[Relevant documents: Oral evidence to the Communities and Local Government Committee on 27 January, HC 1024.]
I beg to move,
That the Referendums Relating to Council Tax Increases (Principles) (England) Report 2014-15 (HC 1056), which was laid before this House on 5 February, be approved.
Members on both sides of the House may well be aware that until now the Secretary of State has not missed a local government finance settlement debate in this Parliament. He sends his apologies, and hopes to join in the debate later in the evening, but, as I am sure Members will understand, he is currently attending a Cobra meeting.
The coalition Government have been working determinedly to restore the public finances, which were left in such disarray by the last Labour Government. It has been complicated and difficult work, and difficult decisions have had to be made. It is in the context of our responsible, long-term economic plan that we have been consulting on the local government finance settlement for 2014-15. Our proposals are fair and balanced, and provide an effective basis for all local authorities to transform local services and promote efficiency. Following a wide range of representations and meetings, we confirmed last week that the settlement would remain almost entirely as announced in December. This is effectively the second year of a two-year settlement, which gives councils a new level of self-determination so that they can take control of their own finances.
May I return the Minister to the words “fair and balanced”? The average cut in spending power for 2014-15 across England will be £71.44, whereas in Birmingham it will be twice that, at £145.33. How can I explain to people in Birmingham that that is “fair and balanced”?
I am sure that the hon. Lady will not be surprised to learn that authorities such as Birmingham have higher spending power in the first place. The 10 most deprived areas in the country have an average spending power of £3,026 per dwelling, while the average spending power of the 10 least deprived is about £1,900.
How can it be fair that my constituents in Northumberland pay a third more in council tax than the urban residents in Newcastle, but receive £100 less per head in services? Our Government have done so little so far to deal with the unfairness that the last Government left for rural areas.
Actually, that is not an unreasonable point. Members highlight the changes in spending power between the different authorities, but they sometimes forget that some of them had high spending power in the first place. The contrast between areas like Newcastle and Windsor is very marked.
On that point about fairness, does the Minister recognise that areas like County Durham have high levels of deprivation and need? For example, the cost of looked-after children is much greater in such areas, because the numbers involved are much greater proportionally in places like Durham, Birmingham and Newcastle than in more affluent areas such as Wokingham.
I think the hon. Gentleman will find that that is why those areas have substantially higher spending power in the first place. He should also note that a member of his own Front-Bench team supported the petition for a fairer spread between urban and rural areas a couple of months ago.
Urban areas receive 50% more in central Government grant than rural areas which, contrary to what some Opposition Members suggest, have lower average incomes, so poorer people are paying higher taxes and getting fewer services. That cannot be sustained.
My hon. Friend has made that point about rural areas with great passion on a number of occasions, and I will deal with it in a moment.
After years of doffing their caps to central Government and talking down their areas to scrape together more handouts, councils can now embrace the autonomy that this settlement gives them. Councils have risen to the challenge of delivering more for less, but local government spending still accounts for a quarter of all public spending. In the current year, it will spend £117 billion, which is £3 billion more than last year. That makes the local government bill bigger than that of the NHS and double the defence budget. It is therefore necessary for councils to continue to find sensible savings.
Speaking of fairness, I believe that it is fair to the hard-pressed taxpayers in my constituency that their council tax has been frozen, not least because the Government have given us more than £7 million to enable that to happen. That funding was opposed by the Labour opposition.
On the subject of how councils spend their money, North Lincolnshire council, which has been Conservative-run since 2011, has frozen its council tax for four years despite the funding cuts and despite having less per head than other councils. It has reversed the previous Labour council’s cuts to youth services and increased spending on and the building of new libraries. It is also replacing damaged and leaking classrooms, which the previous Labour council did not do. It has managed to do all that without having to place any extra burdens on council tax payers. This can be done if councils are prepared to show true leadership by cutting the people at the top rather than the services at the bottom.
My hon. Friend makes a good point. The leader of that council is Liz Redfern, and it is a great example of a well run council. It is showing that we can deliver more for less. Good councils across the country are changing the way in which they deliver services by doing exactly the kind of work that my hon. Friend has outlined.
We cannot always place the burden on local authorities. In Coventry, for example, the cumulative effect will be a cut of 24%, involving 1,000 jobs. More important, children’s services and social services will be cut, and education services will be cut, which will affect school build. The Government are setting the clock back: when they impose a freeze, it is like a dam that will burst in three or four years’ time.
If the hon. Gentleman looks at the statement we made before Christmas, he will see that that is not the case, because we have rolled the freeze grant into the base to help councils. I suggest that his council may want to listen to councils such as North Lincolnshire, which has shown that it can achieve improvements in services, even while spending less.
I have been in the Minister’s position, albeit some time ago, and I wonder whether he agrees that some Members are engaging in bad cherry-picking by pointing out certain difficulties. They also point out that the system of calculation is complicated, but the reason it is complicated is that it uses a balance of factors that suits each individual local authority. It is therefore unfair to pick out the difficult cases without balancing them with the others.
I congratulate the Government on changing the Bellwin formula at this point, which is relevant to the local government settlement. The percentage has gone from 85% to 100%, and the limit has now been relaxed from £1.7 million to £1.1 million. That is good, but my local authority tells me that although their pothole gangs have gone from 13 to 35, all planned work, other than drainage work, has had to be put on hold, so there is still a need for more.
I thank my hon. Friend for that, and I know she is rightly fighting hard for her area. As the Prime Minister said today, we must make sure that we do all that we can to ensure that areas have everything they need in this situation, and I will discuss flooding in a few moments.
On the Government’s own figures, Liverpool has the highest level of deprivation in the country, yet it has an entrepreneurial council that is working hard to back business and support jobs. In those circumstances, with the council showing so much initiative against a background of such adversity, why has Liverpool suffered the greatest cuts of all local authorities in the country?
Actually, it has not. A council that has some of the greatest cuts is my own local authority in Great Yarmouth, which was left a black hole by the last Labour Government through the working neighbourhoods fund. I gently say to the hon. Lady that she might want to remind Mayor Anderson that Liverpool’s authority has £116 million in reserve, one of the highest spending powers in the country in the first place, a regional growth fund and a city deal. This Government are working with such local authorities.
I thank the Minister for meeting MPs from Birmingham to look at this issue, and I congratulate hon. Members generally on highlighting the difficulty of working out what a fair system is for allocating local government finance. The Government have focused on percentage reductions in spending power. Does the Minister agree that, after incentives, looking towards the reduction in percentage spending power, not absolute spending power, provides an equality of pain that gives us a way forward? It takes into account the fact that in areas like Greater Birmingham, where people work in Birmingham but live around it and require services from Birmingham but are not contributing towards—
Order. Before the Minister replies, may I remind the House that 17 Members wish to participate in this debate? Interventions must be short, and I will start to interrupt them if they continue to be as long as they have been so far.
Thank you, Madam Deputy Speaker. The hon. Gentleman made that point in the meeting we had. As I said to him, I will happily go through it in more detail over the next couple of months, meeting him and officials to look at some of the ideas he is talking about.
I will make a bit of progress, bearing in mind what Madam Deputy Speaker said, and then take more interventions.
It is necessary for councils to continue finding sensible savings, to modernise services and to cut back on waste. Recent opinion polls have shown that that is achievable, and we have examples from around the country of councils doing just that. The level of satisfaction with councils is increasing compared with the situation in 2010, highlighting that even when savings are being made councils can maintain or improve services for residents.
This year’s settlement is fair. It is fair to north and south, rural and urban, metropolitan and shire. Let us be clear that next year councils will be armed with significant spending power, averaging £2,089 per dwelling; the top 10 most deprived councils in the country will average more than £3,000 per dwelling compared with a figure of about £1,900 per dwelling for the least deprived areas. We are protecting cities and those authorities facing a higher demand for services, despite what the Opposition suggest. As I say, the top 10% most deprived authorities will be more than £1,000 per household better off than the least deprived 10%. Places such as Newcastle receive £2,400 in spending power, about £900 more than places like Windsor and Maidenhead.
I do not agree with the Minister about Brighton and Hove’s council being satisfactory. The bonkers Green Brighton and Hove council is sitting on tens of millions of pounds of reserves, is spending millions of pounds on its leadership teams and is totally out of touch with residents. What can the Minister do about it?
My hon. Friend has done a great deal by bringing this matter to the attention of Members and putting it on the record. What I say to councils, including the one in Brighton, is that they should do the right thing by their residents and freeze council tax to help hard-working people and families. We understand the pressures that all authorities face, and the division of funding demonstrates that we have tried to be fair.
How on earth can the Minister say that this settlement is fair when, three months ago, the Audit Commission, the local government expert, said that
“councils in the most deprived areas have seen substantially greater reductions in government funding as a share of revenue expenditure than those in less deprived areas”?
Is the Audit Commission wrong?
As I said just a few moments ago, 10% of the most deprived areas of the country have an average spending power of £3,026 per household, compared with £1,900 for the least deprived 10% of areas. We must bear that starting point in mind. The most deprived areas have greater spending power. The average reduction in spending power this year is just 2.9%, with no council being more than 6.9% worse off. This is the highest level of protection that we have been able to offer councils in three years.
The Minister has spoken about councils being able to put a freeze on council tax for a further year. Does he not realise that many councils could see what was coming? It did not take a genius to see that the financial situation in 2010-11 would be difficult. Rugby borough council recognised that, and is now looking at a council tax cut for the coming year.
Again, my hon. Friend gives a good example, to which I will be referring in just a moment. Good councils have planned for this and worked for their residents. Not only are they able to freeze the council tax, but in some cases, councils such as Rugby have done the excellent thing and cut council tax.
Birmingham has cut £300 million from back-office services, but is still reeling from the biggest cuts in local government history. It is losing 23% of its spending power, while Wokingham is gaining 1%. How can it be right that the 10 most deprived areas are hit 10 times harder than the 10 least deprived areas? How can that be fair?
On this issue of spending power, may I take the Minister back to the first and second answers that he gave and see how he puts them together? My hon. Friend the Member for Birmingham, Erdington (Jack Dromey) talked about the reduction in spending power in a deprived area such as Birmingham. The Minister said, yes, but it has a higher spending power in the first place. My hon. Friend the Member for Easington (Grahame M. Morris) then said that the reason—
It is best to refer the hon. Gentleman to the answer I gave a few moments ago.
In response to the question about flooding asked by my hon. Friend the Member for Newton Abbot (Anne Marie Morris), let me say that we are currently experiencing the wettest winter for 250 years, and that has an impact on local authorities’ finances. Many are working tirelessly for the safety of their communities. The Government have made it clear that they are committed to supporting them unequivocally. The severe flooding and storms have affected rural and urban, town and country alike from Great Yarmouth to Dawlish.
Sixty-two local authorities have thus far indicated that they will apply under the Bellwin scheme for financial assistance. The grant reimburses local authorities for the cost of their immediate actions to safeguard life and property. We have enhanced the terms of the Bellwin scheme in response to the most recent severe weather events. The floor has been lowered so that more councils can apply, which will be of particular benefit to the unitary and county authorities. We estimate that that could be worth an extra £15 million to those councils, and we will be paying 100% above the threshold as opposed to the previous 85%. For the longer term, I am committed, along with my colleagues across Whitehall, to undertake a review of the Bellwin scheme to assess what changes may be needed in the light of more frequent and challenging weather events. Members will no doubt already have noted that we have provided a £7 million severe weather recovery fund for those areas affected before and over Christmas.
We have also listened to the wider concerns—I note the comments that have been made in interventions already this afternoon—of colleagues in rural areas about the extra challenges their local authorities might face in achieving service delivery efficiencies. We are topping up the rural services delivery funding by an extra £3 million this year, including the extra £2 million announced today, so it is now worth £11.5 million, which is a further boost to the 95 authorities that will benefit this year.
Does the Minister not recognise, however, that that is less than the cost of employing an officer to work out what the missing money between the rural and urban split would be? Three million quid divided by 95 local authorities is about 30 grand each.
The difference between the urban and rural authorities is between 13% and 10% when it comes to spending power, depending on whether we are looking at the counties or the districts. We will be working with the Department for Environment, Food and Rural Affairs over the next few months to do some research on the difference in the cost of delivering services, which is raised regularly by Members from rural constituencies, and get to the bottom of the issue.
No doubt the Minister has studied the case made by the Rural Fair Share campaign and will be aware that Cornwall, for example, is not only rural, but among the most deprived areas of the country. Does he accept the principle that there is a comparative unfairness between urban and rural local authorities? Even if he cannot address the issue now, does he accept that the Government should address it in time?
As I have said, the difference in spending power between urban and rural areas is between 13% and 10%—unless we are talking about a fire authority, in which case it is plus 3 for rural areas—so there is definitely a gap between the two. The work that DEFRA will do will look at differences in the costs in rural and urban areas.
On fairness, the Minister earlier compared Newcastle and Windsor. Is he aware that Rob Whiteman, the chief executive of the Chartered Institute of Public Finance and Accountancy, has said:
‘When Government ministers compare such different councils as affluent Windsor and metropolitan Newcastle in an attempt to justify the “fairness” of the settlement it only serves to highlight how out of touch this process has become’?
To return to flooding, can the Minister confirm whether he will be making an application to the solidarity fund? I know that the threshold is high, but if it is taken on a regional basis that would be a really helpful source of additional funding for the south-west.
My hon. Friend tempts me away from the local government finance settlement. The Government look at such things, but the fund currently has a threshold of about £3.7 billion, and the Government would have to pay back the majority of what we got because of the way the mechanism works.
Further to the point made by the hon. Member for St Ives (Andrew George), will the Minister give us a guarantee that in the longer term he will grapple with the issue of funding for rural areas? Shropshire is the largest land-locked county in England, and providing services in such large areas inextricably costs more.
Fortunately, in Staffordshire the Trent has not flooded, but we are facing cuts across the board—to the police, youth services, disability services and now libraries. In Newcastle-under-Lyme the actual cash cut has been 13.6%, but under total revenue spending power it magically becomes just 4.4%. Which figure is correct?
