We will debate motions 3 to 5 on local government finance together.
I beg to move motion 3,
That the Local Government Finance Report (England) 2013-14 (HC 948), which was laid before this House on
Mr Deputy Speaker:
With this we shall consider the following:
Motion 4—Local Government Finance (England)—
That the Referendums Relating to Council Tax Increases (Alternative Notional Amounts) Report (England) 2013-14 (HC 928), which was laid before this House on
Motion 5—Local Government Finance (England)—
That the Referendums Relating to Council Tax Increases (Principles) Report (England) 2013-14, which was laid before this House on
This settlement is a landmark for local government. After years of doffing their cap to Whitehall, councils throughout the country can now take charge of their destiny. That message has been in danger of being lost amidst the fog of deficit denial and doom-mongering coming mainly from Labour Members, who are mumbling right now. There are real reasons why people will soon see the benefit of this settlement as plain as day—despite the doom-mongering work of the Labour party.
I appreciate the hon. Lady’s intervention, as it gives me a chance to highlight exactly the Labour party’s problem with local government. It is not about how much is spent, but about how it is spent and about how local councils have the power to make decisions for themselves—something that local government never had under the Labour Government.
Let me make a little progress and I will take more interventions later.
Change was inevitable, so let us not forget the mess we inherited and the size of our economic overdraft, with Labour spending £4 for every £3 they raised. In such circumstances, local government simply could not remain immune. It is one of the biggest players in the public sector, accounting for a quarter of public spending, and it has a budget twice as big as the defence budget and bigger than our budget for the NHS. This year it will spend £114 billion.
In response to the point put by Julie Hilling, my hon. Friend was entirely right to say that it is all about the choices councils make. I commend to him North Lincolnshire council. It inherited from Labour in 2011 a council that was committed to reducing library services and to closing down tourist information centres. In fact, it has done the opposite—built new libraries, extended library opening hours and saved the tourist information centres, as well as replacing mobile classrooms.
My hon. Friend highlights exactly the point I was making—that good councils with good leadership making the right decisions are good for their local residents.
Let us assume that we accept the Government’s financial envelope for this settlement. Why, then, did the Government not award the grants in proportion to need or at least fairly in accordance with need? The local authority I partly represent had a £300 million budget, but £100 million of it is to go within three years. In those circumstances, how does the Minister envisage that local authority expanding services along the lines suggested by Andrew Percy?
There is a range of ways in which local authorities can make a choice. This is the key issue: it is about trusting local government, with good local leadership, to make decisions, such as those my hon. Friend outlined, for the benefit of their communities. I will touch on the fairness of the settlement in a few moments.
I echo the thoughts coming from Government Members, which differ from those on the Opposition Benches. It is possible to balance the budget. It is possible to see increases in fire and police services, as we have seen in Bournemouth borough council. Will he join me in congratulating that council on freezing council tax for the third year in a row?
My hon. Friend makes a very good point. There are some really good councils throughout the country, doing really good work in protecting and making the right decisions for their communities and freezing council tax. I congratulate Bournemouth borough council on doing just that.
Councils clearly have a part to play in reducing the deficit. Opposition Members should not kid themselves, residents or us about their position. They would not have done anything different. In fact, their party was planning to make spending cuts of £52 billion by 2014-15—and, given that they have opposed every single saving that the Government have made, they still have £52 billion of cuts to outline. I hope that they will do so today.
Another point that Members should consider, which is relevant to the question from Mr Field, is that this is a fair deal. It is fair to north and south. Manchester, Liverpool, Nottingham and Newcastle all have more spending power per dwelling than the national average. They are all at least £500 better off per household than, for instance, Wokingham in the south-east. The settlement is also fair to all councils, even those that Labour left facing a massive financial cliff edge, such as Great Yarmouth and Pendle. Thanks to the new efficiency support grant, the seven authorities that face the biggest hit to their budgets—Burnley, Barrow-in-Furness, Bolsover, Hyndburn, Hastings, Great Yarmouth and Pendle—will be protected.
Will the Minister explain why the Government took £573 million out of the relative needs block of the settlement to distribute it on a per capita basis? Is it not the case that they are taking no account of the differing needs of local authorities?
That is simply not correct. The settlement does take account of needs. The areas that would have been most heavily affected—such as my constituency in Great Yarmouth, which would have lost more than £3 million a year thanks to the position left by Labour—have already benefited from a two-year transition grant, and now we are introducing the efficiency support grant.
Does my hon. Friend not realise that the fairness of the settlement is undermined by the damping system? Northumberland county council, which has kept its libraries and its Sure Start centres open under a Liberal Democrat administration, is being told, “You ought to have more, but we are not giving it to you this side of 2020.”
There have been queries about damping in relation to some councils, but this year’s settlement is based on the results of consultation undertaken last year. No overwhelming desire was expressed then for a change in the damping arrangements, and we wanted to ensure that there was stability in the system for the business rate scheme. However, I appreciate that Members have a view, and I will continue to talk to them about it.
I will take more interventions in a moment. Let me first finish what I was saying about the efficiency support grant.
Thanks to the grant, the councils that I listed will not face the cuts that the Labour Government left them to face. Councils that deliver extra efficiencies by the end of the financial year will not just receive the efficiency support grant money that was outlined in the provisional settlement of
I appreciate the effort that the Minister has put into the efficiency support grant. Hyndburn borough council faced a cut of 17% at a time when, according to the Secretary of State, the average was 1.2%, However, I am worried about the cliff edge that faces us. What will happen after two years? Will it be back to 17%? This sounds like a capital sum rather than a revenue payment.
I thank that hon. Gentleman for his question, which gives me a chance to explain again why this came about. Because of the state in which Labour had left local government finance, 20 authorities faced a massive cliff edge. We introduced a transition grant which, during the last two years, allowed those authorities some leeway and enabled them to get into a position that would allow them to move forward. Seven are still heavily affected, including the authority in the hon. Gentleman’s constituency, as I know from an Adjournment debate that took place not long ago.
The efficiency support grant involves a two-year programme. As I have said, in year one councils will potentially receive 25% more than they were expecting from the provisional grants. In that first year, they will work with the Department to increase their efficiency across the board by means of, for instance, shared management and shared services, so that at the end of the two-year period they will no longer need the grant. We made the position very clear to the councils, and they have been sent information describing the kind of work that they need to do in order to receive year two money as a result of the efficiencies that they are achieving in year one.
In December we said councils were facing an average cut of about 1.7%. We now know the impact of the public health grant, however, because that figure has dropped to just 1.3%. People would expect us to say the settlement is even-handed—[Interruption]—and the mumbling from the Opposition Benches confirms that, but a report produced by this House concurs with our view. It says:
“Excluding London, northern regions have larger start-up funding assessments and revenue spending power per dwelling than their southern counterparts” and
“the more deprived areas generally receive higher per dwelling allocations than less deprived areas”.
The heat maps we are publishing today back up the fact that this settlement is fair for all.
It is hard to see the settlement as fair to all when there is a rural penalty, with 50% more per head going to support councils in urban areas than those in rural areas, where people on average earn less and have a higher council tax, but then have lower spending power at the end. In the period up to 2020, we will need to move towards a more just settlement that genuinely reflects need, whether in the inner cities or rural areas.
My hon. Friend makes his point as passionately as he and other colleagues did on Monday, and I know from the meetings I have had with him on this issue that he will continue to do so. I shall talk about rural funding shortly.
The Minister’s party colleague, Mr Stuart, has criticisms, and so too does Baroness Eaton, Conservative former chair of the Local Government Association. She said of the Department, and specifically the Secretary of State, that in terms of the local government cuts he was
“detached from the reality councils are dealing with”.
Why did she say that?
I will explain shortly exactly how we are in touch with local government. The previous Government were so busy doling out grants without a care in the world—handing out money hand over fist in different bail-outs—that they failed to pay attention to local people and local authorities. By contrast, we are listening, learning and improving. We have received 200 written responses to our consultation on the provisional settlement. I have met individual authorities, leaders, chief executives and treasurers, and the LGA, London Councils and other representatives, and I spoke to about 200 councillors in a telephone conference call the day after the provisional settlement. Because we are listening, we are going to do more to support rural areas and manage the extra costs of delivering services in those areas.
As well as confirming the increases to the sparsity weighting and top-ups proposed in the provisional settlement, we have announced £8.5 million of additional funding for 2013-14 in a separate new grant for areas with the sparsest populations to get some extra help to achieve the efficiencies they want.
Will the Minister explain why Nottingham city council is increasing tax but cutting its library services while the county council is not putting up council tax but is keeping its libraries open, investing in its highways department and improving the county’s infrastructure?
My hon. Friend makes an excellent point that highlights how, with good leadership, a good Conservative-controlled county council is looking after its residents, while the Labour-controlled city council is simply lining its pockets.
Council areas such as Breckland, Mendip and South Lakeland will feel the benefit of the increased opportunities for rural areas in these changes, and I know Members representing rural areas will want to continue talking to us about the future over the summer.
Is the Minister confirming to MPs representing rural areas that he is open to having further discussions about the perceived disparity between rural and urban funding? If he is inviting me to join him in the Lobby this evening, I will want to hear a clarification that he is up for such discussions.
As I said in the debate on Monday, I have an open-door policy and am very happy to continue discussions, and I hope rural areas will be able to put together evidence—perhaps through their rural services network—to back up some of their figures and prove their case. I will happily continue to talk to my hon. Friend in the year ahead.
The Minister has been involved in a lot of discussions with various local authority representatives. Is he willing to reopen discussions with Liverpool city council? It covers the most deprived council area in the country, yet it has suffered the greatest cuts. How can that be fair?
Actually, Liverpool has had a reduction of minus 1.3, so it is no different from anywhere else. However, I will happily meet people from Liverpool council, just as I will those from any other authority and any hon. Member who wishes to see me.
I will make a little progress and then take more interventions.
As I said, areas such as Breckland, Mendip and South Lakeland will feel the benefit of this grant, and that brings me to my next point. This system now works in favour of local councils. Through the Localism Act 2011 and the financial reforms in this settlement, which mean that 70% of local authority income will now be raised locally, councils have more power than ever before. However, they need to understand the implications, act in their residents’ best interests and work hard on their behalf, as I know many authorities across this country do. That could be done by redesigning council tax benefit to cut fraud, promote local enterprise and get people back into work, or by redesigning services to make them more efficient and sustainable. Town halls should not be constructing Maginot line defences against the deficit.
The figure the Minister used of councils now raising 70% of the money they spend is obviously going around the Government, because the Deputy Prime Minister mentioned it in the Liaison Committee the other day. Is not the real reason for that percentage increase simply because the amount of money going from central Government to local government has fallen, and therefore the council tax money, which has remained basically the same in most authorities, has risen as a percentage? That is the only reason why that percentage has increased.
The hon. Gentleman needs to look at the new business rates retention scheme, which I shall discuss in a moment, as it gives authorities the chance really to be in control of their destiny, and to drive economic growth for their communities and, as a part of their communities, for the country. I thank him for giving me the chance to highlight that we need to get control of that horrendous deficit left by the previous Government.
I am going to make a bit more progress. We need to move away from what we have seen from local authorities such as Lambeth council, whose residents must have wondered what on earth it was doing with their hard-earned money when it wasted thousands of pounds on propaganda posters attacking cuts. Unfortunately that council is not alone.
Is not one way that councils could quickly save a lot of money by reducing the astronomical salaries of some of their staff? More than 114 town hall chiefs now earn more than the Prime Minister. The chief executive of Essex is on £289,000 a year. The chief executive of Hammersmith and Fulham earns £281,000. Even in my constituency, the chief executive of Cannock’s council earns £113,000 a year, nearly twice what the hard-working MP who represents that area earns. Will the Minister explain why council chiefs up and down the country need to earn six times the salary of an MP?
Order. If the hon. Gentleman wanted to speak, he should have saved his speech and not used it in an intervention. What I am bothered about is that we have a lot of Members who wish to speak in this very important debate, so we need short interventions. Let us try to get through.
My hon. Friend makes a good point. Authorities across this country, particularly small district councils, have to start looking carefully at how they structure their management and how they share management to get best value for their residents’ money. I will come back to that issue in a few moments.
I will make a bit more progress, following Mr Deputy Speaker’s comment.
I have been appalled by things such as we have seen in Lambeth, especially where there are still savings to be had. Last year, local government showed commendable skill in reducing its budget in many areas while protecting front-line services; many residents actually reported that their services had improved. That goes back to this core point about how we spend money rather than just how much we think we can get from a begging bowl. It is not about how much we spend; it is about how we spend it.
Let us examine our approach to troubled families. Instead of having multiple people dealing with a family, we now have just one no-nonsense worker telling them how it is. For example, Barnet council has worked out that the cost of an effective intervention for an average troubled family has reduced from almost £100,000 to just £10,000, so through our community and neighbourhood budgets we are rewiring the system.
I thank the Minister for giving way on that point about how the cuts are having an impact on children and families. He may not agree with Baroness Eaton, although he was not clear on that point, but has he read the evidence from the Joseph Rowntree Foundation? It says that the
“evidence points to the distinctive impact of cuts on services for children and young people”.
What assessment has the Minister made of the impact of these cuts on children and young people, particularly the poorest?
The hon. Gentleman is forgetting that most of these cuts are Labour cuts, and that this is about designing services. It is about moving away from the approach taken by too many authorities, including Corby’s, where they do something because they do it because they do it. They should be looking at the outcome they want for the residents and how best to provide it with the best value for money.
On behalf of the residents of Hastings, I warmly welcome the increase in efficiency grant, which is wisely accompanied by requirements for efficiencies from the council. Is there to be any increase in the efficiency requirements, or do they stay as they are?
