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Local Government Finance

Part of the debate – in Westminster Hall at 9:56 am on 3rd April 2001.

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Photo of David Kidney David Kidney Labour, Stafford 9:56 am, 3rd April 2001

The Green Paper discusses the ability of politicians to explain and justify a system, which many people find incomprehensible, to the public. It is difficult to justify the formula because of its regressive nature.

I should also mention the plight of social services in Staffordshire. As the standard spending assessment is so low, support from central Government is also low. This year, the director of social services reckons that he is £17 million light on the funds that he needs to provide the same level of service as the rest of the country. From a politician's point of view, an excellent indication of that shortfall is that county council elections are due in Staffordshire on 7 June this year, but local politicians have decided to increase spending by 5 per cent. That is almost entirely because of the pressures on the social services budget, especially from older residents who want more support in their homes or to go into residential homes.

That spending increase is a measure of the desperation. Even in an election year, there is no question of not introducing an increase, although it will be unpopular with residents. As the 5 per cent. increase in spending outstrips central Government support by a considerable amount, the excess is loaded on the quarter of the council's income that comes from council tax, which converts to an 8.9 per cent increase in council tax bills, which has made residents angry. It is difficult to explain to them why the local authority bears such a disproportionate amount of that cost.

The Green Paper was welcomed in Staffordshire because it rejected a continuation of the status quo. In that regard, the Government have taken an important stride forward compared with previous Governments. My hon. Friend did not touch this matter, so I ought to make it clear that the Green Paper offered two different ways forward. On the one hand, it suggested a simplification of the existing formula for distributing central Government grants. On the other, it offered a system whereby local authorities would submit their plans for future spending and central Government would decide how to allocate funding in accordance with the quality of those plans.

Most responses that the Government have received do not favour the plan-based system because of the uncertainty at the bidding stage and concern about the additional bureaucracy caused by administering the plans. There is a further worry that that system would centralise control in the hands of the Government of the day, which would not allow local authority independence. Most people support a simplification of the formula. On 5 March, the Government published a summary of the responses received to the Green Paper, and if one reads through them it is easy to see that a majority of respondents felt that a simplified formula was fairer, easier to explain and easier to understand.

I welcome the suggestion on education in the Green Paper, which proposes a simplified formula with a minimum per pupil entitlement throughout the country. The parents, teachers, school governors and politicians of Staffordshire would be delighted to see that in place. Of course, there are reasons why some parts of the country need more money--for example, inner-London boroughs. The Green Paper therefore discusses additional payments for objectively ascertainable levels of deprivation and the costs of recruitment and retention. I have already mentioned the role that the Office for National Statistics could play in providing ward-based data that would justify those objective decisions.

I welcome the discussion in the Green Paper of funding floors and ceilings to limit the gains and losses of the winners and losers and to improve stability from one year to the next. On balance, I would probably support safety valves, as did my hon. Friend, but I am worried about discretion for the Government of the day. I support the response that one local authority made to the Green Paper that any funding for safety valves should be additional funding from central Government and not achieved by top-slicing other authorities' funding.

My final and probably most important comment on the Green Paper concerns the anticipated levelling up of funding rather than taking money from existing winners and redistributing it to losers. That is important to ensure that the future settlement is acceptable throughout the country.

I have read the responses to the Green Paper, which include support for a simplified formula. That support is not unanimous and some authorities oppose it, but it is fair to surmise that opposition comes from those who are gaining from the present unfair formula and do not want to risk losing their gains. There is strong support for a system of funding floors. Of the 229 local authorities and other organisations that responded, 89 per cent. favoured a funding floor, 9 per cent. were neutral and only 2 per cent. opposed a funding floor. That response was different from the response to a system of funding ceilings--my hon. Friend was nervous about that--which was supported by 56 per cent. of those who responded, with 26 per cent. being neutral and 19 per cent. opposed. Again, those who opposed it were those who feared that they would lose out.

