archives and wildlife matters. All are candidates for disruption, duplication, overlap and avoidable extra bureaucracy.

Generally, I am not as gloomy as noble Lords opposite, but for a combination of reasons and accidents the county of Dorset has landed up with the worst of all possible worlds. I hope that my right honourable friend the Secretary of State will opt for the status quo. I am

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sure that the local authorities there will be more cost-effective and better able to provide the services that the Dorset communities need.

5.5 p.m.

Lord Varley: My Lords, I am indebted to my noble friend Lady Farrington for initiating this debate. She made an extremely powerful case, and I support wholeheartedly what she said. Local authorities are indeed facing immense problems in providing services for their communities.

On 1st December last year I had the opportunity to promote a short debate on the standard spending assessment and area cost adjustment and the way that it is applied unfairly to the counties that form the East Midlands: Derbyshire, Leicestershire, Lincolnshire, Northamptonshire and Nottinghamshire. In that debate, I was supported by the noble Lords, Lord Boardman and Lord Kimball, from the Conservative Benches, and the right reverend Prelate the Bishop of Lincoln. If anything, they were more strong in their criticism of how the standard spending assessment applied to the East Midlands than I was. But in reply to that debate, the noble Viscount, who will also reply to this debate, said:

    "I hope that your Lordships will understand that the Government and my department have not closed their ears to the development of the area cost adjustment. If we see that there is a reason for it to be changed there is no reason for it not to be considered." [Official Report, 1/12/94; col. 785.]

On 3rd January of this year a deputation from the East Midlands was received by his fellow Minister, the Minister of State for Local Government, Mr. David Curry. I am pleased to hear that as a result of that deputation, a review is to be carried out about the area cost adjustment methodology and that that review will be for discussion with the local authority associations.

The evidence that money is being disproportionately allocated to the South-East and at the expense of the East Midlands has become extremely clear. I hope that the review to which the Minister has agreed will be undertaken speedily. Therefore, at least a little progress has been made on that subject.

I wish to concentrate the rest of the time at my disposal on the impact that government policies have had and will have on the services of Derbyshire County Council, and in particular the effect of the provisional grant settlement if no changes are made. Local government financial arrangements over recent years mean that in the main councils are now dependent on the Government for their funding. Some 70 per cent. of Derbyshire County Council's budget comes from government grant and the nationally distributed business rate. Only 20 per cent. comes from the local council tax, and the balance is made up from fees and charges.

The power of the Government to cap councils' budgets prevents local authorities from rescuing services by raising council tax levels beyond the limit laid down by the Government. Therefore, if the Government grant level is inadequate, or the Government make a mistake, or fail to rectify a mistake, councils cannot continue to provide good services and services will deteriorate.

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The Government have recently announced provisional grant settlements for local councils, as referred to by my noble friend Lady Farrington, together with new capping rules. The impact on Derbyshire's budget next year is devastating. It means an increase of only one half of 1 per cent. on the existing budget, as has already been said. After taking into account inflation and other factors, it means for Derbyshire a shortfall of £28 million if it is to try to maintain services at the current level. Some may say that the majority of county councils are also limited to a 0.5 per cent. increase. But the consequences for Derbyshire are much more serious because of the previously enforced clamp down—or cut back—on services.

The Derbyshire County Council has had to cut £152 million from its budget over the past five years. Nor can it be said that Derbyshire is over-staffed or over-administered. Over the past five years, 2,360 council jobs have been shed through redundancy or early retirement. The sum of £43 million has been taken from reserves, which are now exhausted. The Derbyshire County Council employs 24 people full time per 1,000 of the population. The comparable figure for England is 30 per 1,000, so that six fewer people per 1,000 are employed by Derbyshire. Derbyshire spends 11 per cent. less on administration and support services than the average for all county councils. It is the fifth cheapest out of 34 councils which compile this kind of statistic. The average council tax paid by Derbyshire residents this year is £471, which is equal to the average for the country as a whole. As I understand it, the provisional grant settlement does not take into account the pay awards for teachers and fire fighters, which are negotiated nationally.

So to put in perspective the budget shortfall of £28 million, it is equivalent to the annual pay bill for the entire operational and support staff at County Hall; or is equivalent to the closure of 15 medium sized secondary schools.

All the services in Derbyshire have been cut back over the past five years from the vital social services to the fire and rescue services. But the real hammer blows have been on education in the county. Education accounts for 60 per cent. of the county council's overall expenditure. Over the past five years £15 million have been cut from school budgets. If the Education Committee has to take its share of the £28 million funding shortfall, another £17 million will be cut from the education budget.

