Communities and Local Government (CSR)
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Mr Clive Betts (Sheffield South East) (Lab)
It is a pleasure to serve under your chairmanship, Mr Robertson. I am introducing the debate as the Chairman of the Communities and Local Government Committee, and I shall draw heavily on the evidence session that the Select Committee had with the Secretary of State; the Minister of State, the right hon. Member for Tunbridge Wells (Greg Clark); and the Minister for Housing and Local Government on 21 December 2010. I shall try to do so objectively, and I am sure that other members of the Select Committee who are here will do the same. However, we all have to wear our political hats as well, so my interpretation might be slightly different from that of some of my colleagues.
Other members of the Select Committee, particularly from the Labour side, wished to be here, but I am sure we are all aware that two of them have constituencies adjacent to one where a by-election is taking place today. I do not know whether the rumours are true, but perhaps the major Government party has not been quite as enthusiastic about fighting the by-election as some other parties have been.
I thought for an awful minute that the Minister might be late. I thought that he might have been detained in last-minute urgent discussions with the Treasury, and that he would come here and announce a little bit of improvement on the settlement. We would have had even more to discuss in terms of helping local government through what will be a difficult period.
I do not want to get bogged down in the Government’s overall policy on deficit reduction. The Secretary of State mentioned it in the evidence session, and said that everything had to be seen in that context, which was a fair point to make. I might make a different point about the depth of the attempts at deficit reduction and the speed at which the Government are going about it, but that is not our job here today; it is to look at the impact on local government and local services.
Nevertheless, it has to be said that if the impact of the scale and speed of deficit reduction is that the economy stalls and unemployment rises, it could lead to increased repossessions, increased rent arrears, pressure on housing services and housing and benefits advice, increased social tensions in communities, and an increase in crime. All those, of course, have an impact on local government: they increase the demand for local government services and increase the need to spend money at local government level and to switch it away from other important and essential services that local government carries out. I shall say no more about that.
Yes, all right, the Government have embarked on a significant deficit reduction programme which means, in effect, cuts to public expenditure. The average cut among Whitehall Departments will be 19% over the four years. I shall raise several matters which I hope the Minister can come back on. The first is that we have not had an explanation as to why the Department for Communities and Local Government seems to have been ready to offer itself up for the largest cut of all. The central Department’s spending will go down by 68% in real terms over the four-year period.
The Government are saying that that is all right because many of the functions that the Department carries out will be passed down to local authorities—the brand of localism is at the heart of what they are saying. On the other hand, the Localism Bill, which will come to the Floor of the House on Monday, includes a great deal of work for the Department at the centre to do. It provides some 150 order-making powers that Ministers and civil servants will be involved in administering. I have concerns about the effectiveness of future work in the Department, given the scale of the cuts.
George Hollingbery (Meon Valley) (Con)
As a matter of correction, I seem to recall from the evidence that the Secretary of State offered that the headline figure for the cuts in the central Department was 68%, but that if one took account of large amounts of direct spending that will be transferred from the Department to local government—not just administration but actual spending—the reduction is actually 33%, exactly equivalent to the Treasury cuts.
Mr Betts
That is still a big figure. It might be helpful to take this a stage further. Perhaps we could have at some point a note from Ministers to identify precisely where the difference between the 33% and the 68% actually goes in being passed down, because local authorities have not been claiming that they are seeing the benefit of an extra 35% in their budgets.
Paul Farrelly (Newcastle-under-Lyme) (Lab)
Before my hon. Friend gets to the substance of his remarks, would he agree that cuts in themselves are one issue, but that there is a separate issue about fairness in how they are applied? It seems from the headline figures that areas in the most need are suffering disproportionately from the cuts, while areas that one might refer to as leafy boroughs and counties are getting away with small cuts.
Mr Betts
I agree with that. I believe there are statistics to prove it, although other Members might come to a different conclusion when looking at the same statistics. We had a discussion with Ministers about that in our evidence session. I shall come on to that specific point, which is an important one.
Moving on from the spending for the Department at the centre to local government budgets, there will be a 28% reduction in Government grant over the four-year period. I believe that that figure is agreed; I do not think that anyone denies it. Why is local government taking a hit that is much larger than the average reduction in Government spending as a whole? There is a slight feeling that it is because it is easier to give the problem to someone else to deal with rather than dealing with it oneself. Pass it on to local government: it will deal with the difficult job and someone else might be blamed.
Mr Stewart Jackson (Peterborough) (Con)
I hear what the hon. Gentleman says. However, given that the right hon. Member for Edinburgh South West (Mr Darling) committed to 20% revenue reductions before the election, and that, as I understand it, the policy of the Opposition is not to ring-fence any particular Government Department, it is clear that local government would have had to take substantial reductions if Labour had been re-elected. The difference is that the reductions have never been quantified by the hon. Member for Sheffield South East (Mr Betts) or any of his colleagues.
Mr Betts
I said at the beginning that I do not want to get into a long debate about the overall nature of deficit reduction, apart from saying that the Labour party has a different view about the scale—reducing the deficit by half, not totally eliminating it, over the four-year period—and the pace, which would not have been as great. We would not have started the cuts in this financial year, before the economy had properly started growing. There are differences.
However, I come back to the point that, whatever the average level of cuts across Government, there still has to be a justification as to why spending on local government—the money passed on by central Government to local government—is taking a hit that is much bigger than the average for all Departments. Why is that happening, particularly when local government has a good track record in making efficiency savings? If one looks at government as a whole, it was local government that led the way, even under the previous Government: 2% year-on-year efficiency savings were built into its budgets.
If one looks at the impact of government services as a whole, the services that are provided by local government are some of the most immediate to our constituents. They include services to the disadvantaged and those in need: social services care provision, aids and adaptations. They are about the quality of life: things such as parks, libraries and sports centres. They are about essential provision for daily life from which everyone benefits, whether it be refuse collection, street cleaning, highway maintenance, street lights—the kinds of things that everyone benefits from in terms of the taxes that they pay and the services that they get. Why put those immediate services for most of our constituents at more risk than the average in terms of cuts of Government spending as a whole? The Government must answer that question.
The Parliamentary Under-Secretary of State for Communities and Local Government (Robert Neill)
In fact, the figures show that revenue support for local authorities reduces by 26%, and that happens to coincide with the percentage of public sector spend that local government takes. However, the independent Office for Budget Responsibility has made it clear that because local authorities have forms of income other than the central Government grant—council tax, for example—the actual reduction in spending power is 14%, which is considerably less than that of central Government Departments.
Mr Betts
I accept what the Minister says about the different ways in which figures have been presented, and I shall come to that in a second. I am not going to complain about or disagree with how that was done, because it is important to look at spending power, but I come back to the point that I made. If central Government are looking to cut their spending, why have they cut the resources that they pass on to local government by more than the average cut in central Government spending as a whole? That seems a reasonable question, irrespective of the issue of local authorities’ spending power.
The second issue is: why have spending reductions been so front-loaded? Local government has rightly complained about that. There is no doubt at all that there is front-loading: of the 28%, 10% is in the first year and 8% in the second. Local authorities, not just the councillors but the officials, say that the immediacy of the actions they have to take means that decisions will be less well made and there will almost certainly be less opportunity for the transformation of service delivery, which we all agree can make savings without the need for service cuts. It also means that local authorities will be pushed back into the salami-slicing approach, which Ministers say they do not want. I am not making a party political point. Authorities of all political persuasions—Conservative, Liberal Democrat and Labour councillors in the Local Government Association—will all say the same thing: that the pressure of front-loading will lead to a less effective and less efficient use of the available resources.
The front-loading will also mean that authorities have less chance to use natural wastage to save money, and will be forced, to a greater extent, into making compulsory redundancies, which are expensive; the money used to pay people to leave and to enable cuts to be made, could have been used to provide service delivery. We know there is an argument there. In the evidence session, the Secretary of State said he thought that the LGA figure of 140,000 job losses in the next year was wrong, but we never quite got from him what the right figure was. Nevertheless, there will be significant job losses.
The Government believe that £200 million of capitalisation will be sufficient to cover redundancy costs; the LGA says £2 billion. Even if the figure is somewhere in between, local authorities will struggle if redundancy costs are of that scale, because getting rid of people in the first year might not make savings and might actually become a cost. The offer that I think the Secretary of State made, that if he had to provide another £1 billion of capitalisation he would cut the revenue grant by a further £600 million, does not seem to be the best offer that local government has ever had from central Government on such matters. Indeed, I think the rather angry response to the evidence that the Committee received from Baroness Eaton on behalf of the LGA has been circulated. In it she states that her recollection of the discussions with the Secretary of State on capitalisation was slightly different to that of which he had informed the Select Committee. She could not understand why, if local government had to make necessary redundancies and wanted to capitalise that cost further, it would be penalised by the Government’s reducing the revenue grant. It would be helpful to have some comments from the Minister, bearing in mind the LGA’s response.
There is a very big issue here of the speed of the cuts and their front-loading, and the effect of that on local authorities’ ability to digest the cuts into their systems and make sense out of them, as opposed to having to salami-slice at least an element of the cuts and having to pay quite a bit of money out for redundancy costs that would otherwise not have been necessary.
I shall now respond to the Minister’s point about how the announcement was phrased. The Secretary of State obviously tries to get the figures down in his announcements, and I happen to agree that looking at spending power rather than at simply grant allocation is the proper approach. We still should look at the grant that central Government give as opposed to what they are doing to cut spending elsewhere in central Government, but it does matter in the end how much local authorities have to spend. When we look at the figures, however, we see a difference between the 8.9% maximum reduction in spending power that any authority has to face and the 0.1% increase that Dorset has managed to receive.
As my hon. Friend the Member for Newcastle-under-Lyme (Paul Farrelly) mentioned, there is a significant difference in the level of cuts and the reductions in spending power between the most and least deprived authorities. The figures that came out of the Library from the Scrutiny Unit show that the 10% most deprived single unitary authorities lost 8.4% of spending power and the least deprived 10% lost 2.2%. That is a significant difference. We have had a discussion about the Scrutiny Unit’s figures, and those figures clearly show a correlation between authority deprivation levels and how much spending would be cut. I do not think it is fair, but I accept, to a degree, that it is more difficult to protect authorities that have large grants because they are deprived, when grant cuts happen. I accept that the Government have done something, at least at the beginning of the process, with the £85 million transitional money to mitigate the problem, but whether that money will be available later in the spending round remains to be seen.
Mr Stewart Jackson
Surely, the hon. Gentleman misses a number of points. One is that he is not looking holistically at the cumulative picture over the past number of years of the grant settlement between local authorities in the south-east of England and those in the north-west and the north-east. Frankly, his Government, when in power, had the opportunity to deal with those issues through, for instance, working neighbourhoods funding, and only very belatedly disaggregated that into super-output areas to tackle the worst cases. They had that opportunity to tackle the underlying problems of social deprivation, but failed to do so.
Mr Betts
I do not agree. We can always have discussions and disagreements about the extent to which grant allocations are fair, and I do not think there has ever been a grant allocation about which some Member has not stood up in the Chamber and complained, saying that their area gets a raw deal. That will always be the case, no matter where we get to. What tended to happen during the spending settlements of the Labour Government was that it was Conservative Members from the leafy shires who tended to get up and complain that they were getting a raw deal and that Labour was doing too much to help deprived areas. That was the general theme of discussions. I think that funds such as the working neighbourhoods fund were, in the end, both reasonably targeted to help some areas of deprivation and reasonably effective. I accept that the Government have decided to abolish the fund and to incorporate it into the revenue support grant.
Fundamentally, this is a matter of principle: as long as a fair settlement can be obtained through the RSG, I am not against the initiative. Over the past few years, there has been a move—under the previous Government and now under this one—to reduce, and hopefully eventually to abolish, ring-fencing and I am generally supportive of that as a principle. With the proviso that the allocation is fair, it should be up to local councils, once the allocation is given to them, to determine how to spend the money in their areas. There will be certain statutory requirements, but essentially, as a move away from ring-fencing and towards a more open method of allocation, I am supportive of this.
Paul Farrelly
I do not wish to campaign for cuts for anyone. My hon. Friend mentioned Dorset, and I shall read out some more names: Windsor, Maidenhead, Poole, West Sussex, Wokingham, Richmond upon Thames and Buckinghamshire. They are all in line for cuts of less than 1%, yet some inner-city areas are in line for the maximum 8.9% cut. Does my hon. Friend not agree that the general public will see that as profoundly unfair?
Mr Betts
The certainty is that people in Sheffield will think that that is profoundly unfair. I cannot resist making a party political point here: they will tend to wonder why a party controlled by the junior member of the coalition has not fought harder for the resources of northern cities such as Sheffield. I was perhaps tempting a response, but I am not going to get one. I am sure that issue will stay around.
