Local Government Finance

Oral Answers to Questions — Prime Minister – in the House of Commons at 1:48 pm on 19th December 2012.

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Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government 1:48 pm, 19th December 2012

With permission, I should like to make a statement on finance for English local authorities for 2013-14 and 2014-15.

The autumn statement sets out how the coalition Government are putting our public finances back on track after the catastrophic deficit left to us by the Labour Government. Local government has shown great skill in reducing its budgets. Committed local authorities have protected front-line services. Little wonder that at a time of retrenchment, satisfaction in council services has gone up.

This year’s settlement will see council expenditure fall in a controlled way. English local government accounts for £1 of every £4 spent on public services. It spends £114 billion. That is twice the defence budget and more than our spending on the national health service. It marks a new settlement for local government based on self-determination and financial independence, a move from the begging bowl to pride in locality. It begins the greatest shake-up of local finance in a generation. We are shifting power from Whitehall directly to the town hall and the county hall.

From April, local authorities will directly retain nearly £11 billion of business rates instead of returning them to the Treasury. Striving councils will benefit from doing the right thing for their communities. If they bring in jobs and business, they will be rewarded. Similarly, the new homes bonus remunerates councils for building more homes. Next year the bonus will be worth more than £650 million, and even more in 2014-15. Under our reforms, an estimated 70% of local authority income will be raised locally, compared with a little over half under the current formula grant system. That is a giant step for localism.

The start-up funding, which replaces the formula grant and gives each council a share, as was confirmed in the Chancellor’s autumn statement, will see £26 billion shared between councils across the country, with the smallest reductions for councils most reliant on Government funding.

We consulted local authorities on our proposals over the summer and have listened to what they told us. They said that less money should be held back from the settlement, so we have reduced the amount we are setting aside for the new homes bonus, the safety net and academies funding. I can announce that, in total, that means an additional £1.9 billion for local authorities up front in 2013-14.

Local authorities also told us that they wanted a stronger growth incentive, and we are happy to respond. We have made the scheme more generous, ensuring that at least 25p in every pound of business rate growth will be retained locally. The settlement leaves councils with considerable total spending power. I can announce today that the overall reduction in spending power next year will be just 1.7%. That represents a bargain to local authorities.

A small number of authorities will require larger savings to be made, but no council will face a loss of more than 8.8% in their spending power thanks to a new efficiency support grant. As the name implies, to qualify for the grant councils will have to improve services. It is unfair on the rest of local government to expect it to subsidise other councils’ failure to embrace modernity. However, the settlement is not about what councils can take; it is about what they can make.

Meanwhile, the settlement continues to protect fire and rescue as a blue-light emergency service. Today we can announce £140 million in capital grant money to fire authorities. Predictably, the doom-mongers have been consulting their Mayan calendars and issuing dire warnings about the end of the world as we know it on Friday and a £1 billion black hole in local budgets. Some have shamefully predicted riots on the streets. But Nostradamus need not worry, because all those predictions have come to nothing.

Concerns that the poorest councils or those in the north would suffer disproportionately are well wide of the mark. The spending power for places in the north compares well with those in the south. For example, Newcastle has a spending power per household of £2,522, which is well over £700 more than the £1,814 per household in Wokingham. We have also maintained the system of “damping”, whereby the Government set a floor that council funding will not fall below. This year’s average grant reduction for the most dependent upper-tier authorities will be less than 3%, compared with 8.7% for the wealthiest. That is more support and protection than last year.

I can also confirm today that local authorities will be able to use the receipts from asset sales raised from 2012-13 to fund outstanding equal pay claims. In addition to what I have announced today, the Secretary of State for Health will in due course confirm public health funding for local authorities.

In his autumn statement, the Chancellor recognised that local authorities have risen to the challenge. That is why local government, unlike most of central Government, will be exempted from the 1% top slice next year, which is worth approximately £240 million to councils. However, as it looks to 2014 and beyond, local government needs to continue finding better and more efficient ways of doing things. There remains scope for sensible savings. With the exception of a handful of authorities, nobody has got to grips with procurement. More can also be done to share offices and services, cut fraud and provide more for less.

I have also asked the outgoing chief fire and rescue adviser, Sir Ken Knight, to pinpoint practical ways to help fire and rescue authorities save money and protect the quality and breadth of front-line fire services. It is disappointing that the shadow fire Minister has signalled his opposition to that move—it is sad on so many levels.

Today I am returning to my ethnic roots by publishing 50 ways to save, setting out practical ways for councils to save money, big and small, but it all adds up. If councils merged their back offices, like the tri-borough initiative in London, they would save £2 billion. Procurement fraud costs taxpayers almost £1 billion a year. Councils are sitting on a record £16 billion of reserves—[ Interruption. ] Of course they are, and it is a record sum. Councils are not collecting over £2 billion-worth of council tax. Better property management could save £7 billion a year. We have also announced today that further savings will be made by the abolition of pensions for councillors. Councillors should be champions of the people, not the salaried staff of the town hall. Today’s guide gives more power to the elbow of the public to challenge crude cuts and champion sensible savings.

