Local Authority Finance

Oral Answers to Questions — Communities and Local Government – in the House of Commons at 2:30 pm on 15th December 2014.

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Photo of John Pugh John Pugh Liberal Democrat, Southport 2:30 pm, 15th December 2014

What assessment he has made of the recommendations of the report by the National Audit Office entitled, “Financial Sustainability of Local Authorities 2014”, published in November 2014, HC 783.

Photo of Luciana Berger Luciana Berger Shadow Minister (Public Health)

What assessment he has made of the implications for his policies of the report published by the National Audit Office entitled, “Financial Sustainability of Local Authorities 2014”, published in November 2014, HC 783; and if he will make a statement.

Photo of Clive Betts Clive Betts Chair, Housing, Communities and Local Government Committee

What assessment he has made of the implications for his policies of the report published by the National Audit Office entitled, “Financial Sustainability of Local Authorities 2014”, published in November 2014, HC 783; and if he will make a statement.

Photo of Steve Reed Steve Reed Shadow Minister (Home Affairs)

What assessment he has made of the implications for his policies of the report published by the National Audit Office entitled, “Financial Sustainability of Local Authorities 2014”, published in November 2014, HC 783; and if he will make a statement.

Photo of Kris Hopkins Kris Hopkins The Parliamentary Under-Secretary of State for Communities and Local Government

Every part of the public sector needs to do its bit to pay off the deficit left by the last Labour Government, including local government, which accounts for a quarter of all public spending. The National Audit Office report recognises that local authorities as a whole have coped well with spending reductions, with many increasing their financial reserves. The Government will continue to support local councils to transform local services, cut waste, tackle fraud and achieve better outcomes for local people.

Photo of John Pugh John Pugh Liberal Democrat, Southport

I admire the Minister’s calm, but the report says that half the local authority auditors, never mind the politicians, have grave concerns. Given that, and given that Labour itself wants to take £500 million out of local authority finance, is it not time for a wholesale review of local authority finance?

Photo of Kris Hopkins Kris Hopkins The Parliamentary Under-Secretary of State for Communities and Local Government

The record shows that the vast majority of people believe that local authorities offer a good service, and local authorities have achieved significant outcomes despite the reductions. Furthermore, the Government have prioritised the ability of local authorities to grow their budgets by developing local businesses, which has brought in significant money to those establishments—£11 billion has been retained in business rates alone.

Photo of Luciana Berger Luciana Berger Shadow Minister (Public Health)

The NAO found that the Minister’s Department did not understand the impact of its cuts on local authority services. By 2017, Liverpool council will have had its budget cut by 58%, which is 20% more than the national average, and it has reserves of only £39 million—down from £125 million—so what is his assessment of the impact of his Department’s cuts on the city of Liverpool?

Photo of Kris Hopkins Kris Hopkins The Parliamentary Under-Secretary of State for Communities and Local Government

The councils facing the most demands are receiving the most money and will continue to do so. It is exceptional that a great city such as Liverpool is standing up and recognising its potential and how it can get itself out of the financial difficulties it faces. The fact that it is confident about its city deal, which will result in 15,000 jobs and 16,000 houses, as a consequence of its leadership, and the fact that it is growing its business base and drawing down significant amounts of money to support local businesses, demonstrates that the community understands the direction to go in, even if the hon. Lady does not.

Photo of Clive Betts Clive Betts Chair, Housing, Communities and Local Government Committee

Given that this is a report by the independent NAO, should the Minister not be at least a little concerned about some of its findings? It states:

“The Department has a limited understanding of the financial sustainability of local authorities and the extent to which they may be at risk of financial failure” and

“does not monitor the impact of funding reductions on services in a coordinated way.”

Is that not a damning indictment? If the Government continue with these policies, some councils will get into serious financial difficulties, and they will get there with the Government apparently unaware and seemingly uninterested.

