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Local Government Finance

Volume 520: debated on Monday 13 December 2010

With permission, Mr Speaker, I should like to make a statement on finance for English local authorities for 2011 to 2013.

The spending review set out how the Government would tackle the catastrophic levels of public debt by delivering necessary reductions in public spending to accelerate deficit reduction and put the public finances back on a sustainable footing. This has involved difficult, but essential and responsible, decisions. Every part of the public sector needs to do its bit to help to reduce the highest deficit in the UK’s peacetime history and the rapidly rising national debt that this Government have inherited.

Last year, the Government borrowed one pound in every four they spent. That threatened our economic credibility. In contrast, our plans to eliminate the current structural deficit over five years have won the backing of the International Monetary Fund, kept our credit rating steady and held interest rates down. The Office for Budget Responsibility’s forecast confirms we are taking the right steps. Its message is that Britain’s recovery is on track.

I have sought to achieve a fair and sustainable settlement for local government by listening to what the local government community has asked for. It will be a progressive settlement that is fair between different parts of the country. First, we have focused on the most vulnerable communities with significant social challenges. These are often the areas that are most reliant on Government grant, so equal grant reductions would leave the poorest places worst off. We have insulated them by giving more weight to the levels of need within different areas and less weight to per capita distributions. We have also grouped councils into four bands, reflecting their dependence on central Government. More dependent places will therefore see proportionally lower falls than more self-sufficient places.

Secondly, we have listened to concerns about the front-loading of the reductions. The Local Government Association asked me to focus on local government total spending, including not just grants but income from council tax and NHS funding to support social care and benefit health. It said that reductions in spending should be limited to 8%. As far as possible, I have given the LGA what it asked for. I have made sure that no authority will face more than an 8.9% reduction in spending power in either 2011-12 or 2012-13. In fact, the average reduction in spending power for 2011-12 is 4.4%. To fund this, I have transferred an extra £30 million of my Department’s budget to local government for 2011-12. I have also provided a grant of £85 million for 2011-12 and £14 million for 2012-13 to fund councils who would otherwise have seen sharper falls.

The spending review also announced that the Government would protect the public from excessive council tax rises. We have set aside £650 million so every council can freeze council tax next year without hitting local services. We will provide councils that freeze council tax with the equivalent of a 2.5% increase in funding instead. That will provide real help to hard-working families and people on fixed incomes, such as pensioners. The Government also want to ensure that council tax payers are protected against authorities that reject the offer and impose excessive council tax rises. We will introduce powers for residents to veto excessive council tax increases through a local referendum. In the meantime, the Government will take capping action against councils that propose excessive rises.

When the House debates the final local government finance report next year, I will set out the capping principles. I will also publish shortly details of the figures that will be used to compare authorities’ budgets between years, should capping be necessary. The previous Government had planned to cap the police authorities of Greater Manchester and Nottinghamshire after they set excessive increases in 2010-11. Subject to challenge, we will ensure that, should they decide not to freeze the council tax, neither can impose an increase of over 2.5% in 2011-12.

This settlement also supports the Government’s commitment to adult social care, providing councils with sufficient resources to protect people’s access to care and to deliver improved quality of outcome. That includes £150 million of NHS funding in 2011-12 to support social care services, promoting integrated working between primary care trusts and local authorities and benefiting the health system. The settlement directs more formula grant to authorities that deliver social care.

Despite all the actions we have taken, I recognise that local government still faces significant challenges. The vast majority of councils have been making sensible plans to address them. I support that and I am restoring real power to councils, ensuring that Whitehall interference, red tape and the burdens of inspection and regulations are gone. The Localism Bill, published today, will deliver a new democratic settlement to local councils, overturning decades of central Government control.

For too long, councils have been barred from using their initiative and creativity to improve services. The limited “power of well-being” acted as an obstacle to cost savings, such as mutual insurance companies. Today’s Bill will fundamentally change councils’ freedom to act in the interest of their local communities through a new general power of competence. That will give councils the legal reassurance and confidence they need to innovate, drive down costs and deliver more effective services. I am also giving councils greater control over their budgets.

With very few exceptions, we have ended grant ring-fencing so that councils can decide for themselves how their money is spent. We will also allow them to borrow against future business rates receipts. Councils now have the freedom and responsibility to concentrate on what residents want: protecting front-line services. To support them, I have set aside £2 million to help councils to modernise and reduce back-office costs.

Councils can protect front-line services by sharing services and back-office functions, improving procurement to get more for less, bringing increasing senior pay under control and using transparency to cut waste. Proactive councils are already taking the opportunity radically to rethink and transform their services. There are also substantial incentives available for councils to invest in long-term projects, which include the new homes bonus and £1.4 billion of regional growth funds over three years—a fund that goes well beyond the working neighbourhoods fund. There will now be a statutory consultation on the settlement for 2011-12 and I look forward to hearing representations from councils.

