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By LGCnet political correspondent Robert Hedley ...
By LGCnet political correspondent Robert Hedley

Local authorities will be consulted on options for changes to the grant distribution - probably this summer - DTLR minister Alan Whitehead told MPs.

'I confirm that the new distribution formula will be in place for the next financial year, but I do not underestimate the magnitude of that task. All authorities want to be winners but that, of course, is not possible', added Dr Whitehead.

And, he said, the government was committed to ensuring that ring-fenced funding as a proportion of total revenue spend will decrease over future years.

Replying to a Westminster Hall debate initiated by David Chaytor, Labour MP for Bury North, he said changes would be made only in the interests of ensuring the money available following the current spending reviewfound its way to the right areas.

Mr Chaytor said Bury MBC, with a population of of 182,000, was one of the smallest metropolitan authorities, and was one of the 20 most improved performing authorities. Its financial problems over the years were influenced by having many properties in bands A, B and C; and by having inadequate SSA for education and social services. Because of its size, economies of scale were limited.

Bury wanted to close the gap between SSA and spend.

Dr Whitehead commented: 'We know that most authorities spend more than the grant allocation system assumes when standard spending assessments are calculated, and we are considering particular pressures in the spending review. Among other things, that will effectively spell the end of the standard spending assessment as we know it.

'We certainly intend to remove from the system elements of roll-forward from historic assumptions, which have caused some of the problems [Mr Chaytor] mentioned'.

The minister said local authorities would take decisions on council tax levels and on whether to spend above the level assumed in the formulae.

'The son or daughter of the SSA system is likely to involve a decision about how much spending the government are prepared to support, and grant will be allocated on that basis. However, we want local authorities that are in the process of making such decisions to continue engaging with their communities about priorities and there implications for council tax', he added.

Refering to efficiencies of scale, Dr Whitehead said officials were examing a proposal from many smaller authorities that an element of grant be distributed on a fixed-cost basis. Authorities should, however, should think innovatively about becoming more efficient and providing better services.

The minister said this year's area cost adjustment turned out to be different from initial indications. A late change in the data supplied by the Office for National Statistics led to a change in the area cost adjustment just before the provisional settlement announcement. Dr Whitehead said the area cost adjusment was possibly the most controversial element of the formula system and the government wanted toreform it.

He added that for the first time the government would identify separately the funding it wanted to reach schools, which could not be done under the current system. Any funding formula would need an element for deprivation and an enhancement for areas where schools must pay more to recruit and to retain staff. However, the government want the level of those enhancements to be based on more up-to-date evidence not by building on past expenditure, as in the present system.

Dr Whitehead concluded: 'We still have work to do on the new system...until the new formula has been developed and detailed figures have been obtained we cannot say how individual authorities' share of overall funding will be decided. We shall be consulting on proposals for the new funding formula in the summer'.

Hansard 7 May 2002: Column 44-51WH

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