I return to the point that one of the problems that the Government have in trying to make the settlement fairer than it is—I do not believe that it is fair—is that the speed of the cuts and their front-loading makes it that much harder to make any sense out of them. The element of transitional funding that would have been needed to mitigate that unfairness would have been a lot bigger than the £85 million that was finally agreed with the Treasury. That is one of the fundamental problems of the front-loading of the cuts and their scale.
I shall make another party political point—they are difficult to resist—but we must put the issue in context. The Minister may use this against me and say that local government has had a lot of money over the years, and that rowing back should not be too difficult. But the increase in total grants, including police and schools grants, and excluding business rates, that central Government provided to local councils from 1997 to 2010-11 was 80% in real terms, which is a very big increase. I return to the point that local government was asked to find 2% efficiency savings year on year, and it has achieved that. Local government as a whole is now a much more efficient organisation than 13 years ago.
A fundamental point about which the Minister may want to say something and on which the Committee challenged Ministers is the amount of business rates and the return of business rates to local authorities, and the fact that by 2012-13—the Secretary of State fundamentally confirmed this—the amount going to local authorities will be less than the business rates coming to central Government. There is a legal requirement on the Government to return all collected business rates to local councils. That will happen this year, but clearly it will not happen in future if the figures—they are notional at this stage—are confirmed.
The Secretary of State said that there were likely to be changes before 2013. There is a review of local government finance, and I understand that the Government’s intention is that business rates collected in an area should be retained there. How will there be an element of redistribution in grant to areas that are deprived and do not have a large business rate base if the total amount of money that central Government give to local councils is no more than the business rates collected, but the business rates will remain with local authorities? How can we achieve any element of redistribution to reflect differences in needs and resources if that is the Government’s intention? This is a really big issue, which Ministers will have to address at some stage.
I do not demur from the Government’s objective to relocalise business rates. I would like local authorities to be given the power to set the business rate. I do not believe that that is the Government’s intention, but it has been my long-term view. At a time when total Government money for local authorities is shrinking rapidly, if business rates are all they have left to give back, but there is no money because it will stay with the local authority that collects it, where is the element of redistribution of Government funding? The cavalry is behind the Minister, and I hope that he will be able to give us an answer.
I do not know whether the Minister will defend this, but can anyone seriously say that there will be no need for cuts in front-line local government services? I am sure that all hon. Members here have been talking to their local authorities, but I do not know anyone who has been assured by their council leader that there is no need for cuts in front-line services. This is not a party political point. All parties in the LGA will say the same. I accept that there has been an extra £1 billion for social services provision, but we all know that there are democratic pressures, particularly if we are trying to keep people out of hospital with aids, adaptations and care packages. That may not even take care of the demographic pressures.
The Secretary of State has said that the Supporting People programme need not be cut, but the next day Westminster council announced a £1 million reduction in its programme. We were told that there was no need for other cuts in front-line services, and that, if local authorities shared their chief executives and a few back-room functions and HR and planning departments merged, that would be sufficient to provide savings in all authorities. That is not true, is it? No one in the Chamber believes that sharing chief executives, HR departments and planning departments will mean no need for cuts in front-line services.
Mary Macleod (Brentford and Isleworth) (Con)
Does the hon. Gentleman agree that sharing services can bring about real savings to local authorities—there are definitely savings to be had from sharing chief executives—which could help local authorities to deliver better services?
Mr Betts
I do not want to give the impression that I am against local authorities deciding to share services in the right situation. My instinct is that an authority such as Sheffield probably needs its own chief executive, but perhaps some smaller authorities could reasonably share. Authorities such as Sheffield, which has very good departments—for example, our planning department —could offer services to other authorities. There is capacity for that. My point was whether such savings would be sufficient to deliver all the necessary spending reductions with no cuts in front-line services. That is not the message that I am getting from local councils of all persuasions throughout the country.
Justin Tomlinson (North Swindon) (Con)
The issue is not just about chief executives. My local authority combined the roles of head of the primary care trust and head of adult social services, which saved money and provided a co-ordinated approach to delivering improved front-line services.
Mr Betts
The only problem with that is that the post of PCT head will go shortly, so that saving will probably disappear. The issue is interesting. I would have liked to be much more radical and bring the functions of the PCT generally within the orbit of local authorities. One or two Conservative councils—I think Essex is one—were up for that. There could have been some more radical changes to make savings.
Local authorities know that they have areas of statutory responsibility in social services and will try to protect those as well as they can. They also know that if reductions are made—this is becoming clear throughout the country—standards of street cleaning will deteriorate, as well as highway maintenance, for which there will be a 19% cut in capital funding. It is right to protect concessionary bus fares for pensioners, but there will be a squeeze on funding for integrated transport authorities in metropolitan areas. For example, subsidies for evening and weekend services, rural services and young persons’ concessions will be hit, and that will then hit people who are more deprived and do not have a car, and who are younger or older and rely on local bus services. The services affected will be those that deliver quality of life—parks, libraries and sports centres.
The Secretary of State said that there was no need for cuts in front-line services, but Doncaster, which has an independent mayor and Labour councillors, will close 14 of its 26 libraries. I understand that Gloucestershire will close 11 libraries and have seven open for only three hours a week. Somerset will close 20 of its 34 libraries, and Croydon will close five. Those councils, which are not of a Labour persuasion, are all making cuts in front-line services. Is the view of the coalition—both parties in it—that all those cuts are unnecessary, and that those councils are maliciously ruining services for constituents and residents when they need not be cut?
Andrew Percy (Brigg and Goole) (Con)
If the situation is as rosy as the hon. Gentleman suggests, why did my Labour council in north Lincolnshire increase the cost of the young people’s post-16 bus pass by 500% four years ago? Why did it have to increase council tax significantly at the rate of 12% over three years? Why have libraries been closed, and why have rural bus services been cut during the past five years—all under the Labour Government when things were so rosy? Does he not understand that part of the problem has been that, although more money came in, the Labour Government told councils such as mine where to spend it instead of giving them discretion to spend it on the services that they wanted?
Mr Betts
I have already said that I generally agree that councils should have greater freedom to make choices about spending decisions. In general terms, I welcome the power of general competence to give local authorities even more discretion. Having greater ability to spend but their resources cut is the ironic position in which most of them will find themselves.
Neil Carmichael (Stroud) (Con)
I am from Gloucestershire, and I have been dealing with this matter with Gloucestershire county council. I echo the point made by my hon. Friend the Member for Brigg and Goole (Andrew Percy) that the Labour Government left councils in a bit of mess by being so prescriptive about areas where they should spend money. The great thing about the present Government is that we will introduce so much more flexibility. Total spending power for front-line services in my area has not been cut as significantly as the hon. Gentleman is suggesting.
Mr Betts
I have given the overall figures, and I accept that some areas have done slightly better than others, but all authorities throughout the country had real-terms increases under the Labour Government. I challenge anyone to come back with an authority that did not have a real-terms increase in its spending. Generally, I support that, and I will not defend everything that the Labour Government did. Ring-fencing should be reduced, and I did not agree with separation of the schools grant. The Government have not been willing to challenge that, or give school grant funding back to local councils. If we believe in the freedom for people to spend and choose priorities at local level, perhaps that should have been done. Equally, I am not terribly happy about the free schools policy. It could take money out of local authorities and separate it from the system.
I support allowing local authorities more control over general Government spending in their area—the “total place” approach. I am a little disappointed in the Committee budgets; they are narrowly focused and down to 16 authorities, and that point was made in the Communities and Local Government Committee. However, I welcome the comments made by the Minister of State, when he said that the Government would listen to proposals from local councils if they came forward with wider or more innovative ideas about how Government spending could be better dealt with, so that councils could take the lead as accountable democratic bodies. That was a helpful comment, and I hope that we will see good examples of councils coming forward, and that Ministers will respond positively.
Finally, I would like to look at housing. I welcome the Government’s assertion that they will carry forward reforms to the housing revenue account. That places powers and responsibilities at local level, which is a helpful and welcome move. Local authorities will be disappointed—as am I—that they will not be allowed to keep all the receipts from any right-to-buy schemes, as they could under the previous proposal. I am concerned that the Government have the powers to reopen that settlement at any time. However, the Housing Minister has said that such a move would take place only in certain circumstances, and there is no general presumption that the Government would open the settlement without a reason.
I am concerned that the Government want to impose greater controls on local authorities’ ability to borrow for housing purposes—that goes against the idea of localism. Are not the prudential rules sufficient? Why do further controls need to be brought in as part of the reform? That does not seem to run with the grain of localism promoted by the Government.
Paul Farrelly
My hon. Friend raises the issue of housing. Does he agree that in order to tide themselves over the transition, many councils will be forced to dip into their reserves? That will clearly have an impact on future income generation. In Newcastle-under-Lyme in 2006, after transferring the housing stock, the Labour party left reserves of over £40 million. Under the Liberal Democrat and Conservative local government coalition, those reserves now stand at £24 million. At that rate of spend, it looks as if the reserves will run out by 2012. There has been no satisfactory explanation of how that situation was reached, or of whether council tax payers have gained value for money. Even though the council has been prudent in dealing with its housing stock, it could face having no reserves to dip into in order to tide it through a transition when the cuts are made.
John Robertson (in the Chair)
Order. Interventions should be kept a bit shorter than that.
Mr Betts
It is a difficult issue. The Minister will say, “Look at all the reserves in local government. They can help mitigate the cuts to services.” They can, but reserves run out; they are spent once and cannot be spent again. During ongoing reductions in spending, reserves can help a council through a problem, but they will not permanently deal with it. Furthermore, reserves are not equally distributed and often they are found in authorities that have made housing stock transfers and have a big dollop of money from that. Some of the reserves cited come from schools and are held at the centre by local authorities, some are housing revenue account reserves with a specific use, and some are needed for the cash-flow issues that councils face on a day-to-day basis. The reserves may help during the first year, but they are not a permanent solution to the cuts.
We know that capital spending on housing will be cut by half in the spending round. We have not been building enough social housing—or enough housing as a whole—in this country, and we can argue on another day about whether the proposals for the new homes bonus and the planning changes will help or hinder that. The Communities and Local Government Committee will produce a report on that issue in due course. Nevertheless, spending will be halved and after the existing commitments to build houses at current rent levels are met, there will be no central Government funding for houses other than those with rents that are linked to market rents—that does not necessarily mean 80% of market rent, but means rents that are linked to the market in some form. Those higher rents will help provide money to build new homes in the future. However, 150,000 new homes will not deal with the waiting list, and of those, any new starts will not have rent levels that many people can afford. That is the real problem.
The decent homes funding is also going to be cut. From the figures provided by the Minister, I calculate that the amount of money for decent homes over the next four years will be just over £1 billion, and the backlog of work still outstanding is around £4 billion. Therefore, it will be about 10 years—probably longer—before all council homes in the country are brought up to a decent standard. That is an awfully long time for people to wait.
George Hollingbery
Will the hon. Gentleman acknowledge the plans for flexible tenancies? They will allow more social homes to be recycled through the market place on the basis of need, rather than having homes allocated for 20, 30 or sometimes 40 years, to people who may not need them. Does he acknowledge the enormous pool of assets in the social housing stock, particularly in housing associations? Those could be leveraged in the market place more effectively than presently happens. Would he approve of that?
Mr Betts
There is a role for different approaches to the provision of housing such as intermediate market rents, more private institutional investment in housing, or links between housing associations and private institutional investors. Those ideas are interesting, and I would welcome them if we were building social houses at existing rent levels at the same time. My concern is that the Government are withdrawing from that. The other ideas are interesting, and in some cases exciting. I support those ideas, but not to the exclusion of money for social housing or of funds to get all homes to a decent standard. I am worried about that, and my overall concern is that we are approaching a housing crisis. Levels of homelessness will rise as unemployment increases. It is not only a matter of Government funding being cut; it is about mortgage availability. With increased deposit levels, young people are not able to get on the housing ladder at present.
Mr Stewart Jackson
I hear what the hon. Gentleman says about the availability of housing. However, in a period of substantial economic growth, the previous Labour Government managed to build no more homes over the course of each year than were built in 1926. That seems faintly unbelievable. Despite the Rugg review of the private rented sector, the Treasury never produced realistic proposals on real estate investment trusts, which have had great success in Europe and north America. The previous Government had the opportunity in a growing market to look into such trusts and remove the fiscal and legal impediments to grow that market. They failed to do so.
Mr Betts
I am not going to defend the level of social housing building by the previous Government; I do not think that it was adequate and I have said that many times in the Chamber and in Committee. A lot of the things that the Labour Government did, including the decent homes programme, were good, but we ought to have built more social housing. I am not sure that the Government proposals will address that matter. There is effectively a total withdrawal of funding from social housing as we know it, so that does not address the reasonable criticism made by the hon. Gentleman.