My knowledge of funding campaigns goes back to the 1990s, when the seven worst funded shire counties formed themselves into a group. It called itself the E7 group and when another authority later joined, it became the E8 group. However, it had little clout or influence because it was a small group of losers and no one took any notice of it. If it threatened an authority that was a winner, it received no support, which was understandable. The group made a strategic decision during the present Parliament and disbanded. It obtained wider support from local government associations and formed a group of the 40 worst funded authorities in the country. It included all sorts of authorities--unitaries, metropolitans and so on. I was flattered that it chose the university of Staffordshire in Stafford in my constituency for its inaugural meeting in recognition of what I had said and done in Parliament.

I attended the inaugural meeting, at which it was agreed to set up a fair funding campaign group, called F40 for convenience and brevity. I said that I would write to Members of Parliament with constituencies covering those 40 authorities to ask if they were interested in supporting the group in the House. Approximately 200 Members of Parliament from all parties replied saying that they would support the campaign. We then held several meetings, which were very well attended bearing in mind our numerous commitments elsewhere, and were able to send out a firm and consistent message, especially to the Department of the Environment, Transport and the Regions.

I like to think that the message that we delivered so clearly and consistently influenced the rationale of the Green Paper. We were pleased with its contents and I am proud that 14,402 supporters of the F40 campaign wrote individual letters in response to the Green Paper. They came from parents, teachers and schools as far afield as Cambridgeshire, Cheshire, Cumbria, Derbyshire, Devon, Dorset, Gloucestershire, Leicestershire, North Yorkshire, Northumberland, Nottinghamshire, Shropshire, Somerset, Staffordshire, Suffolk, Warwickshire, Wiltshire, Worcestershire, Bury, Dudley, North Tyneside, Solihull, Stockport, Trafford, Tameside, Wakefield, Wigan, Bath and north-east Somerset, East Riding of Yorkshire, north Somerset, Poole, Rutland, Swindon, Warrington, west Berkshire, Wokingham and York. That is a pretty impressive spread. A total of 14,402 people wrote in support of a resolution, which, with your leave, Mr. Amess, I should like to read into the record of our deliberations, because the respondents deserve that recognition. It says:

"The f40 Group welcomes Government recognition of the need to remove unjustifiable inequalities in the system for funding education. The next three months give an opportunity for authorities, governors, teachers and parents to influence future plans.

The Group is now keen to work with DfEE and DETR in the positive spirit of levelling up the worst funded areas. However, we are greatly concerned that the Government appears to contemplate that the existing injustices will be continued for another three years.

We strongly urge the Government to act now to provide additional funding for levelling up from April 2001. This will provide a temporary solution under the existing discredited system while the new long-term proposals are being developed.

The f40 Group is of the opinion that the proposed three year freeze to the SSA formula is unacceptable."

That is a positive and powerful message to the Government. The April 2001 financial settlement, which is now up and running, does not include extra money specifically for areas such as Staffordshire. However--it is fair to give the Government these limited accolades--the local government formula for 2001-02 included funding floors and ceilings as an experiment. The Government were partly driven to do that by data changes in the average earnings index, which would have been embarrassing for them. Nevertheless, the fact that, even in advance of the White Paper and new legislation, they are operating floors and ceilings demonstrates a welcome commitment on their part to the matters discussed in the Green Paper.

In the Budget, the Chancellor of the Exchequer announced even greater flat-rate payments to every school in the country--up to £63,000 to a large primary school and £115,000 to a large secondary school. It is welcome, on the basis that equality is equity, that every school in the country receives the same sum of money regardless of its location.

Like my hon. Friend the Member for Upminster, I urge that the White Paper should not long be delayed and that legislation to make the necessary changes in accordance with it should be a priority for the next Parliament. We do not want new groupings of winners and losers fighting each other across party political boundaries about cash. To prevent that, it is important for the Government to stand by their commitment to level up funding to those authorities that are at present the losers.

I look forward to listening to other hon. Members' contributions to the debate.