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Local Government Funding (Hackney)

Volume 520: debated on Tuesday 21 December 2010

In these final hours of a momentous parliamentary year, I am grateful to be able to put on the record my concern about the consequences of local government funding cuts for my constituency. To make the case fully about what a hammer blow the cuts will be, I have to put those cuts into context.

Parents and young people in Hackney are still reeling from the consequences of the cuts in the education maintenance allowance. The east end of London, particularly Hackney, has one of the highest proportions of young people claiming the EMA of anywhere in the country. In one of the further education colleges in my constituency, BSix, more than 75% of the students claim the EMA. Yesterday, I heard the Secretary of State for Education claim that the EMA was tokenistic. I put it to the Minister that the sums involved—£10, £20 or £30—are not tokenistic in the east end of London. Those sums have made it possible for young people to stay on at school. Losing that money will be a blow to household budgets and will be a slap in the face for those young people and their aspirations.

We will also be hit by the health reorganisation, contrary to the claims of Ministers that the health budget is protected. Hundreds of redundancy notices will be issued by the primary care trust in my constituency, as in others throughout the country, as part of the reorganisation process. Ministers have promised that 45% of management jobs will be lost. Those are real jobs held by real people, some of whom live in my constituency and many of whom are women.

The context of the local government cuts also includes the figures this month on rising unemployment and the big cuts in the public sector generally. The Minister knows that the public sector is a major employer in Hackney, particularly of women.

As if all that was not enough, there will also be changes to housing benefit, which will affect claimants in Hackney, who numbered 7,829 as of November. Based on the current caseload, the average shortfall for a claimant in Hackney due to the caps will by £22.96, but the highest shortfall could be as much as £250 a week. Those calculations do not take into account the further shortfalls that will also arise from the 30th percentile rule, which will mean that people can only get housing benefit from the bottom percentile of private sector rents in their area.

We are not looking at local government cuts in isolation. In Hackney, one of the poorest boroughs in the country, local government cuts should be seen in the context of cuts in the EMA and housing benefit, job losses in the health sector and rising unemployment. On top of these things come the local government funding cuts.

I sought this debate because Government grants to Hackney are being cut by 14.9%, the equivalent of £44 million. That is the biggest cut in London and one of the highest in the UK, putting Hackney 26th out of 152, in percentage terms. If I put nothing else on the record, I wish to put on the record that the Government figure showing an 8.9% reduction was misleading, because it includes moneys that do not come from the Government, including council tax revenue, transitional grant funding, which is only available for the first year, and £3.7 million NHS funding for new activities. The real figure is 14.9%, which is more than £44 million.

In responding to the 8.9% figure, I must say that the Government have made much of the fact that funding per head for residents in Hackney in 2011-12 will be £1,043, compared with only £125 per head in Wokingham. That seems like a huge gap. Some, perhaps even the Minister, will say, “Clearly, Hackney is being treated generously and maybe with undue generosity.” But I am grateful to be able to put the truth about the cuts on the record. Hackney has more than £1,000 per head in local government funding because it has a very low tax base per head—the last major factory moved out of Hackney when I first became a Member of Parliament, more than 20 years ago—whereas Wokingham has a very high tax base.

The London borough of Hackney’s need assessment is one of the highest in England—I have worked in Hackney for 20 years and have personal understanding and knowledge of that—whereas Wokingham has one of the lowest. To illustrate that, in case the Minister is not persuaded, 33% of children, or more than 6,000 pupils, in the London borough of Hackney take free school meals, whereas in Wokingham only 3.9% of pupils—just 491 children—take free school meals. In Hackney, 44% of children are in out-of-work families in receipt of child tax credit, but in Wokingham the figure is only 6.7%. In Hackney, the proportion of older people on the income support element of pension credit is 53.7%, whereas in Wokingham it is only 9.2%.

I beg Ministers to stop making misleading comparisons between Hackney and shire counties, because the need in Hackney is so much greater than in the areas that they are referring to. It is misleading and unfair and it seems as though they do not take seriously the huge social need in the inner city.

The cut of 14.9% is being imposed on top of all the other cutbacks that Hackney is facing. What will be the consequences of such a cut in local government funding to Hackney, together with the changes in the apportionment of what used to be called neighbourhood renewal funds? Inevitably, because the local authority is such a huge employer, there is a threat to jobs and services.