We should perhaps look harder at the tax and other impediments to real estate investment trusts. They are a good idea. Yesterday, I met with organisations that seek a more direct way of getting institutional investment linked to people who may want to part rent, part own houses. Is the Minister willing to meet a delegation to look at that? Some interesting ideas ought to have cross-party support.
I am sorry for taking up so much time, Mr Robertson, but I have tried to take interventions. My questions for the Minister are: why are local governments taking cuts that are well above the average for other Departments? Why is such front-loading necessary? It creates particular hardships, as councils up and down the country are explaining. The cuts have been large and fast. Is that why the Government have not been able to make them fairer, meaning that they hit poorest areas the hardest? If changes are made to eligibility criteria for social care, if libraries and sports centres are closed and if bus services are withdrawn, will it not be those suffering the greatest deprivation and need who are hit hardest? Is it not likely that the housing crisis that is looming large will be worsened, not helped, by the Government’s measures?
Those are my questions, and it is probably appropriate to end on them. I am sure that the Minister will have positive and good things to say in answer to all of them, although whether I totally agree with him remains a matter for doubt.
Mr Stewart Jackson (Peterborough) (Con)
It is always a pleasure to serve under your chairmanship, Mr Robertson. Today, we have the opportunity to pay tribute to the Government, as you would expect me to, Mr Robertson, for being imaginative and innovative within the confines of the comprehensive spending review and for seeking to engineer a paradigm shift based on a philosophical underpinning of decentralisation, localism and the devolution of power. The Localism Bill, which will have its Second Reading next week, does not take a slash-and-burn approach to local government. Nor, incidentally, is it a refutation of everything that the former Labour Government did before 6 May last year. There is a general consensus that the current Government are in favour of what the hon. Member for Sheffield South East (Mr Betts) called a drive for transformational local services.
I am a glass-half-full kind of chap, so I see the Government’s measures as an opportunity to drive forward localism in the context of the big society. That concept is, I admit, misunderstood, not least by some in my own party, but it chimes with some of the issues that the former Government were talking about before they lost power. In the previous Parliament, I sat through the Committee stage of the Local Democracy, Economic Development and Construction Bill, which had come from the House of Lords. As hon. Members will know, my colleagues and I did not oppose every aspect of that important Bill; it was a bit of a spatchcock Bill, but we supported certain measures because we thought that they were going in the right direction by devolving power and responsibility to individual councillors and officers. One such measure was multi-area agreements and another was leaders boards, which could be seen as fledgling local enterprise partnerships.
I have always been a bit unfashionable among members of my party in that I have—[Interruption.] I am getting sedentary interventions from my hon. Friend the Member for Brigg and Goole (Andrew Percy). I have always been quite in favour of at least looking at city regions as super local enterprise partnerships and as a vehicle for driving regeneration, and it is important that we continue to debate that. I am talking not about reconstituting metropolitan or non-metropolitan county councils, but about having bodies with real resonance. Local enterprise partnerships go some way in that direction on key issues such as post-16 education, public health and strategic transport.
Andrew Percy
I thank my hon. Friend for allowing me to mention the local economic partnership for the Humber region in the Minister’s presence. A huge argument is going on between our four local unitary authorities—the estuarial authorities—which seem unable to agree with businesses about the need for a Humber-wide economic partnership. We need such a body for the simple reason that it would, just as my hon. Friend says, represent the sub-regional unit, as opposed to the area defined by the more historic boundaries. I thank my hon. Friend for allowing me to make that point once again to the Minister.
Mr Jackson
I am always happy to facilitate an advertising break for Yorkshire and the Humber, as I am sure the Chairman of the Select Committee, the hon. Member for Sheffield South East, would be. In the previous Parliament, a report published by the Local Government Association found that the specific argument against regional development agencies was that they had not overcome the differences in economic growth within or between their areas, and work by management consultants Ernst and Young also found that.
The philosophical underpinning for local enterprise partnerships is that we recognise that there are very local economies. Even in an area such as the north-east of England—I am mindful of the need not to go off the point too much, Mr Robertson—there is a quantum difference between the economic issues that inform decisions taken on Teesside and those that inform decisions taken in Tynemouth, north of Newcastle or in Stockton-on-Tees. Even within that area, there are sub-regional economies, so I think we have made the right decision on local enterprise partnerships.
I want to talk now about the less than benign fiscal climate that we face. I think we will have a mature and grown-up debate today, but it is worth saying that Her Majesty’s Opposition committed themselves to a 20% reduction in local government funding. If members of the Labour party in Parliament and beyond are not going to make that reduction now, and given the Minister’s very good point about the Office for Budget Responsibility having looked at the net reduction as a function of local authorities being able to recoup funding in a way that the Ministry of Justice, for instance, cannot necessarily do, the question is what core services Labour party members will cut.
We have had a lot of lectures from the Labour party recently about local government cuts, so let us look at one example: Durham county council. The unitary authority there will see its formula grant reduced from £263 million to £235 million. We should bear it in mind that Surrey county council, for instance, will see its grant reduced from £178 million to £152 million. Durham seems to find enough funds to spend £3.73 million on communication. It has five diversity officers, four European officers, two climate change officers and an undisclosed number of staff working full time for trade unions. It has also refused to say how much its chief executive is paid. Funnily enough, it is sitting on £93 million of reserves. If I can be slightly partisan, my colleagues and I will accept lectures about the impact of cuts only if all the alternatives to cuts are being pursued.
Chris Leslie (Nottingham East) (Lab/Co-op)
I assume that the hon. Gentleman is proud to be giving a £1 billion cut in corporation tax to the banks in the coming year. That is value for money, is it?
Mr Jackson
I am mindful of the fact that the hon. Gentleman has great expertise as a member of the shadow Treasury team. That is true not least of local government issues, because he and I sit on the board of the New Local Government Network. However, to pick up on the exchanges at Prime Minister’s questions yesterday, the former Government’s lack of effort and application speaks volumes about how imperative they saw the need to deal with that issue.
James Morris (Halesowen and Rowley Regis) (Con)
Is not my hon. Friend’s real point that although we hear a lot from the Labour party about the unexpected depth of cuts, preparations have been going on in local government for at least two years in the expectation that fundamental change would come along the line, irrespective of the party that was in government?
Mr Jackson
Absolutely. Credit where it is due; authorities of all political colours were mindful of the fact that, whichever party was elected, there would be a reduction in the revenue stream because of events in the world economy and the financial collapse. We should also mention the three pillars of the previous Labour Government’s economic policy. One was house building, which, as we have seen, did not work out too well. Another was unlimited public expenditure without proper reform. The third was financial services. I am afraid that all three pillars crumbled, and we are now having to pick up the bricks and mortar left by the parlous economic mismanagement of the elusive right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown).
That is the situation that we face. Let us remember that we are now paying £120 million a day in debt interest. In September last year, we were borrowing £15.6 billion a month. During the same month, interest payments on borrowing rose to £2.3 billion, up 150% on the same period in the previous year. Indeed, at the present rate of borrowing, had the Government not taken the decisions that they did, Government debt as a percentage of gross domestic product would peak in 2014 at 70.3%. We would be in the Portugal, Greece, Iceland and Ireland ballpark. For the Opposition to say that the Government should not have taken the decisions they took in the emergency Budget and comprehensive spending review is extremely irresponsible.
To move on to the issues about local government, the CSR is an opportunity for local government to scrutinise spending, make financial savings and redesign the way it provides services. It is also a challenge for local authorities to consider not only the costs of services but their value to communities. The CSR is pushing councils in the direction of being more innovative and involving the private sector, the voluntary sector and business sectors—I shall talk about some practical examples of the big society a little later—in a dynamic and intelligent use of resources. Removing the ring-fencing of grants, and the aggregation of grant funding from 90 income streams to 10 is exactly the right way to do things. I shall talk later about some of the additional funding issues that will give sustenance to local government in looking to the future, when the economy begins to grow and we have reduced public sector debt, such as the regional growth fund, the new homes bonus and, of course, early intervention grant. All those are extremely important.
As the Minister said, we are facing a net reduction of 26% in real terms between now and 2015, but the likely reduction estimated by the Office for Budget Responsibility is 14%. Of course that is speculative because we do not know the level of the income streams, and how each council will innovate to maximise income and assets. The Localism Bill contains good news for councils about their ability to exert more control over assets and share community assets with local people. My local authority is involving the private sector. Peterborough’s core front-line services, such as street cleaning, recycling, grounds maintenance and household waste, will be handled by a preferred bidder, Enterprise Managed Services Ltd. That is an example of a local authority that is innovating, and that has in recent years been thinking hard, with a business transformation team, to prepare for less than benign financial circumstances.
I was an Opposition Front-Bench spokesman on Communities and Local Government, and I want to think about areas that could have been examined, but were not. Fire control was an utter shambles. The predecessor of the hon. Member for Sheffield South East as Chair of the Select Committee, the sometimes fearsome Dr Starkey, was pretty straightforward and robust in her analysis. It was a financial, management and political disaster on many levels. It was bad. Now, because the Government have bravely picked up the baton of dealing with that issue, local authorities are being forced to think in innovative ways. They were doing that before, anyway. I visited Wiltshire and Swindon fire authority, in the constituency of my hon. Friend the Member for North Swindon (Justin Tomlinson), 18 months ago. The authority was already working with Vosper Thornycroft and with Avon and Gloucestershire on such things as premises, training and vehicle maintenance. The CSR will, I believe, be a catalytic change, so that fire authorities can do that. It will spread throughout payroll, human resources, senior management training and that kind of thing, and we will all agree with that.
One of my responsibilities in opposition was to think about the Thames Gateway. If ever there was an alphabet soup of shambolic mismanagement, it was that—100 separate bodies receiving grant funding, and about 120 statutory consultees. It was the Schleswig-Holstein question of local government. Anyone who understood the Thames Gateway was either mad or dead. I was neither, and did not understand it. That is now being subsumed into mainstream funding.
I want to talk about tax increment financing. One of my criticisms of the Government is that although they talk about it, they are not as yet persuading their Treasury colleagues to buy into the concept of supporting it practically. For want of a better expression, invest to save: with a little bit here there will, further along the line, be a lot. That will be a catalyst for building local economic regeneration and renaissance. I am still not convinced that the Treasury is fully committed to that, in the same way it was, incidentally, to other initiatives of the Labour Government in the previous Parliament.
I have already talked about ring-fencing and the general need for fiscal consolidation. I believe that the issue of targets and ring-fencing gives an important message to local government that we believe in localism. The power of general competence is an enormously important message to local government about civic renaissance, civic pride and putting local people in the driving seat. I am mindful of the fact that the Labour Government promised that in 1997. For some reason—I do not know why—it was not delivered. I think we can all agree that trusting local authorities, which is what the enactment of the power of local competence will achieve, will give councils of all parties that strong and powerful message. I suspect that in the next two or three years there may be a few more councils of the party of the hon. Member for Sheffield South East than of mine—but no names, no pack drill.
Of course the Bill also contains a duty to co-operate on infrastructure. That is important for a facilitation of strategic partnerships with primary care trusts and other larger and smaller local authorities. There are local authorities in west London sharing chief executives, and some smaller local authorities—South Holland, and one in Leicestershire, but I forget which—are also doing so, with a significant revenue effect.
Mr Jackson
I am happy to give way to my hon. Friend, who has great experience in local government.
Bob Blackman
Does my hon. Friend agree that, although the sharing of services and offices is being talked about adequately, what is not being put forward or debated is the question of councils coming together to use their buying power in the market, rather than getting into a reverse auction in which they compete to buy services, and must pay more than they would otherwise have to?
Mr Jackson
My hon. Friend makes an astute point. In fairness, one interesting success—my hon. Friend the Minister may not agree—was the Firebuy initiative. It was mixed, admittedly, but the model was that, in the procurement of equipment for the fire service—whether helmets, appliances or other kit—instead of the authorities making 46 pitches and carrying out 46 tests and experiments, there were economies of scale and purchasing power. It never quite worked, but I think it was on the right track. No doubt the Minister will consider my words when he thinks about the future of Firebuy. However, my hon. Friend the Member for Harrow East (Bob Blackman) is right that that side of local government function has not worked as well as it could and should.