It is easy to see what that would mean. It would mean a further loss of teachers, significantly higher classes, as has already been said, and a lack of maintenance on school buildings as well possibly as other economies. I see that the noble Lord, Lord Dixon-Smith, smiles at what I say. I do not think that there is anything to smile about so far as Derbyshire is concerned. I thought that in his speech he was extremely complacent and did not take into account all the other difficulties suffered by other councils throughout the country. I do not believe that his apologia for the Government was all that effective. What I find unfathomable —it is a question that the Government have not tried to answer even though they have been asked—is why Derbyshire

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receives £248 less in grant support for every secondary school pupil compared with Hertfordshire and £274 less per pupil than Surrey. Perhaps the noble Viscount will attempt to answer that question when he comes to reply. I know that he will have a lot of points and a limited time in which to answer them but perhaps he could at least start to address himself to that particular question.

Between 1984-1985 and 1989-1990, under the grant related expenditure assessment system, Derbyshire was treated as an average county. Derbyshire had a 38 per cent. increase over that period; Hertfordshire had a 34 per cent. increase; and the county average for the country was 39 per cent. Hertfordshire is used as a comparison because in the 1980s it had a population similar to that of Derbyshire.

Following the introduction of the standard spending assessment there has been a marked deterioration in Derbyshire's grant settlement. Over the five years since the standard spending assessment arrangement was brought in, Derbyshire has received a 21 per cent. increase; Hertfordshire has received twice as much, at 42 per cent.; and the county average is about 27 per cent. Over those five years, Derbyshire's population has increased by 3.5 per cent., whereas Hertford's population has increased by only 1.3 per cent.

I hope that the noble Viscount, if he cannot answer those points today, will at least arrange for someone in his department to look at them as a matter of extreme urgency. Two weeks ago, the Minister of State for Local Government, Mr. David Curry, met a delegation from the Derbyshire County Council which was led by the Leader of the Council, Councillor Martin Doughty and the Conservative Leader of the Opposition, Councillor John Morgan-Owen. They were accompanied by representatives of business interests, chambers of commerce and the Diocesan Council for Social Responsibility in Derbyshire. I emphasise the composition of the delegation to show that it was not special pleading from the Labour Party but a genuine and sincere attempt to look again at some of the fearsome problems with which the county council is faced. Mr. Curry acknowledged that they were in a financially "tight" situation. That is perhaps the understatement of the year.

So if Derbyshire's standard spending assessment was at the average for the country, it would receive an additional £34 million in grant. Even if it were at the East Midlands' average, it would get an additional £21 million. I see that the noble Duke the Duke of Devonshire is in his place. I know that he does a tremendous amount of work for Derbyshire and Derbyshire's voluntary organisations from Chatsworth. I am sure that he knows at first hand what is taking place in the county.

This is a serious problem. I only hope that the Minister can answer some of the questions. Derbyshire has been badly treated and I hope that sooner or later those injustices will be put right.

5.17 p.m.

Lord Monkswell: My Lords, this is indeed a fascinating debate. I share with other noble Lords the

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gratitude that we must express to the noble Baroness, Lady Farrington, for having initiated it in such an effective way.

We have heard that for this year there is an inadequate revenue support grant and major reductions in housing support. The noble Lord, Lord Dixon-Smith, said that local government is not broken. If local government is not broken, what are the Government doing trying to fix it?

It may be useful if, as the tail-end Charlie at this stage of the debate, I take a broad historical overview of the situation and consider how we might change things. The period from 1976 to 1979 was the aftermath of worldwide major economic dislocation caused by the increase in oil prices imposed by OPEC. A senior member of the then government said that the party was over. But there was at that time genuine partnership between local and national government to try to ensure that the British nation resolved the difficulties with which it was faced.

From 1979 to 1985 there was a major increase in VAT, a reduction in income tax for rich people, reductions in revenue support grant and major reductions in the provision for council housing. There was also a mass explosion of unemployment and riots in the streets. We need to look at the business of partnership. We should not just think of local government in isolation but in terms of what it does for the nation as a whole. Local government has to struggle with the problems of our society, as they directly affect it.

One way in which local government attempted to meet the difficulties was to increase the rates. In practice that was fairly logical. The rates were effectively a wealth tax. While rich people were seeing a reduction in income tax, poorer people were seeing an increase in VAT. It was logical that the extra demands on local government services engendered by economic policy should be mitigated by increases in wealth tax. It is sad, looking back on that period, that even some senior Labour politicians did not appreciate what was going on and castigated some local authorities.

In the period from 1985 to 1989 the economic situation was not so bad because we had the Lawson boom and unemployment was coming down. But local government was under attack. We had the abolition of the GLC and the metropolitan counties. It is interesting that whenever a tier of local government votes in opposition to this Government, it seems to be sounding its death knell. We saw it with the metropolitan counties and the GLC. We are seeing it now with the shire counties which had the temerity to vote in parties in opposition to the Government.

