I beg to move,
That the Referendums Relating to Council Tax Increases (Principles) (England) Report 2012-13, which was laid before this House on 31 January, be approved.
With this we may take the following motion
That the Local Government Finance Report (England) 2012-13 (HC 1801), which was laid before this House on 31 January, be approved.
Over recent weeks my colleagues and I have had many conversations with local government. We have spoken to individual authorities, the Local Government Association, London Councils and other representatives. They bring a degree of realism about public finances which is sometimes absent from the House. They know that local authorities account for more than a quarter of total Government spending, and that tackling the record deficit is the responsible thing to do. They know that this helps families as well.
In these tough times, as a proportion of total income, interest payments for mortgages are currently at their lowest since records began. A Labour Government would have meant more expensive mortgages, failing to tackle the deficit—[Hon. Members: “No, it would not.”] Yes, it would, because failing to tackle the deficit would have meant bigger spending cuts and higher taxes. One has only to look at Italy and Greece to see that their borrowing costs have rocketed. They are cutting local government spending, proportionally, far faster and far more than we have had to do here in Britain. Let us look at the Republic of Ireland, which has had to introduce a new property tax to try to plug the gap. The reckless calls from the Opposition to spend more money, have higher taxes and ignore the cuts would lead us to very difficult times for families across this country.
Councils have come to discussions with a positive and constructive attitude, which does them great credit. As we have seen, councils are making a huge effort to make the money that is available go further. They have innovated, done things differently, reformed and rethought their services. For example, Lichfield and Tamworth district councils are now sharing their waste collection services. Councils have tried to cut out every instance of duplication. For example, Lincolnshire is bringing county and district data together so that people have to tell councils only once when they want to get something done.
Councils have thrown open their doors to shine a spotlight on waste and drive it out. All councils across England have chosen to publish online their expenditure over £500—all councils except for one sorry exception, Labour Nottingham city council. It is disappointing that Opposition Front Benchers still support the continued arrogant and outrageous secrecy against the residents of Nottingham city, who deserve to see how their money is spent. [Interruption.] They laugh about it, but the public have a right to see how their cash is spent. If the Labour party had some mettle, it would stand up to its local authorities that are refusing to publish that information. My Department has published online every single penny of Government procurement card spending, which has helped cut such spending by three quarters.
The right hon. Gentleman talks about transparency, and Nottingham city council should indeed publish that information, but does not he understand why local government gets a little cross when he and his colleagues lecture everyone on transparency but do not apply it to information on their ministerial hospitality and gifts? Can he explain why the latest such information published on his Department’s website, which I visited yesterday, is for eight months ago, even though it is meant to be published every three months?
First, the whole House will have noted that for the first time, as far as I am aware, a Labour Front Bencher has deplored Nottingham city council’s failure to publish its information transparently. Secondly, it is absolutely right to say that we have decided to publish everything as openly as possible, including not only all expenditure over £500, but every penny of expenditure under £500. The next set is about to be released, as publication is on a six-monthly timetable.
Many councils have made excellent progress in saving cash before cutting services, but there is more to do. Last year councils in England spent £61 billion on procurement, but billions more could be saved by tackling purchasing fraud, stopping duplicated payment, improving bulk buying and joint working, using electronic auctions, negotiating harder and opening up contracts to small and medium-sized firms by cutting tendering red tape. Councils can do more for less, and part of the Government’s plan is to help them do that, not by tinkering and controlling, but by giving them certainty about what is around the corner. That brings me to the two-year settlement.
The right hon. Gentleman is probably the 15th Housing Minister, from all parties, who has stood at the Dispatch Box and called for more efficiency. No one is arguing that we cannot get more efficiency out of any organisation, but is not what he is saying a smokescreen for the fact that he is cutting millions of pounds from some of the poorest communities in Britain?
I am probably the first Housing and Local Government Minister in some time who has been able to discuss the matter at the Dispatch Box for two years running because, unlike the previous Administration, we have not been reshuffled every two minutes. I must say that I have just read out a long list of things councils could do, from stopping purchasing fraud and duplicated payments to improving bulk buying and joint working. Councils have begun to do that, and to do it well, and we have seen some impressive results over the past year.
On the subject of purchasing orders, does my right hon. Friend agree that Hertfordshire county council could look at not going forward with the PFI scheme that might see a large incinerator landed on the border between his constituency and mine, as they are very poor value for money?
I am extraordinarily grateful to my hon. Friend for raising that sensitive local issue, which she will understand I cannot comment on as a Minister with responsibility for planning. It is true that councils that have used procurement wisely, for example through online procurement, competitive working, ensuring that they follow through on getting a purchase order, which is pretty basic, and paying only when they can prove that the goods have been delivered, have saved millions of pounds.
Will the Minister confirm that next year he proposes absolutely no decline in aggregate Exchequer finance, which is going to be about level, and a £1 billion increase in total grants and special grants to local authorities? The Opposition are rather overdoing the gloom.
My right hon. Friend is absolutely right to pre-empt a later section of this message, which is that the reduction in local government spending power is now coming down to 3.3%. Last year it was 4.4%, so it is true, and it was pointed out many times, that the reductions were front-loaded in order to allow local authorities to adjust properly.
I will in a moment.
In this Chamber last year there was an awful lot of noise and heat on the question of why we were cutting up-front in order to ensure that the changes took place, but a year later we see that the vast majority of authorities have managed the process incredibly well. The National Audit Office and others recognise that, and we were right to ensure that we made those cuts up-front.
Does the Minister agree that we should do all what we can to dispel the myth, put about by the Opposition, regarding deprived areas? Great Yarmouth includes some of the most deprived areas in the country, but its borough council has dealt with the changes and cuts, which have come through thanks to the previous Government’s financial mess, without changing or losing any front-line services. Indeed, it is going further now and looking at tripartite deals on shared services in order to give residents the best deal and to protect front-line services.
Before we have a barrage of interventions, let me explain to Opposition Members how we did so.
For a start, my hon. Friend’s local council had an 8.8% reduction in spending power, which was the highest of any authority represented in the House, yet he made the comments that he did. We kept the floors and damping in place, we introduced the transition fund, which continues this year, and we did something that no Government of any size or colour had ever done: we increased the needs index from 73% to 83% in the formula grants.
Why is Hartlepool, in the north-east of England, facing a 5.7% reduction in spending per dwelling and paying 0.2%—£5 a dwelling—into the damping fund, while Wokingham’s spending per dwelling is being cut by 1.5%? That surely cannot be fair when we compare the needs of Hartlepool with those of Wokingham.
The hon. Gentleman’s own local authority had a reduction of 3.2% this year—[Interruption.] His authority had a reduction of 3.2%, which off the top of my head is slightly less than my local authority’s. Different authorities will experience different reductions. We just heard from my hon. Friend the Member for Great Yarmouth (Brandon Lewis), whose local authority had an 8.8% reduction, yet he sent the very clear message to the House that, because his authority has made some of the right moves, it has been able to cope with the changes.
I will just make a little progress.
In reality, money is incredibly short, and we know the impact of not taking action: it is called a credit downgrading, which is what France, Italy, Greece, Ireland and so many other countries have seen. It is as if the entire Opposition are in denial about the mess that this country is in and, in particular, about how we got into it in the first place, which was by continuing to spend money that we did not have.
On the questions that have been raised fairly about why the amounts are different in this district and that district, the answer is that in different areas funding is provided in different ways. In some parts of the country, there is much less reliance on Government funding. If it means that in a particular area more funding is collected through council tax or through services that the council provides and charges for, and less through the amount from central Government, then of course, in tough times when central Government have less money to pay across, it stands to reason that the proportion of spending power may seem different in an area that is entirely or much more dependent on Government spending. The real question to be answered about the settlement is whether we have gone out of our way to ensure that areas that receive more of their funding from the Government purse are better protected. The answer is always yes, because we moved the needs index and kept the transition funds, and because of several other moves.
I have given way a few times; I will make a little progress and then take further interventions.
In December 2010, we set out a two-year settlement, and it turns out that there is virtually no difference at all between the settlement that we are discussing today and the one that we set out back then. Despite the challenges, councils have expressed their gratitude for the stability that a two-year settlement provided. I am delighted that we were able to provide that sense of stability.
As with last year, we sought to deliver a fair, sustainable and progressive settlement. As we have just discussed, we have again focused resources on the most vulnerable communities, giving more weight to the level of need, from 73% to 83% within each council, and less weight to the per capita distribution.
I see many former local government Ministers in the Chamber, including one or two on the Opposition Benches. They are well aware of a phenomenon that takes place after every provisional local government finance settlement: each authority comes in to explain why it is the worst affected in the country. That reality brings a wry smile to those who have done this job before.
To answer the hon. Gentleman’s point, I should say that his authority receives a 3.9% reduction in spending power. That is a touch over the average of 3.3% for this year, but it is by no means impossible and nowhere near the 8.8% cut that one or two authorities, including that in the constituency of my hon. Friend the Member for Great Yarmouth, are experiencing. As I explained to the hon. Gentleman, before he intervened not having listened to a word that was said, we have again given more weight to levels of need in each council and less weight—this is critical—to per capita distribution. I rather think that that goes to the exact point that the hon. Gentleman asked about.
I explained that at some length about five minutes ago, but I shall cover it again. If an area is more dependent on money coming from a particular source, and that source is the national Government, even when we make incredible efforts to keep down the reductions it is always possible for people from that area to stand up and say, “Ah, we have a bigger reduction in spending power.” That is because more of the area’s money comes from the public purse rather than being raised locally from local taxpayers.
I would have thought that Opposition Members would understand that fairly straightforward calculation. They have never told us whether they agree that we should have increased the needs index from 73% to 83% and whether they would have put in transition funding of £96 million, I think, last year, and a further £20 million this year, to make sure that not a single area has had to have a reduction of more than 8.8% this or last year.
(Sheffield South East): Let us get this absolutely right. Despite his justifications about the details, the Minister seems to be saying that, in the end, the authorities with the greatest needs tend to be those with the greatest amount of Government grant; that the biggest amount of their spending therefore comes from the grant; and that those authorities will therefore have the biggest cuts to their spending power. Is that what he is saying to us?
The Chairman of the Communities and Local Government Committee knows the issue better than that. He is familiar with the numbers involved because, apart from anything else, his Committee has spent a lot of time looking into the matter. For the sake of others in the House who might be getting carried away with his argument, perhaps it is worth selecting some figures. Hackney, for example, a relatively deprived area, receives £3,050 per household. Windsor and Maidenhead, perhaps thought of as a more leafy area, receives about half that amount at £1,537—a demonstration if ever there were one that more deprived areas receive a lot more money than less deprived areas.
It is important to set this debate in a broader context. At a time when local government has to make significant reductions, the Government have given local authorities significant powers in the Localism Act 2011, through a general power of competence, to take decisions locally and collaborate with other local authorities to reduce expenditure. Furthermore, the Local Government Finance Bill will allow local authorities to retain part of the business rate, which will help in this difficult settlement at a difficult time.
My hon. Friend is absolutely right. While he tries to expand his argument to cover measures such as the un-ring-fencing of some £7 billion of expenditure each year, it is revealing that the Labour party does not want to acknowledge that we are living in tough times. They do not acknowledge that we have done a series of things, including keeping councils in four different bands, each with a different floor level, and ensuring that the most dependent areas see their funding fall by proportionately less overall.
The Minister’s argument totally ignores the differences between council tax bases in different authorities, and the amounts that authorities can raise from a similar rise in council tax. On business rates, he is ignoring the fact that all predictions show that even if top-ups and tariffs are uprated by the retail prices index, the gap between the wealthiest local authorities and the poorest will grow under the Government’s plans.
I want to make a little progress so I will push on and then take further interventions.
I have already mentioned that an authority such as Hackney receives more than £3,000 per household while those such as Windsor and Maidenhead receive nearer to £1,500. Last year we said that no council should expect a reduction in spending power of more than 8.8%, and I am pleased to say that we have been able to stick to that commitment for the second year running. I also mentioned the £20 million transitional grant, which means that the average reduction in spending power is 3.4%—just a little higher than the figure for the authority of the hon. Member for Warrington North (Helen Jones), which she failed to mention when she intervened.
This settlement delivers on promises already made. It has been recognised across the House and throughout the ages that the revenue grant system needs to change. The previous Government recognised that when in power. Indeed, there were many false dawns under the previous Administration. They set up local government Green Papers and White Papers to look into the issue, and the balance of funding review—remember that? They also set up the Lyons inquiry. What did they do with those reviews? Precisely nothing. They continued with exactly the same system that we are arguing about today, and which, for all sorts of reasons, is far too complex and difficult to interpret or make much sense of.
