Local Government Finance

Part of the debate – in the House of Commons at 9:49 pm on 6 February 2006.

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Photo of Richard Benyon Richard Benyon Conservative, Newbury 9:49, 6 February 2006

I will prove to the Minister that there has been a shift from areas such as West Berkshire. Whether those resources have gone north, south, east or west, I shall leave the Minister to work out, as his Department has contrived a very confusing system.

My right hon. Friend Mr. Curry is quite right—we cannot look at the issue properly if we include the schools money, and the figures that I will use are for non-schools grant. Many authorities receive two and, in some cases, three times as much grant per head as councils such as West Berkshire that do worst in the system. As if the situation were not iniquitous enough, some authorities enjoy annual increases far above those received by West Berkshire. Middlesbrough, for example, has received a 5.7 per cent. increase; Stockton-on-Tees, 4.9 per cent.; Hull, 4.8 per cent.; and Hartlepool, 4.2 per cent. West Berkshire, however, must make do with a below-inflation settlement of 2.1 per cent. In short, a system that is already grossly unfair has been made more unfair with each passing year.

The predictable reaction to that unfairness from the Government is to claim that those disparities are simply a reflection of greater deprivation elsewhere, but that argument is flawed. If we use the indicator of average weekly income, the Government's own statistics show that average income in a relatively well-off area such as West Berkshire is 50 per cent. higher than in council areas with the very lowest incomes in the country. How can that disparity justify Government grant levels 300 per cent. higher in other areas?

The change to the new funding system has hit West Berkshire and a number of other south-east councils particularly hard for another reason. For many years, West Berkshire council, along with neighbouring councils such as Wokingham, were short-changed by a system that imposed ceilings on grant levels. Although demographic trends meant that the Government calculated that West Berkshire required large increases in grant to meet service needs, those were curtailed to pay for grant increases to other councils. Last year, as hon. Members will recall, the grants ceiling was removed for one year. West Berkshire received an overall increase in grant of 11 per cent., and it began to offset the years of bad settlements that it had previously received. A year later, under the new system, West Berkshire is no longer at or, indeed, above the grant ceiling, but is on the floor, with a below-inflation increase in its non-schools grant of 2.1 per cent. How can a council be assessed as requiring a massive increase in grant one year, but receive a grant below inflation the next?

I try not to be cynical, but one can understand why people ask if it is more than a coincidence that the funding system has been changed just as it was finally about to start to address long-term inequalities in funding for some authorities in the south-east, where the Labour party has virtually no presence.

There is a final aspect to the changes in this year's funding system that should not go unnoticed. We live in the world of the relative needs formula. The effect of this change is to render an already complex and opaque system virtually unintelligible. That is helpful, if the system is designed to move resources from one area to another without any genuine justification or accountability. Despite half-hearted Government protestations to the contrary, the old system of formula spending share effectively set out what the Office of the Deputy Prime Minister thought local councils should spend in cash terms on various services.

Not surprisingly, the old system produced some uncomfortable statistics for the Government. The last set of figures for social services FSS in 2005–06, updated for the last time in this year's release of information, showed that West Berkshire came 146th out of 150 authorities in the amount of funding the Government expected it to spend on social services per head. Effectively, the Government expected West Berkshire to provide social services by spending just £197 per head of population, compared with up to three times that sum in other councils.

Clearly, that was always nonsense, brought about by the inequity of the funding system. West Berkshire has the same demographic pressures as other councils, with an ageing population, increased cases of dementia, and so on. The needs and unit costs of social services clients are not radically different because they live in West Berkshire rather than in inner-London or places further north. Why should services to some of the most vulnerable people in our society be underfunded by the Government simply because those people happen to live in an area which, by Government calculations, is moderately better off than other areas?

The truth is that an elderly or disabled person in need of social services provision living in Newbury has just the same requirements as someone in a similar condition living in Newcastle, but the Government believe that my constituent is only a third as important as somebody living in another area. Unsurprisingly, the new system of relative needs formula provides no monetary statistics. The Government say that is because the old system was misrepresented, but it is precisely because the old system exposed such unfairnesses that it has been changed.

There are two other areas that are worthy of consideration in such a debate. First, West Berkshire receives back far less in business rates than it contributes. That is another example showing how resources are shifted surreptitiously from one area to another. It is not a system that is understood by the electorate out there. Secondly, the people of West Berkshire have thankfully taken the only course of action open to them that can mitigate the effects of Government underfunding: they have elected a Conservative administration, which in its first year—[Interruption.]

I hear a scoff from the Liberal Democrat Benches. The Liberal Democrats controlled that local authority, and they were happy to see the people of West Berkshire caught in a pincer movement between a Government who fiddled the funding and imposed the Chancellor's savage stealth taxes on them, and a Liberal Democrat authority that ramped up council tax year on year to pay for ridiculous spending and pet—[Interruption.] I certainly blame both, because I had to live under them for too many years. I am happy for the Liberal Democrats to see our figures.

The people of West Berkshire have now elected a Conservative administration which, despite the appalling settlement that it has received, has identified pensioner poverty as a major problem that is being exacerbated by council tax. The administration wants to keep council tax down. It has recognised the effect of council tax on young families as well. It has managed to achieve a record settlement, even in the climate that the Government have created. I am enormously proud of the Conservative administration running West Berkshire council. It is doing its best to provide quality services within a system of Government grant that is unaccountable, whose logic is untenable and which creates a disparity of funding that is totally unfair.