Finally, this is a transitional settlement, using an inherited system. That is why I have set out details only for the next two years to strike a balance between the need to help councils plan and the need to reform the system. This system, based on redistributing business rates, makes councils heavily reliant on handouts from central Government—some depend on us for up to 75% of their spending power. It is part of the trend that has led to some areas of the country becoming completely dependent on the public sector. It makes planning difficult, weakens local accountability and stifles local innovation. There is no incentive for councils to invest in their local economy as they will see most of the proceeds disappear.

That is why I have set up a review of business rates with the intention that, in future, local government will be able to keep more of what it collects. Ultimately, the councils that invest and support the local economy will be able better to use the finances themselves. The local government resource review will begin in the new year. I commend the statement to the House.

I thank the Secretary of State for giving us 40 minutes’ advance notice of his statement and its 11 attachments. Obviously, we will have to look very carefully at the detail of today’s settlement because, as we all know, the devil is in the detail. I welcome his acknowledgement of the concerns about front loading caused by the comprehensive spending review profile. Many have made that case, although even today the Minister for Housing and Local Government seemed to deny, on a programme that we both appeared on, that front loading would be a problem. The fact is that it still exists, even after the Secretary of State’s statement, but it is a shame that it was not uppermost in his mind when he raced to the front of the queue to settle his Department’s cuts with the Chancellor.

At first sight, there is little else to be thankful for, because today’s announcement includes heavily front-loaded cuts to local government that are not only damaging but deeply cynical. The Secretary of State comes to the House with his statement in one hand and a localism shovel in the other, because he thinks that today is a good day to bury bad news. We have been inundated with empty rhetoric about localism, three written ministerial statements on localism, the publication and First Reading of the long-awaited and much-delayed Localism Bill and a stream of articles and briefings over the weekend, including appearances in which he has waxed lyrical about devolving power to local government. All those promises ring hollow when at the same time he imposes unprecedented cuts on town halls the length and breadth of the country. He is offering councils devolution while holding a gun to their head.

Today we find out what the Government really plan to devolve to local councils: the most devastating cuts in funding for a generation and the blame for difficult decisions. What is worse, the Secretary of State does this with barely disguised relish and to the cheers of his Back Benchers. Time and again, he has spoken of the virtues of local government. He promises to free local councils from the shackles of Whitehall and pledges to give them extra freedoms and powers, but if he really believes in local government, why has he imposed cuts on town halls up and down the country bigger than those for almost every Whitehall Department? Does he really believe that the regional growth fund, which has been sliced enormously, can make up for the losses that local government is facing? Why has he still front loaded the cuts so that the heaviest reductions will fall in the first two years and why has he refused to give councils the help and flexibility they need to meet the cost of redundancy payments? I think that he meant to refer to £200 million to help with costs rather than £2 million, which is what he said. Even so, the Local Government Association is asking for £2 billion-worth of flexibility to handle the redundancy payments that will have to be faced across England.

What further assurances can the Secretary of State give that the poorest councils will not bear the heaviest burden? Like others, I was intrigued when he talked about the spending power of local authorities. Will he explain in more detail how he has worked out each council’s total spending power to enable him to claim that no authority will face more than an 8.9% reduction in spending power from 2011 to 2013? Why does he not talk about the revenue support grant and the cuts to that rather than mixing in council tax revenues and spending provided by the NHS? For someone with so much to say about town hall communications, bin collections and Christmas celebrations, and given that barely a speech passes without being spiced up by a reference to curries, the Secretary of State has so little say about the impact of these cuts. Local councils, the people whom they employ and the communities they serve deserve better than that, as do their partners in the big society. Today’s settlement means that far from community groups and the voluntary sector being liberated to do more, as the Government promise, they might be so hampered that they end up doing much less.

Be in no doubt: these cuts will hit front-line services and cause massive job losses in the public and private sectors. For all Ministers’ traipsing around the TV studios pretending that savings of this magnitude can be made by efficiency drives and sharing back-room functions alone, the reality is very different—and everybody knows it. Even Baroness Eaton, a Conservative peer and the chair of the Local Government Association has admitted:

“These cuts will hurt. We know this means there will be fewer libraries, more potholes going unrepaired, parks shutting earlier and youth clubs closing.”

This is not about whether or not local government funding should be reduced. Across the House, we all accept that the deficit needs reducing—[Hon. Members: “Ah!”] Yes, and that would have meant cuts to local government funding whoever won the election—I made that clear in last week’s debate and I say it again today—but the Government have made their choice. They have chosen to impose cuts on local government harder and faster than in almost any Whitehall Department. There is nothing localist about that. We on the Labour Benches are in favour of empowering local councils and giving people a greater say in the way they run their local communities and in how services are provided, but if the Secretary of State thinks that he can get away with using localism as a smokescreen for unprecedented cuts to local government which still, even after today’s statement, fall heaviest in the first two years, he had better think again.

The Secretary of State announced today the dawn of a new constitutional settlement. I therefore look forward to his confirmation that, in line with convention, the Localism Bill will be considered in Committee on the Floor of the House.

In last week’s Opposition day debate I set the Secretary of State three challenges: to spread the cuts more evenly over four years; to protects jobs and front-line services by ensuring that councils have sufficient capitalisation funds to meet the cost of redundancy payments; and to ensure that the burden of cuts is spread fairly around the country and between our communities. Despite today’s assurances, he has not convinced us that his localism is any more than a cover for cuts. People up and down the country will pay the price for his failure.