I thank my right hon. Friend. One thing that every Local Government Minister knows is that there will always be a reason, a cause, a plea or a demand for expenditure to go into one area rather than another—not just geographic areas but subject matters. He tempts me down a slightly different route, but that illustrates the extent to which the current formula is bust. It is broken, and it was recognised previously that it needed to change, but nothing happened to allow that.
Rather than talking, the coalition is delivering fundamental reform of the local government finance system through the Local Government Finance Bill, which includes our proposals to repatriate business rates—a reform that will create better incentives for councils to drive growth, promote local enterprise and deliver local jobs. Councils will be in the driving seat to expand their local economy. That reform is about not just redistributing the proceeds of growth but creating the conditions to boost growth overall. It is about not just cutting up the cake differently, which is essentially the argument that we are having today, but making a bigger cake in the first place.
The right hon. Gentleman tries to justify the cuts with an argument about fairness, but I am afraid that people who have seen the heat map that has been produced will see right through his smoke and mirrors. The map showing the impact of the cuts reveals that all but two of the 20 worst-hit councils are in the most deprived 20% of councils in England.
I draw the hon. Gentleman’s attention to research that I think is in the Library, showing that the largest decreases in formula grant in the past year, 2011-12, were in the south-east. The decreases were generally smaller for the most deprived areas and larger for less deprived ones. He can look that research up for himself, along with an interesting recent report by the Joseph Rowntree Foundation, which stated that local authorities were protecting the most vulnerable and making sensible decisions about services.
The picture that the hon. Gentleman paints is inaccurate and ignores the central fact that if we do not take measures to reduce our deficit, we will end up in trouble. Given that local authorities spend a quarter of all Government money, if we do not reduce our deficit they will end up bust. It seems incredible that we have not so far heard a single intervention from an Opposition Member to explain how the Opposition would deal with the reductions that are certainly required but that they never want to face.
Meanwhile, the Localism Act 2011 has put new powers in the hands of local taxpayers. They now have the right to call local referendums if excessive council tax increases are proposed. If any authority decides to increase its council tax by more than a certain level, which we are separately inviting the House to approve, it will need the say-so of its local electorate, which is absolutely right. In most cases in which a council wants to increase council tax by more than 3.5%, local people will have the chance to vote. Let the people decide—that is what localism is all about.
In my area, Tory-run South Staffordshire council is keeping the council tax increase at 0%, and so is Staffordshire county council. The situation is not the same with many neighbouring Labour-run local authorities. Does my right hon. Friend agree that it comes down to political will? Some councils want low council tax, and others do not care about their constituents.
My hon. Friend is absolutely right to point out that where there is a will, there is a way. Where there is transparency, the sharing of services and smarter procurement, there is a way. Not a single authority is suffering a reduction of more than 8.8%, and the average is 3.3%. There is no reason for them to be increasing council tax.
Can the Secretary of State confirm that a statement put out by his spokesman last night for the Local Government Chronicle is wrong? It states:
“For a local authority, a council tax referendum is triggered only if its basic amount of council tax increases by more than 3.5%”.
Will he confirm that the Localism Act, which he has just cited, mentions the “relevant” basic amount of council tax, which excludes levies? That means that local authorities with large levies are at a disadvantage in the system and are likely to face a referendum trigger amounting to significantly less than a 3.5% increase.
The right hon. Gentleman is my predecessor and has tremendous expertise and knowledge in this subject. I saw his letter to the Secretary of State in which he raises exactly that concern, but I must tell him that this once, unusually, he has got his facts in a twist—he has got them the wrong way round. It is the case that the referendum is triggered on the precepting authority’s increase only, not by taking into account the addition of levies from other organisations such as police and fire authorities. I hope that satisfies him. In fact, there should be a letter back in his office that explains in some detail precisely how that operates.
I would rather not continue the dispute on the ballot point, if only because we will descend into incredible amounts of detail. The right hon. Gentleman has got his facts wrong, and I have written him a three-page letter detailing exactly why. He is welcome to come back to me, but I fear that the complexity of his argument—
The Minister’s letter is in fact a one-page letter. It confirms that the statement made by his spokesman in last night’s Local Government Chronicle is wrong in fact because it is not consistent with the terms of the Localism Act 2011, which the Minister cites as the basis for the council tax referendum.
I have not seen the Local Government Chronicle, but I have seen the letter. It was certainly more than a page when I signed it. Perhaps it was printed in a very small font or e-mailed in a strange way. It was a detailed letter that makes the point absolutely clearly, but I want to reiterate the point now so that no Member leaves the Chamber uncertain—there is no uncertainty.
The referendum is triggered when an increase of more than 3.5%, brought about by the principal billing authority, takes place. That is based, therefore, on a district, county or borough implementing an increase of more than 3.5%. It does not include the fact that a fire or police authority, or a parish, might decide to increase its amount by more. They are not covered by the trigger point. As I have said, I have gone into quite considerable detail and I want to make sure that the House is clear that the principle is based on those authorities and those authorities only.
I would like to make a little progress.
I do not think there is any need for council tax increases or referendums at all this year. While council tax more than doubled under the previous Government, and although a Labour Government would have hiked council taxes even more in a fourth term, this—
On a point of order, Mr Deputy Speaker. The Minister has tried to help the House and said he wanted to be clear, but he has just made the fundamental mistake, which I think he needs to correct, of citing precepts and not levies in the examples he gave. He therefore underlines rather than undermines my point.
Thank you, Mr Deputy Speaker.
Most people out there would be most interested not in whether a council tax referendum triggers at 3.5% or 3.51%, or whether that includes the £20 charged by the parish council, although that is interesting and I hold by everything I have said at the Dispatch Box so far. Most people in the country would be most interested in the fact that council tax doubled under the previous Administration. If Labour Members had their way, they would have council tax going up even further. People might ask how we know that for certain. The simple answer is that they have not supported this year’s or last year’s council tax freeze. Typically, the council tax freeze in the last year saved the average family at band D £72, and we are providing a further £675 million of funding this year to councils to freeze their bills yet again.
I will give way in a moment, but I wanted to make the point that Labour Members have opposed £675 million to keep council tax bills down this year. That will give hard-working families a helping hand. That is real help now, as someone once said from this Dispatch Box.
I am very grateful to the Minister. In previous years, the Government’s council tax freeze moneys were paid as part of the funding formula, but this year, there is a one-off payment. Does that mean that councils such as Tameside that decide to freeze council tax in the forthcoming year will have difficult decisions to make the following year?
There is no smokescreen. I have just said that this is a one-year payment. To argue that £675 million is meaningless and does nothing for people across the country is to live in a completely different world from most people out there who are struggling and delighted at the freeze.
The hon. Member for Denton and Reddish (Andrew Gwynne) is right about the technicalities. Significant changes to the council tax system are coming down the line for next year. Those changes, which include the localisation of business rates, provide enormous opportunities to authorities across the country, including his own, to write their own destiny when it comes to their economic future. It will cease to be based on who can prove the greatest levels of deprivation, and instead switch, rightly, to who can bring more jobs to an area, who can make their area a more business-friendly place to operate in, and who can build more homes under the new homes bonus. I make no bones about that point, and I am pleased to say that more than half of councils have already signed up to the council tax freeze.
This measure will ensure that local authorities have a stake in the economic well-being of people in their communities—the person living behind the door at No. 22 or wherever—and in whether they can get back into work and off welfare, for example. It is absolutely right to localise council tax benefit, simply because it gives the local authority a stake in helping that person back to work. At the moment, the money goes directly from the centre to the individual, and the local authority does not play a part. In the same way, the local authority currently has no stake in attracting more businesses to an area or in building more homes.
Will the Minister admit that 80% of economic development is down not to what local authorities do but to what the Government do—or, in this case, what they do not do. He is making the mistake, again, of assuming that people receiving council tax benefit are all out of work. The people who will be hardest hit by his scheme will be poor families in work.
First, I think that 80% of business development comes from businesses, not from government, whether local or central, but we might just have a different view about that. Secondly, it is hard to take historical figures, such as the hon. Lady’s 80% figure, and project them forward, simply because we do not know what will happen. We have created in this country a local government finance system entirely divorced from economic realities. Frankly, under the current system, it has made no difference to councils whether businesses have survived or thrived in their local areas. That is wrong, and that is what we will turn around. It is absolutely right to do that.
The Minister wants to ensure that everyone understands the ramifications of his proposal, so will he admit that if a council accepts the freeze, the following year, the year after that and the year after that, its base will be eroded, which means that it will be worse off for having taken the freeze?
The hon. Gentleman asks a timely question, so I am grateful for his intervention. The answer is that I cannot confirm that, as we have not described from where we will take the base. It is therefore a mistake for local authorities, based on today, to think that if they ramp up their council tax, that will automatically be taken into account on transition to the new system. We have not made a decision or an announcement on that, so if councils want to go ahead and take the risk, they should first listen to the warning from this Dispatch Box. With such a big change in the way that local government finance operates coming down the line in 2013, they cannot, right now, factor in their base by putting up council tax. I cannot confirm that today, and they should think not once, not twice, but three times before putting up council tax this year.
I have to say that there are some interesting things going on out there. Some councils are going to the very limit of how much they can raise council tax by without triggering a referendum. Isn’t it surprising? I have seen increases of 3.4%, 3.49% and 3.5%—on the nose—but there they stop. Doubtless those councils will say that those figures have been reached after expert, high-minded advice from apolitical finance directors and that they have been determined as the absolute minimum required to maintain vital services. What a coincidence that such rigorous objectivity comes up with such precise numbers, rather than 3.51%, 3.52% or 3.6%. Funny that—a referendum would be triggered if it did come up with those figures. It is almost as if those councils do not think that a bigger council tax rise would win the support of their local voters.
Then it struck me. Those councils have been inspired by the bicentenary, as so many of us have: they have been reading their Dickens. And which character have they taken as their role model, dipping into their residents’ pockets with a twinkle in the eye? I think we all recognise an Artful Dodger when we see one, and if those councils will not give people a say now, woe betide them at the next local elections.
As I have mentioned, we are not proposing this year to impose a particular level for town and parish councils for a referendum. However, we are concerned at reports that some councils—just a few in the sector, but none the less enough to trigger concerns—are proposing large increases. As with the point about the base, as we move to the new system, we will seriously consider whether to make excessive parish increases part of referendums in future.
On the new system that will be introduced under the Local Government Finance Bill, will the Minister confirm that it is a carry-over Bill and that page 640 of “Erskine May”—which says that
“the procedure should be used in respect of bills which had not yet left the first House”—
therefore applies? With the Government having forced the Bill through Committee of the whole House in three days, which means that outside organisations cannot give evidence and have not had time to get to grips with the Bill, will the Minister confirm that “Erskine May” means that this House will not have the Report stage of the Bill until after the Queen’s Speech?
The right hon. Gentleman is aware that every Opposition normally spend their time arguing that Bills should not be tucked away in some Committee Room, up on the lower or upper corridor, but debated on the Floor of the House. That means that every Member of the House has the opportunity to take part in the debate and that nobody is excluded. I would have thought that that was a thoroughly good thing, so I am proud that we took such important business in Committee on the Floor of the House. It genuinely gave the opportunity to Members, as the people’s representatives, to come and make their points, and it is a good approach that should be followed.
Just as we did last year, we have pushed the system as far as we can to reach a settlement that is sustainable, fair and progressive, and that allows councils to freeze their council tax.
I hope all hon. Members would agree that I have been more than generous with interventions. I am keen for others to be able to speak.
We will continue to work closely with councils to give them the freedom, the tools and the support that they need to get every penny of value out to the taxpayer. I believe that this is a local government settlement that will be welcomed around the country.
I welcome this opportunity to debate local government finance. I am conscious that we are entering a world of strange language—gearing and damping, floors and ceilings—and the Minister did not disappoint. I was slightly surprised, however, to hear so much about Greece and Italy, Ireland and France. Unless I am very much mistaken, when I last checked, those countries were not part of the local government funding settlement, but I stand to be corrected.
Local authorities provide services on which we all rely, and what they do has a huge effect on the quality of life of the citizens we represent and on the neighbourhoods in which they live. They are now having to deal, as every Member knows, with the biggest cut in resources that we have ever seen in our political lifetime. Councils have been forced to absorb a reduction in formula grant of almost 19.3% over the two years of the spending review. The cuts have been front-loaded. What that means, as the Local Government Association has pointed out, is that local government has borne the brunt of the reductions in the spending review rather than the burden being shared equally with other parts of Government.
