Local Government Finance

Part of Oral Answers to Questions — Prime Minister – in the House of Commons at 6:52 pm on 3rd February 2010.

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Photo of Andrew Pelling Andrew Pelling Independent, Croydon Central 6:52 pm, 3rd February 2010

The hon. Gentleman has demonstrated his long-standing experience of local government, along with a recognition of the inevitability of Government involvement. In my view, while authorities continue to have a degree of discretion equalisation is inevitable. I think that that 1980s Croydon local authority adopted a rather municipalist approach, perhaps a little more independent than the more robust conservatism represented by the hon. Gentleman.

The former Mayor of London rightly recognised that many suburban areas in outer London faced considerable challenges, and I think that that applies particularly to Croydon. We suffer, or perhaps enjoy, dynamic population changes-what could be described as "population churn"-while also confronting the challenge posed by the Government's desire to remove a significant number of public sector jobs from the area.

The Government are right to emphasise the £20 million of extra grant that Croydon will receive this year. There is no good reason why the borough should not be able to match the Labour authorities that are aiming for a zero per cent. increase-or, as that is rather a Brownism, perhaps I should say a freeze-in council tax. Nevertheless, Croydon has fundamental underlying problems.

I will make only the briefest reference to a regional Select Committee, as another Member was chastised from the Chair in this regard. However, I think it is a positive result of the establishment of regional Select Committees that the London Committee is examining the important issue of the forthcoming census and its impact on local government financial settlements and other public sector flows.

According to evidence given to the Committee by the London borough of Croydon, its population is likely to be 37,000 greater than the 340,800 that is presumed by the Office for National Statistics and used in local government financial settlement processes. Moreover, 41,034 migrants have registered with GPs in the last seven years, and 25,290 national insurance numbers have been given to non-British workers by Jobcentre Plus over the last three years. Those fundamental problems are undermining the credibility of the moneys given to the borough.

The operation of the area cost adjustment and the distinction that is made between west and east London-Croydon being regarded as an east London authority-have led to a cumulative shortfall of £16 million. Obviously the operation of the ACA is valuable, but the way in which it is not applied to specific grants has a distorting and unhelpful impact on Croydon's allocations. The difference between the amount given to one authority and the amount given to another can be hard to explain. The London borough of Croydon considers itself to face challenges similar to those faced by the London borough of Enfield-in fact, I think it faces rather more severe challenges-but Enfield receives £423 per head, while Croydon receives £348. That is difficult for the authority to explain to local residents and taxpayers.

In addition, the authority could face significant pressures as a result of changes in the funding of the freedom pass in London. Given that support for London local government as a whole is to be reduced by £28.6 million, Croydon will lose £1.3 million. Croydon must also spend £1.9 million a year on supporting migrants-or asylum seekers-who, having exhausted the legal system, find themselves with no recourse to public funds. There has been considerable controversy about the decision to close the asylum walk-in centre in Liverpool and to concentrate activities in Croydon. I feel that the Home Office has turned a deaf ear to our concerns, and I have organised a petition on the issue which is securing a great deal of local support.

I plead for the Department for Communities and Local Government to adopt a more open-minded approach, and to agree that, perhaps over the coming year, it will try to measure the number of additional asylum seekers who are resident in Croydon, in order to see whether the local authority's demand for a better allocation is fair.

A couple of years ago, a former DCLG Minister, the current Minister for Borders and Immigration, Mr. Woolas, got quite animated with me when I expressed concern about the amount of money that Croydon received, and reference was made to local enterprise growth initiative money. The point was made to me that £77 million of LEGI money came to Croydon, but in reality that money is not guaranteed, and there is a great deal of uncertainty as to whether it will continue to be given. That is an important concern.

I am also worried about the negative effect on a very weak local economy of the supplementary business rate in terms of all of that money being abstracted from Croydon businesses and being spent entirely on Crossrail. That will have an adverse effect on potential positive investments in the business improvement district in Croydon.

It is important that Croydon council aspires to achieve the same as some Labour councils in London have achieved: a council tax freeze this year. The incomes of many Croydon residents are either going down or are frozen, and they would find it entirely unaffordable to have yet another increase, especially bearing it in mind that the London Borough of Croydon has increased the council tax by the maximum amount allowed under the informal capping system. I am joined in this call for a council tax freeze by Labour councillors in Croydon, but they have no credibility as they previously increased the council tax by 27 per cent.

Let me turn now to a matter of great concern, on which I hope the Minister will be able to help. At a time when Croydon council is making real cuts-not merely efficiencies-in services, it has arranged for a loan of £145 million in order to build a new town hall. In addition, there is the prospect of £93 million of interest payments until 2036, making a total of £238 million. Considerable concern has been expressed to me by residents who have received a communication from the Labour party suggesting that the total cost will be £1,115 per household. That is a kind underestimate, as it does not take account of interest payments. The real cost for residents is £2,016 per household.

I well remember the very important speech given by Neil Kinnock at a Labour party conference about how it was obscene to see Derek Hatton's Liverpool council issuing redundancy notices by taxi. In some ways, I think it is similarly wrong for Croydon council to be setting about cutting services while at the same time putting aside the equivalent of £3.5 million a year to service such a large loan for such a project. Now is not the time to be building a new council headquarters for the benefit of councillors.

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