I suggest that the hon. Gentleman should look at spending power, which is what the Local Government Association prefers to use, because it outlines the amount of money and the way local councils have influence and control. It is the entire spend that a local authority has; it does not just single out one small part of its funding. That is an important change in how local government finance has worked, as we are now moving to a system in which more and more of the money is in the entire control of local authorities with their own autonomy.
I draw the Minister’s attention to what he told the Committee on 27 January. He said that the system is changing from one based on allocation according to need, which now will be reflected merely in the base business line rate in 2013-14. Basically, the Government will distribute grant according to local authorities’ ability to raise their own resources. Is that not a fundamental change?
Does not this debate highlight what these debates have highlighted year after year—the lack of transparency in being able to judge one side against the other? Every council has had to deal with cuts; some have dealt with them well and some have not. How can voters judge which is which?
In my experience, voters are pretty good judges of what is a good council as opposed to what is a bad council. We have already heard examples of councils that are doing really good work in transforming the way in which they deliver services and work together. I will come to that specifically in a moment.
We are continuing to encourage councils to grow their own economies. Last year’s transformation challenge award incentivised councils to rethink how they go about their business and to transform fundamentally the structure of their local services. Eighteen areas received a share of £7 million to jump-start innovative projects. Following this success, we will continue with the transformation challenge this year, and I will announce the terms and details shortly.
The expertise that councils have shared with other councils and the expertise being shared through the community budget pilots and the transformation network highlight the fact that this is the right approach. Authorities such as Staffordshire Moorlands and High Peak are showing that they can save about 18% by sharing management and working in a different way. Likewise, South Holland, Breckland and other councils around the country are working more innovatively.
My hon. Friend makes a good point. The transformation of how we communicate, particularly through broadband, makes it possible to do many more things more efficiently and effectively, and it will no doubt continue to change how we deliver services and are able to work together across authorities.
The efficiency support grant has further incentivised transformation. The councils facing the largest spending reductions, many of which were in that position because they were abandoned by Labour’s reduction in the working neighbourhoods fund and left with a black hole in 2010, are now being given a leg-up towards making these savings through the transitional grant. I must declare my interest, as Great Yarmouth is one of the authorities that Labour left stranded. Authorities receiving the grant are protected by our safety net, which is bigger and stronger than last year. Despite some areas choosing to play politics with this—I am disappointed that Labour-run Great Yarmouth borough council refuses to follow the lead of other councils, sometimes even cross-party—councils such as Hastings and Pendle are doing some really good work on transforming things. Areas such as High Peak and Staffordshire Moorlands are working cross-party to share management and show the way to savings of about 18%. They are showing the way forward, and I hope that others will follow. Those in receipt of funding are making progress with their efficiencies, with many going a long way towards that, including many Labour-led areas. There is, however, more to do.
I agree that transformation, integration and doing things differently is one way of mitigating the impact of the cuts. However, over the past few years my local authority in Salford has already cut our adult social care budget by £21 million. We were the last local authority in Greater Manchester to have to retreat to the position of providing support only to people with serious and critical needs. That means that 1,000 people in Salford will no longer receive support and care from the local authority. Those are real families in great distress, and the Minister must at least take account of that.
I would be happy to meet the right hon. Lady and other Members from Salford if that would help. In a moment, I will touch on the better care fund, because we do need to look at how we change, reform and transform the delivery of adult social services, particularly social care. That is one of the things that my Department and the Department of Health are working on. I am working closely with the Minister of State, Department of Health, my hon. Friend the Member for North Norfolk (Norman Lamb), to deliver for local authorities.
We want to go further with the efficiency support grant. The Government do not want to continue as we have had to do, year after year, in patching up problems left from the Labour legacy. We have listened to authorities and to Members—not only me, before I was in post, but those such as my hon. Friends the Members for Hastings and Rye (Amber Rudd) and for Pendle (Andrew Stephenson)—about dealing with this issue once and for all and finding a permanent fix. Therefore, for councils that are on track with their efficiency plans and are delivering on the second year of their business plans, which we will review later this year, the grant will be rolled into their settlement in 2015-16. This a massive opportunity—a big reward—that will go a long way to filling, once and for all, the black hole in which seven authorities were left by Labour.
May I ask the Minister whether his Department has done any kind of research into the long-term financial viability of local authorities? We already know that some are nearing the cliff edge, so what assessment has his Department made and what will he do to make sure that they do not go bankrupt?
My hon. Friend mentioned the legacy from Labour. He will know, not least from Great Yarmouth, that damping is an issue for Enfield. Damping poses a structural challenge for places such as Enfield, with unmet need that is embedded year after year, and it does not reflect the growing population and deprivation issues.
I thank my hon. Friend for raising the important issue of damping. I know that hon. Members have differing views about it, but it means that we can have stability in the baseline. It also recognises need as we move towards a new system, the business rates retention scheme, which I will turn to in a few moments.
Councils can become masters of their own destiny in other ways. The new homes bonus rewards councils that have increased the local housing supply, helping them to meet the needs of a growing community. In 2014-15, the new homes bonus will be worth £916 million, which is money for councils to spend as they see fit. Those authorities that have had an increase in their funding—Members have mentioned some of them—have had that increase because they have done the right thing: they have built more houses, and they have got more money for doing so.
The business rates retention scheme has revolutionised the potential to grow local economies, and has given councils a hand in their success. Under the previous Government, councils did not get to see that money—£11 billion in business rates—that they can now retain. Councils sit on a total of £230 billion of assets, and we must do more to turn those assets into better services for local people.
The Minister has talked about giving councils greater control over their spending, which has been reduced hugely—for example, Newcastle has lost £100 million—and about the new homes bonus, which is top-sliced from councils’ money and then controlled by this Government. How does he reconcile the Government’s apparent liberating of councils with their control of councils’ money?
As we have said before, the Government are moving to a different system, in which councils are incentivised for doing things. The new homes bonus is a good example: if they build houses, they will get more money. Councils that need more support with creating or changing to cutting-edge services will now be able to use up to £200 million from asset sales to pay the one-off costs of service transformation.
The autumn statement protected local authorities from further cuts to services by setting out a two-year settlement, so allowing councils to plan for the longer term and to have stability in the services they provide to taxpayers. This year, we are publishing illustrative figures for 2015-16 to enable councils to do that.
As was announced in the spending round, £3.8 billion will become available from the better care fund in 2015-16. That touches on a point made by the right hon. Member for Salford and Eccles (Hazel Blears). The better care fund is a real opportunity for local authorities. It will give our civic leaders a once-in-a-lifetime opportunity not only to encourage better working between their local NHS and social care services but, importantly, to change for the better the lives of the most vulnerable people in our communities. Such a stable platform for forward planning, which is part of our long-term economic plan, will provide councils with the scope to merge back offices, to tackle fraud and to save £2 billion. Improving council tax collection will help to bring in the outstanding total of £2.4 billion in uncollected council tax. Our proposals put councils in charge of their finances and, for the first time in the history of local government finance, give them a direct stake in the success of the local economy.
We recognise the crucial role that councils can play in helping with the cost of living. We have offered councils support so that they can freeze council tax bills, despite the fact that those bills doubled under the previous Government. Since 2010, council tax bills have fallen by an average of 10% in real terms. The total freeze funding up to 2015-16 is £5.2 billion. That is a serious commitment by the Government to help hard-working families. Over the lifetime of this Parliament, the average band D taxpayer could save up to £1,100 thanks to our council tax freeze. The Chancellor has agreed, as he has in previous years, to put the next two years of funding into the baseline. That eliminates any risk of a cliff edge and offers the maximum possible certainty to councils.
Everyone in this House should expect councils to do their bit for hard-working families. They must recognise that they have a duty to take up the freeze offer. Councils that do not accept the freeze and instead want to raise bills by 2% or more may do so, but only by holding a binding referendum. We believe that that strikes the right balance between direct and representative democracy. I say to all councils, take the freeze. If they do not do so, but want to avoid a referendum, the increase will benefit them to the tune of just 0.9%. My message to councillors who are considering that is to go back and push their officers to deliver more for their residents. We have given local electorates the power to veto excessive rises through a referendum. Councils should trust the people if they are confident that they have a case for putting up taxes.
My hon. Friend has been very generous in giving way. Will he look again at the threshold for referendums for fire services, particularly small ones such as East Sussex? If they want to put their precepts up by £3 a year, which is less than 1p a week, it would raise £900,000, but doing so would require a referendum that would cost up to £750,000. That does not make sense and I ask him to look at it again.
I thank my hon. Friend for that question. Local authority and fire authority treasurers often make that point. They say that they do not want to accept the freeze, but they want to build up their base. However, if they win a referendum, they get that in their base for ever, so I simply do not buy that argument. To answer my hon. Friend directly, last year we had a differential for the lowest charging authorities. We look at that on an annual basis. Although we are not doing it this year, we do not rule out doing it in future. With regard to referendums, there is a cost-saving opportunity for authorities this year, because we are allowing council tax referendums to be held on the same day as the European elections, which is 22 May.
So far, 161 councils have publicly announced that they intend to ease the monthly bills burden for families. As my hon. Friend the Member for Rugby (Mark Pawsey) mentioned, some authorities, such as Rugby, Croydon and Kensington and Chelsea, are even in a position to offer residents a one-off council tax rebate, so successful have they been in making savings. I expect many more councils to sign up to the freeze to make a difference to the cost of living for hard-working people and to demonstrate that locally elected leaders make the right choices for their electorate. I encourage councils to make the right choice and to offer a freeze for the fourth year.
Our do-it-yourself, reward-based mantra is a stark contrast to the old begging-bowl mentality. A substantial amount of money is available to local government in 2014-15. It is a bigger budget than the NHS and defence budgets. This settlement offers councils further freedoms, flexibilities and incentives to build more homes; to create more local jobs; to boost business and enterprise; and, ultimately, to provide more and better first-class services for their local residents.
Local government faces the biggest cuts of any part of the public sector. All around the country, councils are having to take incredibly tough decisions about the future of local services.
The Minister is like an abstract artist—the picture that he has painted today is clearly a departure from reality. Nobody believes his figures. He has claimed that the cuts are modest. He says that they can all be dealt with through efficiencies and that there will be no impact on front-line services. He should tell that to the elderly people who have had their home care withdrawn. He should tell it to the parents of children with special needs who cannot get the help that they need. He should tell it to the shift workers in my constituency who have to walk home at night in darkness because the streetlights are not on. He should tell it to the young people whose bus to school, college or work no longer runs. He should tell it to the Tory council leaders who were so appalled at the lack of understanding of the impact of the cuts among Ministers in his Department that they wrote to the Prime Minister to complain about the posturing. He should tell it to the council leaders in the poorest areas of our country who face the cruellest, deepest cuts of all.
The real picture is stark. The LGA says that over this Parliament, local government core funding will fall by 40% and councils will have to make £20 billion of savings. As hon. Members have pointed out, all councils face challenges, but the fundamentally unfair distribution of the cuts is particularly damaging to many communities. Even under the Government’s spending power measure, which is deliberately designed to mask the real impact, the 10 most deprived areas have had a cumulative cut that is 10 times more than the 10 least deprived areas.
The Prime Minister used to say, “We’re all in this together”, but his local authority and that of the Secretaries of State for Justice, for Health, for Education and for Defence, are getting an increase in spending power, while local authorities such as Hackney, Liverpool—as we have heard—and Manchester face the largest cuts. The coalition peer, Lord Shipley, said in the House of Lords last month that
“there is no doubt that the cuts have been steeper in the more deprived parts of the country.”—[Official Report, House of Lords, 9 January 2014; Vol. 750, c. 1700.]
My hon. Friend makes an incredibly important point and I will come to it in a moment.
The widely respected Joseph Rowntree Foundation published research in November stating:
“Cuts in spending power and budgeted spend are systematically greater in more deprived local authorities than in more affluent ones”
We know that that unfairness is not an accident. The former local government Minister, the hon. Member for Bromley and Chislehurst (Robert Neill), who is in his place, told the House,
“Those in greatest need ultimately bear the burden of paying off the debt”—[Official Report, 10 June 2010; Vol. 511, c. 450.]
As my hon. Friend the Member for Easington (Grahame M. Morris) rightly says, since 1948 funding has been allocated to local authorities according to need. In December, the National Audit Office, in its report on council tax support, commented on the end of the formula grant system which it claims
“redistributed business rates according to a formula that determined each local authority’s grant by considering local authorities’ needs and ability to raise resources through council tax.”
That system was by no means perfect—hon. Members have pointed out some of its shortcomings—but it became complex because it strived for fairness. Any reform must keep that principle of fairness at its heart.
I will make progress on this point, and then I will take further interventions.
Will the Government tell the House what meaningful consultation there has been, and who gave them permission to remove a principle that has stood for 65 years—that councils should be funded according to need? The House of Commons Library states:
“Prior to 2013/14 local authorities received formula grant at the Local Government Finance Settlement. The formula used was based on a four block model which included its relative need. In the first year of the Business Rate Retention Scheme this link remained in the funding baselines, but the relationship between funding and need exists now only to the extent that they are present in the original baselines.”
As each year goes by, there will be further erosion of the relationship between funding and need. The Library clearly states that
“reductions are generally larger for more deprived areas and smaller amongst less deprived areas.”
I am grateful to the shadow Minister for giving way; he is being most generous. I notice that he did not respond to the question from my hon. Friend the Member for Birmingham, Yardley (John Hemming) about where Labour would make cuts. On the issue of need, density was given four times the weighting of sparsity, even though there is no link between density of population and increased cost and delivery of services. How was that fair?
If the hon. Gentleman will be patient for a moment, I will, of course, come on to what Labour will do if it forms the next Government. On sparsity, I took part in the debate that he and others led last year, which I thought was excellent. I recognise many of the issues that he raised and there is a sparse rural authority in my constituency in East Northamptonshire. The formula should of course take account of rural sparsity, as well as urban deprivation. There is always a debate to be had about fairness within the system, but what is critical is that the part of local authority funding with fairness at its heart—notwithstanding the debate that will be had—is now being eroded, so the opportunity to ensure that funding is fair and according to need is being lost.