Having heard the Minister’s contribution, it seems that he is still living on a completely different planet from the one on which communities and their councils have to exist. As the Institute for Fiscal Studies confirms, the total cuts to local government spending will outpace those of the public sector as a whole up to 2014-15.
We are discussing £72 billion in aggregate Exchequer finance for this year and next year, which is £1,200 for every man, woman and child in the country. That has to be taken off them in taxes in order to pay to local government. Will the right hon. Gentleman tell us how much more his party would like us to take off every man, woman and child in the country to make that Exchequer finance bigger?
Government Members suggest that just one or two deprived councils are being hit the hardest, but the document by SIGOMA—the special interest group of municipal authorities—shows that the vast majority, if not all, of the most deprived authorities are being hit the worst, while those in the most affluent areas, often represented by Conservative Members, are in some cases receiving more grant.
My hon. Friend is absolutely right, and he anticipates some of the figures I am going to give to the House.
First, however, it is important to note that the Secretary of State lost out to the Treasury—assuming, of course, that he tried to protect local councils in the first place, and there many who would doubt whether he put up much of a fight, given the glee with which he regularly attacks councils for what they do. The consequences of all this are: one, that local government has to deal with cuts that are unfairly distributed; two, that residents are having to come face to face with the consequences of those cuts, as services they rely on change or go; and, three, looking to next year, that councils face nothing but uncertainty about their future financial position. Let me deal with each of those in turn.
Despite the Secretary of State’s claim that what he has done is fair and sustainable, the House knows that the 10% most deprived upper-tier authorities are facing a reduction in their spending power that is nearly four times greater than that faced by the 10% least deprived authorities. That is why the Minister’s argument falls at the very first hurdle. It is also undermined by his Department’s figures.
Newcastle city council has done us all a very great service by laying out the facts. It looked at data taken from the Department for Communities and Local Government showing the cuts in 2010-11, 2011-12 and 2012-13, taking account of transition and council tax freeze grants and the provisional new homes bonus allocations. What do the figures show when all that is taken into account? Basingstoke and Deane will gain—I stress, gain—£6 a person overall, while Knowsley will lose £227 per person. East Dorset gains £3 a resident, while Manchester loses £186. In Greater London, everyone loses, but some lose much more than others. The borough of Richmond is down by £2 a head, whereas Hackney is hit by a whacking great loss of £234 a head. Why is that? Those are the raw figures behind the hard-faced politics that prove that the Chancellor is trying to balance the budget on the backs of the poor.
If Ministers do not like hearing the truth from Newcastle or from their own statistics, what about hearing it from the independent Institute for Fiscal Studies? Its analysis by region shows that London and the north of England have been especially badly hit. Every year it publishes the green budget before the real Budget, and the 2012 green budget shows that overall cuts in local government spending, excluding education, are largest in both absolute and proportional terms in London, the north-east and the north-west.
My right hon. Friend mentioned Knowsley a moment ago when he was comparing figures. Does he agree that when we look at the acute levels of deprivation across the spectrum that we experience in Knowsley, those figures are even worse, because some of the poorest communities in the country are being punished severely in comparison with some of the better-off communities which are getting off almost scot-free?
My right hon. Friend argues the case for his constituents with great force and vigour, and he is absolutely right. This is fundamentally unfair. The reason it is happening—the Minister was remarkably reluctant to admit the truth—is that councils in deprived urban areas rely to a much greater extent than councils in more affluent areas on central grants from the Treasury, which have been cut significantly.
Is it not important to make sure we understand the starting point for the councils the right hon. Gentleman mentioned? For example, the figure for a council such as Richmond was something like £150, but he is comparing it with that for Hackney, which was at £967 in the first place.
My right hon. Friend is right to highlight the real impact of these cuts in areas such as the north-west of England where my constituency is based. May I share with him the impact of the cuts on Tameside, which saw a £38 million reduction last year and a £35 million reduction this year, and which will see a £32 million reduction next year? That will have a real impact on the delivery of services to one of our most deprived urban communities.
My hon. Friend is right. It is quite shocking that the Government have done this knowing what it will do, but at no time have they apologised, as they should, for the unfair way in which they have allocated these cuts, but it is time they did, because it is now clear that far from all of us being in it together, some are much more in it than others. This is not just about local authorities, because the same is true of funding for the fire service, which we are also discussing.
The right hon. Gentleman said that East Dorset and Basingstoke will gain money, but those districts do not get the increases for education and other county services. We are asked to approve a fall in East Dorset from £2.75 million to £2.5 million—a 10% fall—and a fall in Basingstoke from £6.74 million to £6.25 million, which is also quite a big fall because those districts will not get the other increases.
The right hon. Gentleman obviously did not listen carefully enough to the point I made. If he has not seen the figures produced by Newcastle city council he should do so, because it has looked at the impact of the cuts over three years and has taken account of transition grant and the new homes bonus allocation. In other words, it has looked at the total effect on those authorities of all the decisions the Government have taken, and that is what the figures show.
In relation to the fire service, there are brigade areas with a very high rate of incidents, such as Merseyside, Cleveland, Greater Manchester and West Midlands. What is happening to them? They are all facing reductions in funding per head, whereas areas with a lower rate of incidence, thank goodness, such as Hampshire, Royal Berkshire, and Hereford and Worcester, will get increases in their funding per head for the fire service. What that means for the losers is that fire stations are closing, pumps are going and firefighters are losing their jobs.
Is my right hon. Friend aware that the most efficient fire authorities are in the metropolitan areas, and that they are the ones that are losing the most money? I thought that this Government wanted to incentivise local authorities and fire services to become more efficient, but that does not seem to be the case.
My hon. Friend is right. Certainly the West Yorkshire fire service does an extremely good job in meeting the needs of all our constituents.
Worse is to come if Ministers insist on proceeding with the cuts that they have planned for years 3 and 4. As the Minister will know, the metropolitan fire chiefs have been so worried about the prospect that they have given Ministers a stark warning in their response to the review, in which they say:
“The Mets have already shouldered 62% of the cuts in the English fire and rescue service outside London in the first two years…The cuts planned for years 3 and 4 are unsustainable and would lead to life threatening reductions in fire cover and national resilience capacity”.
Unless the Minister has a very good answer to that, he ought to reconsider his plans for the cuts in years 3 and 4.
Last year the Local Government Association warned that the consequences of the cuts in local government finance would be felt in front-line services, although—the Minister made this point—many councils have rationalised back-office services and cut costs. The approach of the Secretary of State and the Minister is to blame councils for all this, claiming that front-line cuts are not necessary. I was interested to read what the Minister told the Select Committee back in 2010, when he was questioned by its Chair, my hon. Friend the Member for Sheffield South East (Mr Betts). My hon. Friend put this to him:
“So the bottom line from your point of view, then, as a ministerial team, is that there is no need for any cuts in services in local government at all.”
The Minister replied:
“No, they shouldn’t be cutting the front-line services.”
Only a group of Ministers who were completely divorced from what was going on in the real world in local government could say such a thing in public. We know, however, that in private some of them have said something rather different. Last year the Under-Secretary of State for Communities and Local Government, the hon. Member for Hazel Grove (Andrew Stunell) wrote to fellow Liberal Democrats—[Hon. Members: “Where is he?”] He cannot be locked in the Division Lobby this time, but it would have been nice to see him here. In his letter, he described the local government settlement as “very disappointing”. A year ago, Liberal Democrat councillors published a letter in The Times in which they said that local government was
“being let done by the Communities and Local Government Secretary”.
Even a good friend of the Secretary of State and the Minister, the much respected Baroness Eaton, accused Ministers of being
“detached from the reality councils are dealing with”.
May I make a point about the impact of front-line cuts on people? In Halton, adaptations for people with disabilities can no longer be obtained because of Government cuts. The Minister did not answer my question earlier, when I asked why the much more prosperous Cheshire East authority has been subject to a much smaller cut than Halton, which is one of the most deprived boroughs in the country.
My right hon. Friend is right to highlight the role of the Liberal Democrats. May I take him to the Stockport part of my constituency, which is Liberal Democrat-controlled, and remind him that throughout the years of the Labour Government, the council’s grant increased year on year? Year after year the council resolved that that money was not enough, but since 2010 it has faced a £54 million cut in its budget, and we have not heard a peep out of it. What has changed?
Sadly, when it comes to the Liberal Democrats, not much has changed at all. That is a pattern of behaviour with which many of us in the House are all too familiar.
We have discussed the figures, now let us turn to the consequences of all this. Before the election, the Prime Minister promised that he would protect Sure Start. Members may recall that he took the former Prime Minister to task for suggesting that that might not happen. What has actually happened? A reply given by Ministers just before Christmas shows that there are now 124 fewer Sure Start centres than there were when the coalition was formed. So much for the Prime Minister’s pledge.
DCLG figures show that last year 93 out of 152 councils —61% of them—cut spending on providing meals on wheels for the elderly compared with their spend in 2009-10, and 55 authorities cut spending on adult social care, although all of us know our authorities face increasing pressures in that area. Also, 75 councils reduced spending on equipment and adaptations for disabled and elderly adults, and according to another survey, 88% of councils were increasing their care charges.
My right hon. Friend mentioned Sure Start. Conservative Hammersmith and Fulham council has cut the Sure Start budget by more than 45% in one year. Perhaps its councillors did not hear the Minister saying there should be no cuts in front-line services. I thought that all Members recognised that Sure Start is an initiative that in the long run will improve educational achievement and cut youth offending, and that it is therefore a good and efficient investment, yet almost 50% of its budget has been cut in one year by this authority.
My hon. Friend makes that point very forcefully. I wonder whether Hammersmith and Fulham will still be the Secretary of State’s favourite council once he becomes aware of what it has been doing, in marked contrast to what the Prime Minister of the party it supports said at the time of the election—but then that is sadly familiar, too.
We cannot get much more front line than making sure old people have a hot meal every day or get their shopping done, or helping people to remain in their own home by building a ramp or putting a shower on the ground floor, so whatever the Minister of State was thinking when he answered an earlier question, or whatever the Secretary of State was thinking in December when he described the draft settlement as
“enough to safeguard the most vulnerable, protect taxpayers’ interests and the front-line services they rely on”,
I would gently say to them that they must recognise the damage that such comments do to the credibility of DCLG Ministers. Every time they say such things councillors, officers and people in local communities look at each other and ask, “Don’t they have any idea of what is actually going on in the world we have to live in?”
My right hon. Friend talks about the damage being done and the reality on the ground, and that is precisely what my constituents are concerned about. They are concerned about the damage to services that my right hon. Friend has described. All that he has said is true in Sefton, which faces a 25% cut, in common with many other metropolitan boroughs.
I thank the Minister for that correction. Sefton also faces the impact of the associated job losses on local businesses that rely on the public sector, as well as the impact of the localisation of business rates. The local economy will suffer greatly as a result of the money taken out of it due to the local government cuts. Businesses will not be in a position to expand. They will also be contracting, and the council will not be able to take advantage of the changes in business rates. That will be disastrous for everybody in Sefton.
My hon. Friend makes an extremely powerful point about the impact of all this on the overall economy, and I shall say a few words about the effect on jobs shortly.
The Institute for Fiscal Studies reports on another area that has been affected. It says that significant reductions in expenditure on planning and economic development are being seen. Councils will need as much resource as possible to respond to the national planning policy framework, and in particular to draw up their new plans if they have not got them, or to revise the plans if they have got them, because if they do not do that, developers can come in and say, “We want to make use of the presumption in favour of sustainable development.” However, they will find that the resource they need to do that work will largely have disappeared.
I am reluctant to raise this point, but I shall: it is extraordinary that although the Minister stands up and says, “Money’s very tight,” his Secretary of State has found £0.25 billion to try to persuade councils to change their minds about how to collect their rubbish. The great localist thinks he knows better than they do how it should be done, even though household recycling rates have more than doubled since 1997, thus saving residents a lot of money in landfill levy, and the majority of councils whose minds he is trying to change with his cash are controlled by councillors from his own party. It is a very expensive family disagreement.
Is it not incredible that this nest egg of money has been trailed before councils, which are to put in bids for a scheme we are not sure about? No prudent council would formulate next year’s budget on the basis that there might be some money at some time coming from the Secretary of State. Also, it is completely wrong of the Deputy Prime Minister to criticise Sheffield council for not taking account of this possible money before setting its budget for next year.
