We now come to the two motions on local government finance, which are to be debated together.
Before I call the Minister to move the first motion, I have to inform the House that there is an error on the Order Paper, in that the two reports relating to local government finance appearing in item 3 on the Order Paper have been considered by the Select Committee on Statutory Instruments.
I beg to move,
That the Local Government Finance Report (England) 2015–16 (HC 1013), which was laid before this House on 3 February, be approved.
On 18 December, I presented to the House a draft of the local government finance report, which set out our provisional settlement for local authorities in England for 2015-16, and began a period of consultation on our proposals. As I made clear to hon. Members then, we aim to deliver a settlement that is fair to all parts of the country, and that recognises the responsibility of local government to explore every opportunity for sensible savings. Every part of the public sector needs to do its bit to pay off the deficit left by the previous Administration. Local government, which accounts for a quarter of all public spending, must continue to play its part.
I assure my right hon. Friend that I will consider rural provision in my speech. Since coming to power in 2010, we have recognised that rural communities need additional support. I am sure he will see from the document I laid in the House on 3 February that we have responded appropriately.
The Minister says he wants a settlement that is fair to all communities. He has himself recognised that the current settlement, notwithstanding the Government’s efforts, is not fair to rural communities. The central Government grant is 50% higher for urban communities than it is for rural communities, even though rural communities are on average poorer and have fewer services.
The Minister says that local government has to bear its fair share of the cuts. Does he accept that according to the Office for Budget Responsibility—the Local Government Association produced these figures for us—if we exclude spending on schools and public health, which local authorities cannot affect, in 2009-10 local authorities represented 19% of public expenditure? By 2015-16, it will represent 16%. In other words, local government has surely borne more than its fair share of cuts. It has had more cuts as a percentage than the rest of central Government services.
I do not have those figures, but what I will say is that I recognise that local government has had to make a substantial contribution to driving down the deficit left by the previous Administration. It is important that we recognise that local government has responded in an extremely positive way to the challenge we have placed before it.
During the consultation period, which closed on 15 January, my ministerial colleagues and I met a number of local authorities and representative groups. I also led a phone-in discussion, with more than 100 authorities participating. In addition, the consultation received numerous written responses. We considered very carefully the views of all those who commented on the provisional settlement. On 3 February, we laid before the House a local government finance report which confirmed our proposal for the settlement for 2015-16 as announced. We also confirmed our proposal that the council tax referendum principle for 2015-16 will be set at 2%.
I recognise the time and effort that those responding to the consultation—councils, in particular—have given in submitting detailed and considered comments on our proposals. As I said, we listened to those views carefully. In doing so, we recognised that councils asked for additional support. As a result, our announcement on the final settlement for 2015-16 included provision for a further £74 million to support upper-tier authorities, including to help them to respond to local welfare needs and improve social care provision.
If the Minister listened carefully to representations and wanted to be fair, how can the outcome be that Liverpool, the most deprived local authority in the country, is suffering some of the harshest cuts?
We need to recognise—I have said this before—that the 10% most deprived authorities receive on average 40% more than the most wealthy authorities. It is right that we create a formula to ensure the more vulnerable and deprived areas get that response, but we should not just measure on the basis of what moneys have been allocated. Local authorities now have the ability to raise money and are rewarded for building houses. I would also point out that the growth deals associated with Liverpool are significant and are led by local leaders.
With the addition of these extra resources, the overall reduction in local authority spending power in 2015-16 is 1.7%. That is lower than that proposed in our provisional settlement. Taking into account the funds we are providing to support local transformation, the overall reduction is still lower, at 1.5%. Once again, the settlement ensures that councils facing the highest demand for services will continue to receive substantially more funding, and we continue to ensure that no council will face a loss of more than 6.4% in spending power in 2015-16.
Does the Minister accept that spending power disguises the real pressure on many councils, and that the money allocated does matter? Barnsley, which covers part of my constituency, is facing eye-watering cuts: a 26.9% cut in the revenue support grant next year, it tells me, and an overall cut in its settlement of 13.6%. It is absolutely nothing like the smaller figures he is giving the House.
I hope, then, that the right hon. Gentleman has apologised to his constituents for the financial nightmare this country faced in 2010. The Government are not making these decisions out of a desire to reduce funding for the sake of it; we are responding to the appalling economy that Labour left.
Can the Minister comment on the balance in his settlement between the money that goes directly in the block grant and the money that goes for special purposes and as a reward for certain kinds of conduct? How is that developing, and what difference does it make to the percentage change?
I hope my right hon. Friend will forgive me; I cannot give him the percentage change, but I can give him some clear figures. For example, business rate retention by local authorities alone is some £11 billion, and as the Prime Minister said this morning, should a Conservative Administration be returned at the forthcoming general election, we would hope to increase that to two thirds.
Through consecutive settlements, we have ensured that these unavoidable changes to local authority funding have been applied in a fair and sustainable way, and through our reforms to local government finance we have established a basis for more self-reliant government—a sector less dependent on grant and increasingly confident about using the tools and incentives we are providing to grow their local economies.
The low level of private rents in the London borough of Havering has given rise to a surge in demand, particularly for children’s services. The local population is already top heavy with older people and all the demands that come with that. How might the funding formula respond more to individual boroughs with particular difficulties?
The key thing about the choices that we have placed before local government is just that—local authorities can determine where money is spent. We appreciate that there is less money to spend as a consequence of the previous Administration’s activities, but it is right that people can make choices, set their priorities and—in this case—choose to look after very vulnerable individuals.
As well as growing their economies, the best authorities are transforming how they do business and demonstrating innovation, including in how they work with local partners. We are supporting them as they do that, helping them to achieve savings and, perhaps most importantly, improving outcomes for people who use local services. As I announced in December, we are developing proposals for a project to identify and disseminate good practice in transforming services, especially in rural areas. This work will involve rural authorities and the Rural Services Network, and is a clear commitment to our rural areas.
The hon. Member for Hornchurch and Upminster (Dame Angela Watkinson) mentioned demand for children’s services. In Coventry, we have to find an additional £7 million for children’s services. More importantly, we have to cut services across the board, because there has been a cut from the Government of £80 million, or 2,000 jobs, in general terms. What will the Minister do about that? He cannot go on blaming the previous Government. The coalition is in government now. There is no choice here, and that is being reflected in local government up and down the country. Local government is becoming a whipping boy for this Government, as it was for previous Conservative Governments.
I am not moving away from the fact that there was a huge deficit in 2010, which this Government or whoever come to power after the May election will have to continue to address. The hon. Gentleman says that we keep on going back to local government. I have not seen anything from the Opposition to suggest that they will do anything but continue to bear down on spending on local government, because they will have to address the issues of concern. We have given local government the opportunity to grow resources by promoting and developing business, by securing planning permission and building the houses required for the local populace. That is the right thing to do.
I shall give way in a few moments.
We continue to recognise the challenges faced by rural communities. Through consecutive settlements, we have helped address the gap in urban/rural spending power. We expect the gap to continue to close. In the meantime, the settlement confirms another year of additional resources for the most rural authorities to recognise the challenges they face in delivering services. For 2015-16, in direct response to Members of all parties, we have increased the grant to £15.5 million.
Does the Minister recognise the challenges faced by London, whose population is on the increase? The population of my own borough, the London borough of Enfield, will increase by 10% up to 2020, putting enormous strain on services, not least on children’s school places. What recognition has the Minister given to that population increase, and will he include it in the baselines so that it is reflected in the grant settlement?
What I recognise is that London is a great international city, which has thrived under this Administration, and will continue to deliver significant jobs, wealth and income to the individuals out there. That is the root issue. Many Labour Members stick their hands out and ask for more money; the reality is that this Government are setting about ensuring that we grow our economy, get people into work and give them the ability to stand on—[Interruption.]
Let me make a bit more progress.
The Government previously consulted on a range of options for how local welfare provisions for the upper-tier local authorities should be funded in 2015-16, following localisation. The Department for Work and Pensions carried out a review, and the Government concluded that local authorities should continue to be able to offer local welfare assistance from existing budgets in 2015-16, alongside a range of other services if they judge them to be a priority in their area. To assist in identifying how much of their existing funding is involved, an amount relating to local welfare provision was separately identified in each upper-tier authority general grant as part of the provisional settlement. This totalled about £130 million nationally, and was distributed in line with local welfare provision funding for 2014-15. The Government have always been clear that councils should choose how best to support local welfare needs, so this allocation cannot be ring-fenced and we will not place any new duties, expectations or monitoring requirements on its use.
My hon. Friend is generous in giving way this afternoon. Harborough district council area covers about a quarter of the geographical area of the county of Leicestershire. It follows that it is a large rural area, with all the sparsity factors that go with it. The district council is Conservative run and it is doing its best to ensure that taxpayers’ money is wisely spent. If I may say so, it has behaved extremely well in ensuring that both the Government’s policies and its own policies are bearing fruit. However, will my hon. Friend bear in mind that there is a perception of a distinction being made between rural funding and city funding, particularly for the city of Leicester in comparison with my area, so will he do all he can to help me explain to my constituents that this Government mean what they say—that they have not forgotten their rural heartlands?
Members have asked for a clear direction of travel in relation to our incremental increases in rural additional funding. I think it is clear that we have done our best to provide those increases during our time in office, given the limited resources that are available to us, but let me repeat an offer that I have already made: I shall be happy to meet my hon. and learned Friend and members of his council to discuss how we can communicate better what we are trying to do.
In response to the representations that we received during the consultation, we have decided to allocate an additional £74 million to upper-tier authorities to help them to deal with pressures on local welfare, health and social care. That will help councils further as they develop localised arrangements.
Will the Minister acknowledge the warnings issued by the Local Government Association about the cumulative impact of a 40% cut in local government funding? Does he accept that many authorities, including Brighton, are struggling to provide services? Is not the truth that this Government do not care about the future of local government as we know it?
I suggest that one of the reasons Brighton council is struggling is its poor leadership. Moreover, the figure given by the hon. Lady clearly does not include significant amounts of public money, including money from the better care fund. Some £5.3 billion appears to be missing from the LGA’s calculation.
That £74 million will be topped up with £37 million of additional funding for local authorities during the current year. That extra money will ensure that councils can step up their efforts to get people home as soon as they are ready to leave hospital, and avoid the need for people to go into hospital in the first place. It will help to promote joint working between our local public services, and will improve front-line services for some of the most vulnerable people in our communities.
Although I live in a large metropolitan district, I also represent a significant rural area, and I know that many single elderly people live in large houses. That is another form of deprivation, in that they must sustain those houses on limited and fixed incomes.
1 urge all councils to protect taxpayers this year by taking the additional Government funding that is on offer for a freeze. That will enable them to help hard-working households and those on fixed incomes, such as pensioners, with their living costs. The tax-freeze grant will be embedded in councils’ baseline funding. Five successive years of freeze funding have seen council tax in England fall by 11% in real terms since 2010, after being doubled by the last Administration. Our actions will save for the average Band D household up to £1,075 over the course of this Parliament.
I welcome the extra funds that will help people to be moved from hospital into the community or to other forms of care, but what is the rationale for ring-fencing that pot of money and not ring-fencing the local welfare assistance money?
The additional £37 million is specifically to address some of the winter pressures we face. We wanted to make sure that local councils work with authorities to address the particular needs of those individuals we wanted to help move into appropriate accommodation, and make sure there was sufficient and appropriate domiciliary care to look after them. That is why it is targeted around that group.
The Minister asserted that the settlement was both fair and sustainable, and I want to address the word “sustainable.” On the current trajectory, by 2018 Birmingham will have lost, using 2010 as a baseline, £821 million. That is two thirds of its discretionary spending. By any definition, that is not sustainable.
I have a lot of respect for the hon. Lady, but I am afraid that poor leadership in Birmingham and the fact that it has not collected some £100 million in council tax arrears may explain some of the issues it is facing. Stronger leadership and the ability to carry out the simple function of placing a charge on an individual and collecting it will assist it.
Does my hon. Friend agree that the real way to achieve proper sustainability for local government funding is to reward those councils who go for growth in their area and increase their tax bases—as we are seeing with the increase in business rates income anticipated this year—and make councils less dependent on central Government grant in the long term?
My hon. Friend speaks very wisely and he knows from his own experience that local authorities appreciate these tools we have given them to grow their finance base, and there is an incentive for them to carry this out by improving those key services and increasing the resources to those services.
For those who do not freeze the council tax, the referendums principles report laid before the House on 3 February confirms that any increase of 2% or more will require a binding referendum by the local electorate. Councils that want to increase their bills should have the courage of their convictions and seek a mandate from their electorate. It is already the case that a council tax referendum can be held at a reduced cost in 2015-16 when combined with the general election. We announced on 3 February that any savings to the Consolidated Fund as a result of a combination of a referendum with the general election will be redirected to councils, so the cost of the referendum to a local authority is low. This weakens the argument that some might make that holding a local referendum will result in excessive cost.
I have no doubt the Minister will want to congratulate Hammersmith and Fulham council, which is one of eight to cut its council tax this year, but why is he rewarding it by cutting its discretionary housing payment not by 24%, which is the national average, or 35%, which is the figure for London, but by 52%? This is an area with the highest property prices and where there is family break-up with people being forced out of the area. DHP is absolutely vital. Will he look again at that cut?
This Government continue to ensure there is a substantial welfare net to look after the most vulnerable individuals, and we have put additional funding into the budget. I applaud the council for reducing its council tax, however, and I would just note that it is following the trajectory given by the previous Conservative administration. That may be only a small glimmer of light, but somebody appears to have learned from the excellent previous Conservative administration.
The local government finance report 2015-16 sets out a fair settlement, which ensures councils continue to have significant spending power. Even with the savings that have been made to date, local authorities in England were expected to spend over £115 billion in the current financial year. When we factor in councils’ new responsibilities for public health, the amount local government are expected to spend is higher than it was under the last Administration.
My local authority, the London borough of Enfield, is the 64th most deprived in the country, but its ability to deal with the problems of need is hampered by the long-term impact of the damping formula. I understand what the Minister said earlier about the need for floors, but can he offer any support to those local authorities struggling to address the needs of their boroughs because of capping over a long period?
There are two things. First, there is not a cap; there is an opportunity for people to increase their council tax, and if councils believe that their public would support them, they may hold a referendum. Secondly, I go back to a point that I made earlier about the success of individuals. The route out of poverty and deprivation for an area such as my former council area of Bradford involves getting people skilled up, with local councils supporting them, and those individuals getting a job and being able to stand on their own feet. Breaking the cycle for an individual trapped in one has to be the responsibility of both central and local government.
The referendum principles report sets a sensible threshold for council tax increases, unless local people are happy to approve something else through a referendum. It is more important than ever that councils can demonstrate to local taxpayers that they are using every pound of their money to best effect to deliver efficient and effective services and to achieve sensible savings.
That was an interesting speech. I pay tribute to the Minister for his generosity in giving way to Members, but councillors up and down the country listening to what we have just heard—in particular the part where he talked about giving authorities the ability to grow their resources—will look at their circumstances today and ask whether the Minister really understands what is going on in our authorities.
I want to begin with the scale of what is happening, because the Minister queried the figure given by the hon. Member for Brighton, Pavilion (Caroline Lucas), which was the Local Government Association’s calculation of a 40% reduction in core Government funding to councils since 2010, as a result of which councils have had to make reductions or savings worth about £20 billion. Would the Minister argue, however, with the National Audit Office, which said in its report “Financial sustainability of local authorities 2014”:
“The government will reduce its funding to local authorities by 37% in real terms between 2010-11 and 2015-16”?
I shall come to that point directly, but the Minister did not actually contest the NAO figure. The reduction in resources of 1.7% that he has talked about today is a selective figure, because it does indeed include council tax, the better care fund and other ring-fenced funding, but if that is excluded the LGA says that the reduction is actually 8.5%. Whatever the statistics that the Minister wants to argue about, the truth is that local government has faced the biggest reductions in the whole of the public sector, as we heard in an intervention.
We should first pay tribute to councils for the extraordinary job that they have done—councils up and down the country, of all political parties—in trying to deal with the consequences of the cuts, because their effort has been herculean. I pay tribute to the Minister for his tone, which is slightly different from that of his predecessors, but councils really resented the Secretary of State once famously describing the cuts as “modest”—which I bet he now regrets—and the LGA’s fears for the future of local government as “utterly ludicrous”.
