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Local Government Funding (Poole)

Before this debate, having seen that the hon. Gentleman had secured it, my hon. Friend the Minister of State advised me that I ought to offer the information about his visit in the spirit of solidarity. We are confident in the decisions that we have made, but we want to engage with local authorities to ensure that we explain our decisions and reconcile them with strong local feelings. I am sure that my hon. Friend looks forward to the opportunity to engage with local representatives next month. The debate provides a useful opportunity to discuss this year’s local government finance settlement and to look at the consequences for Poole, but let me start by commenting on our decisions on the funding of local government revenue expenditure for 2006–07 and 2007–08, which were made following consultation. I appreciate that many of the points raised in the debate by the hon. Gentleman and the hon. Member for Mid-Dorset and North Poole (Annette Brooke) were made and reinforced by the delegation from Poole that met Baroness Andrews on 11 January. Let me assure hon. Members that the points raised were taken into account in reaching our final decisions on the settlement. Total revenue grants to English local authorities will be £62.1 billion in 2006–07 and £65.1 billion in 2007–08. That represents increases over the next two years of 4.5 per cent. and 5 per cent. respectively. Of those totals, £24.8 billion and £25.6 billion will be grant that is distributed as formula grant, which provides above-inflation increases of 3 per cent. and 3.7 per cent. respectively. To get a fuller picture of the Government grant available to Poole, we should include in the comparison the dedicated schools grant, since funding for schools was included in the formula grant in 2005–06. Including schools funding, Poole will receive grant increases of 5.8 per cent. in 2006–07 and 4.3 per cent. in 2007–08. In total we will provide specific grants amounting to £37.3 billion and £39.4 billion over the next two years. That is a key element of the overall picture, particularly as those specific grant totals include funding for schools—the Government’s No.1 priority. We have also been able to provide a two-year settlement for the supporting people grant programme, with £1.685 billion allocated for 2006–07, and we have so far announced allocations of 95 per cent. of the grant for 2007–08. For the first time, in 2006–07 we have announced two-year grant allocations for every local authority in England. We have put a premium on stability and predictability of funding. That builds upon the work we have been doing over the past few years in freezing grant formulae and allocating specific grants in advance. We have now announced two-year individual allocations of formula grant for every authority; and more than 90 per cent. of all specific grants that can be allocated in advance have been allocated for 2006–07 and 2007–08. The first full three-year settlement will be introduced alongside the next spending review round, with which all hon. Members are familiar. In the interests of further stability, we have made grant floors a permanent part of the grant distribution system. Floors guarantee a minimum year-on-year grant increase and curb the volatility of grant levels for individual local authorities. Poole has benefited from the grant floor in both 2006–07 and 2007–08, which has ensured that it will receive a reasonable increase in grant in each of these years. The hon. Gentleman was concerned about the calculation of the formula grant. This year, we have reformed the grant calculation system. The new system has the advantage of removing the old assumptions about spending and tax from the calculation of grant. As a result, it devolves more accountability to local authorities. Many authorities have said that they find the new system difficult to understand. I readily concede that it is still complex. However, in the past we have found that local authorities were concerned that simplifying the grant calculation would, in their view, reduce the fairness and the responsiveness of the system. Our policy therefore is to make the system simpler. For the present, the new system is simpler in principle. Grant distribution is now determined by four things: a relative needs formula, an amount relative to the resources that can be raised locally based on the property profile, a central allocation per head and grant damping. The relative needs and resource elements should be broadly familiar to the hon. Gentleman, since the system has long contained formulaic estimates of relative need and relative ability to raise council tax.