To put the cuts in perspective, in Newcastle-under-Lyme in north Staffordshire, an area of great deprivation, we will now have lost half our Government grant. We face the prospect, in the near future, of losing 75% of grant. How can councils in those circumstances be viable and address local need satisfactorily?
My hon. Friend makes the point powerfully. The reduction in spending power of areas with higher needs and lower resources, and the increase in spending power in the wealthiest areas, will not just close the funding difference between such areas, but in time reverse it. That is already happening.
My hon. Friend has made a very important point. I come back to the comments the Minister made in his appearance before the Select Committee on 27 January. I asked whether the principle of the grant settlement, which equalises differences in needs and differences in resources between authorities, had been effectively eroded. The Minister said yes, there had been a big shift away from the begging bowl structure of the past to an incentive-based structure for the future.
My hon. Friend makes the point powerfully, with all of his experience as Chair of the Select Committee.
Spending power in Leeds will be lower than Wokingham’s in 2014-15, and will fall every year despite higher service pressures. Spending power for my hon. Friend’s own authority of Sheffield and for Newcastle, which has also been mentioned, will broadly match Wokingham’s in 2015-16 and then fall below it in future years despite higher service pressures. The spending pressures that councils face are very different. Newcastle has 101 looked-after children per 10,000 people, whereas Wokingham has 24. Homelessness and supported housing costs are £145 per dwelling in Newcastle and £48 in Wokingham. Statutory concessionary travel costs are £85 per dwelling in Newcastle and £14 in Wokingham. Where is the fairness in a funding system that does not recognise such large differences in need?
The revenue support grant element, which recognises need, will shrink from £15.2 billion in 2013-14 to £9.3 billion by 2015-16. Modelling shows that it could be gone altogether by the end of the next Parliament. The Institute for Fiscal Studies, which the Government are fond of quoting, is clear in its analysis that the poorest areas are feeling the squeeze. Minority communities are particularly affected, too. Of the 30 areas in England with the highest black and minority ethnic populations, 29 face cuts above national average and eight face cuts of double the national average. The Department’s own impact assessment raises concerns about the effect of cuts on BME communities and about services to the very young, the elderly and the disabled. It says it is not possible to make a substantial assessment. I have to ask the Minister why not, given the scale of these cuts? Why has his Department not conducted a full impact assessment, as it was urged to do by the Public Accounts Committee?
Under 13 years of the Labour Government we saw a huge increase in salaries for officers and chief executives in councils. I would like to have the hon. Gentleman’s views on how that can be controlled going forward, because it accounts for a great deal of money.
Chief officer pay is something that should, rightly, be determined locally. We would of course want local authorities to be responsible. I urge the hon. Gentleman to recognise, however, that some of the highest paid chief officers were in Conservative local authorities. We will not be taking any lectures on that point.
The Government seem to have introduced the term “spending power” to hide the true scale of the cuts. London Councils says that it is extremely concerned that the spending power calculation is misleading and incorrect. The Government say that spending power is the total amount of money available to a local authority but the LGA tells us that there is double counting, such as with health budgets that are also in the Department of Health’s figures. Rob Whiteman, the chief executive of the Chartered Institute of Public Finance and Accountancy says that
“these figures demonstrate…statement on the local government settlement this year was by any usual standards an…opaque announcement.”
The Minister says that the change to spending power is a shift in Government policy to reduce dependence. He uses that term about the begging bowl that, frankly, I find offensive. He says that this is about reducing dependence on central Government and freeing councils to encourage local growth. If that is true, we have to ask why it has taken so long for this Government to make a U-turn on business rates, which have risen by £2,000 since May 2010. Why will they not join this side of the House and go further by cutting rates for 1.5 million small and medium businesses? We agree, of course, that councils should not simply be a post-box for the Treasury, and schemes such as the local authority business growth incentive were introduced by the last Labour Government. We will look to reform any so-called incentivisation so that the system works fairly for all areas of the country and is alongside, rather than a replacement for, mechanisms for fair distribution of funding according to need.
First, I find it ironic that the hon. Gentleman should criticise any change to the business rates model that his party resisted for so many years. Secondly, he talks in terms of the four-block model, which is generally regarded as discredited now. Would he persist with it or not?
The consensus around recognising need in local authority areas existed for more than 65 years, until this Government broke it. We have been clear that we will look in the next Parliament to restore fairness in the formula, and of course we will look to ensure that the model in place recognises need.
Let me make a bit of progress. The Minister spoke for 38 minutes, and I know that many hon. Members wish to contribute.
It is to be welcomed that the Government are compensating local authorities for the cap on business rates, but I am told by SIGOMA that the compensation amounts appear to be less than the estimated reduction in total business rates. I hope that the Minister who responds to the debate will comment on that point. Holdbacks to fund the business rate safety net have also been top-sliced unfairly from councils. While Windsor and Maidenhead contribute to the £120 million holdback at a share of £2.27 per dwelling, Middlesbrough contributed £7.97 per dwelling. Why does the Minister think that is right?
I pay tribute to my colleagues, especially the hon. Member for Newcastle upon Tyne Central (Chi Onwurah), who led an important debate on this last year. There was a limited U-turn by the Government on holdbacks. But when the Minister replies today I hope that he can update the House on what recent assessment has been made on the business rate safety net.
I see that the shadow Minister is carrying on the same creative accounting as the last Labour Government. They say that they will stick to the same budget as we will, but they will reduce business rates. I welcome that, but where will they get the money from? They will have to cut it from somewhere else.
The hon. Gentleman will have to do a bit better than that. The reduction in business rates is clearly costed by not going ahead with the cut in corporation tax for the largest businesses in the country. It is a clearly costed policy.
The new homes bonus is another top-slice from the formula grant, and the Government seem confused about its purpose. Their website describes it as:
“A grant paid by central government to local councils for increasing the number of homes and their use.”
But the Housing Minister told the House recently:
“I am afraid the new homes bonus is not about encouraging people to build homes.”—[Official Report, 25 November 2013; Vol. 571, c. 11.]
The National Audit Office report on the new homes bonus said it certainly is not about increasing the number of homes, stating:
“Overall we found little evidence that the Bonus has yet made significant changes to local authorities’ behaviour towards increasing housing supply…We found no association between individual local authorities’ planning application approval rates and the numbers of homes qualifying for the Bonus.”
As the new homes bonus is a top-slice without a purpose, I can understand why local authority leaders and members are frustrated by the fact that it compounds the problem of unfairness—because of course it comes from the grant.
London Councils has brought to my attention the Government’s recent decision to require London local government to transfer £70 million of its new homes bonus grant to the GLA. That is a centralising step by the Government in London. Those councils want to know why they are being treated differently from the rest of the country, and I hope that when the Minister responds later he will justify that.
Other changes are having an impact on councils. There is much concern about the localisation of welfare support. The funding has been passed from the Department for Work and Pensions to the Department for Communities and Local Government, and has already been cut in half in the process. There are no plans for any funding to be available after 2015. Do the Government recognise the impact that that will have on the ability of councils to help the most vulnerable people in our communities?
That leads me on to the Government’s new poll tax for the poorest people. The cuts to council tax support mean that many people on the lowest incomes will see their council tax bills jump. These people are carers, the disabled, single mums, war widows and veterans, and they will all have to pay more council tax and, in some cases, the bedroom tax, the impact of which my hon. Friend the Member for Wansbeck (Ian Lavery) powerfully denounced earlier. Today the Prime Minister has again chosen not to rule out another tax cut for millionaires, so we can see where the Government’s priorities lie.
When people face a cost of living crisis, it is right that local authorities do their best to keep council tax down. In recent weeks, the Secretary of State has briefed the press that he would reduce the council tax referendum trigger, but he seems to have been overruled at the last minute by the Home Secretary and the Deputy Prime Minister. The whole process has been a complete shambles. SIGOMA has said that the late announcement of the threshold was unacceptable. Councillor Caitlin Bisknell of Derbyshire county council contacted me on the day of the announcement to tell me that the council was in the middle of a meeting to set its budget for next year when it was informed by the Government of the referendum limit. While the Secretary of State has been posturing and dithering, councils have been trying to plan ahead. Local councils and communities are the ones who are left to pick up the pieces of the Government’s incompetence.
For all the talk of a council tax freeze, more than a third of local authorities put council tax up last year. According to a recent survey by The Daily Telegraph, more than half the local authorities preparing to increase council tax this year are Conservative councils, including Oxfordshire, the Prime Minister’s county council, which plans to raise its bill for a second year running.
Will the shadow Minister make it clear whether Labour supports the council tax freeze? I am sure he will come on to what he would hope to do if he had the opportunity in government, which I very much hope he does not. I have been reading the Public Finance magazine, which says that he is actively considering plans for new council tax bands. May we have those details now?
We are looking at representations that have been made to us by local government as part of our review on how we ensure that the funding formula is fairer in the next Parliament and fair to all councils. The hon. Gentleman mentions the council tax freeze, but there is no freeze. Many councils around the country are planning to put their council tax up. More than half of them are Conservative councils. Who blazed that trail? Councils such as Labour Hackney, which has been freezing council tax for eight years, did so. The three biggest council tax rises during the Labour period in power were by Tory councils.
The Minister has told us that local authorities can deal with the cuts by making sensible savings and reducing waste. The Prime Minister has described local government as the most efficient part of the public sector. While councils have had to make bigger and earlier cuts than any other part of the public sector and make massive savings, the Secretary of State has lumbered taxpayers with a limo bill of close to £500,000, reportedly the biggest of any Whitehall Department. The biscuit bill is rocketing, and the Department has even been fined for running an unauthorised overdraft. The Minister should therefore not patronise councils with his suggestions for savings.
Labour Hackney council’s social care services are supporting people to stay in their own homes and out of formal care, which saves £2 million annually. Bolsover and North East Derbyshire councils have pooled staff and resources and are saving £1.5 million a year. Blackburn with Darwen council saved £2.2 million in one year using pioneering telecare technology. Oldham council is using a co-operative commissioning approach for its children’s centres. The process is producing savings of £220,000 and protecting those vital children’s centres.
Despite the great work to make savings and reconfigure services in the best possible way for communities in the circumstances, the truth is that many local authorities are being pushed to the brink, as hon. Members have pointed out. LGA figures show that there is a big financial black hole in local government finances, which is widening by £2.1 billion a year. It is expected to reach £15 billion by the end of 2020. That is fuelling growing concerns that local authorities lack the ability to continue to deliver front-line services.
The LGA’s Conservative leader, Sir Merrick Cockell told the Communities and Local Government Committee that 86 authorities are near the tipping point of failure. The Government simply do not know how they will respond when councils fall over. When the permanent secretary to the Department for Communities and Local Government was questioned by the Public Accounts Committee, he said that councils have a statutory duty to balance their books. He is relying on that statutory duty in the face of reality. I am sure finance officers will do their best to advise councils on how to balance the books, but they are not magicians. The Minister must tell us what plans the Government have for when an authority becomes no longer viable.
Hon. Members have asked about the next Labour Government’s plans. We will not be able to stop the cuts or turn back the clock, but we will put fairness at the heart of the relationship between central and local government, and at the heart of our approach to local government finance. It is simply wrong that the most deprived local authorities and the communities that can least afford it are being hit hardest. It is often the areas with the highest demand for services that have the least capacity to raise income through business rates or council tax.
It is crucial that we support councils to deliver economic growth in all areas of the country, and to do that we will extend the model of city deals throughout local government and devolve power over housing and planning and jobs and skills—for example, through co-commissioning of the Work programme. We would also take forward our Total Place programme, which, being far too limited in scope, has sadly stalled under this Government, despite its clear potential. Furthermore, the local government innovation taskforce set up by the Leader of the Opposition is developing an ambitious programme requiring central and local government to work together as we transfer much more power and responsibility to councils. In this way, while resources will be tight, councils will have a fair chance to find a way forward for their communities.
In conclusion, in the Chancellor’s spending review in May 2010, he said—[Interruption.] Hon. Members might want to listen—it is their policy, their announcement. The Chancellor said:
“The Government will…limit…the impact of reductions in spending on the most vulnerable in society, and on those regions heavily dependent on the public sector”
“the Government will look closely at the effects of its decisions on different groups in society, especially the least well off, and on different regions.”
Sadly, on local government funding, that promise of fairness is not worth the paper it is written on. Far from being localists, the Government have shown themselves to be mean and meddling at every turn, and nowhere more so than in taking the most from the communities and the people in the greatest need.
I wish I could say it was a pleasure to follow that speech.
The shadow Minister could have come to the House, in a statesmanlike way, and acknowledged that there was a serious crisis in the public finances that the previous Government made a considerable contribution to creating; that the Government faced a difficult task; that the four-block formula was widely discredited; that for 13 years under Labour council tax spiralled in areas such as mine, more than doubling and creating hardship for those on low wages and the elderly; and that for 13 years MPs for rural areas tried to persuade Ministers that the four-block formula did not capture need properly. Like most people, he knows it does not capture need or deal with the heterogeneous nature of rural deprivation, but rather discriminates against rural poverty and is fundamentally flawed. Instead, all we heard was that the system he would employ would be fairer—well, without the detail, nobody will believe that.
Torridge has the lowest wages in the country—lower than Liverpool, lower than Manchester, lower than the cities for which the shadow Minister was speaking, lower than other Labour-represented areas—the lowest average household incomes in Devon, the lowest income in Devon, the lowest output per capita in the south-west and the highest unemployment in the south-west. There are really deprived areas in these rural areas. For 13 years, Members on this side of the House, as well as some on his side, endeavoured to persuade the Labour Government that this formula was morally bankrupt, but all he can do is pick out and criticise specific aspects of how the Government have dealt with local government funding.
The problem is that the whole formula is wrong. I want to concentrate on certain difficulties that he acknowledged—although he did not say what he would do about them—concerning the highly discriminating way the system treats rural areas. Council tax has spiralled in rural areas: it is £86 per head higher than the average, yet they get £145 per head less in grant funding. Those of us who represent these areas, including, I believe, those on the Opposition Benches, feel that that is an inequity. What would he do about that? We have got to do something about it.
