Local Government Financing

Part of Opposition Day — [2nd Allotted Day] – in the House of Commons at 7:51 pm on 29th June 2010.

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Photo of Chris Leslie Chris Leslie Labour, Nottingham East 7:51 pm, 29th June 2010

The hon. Gentleman can make these points, but they are dancing on the head of a pin. I think it is important that this money goes to the front line and gets spent, but it certainly will not help to cut these sums of money by a quarter-probably more than that-over four years. The hon. Gentleman seems to have these issues completely out of proportion. It is also interesting that in a written answer to me the Under-Secretary of State for Communities and Local Government, Robert Neill, had to correct the announcement that the Government had made to the House about the un-ring-fencing of so much money. They discovered that a mistake had been made when they said that £300 million of private sector renewal moneys and the housing and planning delivery grant had been un-ring-fenced. It turned out that that money was already flexible, so their totals were changed entirely.

I want to talk about one or two other points that have not been mentioned that much. Capital spending on infrastructure and on the improvement of the basic facilities in many of our constituencies is essential. Not only is capital grant being reduced significantly, but a little-spotted change was announced in the Budget in respect of prudential borrowing and the freedom that the previous Administration gave to local authorities so that they did not have to jump through all sorts of Treasury bureaucracy to be able to access capital loans from the Public Works Loans Board. An item in the small print in the Red Book now states that local authorities will have those requests from the PWLB scrutinised far more closely than before. In other words, it is a return to the days of centralism, if they get that money at all. Local authorities will have less capital grant as well as less ability to access PWLB money.

Does that mean that local authorities will have to go for bond finance, which is more expensive? I would certainly like to hear more from the Government about that; there was not an announcement in the Budget about bond finance. I would also like to hear where we stand in terms of accelerated development zones, tax increment financing and other measures that would be useful in encouraging innovation in the way in which local authorities access capital markets.

My final point concerns the choices that local authorities face and where they go with these difficult decisions. Many Government Members might have local authority members who are happy to take on the full burden of these reductions in the services that affect their constituents who are in most need. Many Labour authorities-and indeed, those run by the Liberal Democrats as they used to be-might want to try to temper that and to consider raising revenue from other sources. Traditionally, council tax has been the only option, although there is a quasi-capping arrangement going on with this supposed one-year council tax freeze deal. Most local authorities will probably be fairly daft not to accept the money that is on the table, although it is entirely unsustainable. There is no way that the Government will be able to extend that for long. After we have gone past this first year, we should be aware that the gearing ratio means that local council tax increases could easily be of the 10% to 15% variety. Does that mean that the Secretary of State will bring capping back in? Again, so much for his localism.

I suspect that the real burden will end up hidden away in the fees and charges that all our constituents have to pay, with a return to the easyJet council model-it will be hidden not just in planning charges, parking charges, swimming and library charges and so on but in those social care charges that hit the poorest most of all. Unfortunately, this is an ideological set of changes- although I hope that the Liberal Democrats will think again-that are certainly not in the interests of any of our constituents.

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