Local government makes a massive impact in local economies in terms of people who work for local government and people who contract with local government. In fairness to the present Government, throwing open the contracting process, the tender process and the purchasing process in terms of who makes the decisions and what value judgments they make on what they are buying is being looked at by the Minister of State, Department for Communities and Local Government, my right hon. Friend the Member for Tunbridge Wells (Greg Clark), and by others, including, I think, my right hon. Friend the Minister for the Cabinet Office and Paymaster General, to revolutionise transparency and openness in local government, so that we know why it costs £400 for every 1,000 wheelie bins in Reigate and Banstead but in Windsor it costs only £250. People have every right to know that in this age of transparency. After all, if they know how many toilet rolls that the Member of Parliament for wherever is buying for his office, they should certainly know about and care about how their money is being spent on key services, although God help the concept of the Independent Parliamentary Standards Authority being involved in purchasing in local government.
Mr Jackson
We could rely on it, though, to have a very well paid communications officer to explain to us why that was the case.
I am also slightly worried about community budgets in relation to early interventions. We need to roll that out across the country. There are substantial issues of economic and social deprivation in many parts of the country. Sixteen projects is good, but we need to draw on the lessons from the work by my right hon. Friend the Secretary of State for Work and Pensions and by the hon. Member for Nottingham North (Mr Allen) on early interventions. The hon. Member for Nottingham East (Chris Leslie) will know that his colleague has done a fantastic job in raising the profile of early interventions. We need to take forward some of the work that he has done.
Following on from that, we should be cognisant of the work that the Dilnot commission is doing on social care, because that will inform the Government’s position with regard to the £2 billion boost to social care funding. We are sitting on a demographic time bomb. There are things that we need to be doing in preparing for the number of over-85s doubling in the next 20 years, for instance. Ministers need to be working across Departments to ensure that those demographic changes are reviewed and reflected in the grant, particularly for personal social services.
As for social housing, the hon. Member for Sheffield South East and I have had a rather party political debate. To be fair, I pay tribute to the right hon. Member for Don Valley (Caroline Flint), who issued the rallying cry about tenure. She was royally slapped down by most people in the Labour party, but she was brave enough to mention tenure reform while in government. We must have that debate, as my hon. Friend the Member for Meon Valley (George Hollingbery) said, because it cannot be right that those who need housing most are not necessarily the ones who are prioritised, because of the existing tenure culture.
I see things in a very positive way, because I think that the linking of market values—80% of market values—to the provision of social housing will create significantly greater income streams for registered social landlords, to deliver not just social rented properties but intermediate housing, particularly key worker housing, which is very important in my constituency, and shared equity housing. So many local authorities and so many cities and towns in our country, particularly in the south and midlands, face the issue of the huge disparity between what working people can afford and the price and availability of mortgages.
This is a side issue, but I really hope that the Financial Services Authority keeps in mind the needs of first-time buyers and the availability of mortgages in its mortgage market review. I pay tribute to my right hon. Friend the Minister for Housing and Local Government, who met representatives of the FSA the other day to make the point that it should not be unduly prescriptive and prevent young people in particular from getting on the housing ladder. Developers and house builders are a major part of all our local economies, and for the sake of the country, we need that market to improve.
That is obviously part of the comprehensive spending review, but I will resist the temptation to meander down the path of having a full-blown debate on housing. We are not a million miles apart in many respects, although we have had some disputes about housing benefit and related issues.
It is a pretty stark statistic that in 1970, about 20% of people who lived in social housing were not in paid work, whereas now the figure is not far off 70%. It cannot be right that in the sixth biggest economy in the world, we are embedding welfare dependency in social housing. We need to break up the mono-tenure culture of social housing, because to leave millions of families, including millions of children, in the twilight world of welfare dependency and poor housing is immoral. That is why, if the Government do nothing else, they must tackle welfare dependency, poor housing and the other, related issues.
We need to have a bigger debate, and I hope that the Select Committee looks at the bigger debate, about the fiscal autonomy of local government. A very interesting document was produced not that long ago by the TaxPayers Alliance. It is not always friendly to Members of Parliament, I have to say, but it does produce some very good documents, and one was about the fact that we are the most centralised country, as between central and local government, in the developed world. Well under 20% of local authorities’ revenues come from taxes that they raise themselves locally; the average for Britain’s G7 competitors is more than 60%. This is the key point: the countries with the most efficient public sectors are all much less centralised than the United Kingdom. According to the European Central Bank, the United States, Australia, Japan and Switzerland enjoy an average efficiency lead over Britain of 20%. If Britain could match that efficiency level, spending could be cut by £140 billion with no diminution in the standard of public services.
The Treasury needs to consider that challenge. If we are not just talking, going through the motions, shadow-boxing and engaging in rhetoric about localism, trust and a renaissance of local government, we need to be thinking in the local government review about providing real power in terms of asset-backed vehicles, tax income and financing and other fiscal measures—for instance, the issuance of municipal bonds for bridges, community centres, street lighting and so on.
I do not always agree with my local authority on everything, but it has set up an asset-backed vehicle called the Peterborough development partnership, because it realised what the position was. Mine is a new city, and the Peterborough development corporation ceased in 1988. We simply cannot refresh and renovate all our infrastructure, which was built between 1968 and 1988 by the Peterborough development corporation, without accessing private capital through an asset-backed vehicle. It is vital for the Treasury to understand that and to make the requisite changes in policy in the course of this Parliament.
To finish, may I say a little about the big society? It constitutes a great opportunity and a paradigm shift for local authorities. I draw the House’s attention to a project in my constituency that is not necessarily linked closely to local government, but is nevertheless an exemplar: the St Giles Trust social impact bond at Peterborough prison. The charities involved will receive 46% of the indicative revenue funding to keep a prisoner in prison for a year if they keep that prisoner away from recidivism for a whole year. That is a good example because it gives a fiscal incentive for the charities to do that and it is good for society and good for the prisoners. We need to think more about such initiatives.
An example more closely linked to local government is that of Sandwell Community Caring Trust in the west midlands. That charitable trust has significantly reduced, for instance, staff sickness and the cost of delivering personal and social care, particularly to elderly people. It has been so successful that in 2008 it won the contract from Torbay unitary authority to do its social care. The trust is using the assets in the public realm to deliver more cheaply than local government. I do not see that it is a challenge for local government to work with such organisations; it is a question of square pegs for square holes. Local government is better at some things than others.
I pay tribute to my hon. Friend the Member for Dover (Charlie Elphicke) and his people’s port campaign in his constituency. It is an example of something that was going to slip from local and national control to an international consortium, which would have had little feedback from and interaction with people who care about the local area and the regeneration of the port of Dover, and in the long term, about the viability of that economy and that town. It helps to have Vera Lynn launching your campaign. I think she can sing better than my hon. Friend. That campaign is an example of people working together along the model of the big society.
The Minister will no doubt refer to the Localism Bill, in which we will see on Monday the right to challenge, to take over assets and encouragement for communities to run what the local authority may not want, or have the financial resources, to run. That is the bigger picture about tackling the concept of asset inequality, because, whether we like it or not, too few people control assets. I am very proud to say that my party ameliorated that in the 1980s with the right to buy, which was a wealth transfer to ordinary working people of assets to give them control over their lives. It was one of the best policies, if not the best, ever put forward by a radical, free-market supporting Government in this country. It gave people, and their children, a stake in their futures and their communities. I will never resile from the fact that it was positive. I see that and the growth of mutualism as positive developments in the Localism Bill. This Government, in many respects, is most radical on those issues, as with their welfare changes.
I am delighted to participate in this debate. The Opposition need to move on from the paradigm that more money will deliver better services. They need to understand that that model has been tested to destruction. There is a new model. It is important to take the best of what has been done before, under both Governments, but principally to trust local people in our communities and their elected representatives. They have the capacity and the commitment to deliver the goods for local communities now and in future.
John Robertson (in the Chair)
Order. Before we go any further, may I say that the two contributions we have had have been somewhat lengthy—well over half an hour in each case? If that were the case for the next few speakers, they would be all who would be allowed to speak. Would Members please look at the time? I intend to call the reply from the Committee at quarter to 5 and then the summing-ups. You have an hour between you, so you can work out how long you should speak for.
Chris Leslie (Nottingham East) (Lab/Co-op)
I shall be extremely brief, Mr Robertson, not least because I gather that a Division in the House is expected shortly. I respect the hon. Member for Peterborough (Mr Jackson) in many ways for his contribution, but he may need to look again at his “glass half full” strategy. I suspect that if he has been drinking anything, it will have been the poison in that glass, which has, perhaps, tainted his bloodstream and given him a false sense that local government can skip off into the sunset and cope with a mere wrinkle in its financial settlements. I am afraid that the veneer of normality affecting local government as a result of the spending review he describes masks an enormous near-Armageddon scenario facing local public services, particularly in my constituency in Nottingham.
It is especially cruel that this finance policy should be cloaked in the guise of localism. As a localist, I find it difficult to see anything being devolved other than the axe slashing at public services. I would almost prefer it if the Secretary of State and the Chancellor of the Exchequer were simply to admit straight and up front that they are shifting the burden of public expenditure reductions to local authorities because that way they can get away with the harshness of the impact on public services more effectively. That the Government pretend that this is within the paradigm of localism shocks me.
First, I want to comment, from the Nottingham perspective, on the brutally regressive nature of the settlement for my constituents. It is appalling that the debasing of area-based grant and the abolition of the neighbourhood renewal fund will see a cut of more than £55 million affecting my city. If we roll in any number of other changes, such as the £4 million cut in the concessionary fares grant, the reduction, even with some of the social care uplift, is about 16.5% in one financial year. That is the loss of a phenomenal amount of money for that community.
Chris Leslie
Indeed, which brings me to my second point—more quickly than perhaps I wanted, but it will help the debate. In Nottingham, the Supporting People budget in particular is falling from £22.3 million to £12.4 million. In correspondence the Minister said, “Well, you can’t really tell what’s happening to Supporting People because we’ve rolled it into a formula grant as part of our localism strategy”. However, we can discern in the formula grant from the fifth block— “Grants Rolled in Using Tailored Distribution”—that the amount of money is falling, and it is the fifth largest reduction in England. Nottingham has some of the highest levels of vulnerability, homelessness, teenage pregnancies, alcoholism—any number of problems that the Supporting People budget should be going towards—so it is incomprehensible that the formula should be skewed in a way that hits our city with the fifth greatest reduction.
Thirdly, we should look more generally at the specific grants. I have to challenge the Minister to justify, if he can, the table of statistics that has come from his Department, which the Library has confirmed. It shows that when it comes to the allocation of specific grants, the most deprived local authorities—the most deprived decile, which is the top 10% of deprivation—will see a minus 12% settlement, but the wealthiest 10% of local authorities will see a growth in their specific grants of 24%. By any measure, a dispassionate observer would say that that is a regressive settlement. Hearing this spinology is a real kick in the teeth for vulnerable communities—trying to pretend that this is a progressive settlement, that everything is rosy in the garden and they should just go for a few more efficiencies or shared services. I am afraid that this is far beyond the good work that many local authorities, of all political parties, have been doing to improve local government and make it more efficient. In the past 10 years, local authorities have been the sector of public services that has driven the most efficiencies—far beyond those delivered by central Government. There is no recognition of that in the settlement—quite the opposite. They have been slapped in the face by the Secretary of State and it will be very surprising if some local authorities do not have severe difficulties setting their budgets.
There are other issues about the fire service in Nottinghamshire having to cut 36 fire engines to 30. There are big issues of safety and other questions within the Department for Communities and Local Government budget, but I have made the simple points that I wanted to make. This is a regressive settlement. It is the harshest in history, and I hope the Minister will at least admit that, rather than trying to cloak the arrangement in the localism on which we should all be trying to agree.
George Hollingbery (Meon Valley) (Con)
I will attempt not to repeat points made earlier, in the interests of time.
There is no getting away from the fact that this matter must be considered in the context of the overall Government settlement, the overall level of spending across Government and the spending plans that we inherited from the previous Government. There was much muttering from the right hon. Member for Tottenham (Mr Lammy) earlier about how this was wrong, irrelevant and did not matter. The simple fact is that the right hon. Member for Edinburgh South West (Mr Darling) announced spending cuts of 20% in the Budget in March last year. The spending cuts announced by the Chancellor this fiscal year are 19%.
If we are to change the settlements for local government, if we are to change the timings—which are as important as the amounts, because a pound saved this year is one saved next and the year after—the Opposition have to make some effort to tell us what they would cut instead. I am a local government specialist; it is my area of expertise, if I have any at all. I spent 11 years in local government and very much believe in the worth of local government to local people. I understand that there are other services out there that will be cut if we get improvements. A simple question to the Opposition: what will they be? Here comes an answer.
Mr David Lammy (Tottenham) (Lab)
May I remind the hon. Gentleman that this is a Back-Bench occasion? I know that he understands economics and will appreciate that in seeking to deal with our deficit, the pace at which we deal with it is pertinent, but so is the nature of the tax take. Therefore, there are decisions on tax about which Back Benchers would rightly want to make their views known. The position in relation to the banking levy is felt strongly by the Opposition. It is disingenuous to caricature this as solely a debate about cuts.