I have to say with regret to my hon. Friend the Minister that this Government are not doing enough about it. It is not enough to say that £11 million, with the extra £2 million that he has found today down the back of the sofa, corrects the anomaly that small rural district councils and shire county councils are facing. West Devon has had to take out the best part of 14% of its budget over the last three years. In Torridge, there are similar problems.
One point that the hon. Member for Corby (Andy Sawford) made with which I did agree was that this Government and any future Government that the Labour party may one day in the distant future form will have to decide whether they want small rural district and borough councils, because many of them—certainly some in the south-west—are on the brink of viability. I agree with the hon. Gentleman on that. It may be that we have to look hard at the whole question of the reorganisation of local government in those areas and at whether we can maintain them.
I urge my hon. Friend the Minister to look again at the issue of rural sparsity and fairness to rural areas. The issue seems to be widely acknowledged and what has been done so far is not sufficient. One of the most frustrating factors that those of us on the Government Benches have experienced in meeting the Secretary of State—he has been very good with his time, as has my hon. Friend the Minister—is that every time we present a case, we are told that the figures are not what we say they are. Yet there seems to be no agreed common ground as to what those figures are so that we can both talk on the same level and on the same playing field. I urge my hon. Friend to sit down with the campaign that is growing in momentum and force on this side of the House—I hope that he acknowledges that—and see whether we can agree common terminology and common ground as to what these figures mean, so that we can achieve fairness in the future. I respectfully suggest to the Government that that is something to which they need to attribute the greatest priority because there is a growing sense of frustration on the Government Benches which will not for much longer be capped, if I can put it that way. I hope that, in closing, my hon. Friend the Minister will be able to help us with that.
I want to deal very briefly with the position of Devonshire county council, which is facing a huge problem following the recent severe weather. The new changes to the Bellwin formula are welcome but I understand that the formula does not deal with repair and maintenance. The Devonshire county council has £750 million—
My hon. Friend’s intervention enables me to say that the problem with the Bellwin formula is that it does not cover repair and is for a limited period. Repairs in the south-west, and particularly in Devon, are now up to a backlog of £750 million. I urge my hon. Friend the Minister to look again at the Bellwin formula to consider whether it properly takes account of the costs that large rural shires are facing after this hugely problematic and severe weather.
Does my hon. and learned Friend agree that this point is absolutely essential, because the Prime Minister, in his visit to Devon and Cornwall, made it clear that councils would be compensated for all the costs of clearing up after the storm? Confusion will creep in unless this is dealt with in the way that my hon. and learned Friend describes.
I agree with my hon. Friend and I hope that my hon. Friend the Minister will consider that. The changes that have been announced recently are very welcome but they do not go far enough, particularly for large counties, such as Devon and Cornwall, that have huge road networks, many of which have a backlog of repairs that is being made massively worse by the current spate of bad weather. We are facing huge backlogs of repair and maintenance. The current formula does not go far enough to address those problems. The Prime Minister has made this solemn pledge and I hope, and am sure, that my hon. Friend the Minister will want to see that that is properly fulfilled.
In conclusion, I urge my hon. Friend the Minister to heed this point; the problem relating to the anomaly of small rural councils and county councils—shire councils—will not go away. Torridge and West Devon are facing an existential threat from the cuts that they have faced. In West Devon and in Torridge they have cut, cut and cut again. They have gone far beyond the 40 ways that were announced some time ago. I urge my hon. Friend to address that problem and the rural anomalies.
I want to address three fundamental unfairnesses in the settlement. The first is the lateness with which the Government made their decisions. Reference has already been made to the threshold for council tax increases. It is simply not fair for local councils to find that out when many of them had already come to their budgetary decisions. The Local Government Chronicle has just done a survey of 160 local council finance officers, 14% of whom admitted that they were basically scrambling around making changes to their budgets at the last minute in an attempt to anticipate what the threshold would be. Local authorities have a difficult job anyway, without the Government making it unnecessarily more difficult in that way.
Secondly, let us look at the cuts that local government is once again facing compared with the rest of government. Around 20% of the grant to local authorities will be cut in this settlement and next year’s. That is far bigger than the cut to other Departments. Even by the Government’s own figures for spending power, the cut over those two years, excluding the ring-fenced grants for public health and the better care fund, is around 10%. Again, that is much bigger than for other Departments. The Local Government Association has calculated the real-terms cuts in Government support to local authorities over the course of this Parliament at 40%—more than twice that for other Departments. Are the services that people receive from their councils—road sweeping, refuse collection, public health, checking food hygiene, local leisure centres and parks—really less important than the services provided by all other Departments? I do not believe they are, but if they are in the Government’s mind, they have to justify that as the basis for extra cuts for local authorities.
Let us look at the distribution of unfairness among local councils. We heard an interesting analysis earlier from a number of my hon. Friends who asked the Minister questions. Essentially it boiled down to this. Councils with the highest grant have had the highest cuts; those councils had a higher grant because they had higher needs; therefore, councils with the highest needs have had the highest cuts. That is the logic of the situation.
I am sorry, but if the hon. Gentleman wants me to invent a grant settlement in the course of a six-minute speech, I am not going to oblige him.
When the Minister appeared before the Select Committee on Communities and Local Government, he admitted a fundamental change of Government policy, away from a needs-based system. The only needs taken into account are those reflected in the baseline of business rates, which started with the new arrangement in 2013-14. The new term—the settlement funding agreement—is really composed of two parts: the business rate base and the revenue support grant. As the business rate base is held constant or increases with inflation each year, the totality of cuts that the Government make falls on the revenue support grant element of the settlement funding agreement. Within the revenue support grant is something called the council tax resource equalisation adjustment. That has been cut by 25% this year, yet it is the mechanism by which extra resources are given to the poorest areas with the most deprivation. Those areas have had the biggest cuts, with resources transferred away from them. That is how the mechanism works in practice.
We can add to that the new homes bonus, which of course is not a bonus from Government, but is top-sliced from other Government funding—on the basis, therefore, of the grant that authorities already have—and then transferred to authorities according to the homes they are building. The Minister might say that that is an incentive to build homes—that is not what the Housing Minister said last time he was asked—but in the end, that money comes from a top-slice of grant, which means that those authorities with the greatest need and the greatest amount of grant pay the most into the system in the first place, and most of them lose out in the totality of the process.
Reference has already been made to my authority, Sheffield. The Minister likes to make comparisons with other areas that have not had as much grant in the past, saying that the Government are only doing a bit of evening up. Wokingham does not have the same needs as Sheffield, but in 2015-16, if we exclude the ring-fenced public health and better care fund grants that can be spent only on what they are allocated for, the spending power of Sheffield will be the same as that of Wokingham. That is impossible to justify according to anybody’s definition of fairness and reasonableness. Leeds already has less spending power and Newcastle will have less in two years. That is simply unfair. Does anyone on the Government Benches want to justify the idea that Wokingham’s spending power after 2015-16 should be higher than Sheffield’s? That is the system that Ministers are creating.
As the Minister knows, I am not against bringing some incentives into the local government finance system. I understand the desire for some localisation of business rates. I am in favour in the longer term of councils having the chance to raise more money at a local level rather than being dependent on Government, as an important element of localism involves freeing councils up to raise funds as well as giving them more powers.
I said that I would take only one intervention, so my hon. Friend will have to excuse me. Other Members want to get in.
The system is fundamentally broken and I support the proposals made by the LGA in its “Rewiring public services” document. Let us give local authorities a budget for a whole Parliament so that they can plan ahead and let us consider involving the LGA in the process of distributing grant. I want to go further than that. I want a fundamental review of local government finance based on three principles. First, we should give more powers and responsibilities to local authorities, building on community budgets and city deals and going further than they do. Secondly, let us consider giving councils more fiscal autonomy, as the Select Committee is in the context of fiscal devolution to cities. We can then see whether we can reach some agreement to enable councils to raise more of their own resources. Finally and fundamentally, when the Government distribute money to councils they must do it in a fair way that reflects needs and deprivation. That is the element that the Government have forgotten in this settlement.
Last November, I joined 30 colleagues on the Floor of this House to present petitions calling on the Government to close the gap in local government funding between rural and urban areas by a mere 10% by 2020. The petitions included 1,700 signatures from my constituency. In my view, that was a modest ask and I believe that we should look to the Government to do at least that and more in brisk order.
I recognise the problems faced by the Department for Communities and Local Government in the era of austerity, the need to eliminate the deficit and, of course, the debt repayments that will follow even when the deficit has been eliminated, but I believe that local government is taking too much of the burden—more than other Departments—and that, as the hon. and learned Member for Torridge and West Devon (Mr Cox) said a few moments ago, some local authorities are now facing such difficulties that their viability is in doubt.
It is vital that the Government should face up to the crisis towards which we are heading at great speed. Fundamentally, my complaint is as follows: why should some of the poorest people in the country, on the lowest wages, pay far more in council tax and receive far less grant from central Government while at the same time local services erode around them? That is what is happening in Devon and it is certainly what is happening in my constituency. The district council grant has been halved since 2010 and the total budget has been cut by a third over that time. This year alone, the Government have sliced the grant to the district council by 13.4%.
As for the wider picture, the situation is frankly no better for Devon county council. By next year, it will have seen a 60% cut in Government grant during the lifetime of this Parliament. Our schools and our health system are underfunded and, as other Members have said, the current system is quite simply broken. Rural residents pay council tax that is on average £86 a head higher than urban residents. They receive £145 less in Government grant than their urban counterparts, and this is a funding gap as wide as 50%.
It is welcome that the Government recognise the principle of there being a problem, and that they have put in place this emergency grant for a second year running, but I am sorry to say that even at the enhanced level that has been announced for the grant today, it closes that gap by only £1.04 a head, and at this rate it will take us 86 years to put right the gap in council tax payments, and 145 years to put right the gap in Government grant. This is simply not an adequate response to the scale of the problem that is faced in many rural communities throughout the country.
The Government make much of the spending power measure and bandy that about. That is a flawed measure. It looks at the current council tax revenues and believes that it is acceptable for some areas to pay much higher council tax and sees no reason why that should not continue in perpetuity. It also obscures the scale and impact of reductions in funding and the challenges that councils now face. For example, under the spending power measure, Devon county council has lost only 1.5% as against a national average of 2.9% in the latest settlement. But that obscures the fact that it has lost 9% in revenue support grant and, as I said, the district in my area has lost 13.4% in Government grant. Similar figures can be seen throughout the country.
I agree, just as I think it is a funny form of localism that then starts trying to tell local authorities how often the bins should be emptied.
As the Chair of the Communities and Local Government Committee said, the whole model of local Government funding is now so fundamentally broken that there needs to be a cross-party endeavour to rebuild something from scratch on a blank sheet of paper. The situation that we are in now is untenable. Somehow or other, Whitehall convinces itself that by putting this degree of hardship on to local government, the public anger at seeing some of the services that impact on their daily lives most directly will miraculously be focused solely upon the local authorities that send out the bill. I say to my right hon. and hon. Friends that I simply do not believe that that is a sound political calculation. The public are not stupid and they will see the difficulties that local government, regardless of the party running any particular council, is facing at this time, and they will hold central Government to be responsible for it.
We have already heard from my hon. and learned Friend the Member for Torridge and West Devon (Mr Cox) in the next-door seat about the parlous state of the highways and roads, but Devon county council is now consulting about a programme of cuts that will end all its non-statutory obligations: ending the subsidy on meals on wheels; closing its day centres; getting rid of all its residential care homes; axing mobile libraries and the smaller local libraries; and doing away with the youth service, except for young offenders. This will cause absolute fury on the part of voters. I do not think that it is acceptable. We have people moving into our area who are aghast at the low level of public services that they find in comparison with other parts of the country that they have come from. This is just not acceptable. It cannot go on like this. I made a speech similar to this last year. I told Ministers that they needed to do something about it if they wanted my support in the Lobby. A year has gone by, they have done nothing about it and they will not have my support in the Lobby this evening.
It is a great pleasure to follow the hon. Member for North Devon (Sir Nick Harvey). What he said threw into sharp relief what had been said by the Minister, whose speech elevated George Orwell’s newspeak to a fine art. As the hon. Gentleman made clear, the Minister paraded his shop-soiled mantra about spending power, but objective observers might think that it was more about the freedom to dine at the Ritz.
I make no apology for focusing on the particular problems of my own town and my own council, because Blackpool, which is sixth in the index of multiple deprivation, will have suffered a cumulative cut of 20.6% between 2010 and 2016. We were hit particularly hard by the abolition of the area-based grants in the first emergency budget. The present process takes very little account of the special circumstances of towns such as Blackpool, which are experiencing pressures from incomers on services such as housing and social care. We have also been hit extremely hard by the demographic double whammy of the bedroom tax and cuts in council tax benefit, which others have already mentioned.
However, it is not just a question of the actual hardship; it is also a question of the process. Our local authority has been notified of a 2014-15 in-year new homes bonus of £25,000, the second lowest in the country. The borough treasurer says that that is due to earlier than planned demolition of the Queens Park estate and conversion programmes for houses in multiple occupation, two very worthy initiatives for which Blackpool appears to have been perversely penalised.
The cumulative budget cuts for what is one of the smallest unitary authorities in the country are expected to amount to £88 million over the five years between 2011 and 2015-16. Last week, in a report to the executive, the borough treasurer pointed out that since the approval of this year’s budget by the full council, there had been six separate announcements from the Treasury and the Department for Communities and Local Government impacting significantly and adversely on Blackpool’s central Government funding allocations for the next two years, and requiring plans for budget cuts to be revisited each time. The discriminatory nature of the proposals is demonstrated by the fact that Blackpool will lose £105 per head, five times more than the losses that will be suffered by the two authorities that will lose the least.
We are also suffering as a result of the proposed £1.1 billion top-slice in the new homes bonus in 2015-16, and the transfer of an estimated 35% of that to local enterprise partnerships. In Blackpool’s case, that means losing £4.4 million of revenue support grant from the new homes bonus top slice, while receiving new homes bonus grant of only about £2.3 million. Overall, Blackpool stands to lose £2.9 million from the transfer.
