Orders of the Day — Standard Spending Assessment (Cambridgeshire)

– in the House of Commons at 9:59 pm on 25 March 1993.

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Motion made, and Question proposed, That this House do now adjourn.—[Mr. Nicholas Baker.]

10 pm

Photo of Mrs Anne Campbell Mrs Anne Campbell , Cambridge

I must confess that the standard spending assessment is not a subject which fascinates everyone. After a session in which many hon. Members were up all night, it is perhaps not surprising that so few of them remain in the Chamber for this debate. However, I am very pleased to see the hon. Member for Cambridgeshire, Sout-West (Sir A. Grant) in his seat, because, as one of my fellow Members for Cambridgeshire, he obviously shares my great interest in this matter. I am very grateful to him for turning up this evening.

There is a pattern in the Government's treatment of local authorities—a pattern, I am afraid, of failing to listen, undermining local democracy and removing accountability, and at the same time imposing spending cuts.

The standard spending assessments fit that pattern in all three respects. That is not just my view; it is the view of the Audit Commission which, in a leaked draft report, says that standard spending assessments and cappings leave councils with only cosmetic accountability for decisions largely made by Ministers.

That is not just Labour's and the Audit Commission's view. At a recent meeting of the Conservative-controlled Cambridgeshire county council, a resolution which referred to gross anomalies called for an urgent review of such dubious measures as the Standard Spending Assessment and the Area Cost Adjustment. That resolution, I am pleased to say, received all-party support.

That is all the more surprising when one knows that Cambridgeshire Conservative councillors quake at the knees at the mere thought of the tongue-lashing that they will receive from their former leader, the noble Lady Baroness Blatch for supporting publicly a resolution so critical of the Government. It is quite astonishing, and shows how strongly they feel. It is a situation in which anger conquers fear.

I can therefore say that I speak on behalf of the people of Cambridgeshire when I call on the Government to review the basis of the standard spending assessment and to give a fairer deal to Cambridgeshire.

If we look at some figures first to put the whole thing in context, we see that Cambridgeshire's SSA for 1993–94 is £380·6 million. The council budget has been set £2 million higher than this at the capping limit, and was negotiated because of the larger sums of money lost to further education than in the Government's formula calculations. This has meant an extra £10 on the council tax for a band B property across the county.

I also welcome the hon. Member for Cambridgeshire, South-East (Mr. Paice) who is now almost in his seat, and express my pleasure that he has chosen to attend this evening as well.

The education SSA for Cambridgeshire is £217·8 million, and the education budget is £226·75 million. That is £9 million higher, yet, even in that situation, Cambridgeshire is well down the list of all counties for spending per pupil. What are very sad and have angered local people immensely over the past few months are the cuts in education which Cambridgeshire is having to impose.

We have recently seen £400,000 taken out of the community education budget. That has affected many people and particularly many pensioners, people who may not have many pleasures in life and get a great deal out of community education, including social contact and the opportunity to develop their skills and talents.

The county has also taken £340,000 from its post-16 transport, which means that pupils who previously had a free bus service to school are being charged £40 a term to get to college. That affects many of my constituent; who travel from the north side of Cambridge to the south side, to get to the sixth form college. It also affects much more drastically the constituents of the Conservative Members for Cambridgeshire, South-East and for Cambridgeshire, South-West. One could call it a tax on rural communities.

Also, £200,000 has been taken out of the discretionary further education awards budget; that also affects the opportunities of people in Cambridgeshire.

These, however, pale into insignificance when compared with the £1·3 million taken from the central education support services, even though Cambridgeshire is among the top 10 authorities for delegating resources to schools.

That is not all. Because of the increasing pupil numbers in secondary schools, they would have expected to receive an additional £900,000 this year, simply because of the way in which the local management of schools budget works, but that has not happened.