If we are talking about making admissions, will the right hon. Gentleman now accept that his Government, at what seemed to be a time of relative plenty, skewed funding to urban areas at the expense of rural ones? Now that we are in a period of austerity, which will continue whoever is in power, it is those poorer, more highly taxed and yet lower-serviced rural areas that are suffering most. Will his party pledge to do something about that, or will it carry on putting its own party interests ahead of fairness for the British people?
I have to say to the hon. Gentleman that I resent that suggestion. I make no apology for the fact that the last Labour Government provided funding on the basis of need and that local authorities saw an increase in resources under Labour. I do not recall hearing any complaints about that from the then Opposition when those decisions were being made.
I am going to make some more progress; the hon. Gentleman has had his answer. I accept the point he has made in a number of these debates about the particular challenges facing rural areas. I want to see a fairer funding formula, and I shall address that a little later.
Ministers are in denial about the scale of the challenge that authorities face and are still claiming that the settlement is fair—this is my first and fundamental point. The Minister told the House in December that the settlement is
“fair to all parts of the country, whether north or south, urban or rural.”—[Official Report, 18 December 2014; Vol. 589, c. 1590.]
He said that again today, but let me tell him that nobody else believes it because it clearly is not true. He does not need to take my word for it; all he has to do is listen to what others have had to say about what Ministers have done. The Audit Commission has said that
“councils in the most deprived areas have seen substantially greater reductions in government funding as a share of revenue expenditure than councils in less deprived areas.”
The Joseph Rowntree Foundation has said that
“cuts in spending power and budgeted spend are systematically greater in more deprived local authorities than in more affluent ones”.
The Public Accounts Committee report on the financial sustainability of local authorities said:
“local authorities with the highest spending needs have been receiving the largest reductions.”
The Chair of the PAC, my right hon. Friend the Member for Barking (Margaret Hodge), said:
“These cuts have not hit all local authorities equally, with reductions ranging between 5% and 40%.
Councils with the greatest spending needs—the most deprived authorities—have been receiving the largest reductions.”
At least the former local government Minister, the hon. Member for Bromley and Chislehurst (Robert Neill), had the honesty some time ago to say:
“Those in greatest need ultimately bear the burden of paying off the debt”—[Official Report, 10 June 2010; Vol. 511, c. 450.]
Today’s Minister mentioned council tax, but the one group of people who have not benefited from any freeze in council tax are those on the very lowest incomes, who have been affected by the changes to council tax benefit. There has been no freeze for them.
It is a pity that the right hon. Gentleman quoted selectively, forgetting that I said that that would be because the Labour party would ruin the economy, and only by growing the economy would the poorest benefit. He has said there would be no new money for local government were Labour to come into office, so will he help us by coming clean as to which local authorities he will then penalise so he can distribute money to his political friends and on what basis?
Once again, I do not accept the charge that this is about distributing funds to friends; it is about having a fair funding formula. I remind the hon. Gentleman that when the coalition Government took office unemployment in this country was falling and the economy was growing—[Laughter.] It is no good Government Members laughing, because the evidence, the statistics, the facts will show that that was indeed the case.
On council tax increases, Ministers have frequently made reference to what happened under the last Labour Government, so I have taken the trouble to look at what actually happened then. The truth is that the biggest increases in council tax between 1997 and 2010 were put in place by Conservative-controlled authorities and the smallest increases were under Labour. Indeed, 11 of the top 15 increases in council tax during that period came under Conservative-controlled authorities, two were under authorities with no overall control and one was under a Lib Dem-controlled authority. I suppose that was a coalition.
No. The hon. Gentleman may not like the fact, but the truth is that Conservative-controlled authorities were leading the way in raising council tax. What I am interested in, in this debate, is what the figures show. Why is it that by 2017, as we heard a moment ago, the city of Liverpool, with the most deprived local authority in the country, will have lost half its Government grant since 2010? I have nothing against Wokingham, but why is it on course to have higher spending power per household than Leeds or Newcastle, despite the greater needs of those two cities? Why is it that, having claimed that those with the broadest shoulders would bear the biggest burden, Ministers have done the very opposite to local government? Will the Minister explain why Elmbridge, Waverley and Surrey Heath have been given an increase in spending power over the past five years although they are among some of the very wealthiest parts of the country? They rank among the 10 least deprived local authorities in England. There is a lot of austerity elsewhere, but it does not appear to apply in those places.
Does my right hon. Friend agree that the way the Government have approached local government finance is putting councils between a rock and a hard place? My own council in Hounslow will have to make cuts of around 40% on what it had in 2010. To raise council tax even by 2% would generate about £2 million. To go over that would cost between £300,000 and £400,000 in terms of running a referendum. The council is concerned about what will happen to services, which will have to be very deeply cut.
My hon. Friend makes an important point about the difficult choices faced by local authorities up and down the country. I know that councils will do their darnedest to try to minimise any increase in council tax because of the pressure on people’s finances and because of what has happened over the past five years.
I wish to give one example to show that this is all about the political nature of an authority rather than the previous funding formula. In Redcar and Cleveland between 1999 and 2003, when the council was Labour-run, and 2007 and 2011—eight years—the council tax under Labour did not go up cumulatively by the amount it did under the Tories between 2003 and 2007, who raised it by 24% in four years.
I am grateful to my hon. Friend for putting the record straight, given the charge that has been laid against us by the Government. The fundamental question today is why the system has been moving away from one where funding properly reflected need to one where the principle is being lost. That question was put by my hon. Friend the Member for Sheffield South East (Mr Betts), who chairs the Select Committee, in this debate last year, but so far there has been no answer.
My right hon. Friend is making a powerful and principled point about the way that funding has moved against those areas with greatest need. He is making that case with great clarity, but does he accept that using spending power, as he just did, disguises the depth of the cuts that many councils face? It really cannot be the case that we can accept £1.8 billion of a better care fund in next year’s budget as an increase in councils’ spending power when the power to approve the spending decisions lies not with councils but with the health service in those areas?
My right hon. Friend makes an extremely important point. That is why the attempt that the Minister made to include that spending power, when we know that a goodly portion of that money is not in the hands of local authorities, is not a fair reflection. The point I put to the Minister is simply this: the NAO said that the Government should publish figures detailing the change in individual local authority income in real terms since 2010-11 so that the cumulative impact of funding reductions could be plain for all to see. The question is why have the Government refused to do it, and why are we relying on the finance department of Newcastle city council to do the work of the Department for Communities and Local Government?
The right hon. Gentleman will appreciate that in a constituency such as mine in Hertfordshire we are facing a lot of new building of homes and we need infrastructure. If he deprives my council of the new homes bonus and its community infrastructure levy, how will we provide for all these people in our part of the world? It just does not add up.
I have no intention of depriving the hon. and learned Gentleman’s local authority of CIL income, but as he raises the new homes bonus, I shall be straight and direct with him. I shall come on to this in a moment—in fact, if he will bear with me, I shall come to that point about the new homes bonus and set out why it needs to change.
A good illustration of what is happening in local government can be seen in Coventry, at University hospital. Cuts in the care budget have led to bed blocking, and now there are also cuts in the welfare budget. The Government say that they are trying to be gentle with local government, but does my right hon. Friend not agree that they are actually putting the boot in?
The shadow Secretary of State is usually very fair-minded, so does he agree that the largest local authority service is education, which has over the past five years had cash increases and small real increases in spending, and that the biggest local public service is the NHS, as administered locally, which has had real increases as well? Were they not the right priorities and would not his party have shared exactly that priority of protecting health and education?
Indeed. If one looks back at the record of the previous Labour Government, one can see that that is precisely what we did. In fact, we increased investment in those two things as that reflects public priorities. Of course, Government life is about the choices one has to make and one of the choices the Government have not made is to publish the figures that the NAO has asked them to publish. I suspect that Ministers know what the figures are and know that they will damage their argument that this is a settlement that is fair to all, north and south, and therefore do not want to reveal what is happening. We also know that the NAO has criticised the Department and Ministers for not paying close enough attention to what is going on. Again, those are not my words but those of the National Audit Office, which said:
“The Department has a limited understanding of the financial sustainability of local authorities and the extent to which they may be at risk of financial failure.”
That is why the Public Accounts Committee said:
“The Department does not understand the impact over time of reductions in funding to local authorities, and the potential risks of individual authorities becoming financially unsustainable if reductions continue.”
On current trends, the revenue support grant will disappear entirely by 2019-20. When the Minister replies, will he confirm that that is the case? What assessment have the Government made of the impact of that on the viability of local authority services, particularly in the areas most reliant on Government support? Indeed, I ask Members to pause for a moment and contemplate their local authority’s budget without any revenue support grant whatsoever. The Chair of the Public Accounts Committee was very clear when she said recently:
“Further cuts could not just undermine the entire viability of most optional services, but might threaten some statutory services in these areas.”
I am sure that the shadow Secretary of State is aware that the 12 inner London boroughs hold more in reserves collectively than the 20 outer London boroughs. Does he think that that indicates that funding is going where the greatest need is or does he agree with me that the balance of funding between inner and outer London needs to be reviewed?
The size of the reserves held by authorities across the country—they have been criticised by Ministers for doing that—shows the scale of the challenge they face. Councils are doing exactly what families do if they have any money to put by when times are hard, as they do not know what is around the corner or what difficulties they will face. That is my first point. Secondly, a lot of those reserves are earmarked for capital investment, including invest-to-save projects to help deliver savings further down the line. Thirdly, if councils decided today just to spend all of their reserves, that would pay for local government services for about a month and then they would all be gone. Then what should they do? It is no good criticising local councils for having reserves when they are trying to manage their money prudently.
I want to come to the point raised by my hon. Friend the Member for Coventry South (Mr Cunningham) about social care, which is under particular strain because of the growing number of older people. Will the Minister, in replying, tell us what percentage of the better care fund, about which we have heard today, is flowing into local authorities to support social care as opposed to going to the health service? He will be well aware of the pressures faced by local authorities and, as we have just heard and as all hon. Members know, part of the reason for the rising pressure in A and E departments, and for the growing number of elderly people in hospital beds when there is no medical need for them still to be there, is the reductions, in some cases, that have had to be made by local authorities, despite their best endeavours, in entitlement to social care. The Local Government Association estimates that adult social care faces a funding gap of £1.6 billion in 2015-16 and that that is expected to rise to £4.3 billion in 2019-20. Is that a figure that Ministers accept? If so, what do they intend to do about it?
Will the Minister confirm that the new homes bonus takes money away from the most disadvantaged communities and gives it to areas where, in all probability, the new homes would have been built anyway? What does he have to say about the NAO’s conclusion that there is little evidence that the new homes bonus has yet made significant changes to local authorities’ behaviour towards increasing housing supply? Even two of the Ministers on the Front Bench are not wildly keen on it. The Under-Secretary of State for Communities and Local Government, the hon. Member for Bristol West (Stephen Williams), has admitted that he is “not a fan”, and the Under-Secretary of State for Communities and Local Government, the hon. Member for Keighley (Kris Hopkins), was even more frank because he told the House back in November 2013:
“I am afraid the new homes bonus is not about encouraging people to build homes.”—[Official Report, 25 November 2013; Vol. 571, c. 11.]
Given that, why are Ministers so opposed to funding being allocated on a fairer basis, based on need, as we are proposing?
We are lectured frequently about the need to take tough decisions in tough times. If one accepts the argument—those on the Government Benches do not—that the way in which the cuts have been applied is fundamentally unfair to some authorities, one of the things one can do is to redistribute, and the new homes bonus provides an opportunity to do that.
There is section 106 and there is CIL in order to raise financing. There are also the changes that we are proposing in order to give local authorities, such as the hon. and learned Gentleman’s, greater power over the construction of new homes so that communities can determine where homes are built, but when it comes to the new homes bonus, if one accepts the argument that it is regressive in its impact because it is top-sliced from revenue support grant which is supposed to reflect need and therefore goes towards areas where people want to build homes which tend to be less disadvantaged than others, it is a tough choice. But when people say, “What are you going to do to redress the unfairness of what the coalition has done?”, that is part of my answer.
I know that other Members want to speak so I shall make progress. In these difficult times, what councils want is, first, fairer funding, which we are committed to; secondly, help with longer-term funding settlements so that they can plan ahead; and thirdly, more devolution of power so that they can work with other public services to get the most out of every pound of public funding. We have heard Ministers argue in the past that the relationship of old was based on a begging bowl mentality. A former local government Minister used to talk about that. That is pretty insulting to local authorities which, over the years, have worked hard to grow their economies and create jobs. One cannot look at the growth and success of the city of Leeds over the past 30 years and say that that is the result of a begging bowl mentality. It is because the council, businesses and local people have worked hard to grow the economy, create jobs and improve people’s lives. It was a question of leadership.
That brings me to what is absent from the statement today—devolution of funding to local authorities. I support the city deals that the Government have put in place and I welcome them. I have said that before, but progress has been slow and timid. We had been promised a further deal for the Leeds and Sheffield city regions, following the recently agreed deal with Greater Manchester, but there is no sign of it. Who is running that policy? Is it the Secretary of State, the Chancellor of the Exchequer or the Deputy Prime Minister?
Everyone in the House knows that the reason why the deals are being held up is that the Chancellor wants to impose a metro mayor as part of the deal and the Deputy Prime Minister does not. I am not sure what the Secretary of State’s view is, but he is clearly no particular fan of combined authorities because he said not long ago that he is afraid that they
“will suck power upwards away from local councils”.
In case the Secretary of State has not noticed, combined authorities are local councils coming together freely, voluntarily, in the interests of co-operation, because they see the benefit for their residents. When the Minister replies, will he tell us when Leeds and Sheffield are going to get the same deal as Manchester?
The last point that I want to come on to is about the counties of England. We have heard some voices in the contributions today. It was noticeable that at the recent county councils network conference, for some reason not one of the Department for Communities and Local Government House of Commons Ministers was able to turn up to address the representatives of the county councils. It was extraordinary. I suspect the reason is that county leaders feel wholly ignored by this coalition Government because they see the devolution that has been offered to cities. Where is the devolution to counties and county regions? There is none. If we get the opportunity, we will change that. We would offer economic devolution to every part of England—county regions as well as city regions—to give them greater control over their economic future. On that, I am in agreement with the Minister. We would devolve decision making on transport investment and on bus regulation. If that is good enough for London, it is good enough for the rest of the country.
We would offer funding for post-19 skills, working with businesses and co-commissioning a replacement for the Government’s Work programme to help the long-term unemployed back into a job. We would offer new powers over housing so that communities can build the houses they want in the places they want, and the houses go to the people who need them. By devolving £30 billion-worth of funding—much more than the Government are offering—we would give combined authorities the ability to retain 100% of business rate income growth. The Prime Minister has said that he wants to move towards two thirds, so if he hurries up a bit, he will finally catch up with Labour policy.
The right hon. Gentleman said that he would bring in a new, fairer funding formula for local government. Does he accept that in the formula introduced by the previous Government, weighting was put in for density—four times that for sparsity—which has absolutely no link to need, and that is partly why certain parts of the country, even under this Government, have unfairly benefited? Will he unpick that so that sparsity is given greater weight than density, which has nothing to do with need?
If we get the opportunity after a certain event on 7 May, I would be very happy to receive representations from the hon. Gentleman and everyone else, because when I say that we want to achieve a fairer funding mechanism, that is what I mean.
In return for this economic devolution deal, all we ask is that local government comes together to form combined authorities across England. Their shape will vary from place to place, because economic geography and travel-to-work areas vary. This is a challenge to local government. Local government says to all politicians, “Trust us more.” Well, we would trust local government more. We would say, “Get organised, and significant devolution of funding is on offer in return.”
I have been generous in giving way, but I am going to bring my remarks to a close because many other Members want to speak.
Councils want fairer funding, longer-term settlements, and devolution of power. They have worked really hard to reduce the impact of funding reductions on their residents, but they are now saying that this settlement could mark a turning point where the things they have worked hard to protect will be more difficult to protect in future. If the loss of services that we have seen—in the case of social care, that is largely hidden, because someone has no idea what they would have got before, as they only discover what they will get at the time when they need social care—is only part of what the Chancellor, the Secretary of State and the Prime Minister have in mind for local government in the years ahead, I say to the Minister that Labour Members will certainly not be joining him in a headlong rush back to the 1930s. Hard-working councillors want a Government who acknowledge that they have had a tough time and face stark choices, and Ministers who give an appearance of knowing what is going on.