Next year’s exemptions will give local authorities time to put their house in order, but let us remind ourselves what this is all about: safeguarding vital public services, protecting families and pensioners, and ending the “something for nothing” culture. That is why, despite financial pressures, we will continue supporting, for the third year running, those who insulate residents from a further tax hike. We have set aside £550 million for local authorities to support council tax: £450 million over the next two years for the freeze and an additional £100 million for council tax support available in the new year. All councils have a moral duty to freeze council tax. It doubled under Labour and became unsustainable. We have cut it in real terms.

Just to be absolutely clear, this year’s freeze grant goes into the base for the spending review period and has the same status as every other item in that base. Those who would prefer to carry on with increases and see residents miss out should be ready to answer to their local taxpayers and not dodge them by setting the increase just below the threshold. For next year, we have set the referendum threshold at 2%.

I will also introduce a flexibility to support small district, police and fire authorities that have kept council tax low for years. My hon. Friend Brandon Lewis, the local government Minister, has set out the details in a written ministerial statement today.

This is democracy in action: those who want to hike taxes should put it to the people. I contrast the action that we have taken to freeze council tax with the new housing tax being introduced in the Republic of Ireland. Tackling the deficit helps keep taxes down. If we deny the deficit, taxes on everyday families will rise.

To those who want to play the politics of division, let me say this. This is a fair settlement—fair to north and south, fair to rural and urban areas and fair to shires and mets. But it is also a watershed moment. For the first time in a generation, striving councils now have licence to go full steam ahead and grab a share of the wealth for their local areas and to stand tall and seize the opportunities of enterprise, growth and prosperity. I commend this statement to the House.

Photo of Hilary Benn Hilary Benn Shadow Secretary of State for Communities and Local Government 2:01 pm, 19th December 2012

I thank the Secretary of State for his statement and advance sight of it. We will, of course, study the announcement in detail and I look forward to debating it in the new year.

The House listened carefully to the Secretary of State, and it is clear that he is living in a world of his own. He simply does not understand the impact that his decisions on funding are having on services and the local people who use and rely on them. This is what his colleagues on the front line say about him. Baroness Eaton, the former Tory chair of the Local Government Association, described the right hon. Gentleman’s understanding of the effect of local government cuts as

“detached from the reality councils are dealing with”.

Sir Merrick Cockell, her successor, has called the cuts “unsustainable” and the Tory leader of Kent says that his county “can’t cope” with further reductions and “is running on empty”.

The Secretary of State carries on regardless, ignoring what is happening on his watch. Last week, he told the Communities and Local Government Committee that the cuts were “modest” and that the LGA’s fears for the future were “utterly ludicrous”. He did not mention this, but this week his top tip for cash-strapped councils was that they should loan out their artworks in return for cash. What planet is he living on? Meanwhile, local authorities have made big efficiency savings, cut costs and laid off 230,000 staff—but still, it is services that are going.

Let us be clear about what is being lost due to the right hon. Gentleman’s unfair cuts—libraries, sports centres, Sure Start centres and places at women’s refuges. Birmingham city council says that because of the cuts and spending pressures, its controllable budget will reduce by half in the next six years. In one case, a council has already been pushed to the brink. Earlier this year, Tory-led West Somerset council was declared to be “not viable” in the longer term—not by Nostradamus, but by the Local Government Association.

Will the Secretary of State confirm that local authorities are facing a 28% reduction in Government funding over this spending review period—the biggest cut in the public sector—even though local government is

“the most efficient part of the public sector”?

Those are not my words, but those of the Prime Minister. On top of that, the Chancellor announced in the autumn statement that a further £445 million would be cut in 2014-15. Will the Secretary of State confirm that he is unfairly hitting the poorest areas hardest? The Audit Commission has found that

“the most deprived areas have seen substantially greater reductions in government funding as a share of revenue expenditure than councils in less deprived areas.”

Why are the 10 most deprived local authorities having their spending power reduced by eight times as much per head of population as the 10 least deprived authorities in England? Why will today’s announcement mean that Liverpool will see a 6.2% fall, of £35 million, in its spending power in 2014-15 compared with the previous year, when Mole Valley will see an increase of 0.6%? How on earth can the Secretary of State justify that? Does he have any idea how local councils’ efforts to grow their local economies, encourage apprenticeships and build more homes are being undermined every single day by the Chancellor’s disastrous economic policy, which simply is not working?

Yesterday, the leaders of the core cities wrote to the Secretary of State in blunt terms about the LGA’s graph of doom. They warned that if current plans are not changed,

“there will be no money for anything but social care and waste collection” later this decade. [Interruption.] That is what the core cities say.

The sad truth is that the right hon. Gentleman is in denial. He has failed to stand up for local communities and he is trying to wash his hands of the consequences. Will he confirm that millions of people on low incomes will now face a council tax increase next April as a result of “poll tax mark 2”—not my words, but those of the man who invented poll tax mark 1, the noble Lord Jenkin?

Councils should, of course, do everything that they can—and they will—to keep the council tax down in these difficult times for families, but the Secretary of State is being disingenuous when he talks about a moral duty not to increase the council tax. By cutting council tax benefit, he has decided that one group in the country will definitely see its council tax go up next year—people on low incomes; that is why they get council tax benefit in the first place. They will see their bills go up in the very same month when people on the very highest incomes will get a cut in their tax bills.

