MP’S TAKES GRANT CUT BATTLE TO WESTMINSTER

Date: 25th October 2002
Released by: ANDREW TURNER
Member of Parliament for the Isle of Wight

Island MP, Andrew Turner, spoke out at Westminster yesterday against Government plans to cut grant to the Isle of Wight Council. A review has proposed a 10 per cent cut in Government funding to the IW Council, which the Council estimates would lead to an increase for Band D tax payers of £366 a year.

Speaking in a debate on the review of the local government finance formula, Mr Turner described his “heartfelt wish that the Government would recognize the essential additional costs of providing services on an island.”

Pointing to a report by PricewaterhouseCoopers on the additional costs of providing services, he said, “It evaluates the costs solely attributable to separation by sea at £4.2 million, or almost 4 per cent. of the council's budget.

“The report's terms of reference were to examine how the Isle of Wight council's costs of service provision were affected by severance by sea and to analyse and quantify the additional costs incurred. When the Minister sees the report, I am sure he will agree that it is robust and does not exaggerate … Its robustness may be measured by the fact that it refers to a reduction in the estimated cost of severance by sea from £5.6 million in an earlier report in 1996 to £4.2 million today.

“PricewaterhouseCoopers excluded many factors that result in higher costs but are not directly and wholly attributable to severance by sea, such as the cost of discretionary services; diseconomies of scale—because the Island is a small authority—costs that arise from demographic factors such as the high population of elderly people; the costs of supporting or maintaining the economy of the Island; and costs that are attributable to the physical geography of the Island, such as the cost of coastal protection.

“Even that robust report and its robust definitions came up with additional costs of £580,000 a year for special education, £827,000 a year for fire services, £400,000 a year for waste management, £655,000 a year for construction and £1.2 million a year for social services residential care.”

Mr Turner went through in detail the costs of two services – special education and residential care – and concluded by pointing to the recognition afforded to Islands in Scotland and Denmark.

He said later, “I only had eight minutes to speak and Ministers did not respond directly to my comments during the debate. I suspect they had no answers. I am still seeking a meeting with Ministers to put our case to them in more detail – but I am gravely concerned that a funding switch of the kind they propose would leave the Island much worse off.”

NOTES

Full text of speech from Hansard, 24th October 2002.

Mr. Andrew Turner (Isle of Wight): The Isle of Wight, which I am proud to represent, has much to be proud of. Vectians are robustly independent and provide a loyal and hard-working work force. However, we suffer, as do many constituencies, from relatively high and seasonal unemployment. Our gross domestic product is creeping above 75 per cent. of the national average. Some 25 per cent. of jobs are in tourism and 40 per cent. are dependent upon it. There are a huge number of small businesses that defy the classic small and medium-sized enterprise definition because a SME nationally is large in Isle of Wight terms. Some 26 per cent. of the population are pensioners, who live on fixed or declining incomes.

The economy is looking up. Despite a recent halving of jobs at Westland, there are new jobs and new contracts at AMS, SP Systems, NEG Micon and GBR Challenge, which builds the United Kingdom's official entry for the Americas Cup, which is taking place now. I congratulate GBR Challenge on how well it is doing.

My constituents and local authority are greatly concerned at the Government's review of local government funding, because the proposals, in the worst-case scenario, will lead to a loss of 10 per cent. of Government grant, which is equivalent to a 30 per cent. rise in council tax. To a band D council tax payer, that would put an extra £366 a year on top of what they pay normally. Such an increase is unaffordable to many residents, whether or not it is dampened in the short term by floors or ceilings. The council has said that such a proposal would lead to impossible cuts in services.

There are two important issues that I would like to raise today. The first is the methodology for calculating the area cost adjustment and the second is my heartfelt wish that the Government would recognise the essential additional costs of providing services on an island. 24 Oct 2002 : Column 461 The Isle of Wight is concerned that the data used for the area cost adjustment is not valid for the size of population of the island. At present we are aggregated with Hampshire to produce a robust enough earnings sample but, of course, Hampshire is a wealthy area and the Isle of Wight is a less wealthy area. The small size of the sample produces greater opportunity for error. This is not the basis of a fair distribution of grant or a basis that can be justified to my constituents.

On the island, we have a relatively low-skilled work force. That means that we need to recruit from a wider area than the island for many occupations. When we recruit one employee to the council, we often have a difficulty, in that they have to move and their spouse or partner can then be put out of a job, as we do not necessarily have two equivalent jobs available on the island or within easy travelling distance. We need the area cost adjustment to be calculated on a fair statistical basis and not built up from a hand-sized sample that is sub-divided, further reduced, weighted and reworked, as happens at present.

On the costs of providing council services on an island, the Minister will know that the Elliot review in 1996—the local government finance review of the area cost adjustment by Professor Elliot—recommended that a study be undertaken into the differences in non-labour costs affecting two councils only, those being the Isle of Wight and the Isles of Scilly. Such a study was recently undertaken by PricewaterhouseCoopers and has been sent to the Minister's officials. It evaluates the costs solely attributable to separation by sea at £4.2 million, or almost 4 per cent. of the council's budget.

The report's terms of reference were to examine how the Isle of Wight council's costs of service provision were affected by severance by sea and to analyse and quantify the additional costs incurred.When the Minister sees the report, I am sure he will agree that it is robust and does not exaggerate. I have been through the report with a fine-toothed comb and it does not over-egg the pudding or exaggerate the case. Its robustness may be measured by the fact that it refers to a reduction in the estimated cost of severance by sea from £5.6 million in an earlier report in 1996 to £4.2 million today.

PricewaterhouseCoopers excluded many factors that result in higher costs but are not directly and wholly attributable to severance by sea, such as the cost of discretionary services; diseconomies of scale—because the island is a small authority—costs that arise from demographic factors such as the high population of elderly people; the costs of supporting or maintaining the economy of the island ;and costs that are attributable to the physical geography of the island, such as the cost of coastal protection.

Even that robust report and its robust definitions came up with additional costs of £580,000 a year for special education, £827,000 a year for fire services, £400,000 a year for waste management, £655,000 a year for construction and £1.2 million a year for social services residential care.

I shall deal with one or two of those areas in more detail. In social services, the council pays for 1,750 residential care placements a year—not many for a large council, but quite a lot for a small council—and 350 nursin g home places. The council must keep enough 24 Oct 2002 : Column 462 nursing and residential care homes in business to ensure that places are available on the island. It is unacceptable to place elderly people on the mainland, because a journey from Ventnor to Basingstoke to visit an elderly person, or anyone else, would cost £27 for the round trip and take most of the day by public transport. PricewaterhouseCoopers concluded that prices were higher because of less competition—it compared the island with Hampshire, Portsmouth and Southampton—with additional costs to the tune of £1.24 million.

We use residential places for 40 children with special educational needs, for services that it is not cost-effective to provide on the island. Some non-residential places are available in south Hampshire, but the additional time and cost of perhaps accompanied travel must also be taken into account. Such places sometimes cannot be taken up because of the disruption that weather conditions cause to travel. An additional £580,000 annual cost is incurred providing those residential places.

The fact that islands face additional costs has been recognised and reflected in grant systems in this country and elsewhere. The Scottish special island needs allowance is one example and the Danish grant distribution system is another—

[At this point the 8-minute time-limit fell].