My hon. Friend is absolutely right, and it will be interesting to see in the end how many councils choose to take it up, not least because there is a knock-on consequence over the five years for which the Government are expecting them to change their system. Frankly, £250 million could have been better spent on social care, aid and adaptations, and meals on wheels.
As my hon. Friend the Member for Sefton Central (Bill Esterson) pointed out a moment ago, one consequence of all this has been huge job losses. As we know, the Office for Budget Responsibility announced in November a dramatic revision of its projection of the total number of jobs that would be lost in the public sector, including in local government—up from 410,000 to 710,000 in the years ahead—in part because of what has been happening in local government, and in part because of the front-loading of the cuts.
For England and Wales as a whole, the reduction in the number of workers employed by councils between the first quarter of 2010 and the second quarter of 2011 totalled 129,000, of which women accounted for two thirds. In other words, women are bearing the brunt of these reductions, and it is one of the reasons why the Chancellor’s economic plan is frankly in such a mess. In 2010, he boasted in his first Budget, “Never mind about the jobs that will be lost in the public sector, because they’re going to be replaced by jobs created in the private sector”, assuring us that that would be the case. What has actually happened? In the last quarter, for every 13 jobs that went in the public sector—all 67,000 of them—just one was created in the private sector. That is why the economy is not growing, the plan is not working and the Government are having to borrow more than they said they would.
I have a couple of specific questions that I hope the Minister will respond to. On academies funding, the Local Government Association’s view is that the £265 million that the Education Secretary has finally decided to top-slice—having at one point threatened to take even more—is too high a figure because it does not reflect the actual savings that will accrue to local education authorities. I agree with the LGA. Do Ministers share that view, have they argued local government’s case with the Education Secretary, and does the Minister think that will be enough to put off a resumption of the stalled judicial reviews on this matter? Secondly, on the business rates pooling account, I should be grateful if the Minister clarified whether the Government plan to run a surplus again this year, as they did last year, and if so how it complies with the law on the account’s operation.
The third and last area I wish to turn to is uncertainty, particularly that created by the Local Government Finance Bill. Many councils have no idea, frankly, what their financial position will be next year because the Government’s policy is to localise uncertainty and volatility. As things stand, no council knows what its baseline will be next year under the legislation going through the House, what top-slice share the Government want to take, how the levy will work, how the safety net will operate or what impact, for example, the closure of a large employer in its area would have on business rate income. Nor do councils know, given the 1% average limit on pay increases, how much will be taken off them by the Treasury, although there are estimates of £200 million in 2013-14 and £400 million in 2014-15.
Furthermore, on the council tax benefit, nobody knows exactly how the budget minus the 10% will be distributed, what the take-up will be, and how councils are meant to cope with a rise in unemployment and, therefore, with an increase in applications in their areas. I gently advise Government Members to have a very good look at what this will mean for their constituents, because many Government Members represent areas where the proportion of pensioners is higher than the average. The more that is true, the greater the cut in council tax benefit or, to put it another way, the bigger the council tax bill that will have to be paid by their voters on low incomes, who have absolutely no idea what the coalition Government have in store for them.
Once again, I declare my interest as a member of local government. I share the right hon. Gentleman’s worries that local authorities are not in a position even to guess what the situation will be next year. Does he agree that what is even more worrying is that the Government do not have a clue about what the position will be, and that that is the problem we face?
The hon. Gentleman is absolutely right, and we are talking about a change that the Government are apparently determined to push through in a very short space of time. [Interruption.] On the council tax benefit localisation, it is not a change, with the 10% cut, that I agree with. Government Members ought to listen to what council treasurers and leaders up and down the country are saying, and they should make their views forcefully known to their Front-Bench team before they find their constituents asking them, “What is it you voted for? Why did you do this to me?”
All this uncertainty has been created by the Secretary of State, because it is his Bill and his lack of clarity. What would a prudent authority do in these circumstances and faced with such uncertainty? What authorities actually do is build up reserves to guard against it, yet we know what the Secretary of State does to councils that have reserves—he attacks and vilifies them. That is a pattern of behaviour with which councillors of all political colours have become all too wearily familiar.
I shall now deal with council tax and the other motion before us. Let us remember that average council tax bills are lower under Labour-run councils than Conservative ones. No council, especially in the current circumstances, wants to raise council tax if it does not have to do so. Councils will do their best to avoid doing so, unlike the Secretary of State, who says that he wants to protect people from increases in council tax and then the next moment introduces legislation that will impose council tax increases on people on low incomes.
As my hon. Friends have said, this year’s council tax freeze grant is a one-off, unlike last year’s, and that creates a dilemma for councils. The Tory leader of Surrey county council, which I understand is not proposing to take the freeze grant, said very simply:
“The freeze would be a short-term gain for long-term pain.”
Why has he said that? He has done so because the freeze could mean that residents face bigger council tax increases next year and subsequently.
On the referendum proposal, capping powers have of course been in place since the Local Government Finance Act 1992 was passed by the previous Conservative Government. It is right that councils are accountable for the decisions they make, although if the Secretary of State were true to his “localist” principles, he would have allowed local residents to hold the trigger on any referendum. Instead, the legislation will provide that he will determine the benchmark—so he decides what is excessive. He will determine how the referendum is conducted, the question to be put, the publicity and expenditure levels to be permitted and how the votes are counted. He will even be able to direct that the referendum provisions do not apply and decree the council tax requirement that must actually operate. In effect, the Secretary of State will set the maximum level of council tax increase each year.
May I point out that the right hon. Gentleman was a member of the Cabinet that had capping, whereby the Secretary of State used to set the maximum council tax each year without even asking anyone?
Indeed, with the powers having been put in place by the previous Conservative Government and having remained in place when we were in government. I was merely pointing out to the Minister the inconsistency in the Secretary of State’s argument: he says he is a great localiser but on bins and on referendums it appears that he knows better than everyone else.
I have been very generous in giving way and I have given way to the hon. Gentleman once already, so I am going to conclude to allow others to speak.
On the question of how the 3.5% is calculated, however, after the exchange we have just heard, I would say that I think councils would welcome absolute clarity about what kind of increase would trigger a referendum, not least because of the costs that would result.
In conclusion, the settlement needs to be seen for what it is. The Minister referred to the Joseph Rowntree Foundation and, as he might have read, last month it talked to a number of senior council officials about the impact that reductions in local authority budgets will have on the most deprived communities. The BBC reported what one officer, who, incidentally, works for a Conservative-controlled authority, said, and I want to quote him. He said, very simply:
“This is the most unfair and unjust settlement I have ever seen”.
I agree. It is unfair to councils and unfair to local residents, and that is why we will vote against this motion.
Order. As hon. Members know, the debate is time-limited. Although I am not introducing a time limit on each Back-Bench speech, if Members go on ad nauseam I or one of my successors will have no hesitation in introducing one. That is not directed at anybody in particular. I call Bob Blackman.
I feel suitably constrained by your introduction, Mr Deputy Speaker.
It is a great pleasure to follow the right hon. Member for Leeds Central (Hilary Benn), not least because he is so eloquent and sets out such a strong case for local government. Of course, he knows a thing or two about it, as he was in local government before he arrived in this place.
My starting point is that this is the second year of a two-year settlement. We must consider how far the Government have departed from that settlement in this second year. The reality is that there been improvements to the financial settlement for local government. The one thing for which local government has cried out for many years is certainty over funding. Even if it is bad news, it is better to be certain about what will happen. I am one of those who praised the previous Government for introducing a three-year settlement, as it was probably one of the few things they did well. Even though the settlement for many local authorities was not good, at least it was certain and everyone knew what would happen.
I listened as many Opposition Members intervened on the Minister to ask about the reductions that their councils will suffer. When fundamental changes are made to any type of funding formula and any process of local government funding, there are bound to be winners and losers. One problem that has been associated with local government financing for so long, as the Minister rightly articulated, is the fact that the funding formula is horrendously complicated and virtually no one understands it. Figures are put in, indices are changed, the numbers are crunched and the figures come out. If those figures are not to everyone’s liking, people seek to change the indices to make the facts suit the result that they want.
I know that the hon. Gentleman has a long history in local government and will be aware of the old council tax resource equalisation, which took into account the needs of different councils and gave a level playing field. Does he agree that what we have now is a system that redistributes resources from poorer areas to richer areas? Even worse than that, it gets poorer areas to pay for it under the new damping system.
I recognise the hon. Gentleman’s point. A key issue is that comparisons made year on year must consider the amount per person, per household and so on that the authority has in the first place. One problem under the previous Government was that we saw money moved from London to northern authorities; a deliberate decision was taken and it was quite clear that that was taking place. Now, the balance is being redressed. That is quite right, but the problem is that the hon. Gentleman is comparing one year with another rather than looking at the longer term issues and at how certain authorities have gained substantially over the longer term.
Does the hon. Gentleman also recognise that those northern councils have a different council tax base? In the north-east of England, for example, 50% of properties are in band A, whereas in Surrey that figure is less than 2%, so even if those councils wanted to raise extra finance locally, their ability is severely limited.
I recognise what the hon. Gentleman says about council tax base. That is a fair point. I notice that over some 13 years the Labour Government declined to review the council tax base or the underlying valuations, and I notice that the Government have agreed to continue that process of not revaluing properties for council tax purposes.
We have the opportunity once again this year for a council tax freeze. That is welcomed by local authorities and hard-pressed taxpayers. The Government are committed to that and it should be delivered. I call on all local authorities to take the opportunity of the grant and to freeze the council tax across the country so that all hard-pressed taxpayers can gain the benefit. It is true that different authorities are doing different things across the country. I shall not go into detail; I leave that to others.
Before the last election, everyone knew that local government finance would be substantially reduced. It was in the Labour party manifesto and in the Conservative party manifesto. Everyone knew that it was coming. Every local authority, regardless of its political persuasion, should have planned for those reductions and should therefore have implemented them over the past two years. A series of measures could be undertaken, and I shall mention a few. The first is to cut executive pay. It is interesting that in the past few days the Labour party, in particular, has been talking about people receiving large amounts of public money. There is no doubt that chief executives and senior executives of local authorities have been the beneficiaries of huge increases in pay over the past few years. At a time when local authority funding is decreasing, it is right that senior executive pay in local authorities reduces.
I am not a great fan of my local council, Harrow council, but I take my hat off to it for the measures that it is introducing. Its chief executive is cutting his own pay. He is cutting the number of senior executives and their pay, and he has introduced a system of pay within the local authority which means that the workers on the ground will be paid the same hourly rate regardless of when they work, but they will work a normal working week.
The hon. Gentleman said that local authorities should have expected and planned for reductions. I have some sympathy with that argument because it was clear, as he said, that were there to be a Conservative Government in particular, there would be some substantial reductions to local authority funding. Does he recognise, however, that the real problem for authorities such as mine started in 2010 with the in-year cuts, which took a massive amount of spending out of their budgets that they had already planned for and already started to spend?
I thank the hon. Gentleman for raising that.
I shall come on to some of the issues that every local authority in the country should be examining. Are they using their procurement capability properly? Have they joined with other local authorities to procure services, such as adult social care, using their buying power instead of competing one on one for the private sector services that are available? Have they shared their services across the various councils that operate within their area? Very few local authorities have done that.
Have local authorities fundamentally restructured the services that they deliver, to eliminate multiple handling? The vast majority of councils handle a multitude of grant applications and applications for different services, yet that information is input for every single service, so we have a multiplicity of inputs coming from the most needy families. That means that we employ in local government far too many people to repeat the handling of those cases. Those services should be simplified so that the vulnerable in society supply their data only once and then benefit from whatever services the local authority provides. Has the local authority properly considered outsourcing its services? There are direct suppliers that can deliver those services, often at a fraction of the cost of the public sector.
One of the problems with outsourcing that many councils find, including mine in Sheffield, is that when they have to make cuts to a contract that was agreed some years ago, the cost of changing it can be considerable, and they have less flexibility to adjust services under the new financial constraints than if they had employed people directly, in-house.
I thank the hon. Gentleman for that contribution. One of the necessary aspects of outsourcing is making sure that local authorities work on a partnership basis, rather than just by the letter of the law as set out in the contract. Far too many local authorities are not smart enough in the way they write procurement contracts to make them fit for purpose. By ensuring that contracts are demonstrated and written in the right sort of way, flexibility can be built in and services maintained.
I thank my hon. Friend for reminding me that one of the necessary aspects of procurement is having suitable break points and review points in a contract, so that the contract is long enough for investment to take place but can be changed or terminated by the local authority if the service is not up to scratch.