George Hollingbery
Plainly, this is not a debate only about cuts, and plainly it is an occasion for Back-Bench contributions. It should centre on the evidence given to the Select Committee. Those points were raised in the Select Committee, which is why I refer to them. I notice that the right hon. Gentleman did not answer the question; he did not seek to identify what else he would change. That is fair enough; he is not obliged to do so. However, I posed the question and it was not answered.
The Department has led from the front, and it is right to identify that. The hon. Member for Sheffield South East (Mr Betts), the Chair of the Committee, talked about a 68% reduction in spending within the Department. We have had a small debate this afternoon about whether that is the right number. I understand the point he made about the Department needing to identify exactly what money is being transferred down, such that the figure drops from 68% to 33%. In evidence to the Select Committee, the Secretary of State was adamant that it was 33%, and I think that at this stage we must take that as given. The number of directors general is being cut from six to three; and the number of directors from 26 to 20 in the current year and 16 in the following year. That is a Department leading by example, and we should applaud that.
Considerable efforts have been made in the settlement to protect the most vulnerable authorities. Plainly, those authorities that receive the most grant are those that represent the most vulnerable people. It is a truism that in times of cuts and grants to local government, those that receive the most are likely to see the biggest cuts. We have to admit that that is the case. That is bound to be the case in absolute terms. The Minister for Housing and Local Government admitted such in his evidence. However, the Administration bent over backwards to try to mitigate the effect of those cuts. They would have been very much worse if mechanisms had not been put in place to damp the effects. We saw the new banded floors, the adjustment of the relative need formula and, of course, £85 million of transitional funding.
While there is a correlation in the graph produced by the Scrutiny Unit that shows that some of the most deprived areas will see the biggest cuts, the effect was hugely reduced by the actions that were taken. I do not think that in the circumstances the Government had any alternative but to reduce spending. Therefore, there was always going to be that effect. However, they have done as much as they possibly could to mitigate that effect.
Justin Tomlinson
Does my hon. Friend agree that not all cuts are bad? Those on fixed incomes or facing a pay freeze would welcome plans to freeze council tax and cut out any potential rises.
George Hollingbery
Of course I agree with that. There are plans, as Members will know, to freeze council tax in the current year, and money has been provided to do so. There are also many innovations that can be moved forward. It is a terrible cliché, but necessity is the mother of invention, and I hear a lot of extremely exciting plans to save money across local councils. I will return to those in a moment.
In evidence to the Select Committee the Minister for Housing and Local Government said:
“If most of your funding comes from the Government, rather than from other sources as a local authority, even if you take the most extreme measures, which we've taken by increasing the deprivation index and doing all those other things—three specific steps—you still end up in a position where spending power is reduced more in areas where the primary source of function is the taxpayer.”
The Government admit that that is the case and huge efforts have been made to try to get round it. There is recognition of that in other parts of Government. The national insurance contribution holiday for small business start-ups applies to those areas of the country where there is more deprivation. Areas in the east and the south-east are specifically excluded from the NIC holiday. Therefore, we would expect to see a growth in new businesses in those areas that receive that stimulation. That is a substantial budget that should not be ignored.
To return to some of my local councils: Hampshire country council has lost £45 million of formula grant in distribution changes since 2003-04. Evidence to the Select Committee has shown that the grant per head in the south-east is about £375, and £700 or thereabouts in the north-east. Those of us who know about local government will understand that that is right. There should be less funding in the south-east. We are a wealthier part of the world, and that is to be expected. However, Hampshire will lose another £71 million of grant in the current year. To hear the leader of Manchester city council talking today about his cuts in budget as representing
“re-distribution of money from Manchester to more affluent areas”
in the south, beggars belief.
George Hollingbery
It is particularly galling that the leader of Manchester city council should say that. If we look at the raw figures we can see that Manchester is receiving £354 million this year for 480,000 citizens, whereas Hampshire is receiving £185 million for 1.3 million citizens. Although there are deprived areas of the country that need more money, we must look at scale.
I shall cut down my remarks quite considerably because a number of Members still wish to speak. Let me mention the plight of Winchester and of East Hampshire. I know that the Minister is aware of the issue of South Downs National Park funding and that he is meeting my hon. Friend the Member for East Hampshire (Damian Hinds) to talk about it. None the less, it is a difficult pill for East Hampshire to swallow. Hampshire county council, like many other councils from which the Committee has heard over the past weeks and months in our Localism Bill inquiry, is being very innovative and is undertaking an enormous amount of exciting work that will produce new ways of doing things across the piece.
It is interesting to consider what a reduction in service is. Is the closing of a library a reduction in service? It seems self-evident that it is. However, I am not entirely certain that it is. What if someone wants to run their library service in a different way? If they can close down libraries but, at the same time, provide a better service that offers more books to more people in the right place at the right time, is that a reduction in service? I am not entirely convinced that it is. There is a wider argument to be had here about what these changes may mean.
George Hollingbery
I understand the right hon. Gentleman’s point, but using a very large and poorly insulated building as a drop-in centre for elderly people seems a rather expensive way of providing social care. It is like providing post offices in rural locations as a social support network. If that is the service that the right hon. Gentleman wishes to provide, perhaps there is a different way of funding it that is cheaper and offers better value not only to the citizens in the area but to the people receiving the service. I am not being flippant. I genuinely understand the right hon. Gentleman’s point that such services provide wider benefits, but perhaps councils should think about how they provide their services.
The other day the leader of Hampshire county council made a useful point to me. Many councils make assumptions about what is important to local people. The leader was very clear that the council had to survey local people to find out what they wanted to see protected if reductions were required in front-line services. The results were very surprising. The obvious things that one would think were terribly important, such as roads, were not necessarily what people came up with. In fact—I welcome this—nearly everyone said that protecting services for the vulnerable was the thing that should be done up front and if that meant having a few more potholes, so be it.
I challenge councils to ensure that, when they reduce services, they understand what they are reducing and why, and find out whether their citizens think that they are the right things to reduce.
In November 2009, an article on the Total Place initiative in the Municipal Journal said that only 5% of all local spending was under the control of elected councils. So when we talk about substantial reductions in local services, through local councils, there is plainly some truth in it, but huge amounts more of Government spending go on in local areas than just what goes through local councils.
I will pass over the extensive evidence of innovation that we have had from councils across the country. As a Committee, we have been greatly encouraged by the fact that there is a lot of innovation. That will be further helped by the removal of ring-fencing, which will allow councils to spend more money in the way they see fit. Of course, the Localism Bill itself contains a large number of provisions that will make that easier, including the general power of competence, the community right to challenge, provisions for pay accountability, the transfer of community assets and the abolition of the standards board. Those are just a few measures in the Localism Bill that should help to reduce costs, increase flexibility and allow innovation.
In conclusion, this is a challenging time for local councils, and nobody who is interested in local government should pretend otherwise. Nevertheless, there are enormous opportunities out there to innovate. The ring fences have been removed and the gloves have been taken off for local councils; they can do things in different ways, but they must re-examine their services, look very carefully at what local people want and look innovatively at providing better services in newer ways that provide better value for money and are better tailored to their local areas.
Stephen Gilbert (St Austell and Newquay) (LD)
It is a pleasure to serve under your chairmanship for the first time, Mr Robertson. I will try to heed your earlier comments about brevity. It is clear to everyone here that local government has had one of the toughest settlements for many years. As we tackle the largest deficit in our peacetime history and face up to the legacy that has been left to this coalition Government, the sector will come under pressure. The hon. Member for Sheffield South East (Mr Betts) set out his perceptions of some of those concerns, but he failed to mention how big a role his party played in getting us into the position where some of these measures are necessary. There is no doubt that the settlement will be extremely challenging for local councils. However, there are some aspects of it that should be welcomed.
As my hon. Friend the Member for Peterborough (Mr Jackson) said, it is clear that the ministerial team has worked extremely hard to soften the impact of the inevitable impact of the spending reductions. Indeed the Department here in Whitehall is taking a significant budget hit, which will, no doubt, be keenly felt, but it is being done to ensure that as much money as possible can make it out to local authorities in the country. What is also welcome—the Chairman of the Select Committee acknowledged this—is the fact that £85 million of transitional funding will help the 37 authorities that would otherwise have seen sharp falls in their spending power.
Like most Members, I welcome the ending of the ring-fencing of most grants. I also welcome the new public health grant and the streamlining of other grant funding. The fact that there were more than 90 individual grants was clearly a symptom of the centralising, top-down, “Whitehall knows best” approach of the last Government. As a result of actions taken by this Government, councils will have more freedom to spend the money that they receive on the things that matter to the communities they represent, although clearly that will have to be done in the context of a very challenging funding settlement. It is my view—I hope it is shared by other Members in Westminster Hall today—not only that it is better that decision making happens at the most local level possible but that, in most cases, better decisions are taken at that level.
As my hon. Friend the Member for North Swindon (Justin Tomlinson) has already done, I welcome the Government’s commitment to a council tax freeze. The fact that £650 million has been made available by the coalition to achieve that freeze in councils that opt for it will take the pressure off many hard-working families who are struggling to make ends meet.
However, I would like to put on the record my concerns about the possible impact of the spending reductions on three areas, particularly in view of continued increases in cost pressures. Those areas are housing, adult social care and flood defences, all of which are key issues in my constituency of St Austell and Newquay and I am sure in many other constituencies.
I fundamentally believe that Governments of all political persuasions have failed on housing policy. Today, 1.8 million families in this country languish on social housing waiting lists. If the first duty of any Government is to protect their citizens, in my view the second duty is to ensure that people are able to access decent, secure accommodation at a price that they can afford. I therefore welcome the Government’s commitment to spend £4.5 billion on delivering 150,000 new affordable homes during the next four years, including £2 billion for the new affordable rent programme. Of course, that is not nearly enough but it is a vast improvement on recent years. Indeed, right hon. and hon. Members might be surprised to learn that this coalition Government will be the first Government to make a net addition of homes to the social housing sector since 1979. The reform of housing finance, to give financial independence to council landlords, is also a significant step forward. However, I share the concern that the hon. Member for Sheffield South East expressed—
Alison Seabeck
I acknowledge the hon. Gentleman’s point about net additions to social housing stock, but will he acknowledge that the reason there has been no net addition has been the right-to-buy policy? Under the last Conservative Administrations, twice the number of social homes were lost under that policy than were lost under Labour.
Stephen Gilbert
I thank the hon. Lady for her contribution. However, as she will know only too well, the reality is that under the last Labour Government there was a net loss of 43,000 social homes in 13 years. That is not a record to be proud of; it is a shameful record and I hope that she may be able to share some of the regret that her hon. Friend the hon. Member for Sheffield South East expressed when he said that he felt that the last Government had not gone far enough in tackling that problem. In fact, I was about to agree with the hon. Member for Sheffield South East again—I will try not to make a habit of it—by saying that I remain concerned that the Treasury will continue to retain 75% of receipts from future right-to-buy sales and I would appreciate it if the Minister could explain the thinking behind that approach.
I also want to take the opportunity to give a bit of a plug for the Department for Communities and Local Government. The Government’s consultation on housing ends on Monday and I encourage Members here today and those who may be watching these proceedings to make their views known.
On adult social care, we know that the transfer of learning disability funding from health care to social care is being achieved through the introduction of a specific grant. All other funding related to adult social care has been rolled into the formula grant, including Supporting People funding. Also, a welcome £l billion of extra funding for personal social services was announced in the spending review.
However, despite the measures that the coalition Government have taken to protect vulnerable people, Cornwall county council has decided to cut spending on Supporting People services by 40% and is pressing ahead with those cuts despite having healthy reserves. In addition to terminating several contracts completely, the council has written to providers of somewhere between 70 and 80 services, cutting the contract prices by 40%, and has given providers of the remaining 15 services to understand that they will be subject to similar cuts shortly. That is likely to lead to a massive hit for vital services that are provided to very vulnerable people, such as those provided by Cosgarne hall in St Austell, which is dedicated to the alleviation of homelessness among vulnerable and socially excluded people. Most of those services will find that hit difficult to absorb and some will find it impossible.
I do not pretend to be an expert in local government finance; indeed, I have yet to meet anybody who does pretend to be an expert in local government finance. [Laughter.] However, I have studied Robert Davies and Shehla Husain’s letter of 22 December on the DCLG website, which explains the workings of the formula grant in relation to the Supporting People grant; and the settlement figures. From that, it seems to be the case that the amount of formula grant that Cornwall will receive for 2011-12 that is attributable to the Supporting People programme will be somewhere between £13.8 million and £14.3 million, which is almost no change on the figure for 2010-11 of £14.2 million.