From 1989 to 1991 we saw the end of the Lawson boom and the beginning of the second Tory recession. We saw the poll tax and again there were riots in the streets. It was not a happy period for local authorities. The period between 1991 to 1994 saw the end of the poll tax and somewhat improved revenue support grants. But there were major attacks by the Government on education. To come up to date, this year we have seen a reduction in the revenue support grant. As the noble

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Baroness, Lady Farrington, pointed out, the revenue support grant that appears to be coming through will not provide adequately the resources needed to maintain services at their present level. The inevitable result will be reductions in service levels.

More disturbing nationally are the reductions, particularly for the elderly, in services and care in the community, and for the youngest and most vulnerable members of society through cuts in education provision. We need to be aware of the implications. One factor that enabled this country to avoid totally succumbing to the recession but to bobble along the bottom (if I can put it that way)—each year the Government talk of green shoots but they never come to fruition and we are still virtually at the bottom of the recession—was local government capital expenditure. The recession has been mitigated also by central government capital expenditure. However, we must recognise that, following the last Budget, we are seeing not only a reduction in capital expenditure on the national account—for example, the roads programme has been cut back drastically—but also a major cutback in the capital budgets for local authorities. That will produce inevitable knock-on effects in the economy. We need to recognise that those economic effects will lead to increased unemployment, the inevitable social stresses that go with it and the extra burdens consequently placed on local authorities in the provision of services. When one has a fixed level of services, an increase in the demand for those services inevitably means that the level of service goes down.

I should like to talk a little of how we should think in terms of the future and how we might develop a partnership involving central government and local government. We can work together and respect each other's ability to improve our society. The first thing we need to think about is revenue raising. We need to introduce fair rates. It is totally iniquitous to have a council tax which effectively caps the tax paid by wealthy members of our community. Their taxation is capped but there is no similar cap on the taxation burden of ordinary members of our society.

Another problem with which we have had to deal over the past few years is the schism, the dislocation, the separation, of the local community through its local authorities and the business community because of the nationalisation of the business rate. We need to recognise that there must be institutional mechanisms to link the local business community with the local population through their local authorities. The business rate levied by local authorities was a useful mechanism for ensuring that local authorities got something out of local business and in return recognised that local business was valuable to the local authorities. One of the problems at the moment is the divergence between local people represented by councillors on local authorities and the local business community. I hope that over the next few years we shall see the denationalisation of the business rate.

Finally, we need to end capping; not only capping of local revenue raising, but also of local capital expenditure. In a democracy we must trust people to elect representatives to take decisions on their behalf. If

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those decisions are not in accord with the wishes of the people who elected the representatives, then the local people should have the right to elect other people who will do things differently.

One of the problems created by central government effectively putting caps on local government is that it takes away the freedom of the local community to make decisions on its own behalf. In seeking to improve or restore the partnership that should exist between national and local government, we must respect local government and give it the freedom to provide the services that people need locally.

5.29 p.m.

Baroness Hamwee: My Lords, it is inevitable at this stage of a debate that one repeats points that have already been made. I hope that that will not be a frustration to the noble Baroness, Lady Farrington of Ribbleton. One matter which I must repeat is to thank her not only for introducing this important topic, but also for giving all of us who are currently serving councillors, as well as eminent previous councillors and council officers, the opportunity to voice some of our anxieties.

I too will take a slightly broad-brush approach and echo comments that have already been made that perhaps the greatest long-term problem for local government is that the current constraints mean that good staff and good councillors—and good potential staff and councillors—are lost to local government. The centralisation of decision making means that no real local choice is left in more and more areas. Most recently, another area of education spending has gone to a new quango, and we see more money being given by way of specific grant, which means that the local choice in those areas is limited.

The result is that local people and local representatives cannot balance priorities. To have local representatives on quangos is better than not having them there, but it is by no means sufficient. They have a very narrow area of discretion. Good government is about balance and prioritisation. There has to be an integrated service. Decisions should not be fragmented. I cannot be the only local councillor who feels that the Government have stumbled upon, or perhaps deliberately found, a regime of dividing and ruling in their relationship with local government. However, it is the inability to take overall decisions and the constraints on innovation which trouble me most.

Reference has been made to capping in the area of revenue expenditure. One of the effects of such capping is that it is impossible for the electorate to tell whether its authority is high spending or low spending. My point also applies to capital restrictions, including restrictions on borrowing. I do not condone the schemes that we saw in the 1980s for the sale and lease-back of parking meters in order to circumvent the capital constraints but it is hardly surprising that energy went into such schemes. These capital restrictions and the failure to support infrastructure have been a tragedy. Decisions are taken on an annual basis and one is always tempted to feel that spending on one part of the infrastructure is a decision that perhaps could be deferred until the

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following year when the position might be easier. Those decisions mean that the infrastructure in the medium and longer term is bound to fail and is bound to cost more in the long run. The noble Lord, Lord Harmsworth, referred to school buildings and my noble friend Lady Thomas referred to highways. Those are two areas among many.