Labour Members recognise that local government has to make a contribution to tackling the deficit—tough times do indeed require tough decisions—but there is no justification whatsoever for taking the most from those who have least. However many “Fair to all, north and south” speeches we may hear from Ministers, they can no longer pretend that that is the case. For that reason, while we do not oppose the referendum report, we will vote against the local government finance report.
In one respect, it is a pleasure to follow the right hon. Member for Leeds Central (Hilary Benn), because he always speaks with courtesy and care. On the other hand, it is regrettable that, yet again, we have seen a classic piece of sleight of hand from Opposition Front Benchers. Labour Members have remarkably selective memories. I give him credit, though, for doing rather better than his party leader in at least managing to mention the deficit.
The right hon. Gentleman talked about localism, but then made it clear that Labour Members’ version of devolution and decentralisation, which one might think at first was one of the great damascene conversions of our time—not so much a road to Damascus as a bypass, given where they started from—is totally hedged in with centralised control, saying, “We’ll devolve if you go along with our imposed regional template.” Basically, he is a more subtle version of the noble Lord Prescott. He wants to re-impose regional straitjackets on local authorities through the back door. That is the reality of Labour’s supposed devolution agenda.
I share my hon. Friend’s concern, because what I have just heard is a proposal to reverse what this Government are doing through their regional growth funds: devolving real power and responsibility to Cornwall council. The Opposition are saying that we cannot have that unless we join up with Plymouth or Devon or who knows where.
It is a little like the classic Henry Ford approach of telling people that they can have any colour car they like so long as it is black. The Opposition are saying that people can have any type of devolution they like so long as they sign up to their version of what they now call a county region—that’s a new one! Calling it the north-east or east of England did not work; they are calling them county regions now, but only so long as people sign up to their imposed template.
Local government has not forgotten that this is the same team that introduced capping without giving it the chance to ask for the views of local voters; that introduced comprehensive area assessments; that interfered through the Standards Board and tried to micromanage the behaviour of councillors; and that did nothing to deal with predetermination, which stifled democratic debate. It is the same old Labour. They have not changed at all; they have just reworked the language. This is the same team that, at the end of the day, created the financial ruin of this country which, slowly, the coalition has had to put right. They are the people who damaged the hardest pressed in this country through their economic management, but there has been no apology or word of recantation.
Did my hon. Friend notice the continued insult to England? The Opposition say absolutely nothing about allowing England to settle her income tax levels, but they want Scotland to settle theirs. They want Scottish MPs to come down here and help dictate to England our income tax while they Balkanise England and pretend that breaking it up into mock European areas is some substitute for proper devolution.
Indeed I will, Madam Deputy Speaker. As we consider the future shape of the United Kingdom, I hope we will have a genuine debate about serious devolution of financial responsibility to local authorities, but that is certainly not what the Labour party’s proposals will achieve.
The hon. Gentleman, like me, has had a long career in local government. Over 40 years, I have heard successive Labour Members say that they will find a fairer system to help local government survive, but the first thing they do when they come into office is find ways to reduce the amount of money going to local government while at the same time increasing its responsibilities. How can we take seriously what the right hon. Member for Leeds Central (Hilary Benn) has said if he is following that same pattern?
That is certainly true of Labour Governments when they have come into office. I would gently add that when this coalition Government came into office we said that we would abolish capping and get rid of the Standards Board and the comprehensive area assessments, and we did so. We actually delivered on what we said. That is the difference between the two.
My hon. Friend is rightly dissecting the speech given by the shadow Secretary of State, who failed to say, despite having repeated opportunities to do so, that he would seek to redress the imbalance between rural and urban areas. Is it not clear that every rural community in this country should recognise that a Labour Government will put its own political interests ahead of a fair and equitable settlement? They should not be fooled by the words that have come from the shadow Secretary of State’s mouth today, because he refused to commit to a change that would make the situation fairer.
At the end of the day, it is implicit that a Labour Government would carry out a redistribution. We know from experience that the clever—and sometimes surreptitious—tweaking of the weightings in those 270-odd elements that go into the formula grants through the regression analysis was deliberately manufactured to move money away from parts of this country to those that historically tended to vote Labour. There is no getting away from that reality and the same thing will be done again.
My hon. and learned Friend the Member for North East Hertfordshire (Sir Oliver Heald) made a serious point about what would happen to those authorities dealing with housing need, which I thought both parties recognised. The current Government have said, sensibly, that the money should follow the population growth, because that results in the costs of services being given to local authorities. The Labour party wants to scrap that entirely. It is abject nonsense to go down that route.
If we have to build all these homes in Hertfordshire without the new homes bonus, and if our CIL is cut as the shadow Secretary of State suggested, we will end up with absolute traffic chaos and the whole county becoming a car park. Does my hon. Friend agree that this just does not add up?
I have no doubt that we would also see the imposition of regional planning through the right hon. Gentleman’s delicately termed “county region authorities”. That would be another imposition on local authorities. The new homes bonus has enabled authorities that want to provide homes for their populations to deliver those homes and to pay for the services that such populations rightly demand. There is an inherent contradiction in the Opposition’s argument.
It is significant that Opposition Members are talking about greater devolution. I, too, hope that there will be an increase in the retained element of business rates. Interestingly, that never happened throughout the whole of the Labour party’s watch. They only started to move towards a devolutionary stance after my right hon. Friend the Secretary of State introduced the retention of some of the additional business rate. We have a track record of delivering policies, but they are simply saying that they would do the reverse of whatever they did in the past, which seems fairly normal for the Labour party at the moment.
Yes, it is very clear that more new homes are being built. The right hon. Member for Leeds Central talked about need. One of the biggest recipients of the new homes bonus has been the inner-London borough of Tower Hamlets. It has built homes in a needy area, and it has been one of the biggest beneficiaries of the new homes bonus. There is therefore a direct correlation, and that correlation also relates to need. With respect to the hon. Member for Sheffield South East (Mr Betts), his point was not the best he has made in debates in the Chamber.
It is worth observing that local authorities have calculated that they will see an increase in business rate income in 2014-15, thanks to the Government’s economic policies. Some 91% of local authorities anticipate that their business rate income will grow during 2014-15, because we are starting to get the economy back on track. Having record levels of jobs and economic activity would be prejudiced by the Labour party, but that is the real way to create sustainable funding for local government, not a culture dependent on tweaking handouts.
My hon. Friend the Member for Hornchurch and Upminster (Dame Angela Watkinson) made an important point about why we need to move away from the culture of dependency. Historically, there were disparate levels of resourcing between inner and outer-London boroughs. Once upon a time, that to some degree reflected the demography of London, but that demography has changed significantly. As I know from the experience of my London borough of Bromley, the pressures facing outer-London boroughs are now much closer to those of inner-London boroughs. As my hon. Friend the Member for Beverley and Holderness (Mr Stuart) observed, the artificial inflation of the weight given to density has made the problem worse in some cases. Throughout this Parliament, my right hon. Friend the Secretary of State and his ministerial team have gradually sought to rectify such wrongs, and I hope that in the next Parliament we can build on the very solid foundations built so far.
At the end of the day, I hope that we can move away from the artificial argument about dependence on the central Government grant. We should give local government the tools to invest, which is why the new homes bonus and the retention of business rates are so important. A fairer and more transparent basis for funding is critical, and that is what the coalition Government have delivered.
There is still more to do, although none of us would disagree that local government is probably the most efficient part of the public sector. That is why I was pleased to see the excellent work done through the better care fund. I represent a top-tier authority, and most such authorities regard adult social care as one of their principal funding pressures. Once the better care fund is established, I hope that much more work will be done to align adult social care with health services. Local authorities can often deliver many of the health-related aspects of services for elderly people more efficiently than the traditional health service model. Again, my right hon. Friend the Secretary of State is to be congratulated on opening up that new opportunity, which sensible authorities, such as mine in Bromley, have already seized. We must ensure that health authorities and commissioning groups understand that too, and that they fully co-operate and do not seek artificially to hang on to money—often, their local government colleagues may be best placed to get the best bang for local residents from the available buck. I hope we will see more of that important development.
Although not directly part of the grant settlement, I hope my right hon. Friend will continue to point out to colleagues in the Department for Education that we could look for greater flexibility in the operation of the dedicated schools grant. That is a good thing in itself, but some types of educational spending currently fall outside its parameters, and we could consider that issue for the future.
None of that takes away from the fact that every local government Minister has to do a balancing act when they set out the local government finance settlement. I believe that the DCLG ministerial team has done a good job, and above all we must keep bearing down on the deficit and keep public finances under control. Equally, we should continue to reward councils that do the right thing. In due course, as my right hon. Friend the Member for Wokingham (Mr Redwood) was hinting—I will say this in a way that does not make me out of order, Madam Deputy Speaker—I hope that as we consider future funding arrangements for the whole United Kingdom, we will be able to give more weight to councils such as Bromley that have historically shown high levels of efficiency. Bromley delivers its services at the lowest unit cost per head of any London borough, and it also happens to have the second lowest level of central Government grant. The more we remove local authorities from the need to depend on that ratio of central government grant the better, and the more likely it is that they will profit from their own efficiency. That is the way forward.
I hope that in the short term we will look again at some elements of the way the grant is calculated and give greater weight to efficiency. It is probably right that there should be a greater relationship in local government between behaviour and out-turns, and between behaviour and consequences. The best thing would be to ensure that a higher percentage of local government spend is raised locally, and the Government are on course for that. They have made a good start but can always continue to do further work in future. At least we are able to offer local government a realistic programme as we go into the general election, building on achievements that have been delivered, rather than on the inherently contradictory flights of fancy from Opposition Members. We respect local government—I spent many years of my life in local government, and there are good people and authorities of all colours. For all the words of the right hon. Member for Leeds Central, imposed centralism is not the answer, and we must build incrementally—as the Secretary of State rightly has done—to return powers increasingly to local government. This finance report is consistent with that path, and I hope the House will support it.
This Parliament will clearly go down as the Parliament of austerity, but let us go back to 2010 and look at the situation when we began this journey. At the general election in 2010 the economy was growing—[Interruption.] I know Conservative Members do not like to hear that, but it was growing. The Government made a commitment in the coalition agreement to removing the deficit over the course of this Parliament, but that has not happened, has it? That is because the economy stopped growing because of the immediate severity of the cuts. As a result, not only did that happen, but real wages have not grown, the tax take has been less than anticipated, and the increase in housing benefit paid to people in work has grown substantially. That is why the deficit has been cut to only a third or a half—depending on the definition —of its original level.
The hon. Gentleman is the only senior commentator I have heard suggest that the economy stalled primarily because of a reduction in Government spending. Surely he should accept that it was to do with the general economic dislocation across the continent of Europe. While the rest of Europe is flatlining, and while this Government have tried to wrestle down the deficit, Britain has returned to growth. We have higher growth this year than any other major economy in the world, and that should be celebrated.
That is interesting. If the hon. Gentleman is saying that the fundamental problem was a major dislocation in Europe and the world because of the banking crisis and collapse, it is difficult to blame it solely on the Labour Government. After the major dislocation and the recession, the economy had started growing by the time of the election in 2010. It then went back into recession. That is what happened.
We are where we are. Through all the austerity and the pain of service cuts, the deficit is at least half of what it was. In other words, the Government have missed their target by at least 50%. That is the position. Nobody will dispute that, will they? It is fairly clear that the Government missed their target by at least 50%.
We have had all that austerity, but has it been fair? Has it been fair to local government as a whole, to Conservative councils as well as Labour councils, because they will make that point strongly? Why has local government been asked to bear the biggest burden? There is another way of putting that: why do Ministers believe that the services our communities receive from their local councils are less important than other public services? That is important.
The hon. Gentleman shouts, “We were protecting the health service,” but social care provided by local councils is as important. Of course, that is not protected from the reductions.
The figures I quoted earlier were from the Local Government Association and the Office for Budget Responsibility, so they are clearly right—perhaps hon. Members want to challenge them. The spending that local authorities can control—which excludes schools, public health, which is ring-fenced, and housing benefit—has fallen from 19% of total public sector current expenditure in 2009-10 to 16% in 2015-16. That is a disproportionate cut in local government spending compared with public spending as a whole. There is another way of looking at it: local government spending as a percentage of GDP has fallen from 4% to 2.9%. That is a significant fall.
The Government have tried to spin the 2015-16 cut as a 1.7% cut in spending power, but we should again look at the figures produced by the LGA, which are based on OBR figures. The real figures that local authorities can control, on a like-for-like basis over the years, excluding the better care fund, council tax and the public health grant, which is ring-fenced, show that the cut is 8.5% in real terms. That is the figure.
Ministers like including spending power and they like the better care fund. Hon. Members should read the exchange that the Communities and Local Government Committee had with the permanent secretary recently. He accepted that the better care fund was not part of the grant from central Government to local authorities. That money is included in the budget of the national health service, in the Department of Health. That is where it is accounted for. Ministers cannot count it in both the Department of Health budget and the Department for Communities and Local Government budget. That would be double counting. Ministers count the better care fund in the Department of Health budget, and say, “Ah. We do not talk about the actual grant and money for local authorities. We talk about spending power.” Although the better care fund is in the Department of Health budget, they say that it is part of local government spending power. That is how they get their calculation down to 1.7%. That is how they do it—by sleight of hand. We cannot have that double counting.
That is not to decry or demean the better care fund. The concept of trying to join up health service and local authority social care is obviously a good one.
I will make a little progress and come back to the hon. Gentleman.
There are major issues. Why are local authorities singled out for bigger cuts? Within local government, why have the deprived communities had the largest cuts? Ministers could make a logical, rational argument. They could say that the authorities with the biggest grant might lose the most grant in cash terms. I might not agree with the argument, but I can see a logic to an argument that says because authorities have so much more money given to them historically, they are likely to lose more when cuts are made. Can Ministers sustain an argument that says authorities historically receiving the most grant, the most needy authorities, should therefore have the biggest percentage cuts? What is the logic for that? It is one thing to argue the biggest amount, in cash terms, should come from authorities with the most cash given to them, but why should they have the biggest percentage cuts? What is the logical argument for that? How can it possibly be right that over the period of this Parliament, between 2010-11 to 2015-16, Sheffield’s spending power—I will use the Minister’s own definitions —has fallen by £230.60 per head and Wokingham’s has fallen by £2.29 per head, only 1% of Sheffield’s fall? How can there be any rational, reasonable justification to explain that cut? How can there be?
My hon. Friend is making a powerful and incisive point. Does he agree that this bears down particularly badly on those unitary authorities, such as my own in Blackpool, which have above-average needs in big spending areas such as education and social services, but find themselves subject to precisely the phenomenon he describes?
Absolutely. As I say, Ministers can make an argument that those who have had the most grant might lose the most cash, but not that they should have bigger percentage cuts. They are the areas in greatest need. In two years’ time, we will have the ridiculous situation where Sheffield and most of the northern cities, such as Liverpool and Manchester, will have a lower spending power per head than Wokingham. Can anyone on the Government Benches justify that? It is simply not reasonable.
The hon. Member for Bromley and Chislehurst (Robert Neill), an ex-Minister, said he suspects a future Labour Government would find surreptitious ways to redistribute money back to Labour authorities. I think we can be open about this: this Government have not been surreptitious. They have done it blatantly. They have taken money away from the most needy and given it to the most privileged. That is what they have done, to the point where the spending power of Wokingham in two years’ time will be greater than the spending power of Sheffield on a per-head basis. Sorry, but that is just not reasonable and no one can justify it.
The impact is there for all to see. I went around my constituency last weekend and met people. We talk about the need to join up social care and the health service—of course we need to. Sheffield had a wonderful in-house care service provision called “Care for you”, which dealt with some of the most needy people who were in their own homes and required extensive support. Sheffield ended that service because it was cheaper to go to a private supplier that had lower overheads, mainly because it does not train as well and pays the minimum wage at best. I then met a constituent on Saturday whose elderly father’s carer missed four appointments. After 36 hours his father was found collapsed on his bedroom floor and, of course, was admitted to hospital. Why was he admitted? The care package had failed. Why had it failed? The authority was having to make cuts because of the budget cuts. That is the reality of how things are in local government at present. That is not a bad authority trying to do it on the cheap, but an authority trying to reduce spending, because of the massive cuts it is facing, by another £60 million next year. In the end, much of that will have to fall on social care, the biggest budget.
The hon. Gentleman talks about double counting. He accepted that the Government had protected the schools budget and the health budget, and that therefore, given the size of those budgets in overall Government expenditure, there would be disproportionate cuts elsewhere. Will he put it on the record that his party would, as it did in Wales, cut the health service to protect local government funding? Tough choices means being clear about what one protects and what one will cut. His party seems to want to have it every which way without telling people the truth.