We in Hackney—myself and my hon. Friend the Member for Hackney South and Shoreditch (Meg Hillier) and our elected mayor, Jules Pipe—will be fighting to save jobs and services, but already we know that five youth clubs that we were promised under schemes promoted by the previous Government will not happen. There is concern that the Government are carelessly stopping that youth provision with the stroke of a pen, although Hackney faces so many issues to do with youth culture, gangs, antisocial behaviour and criminality.

We know, partly because of the nature of the schemes that we spend the neighbourhood renewal funds on, that youth offending work and youth work is threatened, as is work with young people not in education, employment or training and on child obesity.

Posts will be deleted. It will suit civil servants and even some council officers to claim that they are not making redundancies—some will be agency posts and others will be voluntary redundancies and I suspect that, at this stage, only a small proportion of posts deleted will be involuntary redundancies—but a post that is deleted is a job that is not there. Just because somebody is an agency worker does not mean that their need for employment is any less. They may not figure in a column headed “Redundancies”, but people who had jobs will lose them.

The hundreds of posts that are deleted, even if they are not officially regarded as redundancies, will mean fewer jobs for young people leaving Hackney schools and colleges who have worked hard and hope to make some sort of life for themselves. In the opening weeks and months, as Hackney local authority draws up its budgets, we will know exactly where the axe will fall. There is no question but that both jobs and services are threatened.

I have heard a number of Ministers in the Tory-led Government talk about local government bureaucracy. The mayor of Hackney, Jules Pipe, is aware of that issue and 36% of posts at tiers 1, 2 and 3 are being deleted—that is 20 positions altogether. In debates such as this, mention is often made of how much chief executive officers in local authorities are paid. Let me put on the record that I do not defend those salary levels, and I do not accept the argument that the salaries earned by some chief executive officers in London are due to the market; it is a cartel driven by recruitment agencies. I have discussed that issue with colleagues in local government who say that they cannot attract the people and that they need to bring people in. I argue, however, that it cannot be satisfactory to have so many leaders of inner-city local authorities who do not live in inner cities; some of them commute from far outside the M25. Local authorities need to invest in second and third-tier officers, so that it becomes more normal to recruit at the highest levels from within. Those authorities would then not have to pay inflated salaries via recruitment agencies, and they would be more likely to attract people who, instead of travelling hundreds of miles to their place of work, are local, have roots in the area and understand the authority.

I do not defend the high, inflated salaries that, in my view, have been paid to some chief executive officers over the recent decade. Such salaries would be more acceptable if those officers accepted what many of us in the House would consider to be proper accountability. Some seem to have difficulty with the notion that together with such a considerable salary—three times that of a Member of Parliament and more than that of the Prime Minister—comes accountability. Sadly, the case of Sharon Shoesmith is an example of that. I am not here to defend high salaries, but even if we got rid of every first, second and third-tier officer in Hackney, it still would not make up for the £44 million of cuts that we face.

In conclusion, we are all aware that savings have to be found in the aftermath of the credit crunch. However, the Labour party does not accept the argument put forward by Ministers and their supporters that the cuts are inevitable in their totality. The cuts are ideological, and the fact that boroughs such as Hackney will be hit so much harder than boroughs such as Richmond points to what is going on. It is wrong and distressing for Ministers to compare Hackney with Wokingham as if they were in any way comparable. It is wrong to mask the scale of the cuts by adding in council tax revenues as if those are given to Hackney from central Government, when in fact the money is raised. It is wrong for Ministers to turn away from the real need that exists in boroughs such as Hackney.

Over the past few decades, remarkable work has been done by community organisations, local authority leaders and the Government in the east end of London. In my local authority, there are five new academies; there is the brand new east London line, which is the brain child of a former Mayor of London. However, the east end still struggles with the legacy of Britain’s industrial past. It is no coincidence that some of the most historically significant local government leaders emerged out of the politics of the east end in the 19th century—George Lansbury, for example, and the councillors of Poplar. It has been clear for over a century that the issues and challenges that face communities in the east end of London cannot be solved by individual charity alone. They cannot be solved by, “The rich man in his castle, the poor man at his gate”, or by charity at the appropriate time. Such problems can be solved by the aspirations and ingenuity of individuals, but only if there is a strong local state. Those of us who live in the east end of London and represent the area, look with apprehension at the clear intention of the Conservative-led Government to whittle away at the local state in the east end, to delete posts and services and leave families and children unprotected against the stormy economic times that we are passing through.