On business rate retention, can the right hon. Gentleman confirm that no council will be worse off from the change to the new system? Is it not the case that areas with less of an opportunity to attract new businesses will fall further behind as Government grant reduces? What impact does he expect appeals against business rate valuations will have on local authority income? What is the size of the adjustment he has made to the forecasts for this and for total business rate yield?

The Secretary of State did not mention the early intervention grant, but can he confirm whether the whole of the £150 million that has been held back will be allocated to local authorities and can he assure the House that that is being done on the basis of need? Local authorities want to know where they stand. Can he give us the figure for the amount that the Government will now be holding back from the settlement for the in-year safety net?

What provision is the right hon. Gentleman making for capitalisation and does that include the assistance that local authorities that face huge backdated claims arising from equal pay court judgments will clearly need? He mentioned asset sales, so can he tell us how much he estimates local authorities will raise in asset sales in respect of the councils affected? By how much has the Secretary of State reduced the hold-back for the funding of academies?

On public health, although the Secretary of State said that an announcement is yet to be made, will he tell the House what factors have been taken into account in distributing funding for public health? What changes have been made to the proposals for weighting, including for deprivation, that were part of the original Department of Health consultation? On the fire service settlement, why are the metropolitan fire authorities facing such a big percentage reduction in their spending power? How many firefighters does he expect to go as a result of what he has announced today and how will fire prevention services be affected?

Finally, on the local government pension scheme, why should a full-time council leader in a big city not be entitled to be a member of the scheme—the Secretary of State did not mention this—while mayors will be so entitled? Can he confirm to the House that continued membership of the pension scheme will be open to his friend the Mayor of London?

This is a bad day for local communities and the people they elect to look after their interests. They would have liked to hear from the Secretary of State a commitment to fair funding and a settlement that would help them through tough times, and they wish that he would understand the difficulties they are going through. Instead, they have a continuation of the profoundly unfair way in which funding has been distributed from a Secretary of State who simply refuses to recognise what is actually going on around him.

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

I am grateful to the right hon. Gentleman. It is entirely typical of him—perhaps he is not a very quick reader—that of the 50 tips he ignored the ones that are going to save billions of pounds, because apparently that is not terribly important. He was part of a Government who promised to deliver £52 billion of cuts. He stands at the Dispatch Box and pretends to local government that it would have faced no cuts under his Government. He knows as well as every single Member of this House that he would have been proposing similar cuts, and that remains the absolute truth. I remind hon. Members that the former Chancellor said in the Labour Budget of March 2010 that there would be £300 million of cuts to regional development agency regeneration, to the working neighbourhood fund—by the way, we picked up the tab for that—to the local enterprise growth initiative, and to the housing and planning delivery grant. On top of that there were £185 million of back-of-a-fag packet cuts to time-limited community programmes and rationalisations of others.

The right hon. Gentleman’s response might best be described as the Jo Moore memorial lecture, because the bad news that she sought to bury on 9/11 was about councillors’ pensions. Just to be clear, the contributions of those who have contributed will be protected, but from the middle of next year they will no longer be able to make a contribution. That will save £7 million, but £7 million probably means absolutely nothing to the right hon. Gentleman.

The right hon. Gentleman talked about Birmingham. Which local authority got itself into the most appalling mess over equal pay when the rest of local government was putting aside sensible savings? Birmingham, which now faces a potential bill of over £700 million. Who is getting Birmingham out of the mess? We are. We will be prepared to allow Birmingham to pay off this sum, which other councils dealt with sensibly over the past 20 years by the sale of assets. Birmingham should be grateful for that. I can further tell the House that out of the departmental expenditure limits—the money from Eland house not relating to local government—we have stumped up £100 million to help Birmingham in this process, because we recognise that it will take some time to deliver the results. Birmingham, and the right hon. Gentleman, would be in a right old mess were it not for us, and I look forward to receiving an apology from him.

The right hon. Gentleman asks why some authorities are actually increasing their spending power and says that it is an outrage. There is just one reason—the new homes bonus. [ Interruption. ] Oh, yes it is. It is exactly the reason, as Derek Twigg will see if he cares to look at the figures. In that lies the clue to this settlement, which ensures that local authorities now have greater control. That is due not only to the new homes bonus but to the retention of the business rate, which is how local authorities can make a big difference.

The right hon. Gentleman asked about academies. The figure is £150 million and the hold-back is £24 million.

One set of councils is seeking to tax the poor in the way that it is seeking to tax pensioners, widows and single mothers living at home—Labour councils. You will not catch a Tory authority trying to ensure that poor people have to pay 30% of the council tax. That is why we introduced the £100 million—to protect the people who have the misfortune to be represented by a Labour authority.

Photo of Dan Rogerson Dan Rogerson Liberal Democrat, North Cornwall

I welcome the localisation measures that the Secretary of State has announced, but he also referred to damping. In previous decades, authorities such as mine have suffered from their distance from the target figures to which the Department says they are entitled. Is there some hope in this for Cornwall? Are we moving away from a damping mechanism that means we will continue to get less money than we should?

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

The hon. Gentleman raises an important point and he deserves a serious answer. We looked at whether we would be able to do that. We took advice from local government, which said that it is keen to have some degree of stability through the introduction of the new system. We certainly hope that the people of Cornwall, who are renowned for their enterprise and for living in a wonderful place to visit, will rise to the new funding arrangements. The further away we move from the old formula, the more places such as Cornwall will be able to triumph.