The requirements will stay as they are, and over the first year we will work with authorities to help them to deliver efficiencies for the benefit of their residents. The money is coming from residents in councils across the country, so we have a duty to make sure that it is well and properly spent on finding the efficiencies they need for the longer term.
I want to make a little more progress.
Our community and neighbourhood budgets are rewiring the system and bringing people together across the board—local authorities, the police and the health service. They are a new way of looking at the public sector, and they stop duplication so that money is spent wisely for the benefit of residents across the country. They are making local savings in millions, which could nationally add up to billions. Ernst and Young said that the potential five-year net benefit of community budgets is between £9.4 billion and £20.6 billion. Community whole place budgets provide an opportunity to align the public sector and make it more streamlined and more efficient and, most important, to give a better service for our residents. We want to do everything we can to help councils to spend the cash of hard-working taxpayers more wisely.
The Minister must understand that boroughs such as mine have had a 40% cut in their grant from Government. That is a reality. He cannot hide the fact that the money has gone, or is about to go, and that it will have an effect on front-line services. The Local Government Association graph of doom predicts that councils such as Sefton and many others will only be able to deliver adult social services and waste collection. Will the Minister tell me why the LGA’s figures are wrong?
I hope that in his speech the hon. Gentleman will tell us about the cuts for local government of £52 billion that Labour have not even announced yet. How will they deal with that?
To put it as politely as I can, some of the figures the Minister has been using today are questionable to say the least. He emphasised his willingness to talk. Core Cities twice wrote to his right hon. Friend the Secretary of State to ask for a meeting. There was no response. The Secretary of State is sitting alongside the Minister. Will he tell us through the Minister whether he is prepared to meet Core Cities—
Order. We have to get the message across. There are going to be short interventions. The hon. Gentleman has been here even longer than I have so he should know. Short interventions help the debate. The Minister is desperate to get on.
Thank you, Mr Deputy Speaker. I am slightly surprised by the comments of Richard Burden. Not only is my right hon. Friend the Secretary of State happy to meet representatives from Core Cities, but I met them myself during the consultation process. They were part of it, so I am not sure where the hon. Gentleman gets his facts.
To help local authorities, we published 50 ways to make sensible savings. [Interruption.] As I might have guessed, the Opposition scoff at the idea that looking after the pennies will take care of the pounds. That is probably why they got us into an economic mess in the first place.
The Opposition should take a leaf from the book of an Olympic hero—Sir Dave Brailsford, the head of British Cycling. His philosophy is the aggregation of marginal gains; tiny changes across the board that add up to the difference between silver and gold. That is what we should be doing. We should not scoff at small savings, because they add up to large amounts.
Thanks to the autumn statement, which exempted local government from the 1% top-slice in 2013-14, councils have time to put their house in order and put people first. As my hon. Friend Mr Spencer suggested, they should start by freezing council tax, as Nottinghamshire county council and many others are doing—we know of about 150 already.
Once upon a time under the previous Government, council tax rose exponentially: it more than doubled. We have put money aside to put tax rises on ice for a third successive year. Councils should take advantage of that for the benefit of hard-working people who can ill afford to pay more. Already, 150 councils are taking that high road—councils from Derby to Dorset, from Northampton to Norfolk and Wolverhampton to Watford; but if councils take the low road and put up taxes, they should be aware of the wrath of the taxpayer. We are setting a 2% referendum principle for all principal local authorities, police and crime commissioners and fire and rescue authorities. That is direct democracy in action.
If an authority wants to raise council tax by more than 2%, the local electorate will have the right of veto in a binding referendum. I am sure that some councils may have a case—personally, I cannot see it—but if they do they should put it to the vote. They should stand up before residents and state their case. If they win the argument, so be it, but we will take a dim view of democracy dodgers trying to sneak in under the democratic radar, especially those using levies as places such as Manchester and Rotherham are doing.
I urge hon. Members to think about what we are saying. The Government grant is equivalent to 1%, so councils that are seeking to increase council tax and avoid a referendum are doing so, in effect, for at most 0.99%. What a kick in the teeth for local taxpayers. Any council leader that cannot get their officers and members to work together to find 0.99 % of savings should look again.
I respectfully suggest that the hon. Gentleman does a bit more research, because the Secretary of State stood at the Dispatch Box at an earlier date to say that it was in the base. The hon. Gentleman misses the point about the settlement. Council tax money is not about lining councils’ pockets—it is hard-working taxpayers’ money. Many councils already have more in reserve than they are losing through cuts. Liverpool, Manchester and Leeds have reserves twice the size of their spending power reductions.
Yet again, we see the difference between the Opposition and the coalition Government. We are protecting the pockets of hard-working taxpayers, and the councils that the hon. Gentleman is talking about should look again and freeze their council tax.
I want to make progress.
This is a new dawn for local government. The local funding settlement used to be the end game, but this year it is just the starting point. Councils are no longer tied to the settlement figures, and they can earn their keep and retain £11 billion of business rates, which could deliver around an extra £10 billion to the wider economy by 2020. In recent years, Newcastle, Manchester and Liverpool all saw their business rates rise above the national average of 4.8%, but thanks to the old begging-bowl system, they missed out on the opportunity of making the most of that money. The old formula grant paid to fail, but from here on in, it will be what councils make, not what they take, that counts. If they bring in more business and more jobs, they will be rewarded. If they build more homes they will get the new homes bonus, worth more than £650 million this year and even more in 2014-15. Almost two thirds of authorities are expected to gain from the scheme in the first year alone.
Is that not a slight sleight of hand? The new homes bonus money is not new money; it has been derived from top-slicing local government funding at national level, as my borough finance officer confirmed to me yesterday.
Yet again, an Opposition Member highlights the fact that they simply do not get it. This is about local authorities getting money for what they do; we are moving to a new way of working. Under the business rates scheme, they will get more money if they bring businesses and jobs in. If they build houses, they will get more money from the new homes bonus. The message to authorities that do not like it is that they should go out and build some houses. Two thirds of authorities are expected to gain, so the message to councils is clear: if they oppose the settlement, they oppose the opportunity for a brighter future. However, if they are self-reliant and ambitious, and work hard on behalf of local people, they will win the day.
This Government are keen to do everything they can to reward radical, forward- thinking councils, so today I am pleased to announce a new incentive for councils to join forces to bring management together, not just sharing the usual back-office functions and services that we hear of, but real front-line changes for the benefit of citizens as well. This is about looking at some of the excellent work done by great authorities and following in the footsteps of some—for example, the tri-borough initiative. Hammersmith and Fulham, Westminster, and Kensington and Chelsea are on track to save around £40 million by 2015-16. We are bringing in a new £9.2 million challenge award to help other councils to follow their lead.
I want councils such as West Somerset, which was mentioned on Monday—
May I thank my hon. Friend and the Secretary of State for making that possible? The House is well aware of the financial difficulties that we have there. A protocol was signed between Taunton Deane and West Somerset to alleviate the problems. This can now happen, at nil cost to either council. I am incredibly grateful on behalf of the people of West Somerset and the people of Taunton Deane. Thank you very much.
I thank my hon. Friend for that intervention. I know that he has worked hard in Somerset to bring the authorities together and to get the right result. I hope that areas such as West Somerset will move forward and see this as an opportunity to help them to do the right thing. The same applies to other authorities as well, particularly small district authorities, which should be looking at bringing together their management to make sure that they are spending the money in the best way possible for their local residents.
What my hon. Friend is suggesting is what we in High Peak did several years ago with Staffordshire Moorlands, when I was a councillor and the council was under Conservative control. The Labour opposition were not keen on it but now that they are in control, they have not rolled it back, so I am pleased with the incentive that he is introducing. May we have that fund back-dated, please?
My hon. Friend makes a good point. Through the consultation process we were looking at how we reward councils that are doing the right thing for their residents and moving away from the begging bowl of the past, highlighted by some of the questions and interventions from the Opposition Benches. I am happy to look at bids and will be announcing details of the scheme next week for authorities which are doing this or have done it. It is an opportunity for small authorities that have done good work.
We want authorities to go further and faster so that residents see and feel the benefits. We want to help and reward those who are doing things right. The evidence shows that it is good to share. South Oxfordshire and Vale of White Horse have a joint chief executive and management structure. South Holland is sharing its chief executive and officers not just with Breckland but with Luton, showing that this works well across different counties without shared boundaries and across parties, despite the views of some Opposition Members. Babergh and Mid Suffolk are sharing not just a chief executive but service delivery across the whole range of their councils’ functions and looking to go further. Those who follow suit will now get extra credit—literally.
This settlement should silence deficit deniers. It is fair to north and south, fair to urban and rural, fair to poor and rich authorities. It is a settlement that rewards innovation, imagination and delivery for residents. It is a settlement that gives councils more power than they have ever had before. It is a settlement that captures a new ethos within local government, generating more income through the new homes bonus, business rate retention and a challenge fund. If councils are willing to put people above political grievance, as Luton has done—I hope Opposition Members will join me in supporting it—and if councils are willing look to the future, not in the rear-view mirror, they have a once-in-a-generation chance to step out from the shadow of Whitehall, and to expand, energise and electrify their local communities and their local economies. I hope they will grasp the opportunity with both hands and deliver on it. I commend the motions to the House.
I am sorry and surprised that the Secretary of State decided not to lead this debate. We know that there are many issues on which he is all too willing to express a view, and it would have been good to hear from him about the most important responsibility he has in the job that he holds—the funding of councils that help support the services on which all our communities rely.
That would have given us an opportunity to question the Secretary of State on why he told the Select Committee in December that the cuts to local government funding were “modest”, and that the Local Government Association’s fears for the future were “utterly ludicrous”. In effect, he told councils to stop complaining. I wonder whether he understands the anger and dismay that those comments have caused, or the great disservice he is doing himself by being in denial about what is happening in local government.
This is a time of rising pressures. In particular, as the Minister will know, the costs of looked-after children and social care are rising. The demands on local authorities are going up while income is going down significantly. That is why the much-debated “graph of doom” produced by the LGA does not, I think, cry wolf; it is what it says is its best assessment of where local government is heading if things continue as they are. If the Secretary of State does not like what I have to say, the LGA’s Conservative leader, the highly respected Sir Merrick Cockell, has called the cuts “unsustainable”, and the Tory leader of Kent county council says that his county cannot cope with further reductions and is “running on empty”.
Ministers know that local government is the most efficient part of the public sector, because that is what the Prime Minister said, albeit before the election, but they have decided to award councils for that efficiency by cutting more from them than from any other part of the public sector. A moment ago the Minister referred to “50 ways to save”, which is a combination of some things councils are doing already, some things that are pretty darn obvious and some things that are insulting. On value for money, will he explain why his colleague, the Secretary of State, decided, despite all these pressures, to take £250 million of public money in an attempt to persuade councils to change the way they collect bins, which resulted in only one council moving from alternating weekly collections back to weekly collections? Does he think that represents value for money when money is so tight?
As the Institute for Fiscal Studies confirmed last year, the total cuts to local government spending will outpace those in the public sector as a whole up to 2014-15. Since then, of course, a further cut of £445 million to local government for the year after next was announced in the autumn statement.
The Labour party strongly makes the case for more expenditure on local government and opposes the reductions that the Government feel are necessary. When we look across the Labour party’s policy announcements, it appears that the only firm promise of cuts relates to the NHS, so will the right hon. Gentleman confirm that he plans to cut the NHS to make up the money to be spent on local councils?
The hon. Gentleman clearly has not been listening to what I have said since taking up this post. I have said in this Chamber before that, were a Labour Government now in office, of course there would be cuts to local government, but they would not go as far or as fast as the ones the Government are making and they would not, as I will point out, be allocated to local authorities in such a fundamentally unfair way.
The truth is that the Secretary of State continues to lose in his battles with the Treasury, assuming, of course, that he tried to fight for local government in the first place. The truth, even if Ministers refuse to admit it, is that local councils are now facing—this is why the word “modest” causes such anger—the largest cuts in their funding in the political lifetime of every single Member sitting in the Chamber.
Does the right hon. Gentleman stand by the £52 billion of cuts for 2014-15 that appeared in his Government’s Treasury pre-Budget report in 2009? If not, what cuts would he make, and where?
I do indeed stand by the statement my right hon. Friend Mr Darling, when Chancellor of the Exchequer, placed before the House and the country. I remind the hon. Gentleman that when he and his colleagues came into government the economy was growing—[Interruption.] It was. There is no good shouting about it. The signal achievement of the Chancellor over the past three years has been to put the British economy flat on its back, which is why we are in such difficulty.
The consequences of what is going on are these: first, local government is having to deal with cuts that are unfairly distributed; secondly, residents are having to come face to face with the consequences of those cuts; and, thirdly, the changes to council tax benefit are being made even worse by the effects of the overall cuts to council budgets. I want to address each of those in turn.
The Local Government Association says that
“funding for local government is projected to fall by 3.9% in 2013-14 and a further 8.5% in 2014-15. This means that the grant to local government will fall by 33% in real terms over the current spending review period.”
It is not possible, by any measure, to call that scale of reduction modest. The LGA goes on to say:
“Modelling work from the local government association shows a funding gap of £16.5 billion by 2019-20, if reductions in support continue on current trends.”
It is not modest; it is massive, and it is about time that Ministers started to recognise the truth of what they are doing.
If denial was not bad enough, the language that Ministers have used about those who are serving in local government has been, frankly, extraordinary and offensive. According to The Daily Telegraph, the Conservative council leaders of Derbyshire, Essex, Buckinghamshire, Wiltshire, Lincolnshire, Leicestershire, Kent and East and West Sussex wrote to the Prime Minister last month to complain about the Ministers on the Government Front Bench. They referred to “patronising language” and said that the nature and tone of constant criticisms of councillors’ work by Conservative Ministers is “most worrying”. They also highlighted
“ill-informed…criticism and sometimes highly inaccurate personal attacks.”
