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Birmingham City Council (Financial Reporting)

Volume 502: debated on Wednesday 16 December 2009

Motion made, and Question proposed, That this House do now adjourn.—(Mr. Mudie.)

I am grateful for the opportunity to have this debate, although I guess that the fact that it is the last debate before Christmas means that it is in something of a graveyard slot. However, it gives me the opportunity to wish you season’s greetings, Mr. Deputy Speaker, and to endorse the comments of my hon. Friend the Deputy Leader of the House about expressing season’s greetings and thanks to all members of the House of Commons staff.

I should also like to take this opportunity to welcome the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Stevenage (Barbara Follett), who will respond to the debate, and my hon. Friends the Members for Birmingham, Edgbaston (Ms Stuart) and for Birmingham, Selly Oak (Lynne Jones), who are also present.

The debate’s title shows that it is about transparency in financial reporting and Birmingham city council, which sounds rather technical, but the debate is really about accountability. It is about how far the local authority—which provides or commissions some of the most important services, the ones that my constituents depend on—is really prepared to level with people such as me. I am elected by my constituents, and I want to know how the council spends public money in my area, who decides the priorities for spending the money that is controlled by the council in the short and medium terms, and what those priorities should be.

Those are issues that I am only now bringing before the House by means of this specific debate, but I have been raising them with the city council not for weeks or months but for years. I know that the fact that I have raised those issues, and that I continue to do so, is a source of irritation to key figures in the city council—both in the central cabinet that the Conservatives control city-wide, and among some of the 12 Conservative councillors that represent wards in my Birmingham, Northfield constituency.

I sometimes get the feeling that they are wondering, “What’s the Labour MP doing poking his nose into these issues? Why is he wasting our time asking all these questions? We are the council. We have quite enough to do getting on with what we have to do as a council without him constantly going on at us. Why doesn’t he just stick to his own job?”

Actually, I think that that is my job. Part of the reason is that, according to its own rhetoric, the council does not just want scrutiny of what it is doing. The council also says that it wants the public—the people whom councillors and I are elected to serve—to be able to comment on services in their communities, and to influence their shape.

The council has a series of committees at constituency level, theoretically all with devolved budgets. As a city with 1 million people—the largest local authority in England—Birmingham is simply too big to try to do everything from the centre. Theoretically, all parties sign up to that principle—an acceptance that greater efficiency and effectiveness are achieved by getting decisions made closer to the ground. But devolution is about more than setting up different city council structures to negotiate internally with each other, whether that is between different parts of the city council’s operation at constituency level or at the centre, or one department negotiating with another.

Does my hon. Friend share my frustration that those devolved constituency meetings are invariably scheduled for days when Parliament is sitting, to prevent Members of Parliament from being there?

It is funny that my hon. Friend says that. When the constituency committees were introduced in Northfield, they always met on a Saturday, which is not ideal in many ways, but it meant that I as a Member of Parliament was able to get to most of them. Interestingly, once the Conservatives gained a majority on that committee, they moved the meetings to weekdays. I can get to very few of them now. I occasionally attend meetings when they are held in the recess. Probably, after this debate, we will find that none is held during the parliamentary recesses. My hon. Friend makes a good point.

According to what I believe, and according to the council’s own rhetoric, devolution is also about consultation and engagement with the people whom public institutions such as Birmingham city council serve in making the decisions that they make. If we are really brave, devolution may even be about taking those first steps along the road of empowering local people to make a difference to the shape of services in their areas and their neighbourhoods.

Everyone seems to sign up to the rhetoric of consultation and engagement, and often even empowerment. We see it scattered around goodness knows how many city council publications. Councils nominate themselves for goodness knows how many awards, praising their own achievements and creativity in these areas. Sometimes they even win those awards because their self-promotion often seems to make a compelling case.

Of course there are examples of good practice in Birmingham, but when I try to relate all the rhetoric to what I see happening on the ground in my constituency, there is a huge gap. Put bluntly, if it is difficult for a Member of Parliament to get a clear picture of what the city council is doing when, generally, MPs can get hold of financial reports, write letters to this committee or that cabinet member, or even hold a debate here in Parliament, what chance is there for an individual constituent in Birmingham, Northfield? What chance is there for the voluntary or community group that relies on funding controlled or commissioned by the city council under programmes such as the supporting people programme—for groups that are scared that if they rock the boat or question the city council too much, they will be out on their ear?