In that context, the cut of 40% by Cornwall county council is utterly disproportionate to the change that the coalition Government have made to the council’s funding. The savage cuts that the council are carrying out will deprive many hundreds of the most vulnerable people in Cornwall of the vital services on which they depend. I do not believe that that is fair. Indeed, it represents very short-sighted decision making, as money spent on supporting vulnerable people is likely to save money in the long run. Indeed, my right hon. Friend the Secretary of State has said on the record:
“Most sensible local authorities will come to the conclusion that every pound spent on Supporting People is probably going to save them five or six quid further down the line.”
I do not expect the Minister to respond to me today about whether I have correctly interpreted those figures; I stand ready to be corrected, because as I have said I am certainly not an expert in local government finance. However, I would appreciate it if he could take a look at the issue in Cornwall and drop me a line about it.
Finally, I want to mention flood defences. As Members will no doubt be aware, my constituency suffered from severe flooding just a few weeks ago. Following the Flood Water and Management Act 2010, a new grant of £20.9 million in 2011-12, rising to £36 million in 2012-13, will be paid to reflect the new responsibilities that have been given to local authorities. That is a welcome step forward. However, it seems that although the Government are giving with one hand they are taking away with the other. There will be a transfer away from the formula grant of £21.5 million in 2011-12 and £42 million in 2012-13, to reflect assumed savings on the maintenance of private sewers. From October this year, when the Act comes into force, those sewers will be the responsibility of utility companies.
The impact assessment for the draft Bill and the subsequent Act by the Department for Environment, Food and Rural Affairs calculated that local authorities spend more than £50 million a year on private sewers across various departments, including environmental health, technical services, building control, engineering, housing and planning. That assessment was based on a 2002 survey of only 12% of authorities, which supplied mainly estimated figures, which at the time even DEFRA advised should be used only as a guide. No local authority that I have been in contact with recognises the figures that have been used in DEFRA’s calculations or agrees that their authority is spending anything like the assumed cost. There is very little clarity about DEFRA’s base data or the methodology used to assess current costs.
Mr Robertson, you might wonder—indeed, you might wonder quite rightly—why I am mentioning that assessment in a debate about the Department for Communities and Local Government, but there is a clear implication for local government funding in the future. I hope that the Minister will ask his colleagues at DEFRA to revisit the survey of costs to authorities, in order to get a better picture. In my constituency, we have quite clearly seen that the first responsive organisation is the local authority and we must ensure that it has the tools and resources not only to deal with floods after they have happened but hopefully to prevent them.
To conclude, there is no doubt that local government will face a challenging period now and in the next couple of years and it is more important than ever that this Government live up to their rhetoric on localism. I urge my hon. Friend the Minister to take heed of some of the concerns about front-loading of the proposed reductions and to look with vigour at the potential savings from place-based budgeting. There is much to welcome in the Government’s approach to the funding settlement and the broader localism agenda, which in my view will finally take Whitehall out of the town hall. However, I for one am anxious that we get that approach right, both for local authorities and for the vulnerable people that they represent.
James Morris (Halesowen and Rowley Regis) (Con)
It is a pleasure to speak before you for the first time, Mr Robertson. As a member of the Select Committee on Communities and Local Government, I welcome the opportunity to speak in this important debate. In the spirit in which the hon. Member for Sheffield South East (Mr Betts) started the debate, I will reflect on some of the important realities of the settlement for local government.
As other hon. Members have said, this is clearly a challenging time for local government. I represent a seat in the metropolitan west midlands that straddles the Dudley and Sandwell metropolitan boroughs, and I know that both those local authorities are having to make difficult decisions about their budgets and priorities. There is no way around that. However, as other hon. Members have also said, the environment might be challenging but it is not unexpectedly so. Even if a Labour Government had been elected, significant cuts in local government expenditure would have had to be made. That is a point of context that must be made in order to inject some reality into the implications of the comprehensive spending review and its impact on the DCLG and local government. The spending review has presented the Department with a difficult series of choices; there is no way around that. The spending review and some of the evidence that we in the Committee have gathered raise interesting questions and present opportunities for local government.
Over the past 20 years, there has been an obsession with top-down performance management in local government. We must now move forward into an age of innovation and collaboration. One perhaps unintended consequence of the CSR is that it has focused attention on the funding relationship between central and local government, which we must examine rigorously, as it is clearly important.
The scale of the fiscal consolidation that the Government are undertaking and its impact on DCLG and local government has produced some welcome and important initiatives. Other hon. Members have discussed the removal of ring-fencing, which is a significant change to the financing of local government. The previous Labour Administration can be considered as a game of two halves. The first half involved a Prescottian vision of regionalisation and central control. The second involved an acknowledgment—other hon. Members have mentioned this; it is not a time to be particularly partisan—that that was the wrong approach and that we needed to move toward more flexibility in grant funding. Now we need to move forward to the next stage in that flexibility. It is not a trivial but a major change in the relationship between central and local government and in funding.
One consequence of the CSR is that a fundamental review has been necessary of the Department’s costs. A 33% reduction in DCLG administrative costs has been announced, which reflects the changing balance of priorities. If we are moving toward a more localist future, DCLG must examine its central costs to see where administrative overheads and costs can be transferred out to the front line. That is an important recognition of the changing balance between central and local government.
As the hon. Member for Sheffield South East said, it is useful, practical and a positive move forward to view local authority funding in terms of the totality of local authority spending power rather than focusing merely on the totality of the formula grant. That way, we will get a true picture, especially considering some of the new grants coming forward into local government, such as in public health and adult social care. At least we will begin to get a sensible picture and a recognition that considering such spending power is a much more rigorous and important way to examine the total funding of local authorities.
Other Members have discussed funding for Supporting People. That funding has been relatively protected within the CSR. It has also been devolved. Again, that is part of a radical change. Central Government are giving local authorities much more discretion to understand the nature of their local communities and make decisions accordingly, which is to be welcomed.
One thing that has emerged from the Committee’s deliberations—I stress this to the Minister; I have raised this point before on the Floor of the House—is that everybody who has observed local government, including me in my previous role as chief executive of Localis, the local government think-tank, would agree that the grant distribution process for local government is opaque and fundamentally flawed. Discrepancies arise not just between metropolitan boroughs, counties and shires but between metropolitan boroughs themselves. Nobody understands how it works. There are always disputes and special pleading. I welcome the efforts made to ensure that fairness is built into the settlement through banding and transitional funding, but however much we try to mitigate it, it does not change the fact that the process of grant allocation needs fundamental reform. We need a more independent and transparent process, and I hope that will emerge from the Government’s review of local government resources and finance. It is fundamental to the future of local government.
The financial crisis and the tough decisions taken in the CSR create an opportunity. Crises are often catalysts for change in systems, whether biological, evolutionary or political and economic. That is no less true for local government today. The current pressure on local government, which we all acknowledge, is providing a catalyst for change. Across the political spectrum, local authorities the length and breadth of the country are taking seriously the challenge of a new environment in which innovation, particularly financial innovation, is central.
Alison Seabeck
The hon. Gentleman is making a thoughtful and well-informed speech. However, he mentioned innovation. Does he not share the concerns of Baroness Eaton? She said today:
“Local government will have to make cuts this year of around £2 billion more than we originally anticipated. This stifles the opportunities for innovation”.
James Morris
I do not agree. Baroness Eaton is obviously doing her job on behalf of the Local Government Association, and she is doing it well, but I know from my experience as a business entrepreneur that having one’s feet against the fire is a profound stimulus for innovation and transformative change.
The hon. Member for Sheffield South East said rather dismissively that a few local authorities getting together to share back-office services would not get us far. I agree that that will not plug the whole gap in certain contexts, but we must take the idea of shared services seriously. In my constituency, we are beginning to see partnership working across the political spectrum really deliver efficiencies and change, for example through new commissioning structures in local government. That must be the future, where local government does not take the role of the service delivery arm, but instead takes on more of a commissioning role. We need to look at new funding arrangements.
Mr Betts
The hon. Gentleman described my earlier comment as dismissive, but that was not my intention. I welcome savings that can genuinely come from sharing back-office services or chief executives where appropriate, but it might not be appropriate in all circumstances. Indeed, the same is true of sharing services not only between local authorities, but between local authorities and other public sector bodies. My point was that I do not believe that could fill a 9% gap in the spending power of an authority, which is also the point that the LGA is trying to make. The Minister said that no cuts in front-line services were necessary because all the savings could be found by sharing services; I was disputing that.
James Morris
I do not want to get into a debate on the definition of a front-line service, but I take the hon. Gentleman’s point. Once we have gone through the period of retrenchment that is necessary to get the country back on a stable footing, the essential challenge in local government will be to maximise the potential for collaboration, efficiency and shared services. That could be through innovative relationships not only within local government, but importantly, across the whole spectrum of local public services. I urge the Minister to take forward the idea of community budgeting and the previous Government’s work on Total Place, which I welcome, because my perception is that sharing the totality of public spending and of public services in the next wave of local government could deliver cost reductions and a much higher level of service.
The Committee reflected on a variety of evidence presented to us. It is a tough settlement, but one that presents a series of interesting questions and opportunities. It is a tough time for local government, but tough times produce change for local government, and many would argue that it is necessary change. The hon. Member for Sheffield South East touted the figure of 80% increases in local government spending under the previous Labour Government. It could be argued that public sector organisations need periods of retrenchment during which they can examine how their processes are operating. We might be looking at a period of necessary change in local government during a tough period of fiscal retrenchment across the economy.
Bob Blackman (Harrow East) (Con)
I will bear in mind your earlier remarks about brevity, Mr Robertson, and as this is the first time I have spoken under your chairmanship, I suspect that that will be measured the next time I speak under you. I do not wish to repeat what Members have said already, but I think that we cannot consider this year’s local government grant settlement in isolation; it is not a one-year issue. We must look at it in the context of previous years and experiences.
I ran local authority finances for a considerable time before entering the House and have served in a position in which we received from a Labour Government drastically lower levels of grant, way below the rate of inflation and pegged every year for three years. Of the 32 London boroughs, 23 were on the floor and were receiving half the level of inflation year on year. That meant that local government had to be efficient and clear about how it would obtain its finances and run its services.
The previous Government often said to local government, “We’ll give you a new duty and ring-fence the money.” Slowly but surely, the money for the basic services was starved and the new duties and services were ring-fenced. The rationale was that the Government wanted to ensure that the money was spent in the areas where they dictated it should be spent. It was a centralised approach to running local government. Local authorities got used to area-based grants, which could be spent only on certain services, and to performance level grants, which could be spent only if performance against a complex series of assessments was achieved. I am delighted that in the current settlement, and, I hope, in further measures that the DCLG team takes, all that will be swept away. The ring-fencing will be removed so that local authorities will have the opportunity to determine local priorities.
An example from my experience that I would like to use is that of working neighbourhood funds. In the London borough of Brent, we set up and used the money specifically for the purpose of ensuring that unemployed people in Brent got jobs, and we were so successful that there was a reduction in unemployment. However, at the height of the recession the previous Government decided to remove all the money. A borough that had been successful and used the money appropriately lost the funding at a time when it was desperately needed, while those boroughs that had not succeeded continued to receive it—a great reward for our success. Actually, it was a great reward for failure elsewhere. There is a key issue that experience from local government has shown to be true.
As several Members have said, every local authority in the country knew that following the general election, regardless of which party won, there would virtually be a public sector recession and that everyone would have to plan for reductions in expenditure. The two authorities that I know well—the one I used to serve in and the one that I have the privilege to represent part of in this House—had planned for a 10% reduction every year for the next four years, but fortunately they will not have to suffer that under the wise settlement that the Government have brought forward. I would say to any authority that did not put plans in place for expenditure reductions that have come down the line that it is no good complaining now, because they did not plan for a future that was almost certain. Local government must transform itself and the services it provides and look at doing things radically different from how they have always done them.
As has been alluded to, that is a direct challenge to many local government officers, but it is important to remember that that is part and parcel of the challenge that has been set down by central Government. I do have concerns, however, for example on what the London borough of Harrow is doing. It has decided to reduce its voluntary sector funding by 30%, decimating the people who deliver services for vulnerable people. It is an easy cut to make, but a short-sighted one, because the people who are being cared for by voluntary services will get worse more quickly and throw themselves on the local authority much earlier, which will be more expensive. It is a foolish way to approach the cuts.
In the other London boroughs—we see this right across the piece—proposals are being made to close libraries, day-care centres and various other services on which vulnerable people depend. With regard to library services, I take the view that libraries are more than just places where books are provided; there are computers there and facilities for vulnerable and deprived people who need the space to study in. When I was leader of the London borough of Brent, I remember being dubious about our plan to open a library on a Sunday for the first time, but there were queues of students at the door at 9 o’clock in the morning because they wanted to study. I say to every local authority that they should not cut such services, even though they seem to be easy cuts to make. They should examine other things before doing that.