The noble Baroness, Lady Fisher, referred to the single regeneration budget. I share some of her concerns with regard to the issue of accountability. Regional officers do not have regeneration as a framework within which documents are publicly available and the public can understand what the strategy is. The bidding process is relatively informal so opportunities for patronage, or at any rate a lack of transparency, are being experienced. The noble Baroness also referred to issues of social equity such as the abolition of urban programme areas for the most deprived areas and the down grading of deprivation as a criterion for funding decisions. There are criteria which are understood and are listed. Indeed, the recent announcements have spelt out the general basis on which decisions have been taken. But they overemphasise economic development and the need to achieve the input of private sector investment. That is important. We all know the value of partnership, but leverage of private sector moneys discriminates against projects which do not appeal to their sponsors. We are aware, too, of the increasing public confusion. The noble Lord, Lord Varley, drew the attention of the House to that problem in his debate on area cost adjustment in the East Midlands two or three months ago. I had intended to say that I was not proposing to whinge about the recent settlement for my own local authority, Richmond-upon-Thames. Perhaps I will indulge myself a little, although I decided to use it in rather the same way as the noble Lord, Lord Tope. My authority is an exemplar and, after all, it is the one I know best.

I am in a similar position to that of the noble Baroness, Lady Thomas. What do I tell residents in my borough? How do I explain to them that decisions will be taken about council tax because we have a high tax base and that there is a national banding system, not a regional banding system? Those who live in band D houses in Richmond are compared with those who live in band D houses in other parts of the country where house prices have a different relationship to incomes. How do I tell them about the low standard spending assessment and about the effects of the last census, which is generally recognised as having omitted elderly people, particularly very elderly people, in disproportionate numbers? In my area, where there is considerable need, we have a very elderly population. These factors have a huge effect.

How do I tell them about changes in methodology which penalise "low need" councils? The changes over merely one year are, as was said to me by my chief executive, implausible. This year we are 101st out of 109 LEAs on the additional needs index for education. Last year we were 63rd. How can we have dropped so fast? It defies belief. How do I tell them about the economic index which means that because my borough, happily, has low unemployment we are automatically

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heavily penalised, although our real needs have not changed so much over the year? How do I tell them about the relationship between the SSA and pupils who come into our borough to be educated because their parents prefer our borough to a neighbouring borough? In our case a pupil from the next door borough who attends a Richmond school received £400 more SSA for that neighbouring borough last year than the same pupil will get for my borough this year. In Richmond's case we have more than 1,000 such pupils.

How do I talk to them about the support grant settlement per head and tell them that it has reduced by 40 per cent. over two years? The figure in my borough is £152 per head. The next lowest of all the London and metropolitan boroughs is £237 per head. The amount in most other outer London boroughs is at least two or three times as high. Finally, how do I tell them that, in order to spend at capping limits, Richmond must raise 45 per cent. of its budget locally? There is a lot to be said for being the most accountable authority in the country. But it is a little odd when, against 45 per cent. of budget, the next highest amount is 33 per cent.

In the context of what we know about the Government's attitude to local government it is not surprising that central government are so resistant to our having a power of general competence. So much of what is happening today adds up to a plea for local government to be able to take its own decisions and to do its best for its own communities. Is it not shameful that the financial constraints, the low level of tax raised locally and the inability to take our own decisions mean that the UK is probably ineligible to sign up to the charter for local self-government?

We have heard about the effect on services—on education (from the noble Baroness, Lady David, and my noble friend Lord Tope), on social services and on community care. I wish it were possible to spend a little longer on the subject of housing.

Finally, I believe that many Conservative councillors would say to the noble Lord, Lord Dixon-Smith, that they fear for the future. They see it as a tragedy that potential councillors and candidates question why they should do the job and wonder why they should work to central government rules. They want at least a level of job satisfaction.

The Minister was quoted on the front of the briefing by the Local Government Chronicle at the time of the announcement of the settlement as saying:

    "We've all been stuffed by the Treasury".

That is an unparliamentary term, but I quote it deliberately. I hope that the Minister can convince us today that it is only the Treasury which favours local administration over local government.

5.40 p.m.

Lord Williams of Elvel: My Lords, I begin by declaring an interest as President of the Federation of Economic Development Authorities, which is a federation of local authorities that have economic

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development departments. That interest is, of course, much inferior to the interest of my noble friend Lady Farrington, who is chair of the ACC.

Secondly, I thank my noble friend for moving the Motion. To respond to the noble Baroness, Lady Hamwee, I am not a serving councillor and I have no axe to grind for any particular council.