Well, so much for gratitude. I do not want to start up the hunting debate again, but we have shot the right hon. Lady’s fox and she has been less than gracious. The first thing we did was to change relative needs level from 73% to 83%. Then we introduced banded floors, and then we introduced a special damping for authorities more dependent on grant than others. This settlement—this formula—is more progressive, protecting vulnerable communities, than anything that the Labour party has produced.

As for the right hon. Lady saying, “What are these figures?”, it is not so long ago that the hon. Member for Derby North (Chris Williamson) was demanding this way of measurement—that we should not just take basic grant and that we should include the question of council tax and money coming from other grants and from the national health service which primary care trusts are spending. It is good to see along the Front Bench my right hon. Friend the Health Secretary, who has done so much to ensure that local government is getting additional powers in this area.

We have delivered everything that the Opposition identified. We have protected the most vulnerable. The right hon. Lady seemed to start saying that we had not done too bad a job, but found that she had notes prepared earlier condemning us.

I very much welcome this truly progressive statement. I congratulate my local authorities in Crawley and West Sussex on the significant efficiency savings that they have already made. Can the Secretary of State confirm that, as we develop the funding formula, it will become more transparent?

I can confirm to my hon. Friend that that will be the case. The present formula is very difficult to operate. In developing it I had worries with regard to balancing need against sparsity. It is always difficult to do that. We had to move extra money across from my Department in order to protect certain vulnerable districts that are not benefiting from the increase in spending in respect of adult social care and the extra help being offered in conjunction with PCTs.

Although the Secretary of State clearly has the stomach for these terrible cuts, that is not the case in local government. In Rochdale, the Liberal-Conservative coalition council has collapsed under the weight of the Government’s unfair front-loaded cuts. Today the eighth Lib Dem councillor resigned from their party. Will the Secretary of State join me in congratulating Rochdale’s Labour councillors, who have put lead in their pencils and taken minority control to create a compassionate council that cares about local people?

The hon. Gentleman had clearly prepared his speech before I delivered my statement. How can 8.9% extra help to Rochdale—to his council—and the following year a 4.3% drop in spending power be regarded as front loading? We have gone out of our way to help Rochdale. We have offered more help than the Labour party would have done. The hon. Gentleman’s council would be a lot worse off if we had applied Labour’s formula. This is a progressive settlement which protects the vulnerable, and the hon. Gentleman does himself no good by not recognising that fact.

I welcome the statement and, in particular, the announcement of a general power of competence for local councils. Will that or a similar power extend to parish councils? There is a great opportunity for parish councils to help local councils, as we did in my village this weekend with snow removal. There is a great opportunity also for parish councils, working with their district councils, to help save money, so will that power extend to the parishes?

Increasingly, we will encourage more parish councils to be formed. We believe that the neighbourhood is the natural point to which funding should go for local authorities, and I am very happy to confirm to my hon. Friend that, indeed, parish councils will get a general power of competence. Basically, the chain will turn on its head: the normal presumption is that councils have to find a law to take a particular action; now, they will have to find a law that prevents them from doing so. I think that that will allow for greater flexibility.

I congratulate the right hon. Gentleman, whom I must describe as Eric through the looking glass, on being able to persuade his minority coalition partners that a scorched earth policy is actually fair and progressive. This year, the national business rate will raise just over £22 billion. Is it not the case that, by 2014-15, the amount that central Government distribute will equal the business rate and run very close to breaking the current law, whereby they are required to distribute the whole grant to English local government?

I thank the right hon. Gentleman for the allusion. He seems to be vying for the title of the Red Queen: judgment first, judgment first, before he hears the facts.

Before the right hon. Gentleman disappears down his own rabbit hole, I will continue.

There is a theoretical surplus in 2013-14, but the right hon. Gentleman knows that we have an obligation to distribute the national non-domestic rate to authorities. The figure of £3 billion is overstated, because the Office for Budget Responsibility has not taken into account the number of grants that we have rolled into the block grant. We have done that because of its distributive effect, and by 2013-14 we hope that a new system of local government finance will be in place.

This announcement is the other side of the coin for flood defence spending. Will my right hon. Friend explain what proportions of the budget, with the removal of ring fencing, will be spent on capital expenditure and on maintenance? Will he consult on the possibility, if councils find themselves short of money, of water companies adopting and maintaining new sustainable drainage systems?

The latter point will of course be a matter for my right hon. Friend the Secretary of State for Environment, Food and Rural Affairs. On the capital programme, the various Departments will make their usual announcements in the reasonably near future, so that local authorities have an indication of their capital programmes.

The Secretary of State speaks of fair, sustainable and progressive proposals, but he must be using a different dictionary from the one on my bookcase, because his proposals will devastate my deprived constituency and borough of Lewisham. Given that 40% of the budget is spent on elderly and children’s care, can he not see that the proposals will mean draconian cuts in everything else? Will he not admit that his real agenda is shrinking the state and shifting the blame?