Mr Lammy
The hon. Gentleman and I agree on many things, particularly our choice of football club. He is firmly on the centre ground, and I appreciate the manner in which he puts his remarks. Does he agree, when he makes his points as well as he has, that too severe cuts to crucial services could lead to huge costs downstream for local communities? I am thinking of policing costs, social exclusion, and cohesion. From his experience in Brent, he will understand where I am going.
Bob Blackman
I thank the right hon. Gentleman for that intervention. I agree that there is concern about the level of reduction taking place in local government funding. I recognise that that is a key concern, and also that it is possibly more front-loaded than other areas of Government expenditure. However, one of the things that has happened in areas of greater deprivation is that over previous years they have gained substantially in central Government funding and grant. That is why it is difficult to make comparisons year on year. They gained far more by having deprivation. Actually, studies show that deprivation has not reduced as a result of central Government funding, so has that been a good thing or not?
Naturally, as the Government have decided to change the formula and grant regime, areas of greater deprivation are experiencing greater reductions. That is, of course, a serious concern to local authorities that are experiencing it. However, certainly in my experience, the plan was there that that would happen. If they have not planned for it, they have been short-sighted, and that is serious.
In the time that I have available, I wish to mention a series of concerns, the first of which is about the suggestion of capitalising redundancies and some services. I was a great proponent of capitalisation—I thought that it was an excellent way of doing things—until the prudential borrowing regime came in. I urge caution, because if one capitalises expenditure, all one is doing is borrowing. One must fund that borrowing on the revenue account, which will probably lead to a huge amount of cost in the future, year on year, for a one-off payment. That is not a good plan of action at all, particularly at a time when we know that local authority funding will be reduced over a four-year period.
My second concern is about the consequences for the voluntary sector. It is easy for local authorities to reduce the voluntary sector slightly—it will not impact on the core services that they provide. Actually, that is a short-sighted view. I urge local authorities across the country to ensure that they safeguard voluntary sector services that are coping with the weak and vulnerable, and doing it cost-effectively. I suspect that in future years that very same voluntary sector will be crucial to delivery of services in the big society that we all support.
The next area of concern is visible services. There is an obvious thing that is often missed. Having been in local government for a long time, I know that when it comes to reductions, local government officers always come forward with what can only be described as the bleeding stumps. It is easy to say to councillors who want to reduce funding that they have to close this day centre, close this library, do this, do that. Never does one hear from local government officers, “Actually, we will reduce staffing by 10% in the administration area.” I am not one of those who says that just by merging services and joining forces with another local authority the gap will be bridged, but at a time of great challenge, all those areas have to be examined and challenged, before one looks at the visible services on which the public rely.
The overwhelming majority of people who work in local authorities are on relatively low salaries and wages, and we should ensure that they are supported. However, over the past 10 years, there has been an absolute explosion in salary levels for local government officers, chief officers in particular. I, for one, am sick to death of reading almost weekly of a local authority chief executive or chief officer departing from one job with a golden goodbye only to walk into another local authority to do a similar job on a hugely increased salary. The excuse made for that across local government is that they have to pay more to attract the best people. I have no problem with rewarding experienced people who do a good job, but that has gone much too far in local authorities. Now is the time to examine those salaries, and I applaud local authorities that are reducing salaries rather than increasing them.
Mr Stewart Jackson
On that point, Manchester city council, which is by no means the largest bottom-tier authority in the country, has already been mentioned. Its chief executive earns £90,000 more than the Prime Minister. Does that situation not point to the fact that my hon. Friend’s comments are absolutely right?
Bob Blackman
I thank my hon. Friend for that intervention. I have not done a study on all these things, but I reckon that virtually every chief executive of every metropolitan authority is probably earning more than the Prime Minister, and that is a serious concern. Is it right? There has to be a measure, because all the chief officers and those below take their lead from the chief executive. That is clearly a concern.
I also ask the Minister to consider seriously the fact that local authorities desperately want certainty over funding. I understand why the settlement this year is difficult, but I have had experience of a three-year funding settlement. Even though it was not too good, one was at least certain about what one would get. Planning for the future is all important, so a long-term settlement that gives local authorities knowledge about the funding they will receive for a multiple of years is something that we absolutely should put in place.
Other hon. Members have mentioned new sources of funding. I am afraid that I do not agree with the hon. Member for Sheffield South East (Mr Betts) on returning the setting of business rates to local authorities. I can imagine nothing worse for business people—they would quake in their shoes—than allowing people at town halls, civic centres and so on to set business rates that potentially could put them out of business in a big way. However, we have to move away from just Government grants, the council tax and the share of business rates as sources of income. We must accept the concept that we need other sources of money, and an attractive way of consulting people on what those sources should be.
We must also examine the Barnett formula, which has been in operation since the 1970s. The Labour Government did not do anything about it, nor did the previous Conservative Government. Lord Barnett, who set it up, has probably forgotten how it was developed. My hon. Friend the Member for Croydon Central (Gavin Barwell) has done a study of local authority funding over several years. It is bizarre how the formula grant has changed inappropriately—this is not a partisan point or a matter for authorities of particular political control. There must be a complete review of all the different indices for the formula so that funding is seen to be fair and understandable. At present, I do not believe that anyone could possibly understand it.
David Mowat (Warrington South) (Con)
My hon. Friend mentioned the Barnett formula, and Lord Barnett’s view on it. He does actually have a view on it, which he made clear at the House of Lords Select Committee on the Barnett Formula. His view is that it should be replaced by a formula that is much more needs-based than the current one. The consequence of the current formula is revenue misallocation in the order of £4 billion per year. That is £4 billion that does not come to the English regions but goes to Scotland and enables it to pay for things that we cannot have.
Bob Blackman
I welcome that intervention.
I also want to mention buying power, to which I referred in an intervention. I would also ask people to look at the creative use of reserves. In the London borough of Harrow in 2006, the outgoing Labour administration set a reserves level of £1 million, with unidentified savings of some £3 million. I would challenge that as an almost illegal budget, but it was allowed through under the processes. Across the country, there are some authorities that have huge reserves and others that do not have any. My view on reserves and balances is that they are money taken from the taxpayer almost as a form of theft, because they are not used for the benefit of services but are stored up for a rainy day.
Finally, there must be a fundamental review of housing finance in this country; the current proposals do not go far enough. We have to make it much easier for registered social landlords and other people to borrow money to build houses, to ensure that we get the properties that we need and homes for people.
To summarise, I have put forward a series of concerns and issues that are challenges for both local authorities and our ministerial team.
Mr David Lammy (Tottenham) (Lab)
I am grateful to the Backbench Business Committee for granting this debate, and I want to associate much of what I say with the comments of my hon. Friend the Member for Sheffield South East (Mr Betts), who is a good friend. I agree with a lot of what Members from all parties present have said, and I do not want to phrase my remarks in too partisan a way.
I want to talk about the impact of the cuts on the very poorest communities in the country, particularly those in London. As the MP for Tottenham, I know something about the issue. What has just been said about the sensitivity around cutting services for the most vulnerable too fast and too deeply is important, because there could be huge social consequences. I hope hon. Members understand that it is hugely important to talk about these matters and to reflect on the history of my constituency.
In representing Tottenham, I represent London’s second poorest constituency. Cuts on this scale will have a huge effect, and there are authorities that are worried not just about the nature of innovation and about back offices and how they share services to make the savings, but about the profound effect on statutory services. Some of those services cut to the heart of the centrality of the kind of civilised democracy that we have to be. In relation to the London borough of Haringey, I am particularly worried that the front-loading of the cuts means that its financial settlement represents a far greater reduction than was expected. We have heard some comments about the preparation that councils could make for the changes, but there are authorities across the country that could not have imagined the scale of the in-year savings that they are being expected to make. Haringey’s funding shortfall for this next year requires it to find £46 million of savings, and a further £41 million over the next two years. The loss comes on the back of the ending of the local authority reward grant, and of the funds from the Department for Work and Pensions for the future jobs fund and from the £2 million in the school development grant.
On the subject of the future jobs fund, my constituency has the highest unemployment in London. A debate is taking place outside the House on a bid for the Olympic stadium, which might involve the Tottenham Hotspur football club leaving the Northumberland Park ward in my constituency. The ward has the highest unemployment in London, and the biggest private employer might be about to leave. Who will pick up the mess if that happens? It will be Haringey council, who will have to step in to provide for the very poorest. Concern for the poorest is not unique to one party; it should be something that we all share. I make my remarks not in a partisan way, but simply to say that we have to think very carefully about the effects of the cuts as they are felt on the ground, and that is particularly important for a local authority that has seen some of the most significant failures in the protection of vulnerable children.
Over the past two years, Haringey has focused on securing improvements to its safeguarding children services, following the death of Peter Connelly and the widely reported problems with the safeguarding of vulnerable children. That has led, however, to Haringey becoming a borough in which 1.2% of all children under the age of 18 are in care—a huge 40% increase since March 2008. In December 2010—just last month—600 children were looked after by the local authority, and our rate per 10,000 was 123. Those figures represent a very high number of young people, and there is a cost attached to them, in particular if we are to ensure that children in care do not continue to come out of care with dire prospects in relation to social mobility, education and all the things that we have seen in this country’s past. There is now a real concern that because of the huge effort to deal with the consequences of the Baby P and Victoria Climbié cases, the cuts will reduce Haringey council’s ability to properly provide the statutory services that the country rightly expects.
I think it is right to say, and the figures will be published shortly, that the increase in the numbers of children in care is not just in the borough that has had the scrutiny—Haringey. All Members, certainly those who represent large conurbations, have experienced constituents coming to them and saying, “My children have been taken into care.” We get both sides of the story, and we have seen an increase in the case load. When we see the figures very shortly, I think that right across the country we will recognise the huge consequences of that story from just two years ago.
George Hollingbery
The right hon. Gentleman makes a powerful and emotional case for the needs in his constituency and throughout his two boroughs. I have enormous respect and great admiration for that. But does he agree that in other areas of the country, which are more prosperous and where budgets are lower, the people who are being helped by those budgets are the poorest in those areas, and that the cuts are felt equally throughout the country whether or not there is more money going to a certain area?
Mr Lammy
I do not want to disagree with the hon. Gentleman, except to say that all local authorities have fundamental statutory services that they must provide. Children are in care in every local authority throughout the country, and local authorities cannot scrimp on services for those young people, and young people at risk of harm. Having seen that acutely in my constituency, I want to impress on the Minister—I do not expect a response on this––the need to look carefully at the situation in the London borough of Haringey and other local authorities, to ensure that the means to provide those services and the pressures of front-loading do not militate against those very high standards that they are rightly now being set.
I hope that the Minister appreciates––he will be familiar with the issues, but they have not been raised today––that as I represent an outer-London authority, it is right for me to raise the serious concerns that exist about homelessness and its costs, and about the decision that has been made on housing benefit, and the costs that are flowing from it. The London borough of Haringey also has the highest homelessness rate in London, with 5,000 people on the register as I speak. The consequences of the decision on housing benefit are already being seen in relation to where people are now being housed by local authorities such as Westminster and Camden, who are already saying, on the record, that they are now placing 70% of their homeless people in outer-London boroughs. That brings real pressure at a time of cuts, and it is not clear where those funds will come from.
I do not want to put this in unnecessarily extreme language, but I am deeply worried about excessive overcrowding in constituencies such as mine. One sees it in other European countries, and I do not want to see it on that scale in the city of London. These are statutory services that local authorities must provide, never mind the libraries and support for the voluntary sector, and it is not clear to my local authority how this will pan out, and where the funding will come from to meet these statutory obligations. Will the Minister say something about that, and about his liaison with his colleagues at the Department for Work and Pensions, given that it is they who have landed him, in part, with the problem?
A point has been made about the voluntary sector. I am deeply concerned about some of the services that are offered in cities such as London that involve close liaison with the Metropolitan police and mental health in particular. There are some very excluded communities in this country; there are young men in this country who present as extremely vulnerable, who are subject to extreme views. I might say that once upon a time, I was one of those young men. When I was growing up under a previous Conservative Administration, when things were tough and there were real pressures between the police and the local community, Neil Kinnock spoke to me sufficiently to keep me in the mainstream, and I was not seduced by some of the extremism that was around.
I hope the Minister appreciates that some of the services that fund some of the voluntary sector in constituencies such as mine, working in youth services and liaising with the Metropolitan police––the hon. Member for Harrow East (Bob Blackman), who has experience of Brent, will be familiar with such services––are absolutely crucial. The funding for a Turkish liaison officer who is working with some of those involved in the extreme gangland criminality that we are seeing in parts of that community is being cut. That funding, which came from the local authority, is no longer there to support that work with the police. I am very concerned about the consequences of that. Will the Minister reflect on other parts of the DCLG empire, and what that means for social cohesion?