This is not a profligate, spendthrift, giveaway authority but a county that was so mean with its spending that the Conservatives lost control in 1985 when its leader was the noble Lady Baroness Blatch, now a Minister in the Department of Education. The Conservatives must be worried that they look set to lose control again in 1993 because the people of Cambridgeshire are fed up with penny-pinching and cuts. They want a quality service, investment in the future, in our children, in our excellent community education service; and they want the opportunity for students, particularly mature students, to win discretionary awards, so that they can gain the qualifications which they need and which the country needs.

The area cost adjustment is based on the new earnings survey, which is valid statistically at the economic planning regional level. Cambridgeshire comes into the East Anglian economic planning region, with Norfolk and Suffolk, and it gets no area cost adjustment, unlike Bedfordshire and Hertfordshire, which come into the south-east region.

The Library has supplied me with statistics looking at the standard spending assessments per pupil for five to 15-year-olds for 1993 to 1994. I see that the SSA per pupil for that age range in Cambridgeshire is £2,218. It is £115 more per pupil in Essex, £135 more per. pupil in Hertfordshire and £215 more in Bedfordshire. That money buys a great deal in terms of resources.

The area cost adjustment is unfair. First of all, it is based on insufficient information. The economic planning region statistics are being used to determine spending at county and district levels. In fact, if the funding of grant-maintained schools is based on future standard spending assessments, we shall see the economic planning region statistics being used to determine spending in individual schools, and the situation will become even more ridiculous, and will give rise to even greater anomalies.

The area cost adjustment is unfair because it is based on insufficient, and insufficiently detailed, information. It is also based on the wrong information, because it assumes that, in expensive areas, staff are paid more to compensate for higher costs. In fact, a survey carried out by the Association of County Councils showed that there was very little variation in pay levels for teachers, police officers and fire fighters. These people are paid on national scales, so the whole basis of the area cost calculation is anomalous and inconsistent.

There is also in my area an inconsistency in the regional organisation of the Department of the Environment. It is a little curious that the Department's regional office covering Cambridge is in Bedford, yet, for the area cost adjustment, Bedfordshire and Cambridgeshire are in different economic planning regions. That does not seem to make sense.

When the SSA system replaced the grant-related expenditure assessments in 1990–91, the proportion of education control totals distributed for additional educational needs rose from 10 per cent. to 24 per cent.—a massive leap. Since then, the proportion has fallen a little, but it remains far higher than is justified. In fact, it is being used as a political fudge factor. A much higher proportion needs to be allocated for basic educational needs.

Finally, I believe that there is consensus that standard spending assessments are inequitable and that they are being abused—inequitable because they do not reflect the true costs of providing local services; abused because they are being used to impose on local authorities spending limits that should be decided by local people at local elections, and not by way of Government diktat.

The term "standard spending assessment" implies that the SSA takes account of the cost of providing a standard level of service in each local education authority area, but this is not true. In fact, each Department at Government level decides its control total, and then the SSA is simply used to divide this total between local authorities.

I am obviously fascinated to learn that the Secretary of State for the Environment is planning a review of the standard spending assessment system, including the area cost adjustment, in the coming year. I very much hope that that review will be more than window-dressing, that it will not be designed simply to fob local authorities off for another year. I hope that it will result in a fairer deal for the people of Cambridgeshire, but the precedents are not encouraging. I fear that the ugly pattern of imposing cuts and undermining democracy will continue. That is why I initiated this debate. I hope that the Minister will take on board the points that I have made.

Photo of Mr Anthony Grant Mr Anthony Grant , Cambridge South West 10:13, 25 March 1993

I am very grateful to the hon. Member for Cambridge (Ms Campbell) for allowing me a moment to participate in this important debate. She put her case with great care and a great deal of charm. In fact, so charming was she that I shall not say a word about the mismanagement of Cambridgeshire under a Lib-Lab coalition. I draw a veil right over that and confine myself to saying that Cambridgeshire county council, under Conservative control, has displayed very good, efficient financial management. The hon. Lady described it as penny-pinching and tight-fisted.