The hon. Lady will be pleased to know that Lewisham faces a drop in spending of 6.5% this year and 4.3% the following year. That does not strike me as draconian by any stretch of the imagination. She has made her reputation on shroud waving in this Chamber, but she should be addressing the needs of the people of Lewisham, who will continue to receive a high level of support from the central state to ensure reasonable provision in Lewisham.

Does the Secretary of State agree that the ending of ring fencing announced today and the introduction of the Localism Bill mark an historic turning point for local government in our country? After 13 years of the previous Government micro-managing every part of local government, today marks the day when the coalition takes Whitehall out of the town hall.

I entirely agree with my hon. Friend. I am delighted that the reductions in Cornwall will be 3.9% next year and 2.2% the following year. He is entirely correct. No matter what the Opposition say, we are passing real, substantial powers to local authorities. We have reduced the number ring-fenced from 90 to about 10. The only substantial ones to note are the school grant and the national health service grant that starts in 2013. We have given local authorities a great deal of leeway and discretion. Given that the Local Government Association said that it would be perfectly capable of dealing with a 9% reduction in spending and that the overwhelming majority of councils are well below 8%, I am very surprised—as, no doubt, he is—that there is not more celebration across the Chamber.

Liverpool is the most deprived city in the country and 40% of 16 to 18-year-olds there are about to lose all their education maintenance allowances. Will the Secretary of State tell the House how much Liverpool will lose in cash terms, including the cuts already made this year?

I made a very pleasant visit to Liverpool earlier this year and had the opportunity to meet and spend time with Councillor Joe Anderson. He told me that he felt that his chief executive and senior staff were overpaid. I commend to the hon. Lady the very brave decision that he has taken today to reduce his top management of 74 by 48. By just removing 48 staff and those among the top officers taking pay cuts, £4.25 million has been saved. That is an indication of the determination of Liverpool. I am delighted to tell her that giving a new damping grant to Liverpool has meant that we have saved an extra £15 million on top of that.

Given the unique problems faced by rural areas and the incredible creativity and energy with which the Eden valley and other communities are overcoming their problems, will the Secretary of State please reassure us about the impact that these decisions will have on rural communities?

One of the great difficulties that I have alluded to is trying to balance relative need with sparsity, which is extremely difficult. I was very keen to pass the additional money available for adult social care into those communities. That has meant that some district councils—by their nature, because they are not social services departments—have faced a quite considerable reduction. That is why we have moved additional money across from my Department to ensure that those communities are not put at a disadvantage. I admit to my hon. Friend that this is a stop-gap, but I hope that within two years we will be producing a much fairer, much more transparent and much more honest policy. We are operating on the basis of an inherited policy, but frankly it was not worth the candle to dismantle it just for two years.

As Coventry council declares hundreds of redundancies, how does the Secretary of State justify his denials that he is relishing wielding the axe, given that he was one of the first Secretaries of State to settle with the Treasury at one of the highest levels of cuts? How does he claim to be concerned about the most deprived communities given the cuts that he made to the area-based grants, which fall almost entirely on those councils with the most deprived areas within their jurisdictions?

The right hon. Gentleman is a very distinguished Member of the House, and he should know not to believe everything he sees in the newspapers. I settled with the Chancellor three days—I think—before the final settlement. I have no idea why the stories that I was an early settler came out. I am sure that the right hon. Gentleman will be delighted that Coventry faces a cut in its spending of 5.9%, and 3.9% the following year. The substantive point is this. I listened to the chief executive of Coventry council this morning on the radio, and given what the council has been doing in terms of greater efficiency and amalgamating services, what we have been able to offer through this process has meant that Coventry has received considerable protection. The levels of cuts are in single figures. This time last week, Opposition Members told us that we were going to see reductions in spending of 20% or 30%. We were told it was going to be Armageddon, so they would have settled for 5.9%.

While I congratulate the Secretary of State on looking after the most vulnerable people in society, may I press him to give some comfort to middle England and the district councils, particularly given the situation that we face over disabled the facility grant and other issues that are coming along, especially in South Derbyshire?

We are all paying a great deal of attention to the squeezed middle, not least those on the Opposition Benches. One of the consequences of our decision to put substantial moneys into adult social care, as well as the move-across on the bus grant, is that the district councils, by proportion, received a much smaller amount. That is why we put in some additional sums of money in order to protect them. I think that middle England is safe with the coalition.

The Secretary of State is right that local government was fearful of the up-front nature of the cuts, which is still there, and the disparities in the cuts, particularly in that they most adversely affect those authorities with the highest level of grant. Will he therefore produce figures comparing not only grant settlements year on year but total spending levels, including council tax, authority by authority? Although he says that the highest cuts in total spending power reduction will be 9%, if the average is 4.4%, does that not mean that some authorities will get no cuts at all, or even perhaps a small increase?