Let me give a few examples to show how difficult it is to find out what is going on in Birmingham. A couple of months ago, looking at a financial statement relating to the service plan for my constituency of Northfield for the coming year, I found a budget heading called “Community Arts”. It is true that, at local level, there was a small community arts budget last year. It was for about £3,000. However, when I looked at the service plan for the coming year, £301,000 was listed as being cut from a budget that was only £3,000 in the first place. So I asked what it was all about. I did not understand. “Don’t worry,” I was told. “It doesn't mean that. You see, most constituencies don’t have a community arts budget at all, so we have been told by the centre”—the centre of the council—“that this is where we should park the efficiency savings that we have to make.”

I was not too happy about that. When I raised the matter again at the meeting of the city council’s constituency committee for Northfield, which I was able to attend, on 22 September this year, I got a similar explanation. The minutes of that meeting record my response fairly accurately. They state:

“The Member of Parliament considered that this method of accounting made the figures completely meaningless and he requested that it be placed on record that he considered this arrangement to be unsatisfactory.”

As I say, those minutes capture my sentiments exactly. However, I did not get anywhere nearer knowing what was going on—either at that meeting or when the minutes came out.

Another example of what I am talking about is a project called business transformation, which the city council says is about developing a fundamentally different approach to running its services, so that it will be more efficient and save millions of pounds. We are told that the programme is about getting resources to the front line and saving on central bureaucracy. It may even be one of those projects where the council has nominated itself for awards, and it may even have won one or two of them. Indeed, it may be an excellent programme, but I simply do not see the evidence on the ground—in my constituency.

I do know—from figures that I managed to extract from the city council after a lot of pushing, prodding and trying—that financing the cost of the business transformation programme means a cut to Northfield’s budget in net terms of £55,000 in 2007-08, £89,000 in 2008-09 and an anticipated £241,000 in 2009-10. I have also been told by the council that the business transformation project will not hit front-line services, and that no savings will be made that are not, as the council put it, “encashable”. But when I have asked who is doing the encashing, and how much saved money will go back to serve the people of Northfield and, in particular, go back to the budgets over which, at least theoretically, there is some local control, the responses have been esoteric to say the least.

The entire devolved budget for the Northfield parliamentary constituency is about £9.37 million, so a cut of £241,000, on top of other efficiency savings, is potentially pretty serious. Surely, therefore, it is not too much to ask for some straight answers to the question, “Exactly where has that money gone?” There is no evidence that only Northfield is experiencing such problems; my impression is that similar problems exist in every one of Birmingham’s parliamentary constituencies.

Rumours abound about big changes to the way in which leisure centres in Birmingham are run and managed, but most of us will not know much about what is going on until contracts have been signed and things are presented as a fait accompli. In that context, I shall ask my hon. Friend the Minister some questions. She will be aware of the concern—it has attracted considerable press comment—about the millions of pounds of working neighbourhoods fund money that the Government provide to Birmingham. My right hon. Friend the Secretary of State for Communities and Local Government recently wrote to Birmingham city council’s deputy leader, who chairs the Birmingham strategic partnership, to express his disappointment at the slow progress in using those funds.

Although I know of projects up and running in my constituency which simply would not exist if the Government had not invested that money, I too am concerned about the pace of spend. All too often, trying to get a handle on what is going on is about as easy as trying to knit fog. It is not easy to sort out why things are so painfully slow, and it is not easy to see whether, overall, working neighbourhoods fund money is being spent on what it should be spent on.

For the avoidance of doubt, I must state that I want the investment to continue. Indeed, I welcome the extra support that Birmingham has received from the Secretary of State in recent weeks, but that does not absolve the city council or, to some extent, its partner organisations from being far more transparent in what they do. I do not think that the city council is deliberately obtuse about these matters—either with me, with its partners in the Birmingham strategic partnership or with the people of Birmingham. Rather, the council is such a large bureaucracy, and so obsessed with its own rules and procedures, that it ends up understanding accountability only between different bits of itself, rather than to anyone else. That is a problem, and I say again that if a Member of Parliament often cannot find out what is going on, what real chance do the public stand? If local people cannot even find out what is happening, how will they have the chance to exercise any real influence over local decisions that affect them and their area?

