Sir George speaks for Hampshire on Revenue Support Grant
25 Oct 2002
Sir George Young (North-West Hampshire): Many of the contributions to this debate will understandably focus on the problems of individual constituencies, as we have heard from the hon. Member for Burton (Mrs. Dean) and my right hon. Friend the Member for Kensington and Chelsea (Mr. Portillo). I will make some generic points that, I hope, have a wider application, illustrating them by reference to the impact on Hampshire, which will be deeply unpalatable. I see that my hon. Friends the Members for Aldershot (Mr. Howarth) and for Gosport (Mr. Viggers) are in their places.

My first point concerns the council tax. In the past 10 years, there has been a consensus that that tax is an acceptable way to fund local government. A similar consensus used to exist in relation to rates, but it evaporated when too much weight was put on them, and there was never any consensus for their successor. The council tax is rather like the rates—it is bridge with a weight limit. It can cope with a certain volume of traffic, but when some of the loads get big it begins to crumble.

Although people accept that the council tax is fair at the moment, it is a regressive tax. People on lower incomes pay a far higher share of what they earn than the better off, and the relationship between ability to pay and the value of the property in which one lives is imperfect. That does not matter as long as the sums involved are relatively small and there is broad confidence in the revenue support grant, but if these changes bring about major increases in the council tax in many parts of the country, and those changes are perceived to be unfair, the Govt may find themselves confronted with a much wider debate. The genie may be out of the bottle and the consensus broken. The Government will then have to find a new way to fund local government.
Secondly, the Government have made it clear that they have a commitment to drive up standards in public service, particularly in education, but the impact of the more radical proposals for redistribution would make a nonsense of the Government's ambition not only in my Hampshire constituency but across huge swathes of the south-east. What the Chancellor bestoweth in his Budget, the Deputy Prime Minister taketh away in the revenue support grant settlement. Hampshire could be £80 million worse off, which is the equivalent of two teachers in every school. There is no way that Hampshire can invest in education and social services as the Government want if its financial foundations are eroded in that way. The Budget speech and the comprehensive spending review would be exposed as empty rhetoric.

Thirdly, it is not only the Deputy Prime Minister who plans to redistribute resources away from my constituency. The Secretary of State for Health is doing exactly the same. For every £100 spent by the NHS on the average constituent, my constituents get £83. The areas that stand to lose under these proposals are the same ones—all around London—where health trusts are struggling to balance their books. That means that in the key sector of community care where social services and the NHS meet, both are looking for economies. Health and education, the Government's top priorities, face a grim outlook in Hampshire and elsewhere.

Fourthly, what is proposed in the consultation document is a sensational redistribution of resources with the minimum of scrutiny and debate. The RSG is larger than the budget of many Departments and, indeed, larger than the budget of some countries. By changing the formula and presenting some of the changes as technical adjustments, a major and ill-targeted redistribution of wealth is taking place on the slenderest of intellectual justifications.

More than £304 million is being taken from a group of people who happen to live in one part of the country and given to a group who happen to live in another. Furthermore, that second group already lives in areas where spending levels are way above average. Public spending per head in the north-east of England is £1,148 more than in Hampshire. A Hampshire teacher will contribute towards 47 per cent. of the county council budget whereas a teacher in Durham will contribute towards 20 to 25 per cent. That is a geographical stealth tax.

Fifthly, the proposals will exacerbate the problems of public sector recruitment in the south-east, where it is essential to meet the Government's targets. Local authorities will be unable to afford competitive wages for the staff they need, in areas where it is already difficult to recruit, and the public servants who are recruited, who already face high housing costs, will have to pay higher council tax bills. Yes, deprivation is one side of the coin and must be recognised, but the cost of service delivery is the other side and should have equal recognition if we are to have a fair system.

Chris Grayling (Epsom and Ewell): Will my right hon. Friend give way?

Sir George Young: Briefly—there is a cap on my speech.

Chris Grayling: I am sure that head teachers in my right hon. Friend's constituency will share the concern of the head teacher in my constituency who wrote to me this morning. She told me that substantial council tax increases would have a "disastrous effect" on standards and morale and would make a difficult recruitment situation much worse. I suspect those sentiments are shared throughout the home counties.

Sir George Young: Indeed. Teachers in many constituencies could have written that letter.

Sixthly, the implications for police authorities have not been mentioned much in the debate but they will have a serious impact in Hampshire. We could lose £10.4 million, which would mean a tax increase of about 22 per cent. to compensate. That would make a mockery of the Home Secretary's ambitions on the law and order front. The chairman of the police authority wrote to me that:

"There would be little or no chance of any increase in the provision of the policing service across the two counties"—

Hampshire and the Isle of Wight—

"next year . . . We fear that this will reverse many of the initiatives funded from the crime fighting fund and the rural policing fund."

I should like the Minister to answer this question: whichever option is chosen, does he expect Hampshire to put up council tax to compensate for the loss of grant entitlement, or does he expect the authority to hold the increase to 6.2 per cent. and cut services?
May I make some helpful suggestions? First, the Government should validate current spending where the SSA is unrealistic—as in social services where everyone agrees that it is inaccurate. Secondly, they should fund the extra area cost adjustment from Government funds, instead of making the home counties pay for it. Thirdly, as far as possible, they should allocate grant by examining basic entitlements to standard services, instead of tweaking the formula with a whole lot of subjective judgments. Fourthly, they should remove the double counting of deprivation. Finally and crucially, they should leave the system as it is and reconsider it during the next year.

In conclusion, I have deep sympathy for any Labour candidate for a Hampshire seat at next year's local elections or at a more distant general election. These proposals are a serious mistake, which the Government may live to regret.

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