I think we should also deal with the myth that somehow the NHS has been protected. If we look at the King’s Fund and other commentators—the British Medical Association, certainly, or go to the GPs in my constituency—its spending has gone up in line with general inflation. Unfortunately, though, it has not been sufficient to cope with the increased demand, particularly from elderly people wanting ever more support from community GPs and hospitals.
If we have dealt with half the budget deficit this Parliament, is the Tory party saying that, if it is returned to power, this scale of local government cuts will continue? Can we really contemplate reducing local government spending as a percentage of GDP from 4% to 2.9% and below? If so, we will not be back to 1930s levels of service provision; we will have gone back even further. The graph of doom is coming. Tory councils as well as Labour councils are talking about it. Figures from the Office for Budget Responsibility show that by the end of the next Parliament, if the cuts continue on the same trajectory, we will reach the point where statutory responsibilities take up the whole local government budget, and nothing will be left for discretionary services. But I do not expect Ministers to respond, because, as the damning report from the National Audit Office said:
“The Department does not understand the impact over time of reductions in funding to local authorities, and the potential risks of individual authorities becoming financially unsustainable if reductions continue.”
That is what the NAO said, and that is the reality we are facing up to.
I do not have time to go into all the issues of decentralisation. I am a decentralist, and I speak on behalf of the Select Committee. We would decentralise not merely spending responsibilities, but tax-raising responsibilities, which the Labour Front-Bench team is beginning to move towards, with full responsibility for retaining business rates locally. I hope we can go further, but so far the Government are not prepared to move in that direction.
In conclusion, there are three big questions that the Government have not answered. Why have local authorities had to face more than their fair share of cuts, compared with other Government services, in this Parliament? Why have the poorest authorities faced the largest cuts—far larger than is proportionate? In the end, do Ministers seriously believe that in the next Parliament we can continue with the same level of local cuts and maintain the financial sustainability of local councils and the services they deliver?
It is a pleasure to follow the hon. Member for Sheffield South East (Mr Betts).
It would be churlish not to welcome the new money announced—it is welcome and needed—but I want to make a few brief observations. It is indisputable that during the attack on the deficit local government has been hit first and hardest, as it often is by all Governments—because local government is not us. We set the budget and they, the councillors, have to make the cuts. In fact, however, it is the only public service budget that has to reach a black line every year, no matter what we throw at it—and we have thrown an awful lot at it, which makes things tough and constrained.
It is widely admitted, however, that in very difficult circumstances local government has coped quite admirably—somehow—but in varied ways and with greater or lesser difficulty. If the NAO is to be believed, the Government do not realise how much that has varied and cannot be sure that local government can continue to cope in the future. The hon. Member for Sheffield South East made that point very effectively. We cannot be sure that local government is sustainable in its current form, particularly because no party is offering it any kind of reprieve, so far as I can see.
It is indisputable—I would not disagree with the hon. Gentleman—that by and large the metropolitan and urban areas have lost most in proportional and real terms. We can, as the Government do, call that fair, because they had the most per capita in the first place—and they still have—or unfair because they have the greatest need. We can stand in argument either way, and most of our argument concerns just that point.
I personally regard a 40% overall reduction in the DCLG’s account during this Parliament as too severe to be well managed and as unnecessarily damaging. I say that as a supporter of the Government’s deficit reduction ambitions. I have voted unflinchingly so far on most financial issues. On this occasion, however, one thing sticks in the craw—the dishonesty and disingenuousness of the presentation of the facts.
It was bad enough when we had the sophistry of spending power replacing the clear grant support figures in hard cash terms. When we started to include money actually in the NHS budget in council spending power—and then went on to deny double counting—the truth started to recede for me. It was very depressing. As the hon. Member for Sheffield South East has explained, the last straw came last week when I and other members of the Communities and Local Government Committee, some of whom are present, saw the permanent secretary and head of the civil service, Bob Kerslake, attempting to describe double counting as something else. It was almost comical—there were contortions that could have appeared in a TV sketch for “Yes Minister”. It was a genuinely class act of a civil servant defending the indefensible. I urge hon. Members to try to download it or find it on Parliament Live, where they will see it is a work of considerable ingenuity!
My point is simple. To make cuts and defend them is honest and tough; to make cuts and disguise them is, as I think most would accept, cowardly and weak; but to make cuts and deny them and absurdly twist language to do so is dishonest and dangerous.
I congratulate my right hon. Friend the Member for Leeds Central (Hilary Benn), the shadow Secretary of State, on his excellent exposition, setting out Labour’s alternative to what the Government have put forward today.
We are meeting at an apposite time. Hon. Members have referred to the reports of the National Audit Office and the Public Accounts Committee. I have with me a copy of the PAC report. To summarise it in respect of the Government’s record on local government, let me say that the Government have failed to provide leadership on local government finance; failed to understand the impact of the cuts they are making; failed to apply the cuts fairly, as we have heard today; and failed to recognise the effect that the cuts are having on councils’ ability to deliver their statutory services.
Many of us here will be familiar with the “graph of doom” produced by the Local Government Association, which has pointed out that in a very short time local authorities will be capable of delivering only their statutory services, and that if the funding arrangements continue on their present trajectory, many authorities will be struggling to deliver even their statutory obligations.
It was my privilege a couple of weeks ago to re-launch the “Fair Deal for Derby” campaign. Derby has been crucified by this Administration, and the Secretary of State is acting like a giant wrecking ball on local government services in the city. We have seen a reduction in funding for the local authority of some £379 per household in the city of Derby. The cuts that the council has already had to make amount to some £96 million with a further £69 million to find—unless the Government change tack or unless, as we hope, we see the election of a Labour Government on 7 May.
Is it the hon. Gentleman’s understanding, as it is mine, that the Labour party has not pledged to increase the overall funding envelope for local government? Will he spell out—in a way that the right hon. Member for Leeds Central (Hilary Benn) failed to do—exactly who would be the losers in a process where there will be no winners except at the expense of others?
My right hon. Friend the Member for Leeds Central was absolutely clear about the funding. He said there would be a fairer funding settlement. I cannot see how my right hon. Friend could have been any clearer than that. What we have seen over the past four and a half years is anything but a fair settlement. What we have seen is the neediest and most deprived parts of the country shouldering the biggest burden. What did we hear from the Prime Minister and the Chancellor? We heard that they would not balance the books on the backs of the poorest people, yet that is precisely what they have done, as we heard from my right hon. Friend.
My local authority in Derby will have lost half its budget. Just imagine the impact of that on council services for vulnerable children and elderly and disabled people in our city! Social care has been decimated, and facilities such as street cleaning, street lighting and leisure services are also under threat as a result of the Government’s cuts.
Last week saw the ridiculous scenario, the ridiculous spectacle, of the Secretary of State coming to Derby and suggesting that the council should use its reserves. “The council has £81 million in reserves,” said the Secretary of State. “Why does it not use that money?” Well, as my right hon. Friend pointed out, we can only use the reserves once, and, furthermore, they have already been earmarked. They have been earmarked for new schools, for instance, and for the cost of the redundancy payments that must be made to the public sector workers who have had to be sacked because of the unprecedented cuts that the Government have imposed on Derby. It is ludicrous for the Secretary of State to come to Derby and say that the council should simply use its £81 million worth of reserves, as if they were not earmarked, which they are, and as if it could keep on using them, which it cannot. It is crazy for him to do that.
To add insult to injury, not only did the Secretary of State turn up unannounced, but when the leader of the council, Ranjit Banwait, politely asked if the Secretary of State would meet him, the Secretary of State snubbed him. He said, “No, no, I haven’t got time to meet the leader of the council.” The leader wanted to report some of the concerns felt by councillors and some of the problems that the council was facing, and to put the case for a fair deal for Derby, but the Secretary of State was not interested. He was only interested in making political capital and in speaking to the leader’s political opponents, his own Conservative friends on Derby city council.
As if that were not bad enough, the Prime Minister then weighed in. He appeared on Radio Derby, and he too referred to the reserves. He then made the ludicrous assertion that West Oxfordshire district council, his local authority, had been worse affected than Derby. I do not know whether the Prime Minister has been paying a visit to planet Zog or has been living in cloud cuckoo land for the past four and a half years, but the suggestion that West Oxfordshire has been worse affected than Derby flies in the face of the facts. The facts are very clear. The cut in West Oxfordshire amounts to some £90-odd per household, whereas the cut in Derby is almost £400 per household, which is four times as much.
I know that the Prime Minister went to a very good school. He went to Eton, I understand. I left school at 15, and I was not great at arithmetic, but it seems to me that the Prime Minister could have done with spending some time in Labour’s former “numeracy hour” to work out basic arithmetic, because he clearly got that very badly wrong.
As Labour Members have already pointed out, the cuts have caused the economy to struggle and to go into a downturn. We have experienced the longest recession for more than 300 years, and the slowest recovery for more than 100. Why is that? When this Government came to power, they inherited a growing economy and falling unemployment, We had started to turn the corner, but what did the Government do? Owing to their ideological zeal, their determination to smash the state, and their obsession with neo-liberal economics, they sent the economy into a tailspin.
It is important to bear in mind the symbiotic relationship that exists between the public and private sectors. Where does the Minister think public sector workers spend their money? Where do the almost 1,500 redundant council workers in Derby spend their money? They spend it in the local economy; they spend it on goods and services provided by the private sector. That is why it is important to recognise this symbiotic relationship between the public and private sectors. Members on the Government Benches clearly do not understand that or why the economy has struggled so much and continues to struggle. They claim it is doing incredibly well now—well, you could have fooled me and many millions of people who are still struggling with the cost of living crisis. It is obvious that their obsession with austerity and market-led economics and their hostility to the public sector have been an utter disaster in terms of the impact on the people who rely on those services and on the economy.
What is desperately needed is a Labour Government on 7 May, with my right hon. Friend the Member for Leeds Central as Secretary of State for Communities and Local Government, because he has made it very clear that there will be a fairer funding settlement within the financial envelope. We have also made it very clear that a Labour Government would grow the economy, which this lot have been singularly unsuccessful in achieving. We would then be able to use the fruits of economic growth to sustain our public services, to continue to grow our economy and to create that economic virtuous circle.
Today we saw the ludicrous spectacle and the political stunt of the Prime Minister pleading with the captains industry: “Britain needs a pay rise.” I thought for a moment when I saw that that he had converted to the TUC because it has been calling for this for a long time. Yes, Britain does need a pay rise—a pay rise for ordinary people, not the oligarchs and the hedge fund managers who fund the Conservative party, and whom Conservative Members were hobnobbing with last night at their black-and-white ball. What we need is a Labour Government, and a Labour Secretary of State—my right hon. Friend—with a fairer funding settlement so we can get this country back on its feet, and get our public services delivering the services people in our country desperately need.
This Government have done a tremendous job in rectifying some of the wrongs the previous Administration inflicted on local government. Local authorities provide key services for all of us—care for the elderly, care for the disabled, care for children, the highways, street-lighting, libraries, youth services, economic development and so on. In that context, there is a real challenge for local authorities that service the rural community, and my community is very rural and is in the heart of Devon.
One challenge we face, in common with many rural communities, is that we have an ageing population. We also have significant infrastructure challenges given the amount of road there is in Devon. Devon has, I believe, more roads than Denmark, and that gives rise to a huge number of challenges, never the mind the challenge of the pothole.
The Government’s comprehensive spending review of 2010 changed the system for funding local authorities and, rightly, looked at a programme of significant funding reductions. It did not take account of the particular needs of rural communities, however. Consequently, in Devon funding has fallen by £80 million and it has had to look at saving £128 million in total, so it has reduced staffing, introduced pay freezes, rationalised the estate and reduced management costs, and by all accounts has done all that a responsible local authority could do.
Therefore, in the context of the funding settlement for 2015-16, looking at what further it can do is a real challenge. Devon’s core funding has been reduced by £29 million, a significant sum given the work that has already been done. There is also significant concern about the implications of the Care Act 2014, which implemented the Dilnot findings and introduced a cap on lifetime cost of care. The authority therefore has concerns about what additional funds it is going to have to find. The Care Act also changed the threshold at which people contribute. All of those uncertainties add to the challenge, and the Care Act is particularly significant for us given the ageing profile of Devon’s population. That said, Devon is grateful for those chunks of money that it has received: the £16 million schools funding—the minimum funding level for school block units—is welcome, as is the £871,000 sum for welfare and social care, which we badly need. None the less, that does not deal with replacing the old grant of £1.3 million to support the vulnerable, which is now gone.
What can we do now? Where can we move forward? How can we rectify that imbalance between the urban community and the rural community? As has been said, the Government recognise the challenge and that something must be done. Indeed, they have already begun to deal with it. The challenge was that the changes in the sparsity weighting were lost in damping, and the reality is that rural areas on average still receive £153 per head less in Government grants than urban areas. The rural services delivery grant was, again, a welcome help, but £15.5 million equates to £1.20 per head. Realistically, that is a drop in the proverbial ocean, and that amount fills about 1% of the gap in the settlement funding assessment. We need £30 million each year, on a cumulative basis, to begin to right that wrong.
My concern, on top of the lack of funding, is that our rural communities are also being penalised by having to pay a greater level of council tax—indeed, £81 more than the average urban constituent. Locally, if we compare Teignbridge district council with the nearest city, which is Plymouth, the residents of Plymouth will get £93.84 more under the latest Government funding settlement. That simply cannot be justified.
There are huge pressures on local authorities, which are really challenged. Whatever they do with council tax, they are still struggling. It is not surprising that the new homes bonus has in effect come to their rescue, to fill the gap, or that, equally, communities feel deeply frustrated and concerned that that is leading to overdevelopment. In our communities, including my Devon community, there is real pressure on care, day care centres, children’s centres and libraries. We are getting to the point at which we will be squeezing the pips and they will be squeaking.
The Government must act to rectify the imbalance and they need to set a new formula. I want to see something set out in the upcoming and final Budget, with real recognition of the real need of rural communities. Even more, I would love to see a manifesto commitment. We need recognition that, for rural communities, social care is a huge cost and a real issue and that infrastructure is a real challenge.
Whatever the Government’s protestations, it is absolutely clear that the settlement is grossly unfair to Liverpool, the most deprived local authority in the country. The settlement can only be construed as part of an ongoing attack on public services.
This year, individual residents of Liverpool will in effect each receive a cut to their local services of more than £391. By 2017, Liverpool city council will have suffered an astounding real-terms cut of 58% to its funding from central Government. That is devastating. The city’s deprivation is mirrored in its tax base, and 77% of homes in Liverpool are in the lower council tax bands, A and B, which means that only 9% of the city council’s budget can be raised through the council tax. In West Oxfordshire, 49% of the budget can be raised through the council tax, because of the wealth of the area.
Mayor Anderson and his council are doing a valiant job in difficult circumstances. They are building new homes, and more than 2,500 have come on stream this year, which has produced more than £3.5 million in additional revenue, but that cannot match the massive cuts by central Government. The council has set a three-year budget to bring stability and has carefully examined threatened services. By looking at new ways to fund libraries it has managed to save the city’s libraries. When the Government withdrew funding for schools under the Building Schools for the Future programme, the council found a way of building the most essential schools. It has also protected Sure Start and children’s centres, although some cuts have been made and, sadly, those services are again being reviewed because of the new cuts being imposed by this Government. Reserves have been spent as far as it is prudent to do so —by 2017 the city’s reserves will be down to £17.6 million —and they cannot be reduced further if the council is to act prudently.
Despite all those measures the council has taken in becoming increasingly efficient and looking for innovative ways of funding public services and creating new revenue streams, vital services are being attacked. The most important and concerning crisis being faced currently is on vital packages of social care. Social care is support to enable people who are ill, elderly or disabled to live in their own home in dignity. When this Government came into power, 15,000 people in Liverpool had support through social care packages, enabling them to live a dignified life, whereas now, as a direct result of Government cuts, that is down to 9,000 people—6,000 people have been deprived of care, despite rising needs. Unless something dramatic happens, the figure will reduce even further. That puts people’s lives at risk and robs them of their dignity. It also affects hospital admissions, because it means that, increasingly, people who are well are not able to leave hospital because appropriate care is not available for them.
