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Local Government Finance Settlement — Motion to Take Note

Part of the debate – in the House of Lords at 3:16 pm on 9th January 2014.

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Photo of Lord Beecham Lord Beecham Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Justice) 3:16 pm, 9th January 2014

My Lords, I refer to my local government interests in the register.

For the past 47 years I have been a councillor for a ward that is among the 10 most deprived wards in the country. Its spiritual needs are in part met by the daughter of the right reverend Prelate, who is the vicar of St James’s church in that ward. Life expectancy is 10 years less in that ward than in the ward in which I live. The unemployment percentage is in double figures. Most of our primary school children in the ward are entitled to free school meals and the schools operate a breakfast club. We have one food bank in the ward and another within a quarter of a mile of it. Hundreds of residents have been hit by the bedroom tax and the changes to council tax support, which can take just under £4 a week from people on JSA of only £71 a week but also affect many people on low wages. Rent and council tax arrears are mounting and evictions may follow, although the council is doing all it can to help avoid them. Non-statutory youth provision is being cut, play centres are closing and another voluntary centre is under threat. The future of our successful Sure Start centre may be in doubt after 2015. Maintenance of open spaces is under severe pressure. The city’s citizens advice bureaux, its law centre and other agencies are overwhelmed with people seeking help over financial and legal issues and are themselves facing grant and income reductions.

Before the general election, the Guardian published a letter from me—it has published a few since—in reply to an article which dismissed the achievements of the Labour Government. Whatever failings that Government, like all Governments, may have had, I could identify many ways in which my constituents had benefited, from massive investment in decent homes, to school and hospital building, the minimum wage, Sure Start and concessionary travel. I ended the letter by saying that I trembled for their future if the Conservatives won the election. Those fears have been amply justified—and more—by the past three and a half years of rule by the Conservatives and their Liberal Democrat accomplices.

However, what is particularly galling is the brazen effrontery of the Secretary of State, who is in complete denial about the havoc that is being wrought throughout much of local government. This was the Minister who was first across the Chancellor’s door in 2010 to offer up local government as a sacrifice on the altar of government cuts—Salome to George Osborne’s Herod, although fortunately we were spared the preliminary dance of the seven veils.

Newcastle, like many other urban councils with high levels of deprivation, faces cuts of 40%—£108 million a year on what was a budget of £260 million. As a result of cuts in the grant and a failure to reflect rising costs and demands of the kind mentioned by my noble friend Lord Smith—whose masterly opening of this debate I applaud— especially in the fields of safeguarding children, adult social care and concessionary travel, core funding is to be cut by 25% over the next two years. The nearby authority of Durham, not the most affluent part of the country, faces cuts of £110 million a year by 2016-17, on top of the £114 million a year it has already suffered.

The story is repeated up and down the country, especially, as my noble friend pointed out, in authorities with a Labour council. Even the Conservative leadership of the LGA has been compelled to warn of the impending collapse of local government by 2020 beyond the delivery—albeit even then in attenuated form—of statutory services.

Ministers are content to rely on selected and misleading statistics to pretend, Candide-like, that all is for the best, albeit in what is perhaps not the best of all possible worlds. However, as Rob Whiteman, chief executive of the Chartered Institute of Public Finance and Accountancy, pointed out, the much delayed announcement, unusually made by virtue of a Written Statement of the settlement, was, as my noble friend pointed out, stronger on spin and misleading presentation than the technically sound explanation that councils and the public would expect.

Here it becomes necessary to delve into the arcane world of local government finance. The territory bears an uncanny resemblance to the Schleswig-Holstein question of the 19th century which, it will be recalled, was understood by three people: Bismarck, one who was mad, and another who was dead.

Thus the much vaunted new homes bonus costs a significant number of authorities , including Newcastle, more than they receive because, like the council tax freeze grant, it is effectively top-sliced out of money that should have come to councils anyway. It is a classic example of the three-card trick. In similar vein, the Government make much of spending power, carefully ignoring that this does not include a range of specific grants, many of which have been mentioned, such as the education services grant and the housing benefit administration grant, but crucially does include pooled budgets of the NHS and the better care fund, much of which will be spent not by councils but by the continuing NHS bodies, be they clinical commissioning groups or others.

The trick of the Government is to talk about spending power, not spending need—hence the ludicrous comparison, to which Ministers are addicted, between Newcastle and councils in the distressed areas of Berkshire, Wokingham, and Windsor and Maidenhead. Thus Newcastle’s children’s social costs are three times that of the latter—£226 per head higher in relation to population. Adult care costs are £206 per head higher. Homelessness and welfare is £82 per head higher and concessionary travel £59 per head higher. There is no comparison between Windsor and Maidenhead and Newcastle in terms of need and deprivation.

Unemployment is four times higher in Newcastle than in Windsor and Maidenhead. No wonder Rob Whiteman said:

“When Government ministers compare such different councils as affluent Windsor and metropolitan Newcastle in an attempt to justify the ‘fairness’ of the settlement it only serves to highlight how out of touch this process has become”.

Thus the alleged greater spending power of Newcastle, touted by Ministers, is illusory—but in time, under this settlement, even Windsor’s spending power will exceed Newcastle’s, and that of local authorities like us. Of course, there are many more victims of this cynical and callous approach. It is not a matter simply of the north-south divide. The pernicious impact of this persistent drift from needs-based distribution will be felt—is being felt—in inner London boroughs and coastal towns, as well as the towns and cities of the Midlands, the north and parts of the south-west.

Without consultation, the Government have cut, and will continue to cut, the grant for resource equalisation, designed precisely to compensate those councils with a lower council tax base, including those with large numbers of students who are exempt from tax. This will be cut by 36% over the next three years, with a huge impact on the distribution of grant, by definition hitting hardest those areas with higher numbers of lower-banded properties. Newcastle, for example, has 57% in band A—the lowest band. Windsor has just 3%. We should remember that many of those in that band who would have received council tax support will now be paying 20% or more of the local council tax, which previously would have been covered by council tax support.

Interestingly, many of the worst-affected councils under this and future settlements are those with high numbers of BME residents, such as Newham with 71% and Birmingham with 42% of the population. There appears to be no evidence that an equalities impact assessment has been made in this respect. I invite the Minister to comment on what might well be a matter for judicial review, because equality obligations appear to have been ignored. The whole way in which the Government have manipulated the system while giving airy assurances about its supposed fairness makes the American fraudster Bernie Madoff look like the Governor of the Bank of England.

During my 17 and a half years as leader of the city council, I thought I had times of great difficulty, as the city faced penalties, rate capping and the depression of the 1980s. Some of that was under the aegis of the noble Lord, Lord King, with whom I must say a civilised relationship is always possible. They were nothing like as bad as the problems facing today’s council, or the people of our city and others. If I am re-elected in May, I hope to notch up my half-century as a councillor in 2017. I can only hope and pray that by then we will have a Government who treats local government as an essential partner in the economic and social life of the country and ensures that it is supported by adequate and fairly distributed resources. If not, I will not be the only one to tremble at the consequences for our communities, our youngsters, our elderly, our economy and our environment.