When the Government make their spending and funding announcements, they should be clear, transparent and unequivocal, rather than revising downwards at a later stage. I speak with feeling because my constituency contains two of the most disadvantaged areas in England with populations of more than 30,000, namely Bloomfield and Brunswick wards. Let me describe the effects of those cuts in human terms. Virtually all the formal youth services have had to go over the last two years. The CCTV budget has been cut, the budget for trams has been cut by £100,000 this year, and the budget for the road safety partnership has also been cut. I could go on.
The reduction in the spending power of areas with higher needs and lower resources, and the changes that the Government are introducing, will not just close the funding difference, but, in time, will potentially reverse it. It is simply wrong that Blackpool should experience a cumulative cut of 20%, when Chichester experiences a 0.2% cut, Spelthorne a 1.2% increase, Reigate a 2% increase, and Surrey Heath a 1% increase. What do all those areas have in common? They are all prosperous, southern, Conservative councils.
We need to help councils to deliver economic growth in all areas of the country. That is why this week’s proposals from my right hon. Friend the Leader of the Opposition and what was said today by my hon. Friend the Member for Corby (Andy Sawford) are so important. Earlier this year, my hon. Friend the Member for City of Durham (Roberta Blackman-Woods) and I produced a pamphlet for the Smith Institute, in which we discussed some of the ways in which Labour councils are already doing things for themselves, and major changes in funding that could be made in the next Parliament.
This Government have worked on the basis of sham localism. They have talked about localism, but they have delivered centralism. We want a fundamental review, and we want to give incentives and initiatives, but that can be done only if everyone works across the boundaries of existing local and central Government and does things together. This Government have completely failed to do that. They have shown no enthusiasm for our Total Place projects, and the bankruptcy of their policies is revealed by the comments that are being made by their own council leaders as well as by ours.
I congratulate the Minister on his speech, and I commend his statement to the House. This is a difficult settlement for anyone to have to achieve, and my hon. Friend has done it as well and efficiently as I would expect him to. It is a settlement that I would have commended to the House when I was a Minister.
I welcome the hon. Member for Corby (Andy Sawford) to his new position, but he made a disappointing speech. Frankly, it was full of wind and rhetoric, and contained very little analysis. The truth is that the Minister has delivered the best possible settlement for local government that he could in these difficult circumstances, and he has worked tirelessly to do so. I will tell the hon. Member for Corby why he is wrong. He failed to answer a question when I intervened on him earlier. While we are wedded to a four-block formula, we will always have difficulties with the way in which we deliver resource to local government. We are stuck with it for this Parliament, however, so let us be sensible and realistic about it. The Government have done the best they can in the circumstances. The paucity of imagination among Opposition Members is striking; they will not move away from that point.
Such a paucity of imagination also exists among some of our coalition colleagues. My hon. Friend the Member for North Devon (Sir Nick Harvey) has made a powerful speech, and much of his analysis was broadly correct. However, when I was the local government Minister and I sought to reform the system by giving more recognition to rurality and bringing greater efficiency into the system, I was baulked at every turn by our coalition partners, who had no desire to make any change. That is the reality of public life; we have to live with what we have.
I believe that it is wrong when an efficient local authority such as my own in Bromley—which will, I trust, freeze its council tax tonight—is not rewarded for its historical efficiency. For years, we have started from a lower base than others, yet we get no recognition for that in the spending formula. That needs consensus to be taken on board. It is offensive that we do not adequately take on board the cost of running services in rural areas, although many of us tried to do that. I was surprised that my coalition colleagues were more concerned with protecting the position of the metropolitan authorities. Sheffield and Stockport were more important to them than protecting the issues affecting their people in the south-west of England. The reality is that they were unwilling to engage in a serious debate on the reform of the four-block formula.
That is not the fault of the Minister. He has done the best he can with the hand that has been dealt to him. In a future Parliament, however, we might have to think about what we should do with local government finance. That will not be done under these coalition arrangements, and it will not be done unless we are more honest about giving incentives to local authorities to recognise hard work.
My local authority has benefited to the tune of some £5 million through the new homes bonus, because we have worked efficiently and effectively. We have sought to do that in connection with our new business rates. We have worked hard, yet I see nothing in the formula that will reward us. In the London system, we are not rewarded for our historical efficiencies, and that is wrong.
We need to take a more sensible approach in order to get through this current period. The Minister has done that fairly and efficiently, but we now need to think more sensibly about what we do in respect of a system that rewards growth and hard work, and rewards local authorities for driving up their own economic base. Some Labour Members raise their eyebrows at that, but Newham council is a local authority that has worked hard to drive up its economic base and does not get a reward under the four block system. Unless we are prepared to deal with the four block system, we are doomed to a perpetual dance around—a bit like the last act of Eugene Onegin and the Polonaise—redressing a formula that is fundamentally flawed.
I do not necessarily agree with the hon. Gentleman’s analysis, but does he accept that it is possible to do both: we can incentivise growth, economic development and housing development, and still address need, without the requirement to destroy the equalisation elements of the formula?
I think we all accept that there will always be an element of equalisation in the formula, but if the system becomes entirely about equalisation, rather than about incentivisation, we will be getting into the wrong place in terms of bringing in market economics and growth. I want an element of equalisation in any formula—everyone does—but I say seriously to the hon. Gentleman that he misses out the importance of recognising that efficiency should be written into the formula. We are in a binary resource-versus-needs equation at the moment in the way the four blocks operate, and there is also an inefficient means within the blocks. I worked this out once and found that about 297—I may have lost a couple along the way—bits of regression and analysis in the formula are worked out. The right hon. Member for Salford and Eccles (Hazel Blears) nods, because she had to suffer about 300 in her time—we have scaled it back a bit. This is a ludicrously complicated formula, it does not get to the heart of where need is, and very often the interactions of the bits of the regression and analysis are counter-intuitive. So unless we are prepared to sit down in the new Parliament—it will not happen in this one—to examine seriously the formulation for local government finance, we will not get anywhere.
The Minister has presented a workable, sensible and effective proposal that will take us through until the general election and beyond. This House needs to take on board the fact that we will be having these same circular debates time and again unless we are radical about the need to change local government finance for the future. Such change will come after the general election, but all of us, if we are serious about local government, need to get a grip on that and be prepared to think outside the box of where we currently are. That would be in all our interests.
Local government is important to everyone. It is about improving people’s quality of life, developing potential, protecting the vulnerable and supporting communities. That is why the Government’s attacks on local services are so destructive. When the severest financial cuts are made on the poorest, that is grossly irresponsible. I listened with horror to what the Chairman of the Select Committee told us: the Government have now admitted that they are no longer concerned about protecting the vulnerable and are more interested in protecting the rich—that is outrageous.
It is completely unacceptable that Liverpool, which on the Government’s own figures is the most deprived local authority in the country, has suffered the deepest cuts yet again. Liverpool will suffer drastic cuts in spending power this year and it will suffer them again next year, with its funding slashed by another 5.4%—£32 million—which is the equivalent of £148 a household. By contrast, Surrey Heath is facing cuts of £73,000—a mere 0.1% cut. That is an indication of where the Government’s priorities lie. In real terms, Liverpool’s funding has been cut by 52% since 2010, and the figure is likely to reach 58% by 2016-17. As 76% of Liverpool’s finance for local services comes from central Government, in recognition of the city’s needs, the cut will be devastating.
I was appalled to hear the Minister state at the beginning of this debate that he regarded that support as a handout. I call it justice; it is about recognising need. He sees supporting deprived communities as giving a handout, which he is rapidly withdrawing. It is an absolute disgrace, and I am pleased that he has put that on the record in this debate today. The reality for Liverpool is that services such as nurseries, care for the under-fives, social care for the vulnerable, which includes 5,000 care packages, library, regeneration and youth services will all be at risk. Whatever spurious lines he tries to go down, the finger of blame will be pointed clearly at the Government who will be responsible.
I noted that the Minister attempted to divert this debate by talking about Liverpool’s reserves. Those reserves are held because they are legally required to be held, mainly on behalf of schools. Furthermore, despite the devastating blows to local services coming from this Government to the city of Liverpool, the council and its mayor are responsible people and they are determined to maintain the city’s finances in a prudent manner, and they will not deviate from that.
My hon. Friend makes an incredibly important point about Liverpool’s reserves, which we calculate are equivalent to one month’s operating costs for Liverpool council. That is a prudent level of reserves. Perhaps, it wants more reserves in order to have some sustainability given the context that she is powerfully describing.
My hon. Friend makes an extremely important point. Nothing that the Minister has said tonight can deviate from the reality that the Government are hitting hardest the poorest areas of the country. They describe the funding that they give as a handout, and they are shameless in their intention to continue hammering the poorest areas of the country. It is absolutely outrageous and absolutely unacceptable. Of course, the cuts in local government support to Liverpool are not the only blows being dealt to the city. For example, the hated bedroom tax is already affecting more than 11,000 Liverpool households, which are losing an average of £14 a week. That combined with the additional council tax charges that the poorest people are being required to pay means that a large number of people are now being asked to pay £16 a week more. That might not sound much to a millionaire or to people who are extremely wealthy, but for a poor person in work struggling to survive on a low wage and to maintain their family, this is an additional hammer blow, which is unacceptable and disgraceful. One consequence is increasing debt for vulnerable people, and that is something about which the Government should be concerned. Instead, they seem to have washed their hands of it and simply do not care.
I have described the current situation in Liverpool in relation to previous revenue support grant settlements and to what is going to happen in the coming two years. It is all credit to the city of Liverpool, its elected council and elected mayor, that the city is resilient. It is fighting hard to support jobs, back enterprise and bring investment to the city. For example, the mayor has already restored the cruise liner terminal. The council promotes investment worth millions of pounds. It is about to host the international festival for business on behalf of the United Kingdom. It is delivering apprenticeships and it has protected people from the impact of Government cuts. However, this settlement makes that task harder; indeed it might even make it impossible. The people of Liverpool know what is happening and who is to blame. Even at this late hour, I ask the Government to think again about the unfair cuts they are inflicting on the people of Liverpool and treat Liverpool citizens with the respect they deserve.
Devon, as we have heard today, is in a particularly difficult position, partly as a result of its rurality and size—we have more roads than Denmark, for example, and they take a lot of maintaining—and partly because of the age of our population. Teignbridge district council, my local authority, has the highest number of over-65s in the whole of the south-west. That puts a huge burden on councils, whether district or county.
The spending power of both types of local authority in Devon is determined by four key factors: the level of the revenue support grant; special support, particularly efficiency support for sparse areas; business rates; and council tax. The challenge with the revenue support grant, as we have heard, is that it has been massively squeezed—by some 8.5%. Why are the Government doing that? I entirely understand that they want to incentivise good behaviour, but Devon has been good. It has collected 98% of its council tax and cut its reserves to the bone. The average grant for rural Devon is 50% less than that for its urban counterparts.
What impact will that have on some of the very special services that we all value, such as education? Devon is sixth from the bottom in the education funding table. It gets £480 per pupil less than the average. I do not believe that is acceptable. To say that we can clearly do with less because we get good results is simply not true. It also has an impact on public health. In Devon we receive £29 per person—remember the age of our population—yet the national average is £51 per person.
The Government, and indeed previous Governments, have recognised that unfairness. They said in 2012 that it is not right, but so far nothing has been done. The ESSA—efficiency support for sparse areas—was intended to provide the answer. Although I am grateful that the figure this year will be £11.5 million, rather than the £8.5 million we had last year, because of damping it will give us less than 90p a head. We need three times more than that. How much of that funding will my local district council get? Last year it got £2,275, so I guess that this year it will get less than £2,500. Last year the county council got £741,318, so this year it will get less than £800,000.
The take for business rates assumes that businesses can afford to pay. Many businesses in my constituency are finding business rates one of the most difficult things they have to budget for. I am pleased that the Government have undertaken to cover the lost revenue through the 2% cap, which I welcome, but it is an ongoing challenge. The reality is that business rates, as currently constructed, help neither the taxpayer, nor the local authority. They are in need of substantial reform. Council tax, the other source of revenue, is a concern for those living in rural areas, because they already pay £86 per head more than those in urban areas. Even if there was no freeze, there is only so far the pips can be squeezed. Frankly, I do not believe that we can go any further.
In my view, therefore, the settlement penalises rural communities and does not reward good councils. I urge the Government to look at it very carefully, because this cannot go on. I would certainly like to see some progress made by this time next year.
It is rare indeed that I make a foray into local government territory—I do not think that it is entirely helpful for previous Ministers to reprise their experiences—but I have spoken today on the police settlement and will speak in this debate because I have been galvanised by the sight of what is happening in my community.
When I came to the House of Commons 17 years ago, it is safe to say that Salford was not the most attractive place to live. We had a huge range of problems, including crime, family breakdown, drugs and dreadful housing provision. We found it virtually impossible to attract business investment, and nobody wanted to live, work or raise a family there. Over the past 16 years we have seen a transformation in Salford and in Eccles. In many ways it is hard to believe that it is the same place. We now have MediaCityUK, the BBC, ITV and Salford Quays. Tourists and visitors now spend £200 million in Salford. Who would even have thought that tourists would be visiting Salford for a weekend break?
For a time, we had the fastest-falling youth unemployment rate in the whole of the north-west region. Our young people were getting skills, they had aspirations, and they were getting decent jobs. We have had a huge amount of regeneration. We are just about to put the final piece of the jigsaw in place with the Pendleton Together programme, for which I am grateful for Government support; we got £120 million through a private finance initiative. That will mean that virtually all of the city has seen some regeneration over the past 15 years. Yet what am I seeing now? In relation to crime, I am seeing antisocial behaviour starting to creep back into the system, despite the valiant efforts of our police service. I am seeing youth unemployment rising at an absolutely heartbreaking rate. I am beginning to see all the advantages we have gained starting to be rolled back.