I believe that Dorset gets a 0.1% increase in its financing; I hope that it will not go mad and squander that additional sum of money. I do not think that any place in England is seeing an increase, when the fact that district councils are receiving a considerably greater reduction in their spending power is taken into consideration. The hon. Gentleman may have seen the bundle of documents that I have here, which include lots of things explaining exactly how we have done this. I commend to him the straightforward calculation on pages 55 to 56, which explains precisely and exactly how the figures have been worked out.

Order. I remind hon. Members that questions are supposed to be short. If the answers could be short as well, that would be helpful, because many hon. Members still wish to participate.

Will my right hon. Friend commend Lichfield district council and Tamworth borough council on leading the way by sharing front-of-house and back-office services to save council tax payers’ money? Will he also congratulate Tamworth borough council on its announcement that it is freezing council tax? It is the first time that that has happened in Tamworth in a generation. Does that not demonstrate that Conservative councils offer value-for-money services—

Order. I have only just said to the House that there should be short questions. That does not mean three short questions or four short questions. The Secretary of State will answer one of those questions.

In the interests of brevity, I congratulate Tamworth. That is the kind of Tamworth declaration that I would expect.

The Secretary of State says that he is being generous in putting £30 million of his departmental budget into local government. For a big man, that is pretty small beer. Does he accept the truth that the abolition of area-based grant means that the poorest places, especially in the north, will be worse off? In Salford, £3 million of area-based grant goes into tackling crime and disorder.

For Salford, the reduction in spending power will be 8.5% next year and 3.9% the following year. There is a misunderstanding from the right hon. Lady, although I do not mean that disrespectfully. The way to protect the poorest is to put money into the block grant, because that is the most distributive grant. That point is like the argument about the level of capitalisation. The more money that goes into the block grant, the more that vulnerable communities are protected.

I support powers to veto excessive council tax rates, especially for those on fixed incomes. That will be welcomed in my constituency, where under the former Labour-controlled council, council tax rates rocketed by 42% in just three years. To protect residents, what levels can we expect for future capping rates?

Of course, I hope that it will not be necessary to cap any authority this year. I rather hope that they will all accept the council tax freeze. The beauty of the measure is that once we get through this year, there will be no more capping. A reasonable level will be suggested, and after that, local people can decide. If local authorities make a reasonable case for an increase, so be it. The measure will act as a break against excessive council tax rises.

The Secretary of State expresses surprise that we are not rejoicing at the settlement that he has announced. After 13 years of Labour Government announcements that always contained year-on-year real terms increases in grants to local authorities, this year the Secretary of State is announcing a settlement in which every local authority in England—with the possible exception of Dorset, although that point was not entirely clear—will suffer a loss. Is that not an indication of what the Tory in government means?

The right hon. Gentleman would not have dreamed of the relative needs level of 83%. Frankly, somebody as distinguished as he should not be asking, “Why are there cuts? What’s happening?” We are in debt. The country is in a parlous state. Our level of sovereign debt is the highest in Europe. Had his party won the election, there would be real cuts in real terms in local government right now.

Under the previous Government, St Albans city and district council, like other councils, laboured under an enormously bureaucratic and interfering assessment regime, with its regulations and inspections. Will the localism policy and the cuts in red tape save local authorities money through not having to comply with expensive regulations?

My hon. Friend is absolutely correct. We have got rid of comprehensive area assessments and all the daft targets, which achieved absolutely nothing. The problem with them was that they cost serious money to put together. That money can now be applied to front-line services.

The Secretary of State will be aware that grant floors are important to boroughs such as Knowsley. Can he explain how his banded floors will operate, and will he indicate what percentage will apply in each of the four bands?

I am happy to do that. Let us deal first with social services authorities. In 2011-12, the floor will be 11.3% for the most dependent authorities, then 12.3%, 13.3% and 14.3% for the least dependent. In the case of shire districts, the floor will be 13.8% for the most dependent, then 14.8%, 15.8% and 16.8%, so there is a good 3% difference between the various bands. Of course, for an authority such as Knowsley there will be a transitional grant on top of that to get the levels down to 8.9%.

Will the Secretary of State clarify whether the new formula more adequately addresses the needs of authorities such as Sefton that have a disproportionate number of elderly residents?

Authorities with elderly residents, of course, will be some of the relatively big gainers because of the provision of adult social care. We want to put extra money into authorities with social services departments, and thanks to my right hon. Friend the Secretary of State for Health, we are looking at putting in serious money to deal with adult social care. I can recall standing at the Opposition Dispatch Box and asking for precisely the action that we have delivered today.

Given what the Secretary of State has said about fairness, why is it that from looking through the list of London borough grant changes, we see that the biggest losses in absolute and percentage terms are in the local authority areas where the level of disadvantage is the greatest?

I wish to make it absolutely clear that obviously, authorities that are more dependent on the grant will feel the effects of any reduction. We have moved the relative needs figure to 83%, and introduced the banded floors and the transitional grant, to protect those authorities. Had we not taken those decisions, and had we applied the system that the Labour party did, the effects on those communities would indeed have been great.

I welcome the Secretary of State’s announcement today. Is it not the case that across the country, there are lots of examples of local authorities working in partnership to reduce costs, sometimes across political divides? Will he outline how he can encourage local authorities along the line of more collaborative behaviour?