Liverpool’s council is enterprising. I was horrified last year when the Minister in charge of local funding at the time said from the Treasury Bench that he thought Liverpool was a city where people wanted to doff their caps. That was an horrendous statement to make; Liverpool is a proud city. It deserves support, it acts enterprisingly and it helps itself. Increasing numbers of jobs have been brought to Liverpool, and in two months’ time Cunard, in celebrating its 175th anniversary, will bring three major, spectacular liners to Liverpool. Their return is a symbol of the city’s renaissance, which has been brought about by the efforts of the city council. But whatever the city council does in supporting jobs and working with the private sector, it cannot provide the public services that the Government are so savagely cutting away. All I can ask for today is for the Government to be fair to local authorities in general, to be fair to the most deprived local authorities and to recognise that in Liverpool city council they have an enterprising, positive local authority, which is there to serve its people, bringing jobs and working with the private sector. Surely it deserves a better deal for public services to serve our local communities.
As a vice-president of the Local Government Association, I wish to start by discussing the LGA figures. They point out clearly that there has been a 40% reduction in core Government funding since 2010, and that today’s settlement will require councils to make a further £2.5 billion in budget cuts. We must all be concerned about the financial sustainability of local government, and I concur with some of the points made by Labour Members and by my hon. Friend the Member for Southport (John Pugh). We must praise councils and councillors across the country for the way in which most have responded to the challenges, finding new ways of working, finding efficiency savings and protecting front-line services—and we find that satisfaction in council services has increased. That is remarkable.
I am proud that this Government introduced the Localism Act 2011 and of the emphasis on local decision making, with some notable exceptions such as top-down pronouncements or when local authorities have to implement local schemes with inadequate funds under constraints set by central Government such as the council tax reduction scheme. On that issue, more transparency on central support—or lack of support as the case may be—would be welcome.
Looking ahead, to deliver services more efficiently and effectively and to drive economic growth we must have devolution within and across England and on demand, building on what has been achieved so far. I do not exclude counties, as it is right that we have bottom-up devolution, through which areas outside the cities have opportunities to have more power. Tax-raising powers should be given to such areas. My right hon. Friend the Chief Secretary to the Treasury discussed that very point this week. Westminster has to let go.
It would be good to see published work on the implications of increasing the proportion of business rates retained by local authorities. I welcome the Government’s inclusion in the final settlement of an additional £74 million for local welfare assistance. I could criticise it and say that it is not enough, but to be honest, I am greatly relieved that all the many representations were listened to, including my own and that of the Liberal Democrat communities and local government committee, of which I am a co-chair. I feel so strongly that local authorities are a place of last resort for people who are destitute and who must be able to access immediate support when some unforeseen crisis has occurred.
Can my right hon. Friend explain why her party believes that the local government settlement should and can be determined by the votes of Scottish MPs, when Scotland decides on the distribution of its local government formula itself? That is fundamentally unfair to the English voter whose will at the ballot box should hold in the way that local government funding is distributed.
I think I will stick to the issue under discussion this afternoon. I am very much speaking from a personal viewpoint.
Let me continue with comments on the local welfare assistance fund. I wish to address some of the brilliant schemes that the fund has been used to support. I hope that they will be able to continue and that the £74 million will continue—or even be increased—in the future.
On behalf of town and parish councils I wish to make a few general points. It is to be welcomed that no town or parish councils will be subject to the referendum threshold. That has concerned me greatly, because parish councils have taken on more responsibilities as services have been cut from higher level councils. I feel that that is a great deterrent to the taking on of some really important services, such as a community library in my constituency, but concerns remain on the short-changing by some principal councils of Government funding for council tax support. The National Association of Local Councils identified more than 30 such councils this financial year, and its research shows that the number of principal councils not passing on any council tax support funding to town and parish councils will increase in 2015-16.
I have just received a holding answer to some questions that I tabled. I was told that my question on what further action the Minister will take on this issue will take a little more work. I hope that the Minister will be able to give me an answer today. Will he tell me what more can be done to ensure that principal councils pass on this funding, which is intended to be passed on? I represent parts of both rural and urban authorities, and I support the Rural Fair Share Campaign. We have had some welcome steps in the right direction, but there is a central unfairness to rural residents, which is that they receive less in services and pay more. We need much more done in that area.
I welcome the reconsideration by the Government of Christchurch and East Dorset councils’ bid for the transformation challenge award and the allocation now of £867,500. The two councils have been working on service sharing for some time now, following a line suggested by the Government. That process has been hard for staff and a recent survey showed that staff morale is very low. I hope that this fund will mean a smoother process and some reassurances that residents in Corfe Mullen, Wimborne and Colehill in my constituency will not feel that they are on the fringes and left out.
I was very pleased when the three principal councils in Dorset were named as the first winners of the Government’s transformation challenge award in October 2013. With other partners, they are working together to transform how health and social services are delivered across Dorset over the coming years, but despite the excellent work that is taking place, funding for social care remains of enormous concern in my constituency.
I decided to look at my first speech in this House on local government finance and I found that in October 2002 I said that
“in the south-west, a recent analysis shows that there is a £70 million care gap. Local authorities are warning that the social care safety net is not adequate for children, the elderly and the vulnerable.”—[Official Report, 24 October 2002; Vol. 391, c. 452.]
Of course, I was addressing a Labour Government. The needs are rising and the problem is becoming worse, but we should acknowledge that it is this Government who have made moves to bring health and social care funding together to make services work better together and to get more for our money. Those are moves in the right direction, although of course I would like some transparency and clarity about the extra funding available through the better care fund for local authorities.
I recently met the leader of Poole borough council, Councillor Elaine Atkinson, and the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Bristol West (Stephen Williams). The council leader’s concerns centred around the ranking of Poole, which is the third lowest funded unitary authority in England, and local needs. The greatest concerns were about social care, and I must praise the council leader, who is not a member of my party, for her passion for social care and for producing and providing the best possible services.
In Poole, the over-65s—that includes me—make up 21.61% of the population. That is a very hefty proportion indeed. For the rest of Dorset, the figure is 26.95%, and, interestingly, the figure is lower in Bournemouth. The demands are great and, of course, following the High Court ruling, we have extra expenditure on the deprivation of liberty safeguards. That judgment obviously affects the statutory requirements for all councils, and I am quite sure that it is important, but there is a shortage of funding. Additionally, as many Members have mentioned, there are even more pressures across children’s social care. That is happening for the saddest possible reasons, but at least we are alert to what is happening out there.
With Poole always having such a low ranking, there is very little room for manoeuvre with the extra demands placed on it. There is great concern that not as much money is coming out of the better care fund locally from the Dorset clinical commissioning group as was initially expected. I welcome the fact that Poole is to receive extra funding to help with the winter pressures of people being stuck in hospital when they are sick but do not necessarily need a hospital bed.
A point that the council leader was very anxious to make concerned the difference between Poole and Bournemouth. It is very difficult to make comparisons between different places to argue a case, but her point was that Poole is allowed to retain 25.49% of its business rates whereas Bournemouth is allowed to retain 42.46%. Obviously, that is worked out according to the existing formula. I do not doubt that the figures are correct, but I am beginning to doubt the mechanism, because on the face of it, looking at Poole and Bournemouth, I cannot understand it. I can understand it on the formula, but I think that it will be really sad if we have to wait until 2020 for the make-up of that percentage to be looked at. I would like that to be reviewed earlier.
In conclusion, I have said a lot today about social care, because I think that local government’s greatest concern is that day of doom, as we have heard. The Care Act 2014 is introducing new and welcome responsibilities, but with them come great uncertainty about the scale of the costs. I think that local government has done us proud. It is important that central Government give local government the tools and resources it needs.
I rise to make a few remarks on behalf of the city of Leicester, which I am fortunate enough to represent. In common with my hon. Friends the Members for Liverpool, Riverside (Mrs Ellman), for Derby North (Chris Williamson) and for Sheffield South East (Mr Betts)—he is no longer in his place—I represent a city that sadly often scores far too highly in the deprivation league tables, yet it has had to cope with significant budget cuts under this Government. That is why I wholeheartedly endorse the vision laid out by my right hon. Friend the shadow Secretary of State in his opening speech on the need for a fairer funding settlement.
I also endorse the shadow Secretary of State’s vision for devolving more powers to local government, because although our city has huge levels of deprivation, we have tremendous potential. We are an exciting and vibrant city, with 9,000 businesses in our city centre and two first-class universities producing graduates who go on to work in the east midlands’ manufacturing base and computing base. Our mayor, Sir Peter Soulsby, has been integral to our city deal and central to getting a deal that will see IBM bring 300 jobs to the city. Indeed, IBM praised the work of the city council when it announced that it was coming to our city.
Leicester’s cultural life is rich. Next month we will reinter King Richard III at Leicester cathedral. While we will be putting on a celebration that is literally fit for a king, 2 miles down the road in Spinney Hills a third of children are growing up in poverty—half the children if we include housing costs. Later this year we will host rugby world cup games, which many will enjoy coming to Leicester to watch, yet 2 miles down the road from the King Power stadium, on the Saffron Lane estate a quarter of the children are growing up in poverty. Some 3,000 families across Leicester are trying to cope with the bedroom tax. Food banks have doubled across our city over the past two years. Our Sikh gurdwaras report that the number of people turning up for free food has increased over the past two years.
However, by 2015-16 Leicester city council will have seen a real-terms cut of 45%—£95 million cut from its budget—for a city that ranks in the league tables as the 25th most deprived in the country. On the Government’s own figures for revenue spending per head, it is losing £205 per person. As my hon. Friend the Member for Derby North and others have said, what a contrast that is with the losses in some of the wealthier and more well-heeled parts of the country, such as in the Prime Minister’s backyard. We are seeing the ending of crisis loans and community care grants and the ceasing of funding for welfare support. In a city where there is such reliance on food banks and other providers of that ilk, I dread to think what that will mean.
The unemployment rate increased quite significantly under this Government, and it has now begun to come down, but in my constituency it is still above average. Is that okay for the hon. Gentleman? I concede that unemployment has come down, but in Leicester it is too high and we need to get it down further.
Would it not be true to point out also that many of my hon. Friend’s constituents are on zero-hours contracts, in part-time work and in low-paid occupations? As the Prime Minister himself has said, Britain needs a pay rise. We also need to get rid of those exploitative zero-hours contracts, which the Labour party is committed to doing.
In his contribution a few moments ago, my hon. Friend spoke eloquently about the need for Britain to have a pay rise and poked fun at the Prime Minister’s late conversion to the need to deal with the fact that wages have been squeezed considerably under this Government. Indeed, by the end of this Parliament people will be worse off than they were at the start of the Parliament, which is unusual by historical standards.
I want to concentrate on Leicester where, like other cities, we are seeing increasing demands on our children’s services. Luckily, our local authority has managed to keep our Sure Start centres open, but some services have had to be cut. We are seeing growing demand on adult social care, like other cities, yet we are trying to cope with deep cuts. We are a city with a proud, vibrant voluntary sector. Perhaps it could be argued that the big society was invented in Leicester, yet all voluntary sector organisations are seeing their grants cut and they are struggling to provide the level of services to the community that they have been able to provide for the past few years. The Government’s rhetoric on the big society rather sticks in the throat when we see what is happening on the ground.
As to how the Government present the figures, my right hon. Friend the Member for Wentworth and Dearne (John Healey) and my hon. Friend the Member for Sheffield South East did extremely well in exposing the fact that when the Government talk about spending power calculations, they are trying to disguise the cuts facing councils. The hon. Member for Southport (John Pugh), who is not in his place, made a brutal contribution referring to that as sophistry. The Government tell us that, on their spending power calculations, Leicester sees a 5.4% reduction. However, as many have pointed out, these figures are distorted by including the totality of the better care fund, a significant proportion of which is not available for local authorities to spend.
With that element removed, the year-on-year reduction in spending power for Leicester is 9.4%, so what we need is not sophistry, in the words of the hon. Member for Southport, but a fairer funding settlement for cities such as Leicester. We need a funding settlement that truly recognises the deprivation in cities such as Leicester. In Leicester—which, by the way, did what the Government want; we have a directly elected mayor—what the city mayor and the local authority need is a funding settlement that allows them to budget for the longer term. We need the devolution of genuine powers to our cities, because a city such as Leicester, with its vibrant, dynamic population, can take full advantage of those powers and make a real difference.
It is a pleasure to take part in this debate. We have heard a number of excellent speeches from both sides of the House, none more brilliantly delivered than that of the shadow Secretary of State, the right hon. Member for Leeds Central (Hilary Benn), who in the most lucid way presented a picture of a much fairer settlement for local government, if only the Labour party came to power. No one in the House has such a pleasant and agreeable manner as the right hon. Gentleman, yet beneath that surface we heard nothing to tell us about what the Labour party would do if it got into power.
Despite all the protestations from Labour Members about the dreadfulness of spending reductions for local government, we know that the Labour party is not committed to spending any more at all. So if anyone is to win, by the sound of it, it will be the local authorities that already have the largest and most generous settlements from central Government, whereas those local authorities in rural areas with an ageing population which, on average, is poorer and has a lower average income will lose out. People in rural areas already pay a significantly higher level of tax and have weaker access to services, yet they will lose out if Labour comes to power. That has not been stated categorically. Members have asked for greater transparency. We got no transparency from the Labour party today.
Tonight our job is to vote. The House decides this evening on the settlement—the distribution of funding to local government across England. It is Labour policy that in a year’s time 35 or perhaps—in the Labour party’s worst nightmares, and it is not that unlikely— 40 Scottish National party Members of Parliament will be able to dictate the distribution of local government funding in England, despite the fact that at the general election people expressed a preference for an entirely different vision. That is possible. When there is greater devolution to Scotland, it is quite wrong that we are unable to distribute our own funds within England in a way that does not allow that to be dictated by those who represent people whom it does not affect. I would like to put that on the record.
As we discuss this subject, I am disappointed that I must again highlight the unfairness that my rural constituents and others across this country face in the settlement. I do not accept the Government line that this is a fair settlement for all. I recognise, though, that they inherited from Labour a funding system so skewed, so indefensible and so politically rigged that it was a shameful scandal. It was one in which, when the numbers could not be made to work out to the political preference of the then Labour Ministers, officials were asked to invent new technicalities in the system—new ways of ensuring that the money went where those Ministers wanted it to go. What did they come up with? They decided that they would use density as the weighting to drive the money where they wanted it.
The new formula had all sorts of perverse outcomes. For the most part, it delivered the additional funds to Labour seats that Ministers were aiming for, but it was totally wrong, because density, which does not link to need in any way, was set at four times the weighting given to sparsity, which does link to need. Although it served the party political purposes of Labour at the time, it also led to perverse outcomes in distribution across seats in areas represented predominantly by Liberal Democrats or Conservatives. It was fundamentally unfair, and areas of the country that are rural and have lower incomes have lost out ever since. This Government inherited a deeply skewed, morally unjustifiable funding settlement from Labour, and nothing we have heard from Labour Members today suggests that they do not plan to return to precisely the same methodologies if they get back into power.
I welcome this year’s announcement of an additional £4 million for rural authorities through an increase in the rural services delivery grant, which did not exist until this coalition Government came to power and recognised the need to do something to address the inequalities in rural areas. In meetings with Ministers this year, colleagues from multiple parties have received the clearest recognition yet that the Government accept the principle that the funding system is biased against rural areas. I am grateful to Ministers who have begun to right the historical injustice brought about by the previous Government. My right hon. Friend the Member for East Yorkshire (Sir Greg Knight) wished to be present when I was speaking but was unable to be here. However, he fully supports the points that I am making on behalf of all the people in east Yorkshire.
On average, as has been said—it is worth repeating after the excellent speech by my hon. Friend the Member for Newton Abbot (Anne Marie Morris)—that rural residents pay £81 more in council tax than their urban counterparts and earn less, on average. Over time, it has been good to see Labour Members slowly taking in this fact; it has been dripping in. People in rural areas are not living in some prosperous idyll—far from it. On average, they have lower earnings than people in urban areas and face greater costs in accessing services. Yet rural residents, who pay more council tax and are poorer, on average, receive £153 less per head in central Government grant than do those, on average, living in cities.
In a moment. This is not about Toxteth or areas of the most concentrated deprivation; it is about a broader picture in which it would be perfectly possible to protect the most deprived areas of, say, the hon. Gentleman’s constituency while seeking to address an imbalance in the funding formula.
I appreciate the hon. Gentleman’s point, but that would mean a further bill for a left-wing organisation and we know where that leads. He will be aware that in the past couple of years the wages of non-unionised workers have eclipsed those of unionised workers and that the TUC is, for the most part—as, indeed, is the hon. Gentleman’s party—a front organisation for those who receive money from the public purse. Trade union membership does not have a great deal of relevance to those who work in the private sector, which exports across the world and generates the wealth that pays for those of us, including MPs, who are paid from the public purse. However, I would always welcome and support anyone who wished to join a trade union, if they saw fit to do so.