I believe that this settlement is unfair. I entirely agree with my hon. Friend the Member for Sheffield South East (Mr Betts), the Chairman of the Select Committee, that we need to build a new system. The hon. Member for Bromley and Chislehurst (Robert Neill) said that we need a radical new system, and indeed we do, because the current system is badly hurting the most vulnerable people. Despite the success story of Salford, we remain a city with a huge number of vulnerable people, young and old. We have already put in place £97 million-worth of cuts over the past three years, and we have another £25 million-worth of cuts to make. Our spending power has been cut by 19.5%. On every single measure, our city is under strain, and many of our residents are now at breaking point. That is not just because of the local government settlement; it is the cumulative effect of the bedroom tax, which my hon. Friend the Member for Liverpool, Riverside (Mrs Ellman) mentioned, all the welfare reform provisions that have been introduced, and pressures on the health service.
Today we have had two debates. A Minister from the Home Office came to talk to us about policing, and now a Minister from the Department for Communities and Local Government has come to talk to us about local government. The cumulative effect of the cuts made by the Department for Work and Pensions in housing, transport, health and all the other areas is what matters to our constituents, because they do not see this in Government Department silo terms. In government, we said to local government, “You’ve got to get your act together. You’ve got to do Total Place, you’ve got to have community budgets, you’ve got to pool your budgets, your inspection regimes and your targets, because that’s the only way to survive this period of austerity.” That is absolutely right because it is the only way that we will be able to protect public services.
At central Government level, there is none of that joining up at all. A Cabinet Minister is judged on how big their budget is, how big their legislation is, or whether they are a big hitter; they are encouraged to operate as an individual. Yet we ought to be collaborating on all these issues. In the previous debate, I suggested that the Treasury ought to allocate interdependent budgets to two or three different Ministers so as to say, “Your success is dependent on your collaboration with your colleagues; we do not operate in silos.” On any company board, the sales director is dependent on the marketing director and the human resources director for the success of the enterprise. Our whole system of governing in this country is utterly old-fashioned and out of date.
This is nothing new. Five years ago, when I was in the Cabinet, I said to the Cabinet Secretary, “If you’re saying to local government, ‘You’ve got to join things up and look through a different lens’, then absolutely the same requirement is on central Government.” I am told that there is a bit of interest in this kind of reform at central Government level. I shall be pushing for that with every bit of my energy, because it is the only way that we, as a country, will be able to survive austerity. When my party comes back into government, which I hope will be very soon, we will face the same pressures. Being more creative, more innovative and more joined-up about the resources that we have to spend is the way we will make a difference.
I commend the report by the Local Government Association, “Rewiring public services”. It has done a brilliant job in trying to get some consensus across the political parties. It talks about more devolution, more co-location, a five-year funding settlement, fair sharing of resources across England, bringing all the Government Departments in England together, wider revenue-raising powers, and municipal bonds. That is the kind of innovation and creativity that we need. Just keeping on with this discredited route of salami-slicing our services will not protect the people who we all know are absolutely desperate. The sooner we get on with this programme of major reform, the better. I note the Minister’s invitation to me to come and make representations. I ask him, even at this late stage, please to consider the impact of this on some of the poorest people in my city, who are absolutely desperate at the moment.
It is a pleasure to follow the right hon. Member for Salford and Eccles (Hazel Blears). She made an interesting speech, as one would expect. Many hon. Members’ speeches have been powerful, not least in suggesting the weakness of the system that guides local government funding.
There is a consensus of disappointment—albeit unspoken on Labour Benches—about the speech made on behalf of Her Majesty’s Opposition by the hon. Member for Corby (Andy Sawford). It entirely lacked any alternative narrative or suggestion, other than a platitude about the system being fairer and needing to be looked at in future, to give us an idea of what the Labour party would do. The right hon. Member for Salford and Eccles was a Minister in the previous Government, and the right hon. Member for Leeds Central (Hilary Benn) was a senior figure in that Government. After all, the previous Government led us into this calamitous financial state, meaning that today’s Ministers have to make tough and difficult choices. Her Majesty’s Opposition’s total failure to recognise responsibility for the mess that the Government inherited, or to provide any insight into the tough decisions or choices they would make if they were ever allowed back into government by the British people, was disappointing. The House deserved better, and I expected more of the hon. Member for Corby, of whom I am actually an admirer.
I am a founder of Rural Fair Share, a cross-party campaign group of MPs from both sides of the House, and I am chair of the all-party group on rural services, so I make no apology for speaking from a rural perspective. Powerful speeches have been given by my hon. and learned Friend the Member for Torridge and West Devon (Mr Cox), the hon. Member for North Devon (Sir Nick Harvey) and my hon. Friend the Member for Newton Abbot (Anne Marie Morris). There was a very Devonian quality to much of their speeches. They spoke effectively for Devon, but also for rural areas right across this country, not least the East Riding of Yorkshire.
As has been said—I make no apology for saying this again—people in rural areas earn less than those in urban ones. The idea that people in rural areas are somehow all prosperous and wealthy compared with the massively deprived populations of urban areas is false. In truth, people on lower incomes are paying £86 more per head in council tax. That came about under the system instituted by Labour Members who talk about the cost of living crisis. It sometimes feels as though they do so with crocodile tears. They put in place a system in which poorer people pay higher levels of council tax, while their councils receive £145 less per head in central Government grant than those in urban areas, and the cost of delivering services in rural areas is higher, as my right hon. and hon. Friends have said. Look at a map: where does it cost more to empty the bins—in the city or in the vast rural area around it? It is obvious that there are cost pressures.
The hon. Gentleman is selling a misconception to the House. Where are services more expensive? Let us look at the numbers for looked-after children, which, as he well knows as chair of the Education Committee, cost £40,000 to £50,000. In my area of Newcastle, there are 101 looked-after children per 10,000 of the population; in Wokingham, there are 24 per 10,000. That is an example of where costs are much higher.
It is fair to point out that Wokingham is not representative of all rural areas in this country. It is a rather unhelpful comparison. However, the hon. Gentleman is right to say that urban areas involve costs, and concentrated areas of deprivation have costs. No Government Members are suggesting complete equalisation, but to have an area with more low-income people paying higher levels of tax for fewer services is not sustainable.
I know that, in his heart of hearts, the hon. Gentleman was disappointed by the speech of the hon. Member for Corby, who simply failed to explain how Labour would wrestle with the issues. The Minister is wrestling with those issues. [Interruption.] The hon. Gentleman is trying to heckle me. What we heard from him was a defence of a system that is indefensible. [Interruption.] It is indefensible to suggest that the system was based on need and that consensus had somehow been smashed. The truth is that the previous Labour Government refused to listen to voices from all parts of the House representing the rural interest. In fact, they allocated four times the weighting to population density—not deprivation, but density—than to sparsity. That was unjustifiable, but, sadly, it continues to be a fundamental part of the system today.
I, too, am pleased that there has been a minuscule increase today in the diminutive grant to rural areas from £9.5 million to £11.5 million. However, even the larger figure would not stretch to a grab bag of crisps for each resident who lives in a rural area, although that might depend on how competitive one’s local grocer is. My hon. Friend the Member for North Devon laid out just how many decades it would take to equalise the figures. Those of us who speak on behalf of rural areas simply say to the Government that we must take more action to narrow the gap. We think that the 50% rural penalty—50% more funding goes to urban areas—should be reduced to no more than 40% within five years.
We have asked for more evidence. The Government have undertaken to carry out research on the cost of rural services. I fear, as do many of my hon. Friends, that the research will look just at rural services. It must compare the costs of services across urban and rural areas. It would then be able to pick up on the point made by the hon. Member for Easington (Grahame M. Morris) about the number of children who are in care and the cost pressures that arise from that.
Not only must the funding system be dynamic and reward successful councils that promote housing and business, but it must have a baseline that genuinely reflects need. The system that Ministers are wrestling with today was inherited from the Labour party. It is not fair and it does not properly reflect need. The fact that rural communities have been penalised so much for so long just goes to show how morally bankrupt are the arguments that we have heard from the Labour party.
I will concentrate on the settlement and the Government’s approach to localism.
I think that all Members accept that the United Kingdom remains one of the most centralised countries in the world. Most Members also accept that services are often better and more responsive when they are closer to communities and local people. There is a general consensus about the need for more localism. I accept that the Government have made some good decisions in respect of localism and have devolved some responsibilities to local government. They have not gone far enough, but they have made some progress. I was pleased that the Leader of the Opposition set out some principles earlier this week on the need for the further devolvement of responsibilities. The Government could do more to progress the localism agenda and that is reflected in the settlement. I will say more about that in a moment.
On Monday, I visited Manchester with the Communities and Local Government Committee. The Greater Manchester combined authority put forward a powerful argument for fiscal devolution. It wants more financial responsibilities to be devolved to local areas. I agree that there is a need for that, but the governance structures would have to be looked at.
I would like to make two important points about the settlement and localism. First and foremost, as the Chair of the Communities and Local Government Committee pointed out, the timing of the settlement has presented serious challenges for many local authorities, including Rochdale borough council. There has been considerable uncertainty and there are also issues with the information that is coming from the Treasury. There is no doubt that the Government need to inform local authorities earlier about their financial prospects. I understand that there was confusion because the Government left out vital information about small business rate relief and education services grants, and that caused problems for local authorities. It was not acceptable to spring the settlement on them for consultation 17 working days before Christmas. Local authorities cannot be expected to cope with those sorts of messages from the Government.
My second point is about crisis loans and the social fund that used to be administered by the Department for Work and Pensions. We now know that the Government decided to devolve that responsibility—we could call this localism—to local authorities so that they could administer crisis loans, community care grants and support to exceptionally vulnerable people. No one will be surprised to hear that when the Government devolved that funding to local governments, they cut it quite dramatically, and they now propose to cut it for the year ahead. We know from the settlement in December that the Government are cutting that funding to zero in 2015. It is good that the Government are localising that responsibility because local authorities can better understand people’s needs, but it is appalling that they have decided to cut to zero the funding for a safety net for the most vulnerable people in our society. That is not the sort of localism that the country wants or that people would expect.
Let me conclude with a few comments about the situation in Rochdale. It is right to say that when compared with more affluent councils, Rochdale has a relatively small council tax base and an equally small business rate base. Rochdale council does excellent work and has big ambitions, but the fact remains that Rochdale is reliant on the grant funding provided by Government. Because of that, the council is disproportionately affected by funding cuts of any size. The cumulative cuts in funding of nearly 23% to Rochdale council since the election put at risk all the work that the council is doing to help one of the most deprived communities in the country. Where cuts are made, they need to be fair. Those who can least afford to pay more, such as Rochdale council, should not be targeted for the deepest cuts, as they have been by this Government.
May I start by saying that I do not speak for my party on these issues? My hon. Friend the Member for Mid Dorset and North Poole (Annette Brooke) does that. I find it discourteous to us as a party that the Chair routinely does not call the lead spokesperson from the Liberal Democrats at the appropriate point in these debates—that is a point for you, Mr Deputy Speaker, to take through.
Order. The hon. Gentleman can call his speech over now if he wishes and we will bring on somebody else—I would be more than happy. I hope he is not questioning the Chair and the way that people have been called. It is for the Liberal Democrats to inform the Chair about who is speaking, and not us working off a list. I hope he wishes to withdraw his earlier remarks.
Of course I do, Mr Deputy Speaker.
I have found this an invidious and divisive debate. It pits rural areas against urban, towns against cities, and north against south. Hon. Members from all sides of the House want to make the best representations for their local communities and get a fair deal for their local areas, but as my hon. Friends have demonstrated, particularly with Cornwall and Devon, this debate pits rural against urban communities. I hope that the Minister can see across the House, across the parties and across the rural-urban divide a desire to consider fundamentally how we reform local government finance in the future, whether that involves my hon. Friends the Members for Beverley and Holderness (Mr Stuart) and for North Devon (Sir Nick Harvey), or the Chair of the Communities and Local Government Committee who is from Sheffield. There is a clear desire to consider properly and fundamentally how we as a national Government grant resources to local councils. At the moment we have this annual theatre in which Members from across the House pop up and defend their individual parts of the country, but without a settled consensus on how the debate goes forward.
I want to speak not about the size of the local government settlement—I recognise, as I am sure my hon. Friend the Minister does, that the economic situation bequeathed to the coalition Government by the Labour party makes an increase in spending very difficult—but about the balance between rural and urban areas. As my hon. Friend the Member for North Devon so eloquently put on the record, urban areas have historically received 50% more per capita funding than rural areas, despite the fact that in rural areas such as Cornwall people on average pay higher council tax, earn lower wages and have higher housing costs as a proportion of their income. Local authorities, whether in Cornwall, Torridge and West Devon or North Devon, face difficulties in delivering services across rural and sparsely populated areas.
The Government have recognised this. In the spending settlement for 2013-14, they suggested that £200 million would be made available to increase the ability of rural authorities to meet those challenging circumstances. What happened, however, was that three quarters of that gain was damped so that the authorities losing out—the urban authorities, pretty much—did not suffer a sudden fall in funding. What we did not expect, and what nobody expected at that point, was that the Government would suspend moving the remaining three quarters of that gain until at least 2020, kicking the argument into the long grass and further delaying a fair settlement for authorities such as Cornwall.
What we have seen today in the Government’s increase in the ESSSA, or efficiency support for services in sparse areas, grant is welcome, but it is really just an additional £2 million on top of a paltry £9 million. If that £11 million is divided across the 95 most rural local authorities, they will have barely enough money to employ a full-time officer to work out the differential between what they should be receiving as a rural area and what they are getting. I suggest to my hon. Friend the Minister that while it is welcome—it would be churlish to look a gift horse in the mouth, as it will make a difference—it is woefully insufficient to start to close the divide between rural and urban funding that so bedevils parts of the country such as Cornwall.
My hon. Friend is making a powerful case and I agree with everything he says about Cornwall. Will he reflect on what we have learnt this evening from my hon. Friend the Member for Bromley and Chislehurst (Robert Neill) and perhaps take up those arguments with the urban Members of his own party, so there can be a proper way forward?
I am grateful to my hon. Friend. She makes the point that I started with: this is a very divisive debate, pitting colleagues within parties on all sides of the House against each other. It pits towns against the countryside and city councils against district councils. That speaks to the fundamental need for overall reform and cross-party consensus on how we deliver local government funding in a way that meets needs on the ground and is equitable across the country, because it ain’t doing that at the moment. I have joined a number of colleagues on the Government Benches in presenting arguments to the Government to the effect that the rural-urban divide needs to be eradicated over time.