I also take issue with the view of the right hon. Member for Leeds Central on balances and reserves. I feel very strongly that taking money from council tax payers and putting it into reserves or balances, rather than spending it on services, is theft from the taxpayer, because it is not being invested in the services provided. In my view, local authorities that maintain large reserves or balances are fundamentally fooling their taxpayers and should be exposed for doing so. Local authorities should maintain balances, but only balances that are required for cash-flow purposes or for funding in-year hikes that might take place.
When the Prime Minister was Leader of the Opposition, he talked about the importance of mending the roof while the sun was shining. Given the uncertainty that the Government are bringing into local finance, is the hon. Gentleman really suggesting that local councils should have no reserves at all to fall back on if their local council tax base goes down following a big closure or some other catastrophe? That is just bad business.
I thank the hon. Gentleman for his intervention and for pointing out the issues relating to balances and reserves. They should be precisely for funding a local authority’s cash-flow requirements, not for saving huge amounts to cushion unexpected amounts. The reality is that there are authorities up and down the country that are sitting on huge balances. I take the view that no more than 10% of council tax take should be maintained as a balance.
I want to mention three other areas. The Government have changed the whole basis behind local government finance, and that is coming forward in legislation. That will change the whole ambit of how local authorities are rewarded. We had some interesting discussions on Second Reading of the Local Government Finance Bill about the fact that deprivation was a key driver for local authorities. The more deprived a local authority area, the more money it got. The Government are changing the whole ambit and structure of finance. We will have a situation in which house building leads to a new homes bonus, so local authorities will be rewarded for building houses and will receive finance as a result. Under the business rate retention scheme, local authorities will be encouraged to promote employment and job opportunities, so we will have an enterprise-led economy, encouraged by local authorities, and the onus will be on enterprise and not on deprivation..
I conclude by reflecting on what has happened in London this year. I applaud the fact that, after three years of council tax freezes under Boris Johnson, the Mayor of London is reducing—reducing!—his share of the council tax, not only ensuring that we have 1,000 extra police officers on the beat, but reducing crime and improving services to Londoners overall. Let us compare that with the record of the great pretender, the old pretender, who over eight years increased his share of the council tax by 152%. The comparison could not be starker. We get a better service and better value for money under the Conservatives.
I was in a bit of agreement with the hon. Member for Harrow East (Bob Blackman), another member of the Select Committee, until he made his final comment, when we reached the point of complete disagreement.
First, the issue to which we return today is very much the issue that we debated in the House a year ago. It is about funding for local government, whereby the Government have an overall policy of cutting public expenditure by 19% but have decided that local government expenditure can be cut by 28%. That is the reality. Local government has been singled out for much larger cuts than the rest of the public services, presumably because Ministers believe that the services that local government provides are less important. That must be the reality.
The Minister begins to shake his head, but, if he does not believe in that, why is he prepared to support the local authority grant reductions, which are so much larger than the reductions in other Government expenditure? That is the question to which Ministers have never really addressed themselves.
I thank the Minister for that reply. It is certainly true that there has been a substantial loss of civil servants in the Department for Communities and Local Government, but I did not say that local government expenditure had been cut more than the overheads in the DCLG; I said that it had been cut more than the overall cut in central Government expenditure. That is the reality, and Ministers ought to be prepared to defend it if they believe that local government services are less important.
Secondly, the cuts were front-loaded. Local government itself argued that, if in the end the cuts were going to be made over a four-year period, they should not be front-loaded, because it would mean rushed cuts with a bigger impact on front-line services than if councils had the time to do more about shared services, an issue to which I shall turn in due course. That, too, is the reality.
We are also told that there has been the certainty of a two-year settlement, but local government was given to understand that there would be the certainty of a four-year settlement—an indication of the cuts over a four-year period. It appears that that is not quite the case. The advantages of front-loading, as initially sold, were that at least local councils would know the score for four years, but, now that the Chancellor has to find another £150 billion of borrowing, no doubt he will return to local government to make further cuts in years three and four. Ministers have not referred to that at all so far.
We will then have the cuts that will follow the changes in the Local Government Finance Bill, which is going through Parliament, and the cuts in council tax benefit funding—another uncertainty for local councils. The pretended certainty of last year is, therefore, beginning to unravel in terms of years three and four, and the one good part of the settlement—that councils knew where they were for four years—is apparently no longer the case.
The third point—alongside bigger cuts for local councils, and the fact that they were front-loaded and there is now uncertainty in years three and four—is the unfairness, which my right hon. Friend the Member for Leeds Central (Hilary Benn) amply demonstrated. The Minister could not argue when I intervened on him, because in reality the councils with the greatest need receive the greatest grant, and they are seeing the biggest cuts in Government funding. That is fundamentally unfair.
My hon. Friend is making a very good speech. On the point about the greatest cuts falling on those with the greatest need, I should say that next year Halton will lose £44 per head; Cheshire East, the Chancellor’s council area, will lose £19 per head. The Prime Minister’s area of Oxfordshire will lose £21 per head. How can that be described as fair?
My hon. Friend makes a good point. I certainly would not describe that as fair, although Ministers apparently would. My constituents certainly do not understand why Sheffield city council is having to cut its budget by more than 10% while other councils have to make cuts of only a tenth of that amount—in percentage terms, let alone in respect of the relative difference per head of population.
Would it not be fairer, and would it not be seen to be fairer, if we talked in terms of percentage cuts rather than using actual figures? If we looked at the cuts in terms of percentages, we would see things better. I am myself trying to clarify the point.
Does my hon. Friend agree that it is nonsense to suggest, as the Minister did, that somehow an organisation such as Sheffield city council can have 11% taken from its budget without that affecting front-line services—no matter how many pot plants are consigned to the dustbin?
I am sure that the Minister will provide some figures in due course.
We have heard from Ministers all the ways in which councils can save money. Of course there are many ways in which that can happen without front-line services being affected; the reality is that councils have been very good at that over the years. Through the period of the Labour Government, councils were forced to find about 2% in efficiency savings, year on year. Over the past 20 years, in fact, they have generally been much better at that than central Government. Councils have a good track record.
If the cuts were not so front-loaded, councils would have had more time to prepare and consider efficiency savings. Cuts to services cannot just be dreamed up overnight; they are often the product of complex negotiations between councils and other public bodies to make sure that the agreements are proper and genuinely deliver savings.
I have just had information about what is going on in Sheffield. Together with Government Departments and other public agencies, Sheffield city council is embarking on a look at the whole public estate—the buildings that the public sector owns or leases, and operates. With central Government Departments and agencies, the council is trying to get better value for money from the whole public estate.
That programme cannot be delivered overnight. There could be very large savings if it is carried out properly, but it must be done in a considered way, with everyone working together. The council cannot simply click its fingers and say that a certain number of millions of pounds in savings are coming next year. The process takes time. Many of us have been trying to argue that the savings can probably come about, but that they will take time.
In the meantime, front-line services are being hit. Concessionary bus fares for young people in Sheffield increased from 40p to 50p this year and will go up to 60p next year. Young people always appear to be getting the brunt of the cuts—tuition fees, the education maintenance allowance and the cuts to youth and career services. The other day, people at a school that I was visiting said that work experience has now stopped because Government funding to assist it has stopped and employers are not responding.
All those things are happening to young people. Sixty pence for a bus fare may not seem a lot, but when the Youth Parliament in Sheffield did an assessment of young people’s needs two or three years ago, buses came out as top of the list of things that are important to young people, as they mean mobility, independence and not having to rely on other people to get around.
Of course, we are seeing cuts in care services for the elderly. Let us congratulate councils such as Sheffield, which is cutting those services by only 5%, when 11% is coming off its total budget, and it is trying to concentrate on administration, management and back-room services. The council is trying to prioritise cuts on back-room services—15% in human resources, 14% in legal services and 26% in IT. But do not let us pretend that legal services, IT and other such services can simply be cut with no eventual impact on front-line services. If we are to make all the changes to the public estate that I mentioned, we will need legal officers in the council. Back-room services are important for the delivery of an efficient front line.
Sheffield council has decided to move to fortnightly refuse collections and to improve its recycling offer. That will save £2.5 million a year, and although it cannot simply exempt those services from the savings, it will try and improve its recycling. The Secretary of State has a view—presumably shared by Ministers—that such matters are all about localism until he has a particular policy or pet project that he wants to see implemented. He believes in weekly bin collection. That is up to him. The idea is that having abolished the vast majority of ring-fenced grants—and I support the Government’s policy on that—we should suddenly invent a new ring-fenced grant for this one issue. It is not quite a new ring-fenced grant, however, because the grant is not in place. Perhaps we may call it a new ring-fenced idea.
Local authorities now have to draw up budgets and decide what to do. They must be prudent, but when considering how their services will be delivered next year, they cannot take account of money that may arrive under a scheme that has not yet been announced. How on earth do Ministers expect local authorities to respond to their view of the world regarding refuse collection if they trail a grant in advance that will perhaps no longer be in place when councils start to formulate their budgets? Councils have no idea whether they will get any money, what will be the criteria for the scheme, how much money there will be in the first, second and third years, and when the money will run out, leaving them to pick up the bill.
Is it not a disgrace for Ministers to trail such a scheme, and then criticise councils—just as the Deputy Prime Minister criticised Sheffield council—for moving to a fortnightly refuse collection? Ministers say that councils should instead take advantage of Government money that has not yet been announced. That is a ridiculous way to run anything. If a parish council ran its affairs in such a way, Ministers would be on their feet, proclaiming that it was inefficient and incompetent. Labour Members can therefore say that this Government are inefficient and incompetent in their handling of this issue.
One or two other points have been raised. Of course we want to see the voluntary sector contribute, whether to the big society or to the delivery of better services for their communities. Again, I congratulate Sheffield council because it is cutting money to the voluntary sector by just 5% this year, compared with the 11% cut to the total council budget.
The voluntary sector depends on public sector employees working with it to deliver services. All the volunteers in my constituency who take part in environmental improvement schemes rely on two council officers, with a bit of seed money to provide training and materials. That is how it works. We cannot divorce the voluntary sector from the rest of the council services.
Neither can we divorce private jobs from public jobs. More than 550 public sector employees in Sheffield city council will lose their jobs, or posts will be held vacant, as a result of the council’s budget proposals. Fortnightly bin collections, however, are outsourced to Veolia, so it will be not public sector workers who lose their jobs but those in the private sector who are employed by that company. We cannot divorce the public and private sectors. The cuts that have necessarily been made by councils up and down the country will affect private sector employment as well as public sector employment. Orders from councils will be reduced as they will have less money to spend, and private sector companies will suffer as a result. The idea that private sector companies will grow jobs on the back of the cuts is fallacious. That is why the economy is heading for recession.
I conclude with one further point about the fire service. The other day, we went to see the Minister with responsibility for the fire service, who is responding to this debate. He kindly agreed to meet a delegation, and I hope that he listened carefully to the fact that the cuts to the fire service grants of the metropolitan fire authorities are twice the level of those for other fire authorities in the country. Fire chiefs are saying that if the cuts continue for a third and fourth year, they will not be able to deliver appropriate fire cover in their areas.
In my constituency, three fire stations are being closed and will be replaced by just two. That may be a more efficient way of delivering fire cover, but it will result in slower response times to some of the large industrial plants in Sheffield that still operate in the steel industry and other related industries. People are worried that if that happens, it could create greater risks at a time when we hope to see great Sheffield firms such as Sheffield Forgemasters continue. We would not want them to be put at greater risk by reduced fire cover. We hope that Ministers will listen to those concerns.
This settlement is unfair to many councils, and those in the greatest need are receiving the biggest cuts. In total, it demonstrates that the Government value the services provided by local councils less highly than other public expenditure, and I will certainly be in the Lobby with my right hon. and hon. Friends to vote against it this evening.
Order. In order to accommodate remaining colleagues who wish to contribute to the debate, to whose numbers, by my sight, one has just been added, making the list slightly longer than the one I had in my possession, I am imposing an eight-minute limit on Back-Bench contributions with immediate effect.
I intend to be relatively brief, Mr Speaker.
We have to start by being clear that very tough cuts have been imposed on local government. It accounts for 25% of all public expenditure, so councils were always going to have to play a considerable role in fixing the black hole in the nation’s finances. It has been hard, given the front-loading of the cuts, but I wish to praise the many councils across the country that have approached innovatively the tasks with which they were faced. I sometimes think that central Government can learn from some local government practices, because councils are closer to the ground and have extra flexibility in how they approach things.