As the noble Lord, Lord Tope, said, the debate comes at an opportune time. It is some time since we had a debate on the general role of local government. It comes also at the time when the revenue support grant is being finalised. Perhaps even more importantly, it comes when the Banham commission has more or less completed its report on its recommendations. The work of the Banham commission has raised a great many interesting ideas. I do not agree with everything that the commission has proposed; nevertheless —and this is an important theme which has run through much of the debate—it raised the idea that there is something called the community and that it is important that whatever local authority is in place it should have a close relationship with the community. That is why I welcome the words of my noble friend's Motion that local authorities have problems in providing the services which their communities need. It is important that we should pay attention to the wording of the Motion.

It is clear that local authorities have problems. Those problems can be stated quite simply. Local authorities have been loaded with duties without adequate resources. The communities that they serve need the services, but there is a question as to whether the authorities are in a position to render those services in a sensible manner.

One means of solving that particular problem, as the noble Baroness, Lady Hamwee, said, is to establish a series of quangos. One simply ignores local authorities altogether and provides services by appointing—mainly—the wives of Conservative Members of Parliament to quangos, and pays them certain sums of money to render the services for which local authorities would otherwise be responsible. I come from Wales, and that has happened repeatedly in Wales. The Secretary of State for Wales has some 1,600 appointments in his gift. Most of them seem to go to the wives not of Welsh Conservative Members of Parliament, because there are not many, but of English Conservative Members of Parliament.

Leaving aside the democratic problem, that creates difficulties for local authorities. If the burdens on local authorities were thereby reduced one might accept that that was one way of dealing with the problem, although not necessarily a good way of dealing with it. However, I can give three examples to show that the burdens on local authorities have not been reduced.

The first example relates to housing, which was mentioned briefly by the noble Baroness, Lady Hamwee. Local authorities are responsible for housing the homeless. However, local authorities have no right and no funds to build houses. Therefore, how are local authorities, which have a responsibility for housing the homeless but no power to build houses, to fulfil that service for their communities?

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The second example relates to education. My noble friends Lord Varley and Lady David put the problem in much starker terms than I ever could. In my noble friend's area of Derbyshire the situation is quite extraordinary. The educational needs of the community cannot be served by the local authority because, although the local authority still has responsibility, some quangos have taken certain matters out of the power of the local authority.

The third example, which was mentioned by my noble friend Lady Fisher, concerns the single regeneration budget. If it had been the case that local authorities were given the task of regenerating urban areas and inner cities, properly without fear or favour as they were in the past, instead of having to spend millions of pounds competing for the single regeneration budget, we would have accepted that local authorities were given the resources to do what they had to do. They have not. That is the problem.

My noble friend Lady Farrington, the noble Baroness, Lady Thomas, and my noble friend Lord Varley, referred to the problems faced by the local authorities next year in terms of the standard spending assessment and the revenue support grant which we have in front of us. Like my noble friend Lord Monkswell, I should like to stand back and consider the trend that has developed over the past few years.

Many burdens have been laid on local authorities. Almost every Bill that I have dealt with in this House—whether it was a trade and industry Bill or an environment Bill—has in some way placed a burden on local authorities. It may have specified that trading standards officers shall do this that and thus; or the local authorities will handle certain matters. Mr. Michael Howard spoke to the annual conference of the ACC in Winchester on 10th November. Under the heading "Procedure for dealing with new burdens", he said:

    "I know, of course, that it is a frequent complaint in local government that whilst we in central Government are always ready to lecture you on the need to cut back expenditure and rationalise your activities, we also slip in from time to time new policies which have a real impact on local government, and which you feel have not been the subject of proper or adequate consultation. I am sympathetic to that complaint. And I want to do something about it".

What he did was to move to a more distinguished office than he held at that time—and he has done something about that! What Mr. Howard did at the time was to ensure that the amount that was made available to local authorities for the "new burdens"—the phrase used—was insufficient.

The noble Baroness, Lady Faithfull, referred to care in the community. We are not arguing about the policy. The Government used the mechanism of a ring-fenced special transitional grant to pass community care funding to the local authorities. That was in keeping with what Mr. Howard said in November 1992. The problem is that in recent weeks a number of local authorities—the noble Baroness, Lady Thomas, referred to yet another which I had not heard cited previously—including Devonshire, Gloucestershire, Lancashire and the Isle of Wight, have all declared problems over the resourcing of community care. Gloucestershire has withdrawn services and, as a result, is being challenged through judicial review. In those circumstances, nobody

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can say that Mr. Howard and the Government have lived up to their words in the assurance that was given to local authorities.