Photo of Kris Hopkins Kris Hopkins The Parliamentary Under-Secretary of State for Communities and Local Government

No local authority has not been able to secure its budget, and each year, as dramas and challenges have arisen, they have faced them and dealt with them. Furthermore, we should not forget that about £2.1 billion is lost to error or fraud and that, despite the challenges, local authorities have managed to grow their reserve base to £21.2 billion.

Photo of Steve Reed Steve Reed Shadow Minister (Home Affairs)

A transformation of services is fundamental to delivering savings on the scale required, but the NAO report states that the

“The Department has not…estimated the capacity of local authorities to carry out widespread service transformation. Nor has it estimated…the level of savings such projects could realistically make, how long this would take, or the potential impact on service users.”

Why did the Minister not ensure that this vital work was carried out?

Photo of Kris Hopkins Kris Hopkins The Parliamentary Under-Secretary of State for Communities and Local Government

The money we put forward to support transformation in councils has been welcomed right across the country—in fact, more councils have applied than we have money for—and, as for outcomes, for every £1 put in, £10 is saved. We know what we are doing, and local authorities are leading the way in driving these savings.

Photo of David Nuttall David Nuttall Conservative, Bury North

It is now two years since the Department published its guidance, entitled “50 ways to save”, on how local government could make savings. Does the Minister have any plans to issue a second edition of this booklet, taking into account all the new ways in which councils, particularly Conservative councils, have come up with to save money since the first edition was issued?

Photo of Kris Hopkins Kris Hopkins The Parliamentary Under-Secretary of State for Communities and Local Government

That is a pertinent question, and a new booklet has just been published that demonstrates how Conservative councils are leading the way in saving money and driving up services. I will make sure that my hon. Friend gets a copy.

Photo of Tony Baldry Tony Baldry The Second Church Estates Commissioner

In every one of the four years in which I was a Minister at the Department for the Environment, we were told by the Opposition that our local government spending settlement would lead to the end of civilisation as we know it. Somehow local government continued and civilisation continued. Does my hon. Friend think that if local government manages better and cuts waste, it should be able to deal with an average 2.9% reduction in spending in 2014-15 without any serious hit on services?

Photo of Kris Hopkins Kris Hopkins The Parliamentary Under-Secretary of State for Communities and Local Government

My right hon. Friend is right. Businesses out there face these reductions and challenges all the time, and local authorities have risen to the challenge and are delivering good services, which are rated highly by the public—despite the challenges out there. We have faced difficult circumstances as a consequence of the previous Labour Government who drove the economy into the ground. Local government is responding to the challenge of addressing those needs.

Photo of Andy Sawford Andy Sawford Shadow Minister (Communities and Local Government)

The Minister’s shockingly complacent response today underlines the NAO’s findings that the Department has

“a limited understanding of the financial sustainability of local authorities and the extent to which they may be at risk of financial failure…does not monitor the impact of funding reductions on services in a coordinated way”— and, even worse—that the Department’s approach “obscures” the “substantial differences between authorities”. Does the Minister have a clue about the real impact of his massive cuts to local government?

Photo of Kris Hopkins Kris Hopkins The Parliamentary Under-Secretary of State for Communities and Local Government

I think there was a question in there. We understand that there are huge challenges facing local authorities, but it is local auditors and local councils that are making the choices about priorities at this time, addressing the needs of the vulnerable people who need to be helped. I am confident that local authorities will continue to deliver high-quality services, despite the fact that resources are currently limited.

Photo of Andy Sawford Andy Sawford Shadow Minister (Communities and Local Government)

The truth, as this damning report by the NAO shows, is that the Government do not know and do not care about the impact of the cuts on the ground. Across the country, street lights have been turned off, bus services cut, lollipop patrols stopped, children’s centres closed and care services withdrawn. Will the Minister come clean and admit that this is just the start of what it really means to take Britain back to the 1930s?

Photo of Kris Hopkins Kris Hopkins The Parliamentary Under-Secretary of State for Communities and Local Government

This House knows, I know and councils out there know that the reason why we have had to make the difficult decisions to make sure this country lives within its means is a direct consequence of Labour’s incompetence and economic illiteracy.