However, the hon. Lady and I are in total agreement about the fact that the council has been unfairly treated for a very long time by the central Government over the question of the SSA. I can go back as far as 1983, when I had very serious complaints. With my noble Friend Lord Pym, I abstained. We were given an acknowledgement by the Minister—now the Chancellor of the Duchy of Lancaster—that Cambridgeshire had been unfairly treated, and were told that the Government would try to be fair in future. I have not seen much sign of fairness. We are still stuck with the wretched area cost adjustment, to which the hon. Lady rightly referred, which seriously militates against us.

My hon. Friends the Members for Cambridgeshire, South-East (Mr. Paice) and for Cambridgeshire, North-East (Mr. Moss) and I have nagged about this issue year after year. On 3 February this year, I raised the matter with the Secretary of State. I pointed out that it was ridiculous that Cambridgeshire does not benefit, whereas Bedfordshire, Oxfordshire and Hertfordshire do. This creates great ill-feeling. I do not believe that it can be rectified by the Association of County Councils and I said that the Government should get a grip on the matter. The Secretary of State replied: I understand very well the concern that my hon. Friend expresses. Indeed, it has been expressed to me very often by several of my hon. Friends. I understand the strength of feeling on this issue, and I can give my hon. Friend the undertaking for which he has asked".—[Official Report, 3 February 1993; Vol. 218, c. 339.] I hope that that will be reiterated by the Minister when replying to tonight's debate, and that we shall have some action at long last. The whole principle of area cost adjustment is completely outdated. It is stuck in a sort of rigid time warp. It is time to scrap it and start again from scratch.

I have been pleased to note the way in which the mood of Government seems to have changed over the years. For example, yesterday the Secretary of State repeated that he was going to undertake a fundamental review of the SSA system in time for the next settlement".—[Official Report, 24 March 1993; Vol. 221, c. 908.] I hope that the consensus on the issue between all Cambridgeshire hon. Members will work on the hearts and heads of Ministers, so that next year there will be an end once and for all to the unfairness from which the fastest growing county in the country has suffered for far too long.

Photo of Mr Robin Squire Mr Robin Squire , Hornchurch 10:16, 25 March 1993

I wish at the outset to congratulate the hon. Member for Cambridge (Mrs. Campbell) on her good fortune in securing this debate and on the way she spoke. I also congratulate my hon. and long-time Friend the Member for Cambridgeshire, South-West (Sir A. Grant) and my hon. Friend the Member for Cambridgeshire, South-East (Mr. Paice), who has been in his place throughout this short debate. At some time this morning—which, as we know, was Wednesday—hon. Members on both sides must have wondered whether this debate would take place.

I am pleased to have another opportunity to speak about the calculation of standard spending assessments, or SSAs as they are known, focusing this time on the calculations for Cambridgeshire. Those assessments have an important place in the system of local government, but they are often misunderstood. I hope that hon. Members will bear with me if I begin by explaining some of the general principles, before going on to explain how they apply to Cambridgeshire in particular. Indeed, only by understanding the general principles can one hope to understand any individual calculation. That is because it is a hallmark of SSAs that they must be calculated on the basis of general principles, applied fairly and consistently to all authorities providing a particular service.

Hence, the method of calculating the SSA for Cambridgeshire is, and must be, the same as the method of calculating the SSA for other counties. That is a vital safeguard against arbitrary determinations and a safeguard which, I trust, commands widespread support in the House. I do not wish to stray into very controversial territory tonight, but I assure the hon. Lady that, back in the days when I was leader of a local authority, before I came into this House and when there was an alternative Government in power, the system allowed for a significantly greater variation on precisely the lines that she mentioned—I think her words were "political fudge".

In any discussion of SSAs, we must bear in mind the underlying aim of the SSA calculation: to calculate a figure for each authority—its SSA—which represents the Government's assessment of the level of revenue spending by that authority which should enable it to provide services to a common standard. This common standard is that which is consistent with the Government's view of the appropriate level of revenue expenditure for all local authorities combined, bearing in mind the position of the economy.