Photo of Clive Betts Clive Betts Chair, Levelling Up, Housing and Communities Committee, Chair, Levelling Up, Housing and Communities Committee

The removal of pensions from councillors will do nothing to encourage younger people in employment to come forward and stand for public service. Will he reflect on what he said at the Select Committee last week, and listen to his colleagues in local government? He dismissed the graph of doom then, but might he now start to think that this is not simply a fantasy, as he has claimed, but a reality of his own making, which has come into effect more quickly and more harshly with the withdrawal and destruction of public services in the poorest communities in our country?

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

I would have thought that the hon. Gentleman would be delighted that the spending power per household in his constituency is £2,421, which is much higher than in many Government Members’ local authorities, and that the drop in spending power represents only 2.7%. I have some faith in the entrepreneurial spirit of the people of Sheffield; the hon. Gentleman seems to want to keep them in chains. His point about pensions is frankly not worthy of him. A relatively small number of councillors have taken this up. It costs £7 million a year. It is perfectly acceptable to me, and I think that they will probably get a better deal, if they use part of the sums they receive out of the public purse to make their own arrangements.

Photo of Heather Wheeler Heather Wheeler Conservative, South Derbyshire

I congratulate the Secretary of State on his statement, which is about realism in the financial situation that the country faces. I declare an interest in that my husband is the leader of South Derbyshire district council, the most forward-looking council in the midlands and probably in the whole country. It is interesting that where councils see that they have a future when they look at the new homes bonus, the new businesses that are coming in, and the retention of business rates, they are entrepreneurial in going out there and getting business. That is the future for councils, not “The state will provide.”

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

My hon. Friend, who speaks with enormous experience of local government matters, is right. Opposition Members seem to think that we are seeking to impose a strange alien world on local government, but this is how things operate in just about every local authority in the world. We have developed this strange world of resource equalisations, where the worse-off and the least enterprising get more, but if they show some gumption and a bit of enthusiasm, the Government will reward them by cutting the grant. Poor authorities around the world have been able to look after their population and ensure buoyancy in their funds by adopting these precise measures.

Photo of Heidi Alexander Heidi Alexander Labour, Lewisham East

The Secretary of Secretary will be aware that the Local Government Association has warned that if growing demand for social care and waste services is met over the next few years, other local authorities’ services—parks, leisure centres and libraries—will face cash cuts of 66% by the end of the decade. When will the Secretary of State accept responsibility for this situation instead of blaming council leaders of all political persuasions for a mess of his own making?

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

That certainly cannot be happening in the hon. Lady’s constituency, because it gets £3,236 per household and the reduction in its spending power is well below the average—it is only 1.4%. People need to show some gumption. Of course, all those things will happen if people just stand around doing nothing, but libraries need to show some entrepreneurial spirit. The hon. Lady need only travel to Hammersmith and Fulham to see thriving libraries where people go through the door and want to use them. Rather than paying homage to the 1950s, she should produce libraries that people actually want to go to by bringing in coffee shops and finding ways to use them better. Rather than continually standing there with her hand out, why does she not show some leadership in her community and get things going?

Photo of Mark Pawsey Mark Pawsey Conservative, Rugby

The need for growth is accepted throughout the House. Is not the best way to encourage local growth, to enable local authorities to retain and spend locally more of the additional business rate from new developments, exactly as the Secretary of State has set out today?

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

I am grateful to my hon. Friend for his question. Frankly, I could not have put it better myself. [ Interruption. ] On the Opposition Benches we see leaders of their communities, people who mock enterprise but who would have delivered cuts and said, “I’m very sorry, it’s not my fault,” and looked the other way. We on the Government Benches are different. We have been prepared to offer serious advice—50 ways to save. We are on the side of, and working alongside, those authorities, whether they be Labour, Conservative or Liberal Democrat, that want to work with their community to bring in prosperity.

Photo of Bill Esterson Bill Esterson Labour, Sefton Central

If the Secretary of State were leader of Sefton council—[ Interruption. ] Heaven forbid. If he were leader of Sefton council, would he cut services to vulnerable, elderly and disabled people, or would he close libraries? Sefton faces a cut of at least 40% in its budget and it cannot save both, whatever smoke-and-mirror act the Secretary of State tries to pull—that is the reality.

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

I cannot understand why that is happening, because the hon. Gentleman’s constituency has experienced a drop of just 2.2% in its spending power and it receives £2,265 per household, which is well above what local authorities represented by Government parties face. If I was the leader of Sefton council, I would obviously consider giving the hon. Gentleman the freedom of the borough. I would also look to make those libraries income-generating and apply that money to help the most vulnerable. After all, this settlement sees considerable, important amounts of money going from the national health service directly to local authorities to deal with precisely that issue. If the hon. Gentleman wants to go back to his constituency and be an apostle for change, he has my backing.

Several hon. Members:

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Photo of Dawn Primarolo Dawn Primarolo Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. A lot of Members want to ask questions to the Secretary of State and not make speeches, but at this rate not everybody will be able to participate, because we have urgent business. I would appreciate short, direct questions and short, direct answers, at which I know the Secretary of State is an expert.