They—remember that these are Tory council leaders—concluded by saying:
“We believe it is essential to bring to your attention our concerns regarding some government policy affecting local government, the rhetoric that accompanies it and the effect it is having on our people.”
It is no good Ministers asking local government to take on an enormous challenge—which it is doing—if at the same time the people they expect to step up and respond are criticised, patronised and belittled.
Perhaps the Minister will explain why allowing councillors to save for a pension has, in his words,
“a corrosive influence on…independent thought”—[Hansard, 19 December 2012; Vol. 555, c. 105WS.]
Let us stop and think about that statement. If being able to save for a pension has a corrosive influence on independent thought, what hope is there for all of us in this House? That is an insult to councillors and it shows a fundamental lack of respect for people who are working really hard to cope in difficult circumstances.
Is my right hon. Friend aware that the Communities and Local Government Committee produced a report recently on councillors and the community? We looked at the barriers experienced by people, particularly younger people in work, in becoming councillors. Many of them lose income because they give up work and have to attend council meetings. Is it not an absolute disgrace to suggest that they should give up their pension as well, so that their income suffers in later life, and a discouragement to people of working age from becoming councillors?
I agree completely. What makes it even more inexplicable is that elected mayors will be able to keep their right to save for a pension. That is what the Minister announced. Will his colleague, the Under-Secretary of State for Communities and Local Government, Mr Foster, explain when he winds up the debate the difference, in time, effort, commitment and dedication to the job, between an elected mayor and the leaders of Birmingham, Manchester and Leeds city councils, who also work full time and are dedicated and committed to their jobs?
According to the LGA,
When the provisional settlement was announced, the Secretary of State said:
“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.”—[Hansard, 19 December 2013; Vol. 555, c. 874.]
I am afraid that the figures simply do not support that assertion.
Let us take a comparison between Wokingham, which the Minister referred to, and Leeds. The final figures in the Government’s documents show that spending power per dwelling in Leeds will be £1,874 in 2013-14, while in Wokingham it will be £1,815. The following year, it will be £1,800 for Leeds and £1,796 for Wokingham—a difference of just under £5. It is clear that the figures do not take account of relative need, because the percentage of children in out-of-work families in receipt of child tax credit is three times higher in Leeds than it is in Wokingham, the percentage of 18 to 64-year-olds claiming income-based benefits is more than three times higher in Leeds than it is in Wokingham, and the percentage of the population claiming incapacity benefit or disability living allowance is twice as high in Leeds as it is in Wokingham. How can that be fair?
I am sure that my right hon. Friend has seen the heat map produced by Newcastle city council. Was he as surprised as I was to notice that the only council in the midlands and the north, from the south-east right the way up to the borders of Scotland, to have a reduction of between zero to £50 per head was Cheshire East—the local authority of the Chancellor of the Exchequer?
My hon. Friend is absolutely right to point that out. I cannot say that I am surprised, given that the central point I am attempting to make is that the way in which the cuts have been allocated is fundamentally unfair.
If the Minister and Secretary of State do not accept that, then what about the Audit Commission? Last November, it produced a report called “Tough times 2012: councils’ financial health in challenging times”, which said:
“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.”
It could not be stated more clearly. That probably explains why the Secretary of State is so keen to get rid of the Audit Commission: how inconvenient that such an organisation dares to speak truth unto power.
The Secretary of State came up with the measure of spending power in 2010. Ministers now publish figures on spending power per dwelling but not on spending power per head of population. This is perhaps unsurprising given what the figures show. Taking into account this settlement, in 2014-15 the 10 most deprived local authorities in England will lose six times more spending power per head of population than the 10 least deprived local authorities, compared with 2010-11. No wonder Ministers did not want to present to the House figures based on population. The councils that will suffer the biggest cut in spending power over the two years are Liverpool, Hackney, Newham, Manchester, Knowsley, Blackpool, Tower Hamlets, Middlesbrough, Birmingham and Kingston upon Hull.
Sat right in the middle of that list are the district councils of Burnley and Hyndburn, which are taking cuts of the same size but have a budget that is a fraction of those unitary authorities. The scale of the cuts is horrendous in those councils.
My hon. Friend is right. He anticipates what I am about to say, because how can that list be fair?
The Prime Minister says that we are all in this together, though less frequently these days because he gets laughed at when he attempts to do so. However, in this settlement, his local authority, West Oxfordshire, which is one of the least deprived in the country, ranking 316th our of 325 in the indices of multiple deprivation, is getting an increase in spending power of 3.1%, whereas some of the most deprived areas, such as Hastings, which we heard about earlier, and Burnley, which are respectively 19th and 11th out of 325 in the indices of multiple deprivation, are facing the maximum cut in their spending power, on the Government’s own measure, of minus 8.8%. How is that fair?
“Those in greatest need ultimately bear the burden of paying off the debt”.—[Hansard, 10 June 2010; Vol. 511, c. 450.]
Is not that exactly what they are about? They are not interested in the people in Nottingham and elsewhere whom we represent.
My hon. Friend is right. That quote sums up wonderfully the philosophy the Government have brought to the cuts they are making.
We had a debate on Monday. Different areas have different needs and I acknowledge the particular challenges that local authorities serving rural areas face. The Government’s job is to balance all those things and come up with something that can be seen as fair.
My right hon. Friend mentioned the small district councils of Burnley and Hyndburn, which are taking huge cuts that are almost the size of those in metropolitan areas such as Liverpool. The 8.8% figure he mentioned includes the efficiency grant, which is a two-year payment. After those two years, it is removed and they are facing a cliff edge that is far beyond 8.8%.
My hon. Friend makes the point about the circumstances his local authorities face extremely forcefully.
What does all this mean for the future financial sustainability of local government? The National Audit Office recently published a report that makes it clear that cuts to councils budgets are having a direct impact on front-line services, even though the former housing Minister went before the Select Committee, I think in 2010, and said that there should not need to be any cuts in front-line services. The Chair of the Public Accounts Committee, my right hon. Friend Margaret Hodge was very direct in her response. She said of the findings from the National Audit Office on local authorities:
“I am alarmed to hear that 12% are now at risk of being unable to balance their books in the future, according to local auditors, with potentially disastrous consequences.”
It is worth reflecting on those words: more than one in ten councils are now at risk of being unable to balance their books in the future—that is what the NAO says. The Secretary of State may say that the graph of doom is scaremongering on the part of the LGA. Will he also say that this is scaremongering on the part of the NAO? If he does not say that, what is the Government’s answer to the picture unveiled by the NAO?
The mayor of Liverpool has invited the Secretary of State to our city to have a look at the books for himself, so that he can point to where the city council is not making the efficiency savings the Government believe it should be making. Does my right hon. Friend believe that the Secretary of State should take up that challenge?
I very much hope that the Secretary of State is willing to accept that challenge; it would be good for him to see impact of the cuts.
I am grateful to my hon. Friend for reminding us. I do not know whether the Secretary of State will indicate whether he will accept the kind invitation he has received. There is no answer at the moment, but perhaps my hon. Friend Steve Rotheram will find out subsequently.
One of the problems councils face is that there is some uncertainty in the system, because of the big change the Government are bringing in as a result of this statement. The truth is that it remains to be seen how local authorities will benefit from business rates localisation, particularly because the Government have given themselves so many ways in which they can take some of that growth in business rates for themselves. The business rate projection for each local authority has been averaged out over two years. Why did the Minister decide on a two-year period, rather than averaging out over a five-year period as his own consultation suggested?
On business rate appeals, although the Government have increased the adjustment of that to £593 million, will the Minister say whether he is confident that that will be sufficient given that the LGA says that appeals in the pipeline could be considerably larger than this, thus exposing local government to an unacceptable level of risk? Why did Ministers change the 2012-13 baseline to include cuts that would not take place until the next financial year? Was it to try and make the reductions in spending power look less than they actually were? I welcome the increased allocation for the public health grant, but because it is ring-fenced, it does not really change the reduction being imposed on councils for all the other services for which they are responsible.
Finally—a lot of other Members want to speak—I turn to council tax benefit. Last year in this debate, I suggested to Government Members that they take a long, hard look at what this would mean for their constituents, including in areas where the proportion of pensioners was higher than average. Now that the change is almost upon us, many people in all our constituencies frankly have no idea what the coalition Government have in store for them.
May I draw my right hon. Friend’s attention to the evidence presented to the Communities and Local Government Committee on council tax benefit, including from councils such as Conservative-controlled Croydon, which is predicting a crisis when this comes in, particularly a huge rise in homelessness?
My hon. Friend makes a powerful point. As I was about to say, a number of families will be hit, not just by one thing, but by several of the changes. It is the accumulative impact that will be so striking.
In its briefing for today’s debate, the LGA wrote:
“Authorities will have to introduce council tax support schemes against the backdrop of a ten per cent cut in funding for this scheme. In practice this means that many councils will have no choice but to pass the cut on to the working age poor.”
The technical details are causing concern. London Councils, in its briefing on the settlement, wrote that it was disappointed with the lack of transparency around the funding for council tax in the future. It wrote:
“From 2014-15 the funding calculations for council tax support will be lost within the wider formula funding allocations and will be subject to the broader cuts to local government funding. However by including this funding within overall formula funding, it means that this already reduced sum could well be altered again”.
It wrote that it would become almost
“impossible to identify what a local authority actually receives for its local scheme”.
Will the Minister confirm that and explain the reasoning behind his proposed change?
We know that last autumn the Government panicked and announced their transition scheme worth £100 million, because they knew there was a car crash heading their way. Especially since councils finalised their council tax support schemes, which they had to do by the end of last month, it has become clear that a large number of councils, including the Secretary of State’s council of Brentwood, are not taking any of the transitional grant. Why is that? The report that went to Brentwood council made it clear that it would have cost it more to do so. It would have received just over £100,000 from the transitional fund, but it would have cost it an extra £300,000 to have taken it. That is not much in the way of help. It is more the economics of the madhouse.
We know that councils are trying to do their best to protect the vulnerable, but the 10% cut in funding, which comes on top of the further cuts announced in this settlement, leaves many with no option but to increase council taxes for the poorest. What does this mean for families? It is a tax rise on people who work hard—do not forget that some people receiving the benefit are in work—carers, the disabled and single mums, and it is happening because while the Secretary of State has spent a lot of time these past two years touring the country, pointing the finger at councils and saying, “You must freeze council tax”, all along he has been masterminding a council tax bombshell for those who can least afford it.
About 2 million people will remember April this year for the bills that will land on their door mats—bills that will tell them either that they have to pay council tax for the first time or that they face an increase. Why will those people, including those in authorities that decide to freeze the council tax, have a bill on their doormat? They are being singled out by the Chancellor and the Secretary of State because they have one characteristic in common: they do not have a lot of money. I say to the Minister that that is what I call a kick in the teeth.
Those same families will be looking at the TV and the papers and discovering that something else is happening in April. Bigger payslips will be dropping on to other doormats—those of people earning more than £150,000 a year, and those earning more than £1 million a year, because the Prime Minister, the Chancellor of the Exchequer and the Secretary of State have decided that those people really need a tax cut of £100,000 a year. How is that fair?
I will tell the House what this will mean in Leeds. According to the council, an estimated 41,000 families will be hit by this tax increase and by the Government’s equally unfair bedroom tax. In some cases, families will be hit twice over. In practical terms, it will mean that £9.4 million will be taken out of the pockets of people on the lowest incomes in Leeds to pay for higher rent and for higher council tax. Councils will be forced, once again, to start chasing people for money that they might not have—in some cases, small amounts of money—in a way that we have not seen since the days of the hated poll tax.
Does my right hon. Friend agree that, in communities such as mine, the changes will have a dramatic effect on the local economy? The one thing that those people do is spend their money in the local economy.
My hon. Friend is absolutely right. The measures will take potential spending power and demand out of the local economy at a time when we have a crisis of growth. They are economically illiterate, as well as profoundly unfair. It is little wonder that the former Conservative Cabinet Minister, Lord Jenkin, who knows a thing or two because he was the man who designed the original poll tax, has called the Secretary of State’s plan—yes, it is his plan—the “poll tax mark 2”.
The settlement needs to be seen for what it really is. Despite the Government’s attempts to hide the truth, it is unfair and unjust. It is unfair to local residents who rely on their local services, and it is unjust in the way it hits the poorest areas and the poorest people hardest. That is why we will vote against the local government finance report today.
Order. Given the extensive interest in taking part in the debate, I have imposed a time limit of seven minutes on Back-Bench contributions. That will be subject to review, depending on progress.
The speech made by Hilary Benn reminded me of a certain type of popular film. It was technically proficient, but it really ought to have been transmitted in black and white, because it was so full of dated thinking. It was reminiscent of those films that we sometimes see at the British Film Institute or of the re-runs of 1970s sitcoms that we see on television at about 1 o’clock in the morning. That is a shame, because, in all the huff and puff, the seriousness and importance of the local government settlement was rather missed. That became apparent during the interventions on the Under-Secretary of State for Communities and Local Government, my hon. Friend Brandon Lewis, whom I congratulate on presenting the settlement admirably. There was a degree of collective denial that I have not seen since I used to visit clients in Wandsworth prison.
The reality is that Labour has never been able to understand that it was committed to making significant cuts in public spending, which would have kicked in in 2014-15, and that because local government accounts for some 25% of public expenditure, it was inevitable that those reductions would have to take place in local government. It is a bit rich of the Opposition to say that we have behaved in an unfair fashion, when we have essentially continued with their formula system—despite my having some thoughts to the contrary when I was the Minister responsible—with an emphasis on the equation of needs and resources.