I am not saying that opaque decision making comes out of only Conservative-controlled institutions such as Birmingham city council. These days the Conservatives spend much of their time talking about a “new localism” or a “radical decentralisation” of power, but we need to remember that there is still a huge gap between their rhetoric of decentralisation and the reality on the ground in Tory-led authorities such as Birmingham. The Leader of the Opposition, the right hon. Member for Witney (Mr. Cameron), talks about giving real power to local people, but his own Conservative colleagues on Birmingham city council cannot seem to manage to deliver that in practice. What does that say about how a Conservative Government would behave given that the Conservative party chairman, the hon. Member for Brentwood and Ongar (Mr. Pickles), has said:

“Our Conservative Councils will demonstrate how we will run the country”?

I guess that how the Conservatives deal with the gap between rhetoric and reality is up to them. People will have the chance to make a judgment about that in due course.

For now, I would like to ask for help from the Minister. I recognise that she cannot run Birmingham city council. However, I hope that the inquiries that the Secretary of State has made about the working neighbourhoods fund will bear fruit and that the results will be widely shared. I ask the Minister to ensure that in the DCLG’s dealings with Birmingham city council, she reminds it that it has a responsibility to be far more open than it is being, including with the city’s MPs. I also ask her to ensure that next time Birmingham city council nominates itself for a best practice award or for praise on an issue where there is DCLG involvement of some sort, she will look beyond the rhetoric and self-promotion to see if what it is saying in theory is reflected in what is happening on the ground.

My hon. Friend the Member for Birmingham, Northfield (Richard Burden) is to be congratulated on securing the last debate of the year and on using his time to raise an issue that concerns him, his constituents, many hon. Members and the Government.

My hon. Friend stressed the importance of transparency and accountability in the finances of Birmingham city council. I absolutely agree. It is incumbent on all of us, in any type of public service, be it in Birmingham or anywhere else, to ensure that we provide the information that citizens need and deserve. This is a priority for the Government and for me. After all, that information is the property of the citizens who employ us to deliver it. As our recent White Paper, “Putting the Front Line First: smarter government”, makes clear, we want to give people the tools they need to help to shape the services they depend on.

We also want to give people the tools they need to hold Government to account at all levels, as my hon. Friend has done today. Technology has a key role to play in building this new relationship. It is liberating and illuminating. It opens two-way channels of communication between citizens and professionals and helps to provide the increased transparency that he is seeking. The Government will help with this transparency by publishing unprecedented amounts of information and data about the institutions, expenditure and people that serve the public. However, the mere publication of data is not enough—we have to contextualise them and ensure that they are understandable and allow for comparisons, particularly across front-line services. We want to stress outcomes, delivery and value for money in that data, which will be available in reusable form by 2011. We will work with local government to develop comparable measures of value for money across a range of local government services. We will consult on those measures from spring 2010 and publish them in 2011.

My hon. Friend made particular reference to Birmingham’s working neighbourhoods fund. I can assure him that we are working extremely closely with the city council and the local strategic partnership, Be Birmingham, to ensure that we move on from the slow start and slow delivery that led to the underspend in the £118 million or so of grant. We want to ensure that spending gets back on track. Birmingham city council has said itself that the underspend is not good enough, and when 37 per cent. of the working age population are workless, it certainly is not good enough. However, it is not right to penalise the people of Birmingham by holding back funding that their deprived areas desperately need.

Will the Minister advise us on what we can do? It is not just a question of the money not being spent. If Members of Parliament cannot even find out how the decisions were arrived at and who made them, it becomes extremely difficult to hold to account people in a position of power.

I agree, and having experienced something similar myself in the years in which I have worked in the eastern region, I assure my hon. Friend that the Government’s White Paper is aimed at addressing that problem. So is our work on Total Place, in which we are mapping public sector spending in different areas. The spend in Birmingham is a mind-boggling £7.5 billion per annum, and we need to keep track of it. The Government are well apprised of the need to do that. As my hon. Friend the Member for Birmingham, Northfield reminded us, in our dealings with councils including Birmingham we must urge them to be more open and ensure that they truly deserve best practice awards.