Photo of James Morris James Morris Conservative, Halesowen and Rowley Regis

While the Secretary of State is dispensing advice, what advice would he give to council tax payers in Halesowen, who are seeing Dudley council spending thousands of pounds on a consultation exercise that calls for council tax rises of up to 4.6%?

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

I will watch the council’s progress with interest and our thoughts will be with the council tax payers at the ballot.

Photo of John Healey John Healey Labour, Wentworth and Dearne

Death and danger from fire do not discriminate, but the Secretary of State did in his first funding settlement by giving six southern fire authorities a rise in funding and the six metropolitan areas a deep cut. Why has he not done what he has done with the police and what MPs from all parties have urged him to do and given a flat, fair, across-the-board cut for all fire authorities in this settlement? Why is he continuing to hit the north harder than the south?

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

The mets benefit considerably from this settlement. The right hon. Gentleman is a serious Member of this House and deserves a serious answer. He will recall that the reduction in police funding was front-loaded and that that for firefighters and emergency services was back-loaded. One of the reasons why we have set up the Knight review is to arrive at that equilibrium and to offer fire authorities some help in that process.

Photo of Bob Blackman Bob Blackman Conservative, Harrow East

I welcome today’s statement. Local authorities all over the country have no excuse whatsoever for increasing council tax. Will my right hon. Friend confirm that this settlement has sufficient funding to ensure that every council tax payer can look forward to a freeze this year and that local authorities should seek to maximise their resources for the benefit of their residents?

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

That is certainly the case. We are talking about a 2% trigger for a referendum. Local authorities can go for whatever figure they want, but they will have to face the people. We are offering 1% to local authorities, if they can get it down to that. Essentially, for those that want to increase council tax below 2%, we are talking about less than 1%. That seems to be a very dubious case, given that we are making it absolutely clear that this money is in the base.

Photo of Louise Ellman Louise Ellman Chair, Transport Committee, Chair, Transport Committee

Liverpool is the most deprived area in the country. Liverpool city council works closely with local businesses to support investment, but the cuts announced today are an added blow to a city already reeling from cuts in local public services as a consequence of Government decisions. Indeed, people in Liverpool have already suffered cuts of £252 per head, compared with an average of £61 per head in England as a whole. Why does the Secretary of State show such contempt for the people of Liverpool?

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

The hon. Lady makes an extraordinary point. Let us be absolutely clear: Liverpool receives the enormous amount of £2,836 per household and its cut is on the average. The hon. Lady has made a point that I have often heard in this Chamber, namely: why are other parts of the country not receiving a bigger cut? Let us put this in context. I have the figures for Liverpool. In terms of the old formula grant—the start-up funding allocation—Liverpool receives £386 million, Manchester £391 million, Birmingham £783 million. Windsor and Maidenhead, however, receives £28 million, Wokingham £31 million and West Oxfordshire £5 million. Essentially, the hon. Lady is asking those authorities, which already contribute to the national pool, to increase their council tax by somewhere in the region of 60%. That does not seem like a sensible thing to do.

Photo of Bob Neill Bob Neill Vice-Chair, Conservative Party

Will my right hon. Friend, in due course, give the House further details of the efficiency support grant, which is a very welcome element of the statement? Will he confirm that it is a new initiative that, for the first time, will reward authorities that get on and do things, rather than subsidise those who sit back, carry on with the old ways and expect to be bailed out by central Government?

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

My hon. Friend will recall that that grant comes from the working neighbourhoods fund. When he and I were looking at that a couple of years ago, we found that the departing Labour Government had left no money to pay for it. We thought that that was completely unacceptable, so we created a transitional grant to help with the process. I am delighted to say that we are now down to about seven authorities that need such help. We are saying to those authorities, “You can’t expect the rest of local government to pay for you not doing the right thing. Provided that you give an undertaking that you will look towards better corporate government, joint working and getting your base down, we will give you the money next year, but if you haven’t made progress by the end of the year, you won’t get anything the following year.” It is completely unfair for local government to subsidise people who are being inefficient.

Photo of Derek Twigg Derek Twigg Labour, Halton

If what the Secretary of State is doing is about being fair, why has Halton borough council, which covers the second most deprived area in the country, had a cut per head of twice that in the affluent Tory council in Cheshire East? Is this not about transferring money away from Labour councils and towards Tory councils?

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

No, that has not happened. There has been a significant shift away from Conservative authorities and towards Labour authorities. I note that the loss of spending power in the hon. Gentleman’s area is 1.8%, which is not materially greater than the national average, and that it is getting £2,416 per household. That does not suggest that a significant amount of money has gone away from his authority.

Photo of Simon Hughes Simon Hughes Deputy Leader, Liberal Democrats

In the past, local government settlements have underestimated the population of many authorities, including mine. Will the Secretary of State assure me that the figures that he has announced reflect need, deprivation and the real number of people in each council?

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

We use the best available statistics. It is amazing that Opposition Members are suggesting that they are not, because they are based on the old system. The extra money that is available relates to the old system. As we move further away from that system, we will ensure that poorer authorities are safeguarded, but we will also ensure—because these are relative changes—that they will benefit when they start to bring in new jobs and enthusiasm.

I hope that my right hon. Friend will allow me at this point to address a question that Hilary Benn asked, but which I neglected to answer. There are always two things in these equations that one needs to be certain about: the population numbers and the income that is likely to be generated through business rates. In the bundle of documents, there will be an assessment of that, which I think offers good news for local authorities.

