It is our intention that the review team should report in June 1996. Professor Robert Elliott of the University of Aberdeen has agreed to chair the review of the area cost adjustment. He is an expert on labour markets and earnings in the public sector. The local authority associations have nominated Roy MacIver, until recently the Secretary-General of the Convention of Scottish Local Authorities. My right hon. Friend has nominated David McDonald, a former under-secretary in my Department.
Draft terms of reference for the review are being discussed by members of the review team and local authorities' representatives. When these are settled, a copy will be placed in the Library.
That sounds encouraging. Does my hon. Friend agree that there must be something intrinsically wrong with a system whereby a school in Staffordshire with 900 students receives more than £250,000 less than a similar school in Surrey which has similar costs? Is not it even more wrong that Labour-controlled Staffordshire council is sitting on huge reserves which it does not use? Is it not about time that we funded schools centrally from the Department for Education and Employment? Let us have central funding, but local control.
I do not agree that something is intrinsically wrong with a system in which there are differences in funding. The fact is that there are schools in different areas, and the purpose of the review is to find out what the total additional costs are. On that matter, my hon. Friend and I will have to agree to disagree.
As far as Staffordshire is concerned, a 3.1 per cent. permitted increase in budget and a 5 per cent. per capita increase in education funding should be fully adequate to fund increased demography and any reasonable teachers' pay award.
The Minister said that the report would be available in June next year. Will he now give a commitment that a new and fair system will be in place for the financial year 1997-98? Does he appreciate that local authorities want action and not words? The present system discriminates against Nottinghamshire and the east midlands, which just want a fair deal.
Everyone wants a fair deal, but everyone disagrees as to what that fair deal is. There is a very good case for taking into account total employment costs around the country. In the review, we are trying to bring up to date this indicator, as we do with other indicators on a regular cycle. If the review team is able to come up with an agreed outcome which is robust and gives better answers than we have at the moment, we will seek to employ that at the earliest opportunity.
Does my right hon. Friend agree that the present system prescribes that a person who takes one step across the border of Cambridgeshire into Bedfordshire is suddenly deemed to be in a very expensive area? Is this not a crazy system which has gone on for far too long? I appreciate my hon. Friend's efforts in this matter, but will he make sure that there is no undue delay in the review? Will he consider using the travel-to-work area system, rather than the arbitrary county boundaries?
We examined carefully the travel-to-work area system in the past year, and it did not prove sufficiently robust. The county councils tried to make their scheme of actual costs work, and that did not work either. That is why we have introduced an independent review, and we have appointed as chairman somebody who is an expert in labour market economics, because this is about costs in the labour market. I hope that the review will be able to produce a robust outcome that all the parties will agree produces the best system. That is perhaps the most optimistic part of my expectations.
Would the hon. Gentleman like to make the same calculation for Tower Hamlets, Hackney, Camden and Lambeth? What benefits Westminster benefits all the other inner London authorities, and it is about time that the hon. Gentleman realised it.