The review by Be Birmingham of the working neighbourhoods fund underspend identified problems in the appraisal process, programme and project management, recruitment procedures, and the tailoring of neighbourhood and constituency employment and skills plans to local needs. Some of what happened can be attributed to careful preparation—none of us wants huge amounts of money to be spent badly. However, as my hon. Friend mentioned, the Secretary of State for Communities and Local Government has written to Birmingham city council and to Birmingham’s MPs, saying:

“We have of course been disappointed with the slow delivery of existing spending plans, and have recently highlighted our concerns about this in public.”

He added:

“However, I am determined that the people of Birmingham should not be penalised for slow action by their local authority, and should still receive the allocation on the same basis as all the targeted authorities.”

I understand the concern of my right hon. Friend the Secretary of State. I recently visited Birmingham and saw in action one of the projects that the money is funding. It is called Enta, which has worked in the city for many years to help get people back into employment and enjoying working life, particularly those who have been unemployed for many years.

Thanks to section 6 of the Sustainable Communities Act 2007, which requires the Secretary of State for Communities and Local Government to make arrangements for the production of local spending reports, local spending reports provide information on expenditure by bodies exercising public functions in a particular area over a specific period. The first local spending report was published this April and covered a substantial proportion of local public expenditure. It represented an important but, I stress, initial step.

The Government are continuing to strengthen the information provided and to ensure that it is accessible and easy to use. However, as I said, given such a mass of information, it is important to produce not only volume, but quality, and that the reports are practical, useful and cost effective.

Future local spending reports will be published online in a clear and user-friendly format that will enable easy interrogation of the data. They will include a wide range of public data on local spending by public bodies, including local authorities, and information will be made available on the local data exchange. An analytical capability will be available on the places databases. Greater transparency will make it easier to look across all local services in a specific area and to spot evidence of duplication or waste. It will help authorities and citizens to do a health check on the public spending in their areas.

It is of course already a legal requirement that local authorities produce a statement of accounts for each financial year which sets out their income and expenditure and gives a year-end balance sheet. The timely publication of high-quality year-end accounts is fundamentally important to sound financial management in every walk of life, not just local authorities. However, in local authorities, the statements must be presented fairly and give a true view, from 2009-10, of the authority’s financial position. That means that the accounts must comply with the highest standards of accounting practice applicable to company accounts in the private sector.

Local authority accounts achieve that, but they also incorporate some modifications that are required by statute, largely to recognise the distinct nature of public sector bodies that are financed by taxation. The need to meet private sector standards and the statutory requirements makes local authority accounts rather complicated to say the least, but some authorities provide very useful summary accounts that give a clear presentation of their finances.

Birmingham city council failed to meet the timetable set down for the publication of those accounts this year. Accounts must be approved by council members by 30 June and published by 30 September. As I said, Birmingham city council failed to meet the timetable last year, and its audited accounts for 2008-09 had still not been published by 30 November 2009. We understand that the Audit Commission is to report on its concerns about the late publication of audited accounts very shortly.

Finally, I should like to touch briefly on the local government finance settlement, which of course makes the delivery of local authority services possible. The year 2010-11 will be the final year of the first ever three-year settlement for local government in England. Allocations of formula grant and area-based grant have been published for all authorities for all of those three years. We have also published allocations for all authorities of 100 per cent. by value of all specific grants that can be announced in advance. In other words, we have been as transparent as we can about the supply side, and we have given local authorities more certainty about available resources than has previously been available.

Over the current three-year settlement, we have also provided an additional £8.6 billion to local government—an average 4 per cent. increase per year in funding. However, we do expect local authorities such as Birmingham to ensure that the citizens to whom they are accountable know exactly, and in a timely fashion, how that money has been spent. That is their responsibility, and it is our responsibility to ensure that they fulfil it well and properly.

I thank my hon. Friend for this timely reminder of the work that we still have to do to ensure that we are as transparent and accountable as we can be. I also thank him for giving me the opportunity on the occasion of my final Christmas in this House to wish all the hon. Members a happy Christmas and a peaceful new year. I also wish to add my thanks to the those of the Deputy Leader of the House to all the people who work in this House to make things easier for the rest of us. Happy Christmas!

Question put and agreed to.

House adjourned.