We have updated their system to give more accurate population figures and to be fair to those in rural areas to the degree that a case could be made. The updating of population figures tends to work to the benefit of
London and other metropolitan areas with more transient populations, and no doubt for that reason the helpful Library research paper states:
“Excluding London—” we all know London has particular circumstances—
“northern regions will receive larger start-up funding assessments—” that is, in effect, the successor to formula grant—
“than their counterparts. The South East, South West and Eastern regions will receive the lowest levels.”
On spending power the paper states:
“Excluding London, northern regions and the West Midlands will have larger spending power per dwelling than their counterparts.”
That reflects the fact that the Government accept that there are greater pressures in some parts of the country—I always accepted that as a Minister, just as my hon. Friends on the Front Bench do now, and it must be recognised. That is exactly what the Government have done and to pretend otherwise is, if hon. Members will forgive me, disingenuous in the extreme.
That is a good try but the hon. Gentleman must realise that we have a persistent inheritance of underperformance by Labour Governments, and there is an unwillingness—demonstrated by his intervention and many others—to move on with the serious issues about how we deliver the best services for local authorities.
For example, it was significant that the right hon. Member for Leeds Central made no mention of the fact that we have created other funding streams for local government through the new homes bonus. That scheme accounts for the increase in receipts in some councils. They are meeting the housing deficit that Labour left behind and we are rewarding them—of course, Opposition Members have no concept that a local authority should actually be rewarded for efficiency and enterprise. That is alien to their culture, so hence the criticism. No mention was made of the fact that the localisation of business rates is the first significant move of devolution in fiscal terms—the Treasury is giving up and forgoing revenue in favour of local authorities—since the second world war. I hope that in due course as the economy grows, the local share of that business rate will increase from its current level of 50%. That is 50% more than was available under local discretion when the rates were effectively nationalised and redistributed, usually under an extremely opaque formula of which Mr Jones was one of the advocates.
I am surprised that the Prime Minister sacked the hon. Gentleman; he obviously hopes he is line for some honour or future preferment. He mentioned the new homes bonus, but councils that will benefit most from that are those in areas of housing growth. That does not include parts of the north-east and elsewhere where, because of the Government’s incompetence, the housing market is not only flatlining but declining.
I have a lot of time for the hon. Gentleman but he does not do himself justice by that intervention. He is in no position to criticise given that we inherited the lowest ever level of housing starts in peacetime thanks to his Government. I do not think that works. Given the area he represents, I am tempted to suggest that he might like to take on board a further note from the helpful Library research paper on assessments of funding:
“For shire districts and single tier authorities controlled by the main political parties, average start-up funding assessments and spending power per dwelling will be lower amongst Conservative controlled authorities and higher amongst Labour controlled authorities.”
If that is not recognising the reality and fairness, what is? Of course, a similar comparison could not be made with county councils because there were no Labour county councils to compare the figures with.
Durham is in the unitaries. I was glad to hear recognition of local authorities as among the most efficient parts of the public sector. That may have something to do with the political control of the majority of local authorities. In reality, this settlement is not just about the important level of funding for this year and next year, but about setting a course that rewards local authorities that think outside the box.
An important point to make about that is that it is slightly depressing to hear, in a number of interventions from Opposition Members, the mantra that says, “We are worried about the cliff edge; we need to rebuild the base.” With respect—I say this from my experience, for what it is worth, in local government and from my period as a Minister—that is a profoundly misguided approach to adopt. The world of public service delivery is changing. Simply rebuilding the base on its old basis is not the answer. The base will never be as it was before, because the way we do things will never be as it was before. We are seeking to give local authorities the flexibility in their funding arrangements to find new ways of using their budgets, not simply saying, “Let’s get back to the old levels of money and the old way of doing things.” That was the mentality that got us into this mess in the first place. On the contrary, through the initiatives announced by my hon. Friend the Minister to reward efficiency much more—I hope we can look at what more we can do in future—we are giving local authorities an incentive to work together. It is not about how much local authorities get; it is about how they use it.
To give one example, I have mentioned in the past the London borough of Tower Hamlets—that well known local authority—which, among other things, manages to spend £1.2 million on eastend life, its information newspaper, which contains restaurant reviews, the football scores and other things that are entirely germane to local council services in its area. No doubt Opposition Members will say, “Oh, what’s £1.2 million here or there?”—that is not the sort of money they are interested in—but let us contrast that with my borough of Bromley, which has never run a municipal newspaper in its life, but which, when it needs to, simply takes out an advertising wraparound with the free sheet. I can tell hon. Members that Bromley has been done: it is appointing a shared director of public health, because part of the important ongoing work on public health funding—to which the right hon. Member for Leeds Central referred—is aligning it more closely with social services and adult social care funding. That is what Bromley is doing: it is working with a Labour council next door on joint procurement of IT services. Bromley is also looking at joint working on its legal and library services.
Those are the things that sensible councils across the country are and should be doing. To sneer at that and say, “Oh, this is just ‘50 ways to insult people’,” indicates a mentality that I have not seen in public life since King Charles X of France was evicted from the Tuileries by the mob in the warm-up for “Les Misérables”. At the end of the day, they have not moved on and they have lost—
Clearly these are difficult times. As my right hon. Friend Hilary Benn said from the Front Bench, there will have to be reductions in local government spending. Our task today is to examine whether the cuts that have been made are fair and reasonable.
Let us look at what the Local Government Association has said. It calculates that, over the four-year period of the comprehensive spending review, local council spending power will be reduced in real terms by a third. That is a significant reduction—indeed, a massive reduction. We are not just talking about local council spending; we are talking about the services that the money is spent on and the effect of the withdrawal of those services on our local communities. The Minister talked about hard-working council tax payers, and of course, council tax payers are, by and large, hard working; but not once did he refer to hard-working recipients of council services. People will now lose those services, which in many cases they rely on. It seems as though the Government are saying to our country and the public at large that libraries, parks, environmental health and adult social care are, in some way, second-rate services that we should have less regard for, because they are prepared to make cuts of a third to those services, but cuts of only 20% across the board to other Government services. What they are really saying is that those local services, which our communities value so much, are worth less and should be esteemed less than other things the Government do.
I have to say that a little bit of me has started to wonder whether it is more comfortable for Ministers to see councils and councillors as something of a human shield—people they can hide behind or to whom they can say, “You’re the people to blame in your local council chambers.” They are the people the public can get at for making the cuts that are affecting them. There is someone between Ministers and the impact on local communities of the cuts they are making to council services. The councillors can always be blamed, and I am very concerned that it is easier for Ministers to make cuts in this area.
Councils have always been very good. Under the Labour Government, when we used to have increases in council funding each year, councils were always required to make 2% efficiency savings a year. It is interesting that in the latest MORI poll two thirds of the public said that they had not yet noticed any impact from council cuts on their lives. That will change, but it shows how good councils have been so far in absorbing the savings and achieving the efficiencies that have been requested of them. But people will be affected and, frankly, the Secretary of State’s 50 ways to save the world will not save our local service.
The Minister talked about the pennies being important. Of course saving pennies is important. When I went to a meeting at Sheffield council the other day I did not get tea or coffee and biscuits. They were not provided. When I do my surgery at Crystal Peaks library on Saturday morning, there is a private coffee shop in the foyer which the council has rented out. Those are the sorts of things that are being done. Sheffield has a brilliant record of collecting council tax—a 99% collection rate—although that is likely to change with the changes to council tax benefits, when it will have to try and get £2, £3 or £4 from people who cannot afford it. We have saved more than £2 million a year through going to an alternate-week bin collection, and I have not had a single member of the public write to me with a discarded chicken masala in hand saying, “Our human rights have been breached by this terrible change.” It has gone very smoothly, and recycling is now rising as a result.
Over a four-year period, Sheffield council will have to save £230 million. That is a reduction in spending power of £200 a head, but other councils—such as Windsor and Maidenhead, and Richmond upon Thames—have to make savings of less than £40 a head. That is five times more in Sheffield than other authorities. The Minister will say that Sheffield gets more grant, and because it has had more grant, there is more grant to cut. But Sheffield, like other cities, has had more grant because it has fewer resources and more need than other areas. Ministers are taking grant from areas that have traditionally had more grant, but those are the poorest, most deprived communities where the cuts are hitting hardest. That is simple reality.
The hon. Gentleman is right to say that deprivation is a key part of the formula. It always has been and it always should be. But, as I understand it, a density factor was added to the formula by the previous Government for which there is no justification, as it is cheaper to provide services in areas that are more densely populated. That is the sort of issue that we need to resolve in coming years.
There are lots of factors that have been put into the formula in the past. We can all make arguments about the details. For example, it is more expensive to provide services in Sheffield because of its topography. We have hills, so construction costs, such as for the tram, go up. But on the index of deprivation, the most deprived areas will get the biggest cuts. There is no argument about that—if there were, Ministers would be jumping up to the Dispatch Box to deny it.
The Secretary of State says, “It is all right, councils have got reserves. There is no need for cuts.” That is not true. Yes, Sheffield has around £150 million of reserves, but more than £25 million of it is held for schools, and it cannot spend that; £25 million is in the housing account, ring-fenced and dedicated; some £50 million is to be allocated for capital projects; and then there is the money that has to be used to match-fund a PFI scheme that the Government have just approved—I give credit to them for taking forward that Labour scheme. That leaves around £11 million of reserves, and it would be folly for the council to put that money into services next year and leave itself with no reserves. So the council is being prudent and appropriate, as are most councils, in how it deals with that issue.
Does my hon. Friend agree that there is a sleight of hand in things like the new homes bonus? The Government are giving with one hand and taking away with the other. Newcastle, for example, will get £6 million for 2018-19, but will lose nearly £17 million. The 12 councils in the north-east will lose some £275 million over the period.
There are smoke and mirrors all over the place. Ministers talk about the new homes bonus as if it were new money as well as new homes. It is not: it is top-sliced from the grant. In Sheffield’s case, the figures are very stark. For every 55p the council gets from the new homes bonus, it would have received £1 if the money had been allocated through the grants system. It is not that Sheffield does not want to build new homes. There is a reason. The market is flat in the private sector, the money for housing associations comes through the Homes and Communities Agency and the money for council housing is not there because the Government have capped the amount councils can spend from the housing revenue account. That is why not so many new homes are being built in Sheffield—it is not through want of trying or want of effort on the part of the council.
I note that the council was blamed by the Deputy Prime Minister the other day when he said that it was cutting front-line services. Yes, it is. There is a proposal to close the Don Valley stadium where Jessica Ennis trained because there is not enough money to keep it going. There are cuts to early-years provision because the council has lost more than £6 million in grant directly, so it cannot be kept going. There are cuts to the eligibility criteria for adult social care.
The Deputy Prime Minister ridiculed the council for cuts to libraries. What the council is doing is a very detailed and proper consultation, recognising that it simply cannot afford to keep libraries going in the way they were funded in the past. It is looking at 10 different models from 10 different authorities across the country. Those are out for public consultation on the different ways of doing things. That is a responsible way to try to approach a very difficult situation.
The council was also ridiculed by the Deputy Prime Minister for spending £2 million on council meeting rooms. No, it has not done so. It has had to make some essential repairs to a grade 1 listed building, the town hall, and it is putting money into reorganising the council accommodation to save £30 million in running costs over a 10-year period. It is not just Labour-controlled Sheffield that is doing that; many councils up and down the country and of all political persuasions are approaching things responsibly in that sort of way.
The Government should listen to the siren voices—Sir Merrick Cockell, Baroness Eaton, the leader of Kent county council. These are not just siren voices, but voices of reason. The graph of doom, whether it comes from Birmingham, Barnet or Sheffield, is a reality. The reality is that if we keep on cutting council funding and the demand for social care goes up, other council services are going to get squeezed out of existence.
Ministers are fond of saying that localism is not just about councils. No, it is not; it is about communities as well. At the end of the day, these cuts are not going to hit councils; they are going to hit communities, and they are going to hit the most deprived communities hardest. When the public, already sceptical, see these cuts become a reality, the anger against this Government will grow considerably in the coming months.
My starting point is to accept that the cuts are tough, but that as local government accounts for about 25% of all public expenditure, local authorities were always going to have to play their part in fixing the black hole in the nation’s finances.
I want to recognise the fact that local government has shown great skill in reducing its budgets. Committed local authorities have protected front-line services, and it is a credit to councils across the country that satisfaction in council services has gone up. It is important to recognise the positive leadership given by many councillors in responding to the challenges presented to them.
I welcome the fact that this local government financial settlement is moving away from an unfair and incomprehensible formula grant system. This will put more power into the hands of local councils by letting them keep more of what they raise locally in business rates. I am firmly in favour of the principle of localisation of business rates. Local authorities will directly retain nearly £11 billion of business rates instead of returning them to the Treasury. Allowing councils to keep more of the business rates they generate should encourage them to have a greater stake in driving growth in their communities. It is a move in the right localist direction.
I hope we will travel further, but I understand the necessity for safety nets and protections in the early days of this system. If councils really make the system work for them, they will bring in considerable extra funds. Whatever they do with the extra funds they bring in by their own actions, it means that they can protect their spending more, which is the important thing. This is the message—that authorities must get on and improve their local economies so that they can protect the front-line services people rely on so much.
We need to recognise, however, that uncertainty exists as we move to the new system. Looking further to the future, there are fears of more cuts to the local council tax benefit support grant. The current situation worries me. It will be interesting to see how different councils handle it. However, the future is potentially more worrying. The National Association of Local Councils has expressed concern about billing authorities’ passing 100% of the available parish grant to local councils this year and in the future.