The SSA has two main functions. First, it helps to determine the amount of revenue support grant received by each authority. In effect, the grant is distributed in such a way that, if all authorities were to spend at the level of their SSA, the level of local tax could be broadly the same in all areas of the country. This was the case with the community charge, and will also apply to the council tax. Secondly, SSAs are used—as the hon. Lady is aware—as a benchmark for comparison within the capping framework when forming a view as to whether the level of an authority's budget, or the proposed increase in that budget, is reasonable or excessive.

These are vital roles, and they explain why I have stressed that it is important for SSAs to be calculated on general principles which are seen to be fair. I should therefore like to spend a few minutes explaining the basis of the calculations.

Although SSAs were actually introduced for the first time in 1990–91, they are the end result of a long period of evolution, in comparison with their predecessors under the previous system, which were known as grant-related expenditure assessments. SSAs have the great advantage of a much reduced degree of complexity. Nevertheless, they build on the large body of detailed research evidence which underpinned the earlier assessments. They also share with them the characteristic of having been extensively discussed, over a number of years, with the local authority associations.

SSAs aim to take account of the main characteristics of an authority which will affect its spending requirement. This is a daunting task covering expenditure in 1993–94, of some £37 billion by over 400 local authorities. There are, of course, constraints on the extent to which this objective can be achieved at any one time. In particular, SSAs have to be based on sound data sources—the census being a prime example—which are available on a consistent basis for all authorities.

Many factors are taken into account in the formulae, and they fall broadly into three categories. There are demographic factors—for example, what proportion of the population are children or elderly. These give us the size of the actual or potential client groups which help determine the need to spend in key areas such as education or personal social services. There are the socio-economic characteristics of the population. Research has shown that, for some services, the need to spend can vary with the number of people falling into certain disadvantaged categories—for example, the numbers in single-parent families or those receiving income support.

These indicators are reflected in SSA calculations. For example, over one fifth of the education SSA element is distributed by reference to an indicator of this kind representing additional educational needs—referred to by the hon. Lady.

Finally, there are adjustment factors to allow for higher employment costs in London and the south-east.

How then do all these factors affect Cambridgeshire? The total SSA for Cambridgeshire in 1993–94 is just over £380 million, which is an increase of 2·6 per cent. on last year's total. After adjusting for major changes of function. of the total, about 57 per cent.—£218 million—is accounted for by education, up by 2·6 per cent. on 1992–93, and a further 13 per cent.—£50 million by personal social services, up by 4·2 per cent. on 1992–93. This, incidentally, excludes the special grant in respect of the local authority's new responsibilities for community care. The remaining 30 per cent. of the SSA is distributed across a number of other services, such as police, fire, and highways maintenance.

It is, however, difficult to discuss such figures sensibly without providing some basis for comparison. If, for example, we divide the total SSA by the resident population of Cambridgeshire, we find that Cambridgeshire's SSA is £568 per head of population. That is a little below the average for all counties, which is £584 per head. In fact, Cambridgeshire ranks 22nd of the 39 counties on this basis. I might also mention here that Cambridge city, the constituency represented by the hon. Member, has an SSA of £116 per head, which is over 25 per cent. above the national average for shire districts, which is £92 per head; it has, moreover, increased by 5·2 per cent. on the equivalent figure for 1992–93, an increase which is more than twice the overall average for shire districts.

We find much the same picture if we examine the figures relating specifically to education. Cambridgeshire's education SSA includes £1,802 per pupil aged five to 10 and £2,613 per pupil aged 11 to 15—again, in both cases just below the average for all counties.

What underlies those figures? If we concentrate on education, which is far the largest component, we find that the formula includes a basic element per pupil in each age group which is the same for all authorities. There are then additional amounts in recognition of various special factors, the three most important being sparsity of population, an index of additional educational needs and a cost adjustment to compensate for the higher employment costs in London and the south-east.