Several hon. Members:

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Photo of Dawn Primarolo Dawn Primarolo Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. Secretary of State, I know that you have an encyclopaedic knowledge of this subject, but we would be grateful if you did not share all of it with us this afternoon. May we have slightly shorter answers please, otherwise Members who want to put a question to you will be disappointed?

Photo of Shabana Mahmood Shabana Mahmood Shadow Minister (Business, Innovation and Skills)

May I remind the Secretary of State that Birmingham’s finances became a mess under a coalition of Conservatives and Liberal Democrats, and that it is a Labour administration that, since May, has been trying to put that right? However, Birmingham is facing some of the biggest cuts in local government history, with a reduction in income of £149 per person, which is more than double the national average. Will he meet me and a delegation of Members of Parliament from Birmingham to discuss the pressures that Birmingham is facing and to see whether we can find a way to mitigate the situation?

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

It is always a pleasure to see the hon. Lady under any circumstances. However, I politely remind her that the decisions on equal pay were taken 20-odd years ago under a Labour Administration. I am delighted to see that Birmingham has increased its balances by £24 million.

Photo of Annette Brooke Annette Brooke Liberal Democrat, Mid Dorset and North Poole

Will the Secretary of State comment on the flexibility that he is introducing to support small, efficient district police and fire authorities that have kept council tax low for years, but that have little room for manoeuvre? There are many such examples in the south.

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

The hon. Lady can read the written ministerial statement by the Under-Secretary of State for Communities and Local Government, my hon. Friend Brandon Lewis. Essentially, small authorities have in the past been capped at very small sums of money, so we will be introducing a de minimis sum of £5.

Photo of Clive Efford Clive Efford Shadow Minister (Culture, Media and Sport)

When the Secretary of State reads out the spending capacity for my area, will he include the spending capacity of the 14,800 people who will become eligible to pay council tax next year under what has become known as the Pickles poll tax? What thought has he given to those people in the announcement that he has made today?

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

I am delighted to say that in order to protect those good folk from the excesses of a Labour council, we have found £10 million to ensure that nobody has to pay more than 8.5%. Perhaps I should give notice that if councils persist in charging the poor—it is only Labour councils that are doing so—I may take the necessary powers to prevent them from doing so. I am delighted to tell the hon. Gentleman, because he wants it to be read out, that his area receives £3,222 per household and has a loss of less than 0.9%.

Photo of Angela Smith Angela Smith Shadow Deputy Leader of the House of Commons

The leader of Sheffield city council has said that the Government’s cuts will mean the end of local government as we know it. As we have heard, the Local Government Association has declared that Tory-led West Somerset council is “not viable” over the longer term. Does the Secretary of State anticipate any other councils becoming no longer viable as a result of the Government’s huge cuts?

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

That is not what the leader of the council was saying when we were doling out all the extra money by way of the city deals. He was telling us how he was going to progress things.

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

I beg the hon. Lady’s pardon. The light was not very good.

We are telling local authorities to work together and join services together. If they stay in the kind of dump or great fug that Opposition Members seem to want, in which they do not co-operate with one another, that prediction will come true, but if they co-operate, things will be better.

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

As a member of Conservative-controlled Kettering borough council, I commend to the Secretary of State its triple-zero policy: zero cuts to front-line services, zero cuts to voluntary sector grants and zero increase in the council tax over a five-year period. Is it not true that the best councils do not moan and groan about their financial settlement, but get on with cutting waste and inefficiency?

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

I am so happy with Kettering borough council that I am thinking of taking a weekend break there to enjoy its good services.

Photo of Adrian Sanders Adrian Sanders Liberal Democrat, Torbay

The previous Government extended the period until a referendum may be held to get rid of an elected mayor. I am thankful for the grant settlement for my area, which looks more generous than that for most other areas of Devon. However, we could go a lot further if we could get rid of our elected mayor and his unaffordable glory projects. Will the Secretary of State overturn the decision of the last Government and allow people to have a referendum before the end of the current mayor’s term of office?

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

I was rather hoping that, in the spirit of Christmas love and understanding, I might be able to bridge a rapprochement between the hon. Gentleman and the mayor. They are both wonderful people and it is a matter of some regret that they seem not to get on.

Photo of Caroline Lucas Caroline Lucas Green, Brighton, Pavilion

My constituents in Brighton have been singled out for the harshest cuts in the south-east. Will the Secretary of State explain to them why he is pursuing savage cuts that are not only socially devastating but economically illiterate? His Government’s plans to get local councils to drive economic recovery will never happen if he makes them cut so deep and so fast.

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

I do not know where the hon. Lady looks for her facts. Her council will receive £2,034 per household, which is a cut of 2.8%—slightly above average. To suggest, however, that people in the south-east have been picked out for the most savage cuts is utter bunkum.

Photo of Gavin Barwell Gavin Barwell Conservative, Croydon Central

My council will warmly welcome the localisation of business rates, but my question is about the distribution systems that the Secretary of State inherited from the previous Government. Ten out of 12 inner-London councils charge less than £1,000 at band D, and 18 of the 20 outer-London councils charge more than £1,000. Does the Secretary of State think that is due to the efficiency of those councils, or the fairness of the distribution system?