We had a rather rushed debate about rural councils the other night, but I think that points were well made. Those of us who represent rural areas—including my hon. Friend Richard Drax, who cannot be present for the debate—feel that the extra cost of providing services in rural areas needs to be assessed. We need to be given some factual basis for it, and we need to look beyond one year. The £8.5 million provided by the Government shows that they were listening, but I think that, just as there was concern about a two-year grant, there is concern about a one-off payment of £8.5 million. I do not think that, in itself, will solve the problem, although it is very welcome.
I, too, was present for the debate on the settlement for rural areas, and I share the hon. Lady’s concern, as does my hon. Friend Mr Stuart. Is she, like me, slightly heartened by the Minister’s assurance that he will listen and talk to us beyond this settlement, so that we can discuss future settlements and those of us who represent rural constituencies can perhaps rest a little easier?
I should certainly like that conversation to reach some conclusions before 2020.
I am glad that the Minister listens to representations, and that there will be more flexibility for shire districts and fire and rescue authorities in relation to the referendum that is required for council tax rises of more than 2%. The rule is being amended to enable shire districts with the lowest council tax rates this year to introduce rises above that level without a referendum, as long as the cash increase in the basic amount is no more than £5. That option will be available to Dorset’s fire and rescue service, which is acknowledged to be very efficient. Dorset fire authority will be given more choices when it sets its budget for 2013-14, although it will face some very difficult challenges.
Many councils are sharing services to cut costs. I have mentioned East Dorset and Christchurch, which have a single chief executive. However, they recognise that they must go much further, and they already have, effectively, a single planning department. There is scope for transforming the delivery of council services.
We should also acknowledge the Government’s provision of other funding pots for local government. The additional £2.4 billion provided for adult social care was extremely important. However, I would be remiss if I did not mention that Poole unitary authority—like so many other authorities—is very concerned about the continuing pressures on the overall budget for support for individuals needing care. The Local Government Association is pleased that the Government have listened to its concerns about the sector, and I note the increased funds that councils will receive for their new public health duties.
There are no two ways about it: we live in difficult times, and difficult decisions are having to be made. However, if there is flexibility and we really work with the local community, difficult times may be the right times in which to use our reserves when that is appropriate.
I should inform the House that my wife is a member of Tameside metropolitan borough council, one of the two local authorities in my constituency.
The Minister’s opening remarks beggared belief. Either he is completely out of touch or he does not understand, or does not want to understand, the impact that this settlement is having on local authorities such as Tameside,
Stockport and many others represented by hon. Members. As was pointed out by my right hon. Friend Hilary Benn, it is extremely unfair. That was expressed to me loudly and clearly at a budget briefing seminar that was arranged for my hon. Friend Jonathan Reynolds and me by Tameside council last Friday. To say that the budget seminar was thoroughly depressing would be a massive understatement.
The starting point is that the comprehensive spending review for 2011-12 to 2014-15 has outlined real-terms reductions of about 28% in central Government funds for public services. However, Tameside will experience an overall cash cut equating to a reduction in funding of 43%. That is massive in any terms.
Also, does my hon. Friend agree that no matter how many pot plants councils get rid of—indeed, even if they were to cut all chief officers’ salaries—no organisation could absorb such a cut without there being an impact on front-line services?
My hon. Friend is absolutely right. Tameside council is an excellent, four-star local authority. It has been highlighted as having some of the best financial procedures of any local authority. It is well managed, and it has met the Gershon savings put in place by the Labour Government with commendation and improved services at the same time. These new cuts are too far and too deep for an authority such as Tameside, however.
Using the Government’s own notional spending power methodology, Tameside’s funding cut will be 1.7% in 2013-14 and 4.9% in 2014-15, amounting to 6.4% over the two years, which is higher than the England average of 5.5% for that period. Those calculations exclude specific grants, of course, such as capital grants, grants for funding education and ring-fenced grants. However, this analysis does not reflect reality for a number of reasons. First, the starting point is taken as the adjusted start-up funding position used in the calculations for the 2013-14 grant, not the actual amounts received in 2012-13. Secondly, the cost of the council tax support scheme is included in both the council tax requirement figures and the start-up funding level, which distorts the reported position.
As was mentioned earlier, further analysis has shown the reduction in spending power, and as I mentioned in an intervention on my right hon. Friend the Member for Leeds Central, it is telling that no council in any region outside the south, with the exception of Cheshire East, has a reduction in spending power of between zero and £50 per person.
As a Cheshire East MP, may I ask the hon. Gentleman whether he is aware that grant funding means that Manchester has three times more per head than Cheshire East? If Cheshire East had the same funding it would not need to charge council tax at all and would have £30 million left over.
There we have it! That highlights just how much Government Members do not get it. I am not here to speak for Manchester. I am a Tameside and Stockport MP, and the reduction in spending per head of population in Tameside is £160.98, yet Tameside is the 56th most deprived area in the country with real social needs. That is why this reduction is so unfair, and the hon. Lady just does not get it.
The savings requirements are £26.5 million for 2013-14, £13 million for 2014-15, £31.94 million for 2015-16 and £46.685 million for 2016-17, amounting to a total of £118.125 million over the next four years. That is just wrong—it is not fair in any sense of the word.
Let me briefly run through the kind of savings—cuts—that Tameside’s council is having to make. On adult services, the council is having to: redesign day services for adults; reduce home care packages; streamline care pathways; reduce voluntary sector grants by 20%; withdraw financial support from luncheon clubs; reduce employment services; outsource further homemaker services to the independent sector; and cut health and well-being services. We are talking about £3.485 million of cuts in 2013-14 and £1.388 million of cuts the year after.
On neighbourhood services, the council is putting in place: new operation structures for district assemblies—that means reducing grounds maintenance, and making cuts to parks, street scene and litter removal functions; an amalgamated parks and countryside service; efficiencies in third sector funding; a new, single, risk-based highways function—that means filling in pot holes; and more savings from the libraries review.
My hon. Friend makes an important point, which brings me on to what is happening to children’s services. Next year, cuts to children’s services in Tameside will be £4.636 million and the year after the figure will be £6.509 million. This just is not right; the services being cut are for some of the most vulnerable people, both young and elderly, in our society.
Let me briefly mention the issue of reserves, because it has been raised before. My hon. Friend Mr Betts rightly says that most of the reserves are tied up for schools and capital schemes in any case. By 2015, Tameside’s council will have £12 million in reserves. That is not enough to deal with the equal pay claims, because they continue to be major areas of risk for the council, not least in view of the judgment made against Birmingham city council in its case.
Stockport faces the same situation; Stockport metropolitan borough council is losing £96.59 per person over these four years. Stockport’s council is much more affluent than Tameside’s, but this settlement is still unfair to it and worse than the settlement anticipated by its Liberal Democrat council. Come the end of this week, that council, too, will be looking at huge cuts to park services, to libraries and to support for children. This is just not fair. It is not fair on places such as Greater Manchester, it is not fair on most of the north of England and it shows that this Government just do not get it.
Order. In order to try to accommodate the remaining colleagues who wish to contribute, the time limit on Back-Bench speeches has now to be reduced, with immediate effect, to five minutes.
I am very grateful to you, Mr Speaker, for calling me to speak in this debate. I had hoped to be called in the debate that was held a couple of days ago on the specific issue of rural funding, so many of my remarks will concentrate on that issue and how it affects places such as Cornwall.
It is a pleasure, in a sense, to follow Andrew Gwynne, who made a passionate plea on behalf of his constituents, as we would expect from any MP. However, I get frustrated with hearing time and again how deprivation is in urban areas; how all the indices, which have been around for some time, to pick up on the real deprivation in urban areas are the only justification for spending; and how we should be looking at this formula and the settlement, and tilting it even more towards urban areas. Those areas have, in fact, historically done much better than areas such as mine.
Cornwall is not what some people might think it to be; it is not a leafy playground full of people wandering around with huge amounts of cash in their back pocket. In reality, it is one of the most deprived parts of the country. Wages are lower than they are in most parts of the country. Even after the accession countries joined the European Union, we are still receiving structural funds to try to help our economy get out of the state it is in. The objective 1 programme existed in many other parts of the country, such as south Yorkshire, but its successor, the convergence programme, is still delivering in Cornwall. After what the Prime Minister told us on Monday, it looks as though it will continue.
Cornwall needs support and investment, but the formula is stacked against it. We often discuss sparsity, on which Mr Stuart has done a great deal of work. Sir Tony Cunningham, the hon. Gentleman and I have worked with many other Members on both sides of the House to raise the issue with Ministers.
The funding formula is a very involved beast, but sparsity is one of the factors that has not been fairly reflected over the years. To the Minister’s credit, he has listened to us, and the Under-Secretary of State for Communities and Local Government, my right hon. Friend Mr Foster, has also looked at the issue. I hope we can make progress.
The issue is compounded by similar formulae in other areas of public spending. We are rightly looking for ways for local government and health to come together to share costs and investment in services, whether social care or health, but those formulae also clobber areas such as Cornwall. Even when the formula shows underfunding, we have the wonderful damping process, so we never get to where we should be.
I understand the reason for damping. Everybody understands that if an area is shown to be overfunded for whatever reason—population changes, for example—compared with some point previously, and another area is underfunded, we need a period of transition to get things right. What seems to have happened over the years, under the previous Government and before, is that the process never achieves what we set out to do; damping is at such a high level that we do not move in the right direction to resolve the problem.
Cornwall has done what it can to be more efficient. We adopted the unitary local government model, which was painful because there was a lot of cultural and structural change to get seven local authorities down to one, and there were job losses too, but if we had not been through that process we would have been far worse off. We have good local town and parish councils that are taking on responsibility for some services that the county council provided—the things that visitors to Cornwall expect, such as public toilets—but without much revenue.
Council tax has historically been higher in rural areas, while there is also an additional element levied by local councils. In areas such as mine, we have low wages, historically high council tax in some parts—
Order. I appreciate that the hon. Gentleman is happy to be speaking, but a number of Members have withdrawn from the debate, so I am putting the limit up again. The hon. Gentleman has a couple more minutes if he wants them. He is not obliged to use them, but he can if he wants.
I hope my contribution did not put off so many Members that they left the Chamber, Mr Speaker.
Local councils will face pressures too, so we need to look at the amount they add to council tax. There are particular pressures on rural areas, as the Government acknowledged in their consultation last summer, but although they looked as though they were moving in the right direction we have yet to see the fruits of that labour.
I congratulate my hon. Friend on his work representing rural areas. Does he agree that starting from next year’s settlement we must see an unwind of the rural penalty whereby 50% more per head goes to urban areas? We must see that figure reduced to no more than 40% by 2020. It can be done without major impact on other areas, and it will bring justice and fairer outcomes for people in rural areas who have suffered too much, too long.
The hon. Gentleman is absolutely right. There is a penalty—a disadvantage—for people who benefit from living in a rural area, and the gap should gradually be narrowed. We are not saying that it should be entirely eroded. Members from urban constituencies have made the case for their areas of need, but the gap has widened. If the direction of travel is right, we will be much happier.
On public spending, public sector jobs in national Government are another way of making sure that that the public sector pound is reaching all parts of the country. In rural areas, the number of jobs in the Government sector has gone down, because Her Majesty’s Revenue and Customs, for example, has got rid of smaller tax offices and jobs have been combined in city areas. It should not go unnoticed that there is a concentration of public spending in urban areas, and that it is leaving rural areas.
What is incredible about this debate is the lack of understanding among Opposition Members of rural areas. I represent the most deprived part of the rural East Riding, which is as deprived as much of Hull, with a life expectancy of 73. However, local pupils and elderly people receive much less in care and services than they would in areas such as Hull or Doncaster, which are as deprived as Goole.
The hon. Gentleman is right. We need to make sure that we get the formula right so that it captures all those factors.
Another factor that is particularly acute for health, but also for social care and the provision of other services, is the ageing demographic. There is an inward migration of older people and an outward migration of younger people, who go to live in urban areas. What particularly dismayed us was the idea that the large element of damping would be frozen for a number of years. The best message that I have taken away from today is that that is not set in stone, and that we will have an opportunity to review it. I can assure the Minister that rural Members will continue to campaign for a fairer settlement for rural areas in years to come, and we look forward to hearing just what can be done to put this injustice right.
I am grateful for the opportunity to speak, and for the additional time to present a deeply concerning issue for the people of Newcastle upon Tyne.
The coalition Government talk about localism and devolving power, but they are clearly trying—and they are fooling no one—to shift the blame, claiming to give power and responsibility to councils while savagely and disproportionately slashing their budgets and ability to do what they do best. That is exemplified by changes to council tax benefit, which devolve responsibility for administering the benefit while cutting funding by 10%, which is effectively 11% in Newcastle, forcing local authorities into the invidious position of having to pass that cut on to local people who are struggling with the rising cost of living. It is also exemplified by the bedroom tax that is coming, as councils will be forced to absorb that into their budget or pass it on to people who are struggling, having been hit by the Government’s economic mismanagement.
I want to focus on the disproportionate cuts imposed on local authorities such as my own, Newcastle city council. My right hon. Friend the shadow Secretary of State referred to the comparison between his local authority, Leeds, and Wokingham, but we are all familiar with the comparison often made between Newcastle upon Tyne and Wokingham. Over the period of the 2010 spending review, the Department will see a 33% cut in real terms in funding. True to form, Conservative and Lib Dem Ministers have passed those cuts on to the most deprived and vulnerable areas in the country. Those who can least afford it are shouldering the greatest reductions in funding.