In my area, for example, two councils now share a chief executive, and there has been much more working together among councils, with the county council co-ordinating it. Poole’s unitary council is merging certain services with Bournemouth, which makes a lot of sense given that they are both relatively small unitary councils. A lot of action is taking place.
I am slightly frightened of getting absolute numbers and percentages mixed up, which is what has been happening all afternoon, but I point out that East Dorset council’s revenue support grant per head is £25.98, so there will not be a £200 cut. There cannot be. We therefore have to consider percentages. One might say that a more deprived area should not have the same percentage cuts as a less deprived one, but there is a difficulty with that. As we know, any organisation has certain basic costs that are the same. We need only look at schools, which need a certain number of staff whether they are big or small. That is an absolute fact.
I will not, because I want to make it clear that it is not correct to switch from numbers to percentages and to try to blur the picture. We know that the percentage cuts are large, averaging 3.3% but varying across the country. In fact, in my part of the country the percentages are towards the higher end.
One of the councils in my area, Dorset county council, is particularly concerned about the funding lost through the current formula damping. We can ask ourselves where that money goes, and we find that, probably quite rightly, it goes to more deprived areas. However, I am told that Dorset has lost a greater proportion of its grant entitlement through that formula—the Labour Government’s formula, I might add—than any authority in recent years. It will lose more than £7.4 million in 2012-13. There is great concern that the damping mechanism will become locked into the baseline for future years. I want to flag up that point as we move to a new system.
We must accept that the Government amended the funding formula to take greater account of councils’ need. Extra funding is available, for example to support adult social care, but I represent an area where the demand for social care is great in relation to resources. All Departments must give a great deal of thought to the funding of social care while we wait for the White Paper and for anything new to kick in, because here and now, councils across the country have enormous problems in ensuring that the most vulnerable people get enough support. That same situation applies throughout the country. There are pressures on that funding.
The new homes bonus is a plus, bringing in extra funding, and on balance, the council tax freeze for this year is a plus. I well remember being on the council under Labour, when the average increase in council tax in England was something like 10.4%, which enormously affected people who were just above the level of qualifying for any benefit. When I reflect back to that time, I recall that I was blamed as a councillor for that increase in council tax, which was because of Government funding. We come back to that point over and over.
In these difficult times, a council tax freeze is very good, but every council in the country is worried because of that one-off payment, as a number of hon. Members have pointed out. How do councils adapt to the situation in subsequent years? It would be wrong not to point out that that is a big concern.
A further concern that I have picked up from my local councils is that they feel they have coped with planning for the cuts that they have had to impose so far, but the uncertainty of next year gives them much less lead-in time for future planning. The Government must take on board the problems that councils face.
Like the Chairman of the Communities and Local Government Committee, I believe that ending ring-fencing is a good move. It is quite painful for local councils, but if we believe in localism, it must be the right thing. Moving towards the new system is right. We surely cannot defend the old system. Nobody understood the formula and it failed the test of time.
I hope that Communities and Local Government Ministers monitor the costs that are shunted on to local councils from other Departments. Examples include the 50% cut in community safety grant; the youth justice proposal that local authorities take youth offenders into care; and full recovery for court proceedings under the Children Act 2004. I could go on, but I shall conclude exactly on time.
I shall concentrate on what the local government settlement means for my council. I have advised my colleagues many times before in the Chamber that North Tyneside council has a mayor and cabinet system. Unfortunately, it currently has a Tory cabinet and mayor, but 35 of the 60 councillors are Labour. No doubt that number will increase in May.
The mayor has decided to go for the zero council tax increase deal, which many councillors would argue means a loss of money year on year. That remains to be seen. As a result of the local government settlement, our Tory council faces a cut of £17 million, and following the fashion of the Tory Government, it wants to make savings by cutting services to the most vulnerable members of our community. They want to cease the breakfast offer for breakfast schools, remove free fruit and milk for key stage 2 pupils and increase home care charges by £50 a week—those charges rose by 51% last year and are currently £151 per week. Even before the budget is set, my hon. Friend the Member for Tynemouth (Mr Campbell) and I find ourselves pleading the case for hundreds of bowlers in North Tyneside, because the council wants to increase their bowling fees by 400% over the next three years, which will put this sport out of the reach of many older people, for whom it is genuinely a lifeline.
The mayor has come up with an even more radical solution to her difficult budget problem. She and the cabinet want to outsource almost all council services to the private sector by October this year. The only services that will stay in-house will be legal services and the safeguarding of children and young people. Everything else is up for grabs. North Tyneside is no stranger to outsourcing, having outsourced council repairs some years ago, but that proved to be an inefficient and costly service for those who used it—the number of complaints that my office gets every week testifies to that.
There is no getting away from the fact that private companies need to make profits. As the leader of the Labour group in North Tyneside, Councillor Jim Allan, said, the private sector has no magic wand with which to deliver the same services at the same level but with less money. It does not work like that. Outsourcing just one service would take time. For one, there would be the consultation with the public, which is not happening in North Tyneside, and what about the human resources implications, working with the unions and the tender process? How can all that be done for multiple services in a six-month period?
Everyone from residents to staff and councillors realises that budget cuts can mean change, but this seems a change too far. The North Tyneside council that I was a councillor on for 15 years was always striving to achieve, always looking forward and always trying to work with its residents in the most positive strategic way, but now our Tory mayor and her cabinet are bowing to the pressures from the coalition Government, taking the easiest way out of managing the huge Government cuts and throwing North Tyneside on the mercy of full market forces.
I was not intending to speak in this debate, but many hon. Members have highlighted the importance of fairness, so I thought that someone should stand up and highlight the fairness to council tax payers. I speak from experience, having been a councillor for 10 years on Swindon borough council. We took control of that council off the back of a 42% hike in council tax in just three years. When my hon. Friend the Member for Mid Dorset and North Poole (Annette Brooke) talked about an average Labour council tax rise of just over 10%, I thought, “If only that had been the case!”
Members have highlighted their concerns about the council tax referendum, but I can assure them that the constituents whom I represented as a councillor and whom I now represent as an MP would have been delighted to have had the opportunity to hold the Labour administration to account. We must bear it in mind that those who suffered most at the hands of the council tax hikes were those on fixed incomes, including pensioners.
I want to talk about the opportunities to give local authorities greater freedom and enable them to address and protect the important front-line services that many Members have highlighted. For example, during my time as a councillor, Labour not only hiked council tax by 42% in three years, but managed to drive down standards until we were the joint worst in the country. The Government inspectors came in and said, “You need to reinvigorate the council. You need to ensure that you have an excellent top management team. You need to go out to market and get the very best council officers available. To do that, you must pay them considerably more money than they are paid now.” The council almost doubled the money on offer and re-employed pretty much the same officers—all paid for by local council tax payers. I welcome the fact, therefore, that the Government will be pulling back on the huge numbers of inspections.
I welcome developments, including in my constituency, where my chief executive is cutting his own pay for the second year in the row—we are seeing that across the country. We need greater transparency and accountability for the highest earners in the public sector.
We also saw a great disparity between the national pay settlements, where the Government would award pay rises for public sector workers, but then award the local authorities that process that money a much smaller local authority settlement. All local authorities were invariably playing catch-up before they had even started the cycle of working out the following year’s council tax.
We had endless BVP—best value performance—targets. When I first became the lead member for leisure, recreation and culture, I was particularly excited to bestow my unique “Tomlinson vision” of what I wanted to do. However, I was presented with a colourful chart setting out exactly what the Government insisted I should do as the lead member, which bore very little resemblance to the public’s priorities. All that cost considerable amounts of money, as we chased the national—and irrelevant—targets. There was also a need for endless consultations and vanity communications projects, where in some regions we had to go out and spend many thousands of pounds talking to just a handful of people to determine what we should and should not do.
We need greater transparency in how local authorities spend money, and I had an end-of-term Adjournment debate on that subject. This Government are trying to open up local government finance, so that we can embrace the potential armchair auditors—the hundreds and thousands of people out there who do not have the time to be full-time councillors, but who have good ideas or good experience of how local authorities could save money. I set out some of the challenges that local residents face in identifying financial figures and being able to make suggestions. I said that local authorities should embrace the idea, setting up their own star chambers, incentivising local residents to find savings and sharing those savings with local residents, so that the council can bank half the money. Perhaps the local residents could then suggest which front-line services the other half could be spent on improving. I would like to see a lot more of that. I was told that one of the arguments against that idea is that it would cost many local authorities a lot of money to answer such requests and understand whether local residents were right in challenging the figures. However, it is a worry if local authorities do not own their own budgets and are not able easily to answer such requests, because we would expect them to be able to do so.
A greater priority needs to be placed on capital investment in invest-to-save schemes. As the lead member for leisure, I knew that the majority of the things that we did would end up costing us revenue, which put further pressure on council tax, so we started to prioritise activities such as five-a-side football pitches. We built three 3G—third-generation—football pitches on a four-year payback scheme. They were paid off within 13 months, and then contributed money back into the council tax coffers, as well as providing a brand-new facility for local residents.
Members have already talked about the need for better procurement and shared services across borders. We were one of the first local authorities to combine the lead for adult social services with the primary care trust, so that there was one chief executive. Rather than having two competing organisations, they were working together. It saved costs and we had just one priority. Finally, the opportunities presented through the business rates scheme and the new homes bonus provide local authorities with an incentive, as they are rewarded for doing the right thing. I remember the number of times that businesses would come to us and say, “You should be doing far more to promote us,” but there was no financial incentive to do so; in fact, sometimes there was a disincentive. However, we now have a real opportunity.
Although these are challenging times, we must never forget that we are here to represent hard-pressed council tax payers. Despite the challenging figures that people have to find, there are plenty of opportunities to improve front-line services and protect the hard-pressed council tax payer.
The hon. Member for Mid Dorset and North Poole (Annette Brooke) said that all councils start on the same basis, but that is the fundamental problem: they do not. What this Government are doing in the settlement—we also saw this last week, in the Local Government Finance Bill—is rewarding the councils that vote Conservative in the south of England. They are building that into the system, possibly for the next 10 years, because the proposed use of the 2012-13 grant as a baseline for 2013-14 will mean that injustice continuing in years to come.
What we are basically seeing is an unfair system in which councils in deprived areas—we have heard some examples today, such as Knowsley and others—are paying for more affluent areas, which is the reverse of redistribution. If we look at how the system has been designed, we see three reasons why that is happening. One is the abolition of council tax resource equalisation, which ran from 1993-94 to 2010-11. It took deprivation into account, placing councils on a level playing field, yet this Government have torn it up. We saw in last year’s adjustment a cut of £473 million and for the coming year a cut of £515 million. As my right hon. Friend the Member for Leeds Central (Hilary Benn) said, some have had a 15% cut in local government expenditure.
The Government are trying to give the impression to local councils and local people that it has nothing to do with them. Well, it is. Durham, for example, has had to take £125 million out of its budget. The idea that it is possible to do that by cutting the chief executive’s pay is nonsense; if he worked for nothing, it would not chip away much of that. It is all part of a well worked out strategy by the Secretary of State to shift the blame to local councils.
I spent nearly 11 years in local government, and there was not a single year in which we failed to look for efficiencies. Contrary to what Conservative Members say, most councils do that. The idea that they can be turned around in one year is absolute nonsense, as is the idea that it is possible to avoid front-line service cuts in County Durham by halving the chief executive’s pay or cutting down on the number of pot plants. For the Minister to claim from the Dispatch Box that these cuts can be made in councils like Durham without any effect on front-line services is absolute nonsense. No organisation, let alone a council, could take out such an amount—something like 23% of its budget—without it having any effect.
My hon. Friend will be aware that Liverpool city council is one of the highest ranking in the indices of multiple deprivation, yet it suffered an 8.8% cut worth £91 million last year, it is having a £50 million cut this year and a £25 million cut next year. Can he understand the Minister’s argument that this new methodology will somehow make things fairer?
Well, it will not make it fairer; it will make it more unfair. The Secretary of State knows exactly what he is doing politically; he is rewarding the people who vote Conservative.
The formula grant for children’s services is another element that puts pressure on councils in the north of England, especially if we look at the detail. That grant has been cut, and I have to tell the hon. Member for Mid Dorset and North Poole that the number of children in care in councils such as Middlesbrough is huge in comparison with the number in Dorset. The cut thus has a disproportionate effect on councils in County Durham and in other northern cities in comparison with councils in the hon. Lady’s area. Another issue is the damping mechanism. Nine out of 12 councils in the north-east lose out under that process.