These are almost the final hours of 2010. It has been a momentous Parliament. For the first time in many years we have a coalition Government, and for the first time ever, I am on my party’s Front Bench. The year has ended in a way that many of us could not have foreseen. As I said at the beginning of my speech, I am pleased to put my concerns about the cuts on the record, and I assure the Minister and the House that when it comes to fighting to defend the interests of the people of Hackney, I will stand side by side with my colleagues and we will give no quarter. We were elected to fight for people who have no voice and for a better, stronger community. My hon. Friend the Member for Hackney South and Shoreditch, the mayor of Hackney, and I believe that the wave of cuts that is coming towards the east end from all quarters poses a real threat to communities and to the changes made by recent generations.

I am grateful to the hon. Member for Hackney North and Stoke Newington (Ms Abbott) for providing hon. Members with the opportunity for this debate. As she said, it has been a momentous year for her and also for me—I, too, did not expect to be where I am. However, that gives me the opportunity to address the concerns raised by the hon. Lady, and those in a wider context that relate to the economy and local government.

When the coalition Government took office, they had clear objectives. Right at the top of those objectives was the desire to shift power from Westminster—and more particularly from Whitehall—to people and communities at grass-roots level, and to promote decentralisation and democratic engagement. We are doing that by giving new powers to councils, communities, neighbourhoods and individuals.

The backdrop of the economic crisis that we inherited meant that we also needed to identify better ways of funding local government. The spending review and the provisional settlement provide opportunities to do that, and we are working hard to ensure that it happens. Managing the impact of the funding reductions requires tough choices.

I do not accept the hon. Lady’s view that the cuts are ideologically driven. I am sure that if someone comes to her surgery and says, “I am having difficulty paying my rent or my electricity bill but I’m going on holiday to Corfu next week”, her advice would be to cancel the holiday to Corfu and concentrate on delivering the essentials. That is what the Government are doing. Each day, £400 million must be borrowed—perhaps the figure is even larger. We are increasing income and we must reduce expenditure. We are doing that to the best of our ability by protecting the most vulnerable people. I understand the hon. Lady’s points; they are heartfelt and based on her experience as a vigorous and active constituency Member. However, we need to put that in a context where the revenue funding to local government from central Government must be reduced. The comprehensive spending review confirmed that the revenue would reduce by 26% in real terms during the CSR period, excluding expenditure on schools, the fire brigade and police. However, it is very important to understand—and I am sure that the hon. Lady does understand—that local government spending will reduce by far less than 26% because councils also get money from council tax. She is wrong to discount the contribution that council tax will make to the spending power of Hackney.

I am not discounting it; I am saying that it is misleading to claim that it is only an 8.9% cut, when the cut to the money that the Government give to councils is more than 14%.

I understand the point that the hon. Lady is making, and I will come on to the detail of the sums in a minute or two, if I may. However, the Government, the Department and the Secretary of State have made it clear that we are talking about the spending power available to councils, which is what is crucial to the council’s delivery of services and its employment of staff, as I am sure she understands. It is about how much money the local authority has to spend. She is right: the contribution from central Government is reducing and will reduce further over the period of the CSR. However, the capacity of the council to spend money will not fall below the figures we announced.

Even in these difficult financial times, we have protected those in most need of support. We have provided £1 billion of NHS funding to support social care services, which will build up by 2014-15 and is front-loaded, with £800 million of it coming in the next financial year. That includes £650 million paid through PCTs next year, and Hackney will benefit from a share of that money—as will all social services authorities—by receiving approximately £3,700,000. In a throw-away remark, the hon. Lady said that that would be for new duties; it is for managing the junction between health and social services, which service deliverers on both sides understand can make real economies and add common sense to their joint budgets, as well as improve care. In addition, the Department of Health is rolling £2.4 billion of social care funding into the formula grant over the next three years. That is made up of existing social care grants, which will rise in line with inflation and reach £1.4 billion by 2014, and an additional £1 billion, which will come from the funding to the NHS to councils to support social care.