Further to the intervention from my hon. Friend the Member for Truro and Falmouth (Sarah Newton), if it is the case that Members of the hon. Gentleman’s party are standing in the way of a fairer settlement for rural areas, it may be worth having a quiet word. I would certainly urge him to do so, if that is the blockage.
There is no suggestion that any one of my colleagues, as opposed to any one of my hon. Friend’s colleagues on his side of the coalition, is standing in the way of tackling this funding formula. Of course, one of his colleagues is the Secretary of State. I think both the hon. Gentleman and I know that the funding formula bequeathed to us by the Labour party is one that really put in place the disparity between rural and urban areas, and one that he and I and all our colleagues on the Government Benches are asking our right hon. Friends in the Treasury and in the Department for Communities and Local Government to address.
I have joined colleagues on this side of the House in presenting the case for a fairer funding formula for Cornwall to Government. I am disappointed, to say the least, that that case has not been heard today. On that basis, it would be wrong for me to support what I think is an inadequate settlement tonight, and I shall continue to work with colleagues from all parts of the House to try to find consensus on how we deliver local government funding that is fit for purpose.
Hull is a very proud and resilient city, despite many setbacks that include being one of the most heavily bombed cities in the second world war outside of London and the loss of the fishing industry in the 1970s. Now we are looking at opportunities to renew Hull. We are looking at building on the city plan to develop our renewables industry and to develop and extend the industry around the Humber, and of course we have been nominated as city of culture for 2017, building on the wonderful facilities that we have in the city, like Hull Truck theatre and our excellent museum quarter, and the possibility of a Hockney gallery. I pay tribute to the Labour council in Hull and its leader, Councillor Brady, for having a vision of how Hull can go forward positively.
However, we are hampered by the unfair slashing of the local authority funding to Hull, repeated in many other northern cities. That is despite the Government saying, when they came to power, that they wanted to rebalance the economies of the north and south and address the problems of the general split between north and south. Hull is losing 25% of its budget. Of course, Hull has traditionally relied on central Government grants because our low property values mean we have a low council tax base and we have high levels of need. I fundamentally object to what the Minister said in his opening remarks—he said that local government was moving away from the begging bowl approach. That says a lot about the way he sees local government funding.
My city has more people in long-term unemployment than anywhere else in the United Kingdom. In one ward in Hull, men live seven years less than the English average. We have more low-skilled jobs, part-time work and people on zero-hours contracts than many other parts of the country. From this unfair local authority funding cut, we have already seen nearly 2,600 real jobs go in our local authority. I stress that those are real jobs—care assistants, and early years workers and support workers for troubled teenagers so that we do not end up having to spend a lot more money down the road when those children grow up and have more problems. Those are real jobs that are necessary in a city like Hull, and of course, when people lose their jobs, their spending power is lost to the local economy.
My constituents are finding out that the Government are balancing the books on the backs of the elderly, the disabled and the young, through the DWP changes that we have seen, such as the cruel bedroom tax, with 4,228 claimants affected in my city. Some 20,000 people who previously did not have to pay any council tax will now have to pay 8.5%, which will go up to 20% next year. As my hon. Friend the Member for Liverpool, Riverside (Mrs Ellman) said, it is the pressure on the low-paid and the vulnerable that is really affecting cities such as Liverpool and Hull.
It is suggested that efficiency savings can be made, but they have already been made—they are long gone. It is not the fat that is being eaten into now; it is the bone. Hull was very badly flooded in 2007, and it is at such times that the resources that are available to local authorities, the fire brigade and the police come together to provide the support that communities need when they are in crisis. If we cut and cut and cut, those support mechanisms will no longer be there. My heart goes out to people in the south who are suffering flooding problems currently, but perhaps they are recognising that cutting statutory services is very foolish in the long run. The statutory services are retreating into their silos, which is not helpful for dealing with crises in our communities.
As I have said, when the Government came into office, they said they wanted to rebalance the economy between the north and the south, but the unfairness of the cuts in our city means we are struggling to provide support to our communities, develop the skills in our communities and bring businesses in. We just do not have the resources to do those things.
When Labour was in government, the Liberal Democrats always called for more money for Hull, but in this House they have consistently voted all the way to cut money for my city. The Liberal Democrats on Hull city council have now called for a council tax freeze, which would mean even more cuts to services. Lib Dems support the unfairness of the cuts to areas in the north such as mine. At the last general election, they pretended to be friends of the north and said they would stand up for Hull, Sheffield, Leeds and other cities, but the people of those cities will very well remember the actions of the Liberal Democrats in government. They are not friends of the north and that will not be forgotten.
To date, committed local authorities under all parties for the most part have managed to protect front-line services. I should like to put on record that credit is due to many councillors throughout the country, particularly given that satisfaction in council services has increased.
However, today we discuss yet another difficult financial settlement. I want to start with some positives. I welcome the extra funding to enable councils to freeze council tax for the next two years despite the fact that I believe in localism and look forward to times when it will be appropriate for more local choices to be made. Given the inherited economic situation in 2010 and the measures that have had to be taken, it has been vital to protect our constituents from further pressures on their costs of living. I note with some pride that most if not all Liberal Democrat-controlled councils are expected to freeze council tax in 2014-15—a record that, I suspect, cannot be matched by the other two major parties.
I welcome the increased efficiency grant. I have always been supportive of business rate retention as an incentive for growth and job creation and hope it can be further localised in future. I welcome the changes that have been made on the new homes bonus—a consequence of the Government listening—so that more money goes directly to local councils than was once expected. However, I recognise that London councils face considerable top-slicing and are at a disadvantage.
I welcome the move to support adult social care and the challenge to local councils to integrate health and social care services, but I am deeply concerned about whether the funding will be adequate to deal with the needs of our most vulnerable constituents. City deals and the regional growth fund provide opportunities for further decentralisation, which I welcome, along with the additional funding. I welcome the extra funding for rural councils, but I concur with hon. Members who have said that that in no way gets to the heart of the matter. The rural penalty has been with us for a long time. I represent part of Purbeck district council and have presented a petition in the House on the matter. The gap goes on and on. We are not closing it. I have constituents on low wages and there are very high housing costs.
Bus services are among the many services being cut in the rural part of my constituency—I do not apologise for bringing it up again. My constituents, whether they are going to work or college, non-catchment sixth forms, apprenticeships or work training, are simply unable to use buses, as are tourists. The most recent cuts have made the situation diabolical. From April, in one large village, with a population of 1,800, whose bus route goes through several other villages, there will be a bus to Poole only two days a week, and evening services at 5.30 pm are being slashed, meaning that workers are not being supported. I have received representations from Colehill, Wareham town council and right across the rural part of my constituency about this matter, so will the Minister meet his counterparts in the Department for Transport to discuss this serious issue? Basically, some of my constituents face a stark choice: use a car or move from the village. That is very harsh.
I remain concerned about the local council tax reduction scheme. I understand from the National Association of Local Councils that about 20 billing authorities are not passing on council tax support funding to parish councils. What further action can the Minister take? Indeed, do billing authorities have any certainty about this stream of funding for the future? I am pleased, however, that the referendum principles have not been extended to the parish councils. Some of the deficits in services can be made up as reductions are made in other areas.
Local government is facing a tough situation, and the Government must listen to councils that fear they are facing a cliff edge or a precipice in future years. I also think that the rural penalty must be addressed sooner rather than later. We need to appreciate what local government does best, which is pulling local government services together. I support the rewiring of local government services as put forward by the Local Government Association. Among other things, local government borrowing that complies with prudential rules should be facilitated, but at the same time, I thank the Government for allowing councils to borrow more money in the last financial year. I want more, not fewer, and better quality services delivered by local government, and I want other services facilitated too.
I want to touch on my concerns about the overall settlement and about my own area of County Durham.
I commend to hon. Members who have not seen it the excellent briefing note provided by the House of Commons Library. Frankly, any impartial observer reading it would realise that it makes a complete mockery of the local government Minister’s claim that this is a fair settlement. He suggested that those with the broadest shoulders should bear the biggest burden, but that is clearly not happening. At a time when ordinary people across the country—certainly in my constituency—are struggling with the cost of living crisis, the Prime Minister and the Secretary of State for Communities and Local Government think it is right that the most deprived communities in the country should bear the brunt of Government cuts, while the most affluent areas should escape relatively unscathed.
I say that advisedly. The revenue support grant for Durham is being cut by £28 million. It is suggested that these cuts have been applied fairly, but of the 14 councils in England that are receiving an increase, 13 have Tory MPs, four of whom are Cabinet Ministers. To my mind, this is gerrymandering of the revenue support grant, and it is targeting mainly Labour-held councils. They are the principal losers, because they are being targeted for much deeper cuts than their Conservative counterparts, and it is having a devastating impact on their ability to provide services locally.
I am amazed at the audacity of Government Members who claim that we are all in this together. During this Parliament, the 10 most deprived areas in England, including mine, are receiving cuts 10 times greater than the most affluent areas. Despite all the Government’s rhetoric about rebalancing the economy, Durham county council’s cumulative spending power is being reduced by a staggering 17.3% under this Government. The Treasury calculated that, for the period from 2011-17, £222 million is being lost. Conservative and Lib Dem Members were saying that we need to address the disparity between urban and rural areas. Members who represent affluent areas should come to my constituency; they should come to Peterlee and to Horden and see the problems that we have. They would then understand the lack of car ownership, the problems that people have in accessing services and their disadvantages.
Adult social care and children’s services account for over 60% of our expenditure. We have heard about the Barnett graph of doom, where all local government revenue will go on statutory functions, particularly social care. Many authorities, particularly in the north, will hit the buffers. The hon. and learned Member for Torridge and West Devon (Mr Cox) suggested something similar was going to happen in the south-west. It should be a cause of concern for all of us.
It has somehow been implied that we are undeserving. My late father was a coal miner. County Durham made enormous sacrifices for the nation. The county has been scarred by a legacy of coal mining, shipbuilding and steelworks. That has a legacy in people’s health that we must recognise in greater need. There is a debt of honour that the Government should recognise. Consensus on the equalisation element of the revenue support grant has existed across all parties since the war. It is a serious matter to break it.
There are alternatives. My hon. Friend the Member for Corby (Andy Sawford) mentioned the discussions that have taken place with the Local Government Association, but we should not throw the baby out with the bathwater. The Government will be putting authorities such as mine under the most intense pressure and, quite frankly, the wheels will come off. They will not be able to deliver services. This will result in children and older people in deprived areas such as mine suffering worse services than their counterparts in more affluent parts of the country. That seems to me to be a perversity.
In areas such as County Durham, with a relatively small council tax base due to low house values—some 60% or 70% of the properties in my constituency are in band A—there are problems because of the greater use of local council tax support schemes. What does that mean? It means that we have a greater reliance upon Government grants to maintain the same level of services. So when grants are cut—even in the same proportion as in affluent areas—areas such as mine suffer the most. If this is the rebalancing of the economy that the Government are trumpeting, they are ignoring the reality of people’s needs. It is Robin Hood in reverse: rewarding those living under Tory councils at the expense of those in Labour councils.
I am glad to be the last speaker in this debate and that my patience has paid off. I am very keen to talk about the one thing on which there has been consensus: the overall local government settlement. The argument is very much to what extent the cake is split. I accept that the coalition Government had to do something about public spending in general. Local government spending is some £22 billion, or 25% to 30% of total public expenditure. When some three and a half years ago we inherited, from the previous Government probably the biggest deficit since the second world war, it was absolutely essential that we did something about it.
I very much welcome the fact that the Prime Minister has been several times down to the west country. The Bellwin formula is being looked at so that we can repair the coastline and do something about the flooding, in order to put the west country, and Devon and Cornwall in particular, literally back on the map of the railway system. It is essential that that is done.
I say this to Ministers—[Interruption.] I see that the Minister has returned to the Chamber; I very much welcome him back. We have had some interesting meetings with him and with the Secretary of State, at which we have been treated very courteously. Some £11 million has been found to get a fairer share for rural authorities—the generosity overwhelms me—but we are asking for another £20 million a year for five years to reduce the anomaly. What is £20 million out of £22 billion? By my arithmetic, it is less than 10% of 1%, or 0.01%. That is all we need to recognise and address the fact that local authorities in rural areas are not treated fairly. We pay some £85 more in council tax on average and receive £145 less in grant from the Government. That needs to be settled.
I have said this before, but Devon has more roads than the whole of Belgium, which imposes a huge cost. In January, it was estimated that some 7,500 potholes needed to be filled in Devon alone. All this will add an enormous cost to the delivery of our services. Bus services in Devon and the concessionary scheme cost the county council some £10 million. This is a concession that the county council makes: it does not have to find that money, but it makes sure that the people of Devon can get those concessionary fares.
The schools in Devon are much smaller than many across the country and are very spread out, with rural school transport imposing another cost. All these things have a huge impact on Devon county council. Devon county council has reduced its staffing by some 3,000 people over the last few years. It is therefore a lean, mean council that is delivering good headline and front-line services, but we need that help—not only for Devon county council, but for East Devon district council and Mid Devon district council, which is probably one of the most rural in the country.
My colleagues have made the point that when people drive through Devon and Cornwall, they see many parts that look hugely prosperous, but among them are some of the poorest people and the lowest wages. We welcome many tourists down to Devon and Cornwall, and when they retire from these wonderful, affluent areas of London and the home counties, as they love to do, that drives up house prices. That means that the local people have to pay an awful lot more for their homes. Therefore, those on lower wages are paying higher council tax than they should be and we are having lower services delivered than we should.
I urge Ministers—[Interruption.] I see that the Secretary of State is now in the Chamber; I very much welcome his listening to us. I ask that one of these days we finally sit down and agree the figures for the anomaly. Dare I say it, but another Secretary of State talked about moving the goalposts, and I think sometimes the goalposts do get moved when we sit down and talk about local government finance. I think Ministers accept that, which is why we put in place a formula to review the costs of delivering rural services and why we started to move money across in 2013-14. However, we have now put a damper on that and stopped that money flowing across.