I must take my hat off to the Secretary of State for his clever use of percentages when what we should really look at is cash. When cash is taken into account rather than percentages, we find councils like South Tyneside, Hartlepool and Middlesbrough losing money through the damping mechanism, so that they have to pay to help “deprived” areas like Windsor, Maidenhead, Richmond upon Thames and, my old favourite, Wokingham. Let us compare Hartlepool to Wokingham. Under the damping mechanism, Hartlepool pays to support Wokingham. Hartlepool faces a cut of £142, that is 5.7%, in spending per dwelling and then has to provide under the damping mechanism £5—0.2%—for every dwelling, which helps to protect Wokingham. Wokingham faces only a £27 cut per household, or 1.5%—only half what the Minister says is the average.
We heard it said in last week’s debates on the Local Government Finance Bill that the system is complex and that the Government are simplifying it, but they are not. They are putting in place a mechanism that will reward affluent areas. It takes away the one thing that equalisation did, which was to ensure there was a level playing field. That will no longer be the case under this system. Northern councils such as those mentioned in earlier examples are taking disproportionate cuts as well as having added costs in running their services because of high levels of unemployment, high numbers of individuals needing social care and the numbers of looked-after children. Those services place huge costs on those councils, which other councils do not have.
My hon. Friend is making a very good speech. Does he recall the Chancellor saying:
“We are all in this together. I am not going to balance the budget on the backs of the poor”?
As my hon. Friend has heard tonight in relation to Knowsley, Halton and other areas, that is exactly what the Chancellor is doing—he is hitting the most deprived areas the most.
Exactly. We hear a lot of this nonsense and the soundbite that we are all in it together but we are not. The Government are protecting their own affluent areas at the expense of others. I think that under the Thatcher Government, Liverpool was written off at one time, and the current Government are clearly writing off certain areas.
The other alternative is to raise council tax. We heard earlier the new localisation of business rates being trumpeted as something that will bring in huge amounts of cash, but it is a damn sight easier to raise investment and to attract business to parts of the City of Westminster than it is to parts of Ashington in Northumberland or Seaham in Durham. The ability of councils to attract business will be limited, so the areas that will gain from that change will be those affluent councils. Similarly, the councils that will benefit from the changes regarding the new homes bonus will be those where house building is still going on. The house building market in the north-east is flatlining, thanks to the economic policies of this Government, and people are not building many new houses, so even those areas that have available sites are not going to gain.
Another issue is the ability of local councils to raise funding through council tax. In the north-east, 50% of properties are in band A, whereas the figure in Surrey is about 2%, so even if there were an equal council tax rise in both areas, Surrey would have a greater ability to raise large amounts of money than the north-east. The difference is quite stark. In addition, there is the problem that is coming down the road with the localisation of council tax benefit, which will come with a 10% cut. That is another cut for councils that have large numbers of people. My hon. Friend the Member for Warrington North (Helen Jones) has made the very good point, which I keep reiterating, that people on council tax benefit are not all on benefit; many of them are in low-paid work and they will be disproportionately affected by these proposals.
The Government know exactly what they are doing. They are devolving responsibility to local councils and with it devolving the blame. They are trying to give the impression to local people that they have nothing to do with the cuts that are coming in County Durham and other northern councils because of this mechanism, but they have. Only one person is responsible for this: the Secretary of State.
Order. May I just point out that the Front-Bench winding-up speeches will begin at 6.27 pm, so we have a little under 14 minutes and two speakers remaining. I know that the hon. Member for Portsmouth South (Mr Hancock) will be gracious and courteous in wishing to share his time with the right hon. Member for Knowsley (Mr Howarth).
I will try to take your lead and be as gracious and courteous as you are, Mr Speaker.
Once again, I am very disappointed. First, I have to register my interest as an existing and long-serving member of Portsmouth city council. I would have hoped that in the past month or so those Ministers in the Department who have had experience in local government would have been reading and listening to what their former colleagues in local government have been saying to them about the problems with the current settlement and with what is being stored up for the next year or two.
It was not easy for the Tory leader of Surrey county council to say that Surrey would decline to take the gimmick from the Government to keep the council tax down. I am sure that he did it with a heavy heart, but, as he rightly said—this was recounted again here this afternoon—it is better take the pain when it is evenly spread, and when one is at least in control of it, than to accept a short-term gain only to experience a very long-term pain. I think that there is something seriously wrong when a Minister, such as the Minister who opened today’s debate, can give no explanation whatsoever, and can offer no hope to local authorities such as my own which accepted the 2.5% gimmick cut. I tried to persuade my colleagues not to do it, but they chose to take the opposite view.
For us, that will pose a real problem. In my local authority, the shunted costs—the responsibilities that are being pushed down to us—amount to £1.8 million. That is the extra sum that we shall have to find to pay for services for which we never had to budget before. Examples that have been given are the full recovery of the cost of court proceedings, discretionary housing benefit payments, a 50% cut in the community safety grant, section 117 cases, concessionary fares, what is described as
“Concessionary Fares Increase Care of New Back Office System”
—which has been demanded by the Department for Transport—and the youth justice system. That £1.8 million comes on top of a 10% cut.
I was disappointed when the hon. Member for Beckenham (Bob Stewart) asked whether it would be easier to explain all this in terms of percentages. I do not care how people explain it. It is painful, difficult and awkward for local authorities to do anything, and they have not acted irresponsibly. The days when Ministers were able to cite the irresponsible council are long gone. As was pointed out earlier, no council has avoided making efficiency savings. It is in our interest to make such savings, and we have tried desperately hard to make them.
I will be.
My hon. Friend has mentioned percentages. I hope he agrees that the real issue is gearing. A 10% cut in an authority with an 80% gearing of formula grant to the rest of its funding will mean an 8% reduction in its overall budget, whereas if only 20% of an authority’s funding comes from formula grant, it will experience a reduction of only 2%. That is the big issue.
My hon. Friend’s point is well made, but it is falling on deaf ears. It has been made time and time again. It was made last year, for instance. It is unfortunate that no one is listening, and it is very unfair and very disrespectful to Members who serve in local government. Next year, Tory councillors who will be defending their seats in the county council elections will hope against hope that the Government will pull some sort of rabbit out of the hat to safeguard them from having to impose pretty horrendous council tax rises.
This afternoon’s debate is a fait accompli. We shall vote either for or against the motion. I shall vote against it, and I hope that my colleagues who have served or are still serving in local government will do so as well, because this is not doing the cause of local government and local democracy any good. For Ministers not to be able to answer even the simplest, most fundamental question about where we go from here is totally unacceptable and unfair. As Members have said repeatedly, this is shifting the blame. It means more responsibility, fewer resources, and indeed more blame—not for Government, but for local government.
It is a great pleasure to follow the hon. Member for Portsmouth South (Mr Hancock). I think I said that in a debate about a week ago. I meant it then, and I mean it now. The Government really should listen to what the hon. Gentleman has to say, given his long experience of local government and of the problems that he has just described.
The hon. Member for Mid Dorset and North Poole (Annette Brooke) cautioned the Government against blocking in the damping system. I shall make the opposite point, however. The Minister currently on the Front Bench, the hon. Member for Bromley and Chislehurst (Robert Neill), has a long background in local government and understands why arrangements such as floors, ceilings and damping are put in place. Unless that is locked in, Knowsley, which is already suffering very badly from the current system, stands to lose £6 million. I therefore hope the Government give serious consideration to locking in that system—and in particular to locking in the floor, not least because it is especially important for Knowsley.
In order to illustrate the importance of this point, we have to mention the figures. Last year, Knowsley’s cut in revenue spending per head of population was already £156, compared with the average across England of £49.18. The added effect of this settlement will make that problem even more serious.
Let me give one more set of statistics before I address the substance of my argument. SIGOMA—the special interest group of municipal authorities—represents the local authorities of several Members, and my right hon. Friend the shadow Home Secretary prayed it in aid earlier. It tells a story about funding growth. The lowest ranking local authorities over the period it addresses are Liverpool with growth of 21.9%, Knowsley with 21.9%, Bury with 21%, Wirral with 21% and South Tyneside with 22.7%. These statistics are pretty meaningless unless we know what to compare them with. Perhaps the best comparison is with those authorities that will have the greatest growth. They are the City of London with a staggering 139.6%, Westminster with 90.7%, Hillingdon with 40.6%, Camden with 37.5% and—guess what—Kensington and Chelsea with 34.5%. That cannot be fair.
The Minister who opened the debate, the right hon. Member for Welwyn Hatfield (Grant Shapps), engaged in quite a bit of sophistry, and my hon. Friend the Member for Sheffield South East (Mr Betts) exposed, as it were, the raw nerve in his argument. Astonishingly, the Minister argued that a local authority with high need will probably already have a high level of grant and therefore should expect to have more grant cut in the future. I do not think there is a better term to describe that argument than “sophistry.”
The Minister also said there was plenty of room for cuts and for reform and changes to the system. He stated that we could improve things and that lots of money would be saved. Specifically, he said he wanted to cut the red tape in tendering. The Minister is not in his place at present, but no doubt he will return at some point in the proceedings. I do not know whether he has ever sat in on a local authority tender-opening process, and I certainly do not know what he is thinking about when he refers to red tape in that regard. As several other Members present will be able to confirm, this is what happens in such a tendering process: people go into a room, the envelopes are opened, and the amount of money each contractor has tendered for the job is read out, and in the end, unless there is good reason to do otherwise, the process concludes with the declaration, “We accept tender X”—or Y or Z—“subject to checking.” The red tape is contained in precisely that term: “subject to checking.” The checking involves council officers working out whether the firm involved can do the job and has the resources to ensure that it is completed. That is what the red tape, on which we are going to save millions of pounds, consists of.
I was confused when that list was being read out. Was the right hon. Gentleman as confused as I was when it was said that local authorities should do more about procurement fraud? Was it seriously being suggested that when local authorities know about such fraud, they do nothing about it? That was mind-boggling.
I am grateful to the hon. Gentleman for that, but the point is that unless there is a rigorous, properly policed tendering process, the potential for fraud is even greater.
I will conclude as I know that my hon. Friend the Member for Warrington North (Helen Jones) has plenty more to say. Whatever decision my Front-Bench colleagues reached, given the extent to which this motion discriminates against local authorities such as Knowsley, there is no way I could support it today. I am happy to join them in the Lobby because this is a despicable measure, and I suspect that the Under-Secretary, in his quiet moments—if there are any—feels the same as I do.
We have heard numerous examples of the damage being inflicted on local communities by the Government’s slash and burn approach to local authority spending. It has inflicted on councils larger cuts than any Government Department has taken, without planning or looking at the effect on individuals, and even without any thought of the longer-term economic consequences.
My hon. Friends have highlighted the situation very well. My hon. Friend the Member for Sheffield South East (Mr Betts) talked about front-loading of the cuts making it impossible to plan, and the uncertainty local councils face. My hon. Friend the Member for North Tyneside (Mrs Glindon) gave powerful examples of what is happening, and talked about the cuts in school food provision and the increase in home care charges. My hon. Friend the Member for North Durham (Mr Jones) talked about the injustice of the cuts to front-line services in his area, and my right hon. Friend the Member for Knowsley (Mr Howarth), speaking for one of the most deprived authorities in the country, highlighted how the cuts are being inflicted on the poorest communities. All have shown how people are having to live with the harsh realities of life under this Government.
Of course, the Government, far from trying to hide the fact that they are hitting the poorest most, are quite up-front about it. The Under-Secretary of State for Communities and Local Government, the hon. Member for Bromley and Chislehurst (Robert Neill), in a quote he should be reminded of again and again, said:
“Those in greatest need ultimately bear the burden of paying off the debt”.—[Official Report, 10 June 2010; Vol. 511, c. 450.]
That’s it then—not the bankers, not the millionaires in the Cabinet; the poorest pay the price. Same old Tories, and, apart from the hon. Member for Portsmouth South (Mr Hancock), same old Lib Dems: always telling us they are going to do “something”—we know not what—and then trooping through the Lobby desperate to hang on to their chance of a ministerial car. It is said that it profits a man nothing to give his soul for the whole world—but for a Honda Civic? Really! Once again, we see the poorest paying the price and, in the second year of this settlement, the damage being inflicted on the most vulnerable people.
As my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) reminded us, the Government began with cuts in the working neighbourhoods fund and the Supporting People grant, which helped 1 million people, including victims of domestic violence and people with mental health problems. The Government have gone on to entrench that unfairness in the system and so we see, for example, that by the end of the two-year period Liverpool will have lost £235 per person in spending power, Manchester’s figure will be £186, Birmingham’s will be £155 and Nottingham’s will be £147. Those are the cities that the Government say are going to lead our economic revival. It is not even a case of one half of the Government not knowing what the other half is doing, because one half of the Department does not know what the other half of the Department is doing either.