We have protected investment in the homelessness grant and are prioritising services with the Supporting People programme over the spending review period. We are also giving more flexibility to local authorities. We are ending the ring-fencing of all revenue grants from next year, except school grants, and there will be a new public health grant from 2013. We have simplified and streamlined grant funding, and have shifted a wide range of other budgets, including GP and police and crime commissioner budgets, to the local level where they can be pooled and aligned. An important further step will be the creation of community budgets starting in 16 pilot areas next year, but it is possible to extend that to all local authority areas by 2013.

Turning to Hackney, I welcome what the hon. Lady had to say about high-powered salaries in the local government sector. I think that she and I are of the same mind on that. I hope her words will be widely listened to across London and elsewhere. We have produced a settlement that ensures that no council will see its revenue spending power decrease by more than 8.9% either next year or the year after and is progressive in its impact—I will come to that in a moment. It also confirms the transfer of control of finances from Government to local authorities, giving local authorities discretion. It is in that context, and the context of the council tax freeze and next year’s supporting grant, that I want to assure the hon. Lady that we have responded to the pressures that undoubtedly exist in Hackney for public services and for strong local government.

Is there not a danger in the local government settlement that we are inadvertently penalising local councils that are already running a very tight ship? As the Minister may know, Bromley, which includes my constituency of Orpington, receives the second lowest local government formula grant—just £216. That is being cut by 14.3%, even though the council has very little to cut as it is.

I can if necessary fight a war on two fronts, but that intervention probably makes the point for me. The settlement that we have produced protects Hackney and, it perhaps could be said, at the expense of Bromley. We have subdivided local authorities, in relation to the allocation of grants, by what we have described as banded floors. There are four bands, based on their dependence on Government grant as a fraction of their total spending.

If the local government settlement is as benign as the Minister says, why have leading Liberal Democrat councillors and local government leaders and leading Conservative local government leaders attacked it? I believe that one Liberal Democrat local authority leader went so far as to refer to the Secretary of State and the Minister for Housing and Local Government as Laurel and Hardy. I would not dream of being so disrespectful, but those are not the words of people who are happy with the settlement.

The hon. Lady and I have been around for longer than probably either of us wants to admit. With every local government settlement, every council finds a reason to complain that it has not been dealt with fairly. I understand that. This is the local government settlement in which every local authority faces a reduction, so it is not unexpected that the pain is felt and sometimes expressed.

However, we are protecting Hackney through the introduction of the banded floors, which means that its proportion of grant reduction is less than the proportion of grant reduction for those in the most independent sector of the local government family. In fact, Hackney is 3% better off than it would have been if we had stuck to the previous Government’s grant formula system.

We have adjusted the distribution of grant to give greater weight to relative needs, raising the figure from 73% to 83%, so that the per capita element is reduced and the element dependent on the deprivation of the area is increased. We have also introduced the transitional fund. That directly benefits Hackney to the tune of about £5,800,000. The introduction of the transitional grant means that we have been able to limit the losses of the councils that would otherwise have been most severely hit. The transitional grant goes to Hackney; it goes to some 70 councils in all over the two-year period, ensuring that any council that in either year would go over the 8.9% threshold will receive transitional grant funding to bring it back to that level. We are currently consulting on that and, in making our final recommendation, we shall look with interest at the feedback that we get from councils.

I want to deal with the hon. Lady’s point about the comparison between Hackney and Wokingham. That is not to say that Wokingham is like Hackney. It is to point out to hon. Members that the Government understand that Hackney is more vulnerable than Wokingham, which is why for every pound of grant going to a person in Wokingham, £8.36 goes to a person in Hackney—a multiple of 8.36. That is the amount of Government grant going to Hackney compared with Wokingham. That is not because we are saying that they are the same, but because the Government freely acknowledge their differences and the need to respond differently and appropriately.

The hon. Lady suggested that there was some kind of conspiracy, perhaps at the expense of her party. The formula grant reduction for Conservative single-tier authorities is 11.9%. For Labour authorities, it is 10.9%. For Liberal Democrats, as she might think is appropriate, it is an 11.3% reduction. Therefore, there is no political conspiracy. Labour authorities have on average £1,092 spending power per head; Conservative ones £862; Liberal Democrat ones £929. Those figures come from the House of Commons Library.