I am pleased to report that a number of authorities have gone some considerable way to find savings that can be made. We have already talked about Coventry, and Hammersmith and Fulham, Kensington and Chelsea and Westminster have started to join together to improve things. Birmingham has managed to save £130 million by outsourcing and Suffolk £40 million by divesting services. In the west midlands, asset rationalisation has achieved a £640 million saving. There is a very long list, which I shall not read out, but it is immensely important that authorities recognise that they can protect front-line services by shifting resources from the centre to the most vulnerable.

No matter what the Secretary of State says, the fact is that Tameside council is preparing for massive spending reductions over the next four years. Given that he has said that the changes are fair and sustainable, how does he square that situation for a borough ranked the 56th most deprived local authority area in England?

Tameside is enjoying considerable protection because of the three steps that I have announced, which I will not repeat. There are additional ways in which Tameside could improve its financial position, including through the regional development fund and such like. In fact, I have just been told that Tameside has a reduction in spending of 6.2%, which hardly figures with what the hon. Gentleman has just said, so I shall look forward to finding a nice thank you note from him on the board tonight.

May I congratulate the Secretary of State on protecting adult social care and on listening to local councils about front-end loading? May I also commend to him the work of East Staffordshire borough council, which, by cutting expensive senior management, is protecting front-line jobs and services? Does he agree that average reductions of just 4.4% will mean that no council should be cutting front-line services?

I am grateful to my hon. Friend. This move goes hand in hand with increased transparency, because, by the end of January, every local authority will have to produce online all expenditure of more than £500 for close scrutiny by the electorate. If authorities are not cutting senior management but are instead taking out front-line services, it will not be me to whom they will be accountable but their electorate. I believe that this settlement will ensure that the trend towards a reduction in the centre and the protection of front-line services will be accelerated.

Will the Secretary of State tell the House how much money councils will be getting from the NHS to spend not on social care but on public health?

There are two funds, which add up to just a smidgen over £2 billion. The co-operation of the Department of Health, and the move in which local authorities with social services departments will now have an opportunity to influence the local health scene, represent a considerable change of which Joseph Chamberlain would have been proud. This will put local authorities in their rightful place of being able to co-ordinate a vital part of public health provision.

May I ask the Secretary of State how he has dealt with the mess that he inherited from the previous Government around concessionary bus travel, which is so important for communities in North Yorkshire?

It has been a most dreadful experience, with the moves from the districts to the counties. One of the principal problems has been that a number of district authorities put in more money than the Government were actually giving them. At some point, some of that money was passported across to the counties, so that the districts registered a loss. I have tried to help by adopting a broad-brush approach of putting additional money into districts that are faced with a big loss in their spending power, but this is only a provisional assessment, and I will be listening carefully to what local authorities have to say on this issue.

Does the Secretary of State think that Mr David Shakespeare should remain as leader of the Conservative group on the Local Government Association after his offensive remark last week, which has been reported in today’s newspapers, that constituents from poorer parts of the north—including areas such as my own—should

“replace the Romanians in the cherry orchards”?

I was not aware of Councillor Shakespeare’s remarks until the hon. Gentleman mentioned them. I will be seeing him first thing on Wednesday morning, and I shall ask him precisely what he meant by that.

I welcome the Secretary of State’s commitment to review business rates revenue. May I encourage him by saying that giving much of the business rates revenue back to local councils would reward proactive councils such as Gloucester city council, which sets out to attract inward investment, which is a great source of new jobs?

I am very aware of my hon. Friend’s constituency. I have visited it and know how proactive the council is in trying to bring in business. That is the secret: we need a system that rewards enterprise and initiative. Sadly, the current system tends to stifle both.

The Secretary of State will know that, in the early part of the year, before the general election, Birmingham city council was already facing a major overspend. It claimed that it was not getting enough money from the then Labour Government, whereas one or two others said that the overspend was due to the council’s mismanagement. Now that the right hon. Gentleman proposes to cut even more money from Birmingham city council, which does he think it was? Will he give the cash figure for the reductions in Birmingham? How does his statement relate to the forthcoming 20% cut in police numbers that his hon. Friends in the Home Office also propose for the west midlands?

I am delighted to tell the hon. Gentleman that Birmingham faces a cut in its spending of 8.3%, and 4.3% for next year. I am also pleased to tell him that Birmingham has managed, through outsourcing, to reduce the gross level by £135 million, which is attractive. The hon. Gentleman represents a party that got us into the mess in the first place.

The hon. Gentleman says, “Oh it’s the banks”. Big Government, with unsustained borrowing, got us into the mess. Labour Members must take their fair share of guilt and blame for that.

In Macclesfield, we are fortunate to have the wonderful Bollington leisure centre, which is run by the community for the community. Does my right hon. Friend agree that that success story clearly shows what local communities will be able to do under the powers of the Localism Bill?

My hon. Friend clearly shows what localism can do, and the Localism Bill will ensure that more communities can do that. He will have noticed the scoffing on the Labour Benches about ordinary people banding together to protect a community facility. We have to emphasise that it does not have to be owned by the state to be used by the community. My hon. Friend clearly demonstrates the future; Labour Members demonstrate the past.