Let us have a look at what happens in other authority areas. Wokingham council, our favourite authority, actually gains overall from this settlement. Dorset, taken as a whole, has a cut of 10p per person, while the figure for Richmond upon Thames is 80p and the figure for the Windsor and Maidenhead authority is a massive, by its standards, £2.20. What do many of those authorities have in common? They contain the constituencies of Cabinet Ministers. Does that not make nonsense of this statement from the Deputy Prime Minister:
“Our core aim is to hard-wire fairness back into national life”?
Tell that to the people who have lost their Sure Start programmes, and to the elderly people and disabled people who are paying more for home care or who are not getting that care at all because the eligibility criteria have changed.
My hon. Friend will have to forgive me for not giving way, but we are short on time.
Tell that to the people whose community centres, libraries and day centres have closed. The truth, which Government Members have to face, is very simple: people who are wealthy can buy themselves out of those cuts, because they can pay for care and buy their books, but the people the cuts hit most are those who cannot do that. I am talking about the people who have paid their taxes all their life and then find that they cannot get care in their old age and that their sons and daughters are caught between trying to look after them, to work and to look after their children. I am talking about the families on low wages who go out to work every day and want their children to get on but cannot afford to buy all the books they would like and are dependent on their libraries. [Interruption.] I hear the muttering from the Parliamentary Private Secretaries and I know that the Tories are going to say, “We do not do this because we want to, but because we have to.” Let us start nailing that myth, shall we?
In the year from autumn 2009 to autumn 2010 the economy grew at 3.9% and unemployment was falling. So successful have the Tories been that the economy is now in negative growth, the level of unemployment is nearly 2.7 million and, scandalously, one in five of our young people is unemployed—and borrowing is increasing. The Government’s approach has not worked. They could, of course, have worked with local authorities on long-term savings and they could have assisted local authorities to use their spending power to help tackle those problems. Before they started their cuts, the local authority procurement budget was £34.2 billion, most of which was spent with small and medium-sized firms. Councils such as Tameside—it did this through its Tameside investment project—were using their purchasing power not only to build new schools, but to assist local firms; it put £15 million into local companies.
My hon. Friend makes a good point, and I shall be dealing with that matter in a moment. The Government could have worked with local authorities to use that purchasing power, but what they failed to understand was that when it is cut too far, too fast, those local companies do not expand—they contract or go bust. The Government, while taking that approach, have taken away every lever local authorities had to help their local economies. Nottingham alone lost £6.5 million from the scrapping of the future jobs fund. My hon. Friend the Member for Denton and Reddish has mentioned Tameside—[Interruption.] If the Minister wants to intervene, I will be happy to let him.
We believe that all councils should publish their expenditure and we would like the DCLG to set an example by not being so far behind the curve in publishing its expenditure, too.
The Government took away the community growth fund and abolished regional development agencies. Scandalously, they will not even let local authorities participate in the Work programme so that the very people who understand their local communities best and have long-term relationships with local businesses are excluded from it. That is the problem with this settlement. It is sending local areas, many of them the most deprived in the country, into a spiral of decline. People are facing cuts to services, increases in charges and a loss of jobs.
Some 129,000 local government jobs have already gone and more than 700,000 are likely to go. What happens then? Those people cannot spend money in the local economy, so private businesses lose revenue and as they suffer they lay people off. Local councils are locked in a spiral of more and more demands on their services and less and less revenue. That is why we oppose this settlement. It is unfair, it hits the poorest most and, most of all, it is economically illiterate. I urge my hon. Friends to oppose it tonight.
The debate has at times been a little like my experience in local government since I was first elected in 1974. There have been some serious and important contributions, some genuine commitment, and passages—particularly towards the end—of the utterly surreal. Towards the end of my local government career, I was dealing with Mr Ken Livingstone, and I have just listened to the hon. Member for Warrington North (Helen Jones) summing up—surrealism comes at the end. I am afraid that the official Opposition throw away any sense of credibility when they resort to the sort of rant that misses the fundamental reason why the tough settlement—my hon. Friend the Member for Mid Dorset and North Poole (Annette Brooke) and others said that it is tough, which I accept, and the Government have never pretended that it is anything else—is necessary.
Why is it, sadly, necessary to have these reductions in public spending? Why does local government, as 25% of public spending, have to bear a share? The Labour party bankrupted the country. Its shameful failure has made every reduction necessary and the mealy-mouthed and, to many people in local government, distasteful unwillingness to accept responsibility condemns Labour Members from their own mouths. It condemns them to having no credibility and it is why, ultimately, they see the results they do in the opinion polls. It is no good blaming their leader, as it is not just that they do not listen to him but that nobody is listening to them. It is interesting that the Leader of the Opposition apparently recognises that there must be deficit reduction because of the mess that his Government left, and the shadow Chancellor appears to agree with that—it is about the only thing they do agree on, of course—but it never permeates down, as far as I can see, to the rest of the shadow Cabinet, never mind to anybody else. We have heard not a word about what the Labour party would have done to help local government in dealing with the inheritance that it left.
The coalition Government have faced up to economic necessity and have also given progressive, sensible tools to help local government through the immediate situation and out of it. The Government inherited the formula brought in by Labour towards the end of its period in government. We have had that formula grant for a long time and it has always, as we know, contained an element of ministerial discretion. The lack of transparency in how it operated quite rightly leads my hon. Friend the Member for Harrow East (Bob Blackman) and others to say that some people had suspicions about the objectiveness with which Labour used that formula.
Instead, what we have done is to increase the weighting given to the needs element in the formula for this year’s settlement to help those most in need, and for the longer term to move towards a more transparent system whereby local authorities can retain growth in the business rate and reward those who are entrepreneurial and go-ahead and want to do the best for their areas, rather than saying, “We must be locked for ever in a counsel of despair”, which involves grant dependency. One of the saddest aspects of this debate is the number of Opposition Members who have experience in local government but who are locked into that counsel of despair because they do not have enough faith in their own people and those who work for them.
Since the settlement is set out in reams of paper, I need not trouble the right hon. Gentleman too much with that, though he might like to know that the right hon. Member for Leeds Central (Hilary Benn), I regret to say, fell—unintentionally, I am sure—into error in his point about expenditure. The disabled facilities grant has in fact been increased this year, as it was last year. It was increased by a further £20 million. It has gone up from £167 million to £187 million, and it will go up to £207 million next year.
It is worth saying that central Government are providing £27.8 billion in all by way of formula grant to local authorities. In addition there are further specific grants. It is also worth saying, if the right hon. Member for Knowsley would like some figures, that we are providing a further £20 million in transition grant this year. That makes up for the slack in budgets that came when the Labour Government brought working neighbourhoods funds to an end, quite deliberately and in a planned fashion.
I thank the Minister for giving way. Does he agree that one of the figures that is most important to the people whom we are here to represent is the one that relates to their council tax? The Government have allowed it to be frozen for a second year, which is a vast improvement on the years of multiple increases under the previous Government.
It is ironic that we heard very little about whether the Opposition will encourage Labour councils to take the council tax freeze. I hope they will. Following the damascene conversion of the shadow Secretary of State to condemning the lack of transparency of Nottingham city council, I hope he will say that whatever the Opposition think about the Government overall, it is necessary above all to protect council tax payers and hard-pressed families and to adopt the council tax freeze.
Many authorities are doing that and they are using the breathing space. We have said that this year, because of the economic mess that we inherited, it is a one-year payment. Last year’s payment will be throughout the spending period. It gives local authorities a breathing space in which to manage the reconfiguration of their services. Good authorities are doing that.
Better procurement is an important issue and it should not be sneered at, as some hon. Members did. My hon. Friend the Member for Mid Dorset and North Poole is right to remind people that smaller authorities in rural areas often have less flexibility in managing budget pressures than larger authorities. We must recognise, therefore, that we cannot necessarily draw comparisons. Our system specifically builds in fairness, and not only because we have increased the needs element in the formula. I know it is a shock to Opposition Members, because they have the intellectual arrogance to think that only they have a conception of fairness; that they have a monopoly on the subject.
That is the fundamental arrogance that got Labour into opposition after all those years. The Opposition promised the electorate in their 1997 manifesto that they would hand back the business rate to councils, and they spent 13 years not doing that. The right hon. Member for Leeds Central said that he wanted certainty. Did it take him 13 years to be certain that he would not do it? That is what he managed to do. Instead, the coalition is getting on with it. Although it is not easy to fix a broken system, the coalition is making an honest stab, and local government deserves—
I have given way twice already and made it clear that I will not do so again. I am sorry, but I do not want the hon. Gentleman to get too worked up about it. I want to be fair to the right hon. Member for Leeds Central by responding to his other specific point.
With regard to the top-slicing of the local authority central services equivalent grant, my right hon. Friend the Secretary of State will of course make an announcement in due course. As always, that is being considered through discussions between Government Departments. I hope that the right hon. Gentleman will welcome the fact that the Secretary of State, in making his decisions, has taken note of a number of recommendations and concerns raised by local authorities. We must strike a fair balance in that regard and will do so. In relation to pooling and whether there will be a surplus, I think that—
I hope that the hon. Gentleman will do me the courtesy of letting me answer his party’s spokesman.
The right hon. Gentleman referred to pooling, but I think that he meant the provisions under the Local Government Finance Act 1988 by which the totality of the money raised by the national non-domestic rate, the business rate, must be returned to local government. That continues to be the case. In this year, when the totality of non-domestic rate raised was more than the formula grant, the rest was returned by way of grant to local authorities outside formula grant, and that remains an option. Everything comes back to local government one way or the other, and that is the statutory requirement that the Government have consistently met.
The right hon. Members for Wentworth and Dearne (John Healey) and for Leeds Central asked about referendums and what does and does not qualify. Referendum provisions apply to the billing authority in a two-tier area—a district or unitary council or a London borough—and to major precepting authorities: a county council, police authority or fire authority. In each case it is their own element that is subject to the referendum, so the district council cannot be forced into a referendum because of an increase by the county council, or vice versa. When we talk about levies, we are not talking about precepts, as the right hon. Member for Leeds Central knows, but about the rather more technical payments that we generally get from passenger transport authorities or drainage boards—
Six hours having elapsed since the commencement of proceedings on the motion relating to Police, the Deputy Speaker put the Question (Order, 6 February).
Question agreed to.
That the Referendums Relating to Council Tax Increases (Principles) (England) Report 2012-13, which was laid before this House on 31 January, be approved.
The Deputy Speaker then put the Question necessary for the disposal of the business to be concluded at that time (Order, 6 February)
Motion made, and Question put,
That the Local Government Finance Report (England) 2012-13 (HC 1801), which was laid before this House on 31 January, be approved.—[Robert Neill.]
On a point of order, Madam Deputy Speaker. In his reply to me this afternoon, the Prime Minister claimed that a third of Welsh patients are waiting more than 18 weeks for treatment, when it is only a fifth, and that 27% of patients are waiting for more than six weeks for direct access to diagnostics, when it is only 18%. Those are not even the targets that the NHS in Wales works towards, so the whole basis for comparison was wrong. As I am sure that the Prime Minister would not wish to mislead the House or to leave such an inaccuracy uncorrected, however inadvertently, will you say whether he has requested the opportunity to come back to the House and put matters right, as he should?
I have had no such notification. As an experienced Member of this House, the right hon. Gentleman will know that, strictly speaking, that was not a point of order. He has got his views on the record and I am sure that he will pursue the point if he feels that he needs to.
I now have to announce the results of Divisions deferred from previous days. On the motion relating to the mayoral referendum for Manchester, the Ayes were 315 and the Noes were 201, so the Question was agreed to. On the motion relating to the mayoral referendum for Newcastle upon Tyne, the Ayes were 317 and the Noes were 201, so the Question was agreed to. On the motion relating to the mayoral referendum for Sheffield, the Ayes were 316 and the Noes were 201, so the Question was agreed to. On the motion relating to the mayoral referendum for Coventry, the Ayes were 314 and the Noes were 201, so the Question was agreed to. On the motion relating to the mayoral referendum for Wakefield, the Ayes were 316 and the Noes were 201, so the Question was agreed to.
On the motion relating to broadcasting, the Ayes were 326 and the Noes were 198, so the Question was agreed to. On the motion relating to electronic communications, the Ayes were 325 and the Noes were 198, so the Question was agreed to.
[The Division lists are published at the end of today’s debates.]