Sir George Young (North West Hampshire, Conservative)

Before we move on to part IV, I should like to press the Minister on the financial arrangements that follow the scenario that we have just discussed under clause 46. Clause 47 relates to the amount that must be transferred from local government to the care trust following the establishment of the care trust. Some important issues are involved on which the Minister must focus.

By definition, we are discussing a local authority that has failed and did not want to enter into a voluntary arrangement but for which none the less, for the reasons that the Minister described, a care trust has been established. The issue arises of how the care trust will be funded. The Minister will look to the local authority to transfer the social services budget for the provision of the services that the local authority would previously have provided.

I do not believe that it will be straightforward. At present, most local authorities spend more than their standard spending assessments. The local authority in my constituency spends more on social services than it is supposed to under the rate support grant formula. It would be perfectly reasonable for the local authority to say to the Government, ``You think we ought to spend £x million on social services, which is the amount in the RSG; that is the amount to which you should help yourselves in order to run social services.'' However, the Minister might say, ``You are spending more than the SSA. I think it entirely reasonable that a larger sum than the SSA provision should go to the care trust.'' If the Minister had his way, that would affect the local authority, as money that might otherwise be designated for education or transport, for example, might go to the trust.

We now come to what will happen in the event of a disagreement. Paragraph (c) provides that in the event of a disagreement an arbitrator will be involved. The explanatory notes touch on that. In the event of a failure to agree locally on the level of funding an arbitrator can be brought in to determine the appropriate level, which can be checked against a national formula to compare decisions made locally. I wonder whether the Minister might say a little more about that. It is a novel arrangement—I have not come across it before—whereby an outside person will adjudicate as to how much money is transferred from a local authority to a central Government Department. That will require the wisdom of Solomon. If, as is suggested in the clause, he refers to a national formula, I imagine that that is the SSA. If that is the amount that ought to be transferred, the result may be that slightly less money is put in than was being spent previously.

On clause 47 stand part, it would help the Committee and local authorities to know exactly how much money the Secretary of State was going to take out of their pockets in order to go ahead with the arrangements under clause 46.

Mr John Hutton (Minister of State, Department of Health; Barrow & Furness, Labour)

It might be helpful for Committee members to consider the context of clause 47 and what it is designed to do. If the Committee accepts the principle—I accept the Conservative Opposition did not agree to this—that the Secretary should have the power to set up a care trust in the circumstances outlined in clause 46, I hope it is clear to the right hon. Gentleman that the powers in clause 47 are necessary and complementary to making sure that that policy objective can be secured.

It is clear from the way in which clause 47 has been drafted that, even in circumstances where a compulsory care trust has been set up, we want to allow for the possibility of an agreement about the resources that should be transferred. We all accept that that would be the preferable solution. At the same time, however, we cannot allow a situation to develop where, in the absence of such an agreement, the compulsory care trust could be frustrated by one or other of the parties not agreeing the resources that were necessary for the establishment of the care trust. That would clearly drive a coach and horses through the main policy objective. We need, therefore, to deal with a situation where, in the absence of agreement, the Secretary of State has to make a decision about the resources. Having looked at the matter very carefully—and I agree that more discussions are needed between the Government, the Local Government Association and other interested parties—we consider that it makes sense to use the expertise of an arbitrator to resolve any disputes about how much resource should be transferred to the care trust under clauses 46 and 47. That is essentially what we are trying to do and it makes sense to deal with it in that way.

The right hon. Member for North-West Hampshire (Sir G. Young) has asked me to specify what I think will be transferred to the care trust under clause 47. With the greatest of respect—and I am sure that he knows this as he has done my job—it is not possible for a Minister to tell the Committee precisely how much will be transferred if particular circumstances arise in the future. That is clearly not a possibility. Of course we would have to look at the standing spending assessment and at what the local authority had spent on the services involved. Of course we shall have to do that. In the absence of agreement, however, it will be the arbitrator's job to advise the Secretary of State on the appropriate level of resources that should be transferred.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

The Minister will correct me if I am wrong, but my understanding is that the standing spending assessment indicates the amount that a local authority ought to spend in order to deliver services adequately. How will the Minister tell a local authority that he requires them to deliver a sum greater than their social services SSA for the purpose of financing a care trust or a partnership arrangement? How will Minister justify that? Is he saying that the SSA does not provide an adequate formula for determining the correct amount of spending?

Mr John Hutton (Minister of State, Department of Health; Barrow & Furness, Labour)

I would be a very brave man if I were to enter into that discussion. I do not know how other members of the Committee feel about this, but having some responsibilities in these matters and looking at the current distribution of local government resources, I think that very few right hon. and hon. Members would say that the system was satisfactory. That is why the Government published proposals in the Green Paper on the reform of local government finance setting out a way in which we might introduce greater fairness into the system. The discussions are on-going and the Government have come made further proposals.

As a matter of principle and a matter of record, the right hon. Gentleman might be interested to know—he might have had some responsibilities for this in his previous ministerial incarnation—that under the previous Administration the Welsh Office introduced arbitration schemes for settling resource disputes between GP fundholders. The principle, therefore, of an arbitrator to resolve these disputes is not novel. It has been used on previous occasions. I must also say, with the greatest respect, that he was not right in his remarks when he talked about transferring resources to a central Government Department. That is not so. We are talking about transferring resources to the care trust, so that it can deliver appropriate, high-quality public services. That is not transferring resources to the Department of Health.

The question is whether we need the clause. In my view, the answer is yes. Resolving the issue of resource transfers is a complex matter. We have set out a proposal that will make sense of that, and allow the matter to be dealt with. It will be dealt with in the first instance by agreement, wherever that is possible. If it is not, it will be dealt with through the expert assistance of an arbitrator, who will advise the Secretary of State about the appropriate level of resource transfer.

With the greatest of respect, I probably cannot go any further than that in specifying the formula that will be used to judge the necessary amount of resource transfer, or in answering the detailed questions, which are important and must be resolved. They will be resolved, and a sensible set of conclusions will be reached, in further discussions with the LGA and others. As with clauses 45 and 46, the fundamental question is whether we need such a power. The answer is clearly yes, as we have established the case for a compulsory care trust, and the detail of the proposals offers a sensible, pragmatic, fair and even-handed way of resolving issues that are complex both in practice and in principle.

Question put and agreed to.

Clause 47 ordered to stand part of the Bill.