Although there is a smaller gap of £73 per person between rural and urban spending power, it is smaller only because it takes into account the higher council tax that rural residents have to pay. Poorer rural residents are subsidising richer urban authorities. That is worth repeating, because anyone listening to the impassioned protestations of Labour Members would think that was not true: poorer rural residents are subsidising richer urban authorities. There is no acceptable justification for that status quo.
The fact that the Government have introduced the rural services delivery grant during this Parliament and increased it every year is welcome recognition of the rural penalty. This year its value has been set at £15.5 million, or £1.20 per head. At just 1% of the shortfall in the main central Government grant, that additional money does not by itself deliver a fair deal for rural areas.
I will happily give way to the hon. Gentleman. Perhaps he will be able to provide us with more honesty than those on the Labour Front Bench and give the House the honest account of who the losers will be if Labour comes to power. I suspect there would be further injustice for rural residents across England.
The hon. Gentleman was very keen to intervene on virtually everybody else who has spoken, so I am pleased he has eventually given way to me. If I follow his argument correctly, is he saying that the funding settlement for cities such as mine is too generous?
I am grateful to the hon. Gentleman for making that point. I had hoped that he would talk about the fact that his party would not invest any more money in the local government funding settlement. If his reading of what his Front-Bench colleagues have said is that his area will receive more money—I think that is the case—that means that the injustice for poorer rural residents will increase. It is not the case that urban authorities in general are unfairly funded or have had disproportionate levels of cuts, because that funding was skewed in the direction of urban areas in the first place. The Labour party refuses to explain how it would have dealt with local government funding in this Parliament.
My hon. Friend is making an excellent speech. Labour has said that it would raid the new homes bonus, which is worth £6 million to my local authority and which we are getting to fund infrastructure as a reward for taking development and building the new houses we need. Frankly, it is disgraceful that Labour wishes to raid that and redistribute it to other areas. My residents will certainly not support that.
My hon. Friend is absolutely right. The hon. Member for Liverpool, Riverside (Mrs Ellman) said how deprived Liverpool is, but what she did not mention was what has happened to unemployment there, which, as in Leicester and Derby, is down under this Government. That is not because Labour has suddenly become enterprise friendly or is the result of decades of failure to promote enterprise, prosperity and wealth creation; it is because this Government have created the conditions that have helped drive down unemployment. By putting in place incentives such as the new homes bonus and understanding that incentives drive behaviour, this Government have tried to create a response in councils that will lead to the right outcomes for people.
In that way, in 20 years’ time, the successors of Labour Members representing urban areas will not be shroud-waving proudly in the Chamber about how deprived their communities are; they will be celebrating the fact that their communities have been transformed and made more prosperous. That is the coalition Government’s vision, but through all the years of false boom presided over by the Labour party, so many people in urban centres represented by Labour Members were left to fester. Too many people were left on dole queues, from which they are now being removed by precisely those policies, such as the new homes bonus, that encourage the right behaviour.
As my hon. Friends have said, there is a risk. Areas doing the right thing and challenging the nimbys—saying, “Look, we need housing, and we want it to be affordable; we want affordable housing and market housing; and we want housing to accommodate our young people and give them hope for the future”—need to be rewarded with the funding to put in place the infrastructure to make such developments saleable to their residents. However, Labour Members want to strip away the new homes bonus. Yet again, they just do not understand. They want everyone to take the money from the central public purse. They talk about devolution, but that in fact means more central control. They talk about improving incentives to do the right thing, but they want to strip away the new homes bonus. Their approach to local government finance is incoherent and damaging, and it will lead to a raid on the already poorly funded and inequitable settlement for people in rural areas.
The discussion today has covered social care. Like the right hon. Member for Mid Dorset and North Poole (Annette Brooke), I attended debates about care during the last Parliament. I cannot say they were massively attended, but time and again she and I faced Labour Ministers who said they were sympathetic to bringing social care and the NHS together. What did they do? Absolutely nothing. I remember, as she will, that after they had been particularly sympathetic to the direction of travel, they gave a 4% increase to the NHS and a 1% increase to social care in their next financial announcement —and they wonder why we have not created a more co-ordinated system. This Government are working to bring the NHS and social care together so that there is seamless support for an ageing population.
The ageing population is disproportionately located in rural areas, such as the East Riding of Yorkshire—including my constituency of Beverley and Holderness—which have had the largest increases in the numbers of over-65s and over-80s in the country. That drives cost, but the Labour party would allow the money to be skewed to their core areas, which on average have much younger populations and no such needs. To look at the NHS settlement as a parallel, at the end of Labour’s time in office, Tower Hamlets, with its peculiarly young population, spent four times more on each cancer patient than Dorset, with a very aged population. That is gross inequity, but the first time we hear anything from Labour Members is when a Government who inherited appalling public finances seek, inch by inch, to create a little more fairness.
I want to finish in the same way as my hon. Friend the Member for Newton Abbot. I am sad that no Conservative Ministers are on the Front Bench at the moment, but I know they are assiduous readers of Hansard. I say to the Under-Secretary of State for Communities and Local Government, the hon. Member for Bristol West (Stephen Williams), that I hope the Liberal Democrats and the Conservative party—I would like to say this of the Labour party, but I am not holding my breath—will make a manifesto commitment to bringing in a truly fair funding formula based on need. The right hon. Member for Leeds Central talked about that, but he would not in fact implement it.
As my hon. Friend the Member for Newton Abbot said, I hope that a commitment will be made in the Budget before the election to increase the grant to at least £30 million a year. In that way, we can close the gap between urban and rural areas by 2020, recognising that people in rural communities are older, have lower average incomes and pay higher council tax, and recognising the fact that they deserve justice—at last—from whoever is in power on 8 May.
Some of us might well wish the hon. Member for Beverley and Holderness (Mr Stuart) would hold his breath, but I would like to move on and talk about the impact of the cuts on my constituency. We should focus on the human issues—the lost council workers’ jobs, the lost opportunities for young people, the impact on street cleaning, and the impact on those who are hit by benefit sanctions or the bedroom tax—but we must also hold the Government to account for their totally inadequate formula and calculations that have informed this year’s cuts. They have disguised the completely unjust treatment of our most deprived areas and failed to take into account the pressures with which our most vulnerable areas already contend.
The Department for Communities and Local Government says that, on its minimalist spending power criteria, Blackpool’s funding has been cut by £114 per person, or 4.7%. According to those formulas, even that is two and half times the average cut in England. That is bad enough, but it does not reflect the real damage that is inflicted by cumulative cuts to a small unitary authority that has special factors in terms of demographics, transience and health, which have borne down further on it, not least when we include a large percentage of care and health issues.
The Government are imposing those damaging cuts when there is an ever-increasing pressure in Blackpool and an ever-rising bill to maintain services. The annual grant provided to Blackpool, the sixth most deprived council on the Government index of multiple deprivation, has fallen by about £50 million since 2010. That is about 35% of the 2010 budget.
Blackpool has also had to cope with rising demands in areas such as children’s services, whether because of increased numbers of referrals from high-profile child welfare investigations, or because of transience both from outside and within Blackpool as some families have to move several times because of poverty or family break-up. To meet those demands, the council has had to cut more than £90 million, which it would normally have spent on services, to balance the budget. The human price of that has been 759 council workers losing their jobs since 2010, with a further 200 to 300 facing that threat from this year’s settlement. Incidentally, all those council workers have already made significant sacrifices, this year taking five more days’ unpaid leave.
It is no wonder that the leader of Blackpool council, Councillor Simon Blackburn, has said that we are entering uncharted territory, and that my residents speak at packed meetings and healthwatch panels of the thinning of the fabric that has kept Blackpool a vibrant and cohesive town even when there were major realignments in tourism and visitor numbers.
The money is not shared out fairly between the regions, as the Government claim. The LGA was quick to point out that the Government’s supposed average of 1.8% cuts would be more like 8.8% in effect. Newcastle council estimates that Blackpool’s official cut of 4.7% is nearer 9%. The Chartered Institute of Public Finance and Accountancy says that Blackpool’s real loss of spending power has been 9.7%, double what the Government claim. It is the 11th worst-hit area of 383 in the country. No wonder CIPFA described the Government’s figures as disingenuous and as underplaying the size and scope of the cuts.
Why are there discrepancies? Pooling budgets between the NHS and the council can be a valuable way of improving local services, but the Government are wrong to use that to mask the full nature of local cuts. As has already been said, money that has been spent by the NHS and placed in pooled budgets should not be counted in local budget figures. That money is not available to plug the gaps in council services. That serves only to disguise the full stress that vital local services have been put under. When we add to that the vagaries of revenue raising from income from visitors on a year-by-year basis, as is the case in all seaside and coastal towns, and when we take into account the fact that in Blackpool, given our larger than average percentage of disabled and older people, which means that issues around morbidity as well as mortality are extremely challenging, there is something almost obscene about a sleight of hand that means the change from 2010-11 to 2015-16, when we include public health and the better care fund, is £260 per head compared with that of leafy Surrey, where there is an actual gain of £3.
We have also seen in Blackpool some perverse implications from the blunt mechanisms that determine the grant. Laudable local initiatives to replace high rise housing estates, which have struggled to provide residents with safe and secure housing, with new spread out family building have left us with the fifth lowest new homes bonus in the country. This blinkered focus on simply counting the numbers of dwellings disregards the quality of the houses. I shall not hold my breath, but perhaps the Minister can provide us with a coherent reason why Blackpool and other more deprived areas are so much harder hit than Tory shire areas.
The other issues that need to be considered are the specifics of how an authority such as Blackpool is affected. The early intervention grant has been almost entirely scrapped, with a 93% cut. There is almost a standstill because of the pressures on public health funding—this in a borough where alcohol and substance misuse problems are extremely significant. Payments for discretionary housing are down from £581,000 to £370,000, and housing benefit has been squeezed even further. The cuts are having a double whammy effect on the voluntary sector. First, they are putting more and more pressure on the voluntary sector to fill the gap. At the same time, the funding that the sector has historically received from local authorities like Blackpool has been drastically cut.
While we are on this issue, let us look at the deforming effect of the so-called reforms of welfare on budgets. The Secretary of State, on a visit to Blackpool last Friday, tried to pacify people and said that no one should be suffering, because there was a hardship fund. Well, they are suffering. My casework is full of people who are suffering. They are suffering because the voluntary sector and local authorities do not have the capacity to come to their aid. It is not surprising, therefore, that more than 12,500 respondents said no to the original local welfare provision findings from the Government, with only 17 in favour. The Government have been forced by this outcry to make last minute judgments.
I have said in this House many times that I am a firm believer in the ability of properly empowered local authorities. The Minister, in his speech, has underlined that point conclusively. As a former shadow skills and regional growth Minister, I believe that co-operation, collaboration and multi-agency agreements, and the devolution proposals that are now at the heart of Labour’s policy in this area, can secure transformative change. Real localism requires respect shared between all parties. The Government who fail to understand the practical pressures being faced by local councils, who disguise the full extent of the cuts being imposed on them, and who show political favouritism to some areas over others could never be part of the creation of a bold new locally led system. Ultimately, it is the people in communities such as Blackpool who have suffered.
We would welcome more powers to stop rogue payday lenders, to limit the number of gambling outlets in high streets, to stop our pubs being driven to the wall, and to control and provide public transport that is tailored to community needs and not simply to a cartel of operators. Blackpool is an enterprising council. We have shown that in the way in which we have used, in a very positive fashion, lottery funding for our visitor, illumination and heritage initiatives.
Ultimately, objections to the unsustainable withdrawal of local funding for core council services, which we have seen again in this settlement, are treated as inconvenient obstacles to the political decisions of the Government. That cannot be satisfactory; that cannot be the way forward; and that cannot be the mantra of the new Labour Government we all hope for in May.
From a seaside town, we move to an inland city that also has great needs that are not being met by the settlement and the policies of the Government.
I wish to say a few words about a specific issue affected by the settlement imposed on local authorities like mine, and then to make a few points of more general significance, particularly as regards Birmingham. I was in Birmingham this morning, and for once there was some good news. For many months, school crossing patrols—lollipop men and women—have been under threat, as a result of the huge cuts being passed down to our city. It has caused massive concern among parents, schools and everybody who worries about children’s safety, and I pay tribute to the unions in the city for spearheading the campaign and to our local paper, the Birmingham Mail, for highlighting the issue.
The good news is that the campaign has borne fruit. We are not out of the woods—there will still be fewer school crossing patrols, and there needs to be a discussion between schools and the council about what their respective responsibilities should be—but today the Labour city council confirmed that it would maintain school crossing patrols on the busiest roads where there were no other controlled crossing points and where the only other crossing point was a zebra crossing. The council has listened. In a meeting I had with it yesterday, it said it would redouble its efforts to integrate school crossing patrols in an effective overall strategy for providing safe school routes, whether that be 20 mph zones or by encouraging safe walking and cycling to schools. That is the good news, and I pay tribute to all those I have mentioned, as well as my fellow Labour MPs from the area, for spearheading that campaign.
The less good news was the response from the Secretary of State. I too am sorry that he is not in his place. Indeed, I am sorry that the Under-Secretary of State for Communities and Local Government, the hon. Member for Bristol West (Stephen Williams), has been left entirely on his own by his coalition partners—oh, he has now been joined. Anyway, perhaps he will pass on a few sentiments to the Secretary of State, who, as my hon. Friend the Member for Derby North (Chris Williamson) mentioned, made a sweeping visit to the midlands last week. When confronted with the issue of school crossing patrols in Birmingham, he said:
“We had to send someone in to look at Birmingham because it’s been so badly run for quite a long time.”
In fact, his party ran it for quite a long time! He continued:
“We’ve made a number of recommendations and it really does need to start looking at the more important things that will bring in quite a lot of money, than start messing around with people who take kiddies across the street and keep them safe.”
How dare he? This is from the Minister who railed against the use of CCTV outside schools to deter drivers from parking where they should not—something that parents know is a problem in front of many schools. To grab a headline, he wanted to get rid of one of the tools that could keep those children safe, and he tried to force it through in his deregulation Bill, but was forced into a U-turn when his colleagues said it was important to exempt schools from his ban on CCTV. How dare he imply that cuts to school crossing patrols are simply a Birmingham problem, when we know, from research we have done, that two thirds—66%—of local authorities have cut the number of school crossing patrols since 2010? That means 1,000 fewer lollipop men and women than when the Prime Minister took office.
In 2013, the shadow Transport team obtained through freedom of information requests the following figures on road safety budgets and staffing levels in 133 local authorities. It found 92% reported having to cut their budgets from 2010-11 to 2013-14. Of those, there was an average budget reduction of over a third—42%—while two thirds of all local authorities responded by cutting staff working on road safety in the same period, and nearly half of all respondents—49%—had cut budgets for walking and cycling. A recent survey by Brake revealed that two thirds of the parents of primary school children think roads are unsafe for walking and cycling, while Sustrans has reported that about the same number of parents say their child has experienced a “near miss” on the school run. The latest figures show that in 2014 the number of children killed or seriously injured rose for the first time in 20 years. Progress on reducing casualty rates is stalling under this Government, with three consecutive increases in road deaths last year.
So how dare the Secretary of State make those comments about school crossing patrols in my city? How dare he do so when our city has lost a third of its budget since 2010—the equivalent of £161 per household compared to a national average of £47, which is far more than places such as Surrey that have seen their spending power increase? A number of hon. Members have raised that point.
For the 2015-16 financial year, we in Birmingham are facing the largest cut in history, of £100 million, at the same time as we need to spend more money on child protection and social care. More than £250 million-worth of savings are required by 2017-18, and the total between 2010 and 2018 will have been £821 million, as my hon. Friend the Member for Birmingham, Edgbaston (Ms Stuart) pointed out a little while ago.
We have been urged to spend more—and rightly so—on child protection and safeguarding, but we face a Government who will the end while cutting the means to achieve precisely that. Birmingham is facing yet another above-average cash cut in spending power to 2015-16—as I say, about £161 per dwelling, which is 6%. That is more than three times the national average cut of £47 per dwelling.