As hon. Members may be aware, I have raised this with the Minister both in an Adjournment debate and yesterday in Deputy Prime Minister’s questions, because my local authority, Newcastle city council, is in a dire financial position as a result of a combination of ever increasing cost pressures and hugely disproportionate reductions in funding from the coalition Government, which has created a budgetary black hole. The city treasurer has revealed that the funding gap in Newcastle by the end of 2014-15 will not be £90 million, as originally thought. Following further announcements by the Secretary of State at the end of last year, that will increase by an additional £10 million, so the black hole will now be as large as £100 million over the next three years. Around half of this is a direct reduction in central Government grant funding, with the rest being unavoidable cost pressures that the council must absorb. Based on the Department’s own figures, the cut in Newcastle’s spending power between 2012-13 and 2014-15 will be £218 per person, compared with a national average cut of £134 per person. At the same time, as my right hon. Friend the shadow Secretary of State set out, the Prime Minister’s own local authority is getting an increase in spending power of 3.1% in its local government finance settlement for 2013-14. The claim that we are all in this together would be laughable were it not such an insult to the reality that people are facing.
The most deprived areas where the needs are higher are once again being punished by this Government, willingly assisted by Liberal Democrat colleagues. Newcastle city council has produced research that reveals that the 50 worst affected councils will receive a reduction of £160 per head on average, with the 50 councils least affected receiving a cut of £16 per head. Yet the 50 most affected have, on average, a third of children living in poverty, whereas the 50 least affected have child poverty rates of 10%. It is truly shameful.
The excellent heat maps produced by Newcastle city council clearly and easily illustrate where the Government are aiming their cuts: at the most deprived northern areas and inner London boroughs. Put simply, the areas that are being hit hardest are the areas that are most in need and require the most support—the areas where more children are taken into care, the areas where fewer adults are able to fund their own social care, the areas with higher levels of statutory concessionary travel, areas with more specialist housing need and higher levels of homelessness.
When we raise the situation currently faced by Newcastle and many cities like it, Ministers are fond of touting the tired comparison between my city and the town of Wokingham. Let me continue in that vein. By 2015 Newcastle will receive funding cuts of £218 per head. In the same period Wokingham will receive cuts of just £27 per head.
Will the hon. Lady acknowledge that her authority will have a spending power cut of just 1.1%? That is below the national average.
The Minister is well aware that he is talking at cross purposes with what I am setting out, which is the impact over the next three years, not in the next financial year. I hesitate in case it is out of order to say that it is very disingenuous for the Government to present these figures in a way that does not match up—
Order. The hon. Lady should not attribute an unworthy motive to the Minister. Therefore I feel sure that through her dextrous use of language she can find another word to make her point.
Thank you, Mr Speaker, for keeping me in order. There is clearly a difference of opinion about the impact of the cut and the period we are talking about.
Yes, Newcastle still has a spending power per household of £2,522, which is over £700 more than the £1,814 per household in Wokingham, but Newcastle is more deprived and has higher needs. Newcastle has 550 looked-after children, compared with 70 in Wokingham. That is 101 looked-after children per 10,000 children in Newcastle and 20 per 10,000 in Wokingham. Newcastle has nine times the cost of statutory concessionary travel owing to high numbers of poorer pensioners travelling in the city, and Newcastle has fewer people able to fund their own social care, greater homelessness needs, higher council tax support needs and a lower council tax base.
I am sure many of my hon. Friends have already highlighted similar differences between the settlement in their authority and those in other—predominantly Conservative—local authorities, which are not seeing the same level of spending cuts. Local authorities are having to slash front-line jobs and close Sure Start centres, libraries and many other vital services as a result of these unfair and disproportionate cuts.
I must return to a point I raised with the Deputy Prime Minister yesterday regarding some Liberal Democrats in Newcastle who are campaigning against the impact of the cuts. Once again, I would extend a welcome to any Liberal Democrat MPs who want to join us in the Lobby tonight and vote against this unfair settlement. Otherwise, they have no place campaigning against the impact that will result if it goes through.
It is a pleasure to take part in this debate on the local government settlement for 2013-14. I start by paying tribute to the Minister, who has gone out of his way to make himself available to those of us who are concerned about the impact of the settlement and to listen to us. I appreciate the way in which Front Benchers have engaged with this.
I will speak mostly about funding for rural areas. The Rural Services Network, which brings together not only local government in rural areas but all sorts of health bodies and others, has analysed this year’s settlement and found that, at first look—I do not want to repeat too much of the debate we had on Monday night—the effect of damping in the eventual settlement is to increase the rural penalty, which already sits at 50%. Urban areas, as defined by the Government, get 50% more per head than rural areas.
They should come to my constituency, visit Withernsea and the areas there and see whether everyone is wealthy. They are not. We need to ensure that allocations are fair, based on need.
Does my hon. Friend agree that the rural penalty, which he is describing so eloquently, is getting worse, not better? Although we are absolutely delighted that Ministers are listening to us, I believe that we can mobilise the yeomanry in the countryside if we need to in order to make our point, because we want Ministers not only to listen, but to act.
I am grateful to my hon. Friend, who led the Back-Bench business debate on Monday. He is absolutely right. The test for the rural fair share campaign, which I chair with my hon. Friend Dan Rogerson and the hon. Member for Workington, is to have an urban-based Labour MP, moderate and reasonable—quite a number are—if not exactly getting out the bunting and cheering at the prospect, then recognising the strength of the argument in favour of fairness and meeting the needs in rural areas.
It is not some sort of grab. I think that it was perhaps too easy under the previous Government, with a Labour majority, to use deprivation and the cry from the big urban areas to keep skewing the funding more and more. It was both politically convenient and the deprivation provided a kind of moral veil. The position we are in now, with a rural penalty of 50%, is indefensible. If it is defensible, will someone please stand up and make the case?
Age is also a key driver of cost. In rural areas such as the one I represent, we have both an elderly population and a great number of people on low incomes. That combination needs to be addressed, as does the cost of service delivery, because it is more expensive to deliver many services, although not all, in the rural East Riding than it is to deliver them in north Hull. The last thing I want to do is talk down the residents of north Hull or of any other part of the country, urban or otherwise, but we need to have another look at need and ensure that we, preferably with a broad consensus across the House, can have a settlement that is fair to all, even at a time of reductions in public spending, as we are seeing now.
I agree with what my hon. Friend has just said. Will he confirm that what we have actually heard today from Opposition Members is that they do not understand the argument about deprived communities, such as mine in Goole and across north Lincolnshire? They are continuing to defend a system that works against the interests of people in rural communities such as mine.
My hon. Friend is right. The Opposition have made it absolutely clear that they wish to maintain the unfairness that impacts on the services provided to his constituents day in, day out. That is their message. Further to that, every single Opposition Member who says that they do not want this level of reduction in the overall amount spent on local government is calling for that money to come from cuts to the NHS. That is the truth. The Labour party has made it clear that it will not protect the NHS. It is only the Government who are committed to doing so and Labour Members, in every impassioned speech they make, are calling for reductions in spending on the NHS—real-terms cuts in health—so that councillors’ pensions can be protected alongside services.
I thank the hon. Gentleman for giving way. Some of the cuts that are being driven through in many of our cities will increase NHS costs because of the lack of support for vulnerable children and elderly people. The general lack of public services will ultimately be detrimental to people’s health.
I cannot help noticing that the hon. Lady absolutely refuses to rule out cutting the NHS, because that is her party’s policy. Most parties that go into opposition split—they start to divide. The unity of Labour in its commitment to cutting the NHS is, from the point of view of party loyalty, admirable. The hon. Lady, like other Opposition Members, has made it clear that the NHS can pay so that local government will not have to be asked to be more efficient and make savings.
Rural areas have long been poorly funded compared with urban areas, and they start from a significantly lower base. Talking about cash reductions in areas that receive much higher amounts of money does not give a fair and balanced picture. I agree that we should see the argument from all sides with regard not only to cash reductions, but to percentage cuts. The hon. Lady heard the Minister say that the percentage cut in Newcastle, which has a vastly greater budget than rural and deprived areas of the East Riding, is experiencing lower levels of reduction. To make out that it is the opposite and that this is an unparalleled assault on cities such as Newcastle misrepresents the settlement.
As I have said, the costs of delivery in sparsely populated areas are often higher than those in urban areas and, overall, rural residents earn less on average than people in urban areas. Labour Members have made out that everybody in an urban area is in the most terrible, deprived state, but most people in the cities are not and lots of people who live there earn more. They have higher average earnings than those in rural areas. Council tax in rural areas, where incomes are lower, is £75 a head higher. If we apply that across the household, we will see that the spending power in rural areas is lower. I sympathise with Labour Members on the closure of cultural centres in their areas, but my area does not have any because we do not have the money—the distribution is not fair.
Fair-minded people should recognise that reality. For too long, strident, sectarian interests have been allowed to dominate the debate. I call on Ministers to do more to understand the real costs of delivery across different service areas and make sure that we have a more informed debate than the political mud-slinging of those who represent urban areas as being entirely deprived. I do not want to be guilty of that in a rural sense.
The Department’s consultation in summer 2012 promised some improvement, but 75% of it was damped away. Since then, in meetings with the Minister, who, as I have said, has been most generous with his time, we have tried again and again—it is interesting to see Department officials present—to get the numbers so that we can all agree on them. I have brought along with me, especially for the Minister—I will hand it to him—the official governmental criteria of classification of councils, because Ministers have told me that they are not sure precisely how it works. Will the Minister who winds up the debate tell us what is happening to rural areas? I know this is not how money is allocated, but will the Department please do the assessment, if it has not done so already, of where the money is going to councils?
The official criteria of classification were agreed across Government in 2009. The document defines areas as rural-80, local authorities, rural-50, significant rural, major urban local authorities, large urban and other urban. Does it say that it is impossible to classify them? It does not—it is not true. It has been done by Government and the least that Ministers owe us is to tell us how those numbers work out across those particular designations.
Having listened to what Government Ministers have said this afternoon I really think that they are living in a world of fantasy and make-believe.
For Liverpool, and for similar places, this is a harsh settlement. It is part of the Government’s onslaught on local services and local government. Beyond that, it is part of a toxic package of Government cuts to local services, housing benefit, council tax benefit and welfare, together with the introduction of the bedroom tax. The combined effect of all these measures is to inflict severe hardship on local communities and, in particular, on children. When my hon. Friend Stephen Twigg raised this issue a couple of months ago and received the Government’s response, it became very clear that they had not paid any attention whatsoever to the cumulative impact of these savage cuts. That is shameful. The Government seem to be ploughing ahead with their cuts to deprived areas such as Liverpool as though they do not have a care in the world. That says more about their attitude, ideology and philosophy than it does about their competence.
Let us look at some facts. According to the indices of deprivation, Liverpool is the most deprived local authority in the country. Next year, it will be forced to cut £32 million from its local government budget, on top of the £141 million it has cut over the past two years, and there is more to come. Indeed, over a four-year period it is being asked to cut more than 50% of its controllable budget. It has been shown that for every individual in Liverpool the cumulative effect of four years of cuts is a cut in spending of £329.54 per head. So Liverpool is not only No. 1 in terms of deprivation but right at the top of the list for the amount of spending cuts per head that this Government are inflicting through local government cuts alone.
Liverpool city council is a very responsible council, and it has done what it can to protect local people against Government cuts. One of the first things it did when faced with the challenge of these cuts was to review how the whole council operated. It has slashed £30 million from its administration and cut out a half of its senior management. It has also done what it can to protect services. I will give one indication of what it has achieved over the past two years. Last year, the Sure Start centres were under great threat because their budgets had had to be reduced by over 50% due to the cuts in funding, but as a result of changing how those centres operated, in some instances affecting services adversely, they have remained open.
Now, we in Liverpool face the Government demanding even more cuts of the city. The council is continuing to review how it delivers its services, and it is looking for new ways of providing funding, but it will not be possible to protect public services. It is also an entrepreneurial council, engaging with business to bring investment into Liverpool. At the same time as fighting against these unwarranted and unjust cuts to local services and local people, it is holding its hand out to businesses to try to support investment and maintain jobs and employment in the city.
It is a simple fact that people in the most deprived area of the country, where 22% of the 100 very poorest local areas are found—the super output areas—require public services. Indeed, a decent society requires public services. The Government’s actions in relation to local government cuts and cuts to other services in Liverpool are unwarranted and unjust, and I call on the Minister to think again.
I have listened carefully to the debate and I have to say that the Government are out of touch with what is going on in many parts of the country. I want to talk about what is happening in my home city, because the disproportionate nature of the cuts in Hull needs careful examination.
In the past two years, Hull has lost £163.50 per person, compared with a national average of just £74 per head. From the cumulative figures that have been provided by Newcastle city council, it appears that, over the four-year period, the figure for Hull will rise to £228.36 per head. Hull is taking a much larger share of the Government’s council funding cuts than many wealthy areas. When I looked through the figures, I was particularly struck that West Dorset district council was losing only £2.70 per head.
We know that, from April onwards and up to 2015, Hull will lose a further 7.2% in what the Government are now calling “spending power”. As has already been said, the Prime Minister’s West Oxfordshire council will be receiving a rise, even though it is the 316th least deprived local authority area out of 325. Hull is the 10th most deprived area and is taking a much larger cut. That is not fair, and I think that that unfairness forms the basis of the objections of many Labour Members—the lack of fairness in the distribution of the cuts that are taking place.
Will the hon. Lady clarify whether she was comparing like with like, given that West Dorset is a district council and Hull, I presume, is a unitary council?
That is an interesting point. One of the issues the Government have to face is that they are using all sorts of different terms and ways of describing the funding that is going to local authorities. What I know is that in Hull the cuts are much deeper than they are in many wealthier areas. The citizens of Hull know jolly well that, with a Liberal Democrat-Tory Government, areas in the north are being disproportionately impacted.