I shall not go through the list of the new commitments that have been given to local authorities since 1979, but it is a fairly long list. It includes important core work such as fulfilling seat belt requirements in school transport; providing additional local authority accommodation for young offenders under the Criminal Justice and Public Order Act 1994; the implementation of the Police and Magistrates' Courts Act 1994; additional checks on street lighting; continued collection of the poll tax; enforcement of the new Sunday trading rules and providing protection against counterfeiting by unscrupulous traders. All those burdens have been laid on local authorities. Although it is not possible to say that that has not been covered in the revenue support grant, from what noble Lords from all sides of the House have been saying there must be serious doubt about whether the Government have lived up to their commitment to grant sufficient resources to meet the burdens that have been placed on local authorities.

The noble Lord, Lord Dixon-Smith, gave what my noble friend Lord Varley described as an inadequate "apologia" for the Government in which he said that local government has not broken down. Local government may not have broken down but, as my noble friend Lady Gould and the noble Baroness, Lady Hamwee, said, it is getting more and more difficult to find good people to serve as councillors and officials in local government. If you cannot get good councillors and good officials, local government will break down. So the question that the Government have to answer is quite simple: do the Government want healthy local government or not? I would understand it if the Government said that they do not want healthy local government.

The noble Lord, Lord Dixon-Smith, said that he was "kicked out" of local government. The democratic process unfortunately worked, so we are happy to see the noble Lord among us, possibly as a result of that unfortunate electoral event. If the Government do want healthy local government, they must recognise that local authorities may well be controlled by their political opponents. They must recognise that the Labour Party or the Liberal Democrats may well control local authorities and that the control of some local authorities will be divided. It cannot be the case that because many local authorities are not controlled by the Conservative Party, the Government can say that they will claw back everything into Westminster. Subsidiarity, like charity, begins at home. That is what the argument is really about and that is the problem that the Government must face. Until they recognise that their opponents may be able to exercise positions of responsibility sensibly and constructively—in other words, until they recognise that democracy should work at all levels and not just in the House of Commons—we will never have healthy local government.

My noble friend Lady Farrington said that the relationship between local authorities and the communities that they serve is "sacrosanct". That is the word that she used—rightly, I think. Until the

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Government recognise that very simple truth, local government (whatever its form) will never (in any understandable sense of the word) have the freedom that it really needs.

5.55 p.m.

Viscount Ullswater: My Lords, I have listened carefully to all the concerns eloquently expressed this afternoon and I am most grateful to the noble Baroness, Lady Farrington, for giving us the opportunity to discuss these very important issues.

The Secretary of State for the Environment announced his proposals for the local authority finance settlement for England 1995-96 on 1st December. The Secretaries of State for Wales and for Scotland announced their proposals for spending in Wales and in Scotland on 29th November.

I think it would be helpful if I set out the key facts about what we are proposing in order to have healthy local government, which is what the noble Lord, Lord Williams, also wants. Total standard spending (TSS) is the amount that the Government consider that local authorities need to spend in aggregate to carry out their functions. TSS will rise 2 per cent. in cash terms from 1994 to 1995. Adjusting for function changes, the increase is 2.2 per cent. The TSS figure for England for 1995-96 will be £43.511 billion.

Adjusted to remove the figures for community care, as regards which the transfer of responsibilities to local government is taking place over several years—and I am glad to hear the very good report that my noble friend Lady Faithfull brings from those who have left that mental hospital in Greenwich—and the figure of £50 million allowed for local government reorganisation, the TSS for all other services is £41.623 billion, an increase over this year of 0.8 per cent.

The noble Baroness, Lady Thomas, noted that responsibility for the provision of care in the community is being transferred to local authorities. As I have indicated, additional provision to reflect those responsibilities has been provided. It is now up to local authorities to manage those resources and to decide what priority to give to spending on those services. I shall ensure that Ministers in the Department of Health are aware of the points that the noble Baroness made.

In allocating the total sum between services, we have decided to give priority to the police and education. The noble Baroness, Lady Farrington, was right when she said that the standard spending assessment is the Government's view of what revenue local authorities need to spend in order to provide a level of service which is consistent across all authorities. The system of SSAs is a fair and relatively simple means of distributing resources between authorities. This is not just the Government's view, but it is the view of the Audit Commission. In a study of the SSA system entitled Passing the Bucks published in 1993 the Audit Commission commented that the SSA system is:

    "a more sophisticated system of equalising needs than any overseas system examined in this study and it is an improvement on its predecessor in many respects".

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The methodology for calculating SSAs is the subject of much informed debate and each year we consult local authorities on the system for the coming year. We are currently considering what local authorities have told us during this year's consultation. Some 90 delegations, including a delegation from Derbyshire, came to put their views to Ministers in my department and I know that Ministers in the Home Office had separate meetings with representatives of police authorities. I had the pleasure of meeting six delegations to discuss the proposed settlement.