I suggest that we sit down to discuss this and turn on the tap again, so that the funds can start to flow and we can get a fair settlement, because we will not get a fair settlement from Labour Members, who spent all the money, borrowed and created huge debts. It is therefore up to this Government to sort out the anomaly. I look forward to working with the Secretary of State to ensure that that happens, because the people in rural areas of Devon and across the country deserve a better deal and they expect this Government to deliver it.
As I spent time contemplating this financial settlement for local government, I was reminded of my recent rereading of that towering classic of Victorian literature, Charles Dickens’ “A Tale of Two Cities”. That is basically what we have here: a tale of two local governments.
For some, it is, relatively speaking, the best of times. The comfortable twin towns of Reigate and Banstead and the wonderful Wokingham have barely been touched by the Secretary of State’s funding scythe. No shadow of Madame Guillotine stalks local government in the home counties. Indeed, as we have heard, some have even seen cumulative growth in spending power per household under this Government.
Local government is the most efficient part of the public sector and it is likely to be commended for its customary ability and experience of doing more with the same resources or the same for less. Innovation and service improvement are in the DNA of local government.
I was a local councillor for 18 years in Newham. We constantly challenged what we did and how we did it, and what we spent our money on. We were aware of the need to get every pound of value out of services, recognising that no service can stand still. We challenged ourselves so that we could direct investment to new priorities. That is the way of all well-managed councils, whatever their political complexion, but these swingeing cuts take councils well beyond the capacity to manage change in such a way.
We heard excellent speeches from my right hon. Friend the Member for Salford and Eccles (Hazel Blears) and my hon. Friends the Members for Blackpool South (Mr Marsden), for Liverpool, Riverside (Mrs Ellman) and for Rochdale (Simon Danczuk) in which they spoke eloquently of the effect of the cuts.
For other parts of local government, the Liverpools, Newcastles, Manchesters and Blackpools—and, indeed, the Newhams and Hackneys—of this world, it is absolutely the worst of times. I must join my colleagues in drawing the attention of the House to the strong correlation between the cumulative level of cuts and deprivation. There is clear evidence that the poorest areas are being hit hardest.
As my hon. Friend the Member for Easington (Grahame M. Morris) elucidated, it is the people in those communities and others like them who are bearing the brunt of the cuts. As we have heard, the 10 most deprived areas will, over this Parliament, have their spending power cut by 10 times the amount that the least deprived areas will. We will see a reduction in or the removal of vital local authority services, putting further pressure on struggling households and families. Hard times indeed.
Increased charges for essential services, the bedroom tax, and the localisation of council tax benefit—for localisation, read cuts—are having an impact on the most vulnerable in our communities. No wonder we see the burgeoning use of food banks, with people driven by desperation, despite the humiliation they feel, to rely on their neighbours for food and sustenance for themselves and their children. That will only get worse, as many are resorting to payday loans as an alternative source of money for food, warmth and rent.
My local authority, Newham, estimates that its real-term cuts will be about 39% between 2010-11 and 2015-16. That represents a cut of £97.6 million, or £300 for every resident. Compare that with a reduction of £16.6 million for Richmond upon Thames, or £88 per head.
It is not just in areas with Labour MPs that that unfairness is played out. Thanks to my right hon. Friend the Member for Southampton, Itchen (Mr Denham), I have been given access to some research carried out by the House of Commons Library. It shows the cumulative reduction over five years for the following Labour-led councils: minus 26.66% for Stockton, minus 23.63% for Broxtowe, minus 19.85% for Norwich and minus 19% for Thurrock. On the other hand, let us look at Surrey Heath, where the reduction is minus 0.75%. In Waverley, it is minus 0.37%. In Elmbridge, it is minus 0.25%. The winner? Epsom and Ewell, with a whopping increase of 3.51% over those five years.
Those local authorities share some characteristics. Not only are they in the least deprived local authority areas, but they are all represented in this place by Cabinet members. Where on earth is the fairness in that? It does not seem to me that we are all in this together. It seems that the Government are shredding the lives and the communities of the most vulnerable, while they make sure that people like them are protected. For shame. For shame. These cuts have a real cost, just as the cuts to the Environment Agency have had a cost. In local government cuts there is a cost to libraries, to looked-after children and to social care, and there will be a cost to an already struggling NHS.
My hon. Friend the Member for Rochdale (Simon Danczuk) in his super speech and my hon. Friend the Member for Kingston upon Hull North (Diana Johnson) spoke eloquently about the fact that this is the year the Government have decided not to provide a dedicated resource to take the very poorest out of council tax liability. In the first six months of this financial year, 670,000 people faced bailiffs. What is the biggest calumny in this? The Government use the stick of non-collection of council tax from those low-waged council tax payers to beat the councils with. It is not Dickensian, it is Orwellian.
We can see from this local government settlement that the whole ethos of local government funding has shifted away from need. Those councils most dependent on Government funding, those with the lowest council tax base, those that are most deprived, are the ones that are being hit hardest. Councils for wealthier areas, unsurprisingly, have a larger council tax base, further insulating them from the chill experienced elsewhere.
This is a callous, cruel, short-sighted and just plain wrong approach. I cannot envisage a worse approach. It is another example of the Government balancing the books on the backs of the poor. But along with the charge of unfairness, along with the charge of partisan government, must come the charge of indifference. As my hon. Friend the Member for Sheffield South East (Mr Betts) said in his excellent speech, the autumn statement was late. The provisional local government settlement announcement was late, as was the council tax referendum limit announcement. How can the Government not understand that their dilatory complacency makes it so much harder for councils to plan for the excessive cuts that the Government have imposed? This settlement is wrong and it is callous. It takes money from poor areas and distributes it to those who are not in such need. I urge my hon. Friends and others in the Chamber who cannot accept the Government’s unfair settlement to join me in voting against it.
We have had 15 interesting speeches, plus other speeches from the Front Bench. I remind Members of the context in which the debate is taking place. The Government came to power with the pressing need to balance the nation’s books, and that meant reductions in all areas of Government spending, and local government has had to pay its fair share. Over the last few years the Government have had to make some tough decisions about public finances—tough decisions that the last Government shied away from in their last two years in office. The crash, remember, was in 2008.
But those tough decisions are now paying dividends. The national deficit has been reduced by a third, unemployment has fallen and employment is at an all time high, so it is vital that we stick to the disciplined course that we have set for ourselves. Like every part of the public sector, local government has had to pay its share to reduce that deficit and get the nation’s finances back on a stable footing. If I can characterise the comments made by most Labour Members, with some exceptions, this has all led to total unfairness to all of their cities and constituencies.
To remind Members again about the context, this Government have decided to protect the national health service budget in real terms. This Government have protected the schools budget in cash terms. This Government have put huge amounts of money behind children who, like me, were on free school meals. All of that money will benefit Salford, Liverpool, Sheffield and other places. We have also taken the poorest in society who are working out of the income tax threshold. We have raised the national minimum wage. We have raised the apprentice wage. We have raised the state pension. We have built more social houses than the last Government, and this Government will be the first in 30 years to leave office with more affordable and social housing in the housing stock. Together, we are building a stronger economy and a fairer society, in which everyone can get on in life.
Many Members have contrasted the spending power of cities with that of southern authorities. However, it is absolutely clear that the spending power of authorities such as Newcastle is far in excess of that of many other authorities with similar responsibilities but entirely different demographics. It is completely wrong to say that unfairness is built into the system, given that the top 10% of the most deprived authorities in the country are the authorities with the most power to spend on their citizens.
As has been acknowledged during the debate, we are moving to an entirely new system of local government finance. I accept that there is more to be done and that there is a need for reform in the system, but I am sure that that reform will come when the economy has fully recovered.
Reference has been made to the amounts that are raised through council tax, and the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Great Yarmouth (Brandon Lewis), was criticised for his “language of begging bowl”. As someone who, when I was a council opposition leader in Bristol, went on deputations to local government Ministers in both the other parties, let me put it this way: local government had a supplicant relationship with central Government, and that is what this Government are trying to change. We are putting more incentives in the system for local authorities to build more houses. The business rates retention will encourage local economic growth: for the first time, local authorities will retain more of the benefit from economic growth in their own areas rather than handing 100% of it to the people in the Treasury, so that they can decide how much should be distributed around the country according to their own formulas and principles.
Another of the new incentives is the new homes bonus. I am sure that the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Keighley (Kris Hopkins), will be pleased that his authority in Bradford is to receive £2 million in new homes bonus. Leeds will receive £3 million in new homes bonus, and my city of Bristol will receive £2.2 million.
The other major criticism that we have heard today is that some parts of the country have lost out at the expense of others, either as a result of this settlement or over a long period. However, the settlement represents a fair deal for every part of the country—north and south, district and county, city and shire. As I said a few moments ago to the Chairman of the Select Committee, councils have an average spending power of £2,089 per household, and the average spending power reduction will be just 2.9% in the forthcoming year. Moreover, protection is built into the system for the most deprived areas of the country, which are the most dependent on grant.
We have also recognised that services are sometimes more difficult and expensive to deliver in rural areas. Many Members, particularly those on the Government Benches, recognised the real difficulty that rural authorities experience in delivering services to their constituents. I certainly recognise that poverty is found in all parts of the country. It is not necessarily concentrated only in city-centre constituencies such as mine; it is found in Barnstaple, in St Austell, and in many other rural and sparsely populated parts of the country. That is why we have already set aside £9.5 million—£1 million more than last year—to help the authorities in the most sparsely populated rural areas.
I thank my hon. Friend the Member for North Devon (Sir Nick Harvey)—there were many Devonian speakers in the debate—for saying that we ought to go a little further. In fact, today we have announced a significant amount of extra money: £2 million. That means an extra £44,000 for North Devon district council. My hon. Friend the Member for St Austell and Newquay (Stephen Gilbert) said that the average per authority was £30,000, but Cornwall’s unitary authority will have just over half a million pounds extra.
Local authorities need to protect taxpayers by keeping their council tax down. For many of our constituents, the council tax bill represents a huge part of their monthly outgoings. In many cases, it is much more significant than other utility bills, so to denigrate the Government’s policy of encouraging local authorities to freeze council tax is to miss a major point of what the Opposition call the cost of living crisis. If they do not recognise that council tax is part of the cost of living pressure that all our constituents face, they are living in another world.
It is no surprise to find that Labour Members live in another world. Under the previous Government, council tax more than doubled, pushing a typical bill up to £120 a month for hard-working people and pensioners. This Government, however, have done everything possible to protect families from further increases. Over the past three years, council tax bills have been cut by 10% in real terms across England, and we are encouraging local authorities to continue to freeze their council tax. We will further incentivise them to do that not only by offering them a grant but by putting that grant into the baseline so that they can have certainty for future years.
Already, 137 local authorities have confirmed that they intend to reduce or freeze their council tax bills, including—as my hon. Friend the Member for Mid Dorset and North Poole (Annette Brooke) pointed out—almost all the Liberal Democrat local authorities. They include the local authorities led by directly elected mayors in Watford and Bedford, and the Liberal Democrats in my own city of Bristol want our city’s mayor to follow their example.
The referendum principle has been mentioned by many speakers today. The hon. Member for Sheffield South East criticised the Government for taking time to announce what the referendum threshold should be. We confirmed on 5 February that it will remain at 2%, which was the assumption that the local authorities were working on when planning their budgets. The hon. Gentleman was around during the last Parliament, and I must gently remind him that the previous Government frequently capped local authority council tax increases without announcing the cap until March, after the local authorities had set their budgets and started to prepare the bills to pop through people’s letter boxes. We have certainly improved on that situation.
There are many things that local authorities can do to balance their books in an efficient way. The Government are encouraging such efficiencies, and there is still plenty of scope. For instance, the Liberal Democrat council in Kingston-upon-Thames is investing in a combined heat and power system that will benefit its council buildings and private sector buildings, saving money and carbon at the same time. Cambridge council is protecting and enhancing local shops, which is good for local residents, good for tourists and good for local economic growth. The process is now being incentivised by the retention of business rates.
I am not privy to every conversation that takes place, as my hon. Friend knows. I can assure him, however, that possibly the most powerful person in the Government with his hands on the purse strings from our side of the coalition, the Chief Secretary to the Treasury, is most certainly a friend of rural areas. He has pushed for the freeze in fuel duty, which is another example of the Government listening to the cries for help from rural communities. There is a danger, in these debates, that we see matters purely in the context of the silo of our own Department. I agree entirely with the right hon. Member for Salford and Eccles (Hazel Blears)—the former Secretary of State for this Department—that it is a mistake for Governments to do that, and we have not done it. Across the piece, we are doing our bit to help rural areas, including through freezing fuel duty. Had Labour’s plans been put into effect, rural motoring would have cost much more.
There is more that local government can do to hold down costs. An example can be seen in the tri-borough initiative in west London, involving Hammersmith and Fulham, Kensington and Chelsea, and Westminster councils. The leader of Kensington and Chelsea council told me recently that the initiative was on track to save £40 million by combining back office and management services.
In conclusion, this coalition Government are all about building a stronger economy and a fairer society in order to help people to get on in life by giving them more power to decide what happens in their community and supporting their local area in ways that will allow their community to thrive and prosper. There is no doubt that some difficult decisions have had to be made about public finances, and councils cannot be exempted from that process. But councils have taken important steps towards modernising and transforming their services, and I certainly pay tribute, on behalf of all of my colleagues, to the efforts that many councils have made to live within their difficult budgets. I also think we must all acknowledge that more could be done to reduce the costs of delivering their services while keeping council tax down, and I have every confidence that they will rise to the challenge.
Three hours having elapsed since the commencement of proceedings on the Motion, the Deputy Speaker put the Question (Order, 10 February).
A Division was called.
Question agreed to.
That the Referendums Relating to Council Tax Increases (Principles) (England) Report 2014-15 (HC 1056), which was laid before this House on 5 February, be approved.
Local Government Finance Report (England) 2014-15
Motion made, and Question put,
That the Local Government Finance Report (England) 2014-15 (HC 1055), which was laid before this House on 5 February, be approved.—(Brandon Lewis.)