Cambridgeshire receives a relatively high allowance in respect of sparsity, an adjustment that recognises the inevitable diseconomies of running small schools or incurring high school transport costs. It also receives an amount just above the county average for additional needs. This in turn reflects the fact that they are positioned towards the middle of the range in terms of the indicators used to measure the incidence of additional needs.

To take one example, the 1993–94 indicators show that about 12 per cent. of children in Cambridgeshire are children of income support claimants. That compares with 29 per cent. for Cleveland, at one end of the county spectrum, and less than 8 per cent. for Surrey at the other. In fact, in terms of the overall index for additional educational needs, Cambridgeshire again ranks 22nd of the 39 counties. Such reasons explain the differences between SSAs per head to which the hon. Lady referred.

Then there is the area cost adjustment. I know that it is an issue of particular concern to the hon. Lady. It is a topic which has been raised by Cambridgeshire on several occasions, including a meeting which took place just before Christmas with my hon. Friend the Minister for Local Government. As my hon. Friend the Member for Cambridgeshire, South-West pointed out, he has raised the issue several times. It is a fact that Cambridgeshire does not benefit from the area cost adjustment, which is confined to London and to counties in the south-east. It is based mainly on evidence from the new earnings survey. This is a survey based on a sample of information from employers, and the sample is too small to allow reliable figures to be calculated for individual counties, even if that were considered desirable. The analysis does, therefore, have to be calculated at a regional level and, on this basis, results have shown that only London and the south-east face costs which are consistently and significantly above the national average.

It has also been suggested that the area cost adjustment may be too high because it is well above the standard rates of London weighting paid—as the hon. Lady herself pointed out—to groups such as teachers, police and firemen. We have not so far been convinced by this argument, as other relevant costs need to be taken to account. More generally, however, we have been struck by the number of representations being made about the area cost adjustment, arguing—I stress this—for changes in both directions, and by the strength of the feelings aroused. The Secretary of State has therefore already made it clear that this will be one of the topics to which we shall give very careful attention during this year's review of the SSA methodology.

I shall write to the hon. Lady about at least one of the points she made, because time will not allow me to deal with it. She spoke about cuts in education in general. Of course, she is well aware that the detailed budgets of local authorities are a matter for the authorities themselves; in general, however, we believe that provision made within the settlement is adequate when account is taken of the much reduced level of inflation, the policy of pay restraint for public sector workers and the scope for improved efficiency in the delivery of public services.

In reaching our decisions, we took account of the pressures on local authority services, but we also had to have regard to the capacity of the taxpayer, locally and nationally, to bear the burden of expenditure. Job losses are sometimes unavoidable, and of course they are always a matter of regret, but local authorities must play their part in the vital task of controlling public expenditure.

With the hon. Lady's permission, I will write to her about the delays—as she would put it—in reflecting increases in pupil numbers, and about additional educational needs.

Of course, all local authorities would like to have more money, and I am sure that there are many worthwhile projects on which the extra money could be spent. However, we all have to live within our means. I believe that the settlement that we have provided for 1993–94 is very fair, in the light of the current low levels of inflation and the difficult economic circumstances that the country faces. It is fair both to the beneficiaries of services and to those who pay for them.

I am pleased to note that council taxes in Cambridgeshire will generally be well below the national average. No doubt that reflects in large part the prudent management by Cambridgeshire authorities in general of the resources at their disposal.

I concede that many criticisms have been made of SSAs, but that is to be expected when everyone would like a larger slice of the RSG cake. I would never wish to pretend that SSAs were perfect. Indeed, I would say that perfection is a target that is always bound to prove elusive in an area of such complexity. It is one of the great merits of the system that the entire process is completely open, with all data available for inspection. The methodology is continually under inspection with local authority representatives and other interested parties.

The process of trying to improve and update SSAs is never-ending. As I have said, 1993 will be an especially busy year in SSA development, not least because we expect to take on board the full range of indicators from the 1991 census.

Question put and agreed to.

Adjourned accordingly at half-past Ten o'clock.