The noble Lord, Lord Varley, went into bat again on behalf of Derbyshire. I commend him for his tenacity. The effect of the proposals on total SSA is that two of the five authorities in the East Midlands—I told him this on a previous occasion—are at the average for all shire counties, or do better, and three are slightly below average. As I have said, the SSA system is formula-based, objective, and wholly open to scrutiny. We do not look at the system from the standpoint of what it delivers for X or Y authority; we look, in conjunction with local government, for formulae which fairly represent need. We are always ready to consider objective needs-based improvements to the system. One element of the system is the area cost adjustment about which I know the noble Lord, Lord Varley, has comments. In so far as that applies to Hertfordshire and not to Derbyshire, that of course affects the relative SSA levels of the two authorities.

The noble Baroness, Lady Farrington, and the noble Lord, Lord Tope, gave my right honourable friend the Secretary of State for the Environment the benefit of their views on our proposals at the Consultative Council for Local Government Finance last Thursday. In addition, we received several hundred letters on the proposed settlement. All of those representations will be taken into account when the Secretary of State takes his final decisions on the settlement for 1995-96.

In its report on the system of SSAs the Audit Commission recognised that openness. The report said:

    "The determination of SSAs, being wholly formula based is explicit and open to scrutiny. Overall SSAs might be classified as transparent, but not simple".

The noble Baroness, Lady Hamwee, sounded decidedly suspicious. She pointed to a significant change in the relative score on the educational needs index for the London Borough of Richmond-upon-Thames. We have no proposals to change that element of the SSA methodology for 1995-96. That suggests that conditions in Richmond-upon-Thames must have changed between the years, and that has been reflected in the SSA. I shall write to the noble Baroness on that point.

We recognise the need to keep the system of SSAs under review. We do that in consultation with the local authority associations. We have a well-established system for involving local government itself in the development of all SSAs. This year we have kept the SSA system relatively stable, except in the area of police where the creation of new police authorities and the move away from agreed establishments have

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necessitated a new formula (and hence SSA) -driven approach to allocating resources. Substantially more work is needed on the police SSA for 1996-97.

An important assumption which we are required to make every year is what improvements in efficiency local authorities can be expected to make. Often we are told by particular authorities that they have no further scope for improved efficiency and will be forced to make cuts in services.

My noble friend Lord Dixon-Smith gave us some interesting statistics, and from his long experience has indicated that the proposed cuts often do not take place, and somehow efficiency gains are found.

Last week, the Audit Commission published two reports Paying the Piper and Calling the Tune which call for better use of resources, better management of paybills, and the use of performance-based management at all levels in local authorities. The noble Baroness, Lady Gould of Potternewton, quoted from Paying the Piper. I should like to quote further from the first of those reports because the commission concludes:

    "Using the techniques in this report has helped many councils to achieve savings of five to ten per cent. of staff budgets without damaging services. If all councils saved five per cent of paybill, national savings of £500 million would be available".

The commission also notes that it is not for central government to impose such changes. It is for local authorities themselves to define the framework and meet the challenges of getting better use from limited resources.

The noble Lord, Lord Williams, said that local authorities of course have problems; they have duties, but not enough resources. It is up to them to decide how they spend their resources. They may be limited resources but that presents them with a challenge to spend them in the best possible way.

I am pleased to be able to tell the House that the Government's position has been vindicated by an independent and responsible body like the Audit Commission at a time when local authorities themselves have been very critical of our determination that they can and must improve their performance.

The noble Baroness, Lady Farrington, and the noble Lord, Lord Tope, with his experience as leader of the London Borough of Sutton, and, perhaps more particularly, the noble Baroness, Lady David, drew attention to the problems of education. The settlement includes an increase of 1.1 per cent., as the noble Baroness said, in resources available for education services. Of course each education authority has discretion to decide how much of its total budget to spend on education and how much on other services. In education, as in other areas, authorities have scope for savings. They cannot merely roll forward past spending without scrutiny.

My noble friend Lady Faithfull also drew our attention to the difficulties of funding special educational needs. I do not try to hide the fact that there are difficulties there, as other noble Baronesses have also said. I am well aware about authorities' concerns about the threat to educational standards. The Government are committed to improving our children's

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standard of education. The extra resources we are giving authorities will enable schools to continue to improve standards.

The noble Lord, Lord Tope, indicated the problem that the Borough of Sutton was having with recoupment. The ending of recoupment has been generally welcomed by local government. I can assure the noble Lord that we shall try to remove any anomalies caused by errors in data this year. The ending of recoupment avoids the complications for authorities of collecting payments from other authorities.

