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Redundancy Costs (Local Authorities)

Volume 519: debated on Thursday 25 November 2010

1. What estimate he has made of the likely amount local authorities will incur in redundancy costs in the next 18 months. (26198)

It is for individual councils locally to determine redundancy policies based on their own circumstances. Decisions about when and how to make and manage work force reductions, including policies on redundancy payments, are rightly for individual councils to make as the employers.

Ministers do not have the first idea what the cost will be to local taxpayers. Is this not a triple whammy, whereby families and individuals lose their services, communities find that provision is taken from them and individuals lose their jobs? Is it not correct that instead of paying for services, council tax payers will have to pay for redundancies for services that are being withdrawn? Is it not a scandal that the Government do not know what the impact will be?

The Government have endeavoured to assist the most vulnerable local councils by increasing the amount of money available in the formula grant that is not ring-fenced, moving more money into formula grant, reducing the amount of ring-fencing and rolling more grants into one. I imagine that when his Government were in office, the right hon. Gentleman would have complained greatly about their removal of working neighbourhoods funding for his city of Sheffield, which will cost the city some £38 million. We will endeavour to find the means to cushion that—

I gather that in the comprehensive spending review the Government allocated £200 million for the capitalisation cost of redundancy payments. I also gather that local authority chief executives and treasurers suggest that the costs might be between £1.5 billion and £3 billion. If they are correct and the Government estimate is much lower than the actual sums involved, what are the Government going to do about it?

Capitalisation, which enables local authorities to treat revenue expenditure as capital and borrow for it is an exception to the accounting rules, so there has always been a need for some control, and capitalisation for a number of streams has never run at 100%. It is also worth bearing in mind that local authorities have been aware for some time that reductions in expenditure were inevitable—they were planned by the previous Government. A shrewd authority will therefore have planned to deal with the problem in advance.

Local government now predicts an 11% cut in council budgets next year, with 140,000 jobs lost and a redundancy bill in excess of £2 billion—not the £200 million originally predicted by Ministers. Is local government right? Do Ministers know, or is the truth that they simply do not care about the public servants they will lay off or the public services that they will lay to waste?

The greatest threat to public services for the future is failure to tackle the unprecedented deficit that the previous Government left us. We are prepared to work with local government to deal with those issues, but the hon. Gentleman and his party clearly have no answers whatever.