I am grateful to my hon. Friend for providing that figure. As I said, that compares with the cumulative figure over four years of £228.36 for Hull residents, and that is just not fair. The case that I am putting to the Government is that they need to think again if they want to rebalance the economies of the north and the south. This is just another hammer blow to economic regeneration in the north, and to cities standing up and paying their own way. It will not help my city of Hull, which is struggling at the moment. Just before Christmas we saw 1,200 job losses in the local area from the private sector.
I pay tribute to the work of Hull city councillors who are trying to work with the budget they have been given by the Government. They have been put in a very difficult position. My hon. Friend Mr Betts, the Chair of the Communities and Local Government Committee, set out clearly the important work that local councils do on environmental health and trading standards, and in looking after some of the most vulnerable and damaged young people in our society—looked-after children, and elderly and disabled people who need social care. The councillors in Hull are doing their best to make sure that they can cover as much of those services as possible, but the Government are making it completely impossible to provide the kind of services we need in an area with such disadvantage.
What I clearly remember from my time as a Hull councillor is that, at the end of the last Labour Government, we had fewer jobs in the city than we had at the beginning. I also remember Labour frittering away the KC money. Public health funding in Goole will be £27 per ahead, but in Hull that figure is four times greater. Is the hon. Lady defending the fact that people in Hull, which has a similar demographic profile to Goole, have four times as much spent on their public health as somebody in my constituency?
I am sure that the hon. Gentleman would not argue that people in Hull should lose the money they need to deal with health inequalities and that that money be given to the people of Goole. Surely, he should fight his corner for the people of Goole and ensure that the Government provide the necessary funding.
I am reminded of the 1920s and the dispute involving Poplar borough council. We had a Liberal-Tory coalition then, and the good councillors of Poplar had to fight their corner then, because of the nature of the cuts being imposed on poorer areas of the country. It was generally accepted after a High Court ruling that richer areas should subsidise poorer areas, but of course the Government are rowing back completely on that and reverting to the idea that everywhere has to cope on their own, as a result of which the wealthy areas do well and the poorer areas sink without trace.
The new homes bonus will not help areas such as Hull. It is the wealthier areas that benefit from new homes being built. The Liberal Democrats like to talk about the pupil premium, but in 2011-12, Hull city council had £6,516 per pupil to spend on education and support services, whereas Kensington and Chelsea could afford to spend £8,920 per pupil. My constituents know jolly well what the Government are doing to the funding available to them and other northern cities.
This is a time for people in Hull to come together, and that includes the Liberal Democrats. There was a brief flirtation with the Liberal Democrats in Hull, but I think that most people there now recognise what they really are—Tories. People in Hull now recognise that this is not a fair settlement from the Government. We need to stand united in Hull, just as people in Newcastle and other parts of the country are standing united, and say, “Enough is enough.” The bedroom tax, council tax benefit—they cannot keep doing this to cities that are already struggling. I call upon the Minister to address the inequality in the cut given to Hull in particular and to explain it to my constituents, because they do not understand why they are being so penalised. They are doing their very best, living on limited incomes, working as hard as possible and looking for extra work when possible, yet the Government, time after time, seem hellbent on making the poorest pay the most. It is not fair.
I do not know how the Government and Government Members can justify what they are doing to local government finances. It is rare that I agree with a Tory, but I absolutely agree with Robert Neill, who is no longer in his place, who said that those in greatest need ultimately bear the burden of paying off the debt—perhaps that is why he is no longer in post. That attitude is apparent in the cuts to local government spending—cuts that disproportionately affect the poorest communities.
Newcastle city council research shows that Bolton, the 36th most deprived borough, will receive a cut of £178.26 per head over the four years, while Epsom and Ewell will lose £15.18 per ahead. It is not fair and it is not right. Why did the Secretary of State sign up for the biggest hit across Whitehall? Why did he sign up to £5.6 billion of cuts to local authority spending—a higher percentage than other Departments? If it is to pay down the deficit and debt, well it is clearly not working, because both are increasing because of those savage cuts. [Hon. Members: “No they’re not!”] The poor are paying the price of an economic crisis not of their making.
The deficit is going up too.
The Government will not even take responsibility for these cuts, because they simply try to pass on the responsibility to hard-working councillors up and down the country. They are masters of the politics of passing the buck. They try to say that it is the fault of Wigan and Bolton that services are reduced, that libraries are closing and that youth workers are being made redundant. How dare they? They like to paint a picture of profligate local authorities wasting taxpayers’ money, but that is not true of the councils in my constituency.
One of the senior officers in Bolton told me that he had worked in local government for 24 years and never known a year in which the council had not had to make savings of £3 million or £4 million from the main budget area. However, he went on to tell me that he had never seen anything like what is happening now. Bolton has already had to find cuts of £60 million to its budget since the election, and it will now have to find an extra £43 million over the next two years, out of a controllable budget of £178 million. Of course services will be affected; it would be ridiculous to suggest otherwise.
The Secretary of State has told us all to go and challenge our local authorities on the cuts, so I did. I took his list of 50 ways to save, and asked people on my council what they were going to do about it. Their response was illuminating. They asked me what on earth I thought they had been doing over the years. They also said that most of the changes would save only pennies, in comparison with the £43 million savings that they needed to find. As Members would expect, however, I did not accept that. I went through every one of the 50 suggestions with them. They said that they already share back-office services and, where possible, procurement and IT. They pointed out, however, that those things could not be achieved overnight because contracts came up for renewal at different times in neighbouring local authorities. They control spending, they have transparency and they take cheats to court. Their reserves are already committed. The Yorkshire Purchasing Organisation was set up 30 years ago to enable combined procurement. They collect 99% of the council tax due, which is a great achievement in the 36 most deprived areas.
I am sure that Bolton and Wigan councils will be really concerned, just as Tameside council is, that their collection of council tax will start to drop as a result of the council tax benefit changes.
My hon. Friend makes an important point. The changes are creating real concern among local authorities. They are wondering how on earth they are going to collect extra money from people who already have incredibly squeezed budgets.
I will continue with my list. The council has already closed all the cash offices except the central one. It shares buildings and is centralising its staff, who already hot-desk. The canteen breaks even. The council stopped using posh hotels and holding glitzy award ceremonies years ago. It opened a coffee shop in the library, but it did not work. It has got rid of more than half the senior posts in the authority. It considered sharing the chief exec post, but realised that that simply would not be feasible for a local authority the size of Bolton.
The people I spoke to laughed at the suggestion of a recruitment freeze, because they have not been recruiting for four years. Like my right hon. Friend Hilary Benn, they thought that getting rid of councillors’ pensions was a disgrace and that it would work against fulfilling the need for younger councillors, as well as the need for cabinet members to have real oversight of their departments. The council does not have consultants, and it uses agency staff only to cover the changes that it is being forced to make.
I declare an interest, in that when I was officially Hull’s most popular councillor, I did not take a pension. I was the only one on the council who would not take one. Is the hon. Lady saying that councillors should not make any savings at this time in the cycle? My councillors in North Lincolnshire took a cut in their expenses so that they could employ apprentices. Does she not think that councillors should lead by example?
I do not think the hon. Gentleman has been listening. I am saying that Bolton council is already looking at every one of the points on that list. On pensions, it is a disgrace to say that councillors should not be able to pay into the pension scheme—[Interruption.]
Order. We cannot have challenges about each other’s pensions at this stage—[Interruption.] Order. Mr Percy, you should know better. I am not worried about your pension; I have no interest in how much your pension is worth, and the House does not want to know either. We want to hear Julie Hilling.
Thank you, Mr Deputy Speaker.
The only time my council uses agency staff is when it is forced to do so because of the changes it has had to make. The people I spoke to pointed out that agency staff were often cheaper because they did not have pensions or sick pay, but we want local authority workers to have those things. The council does not send people on leadership courses, and it certainly does not waste money on head-hunters or adverts, because it has frozen all posts. Absenteeism is low, and it invests in physiotherapy to get injured employees back to work. It releases staff only for trade union duties; because of the scale of the changes that the Government have wrought, that is essential for effective consultation with staff. Of course, trade union reps are incredibly busy at this time.
The council does charge for check-off and has never employed a lobbyist. It does private advertising, including on roundabouts across the borough, and has service level agreements with the voluntary and community sector projects to which it gives money. It stopped free food and mineral water years ago, and now provides no tea or coffee at meetings, including all-day planning meetings. There is no first-class travel. Travel is paid at nationally agreed rates, but the top two bands have been cut. It uses videoconferencing when it can, but as the borough is compact there is no money to be saved on travel. It uses the voluntary sector and has had multifunctional printers for years. It does not produce glossy leaflets and makes questionnaires only when it consults on Government cuts.
The council sells the services that it has not already had to get rid of, and the town hall has been hired out for years. It may be able to lease a few more works of art if that makes financial sense, but it thinks that will bring in only a few pennies. It already leases out the Egyptology collection, which raises a lot of money. It saves money on computer software where it can, and asks staff for suggestions.
The Minister will, of course, have been listening very carefully and knows that I have missed two areas. Bolton council wanted me to ask how the Government think it can inform residents about changes to services if it does not communicate with them, and it finds the Secretary of State’s point about scrapping the “town hall Pravda”very insulting. In fact, the newspaper that the council produces four times a year is virtually self-funding.
The Secretary of State says that councillors can issue their own ward newsletter using party political funds—what nonsense. Anyone who has read a Lib Dem leaflet will know that it is not an organ for unbiased truth, and they and I fundamentally disagree with the Secretary of State’s proposal to stop translating documents into foreign languages. Would it not be wonderful if all our residents were fluent readers of English? In the real world, however, in which Labour Members live, people do not. What absolute nonsense to propose that translation undermines community cohesion. Translation enables all our citizens to play a full part in society and find out essential information. Without such information, there are higher costs to the state in terms of health and dealing with problems.
The Government are trying to put up a smoke screen and say that despite the most savage cuts ever known, local authorities do not need to cut services. Cutting more than £100 million from Bolton, the 36th most deprived local authority in the country, is wrong and will mean that my constituents suffer. The Government should hang their heads in shame.
As the Under-Secretary of State for Communities and Local Government, Brandon Lewis who opened the debate moved to the apotheosis of a speech that, sadly, was rather shot through with bombast and self-satisfaction, he delivered the stirring words that putting councils in charge of their own destiny was the centre point of this local government statement. In the time allowed I would like to look at one council—my own council in Blackpool—and see what it has done to put itself in charge of its own destiny and how it has been affected by the way the Government have dealt with it.
As a small unitary authority, Blackpool is entering a difficult situation and difficult narrative due to Government cuts over the past two years. According to the multiple deprivation index, it is the sixth most deprived council in the country, and in that respect resembles a number of other seaside and coastal towns that have pockets of severe deprivation—such as the Minister’s council in Great Yarmouth, for example. Most of those areas, including many in the north, were hit badly by the removal of area based grants, which, as we have heard, were famously defended by a former Minister because most must be cut from those who have received the most.
Blackpool does not benefit from any dedicated funding because of the level of transience, and there is no acknowledgement in its health funding of the extra burdens placed on services by visitor numbers. On the heat register, Blackpool will lose an average of £215 per person over four years, and £83 over two years. My council has had funding cuts of 19.2% for the past two years. It has lost £40 million over the past two years, with approximately £14 million of further cuts in 2013-14 and approximately £20 million more over the next two years. I noticed that the Minister waxed lyrical about profligate councils sitting around with big reserves, but Blackpool council’s current reserve stands at £4 million, out of a proposed net expenditure budget for 2013-14 of £150 million.
Like many other councils we have heard about this evening, Blackpool has done many of the things that Ministers have preached should be prudent for local government to do. It has worked on ways to cut waste in a major way and cut a whole level of senior officers. Sadly, it has had to lose hundreds of posts and hundreds of jobs over the last two years, with 300 posts proposed to go this year. Blackpool has also frozen the council tax, but—of course, the Minister did not tell us this—that is on the basis of a grant of only 1% this year as opposed to 2.5% for previous years. Despite all that, Blackpool council has gone ahead with progressive measures, including moving towards a living wage for its workers and free breakfast clubs, so it does not need to take any lessons from Ministers about that. The cash reduction in this year’s Government settlement is £3 million. The council tax freeze grant, to which I have referred, means a further loss of £1.5 million, with demographic pressures from children’s social care of £1.1 million.
Let me turn to the council tax changes and the basis on which they are taking place. As we heard from my right hon. Friend Hilary Benn, the shadow Secretary of State, millions of people in England on low incomes face rising council tax this year, including those who will now have to contribute to council tax who have previously been exempt. What will that figure of £410 million and a 10% cut in funding do for people in Blackpool? In Blackpool, it means a tax rise on a large number of people on low incomes. Like most seaside and coastal towns, we have people doing two or three part-time jobs, many of them women. We have larger than average numbers of older people and disabled people, which has specific implications for the amount that my council will now be forced to charge those who are not exempt, because this Government have decided that pensioners should be exempt from contributing to the council tax support scheme.
However, the more pensioners and older people an area has—it is a well known and established fact that large numbers of old people move into seaside and coastal towns—the higher the level of account that has to be placed on other people. Who are those other people? They are not the millionaires, who will receive a tax cut; they are people working hard on low incomes—carers, the disabled and single mums. They are people who are already being hit by the Government’s cuts in the uprating of benefits and working families tax credit. They are the people who will suffer and whom my council will not be able to protect from the depredations of this Government.
The Minister who opened this debate comes from a seaside town. He knows of some of these issues. Perhaps if he were to move away from the distorting mirror that he has had inserted in his little red ministerial box—
Well yours might be, but I am not sure about the Minister who opened this debate.