Earlier this year, Liverpool, the most deprived local authority, sustained the largest cut to its area-based grant of any core city. Will the Secretary of State now please answer the question asked by my hon. Friend the Member for Liverpool, Riverside (Mrs Ellman), and tell us how much he is cutting in cash terms from Liverpool’s budget?

One of the reasons why the hon. Lady’s constituents and the fine city of Liverpool face a problem is the working neighbourhoods fund, which the Labour party cut. It took that money away. We had to find a way to pay for that, which is why Liverpool will be restricted to a loss of 8.7% and 7.1%. In addition, on the tour to which I referred earlier, we ensured that the money for decent homes, which the previous Government abandoned, was provided for Liverpool. Liverpool is in a much stronger position now than it was when the Labour Government were in power.

While I welcome today’s statement, particularly the measures that go towards tax incremental finance, will my right hon. Friend consider making them developer led, rather than local authority led? When the measures were trailblazed in the United States a couple of decades ago, most American cities and states found that regeneration was much more effective when they were developer rather than local authority led.

Obviously, as part of my job, I have met a number of developers. Those who have reasonably full books as far as housing is concerned are the ones who have got alongside a local community. Those developers are seen not as an occupying army bulldozing over the green belt, as was the case under the previous Labour Government. They work alongside local communities, clearly demonstrating the benefits that development can bring to a neighbourhood. I think that that is the future—developers, local government and local communities working in co-operation—and that is what the Localism Bill will deliver.

I met the chief executive of my local authority, Northumberland county council, last week. He tells me that he must save £100 million in the next two or three years. I hazard to say that that puts Northumberland county council in a right pickle. Is it not true that all that is happening is that services are being slashed and cut, people are being put on the dole, and the volunteers, if the Secretary of State can get them, must come in to replace them?

I have good news for the hon. Gentleman in terms of the loss of spending power, which is just 5.6% this year and 3.2% next year. As he is so cosy with his chief executive, he should ask him to take a pay cut to reduce central funding and the central office, to start sharing with other authorities, and instead of cutting the front line, to start cutting the feather-bedding.

I am delighted that rurality and the age of the population will be taken into account, but may I have some reassurance that Devon will not find itself, as now, right at the bottom of the spending league tables for schools, with children having roughly £400 per head less spent on them because of the cost of transport, among other things?

My hon. Friend should be pleased to know that Devon faces a cut of 1.8% in its spending. One reason for that, as in other local authorities, is that social services are offered a degree of protection depending on the number of elderly people who have chosen to live there. However, some of the districts have to rely on the full amount in terms of the guarantee of no more than 8.9%.

The Secretary of State lost his train of thought this morning on the “Today” programme, which we can well understand given his disgraceful statement to the House this afternoon, but may I ask him a specific question? In the banding annex of the local government finance report, Dorset is in band 4, but he said that it will receive a slight increase in funding, or at least no cut. Will Halton, which is in band 1—the most deprived band—receive an increase in funding? It cannot be fair for somewhere in band 4 to get a better settlement than somewhere in band 1.

The hon. Gentleman would be better to can the abuse and read the plain English guide to the settlement, which I commend to him because it demonstrates that what he just said is nonsense.

Does the Secretary of State share my sadness that such a tough local government settlement was necessitated because the previous Government shattered the public finances? Despite that, can he confirm that he has found £650 million to ensure that council tax is frozen next year in Dover and Deal and across England?

I am delighted to respond to my hon. Friend and to say that the council tax freeze will offer substantial protection to his constituents, who have worked hard and paid through the nose for council services over the years, seeing enormous increases under Labour. I am delighted that we can offer that additional money to freeze council tax.

Is the Minister aware that Bolsover lost every single pit when the Tories were last in, and that every single textile factory was closed? It is in the bottom 50 of all constituencies in Britain in terms of deprivation, and there is something sinister in him deciding to cut Bolsover’s grant by 20.3%. Why?

The hon. Gentleman is entirely wrong. Bolsover will receive the full protection of the 8.9% cap in terms of its total spending power. That is a substantial difference—[Interruption.] He chunters, but we have opted for a measure regarded as desirable by the Local Government Association and his Front-Bench team a week ago. He should not blame the method just because it has not delivered the kind of bloody stumps that Labour Members wanted.

Local authorities all over the country will welcome the £200 million set aside to transform back-office functions and cut bureaucracy, but they will be concerned about how they can access the money. Will my right hon. Friend confirm the £200-million figure and state how local authorities can access it, so that we can see those reductions in bureaucracy and the transformation of the system?

They will gain access in precisely the same way they have gained access this year and in previous years: they will bid for an amount. No authority has ever received 100% so the £200 million will be apportioned on a percentage basis. I look forward to receiving applications from authorities throughout the country.