I am grateful. Because the hon. Gentleman’s speech is so gloomy, I thought he might like to hear something more positive, which is that the unemployment rate in his constituency has seen a bigger cut still. It has halved since 2010. Is it not true that every Labour Government leave more people on the dole than when they came in, and that it is the Conservatives who put the country back together, put people back to work and put money in their pockets?
The hon. Gentleman will be aware—[Interruption.] I will tell him. Between 2009 and 2010, the number of people who were long-term unemployed in his constituency went up from 460 to 1,090—more than doubling in the final year that Labour was in power. That was a perfect encapsulation of Labour’s impact on ordinary working people: they get disadvantaged.
The hon. Gentleman has perhaps missed the fact that there was a worldwide recession at that time, as a number of my hon. Friends have had to remind Conservative Members. Another theme in the hon. Gentleman’s statistics is that when Labour was power before the worldwide recession, there were 25 young people in my constituency out of work for more than a year. There are now five times that number. If people are out of the labour market, they find it very difficult to get back in. Frankly, this Government’s policies are doing nothing to address that problem.
Judging by what we have just heard and what we heard from the Minister who opened the debate—who knows whether the Minister now on the Front Bench will say the same when he winds up the debate?—it is clear that they still do not get it. They simply do not get it. Whether in a city, or in a town on the coast or inland, or in a rural or urban area, if needs are greater but areas face percentage cuts similar to those of more affluent areas—or, as my hon. Friend the Member for Sheffield South East (Mr Betts) who I am pleased to see just back in his place said, if the percentage cut is even greater—the former will be hit harder. Services suffer more, and real people suffer more. That is the reality that Birmingham faces.
We have heard a few times from Government Members that urban areas such as Birmingham were favoured or featherbedded in the past. Government Members are fond of claiming that anything that is not right today is somehow the fault of the Government who were in power before 2010. Birmingham was a Conservative council from 2004 until 2012, when the Conservatives lost power. I do not remember a single Conservative councillor, a single Liberal Democrat councillor or, indeed, a single Conservative Member of Parliament in Birmingham claiming during that time that their city—our city—received too much from the Labour Government. I do not remember any of them saying that we could easily afford to lose another third of our budget, and up to two thirds in the future. I do not remember any of them saying any of that while they themselves were trebling Birmingham’s debt, so let us have no more buck-passing from Ministers now.
We need a funding formula that is fairer—a funding formula that is based on the principle that those in the greatest need receive the most support. My right hon. Friend the shadow Secretary of State has outlined some of the ways in which that could start to happen, but at present we do not have a fair deal. Unfairness is at the heart of the Government’s local government policies, and I am convinced that that will not change in the next few months. It will require a Labour Government after 7 May to ensure that change happens.
It a great pleasure to follow my hon. Friend the Member for Birmingham, Northfield (Richard Burden). Not only do we have adjoining constituencies, but when I became a Member of Parliament in 1997 I took over part of his constituency, so our work has always overlapped.
I want to talk about cities, and the future of cities. Cities do not reflect the national economy; they are the national economy, and that has never been more true than it is today. Whether we are talking about Birmingham, greater Birmingham or a combination of authorities, those big conurbations and their populations are a driving force.
In the 19th century, Birmingham exploded in size. Formerly an insignificant village, it became the fourth largest urban centre in the United Kingdom, and few of the 175,000 men and women who lived there had been born locally. Birmingham was also the most divided city in the country in the context of religion: no one Church was predominant, and the tone was set by various Protestant nonconformist denominations. It was also an aspirational community, which was proud of its innovation and enterprise, its skills and its people.
The late Joe Chamberlain made Birmingham the best-governed city in the empire, and he did so in important ways. He wanted clean water, because it was a public health good. He wanted a gas supply to modernise the city’s infrastructure and raise revenue to support business rates. He wanted better housing for the people, and he wanted free primary school education, because skills were the foundation for future prosperity and well-being. This is not just some pointless history lesson; it is about the “civic gospel” that was Chamberlain’s vision of cities. Every generation must rediscover its own civic gospel according to its circumstances.
These are the questions that I really want to ask Ministers. What is their vision of cities? What is their civic gospel? How do they see the future? I can tell them what my vision is. The city of Birmingham contains 1.1 million people, of whom 238,000 were not born in the United Kingdom, of whom 53% are white British—compared with a national average of 80%—150,000 are Pakistani, 65,000 are Indian, and 50,000 are black Caribbean. Of those people, 46% say that they are Christian, 22% say that they are Muslim, and 20% say that they have no religion at all. Regardless of where those people come from and regardless of where they were born, however, 86% say that they are British. It is a very young city, too, with 40% of the population under the age of 25 and 30% under 15. It also has pockets of the most persistent unemployment, and they are very often in the very areas where we have the increase in the birth rates.
The city also trains 40,000 graduates every year, but we do not as yet hold on to the graduates we are creating. So I say: let us define the responsibilities of the city. They include education, linking schools with employers, providing public health, looking after the vulnerable, whether young or old, and providing decent infrastructure.
That takes me to the settlement, because this settlement will not allow us to do that. If the Secretary of State’s vision of the town hall is that it is no more than a call centre, let us talk about that. Let us use that as the basis of saying that the Conservative Government vision of local government is so minimalist that it has statutory duties and beyond that very little extra. Let us have a debate about that. I do not think the Secretary of State is making that case, however. He is saying he has a much greater vision, including to do with wealth creation, but the funding structure simply will not allow us to do that.
I am also going to be frank now. Not all is well in Birmingham. We must acknowledge that. There have been some deep systemic structural failures in that city going back over several administrations. We have had three major reviews—Kerslake, Warner and Tomlinson. They have shown us a way forward. The city must grasp that and say, “This is our chance to come to terms with some of the problems of the past and put them right.”
While I do not want to be party political, I do want to make one point. Lord Whitby built a magnificent library which will cost £1 million every month for the next 40 years before we even put in the first book or the first people of Birmingham go through the door. Interest payments on that library are costing us £1 million a month, which is more than the city of Birmingham spends in the entire year on traffic wardens outside our schools. In respect of his £188 million project, he said he was “saddened” that the city council was cutting the services and the hours. I am not just saddened; I am very disappointed. He says he is sad and he tells us through the newspapers that he could find solutions to this by involving local business. As he does not seem to be overtaxed by making speeches in the other place, perhaps he would like to broker such agreements and talk to local businesses and bring them in.
The problems of Birmingham are the responsibility of all of us, not just of that city. It is a city that is more dependent on Government grants and therefore requires high levels of expenditure, yet it has had reductions in funding year on year, the last one being 18.6%. It is growing consistently, too, which creates its own specific responsibilities.
We are not just facing cuts; as my hon. Friend the Member for Birmingham, Northfield said, we are also having to increase spending on child protection services—an extra £21.5 million—and on older people and younger adults by £6.5 million. As I said in an intervention, on the current trajectory by 2018 we will have lost two thirds of our discretionary spending. Where is the long-term structural solution coming from?
I want to make a further point. The ethnic diversity of Birmingham is also one of its strengths. Ethnic cohesion in that city is far stronger than people realise or acknowledge. I was in Manchester when the Moss Side riots flared up. I never want to see anything like that happening in our cities again. When Haroon Jahan died in Birmingham in 2011, his father called for calm and asked the community to stand together.
I am proud of the fact that our only Jewish primary school in Birmingham has got more Muslim than Jewish children. It is a very Jewish school, but the Muslim population sends its children there. Our Catholic schools also have large numbers from the Muslim communities. We need to foster that diversity and ambition, because part of what I see as our civic future is for Birmingham to succeed in life sciences, manufacturing and technology. Our population, our young population, our location and institutions could help us to achieve that. If we do not, and if our cities fall back to the difficulties that we had in the 1980s—frankly, the kind of funding structures being offered to us are on the road to such difficulties—it will not be only a Labour city council’s problem, or even a Conservative city council’s problem, it will be a problem for all of us. Our cities are the lifeblood that provides everything.
Where do we go with this? Whitehall is not minded to give more money to our cities, so I do not think there is any other way but to look at independent funding streams, which give reliability and certainty that the areas generating the wealth will keep it. I am agnostic as to whether we go for land tax, stamp duty, business rates or whatever the streams are, but all the talk of devolution and returning responsibility to our cities and city leaders will go nowhere unless we make our cities our opportunities. Our cities are our strength.
I heard all that discussion about rural areas, and as a Bavarian farmer’s daughter, no one needs to tell me what the countryside is like, I remember it well, thank you very much—
Name the time, name the place, I am there.
However, cities such as Birmingham, ethnically diverse, young and growing, are our future. It will be to the Government’s lasting shame if they do not come up with a structure that will allow us to realise a new vision for our big cities. If we do not, we will all pay the price. My ambition for Birmingham is clearly higher than the ambitions of the Government Members.
What a difference a year makes. At the time of the previous debate on the local government finance settlement, Hammersmith and Fulham had a council that after eight years was increasingly at war with its own residents on housing, planning, health, education and social care. Its decisions seemed designed not only to alienate the electorate, but, perhaps because of that, to seek to change it by socially engineering the borough so that the resident population or large parts of it were encouraged to move out, to be replaced either by the very wealthy or, in the case of the council template of buy-to-leave or safety-deposit box flats, by no one at all. There are tall, empty buildings where offshore money is simply dumped in west London and other places.
We are still dealing with the consequences, but it seems extraordinary that a park was being sold off in the most deprived area of my constituency. Where there had been free football pitches, people would now be charged £90 an hour. The Earls Court exhibition centre is, sadly, still being knocked down, despite the chronic lack of exhibition space in this country. It was going to be replaced by 1,300 luxury flats, with no affordable flats at all. Shepherds Bush market is still, I am afraid, under threat, but we are working hard to save that iconic, 100-year-old market that serves my constituents, which again was to be replaced by luxury flats. Charing Cross hospital was designated for demolition, also to be replaced by luxury flats, and a whole council estate, with thousands of council tenants and leaseholders having their homes demolished, was to make way for high-rise developments.
I do not know whether it was because of or in spite of that, Hammersmith and Fulham council was described by the Prime Minister as his favourite council and by the Secretary of State as the apple of his eye for its hard-line Thatcherite policies, whereby everything socially useful seemed to be on the demolition list and everything that gave the area identity was to be replaced by faceless blocks. The electorate, however, did not agree, and they evicted the council last May and replaced it with a Labour council. Had that new council done nothing and sat on its hands for four years, it would still have been a blessed relief for my constituents, but it has not been doing that—far from it.
In preparation for the debate, I asked the Labour leader of the council, Councillor Stephen Cowan, to give me a short list of the council’s achievements in the past nine months. The list is too long for me to read out, even in the time I have left, but I will give some examples, because it illustrates how a council takes over from the car crash that preceded it, having not only to remedy and ameliorate the policies I talked about, but to introduce positive and progressive policies of its own, in a climate of the cuts that many right hon. and hon. Members have eloquently spoken about this afternoon.
The council set up a hospitals unit to try to save Charing Cross hospital. People may ask how a council can affect that, but we have an effective hospitals campaign which is now welcomed into the town hall and supported by the council, and we are confident that, using the powers we have, we will be able to save that hospital. One of the first things the councillors did was vote through a 10% cut in their own special responsibility allowance. The second thing they did was to save Sulivan primary school, which had become a national cause célèbre. It is one of the best primary schools in the country, according to its results, and one of the most inclusive. I have a soft spot for it because I went to a school just next door to it. It was designated for demolition and closure solely to provide a site for a secondary free school. That school has been found another site, but Sulivan survived and is thriving.
Millions of pounds in new affordable housing have been negotiated; an additional £26 million has been negotiated on extant planning consents. That is not about new planning consents, where, obviously, and contrary to the previous council, we are asking for significant amounts of social and affordable housing; it is on deals that were already done. One of the most shocking things about the previous council was that it was such a poor negotiator. Whether that is because it did not really want to take money off private developers, it could not care less or it did not want, for reasons of gerrymandering, to have social housing, I do not know, but that is an extraordinary figure. It says that we can negotiate tens of millions of pounds simply by going back to the developers, even though we have, in effect, no bargaining power other than to say, “If you want to work with us in the future, you need to show you are responsible.” It is ironic that property developers are more responsible than Conservative politicians in that respect.
We also now have the largest ever number of local police funded by the council, at 44 police constables funded, which, to take up the theme of this afternoon’s previous debate, makes up in some way for the cuts Boris Johnson has made in the Met; we have had a 25% increase in voluntary sector funding, with an emphasis on homelessness and social inclusion; and we have begun the programme of turning the residential streets into 20 mph safe zones. Visitors to Hammersmith a year or so ago would have seen what we described as “North Korean-style” banners hanging from every lamppost, with pictures of smiling Conservative councillors and messages like, “Grain production up 2,000%”. By cutting those and the glossy magazines the Tories produced, we saved, at a stroke, £600,000 a year, which we can spend on essential services.
We did not get rid of the tri-borough, with the two neighbouring Tory councils, because there were some economies of scale there—so that is not an ideological point—but we did take back the decision-making powers from the tri-borough to ensure that Labour values would prevail in Hammersmith, unlike with the repeated cuts made in Kensington and in Westminster. We established an independent health commission chaired by Michael Mansfield, which is taking evidence now because the Health Secretary has refused consistently either to meet west London MPs or to review the appalling decision to close the four accident and emergency departments in west London. We cut the proposed rent rise for council tenants from 4.5% to 2.89%. We have started the process of buying back Hammersmith park, which had been sold.
We have given support to local food banks and taken action to tackle food poverty. We are challenging the Mayor of London’s right to nationalise the northern part of the borough and turn it into a development corporation for the construction of luxury housing—I will not dwell on this matter further because I have secured a debate on it on Thursday. We have saved the Lyric theatre after the Tories disastrously mismanaged the regeneration scheme, started to introduce safer and better cycling provision, given new support to the Royal British Legion, and reduced the use of management consultants. We have introduced, for the first time, speaking rights for residents at planning committees and involved residents, through commissions on issues such as the third runway at Heathrow, in leading policy decisions.
We have taken action against the disastrous special educational needs provision, particularly the transport contract, that the Tories introduced. We have introduced housing benefit advice workers in citizens advice bureaux. There is a new openness in the way in which the council does business. Nine children’s centres have been saved from planned closure. There has been action to support start-up businesses. We have trialled pedestrianisation of the North End road market, which attracted 10,000 shoppers on the day. We have blocked the Tories’ proposals to reduce trade union representation, cut meals on wheels charges by 33% and cut 15 other charges. We have halted the Tories’ plans—they did not reveal them before the election—to increase parking charges by 15% and we have frozen charges for school meals and 138 other charges.
We have abolished charges for home care for elderly and disabled people—we are only the second local authority in the country to do that. Last but not least on my list is that foster carers have been exempted from paying council tax, and we are, I think, the only council in London, and only one of eight in the country, to cut council tax. All of those things were done in the first nine months of a Labour council in Hammersmith, and they were done against a background of cuts in our budget. Ostensibly, there is a 4.7% cut in the financial settlement, but when ring-fenced budgets are taken into account, that is actually a cut of 10%. Hammersmith has received a cut of £286.16p per head, and that is despite being the 55th most deprived local authority in the country. That is the background against which these decisions are being made. I am proud of the record that a Labour council is establishing, and I know from the correspondence from my constituents that they also appreciate what is being done.
We are not out of the woods by any means. The baton, which was dropped by the previous Conservative council, has simply been picked up by the Mayor and the Government. Some very brave and courageous shopkeepers around Shepherds Bush market took three legal actions to try to save their livelihoods and their businesses. When they won the public inquiry against the compulsory purchase that the previous Conservative council had instituted, they thought—and we all thought—that we had saved the market and the shops. But then, giving no reason at all, the Secretary of State intervened and overturned the decision and said that the development should go ahead. Similarly, he agreed to the demolition of the exhibition centre at Earls Court and the 750 council homes on the site and allowed that premium land to be sold off at a substantial under-value.
Worst of all, a mayoral development corporation is to be set up—as I have said before I will not dwell on this matter as it is the subject of a Westminster Hall debate on Thursday—taking in the whole of the north of my constituency, where the Mayor of London intends to build 25,000 homes. As far as we are aware, none of those homes will be genuinely affordable or for local use. The Mayor has described it as a mini Manhattan. Is that the Conservative view of localism, so that where Conservative councils are rejected firmly and clearly by electorates they will simply find ways of pursuing their policies by other means, by taking over the land and overriding local decisions through the powers of the Secretary of State?
