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Local Government Finance

Volume 558: debated on Monday 4 February 2013

8. What recent assessment he has made of the local government finance settlement; and if he will make a statement. (140756)

The local government settlement that we have confirmed today provides councils with an average of £2,216 per household, which will enable them to freeze council tax and deliver essential front-line services to their residents. The figure for Blackpool is £2,458, well above the national average.

I thank the Secretary of State for that reply. What role does deprivation play in reaching a local government finance settlement with individual councils, such as Blackpool, where deprivation is very high? Will the Secretary of State reassure me that those councils are not disproportionately penalised in reaching that settlement?

I can give my hon. Friend that reassurance. The figures show that the scheme that gives the weighting for deprivation is essentially unchanged from Labour’s scheme, apart from one significant change. We have introduced banded floors—damping floors—that mean that those who are more dependent on grant receive more protection than those who are more prosperous. It is fair to say that the settlement is more progressive and gives greater weight to deprivation than Labour’s scheme.

When the Secretary of State first announced the settlement for next year he referred to a cut in spending power of 1.7%. Will he confirm that that should have been 2.6%, as he double-counted the council tax support money? Will he also confirm that the cash handed over to local authorities in the start-up funding assessment next year will be 8.4% less than this year’s formula grant, which it replaces? Will the Secretary of State stop pretending that cuts of that magnitude can be managed without hitting front-line services?

I am delighted to confirm to the hon. Gentleman that the reduction in spending power is not 1.7% but 1.3%. That represents good news. Figures tend to move about—[Laughter.] That is why we have a provisional settlement. I do not know why Opposition Members are laughing; I respectfully remind them that in several settlements things changed dramatically and that one year Labour was forced to go out to consultation again.

Does my right hon. Friend realise that the £1.3 million new homes bonus paid to Worcestershire is being funded by a £3.5 million reduction in its baseline funding and that Wychavon district council’s new homes bonus of £1.2 million over the past three years has been matched by a £2.2 million reduction in its baseline funding? Does he understand the inexorable logic of the position that including the new homes bonus in spending power perverts the purpose of the new homes bonus, which is to incentivise communities to accept new development?

My hon. Friend must accept that we took more into consideration than the grant going in and that we have moved on to spending power, which is what the Local Government Association and the Labour Opposition wanted to see. The local government spend is £114 billion. That is twice the size of the defence budget and more than we spend on the national health service. Even his own authority must play a part in reducing public spending to deal with the deficit we were left by the Opposition. The new homes bonus gives the authority an opportunity to make money.

I understand what the Secretary of State just said, but the obligation is not fairly spread across all local authorities in England. Will he reconsider central Government grant aid to local authorities and the relationship between that and the obligation to provide statutory social services, as the demand for such provision is steadily rising in inner-city areas while the grant is steadily being reduced?

That is of course why we have given additional sums to help those areas that are more reliant. That is why a place such as Newcastle will receive something like £600 per household more than somewhere like Wokingham. That is a sensible thing to do, and the right hon. Gentleman should support that, rather than decry it.