The verdict on this policy will be delivered next May and in May 2012, and I fear that the Secretary of State has just written the Götterdämmerung of Conservative councillors over the next four or five years. In Rotherham, there are literally hundreds of voluntary organisations relying on just a small helping hand from local government of a few hundred or few thousand pounds—not big money. May I ask him to pay particular attention to that to ensure that the voluntary sector does not go under as a result of the settlement?

Given that the reduction in spending for Rotherham is just 5%, it should be in a strong position to continue funding those groups. At a time when funding by Government grant is being reduced by 26%—14% in terms of total resource—it is beholden on local authorities not to salami-slice, but to restructure in order to achieve the advantages of back-office mergers. If Rotherham, which is a fine authority, does that, I am sure that those small grants will be protected.

Towns such as Dartmouth and Kingsbridge in my constituency are resisting the imposition of high and unwanted on-street parking charges by the county council that they see as a back-door form of revenue raising. Would my right hon. Friend encourage them to organise a local referendum?

It is always a bit of an inconvenience when the public make their position known—democracy is always a bit messy, but it is the best system we have. I cannot see any problem with local authorities facilitating such a referendum. The county council could also think about delegating that function to the local towns, so that they can organise these things. That is what happens in an awful lot of districts. My hon. Friend represents an attractive part of the world that many of us visit in slightly more clement times. However, car parking can be vital to a local economy so if she wants to start the referendum process, she has my full support.

Further to the question from the shadow Secretary of State, given that the Secretary of State has repeatedly referred to the Localism Bill, in the House and on the radio this morning, as a new constitutional settlement, will he confirm that all stages will be taken on the Floor of the House?

Madam Deputy Speaker, you have asked for brevity, so I am happy to say no. A longer answer is: not a chance.

May I warmly welcome my right hon. Friend’s commitment to reforming the fundamentally flawed system that he has inherited? However, does he agree that in the interim, councils such as mine—which, unlike most local authorities, saw real-terms cuts under the previous Labour Government—will have a particularly hard time?

I do recognise that, and I apologise to my hon. Friend. I would not have wanted to start from this position; I would have wanted a fairer, more reasonable system. However, I recognise that when we start to move money around the country and change things round, we have to put in floors and ceilings. That would have been more disruptive to local government than what we are doing, which we are at least doing on the basis that we are all in this together and that we have managed to protect the most vulnerable authorities.

I have in my hand a rather thin document entitled “The thinking that underpins the Localism Bill”. It is full of big words such as “liberalism”, “community politics” and “big society”, some of which the Deputy Prime Minister thinks he understands, but is all this not just hot air unless we see a real end to rate capping, an offer of local tax-raising powers in communities and the return of the business rate, which the Tories removed?

Except for the abuse, it sounds as if the hon. Gentleman might be ready to defect across the Chamber—and we will, of course, be ready. I would hardly describe the bundle of documents that we have issued as insubstantial, and frankly, I would commend to him the plain English guide to the settlement. However, if he wants to make a representation to the Government about the reform of local government finance, he is most welcome to do so, because I will be absolutely frank: although he is no longer in his usual place, we are indebted to the right hon. Member for Greenwich and Woolwich (Mr Raynsford), on whose hard work we will be building, but who received scant thanks from the previous Government.

My Colne Valley constituents, and in particular the Lingards community association, are excited about the Localism Bill, because it comes at a time when Labour-run Kirklees council is running a consultation costing tens of thousands of pounds—perhaps hundreds of thousands of pounds—in order to impose 28,000 new homes on our beautiful part of west Yorkshire. Will the Secretary of State join me in confirming that the Localism Bill will give powers to local people to decide where local houses will be built?

Order. We are not talking about the Localism Bill; we are talking about the settlement. As the hon. Gentleman did not ask about the settlement, we will move on.

The Secretary of State said in his statement that there are “substantial incentives available for councils,” and he mentioned the new homes bonus. May I ask him to ensure that demolitions will be netted off? I have 2,500 empty properties in my constituency, and if demolitions are included, there will be no new homes bonus for what is one of the most deprived constituencies. Another point that I want to touch on briefly—

Order. No, the hon. Gentleman will not raise another point. This has already gone on for a long time. I have been very patient, despite the fact that I have asked people for short questions and short answers.

We are talking about a regeneration fund, and we will indeed be offering part of the new homes bonus to get property that is empty after a period back into service.

The hon. Gentleman can shake his head, but we are responsible for the new homes bonus, so I tend to think that we probably know a little more about it than him, and he should be reasonably happy about that answer.

Those responsible for providing adult social care who have heard the right hon. Gentleman predicting that the settlement will result in improved quality may think that he is telling a cruel joke. Is he confident that when ADASS—the Association of Directors of Adult Social Services—and the Local Government Association have studied the detail of the settlement, they will stop saying that there will be a shortfall in social care funding of billions of pounds?

I have to say that, not so long ago, I was at the Opposition Dispatch Box asking for this kind of money. We are talking about the only substantial increase in social care that this House has seen for a very long time. Frankly, mocking it is ridiculous. What the settlement will also do is increase co-operation and co-ordination between the health service and social services. That is something that we can all unite behind. There are many reasons—I suppose—to attack the settlement, but that is certainly not one of them.