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

My hon. Friend and I have had many discussions on that issue, and as I said when replying to another colleague earlier, to a degree some of the inequalities and possible bias towards Labour authorities had to stay within the system because I wanted to deliver stability. I can promise, however, that as we move further away from the old settlement, the more efficiency we will see. Given its entrepreneurial feelings, I have little doubt that Croydon will benefit greatly from the system.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

I sometimes wonder what colour the sky is in the right hon. Gentleman’s world. When comparing Newcastle with Wokingham he cleverly uses statistics for spending per head. Does he agree, however, that Newcastle and other similar councils have larger demands on their services? Unemployment figures for central Newcastle are 1,280 compared with 175 in Wokingham. Even if the council were to implement each of the Secretary of State’s 50 recommendations, including No. 37 about not funding sock puppets, it would not be able to match the funding gap presented to it.

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

I commend the hon. Gentleman for thoroughly reading that document, although I trust he did not start from the back and work his way forward. The hon. Gentleman represents Durham—[ Interruption. ] Well, I would be superhuman if I remembered every single figure in my head. Per household, his council receives £2,228, and the reduction in its spending power is less than the national average. The hon. Gentleman should be thanking me rather than talking about sock puppets.

Photo of John Pugh John Pugh Liberal Democrat, Southport

In his statement, the Secretary of State said that next year the new homes bonus will be worth more than £650 million, and even more in 2014-15. He later said, “We’ve reduced the amounts that we are setting aside for new homes bonus.” Will he clarify whether there will be a cut in the new homes bonus?

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

Very easily. We had discussions with local authorities, and we were going to hold back by way of the top slice a particular sum in order to pay for the new homes bonus. Local authorities put to us a number of reasonable points about how the new homes bonus and—for want of a better word—the cash flow will be paid. We thought they made a reasonable point and decided that we were not taking much of a risk by keeping close to what local authorities were saying.

Photo of Pat Glass Pat Glass Labour, North West Durham

The Secretary of State talked about £150 million of additional spending on academies. Is that part of or in addition to the existing £1 billion overspend on academies and free schools in the budget of the Department for Education?

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

I am grateful, because a scribbled note has arrived from the Under-Secretary of State for Communities and Local Government, my right hon. Friend Mr Foster, and the figure is not £150 million but £180 million. Those announcements will be made by the Secretary of State for Education.

Photo of Peter Bone Peter Bone Conservative, Wellingborough

East Northamptonshire district council and Wellingborough council have embraced the Secretary of State’s reforms. They have a wonderful new leisure park, a retail park plan, 2,000 new jobs and the project is ready to go. The only thing stopping the project is the Secretary of State’s Department. Will he speed up the process and approve it?

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

One looks at these matters in a quasi-judicial way, and despite my hon. Friend’s obvious charm, not even an invitation for a cup of tea with his delightful wife will persuade me to do anything other than observe proper process.

Photo of Richard Burden Richard Burden Chair, International Development Sub-Committee on the Work of the Independent Commission for Aid Impact, Chair, International Development Sub-Committee on the Work of the Independent Commission for Aid Impact

During the Secretary of State’s tirades about Birmingham would he care to get his facts right? As my hon. Friend Shabana Mahmood observed, Birmingham was run by a Tory-led coalition from 2004 until last May. The Labour administration before that set aside money for dealing with equal pay claims, but that money was spent by the Tory administration. How can the Secretary of State justify a reduction in spending power of twice the national average? Is it not time that Birmingham got a fair deal at last?

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

I recall that I was a councillor when all that started. However, even in a year when the council is claiming poverty it managed to increase its reserves by £25 million. As a Birmingham MP, the hon. Gentleman must know that the council stands no chance of being able to deal with the enormous burden—just short of three quarters of a billion pounds—without the generosity of those on the Government Benches who are prepared to help Birmingham. They do so happily because we cannot allow our second city to go under.

Photo of David Nuttall David Nuttall Conservative, Bury North

Does my right hon. Friend agree that when councils look to make savings, council tax payers should not be expected to pay the salaries of council employees who spend their time working for trade unions that then pay millions of pounds to the Labour party?

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

I am a very strong supporter of the trade union movement; it does absolutely marvellous work. In times of financial stringency, however, I am sure that the trade union movement will be embarrassed to receive money from the public purse. I will shortly issue best practice guidance to local authorities to find ways in which local trade unions can give money back to local government.

Photo of Diana R. Johnson Diana R. Johnson Shadow Minister (Home Affairs)

In his statement, the Secretary of State referred to a “moral duty”. Where is the morality in cuts that are directed at the poorest areas and those least well equipped to generate extra business revenue? Why has Hull had a cut so far of £163 per head compared with £2.70 per head in West Dorset?

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

Of course, West Dorset receives considerably less money than Hull. The hon. Lady’s council will receive per household a figure well above the national average at £2,371, and a drop in spending power of less than the national average at 1.4%. She should show some leadership.

Photo of John Hemming John Hemming Liberal Democrat, Birmingham, Yardley

When Labour took control of Birmingham earlier this year, the council immediately put up costs by what will be £10 million a year by increasing wages for some staff by as much as 70%. It is now aiming to charge the poor council tax at 24%. Does the Secretary of State agree that we should protect the poor and not put up costs in a time of financial problems?