If the Minister got away from that distorting mirror and went back to his constituents in Great Yarmouth—to some of the houses in multiple occupation, the people living in bad private housing or some of those groups of his constituents who will be most affected—perhaps he would not come to this House with a speech so full of complacency and smugness.
I wonder whether the hon. Gentleman is talking about the same people who will now benefit from the £7 million transitional grant or the next £4 million to £5 million of efficiency grant that the council will get, following the cliff edge left by the last Labour Government, leaving them without that money.
I am interested that the Minister has turned to the transitional grant, because in percentage terms the average transitional grant will cover only a quarter of the original 10% cuts. It just so happens that my council in Blackpool will receive the lowest proportion of the transitional grant, so I am afraid the Minister will win no plaudits from Opposition Members or, I suspect, from many of his own constituents for the settlement he has imposed on them. The reality of this settlement is that it is unfair and unjust for some of the poorest people who are working hard as carers, part-time workers and single mums. Such people in Blackpool and many other places can ill afford to pay this money, and the Government should be ashamed of the incoherent and unequal settlement that they have put before the House.
This has been a very interesting debate, with some thoughtful and well informed contributions from my hon. Friends, and even from Members on the other side of the House, especially the hon. Member for North Cornwall (Dan
Rogerson). He made some sensible points about the needs of rural areas, and also managed to nip out to attend mass on Ash Wednesday.
I do not have time to go through all the contributions from my hon. Friends, but they have highlighted the unfair nature of this settlement, and how shambolic it has been. It arrived late, and different grants dribbled out at different times, making it very hard for local councils. The Government could not even get basic calculations right. They miscalculated spending power, because they double-counted. They came out with alternative notional amounts that would not only have meant some councils holding a referendum if they wanted to increase council tax by less than 2%, but some having to do so if they wanted to freeze it—and the Government lecture councils on efficiency.
There is no doubt that this is a very difficult settlement for local government. It is so difficult that even the Minister’s friends are starting to complain. Councillor Bob Banks from Wychavon council has said:
“The general thrust is that we’ve been given a lousy funding settlement by the Government which will affect us very badly.”
The Local Government Association, which is Conservative-controlled, estimates that the funding gap will be £16.5 billion by 2019. We have heard about the Secretary of State’s “Fifty ways to save”, but even he cannot think that sacking the chief executive and putting a coffee shop in the library will raise £16.5 billion.
We heard from the Minister—I think someone described his statement as rather bombastic—who said that the settlement was fair. A settlement that ensures that the 10 most deprived authorities in the country are taking spending cuts six times higher than the 10 least deprived is not fair by anyone’s estimation, however much the Government try to use smoke and mirrors to cover it up. That is indeed what they have done. First, they changed the base—the 2012-13 funding base—by including in it cuts that do not start until the next financial year, including cuts to council tax support, to early intervention grants, and to grants for preventing homelessness. Then they added in the public health grant, but that is not only ring-fenced, it is a grant for new burdens on local authorities, so it cannot be used to calculate year-on-year changes.
The reason for those changes is very simple: they want to make it look as though the cuts in spending power are less than they are. But we know what they are. There is a 33% cut in funding for local authorities over the spending review cycle. For some authorities, of course, it is much worse. The Secretary of State has taken to giving out spending power cuts per dwelling now, rather than per person, but even on the Government’s own figures the unfairness is clear. Over the next two years, Knowsley will lose £206 per dwelling, Surrey will lose £14, Camden will lose £200, Wokingham—our favourite council—will lose £43, Liverpool will lose £184, and Windsor and Maidenhead will lose £46. At least we can grant the Tories the merit of being consistent: they always take money from the poorest people, whether it be through a bedroom tax for the very poorest and a tax cut for millionaires or attacking the poorest local authorities in the country. We can rely on them to be consistent.
Perhaps it is not quite the same for the Liberal Democrats, whose leader said in the local elections last year:
“We stand for the whole country not just parts of it”.
Well, if he looks at the heat maps for where the cuts fall, I doubt whether he would say that in the north-east, in the north-west, in inner London boroughs or in our big cities—even in what he used to call “my city of Sheffield”. His city of Sheffield is taking a £50 million cut on top of the £140 million it has already taken. Of course, it will not affect him, because he does not live there.
Then we have the smoke and mirrors applying to the rest of the grant. We have heard about the new homes bonus. In fact, the money for that bonus is taken out of the formula funding by a straight percentage cut, but its distribution is related to council tax bands, which means that local authorities with a higher tax base gain more than those with a lower tax base. That is why Newcastle will lose £6.4 million and get back £3 million; and why Knowsley gets only 15p for every pound it is top-sliced. “To them that hath shall be given” seems to be the mantra of this Government. That is why in this settlement, the relative needs block has been cut by over £500 million. It is because this Government are not interested in funding for need.
The same is true if we look at the early intervention grant. Money in the settlement has been top-sliced supposedly to account for nursery places in schools for two-year-olds. In the autumn statement of 2011, however, the Chancellor promised that that would be new money. It is not new money; it is money taken from some of the most deprived children in the most deprived areas of this country. By the end of next year, the funding gap will be £488 million—and it will go on rising. I do not know how any Liberal Democrat who has trumpeted the need for support for the poorest children can possibly vote for such a settlement.
Let us look at the other part of the settlement—the localisation of business rates. The Government have determined local councils’ allocation based on a two-year average, but their own consultation recommended a five-year average. The reason is very simple: it was to reflect appeals over a full cycle. Now under great pressure, they have put money back in for appeals, but it is nowhere near the costs that local councils will face. What will happen when the appeals come in? Councils will have no choice but to cut services yet again to fund backdated appeals.
The Government have, of course, come up with a figure by which they expect business rates to grow. No one knows quite how they have reached that figure. I think that they have probably plucked it out of the air. The Office for Budget Responsibility has been wrong in every estimate it has made of business rate income since it was set up. It has always overestimated it. So, local authorities are then told to grow their business rates. They must bring in more jobs and businesses, but they are facing a flatlining economy and a double-dip recession. The Government have no plan for growth, yet they lecture local authorities on promoting it. It is like King Herod lecturing people on child care. What is more, they make it more difficult for the poorest economies because of the amount of money they are taking out of them.
Let us consider the reductions in council tax benefit funding. Birmingham alone will lose at least £10 million. Newham will lose £3 million, and Gateshead £2.9 million. Only a fraction of that will be returned in transition grants. Then there are the benefit cuts. Liverpool will lose £7.3 million per annum in bedroom tax alone, and
Knowsley will lose £3.4 million. Newcastle estimates that the incomes of 27,000 families will be cut as a result of the Government’s tax and benefit changes. That money would otherwise be spent in local shops and businesses, funding the local economy. The Government take money away from the local economies that are struggling most, and then lecture authorities on how to grow those economies.
I am sorry, but I must end my speech in a minute.
Nothing could better illustrate the doublethink that prevails in the Department, and that is why we will vote against this settlement tonight. It is unfair. It takes money that they need from the local economies that are struggling most. It does not help them to grow, because it is economically illiterate, divisive and ill-conceived. I urge my hon. Friends to join me in voting against it.
I agree with two things that were said by Helen Jones. First, I agree that we do not have an opportunity to respond to all the contributions that have been made. If I do not manage to answer all the questions that have been raised, I will write to those who asked them, if that is possible. Secondly, I agree that this has been a passionate and largely well informed debate, which has demonstrated the existence of genuine interest in, and support for, the work done by all our local councils.
I fear, however, that the hon. Lady tended to be somewhat selective in her use of data. For example, she expressed concern about the education of less well-off pupils. What she failed to mention was that outside the local government funding settlement, the Government are providing significant additional funds through the pupil premium, and that the current amount will rise to £2.5 billion.
No; others may wish to intervene.
I suggest that the hon. Lady is wrong in her analysis. I genuinely believe that the settlement is fair, but I also believe that it represents a watershed moment for local government. We have made clear that it arms authorities with an average spending power of £2,216 per dwelling with which to protect services. We have also acknowledged that that is a reduction—a reduction in spending power of, on average, 1.3%. Diana Johnson questioned which figures we should use. We are using the spending power figure because it is the figure that the Local Government Association asked us to use.
Concerns that the poorest councils would suffer disproportionately as a result of the settlement are simply wide of the mark. Hackney, for example, receives £1,700 more spending power per household than Windsor and Maidenhead.
No, I will not.
“Deprived areas in the north…the Midlands and inner London…still receive more government funding per resident than less deprived areas.”
I know that many in local government have shown great skill in reducing budgets. Committed local authorities have protected front-line services, and it is to the credit of councillors throughout the country that satisfaction with their services has risen, as is shown by a recent LGA survey. Some 72% of people polled were very or fairly satisfied with the way their council was being run. That is a tribute to the many town halls up and down the country that are working hard on behalf of their local people, and it shows what determination and innovation can accomplish in trying times.
My hon. Friend Annette Brooke made an excellent and thoughtful speech, and I join her in praising those councils. Those are the qualities councils will need in the months to come, because we all acknowledge that there are big hurdles ahead. It will be a challenging time. That is why today we have announced an additional fund of £9.2 million—the challenge award—to help those councils who wish to be even more innovative.
There will always be some who make cynical, politically motivated cuts to services rather than look to alternative approaches. Newcastle council announced it will slash its arts budget by 100% and shut down a swimming pool, yet neighbouring Gateshead—also Labour-run—and nearby Lid Dem-run Northumberland are both facing bigger percentage cuts but are not doing anything so draconian. Let us be clear, therefore: anyone who sacks a member of staff or shuts down a public service for political purposes is a disgrace to politics and a disgrace to Britain.
The truth is that the majority of authorities are doing their best in challenging circumstances. Portsmouth council, for instance, has invested £4.5 million over the past two years in adult social care, while keeping libraries, play centres, youth centres and museums open, and it has also played a key role in building more affordable homes. I note in passing that in the last two years every Liberal Democrat-controlled council has frozen its council tax, because helping council tax payers, whose council tax rocketed under Labour, is crucial.
I will not give way now.
Not only are this Government helping people by reducing their income tax; we are also helping them by keeping their council tax down. Interestingly, the shadow Secretary of State did not mention that issue. As my hon. Friend Robert Neill said, the right hon. Gentleman’s speech was full of huff and puff and dated thinking. It was the same old mantra from Labour: nothing about protecting council tax payers from the huge rises they suffered under the Labour Government; nothing about finding more efficient and effective ways of delivering services, as many authorities are now doing; and nothing about the real opportunities provided by the business rate retention scheme. Helping local economies to grow means more money will flow into the local council.
The shadow Secretary of State asked a number of questions. He asked why the business rate baseline had been based on two years, not the five years we originally proposed. The answer is simple: we consulted and that is what the Local Government Association asked us to do. He asked what we are doing to help councils with the potential impact of business rate appeals. Again, we listened to local government, and then agreed that the costs could be spread not over one year, but now over five years, and we reduced by 8% the anticipated income and we have introduced a safety net for those whose income falls below 7.5%.
I was surprised that the shadow Secretary of State again attacked what he called the bedroom tax and failed to mention that the same approach was adopted for 13 years by the Labour Government. [Interruption.] He failed to mention that 390,000 households—[Interruption.]
Order. We must have a little more order. It is very hard to hear the Minister, and it is important that all Members can listen to what the Minister has to say.
My point is that the shadow Secretary of State failed to mention that 390,000 households have two or more spare bedrooms, while 278,000 households are overcrowded. However, I will give him some credit for getting up to date in one area. Last September, he came out in support of Manchester council spending nearly half a million pounds on a single Alicia Keys concert, so he is at least ahead of the Secretary of State in that he knows who Alicia Keys is, and I give him credit for that.
The Government have already done much to help local councils by giving them increased freedoms to help them meet the needs of council tax payers. In Monday’s debate, Chris Williamson said that
“Labour’s policy is to give a fair deal, a new deal, for local government and to allow local government on the ground to determine the shape of local government, rather than it being imposed from the top.”—[Hansard, 11 February 2013; Vol. 558, c. 676.]
That certainly was not the policy of the Labour party when it was in power. Central Government’s stranglehold over local government got ever tighter then, but perhaps he is right and Labour has seen the error of its centralising ways. While the Opposition debate a new approach, we are delivering a new approach. We have already provided greater borrowing flexibilities, a general power of competence, the removal of numerous ring fences, and increased flexibilities in the decision-making process.
I am happy to do so, and I congratulate my hon. Friend on his lobbying campaign. The Under-Secretary of State for Communities and Local Government, my hon. Friend Brandon Lewis has given a clear answer to him, to my hon. Friends the Members for North Devon (Sir Nick Harvey) and for North Cornwall (Dan Rogerson), and to others: we are a listening Government, the Under-Secretary’s door is open and he will continue to listen.
The key change that has occurred in this budget which has almost totally been ignored is the one to allow local councils to retain a key proportion of business rate, giving them the real opportunity, for the first time, that if they work with the local business community to help get growth in that community, they will get a real-terms reward. This is a fair settlement and it is a settlement about opportunity. We are talking about opportunity through the new homes bonus, through the business rate retention scheme and now through our new challenge fund. We believe that the majority of local councils are up to the challenge, and those who take on that challenge will have our full support.
Question accordingly agreed to.
That the Local Government Finance Report (England) 2013-14 (HC 948), which was laid before this House on
More than three hours having elapsed since the commencement of proceedings on the first motion, the proceedings were interrupted (Order,
Mr Speaker put forthwith the Questions necessary for the disposal of the business to be concluded at that time (Order, 6 February).
That the Referendums Relating to Council Tax Increases (Alternative Notional Amounts) Report (England) 2013-14 (HC 928), which was laid before this House on
That the Referendums Relating to Council Tax Increases (Principles) Report (England) 2013-14, which was laid before this House on