In my intervention earlier, I gave an example and I am sorry that the Minister was unable to answer the question that I was genuinely asking, and if the Minister who is winding up cannot deal with it I would like him to get back to me on it. The discretionary housing payment is a vital lifeline in many authorities, but in none more than in London authorities, where the combined effect of the bedroom tax, the cap on local housing allowance and the cap on benefits means that many hundreds of families now cannot afford their rent. The consequence will be that they will be forced out of London, losing their jobs, being separated from their families and having to take their kids out of school. The one lifeline they had was DHP and yet for this coming year the cut for Hammersmith and Fulham is 52%, more than double the national average of 24% and substantially above the average for the rest of London, which is 35%. How can the Minister justify that as regards that lifeline, which keeps families and communities together? It is little enough on its own but, as I say, it is just another way in which the process of social cleansing continues across west London.
It is great that we have a Labour council now and it will be great to have a Labour Mayor as well next year, but my constituents are living in the worst housing conditions I have seen for 30 years in terms of overcrowding and a lack of affordability for everybody from Generation Rent through to families in council and housing association homes. The only thing that will change that situation and build the houses they need is the election of a Labour Government in May. I pay tribute again to the Labour council for doing everything it possibly can to assure the welfare of the people of Hammersmith and Fulham. It needs that additional assistance and to work in partnership with a Government who genuinely care about everybody who lives in our inner cities, not only those who can afford to buy the tower blocks of £2 million flats that are the only answer the Conservative party seems to have to the regeneration of London.
The debate has illustrated just how clueless the Government are about the impact of the cuts imposed on local government. As we have heard, the Government have been criticised by the National Audit Office and the Public Accounts Committee for not understanding the real impact of the cuts. What is worse is that they are deliberately trying to hide how the cuts have been distributed unfairly.
We have heard how the areas of the country with highest need have received cuts up to 16 times greater than those with the lowest levels of need. Places such as Elmbridge, Waverley and Epsom and Ewell have had a funding increase at a time when local government’s grant overall has been reduced by 40%. We have heard from Members such as my hon. Friend the Member for Derby North (Chris Williamson) about their authorities facing cuts of up to £50 million. The figure is even more in larger authorities such as Birmingham. In those areas, times are extremely tough and I echo the remarks made by my right hon. Friend the Member for Leeds Central (Hilary Benn) in paying tribute to the great work of councils of all parties up and down the country. In particular, I acknowledge the great work of Labour councils who, on the whole, have faced much larger cuts.
The National Audit Office found that the Government will have reduced funding to local authorities by 37% in real terms over this Parliament. The Local Government Association says that it is a 40% reduction and the Government tell us that it is a 1.7% reduction. Nobody, but nobody, believes their figure. Even if we attempted to massage the figures by including council tax and other ring-fenced funding, as we have heard, the LGA says that that would mean an 8.5% reduction. Within that, there is double counting.
My hon. Friend the Member for Sheffield South East (Mr Betts), speaking from his experience as Chair of the Select Committee on Communities and Local Government, forensically took apart the Government’s claims, highlighting the double counting and the money sitting on the NHS books that DCLG Ministers claim is available for councils. The hon. Member for Southport (John Pugh) called it sophistry. In a damning turn of phrase for a coalition MP, he said that sophistry to disguise the cuts would be cowardly, but to deny them is dishonest and dangerous. That is what is happening.
Will the Minister commit to publishing the cumulative impact of funding reductions on individual councils? The National Audit Office has requested that, and I have tabled written questions to that effect, although I received a very disappointing response today telling me that the information will not be made available. As the hon. Member for Southport quite rightly said, that is an attempt to disguise what is really happening, because those figures would expose the deep unfairness of the cuts.
My right hon. Friend the Member for Leeds Central referred to the comments of the Public Accounts Committee, the Audit Commission and the Joseph Rowntree Foundation, which has stated:
“Cuts in spending power and budgeted spend are systematically greater in more deprived local authorities than in more affluent ones”.
My hon. Friend the Member for Blackpool South (Mr Marsden), who represents the sixth most deprived area in the country, talked about the cost pressures in his area, with the rising demands on children’s services, the growing elderly population, the challenge of implementing £90 million of cuts and the loss of 759 council workers. We do not denigrate those people as town hall bureaucrats in the way coalition Ministers do; they were providing a valuable public service in their communities. My hon. Friend talked about the thinning of the very fabric that has kept that community together. I recognise those remarks, as I am sure do hon. Members on both sides of the House.
We have heard today that by 2017 the city of Liverpool, the most deprived local authority in the country, will have lost over half its Government grant compared with 2010. In fact, my hon. Friend the Member for Liverpool, Riverside (Mrs Ellman) told us that the latest estimate is 58%. That, in her words, is “devastating”. The council has taken measures to become more efficient, to generate new revenue streams and to reduce and use reserves as effectively as possible while maintaining a reasonable level of reserves, but it is also having to make cuts that are damaging people’s lives. The truth is that no councillor wants to talk about that. Her great city mayor, Joe Anderson, and the councillors serving the city do not want to talk about the incredibly difficult decisions they are having to make, because they are doing their very best to keep the show on the road. However, as my hon. Friend said, older people in her city are being deprived of care despite their growing needs. She said that at the start of this Parliament 15,000 people were receiving care and help, but now the figure is 9,000, so there is a real unmet need. That is the human cost of the cuts. That is the real tragedy.
My hon. Friend the Member for Birmingham, Edgbaston (Ms Stuart) talked passionately, as she always does, about the great city she represents. It is a diverse and young city that trains 40,000 graduates a year. She talked of her vision for the city and all the opportunities to exploit its great strengths in sectors such as life sciences, and she talked honestly about the challenges it faces, but by 2018 the council will have lost two thirds of its discretionary spend. That is a very real threat to the city’s ability to make the most of the opportunities it has.
The hon. Gentleman has virtually made two speeches, given his 20 interventions, so I am sure that he will understand if I reply to the points that have been made rather than giving way.
My hon. Friend the Member for Birmingham, Edgbaston said—I paraphrase—that it would be to the Government’s lasting shame if they do not do what they can to create the conditions in which Birmingham can succeed. It is our intention to create the conditions in which all our great cities, and all our great counties and metropolitan unitary areas of our country, can succeed. We want a devolution deal that will give opportunities to all areas of our country.
My hon. Friend the Member for Birmingham, Northfield (Richard Burden) talked about a particular issue in his constituency: school crossing patrols. I congratulate him on his campaign. I will not run down his campaign in the way that we heard the Secretary of State disappointingly has done. My hon. Friend has found a positive way forward to try to keep children in his constituency safe, and he should be congratulated on that, as should Birmingham city council.
My hon. Friend the Member for Hammersmith (Mr Slaughter) told us that in just nine months the council has set up a hospital unit to defend hospital services, saved Sulivan primary school, invested in affordable housing, funded police officers, backed the voluntary sector, cut the proposed Tory rent rise, taken action on food poverty, saved the local theatre and backed cycling—I have to say that it could soon be my favourite council, second only to Corby borough council. My hon. Friend made a powerful case for the great things that Labour councils are doing against a background of higher cuts than in Conservative and coalition areas across the country.
Having claimed that those with the broadest shoulders should bear the greatest burden, why have Ministers done the very opposite in local government? Since 1948 local government has been funded largely through a grant according to need, a principle that existed through successive Labour and Tory Governments. The idea behind it is very simple: not all areas of the country are the same; they have different needs; and it is good for our economy and our society to give the people of every area a fair chance of a good life. Decent local services provide the basis of that, so that whether a looked-after child is growing up in Newham, Newcastle or Northamptonshire, their needs will be met. The Government have argued that the old way of doing that, which strove for fairness, lacked incentives.
The Labour Government introduced the local authority business growth incentive scheme. The next Labour Government will let combined authority areas keep 100% of business rate growth. Incentives have a role to play, but it was wrong to freeze the grant at 2013 levels and engineer a complete shift away from redistribution. The ability of areas to take up the incentives and to replace lost grant with income from them varies enormously. We know that for all sorts of reasons, in the short term, from one year to the next, the chances of generating growth in some areas is much greater than in others. To compound the unfairness, the incentives being funded are from top-slicing the grant—a further raid on the resources of councils with the greatest needs. So when the Minister replies, will he say why he thinks it is right that the spending power of Wokingham will soon overtake that of Newcastle and Leeds, which have much greater needs?
On current trends, revenue support grant will disappear entirely by 2019-20. There is a real question about the future viability of local authority services, including statutory services. We can already see the impact of the cuts—for example, the impact of the cuts to social care on the national health service. A Labour Government will end the bias against areas with the greatest needs by ensuring that the funding we have is distributed more fairly. That means a settlement that works for all authorities in all areas of the country. That will include the new homes bonus, which was criticised by hon. Members, including the hon. Member for Newton Abbot (Anne Marie Morris). It takes money away from the most disadvantaged communities and gives it to areas where new homes would have been built anyway. That is the point. The new homes bonus is top-sliced from one year to the next. It is no basis for planning ahead.
We say to every area that a fair long-term approach will be best for every local council. That is why we are committed to longer-term funding settlements and multi-year budgets, so that local authorities can plan ahead, push ahead with reform and shift from high-cost ways of doing things towards investment in preventing problems, rather than paying for them later. There has to be a better way forward than taking a huge amount of resources from the poorest areas of our country.
At the same time, we will devolve significant powers and resources to all areas of our country—not just small-time agreements with a small number of cities, but large-scale devolution across our country. We will introduce a new model of decision making and new local accountability structures, like the local public accounts committee. Labour will put devolution at the very heart of the next Labour Government, with a new English regional cabinet committee.
Today we affirm our commitment that a Labour Government will move quickly towards fair funding. We reject the deeply unfair funding changes that this Government have imposed on local councils. Taking most from the areas with the greatest need is wrong and we will vote against the motion.
We have had 13 Back-Bench contributions to the debate. Most of them have been thoughtful and reasonable, with Members standing up for their constituents, as our electors would expect. We have heard a lot about different areas, including the reinterment of Richard III in Leicester and the lollipop people, if I may put it that way, in Birmingham. We heard about cities and counties. The speech I found most enjoyable was that of the hon. Member for Birmingham, Edgbaston (Ms Stuart), who addressed not only the history of her great city, but the future vision. There may be a face-off between her and my hon. Friend the Member for Beverley and Holderness (Mr Stuart) as to who can milk the cow most productively. As someone who grew up in a Welsh village surrounded by sheep, I will not offer any rural contribution.
What we heard from the Opposition Benches was long on what problems there are and how awful the position is, but had very little recognition of the fact that one of the reasons for the current difficulties is the situation that we inherited in 2010. A couple of Members looked through that rear-view mirror and were in almost complete denial about that legacy. That might have been understandable in 2011 or 2012, but at this point in the political cycle, 90 days before the country goes to the polls, we expected to hear more of the vision that the hon. Member for Birmingham, Edgbaston spoke about—the solutions to funding local government in the future.
Thanks to this Government’s policies of stabilising the economy, getting the public finances under control and rebalancing the economy, we are now seeing a better future for this country. Local government, like every part of the public sector, has made a significant contribution to getting to where we are. As my right hon. Friend the Member for Mid Dorset and North Poole (Annette Brooke) said, councillors from all parties should be congratulated on that. The Government continue to need to make difficult decisions to put the public finances on to a sustainable path. In that context, it is inevitable that councils, which account for a quarter of all public spending—this year they will spend about £115 billion-worth of taxpayers’ money—will have to operate with reduced budgets.
Let me assure the House that, contrary to claims that have been made, in this settlement, like those before it, councils with the greatest needs and the highest demand for services still get the most funding. Indeed, the 10% most deprived local authorities in England receive 40% more spending power per head than the 10% least deprived. Several questions were asked about different authorities. Let me take the top and the bottom as examples. Hackney is the most deprived local authority area in England, and its spending power per dwelling will be £3,706.89, while Hart—I am putting together the district and county services and comparing like with like—will receive £1,854.57. At the top and the bottom, we can see that need is still reflected within the system.
That would indeed seem rather odd on the face of it, but we are talking about the settlement now, not making projections about the future. What happens in future will be a matter for the next Government, in whatever configuration they are, and we will have to see where we are at that point.
Several hon. Members talked about additional resources for rural authorities. We recognise the challenges that those authorities may face in delivering services to their communities. My right hon. Friend the Member for Mid Dorset and North Poole and my hon. Friends the Members for Beverley and Holderness and for Newton Abbot (Anne Marie Morris) made a powerful case. We have listened, and that is why, for the ongoing settlement, we are adding £15.5 million for the most sparsely populated rural areas. My hon. Friend the Member for Beverley and Holderness said that poverty is found in rural areas as well as in urban areas. Indeed, the only area of the country that still has objective 1 funding from the European Union is Cornwall—not one of our big cities.
I am grateful to my hon. Friend for his comments about rural areas. Labour Members have not said anything about unemployment. In the shadow Minister’s constituency, there has been a drop in unemployment of more than 60%. In Liverpool, Riverside, the figure is more than 45%. Contrary to what the hon. Member for Birmingham, Northfield (Richard Burden) said, long-term unemployment is also down in his patch. That is the reality that underlies this debate. That is what the Government are doing, though Labour Members said that there would be 1 million more unemployed. We have had to fix the mess that the previous Government left behind.
That is absolutely right. Contrary to the predictions made by the shadow Chancellor, in particular, that unemployment would sail to over 3 million and we would have disorder in the streets, it has in fact fallen dramatically, certainly in my constituency of Bristol West, where it is dramatically down on the 2010 figures.
We are providing an additional £74 million to support upper-tier authorities to help them to respond to local welfare needs and to improve social care provision. We have deliberately shifted the emphasis from keeping councils dependent on grant to providing them with the tools they need to grow and shape their local economies. For Britain to prosper, every part of the country needs to fulfil its potential. That will not happen if councils remain entirely dependent on Whitehall. We have set up a system that rewards councils that go for growth: those that are supporting businesses, attracting investment, and helping to create jobs. Councils that are open to new business will see the benefits of that growth through a retention of their business rates. Those that support new house building are rewarded through the new homes bonus. Many councils, of all parties, agree that these measures are having a positive impact on their ability to deliver better outcomes in their areas.
That is not all. Contrary to the impression that we are somehow drawing the heart out of local communities through this funding settlement, we have to see it in the context of resources that have been given to local areas. For instance, £12 billon is being given to local enterprise partnerships in England to spend on local economic priorities. Those growth deals will help to train young people, create thousands of new jobs, build thousands of new homes and start hundreds of infrastructure projects. We will have had six rounds of the regional growth fund, spending £2 billion helping innovative businesses to grow, and through the £90 million coastal communities fund, which also helps rural authorities, we are investing in jobs and growth in our coastal towns.
As well as growing their economies, the best authorities are transforming the way they do business. We are supporting them as they do so, achieving real savings and, importantly, improving outcomes for the people who use local services.
In November, we announced the latest round of successful bids to the transformation challenge award. We will provide about £90 million to support 73 projects that will improve services and ultimately save the public sector more than £900 million. Councils must demonstrate a readiness to learn from each other and from projects proven to develop change elsewhere.
We are committed to helping local places deliver more integrated local public services that improve outcomes for everyone. A good example of that is the better care fund in relation to health and social care. Initially we had hoped that £3 billion would be pooled locally, but we were pleased to see the figure increased to £5 billion. Several Members said that that was double counting, but that £5 billion, spent by the NHS and local government, is overseen by health and wellbeing boards, with local councillors taking the lead in shaping integration between social care and the national health service.
There can be no doubt that councils are rising to the challenge. Every council has issued a balanced budget this year. The majority of residents remain satisfied with the way their council runs things, which is testament to the great skill that authorities have shown; I pay tribute to them for all their efforts. Councils continue to have significant spending powers—as I have said, they have more than £112 billion this year—but they must satisfy local taxpayers that they are using every pound of their money to best effect to deliver efficient public services.
Finally, to rise to the challenge put down by the hon. Member for Birmingham, Edgbaston, I think that all three main parties in England are moving at different paces. My party probably got there first, in coalition, and our coalition colleagues have also embraced localism and regional growth. We see a strong future for local government—with cities driving their local economies and counties having the opportunity to do so, too—with more powers, more responsibility and an end to the situation where England is the most centralised state in Europe.
That the Local Government Finance Report (England) 2015-16 (HC 1013), which was laid before this House on 3 February, be approved.
Local government finance
That the Referendums Relating to Council Tax Increases (Principles) (England) Report 2015–16 (HC 1014), which was laid before this House on 3 February, be approved.—(Kris Hopkins.)