The noble Baroness, Lady David, made a number of remarks about adult education. The Government are fully committed to the notion of lifelong learning. The new further education sector has clear responsibilities towards adults. At the national level we have ensured that LEAs have the resources to carry out their duties. Noble Lords have suggested that schools have suffered a history of government under-investment. That is just not true. Spending per pupil rose 52 per cent. in real terms between 1970-80 and 1992-93, and 22 per cent. on repairs and maintenance. Pupil/teacher ratios have fallen from 18.9:1 in 1979 to 17.8:1 in 1993.

We have made it clear that public sector pay increases must be met from productivity or efficiency gains. The pay review body must take account of available resources in making its recommendations. Local government has threatened large-scale redundancies among teachers for several years. It has not happened. I do not expect this year to be any worse than others.

The noble Baroness, Lady Farrington, drew our attention to the housing investment programme. I must, first, tell the noble Baroness, Lady Hamwee, who was also interested in housing, that local authorities have housing debt of more than £37 billion. The requirement therefore to set aside 75 per cent. of housing receipts represents the Government's financial judgment of how much of that should go towards reducing that debt and how much should fund new spending. Any relaxation in the set-aside rules would add to pressure on public expenditure and lead to a higher PSBR. However, HIP allocations for 1995-96 total almost £1.3 billion, despite the tough PES round. In addition, local authority housing will benefit in 1995-96 from £313 million for estate action schemes; £90 million for housing action trusts; £60 million for the cash incentive scheme to help tenants move to owner-occupation; and £30 million for the housing partnership fund, concentrating particularly on bringing empty properties back into use. Local authorities estimate that they will have available about £830 million of usable capital receipts at the beginning of the 1995-96 financial year.

The noble Lords, Lord Varley and Lord Monkswell, and the noble Baroness, Lady Thomas, complained about the imposition of capping on councils. As regards the principle of capping, we are serious about controlling public expenditure. We therefore need a system that ensures that all authorities play their part in restraint. The capping system achieves that.

The noble Baroness, Lady Fisher, made a spirited speech defending Birmingham and its regeneration projects. Birmingham bid for £5.9 million from the single regeneration budget for 1995-96; £48.9 million

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over five years. It received approval for £3.6 million in 1995-96, coming up to the figure of £28.3 million that she quoted for the five-year period. That represented three of five parts of its project. The highest priorities were approved. The approved bids represent the highest amount for any authority in the West Midlands and the fifth highest nationally. Only projects in London, Sheffield and Bradford received more. I shall read carefully in Hansard what was said by the noble Lord, Lord Williams. He indicated that somehow the Government should give a blank cheque to local authorities in order to help them to cope with regeneration—give them the task, give them money.

My noble friend Lady Faithfull was anxious about the provision of secure training units. The Government believe that the public should be protected from young offenders and that less secure facilities provided by local authorities would not be adequate. As my noble friend indicated, the Government have taken steps to provide new secure training units, which will be fully funded by central government.

The noble Baroness, Lady Gould of Potternewton, was anxious about local accountability. Of course, the Citizen's Charter and the charter mark scheme aim to encourage local authorities and other public bodies to put the customer first. The noble Baroness was right in saying that decisions on local services are best taken locally. Local authorities have the discretion to decide their own spending priorities in the light of local circumstances.

My noble friend Lord Harmsworth drew our attention to the commission's finding on Dorset. The commission's final report on Dorset was published on 15th December. We have stated that we shall not announce our decision until the representation period finishes on 9th February. Before taking any decisions, we shall of course take into account all representations made.

We know and understand that this is a tough set of proposals. We proposed it only after a great deal of discussion about the services that authorities have to provide and about what the country can afford. Demographic pressures, such as the pressure on education services of rising numbers of schoolchildren, and on social services and community care of the increasing number of the very elderly, were taken fully into account. We also took into account the costs of local government reorganisation and the costs of establishing the new police authorities.

But the public sector as much as the private sector cannot just add up all new pressures and expect to have that much extra to spend. It must reassess its baseline. It must ask: can we do anything differently? Is our current way of tackling a problem still the best way? All authorities must look for efficiency savings and must be prepared to re-order priorities in line with changes in local needs.

We are now taking stock of all the representations made to us during the consultation period on the provisional RSG settlement for England. We will also, of course, take into account the views expressed here

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today. Our aim remains to achieve a rigorous settlement which will enable local government to provide the services people need if the resources are used prudently.

6.15 p.m.

Baroness Farrington of Ribbleton: My Lords, in rising to thank all noble Lords who have taken part in the debate, I first thank the Minister for his reply. I shall resist the temptation to respond to his separate question of whether there is a way in which the Government could do things differently. The conventions do not allow me to respond to that.

I thank all noble Lords who have taken part. The debate has demonstrated the wealth of experience and knowledge in this House about local government. That factor is important in securing future support for local democracy. I beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.

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