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

It was an outrage that Birmingham increased some wages by 73%—

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

Birmingham. The council put 16-year-olds on the same wages as adults. It made a mistake and it was foolish to do so—[ Interruption. ] The hon. Gentleman should listen, because he is probably not used to dealing with poor people—[ Interruption. ] No, no—a toff has an opportunity occasionally to meet the odd poor person. What was really bad about Birmingham involves the second part of the question from John Hemming and how the council is seeking to get 23% council tax from poor people. As a committed socialist the hon. Gentleman should be on the phone now telling the leadership of Birmingham to look after the poor, not to tax them.

Photo of Dave Watts Dave Watts Labour, St Helens North

The Secretary of State will be aware that the Audit Commission has made it absolutely clear that the biggest cuts are hitting the poorest communities and boroughs. What is the public to believe: his fiddled figures or the Audit Commission?

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

The hon. Gentleman is being very selective in his reporting, but it is absolutely clear that the poorest authorities are receiving a smaller cut than the more wealthy authorities. The protection that we have offered the former in this settlement is better than the protection offered under the Labour Government.

Photo of Julie Hilling Julie Hilling Labour, Bolton West

Does the Secretary of State not realise that local authorities such as Bolton, which faces £100 million of cuts, are already doing all they can to support business growth, make efficiencies, share procurement and protect services? When will he admit that his actions are slashing services and hurting the most vulnerable?

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

What came out from the letter and Steve McCabe, who apparently meets the odd poor person at some of his surgeries, is that most of those authorities have done the odd thing on joint working or procurement, but I am talking about a much more fundamental realignment of local government services. I am looking not just at the back office, but at the front office. There have been far too many instances in the north-west of really good deals being turned down because people were concerned about the badge on the side of the van. I am therefore looking to the hon. Lady to show some leadership.

Photo of Helen Goodman Helen Goodman Shadow Minister (Culture, Media and Sport)

Will the Secretary of State share with the House his estimate of the value of the business rate retention in Durham and its value in Westminster?

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

Westminster will make a considerable contribution to the levy so that money goes directly to Durham. Money from Westminster will go directly to Durham, so if Westminster does very well—as it will—Durham will benefit.

Photo of Andrew Love Andrew Love Labour, Edmonton

My local authority, Enfield, faces a triple-whammy under the Government. First, the rapid demographic change of which the right hon. Member for Bermondsey and Old

Southwark (Simon Hughes) spoke is happening but is not recognised. Secondly, the Audit Commission reallocation from poor to richer authorities affects my area. Thirdly, the damping formula, which will be engaged for an extra two years, will affect my local authority. Can the Secretary of State give my constituents any reassurance that the Government recognise the problems of London boroughs?

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

Yes. I can helpfully tell the hon. Gentleman that, per household, he will receive £3,015, which is well above the national average. I am delighted to say that spending power goes down by just 0.6%, which is significantly less than other reductions. He is therefore sitting pretty.

Photo of Graham Jones Graham Jones Opposition Assistant Whip (Commons)

The Secretary of State has said that seven authorities will require larger savings to be made, but that no councils face a loss of more than 8.8% in their spending power, thanks to the new efficiency support grant, which replaces the transitional relief grant. Is that not a conditional, ring-fenced grant, and town hall to Whitehall, and anything but localism? My local authority does joint services, and back-office and shared services, but how will it benefit from the Secretary of State’s statement?

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

The hon. Gentleman is a little confused. His authority is Hyndburn. I remind him that he would be receiving nothing additional had it been up to the Labour Government, who left no provision for the transitional grant. The transitional grant was wholly devised to help him, but his council must show some gumption. Who is paying for it? The rest of us are. He must ensure that Hyndburn starts to have joint services and better procurement—

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

No it is not—or not enough. I remember the hon. Gentleman’s Adjournment debate, and what he says is certainly not the case.

Photo of Steve McCabe Steve McCabe Labour, Birmingham, Selly Oak

The people of Birmingham will be delighted to hear how kindly disposed the Secretary of State is towards them. Along with his list of 50 simple savings, will he agree to publish the recommended savings in cuts that his officials say can safely be made in Birmingham, so that I can share that with the Birmingham public?

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

I will e-mail that to the hon. Gentleman. Why should I not like Birmingham? It is a beautiful city and the second city in England. Anybody who wants to set up enterprise will find a welcoming hand there. I wish Birmingham nothing but success, but I must tell him—I have some familiarity with the finance—that the top few suggestions would help Birmingham out. I hope Birmingham takes that line. If it does, it will produce better services and have a much more secure future. I wish it well.

Photo of Luciana Berger Luciana Berger Shadow Minister (Energy and Climate Change)

Further to the question from my hon. Friend Mrs Ellman, may I remind the Secretary of State that Liverpool is the most deprived city in the UK? Will he tell the House why he is yet again disproportionately hitting both the Merseyside fire and rescue service budget and our council budget?

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

May I remind the hon. Lady that she has £2,740 per household, plus the amount for the fire authority? Metropolitan fire authorities are receiving a much higher level of settlement than other parts of the country. We have offered Liverpool a fantastic deal. The mayor of Liverpool had my complete confidence up to the point when he suggested that there will be riots on the streets—he was one of the first to offer reassurance during last year’s riots. I hope again to be able to work with Joe to the betterment of Liverpool.