John Robertson (in the Chair)
Order. Before the hon. Gentleman intervenes, I must ask the right hon. Member for Tottenham (Mr Lammy) to bring his comments to a conclusion.
Mr Jackson
Perhaps I could be so bold as to say that what kept the right hon. Gentleman on the straight and narrow was being educated at one of the best schools in the country—the King’s school, Peterborough. Looking more positively at some of the changes that are about to take place, I believe that they will encourage faith and community groups into the public square to take on work and to work collaboratively with local authorities to tackle very difficult social issues, such as social exclusion, deprivation, homelessness and drug misuse. They have not done that hitherto because there has been an element of institutionalisation in those groups.
Mr Lammy
I am grateful for all the help that I received in the city of Peterborough. It is a great city, but the hon. Gentleman will know too that it is a city with tremendous challenges, partly for the following reason. There are communities in Peterborough, as in mine, that do not have the necessary capacity. I am therefore very nervous about the springing up of wells in the “big society” and the expected support. Money must come from somewhere, which is why I spoke as I did.
I am grateful for the time that I have been allocated, Mr Robertson. I wanted to make three central points and I have done so.
Alison Seabeck (Plymouth, Moor View) (Lab)
It is a pleasure to speak under your chairmanship, Mr Robertson. To avoid misunderstandings, I should draw the Chamber’s attention to the entry in the Register of Members’ Financial Interests for the right hon. Member for Greenwich and Woolwich (Mr Raynsford), who is my partner.
I thank the right hon. Member for Tottenham (Mr Lammy) for seeking this debate, and the Backbench Business Committee for agreeing to allocate time for this extremely important matter. I commend the work of the Select Committee on Communities and Local Government, and the members of that Committee who have contributed today.
The debate has been wide ranging and well timed on the day when Manchester city council has had to announce 2,000 redundancies on the back of 1,400 job losses in Greater Manchester police as a result of the Conservative Government’s decisions—they made the decisions. We have been reminded all too clearly of the immediate relevance of the cuts to people’s lives, and to families throughout the country who will be watching the post every day for redundancy letters as the result of the cuts brought forward. I fear that Manchester will be the first of similar stories, which are tragic for the individuals and hard-working families involved.
George Hollingbery
Will the hon. Lady confirm that all the redundancies announced in Manchester today are voluntary, and that none is compulsory?
Alison Seabeck
Manchester city council said that it will try to achieve voluntary redundancies, but even those may be hard to bear, as I am sure the hon. Gentleman will agree. Manchester is one of the best performing councils in the country, despite being the fourth most deprived, and for years has worked to increase efficiency and to share back-office work with other local authorities throughout the region.
My hon. Friend the Member for Sheffield South East (Mr Betts), Chair of the Communities and Local Government Committee, made, as ever, a well-informed and well-argued opening speech in which he highlighted comments made during the evidence session. The Committee was clearly as bemused as local authorities are about the reasons and logic behind the CLG taking a 28% hit overall. I suspect that comments made by the Secretary of State, in which he indicated that he was prepared to pass on the pain to local councils, have never been gainsaid and I would be interested to know whether the Minister is willing to do that today.
My hon. Friend also raised the issue of business rates, and that was followed up by the hon. Member for Harrow East (Bob Blackman). If that policy is pursued, there is clearly a question about whether there should be some sort of redistribution. We also heard contributions from the hon. Members for Peterborough (Mr Jackson), for Halesowen and Rowley Regis (James Morris), for North Swindon (Justin Tomlinson), and for Meon Valley (George Hollingbery). They all showed experience, expertise and interest, and provided a thoughtful consideration of the difficult challenges faced by authorities across the country. There is clearly cross-party concern in some areas, and the Labour party would like to see further exploration of those issues. In some areas, however, the gulf between the parties is huge and difficult to cross.
The hon. Member for Harrow East spoke about the redistribution of reserves, and I would be interested to hear the Minister’s comments on that idea. My colleague from the south-west, the hon. Member for St Austell and Newquay (Stephen Gilbert), said that he wanted Whitehall out of the town hall. That is a good sound bite, but his speech was slightly contradictory. He sought direct interference from the Minister in what Cornwall county council is doing with the Supporting People programme. He cannot have it both ways.
Alison Seabeck
I will not give way at the moment; I may return to the hon. Gentleman later. He also raised genuine concerns about the future cost implications for CLG of the private sewer network. I urge the Minister to look at that; I thoroughly support what the hon. Gentleman was saying. Costs are coming.
My hon. Friend the Member for Nottingham East (Chris Leslie), who is sadly no longer in his place, touched on the Supporting People programme. He must wonder what the Secretary of State was thinking when he said during the evidence session:
“I’m glad you have noticed that we have protected Supporting People.”
That is clearly not the case in Nottingham.
The comments of my right hon. Friend the Member for Tottenham (Mr Lammy) reflected a deep understanding of his constituency and the people he represents. Having lived in Tottenham and worked in Tottenham high road for many years during the 1970s, I understand the area well. His point about the importance of local authority services to community cohesion cannot be ignored.
In the negotiations between Whitehall Departments and the Treasury, the Secretary of State simply did not step up to the crease on behalf of local services and the Government funds on which local people depend. Rather than try to work with councils, he tried to squeeze himself into the club with the Prime Minister and Chancellor by settling early, irrespective of the consequences on local services. [Interruption.]
Let me explain for the benefit of Hansard that there are chuckles in the room. That may be for the image of the Secretary of State squeezing himself in anywhere. However, I do not believe that he is interested in hearing what local councils think. Perhaps the Minister can tell us how many local authorities the Secretary of State has visited since taking on the job—I think it was five; just five out of hundreds. The cuts being brought forward to local councils are greater than in almost any other area of government. It is a shame that the Secretary of State did not take time out to listen to the concerns of local councils.
For months we were told by the Secretary of State and his ministerial colleagues that there would be no front-loading of cuts to local services; we were told that the Labour party was scaremongering. Shortly before Christmas, we saw the figures from the Minister’s Department, and contrary to all the claims, the cuts were front-loaded. That will impact on front-line services. Although local authorities had pleaded for the cuts to be spread across the period of the comprehensive spending review in a way that would allow for the preservation of some services with a delivery model adapted to fit the funding cuts, there was only the cold reality of front-loading. That will see services halted, not transformed.
As I have mentioned, we heard from Baroness Eaton. She is a loyal member of the Conservative party and an experienced local government leader. She said:
“Local councils knew the cuts were coming”—
—that is true whether a Labour or a Tory Government were elected, and that point has been made by other hon. Members today—
“and had planned prudently to reduce spending over the coming years. We cut more than £l billion from our budgets in the middle of last year, rolled up our sleeves and got on with the job.”
That is what one would expect from local authorities.
“But the unexpected severity of the cuts that will have to be made this year will put many councils in an unprecedented and difficult position.”
The Government are beholden to revisit that matter before coming to any final decisions on funding and they should consider those comments carefully.
The Secretary of State does not even seem to acknowledge the difficulties faced by local authorities from front-loading. He sees it as a virtue, despite the comments from Baroness Eaton. It appears that no one was listening to local people and their representatives. The Secretary of State said:
“I think that the amount of front-loading, as it exists—there is a fair bit this year and a fair bit next year—is very important to encourage local government to deal with this whole question of restructuring.”
It is important that we remind ourselves what cuts to local services mean, and my right hon. Friend the Member for Tottenham made that point extremely well. The impact will be on adult social care for the elderly, day care centres, child protection, fostering and adoption, children’s centres, the quality of local housing and a host of other areas. The cuts will result in real damage to the levels of service that people rightly believe they deserve when they pay their council tax.
It would be wrong to say that only the Labour party opposes the cuts—we have a coalition of our own against the measures. The Conservative leader of Bury council said:
“it is almost impossible to absorb such vast figures in the time that we have available”
and it is on the time and speed of what is being proposed that the Labour party most disagrees with the Government.
The Liberal Democrat former leader of Liverpool city council, one of the most deprived local authorities that will be among the hardest hit by the Government proposal, said of Ministers:
“Either they really do not know how serious the situation is that they have created...or they are deliberately trying to distract attention from the problems that they have created.”
I ask the Minister: which is it?
As a result of initiatives by the previous Government, including Total Place where there were benefits of joint procurement, councils of all political colourings are already sharing back office functions. They are cutting executive posts and looking at executive pay. We all expect them to do that in the current circumstances. However, if every local authority cuts the post of chief executive and of every member of senior management, the money that would raise would not scratch the surface when set against the cuts that the Government demand from local councils. The argument about executive pay is valid; many councils have already addressed that and others will follow. However, when set against the lack of action on bankers’ bonuses, the Government lose all credibility.
The situation in Manchester that has dominated the news today will be replicated. Ministers should stop taking the public for fools and come clean about exactly what the cuts will mean to local services. They must stop trying to wind up the public into believing that this is all about the salaries at the top—the public are not stupid and will see through that smokescreen. Once the cuts start to appear, they will know that it is not simply a question of executive pay.
The CLG response to the CSR has been weak in terms of the fight to protect services for the most vulnerable. The way that the cuts have been distributed across local authorities is unfair, and the way that they have been front-loaded is reckless. I look forward to the Minister’s response.
The Parliamentary Under-Secretary of State for Communities and Local Government (Robert Neill)
It is a pleasure to serve under your chairmanship, Mr Robertson, and I will endeavour to encompass as much of this interesting, well-informed and wide-ranging debate as I can in the time available. I congratulate the Back-Bench Committee on selecting and nominating this subject for debate, and the Chairman of the Communities and Local Government Committee, the hon. Member for Sheffield South East (Mr Betts), on the thoughtful way in which he introduced it. He and I do not always agree about everything, but I never doubt his knowledge and interest in local government. I also pay tribute to that Committee; it does great work and a number of hon. Members who sit on it have spoken today.
Perhaps I can deal briefly with the background and then with some of the specifics in the contributions. I will not seek to make a lengthy issue of the economic background, save to say that it is the reality that no one can escape. In relation to the more partisan comments that were made, I have to say that it gives pleasure to no Government of any kind to find that they have to reduce the spending available for various services. However, as has been observed and, I think, accepted in varying degrees on both sides of the House, it was trailed well to everyone in local government and to the public that sadly, whatever the outcome of the general election, the country’s financial circumstances meant that reductions in public spending would be necessary.
When the coalition Government came to office and saw the extent of the problem, they concluded, rightly, that swift action was necessary to reduce the deficit. Otherwise, there were real risks to the economic health of the country and to the country’s international credibility. If that were not tackled and there were a serious economic downturn, which was a real risk, it would be an even greater threat to public services in the long term. A destroyed economy would make it all the harder to deliver the public services that we all want.
There may be a difference between us, but I say to those Opposition Members who criticise the speed and scale of the steps that we have taken that it behoves them—as they are, I regret to have to say, primarily responsible for the mess—to say what they would have done instead. Simply to criticise the Government, who are doing something that is starting to turn things around, is, in the circumstances, not good enough.
We have had to deal with the situation that confronted local government in a way that was fair and proportionate. I want to set the record straight on one or two matters that were raised. First, in relation to the settlement for local government as a whole and the picture compared to the rest of Whitehall, it is important to make it clear that against the 2010-11 baseline, the Department for Communities and Local Government will be making savings of some 33% on resource, but we will also be moving some £6.7 billion into formula grant. That is money that we are ceding to local authorities.
I think that it is some of those differences in the figures that produced the difference in the figures that the hon. Member for Sheffield South East was calculating. He referred to a 68% cut in the CLG budget. No, that is the combined total reduction in resource and capital funding by 2014-15. The resource funding was reduced by 33%, but we have chosen to devolve extra money by putting it into formula grant, rather than keeping it in the Department. So we have passed money down, within a tight settlement, to local government as a whole. In fact, our departmental resource support for local government will reduce by 22% compared with 33% for CLG as a whole, so we are protecting local government as opposed to the central Government elements of our spend. Similarly, although we have had to reduce capital support to local government, that reduces by a lower percentage than is the case for the CLG’s central departmental expenditure limit—the DEL, as it is called.
Against that background, we have endeavoured to support important programmes. We are putting £6.5 billion into the Supporting People programme. That constitutes a reduction of only 12% compared with the CLG’s 33% resource reduction overall. That is why my right hon. Friend the Secretary of State was right to tell the Select Committee that we had sought, in the circumstances, to protect Supporting People.
We have sought to make the settlement itself more progressive. I shall come to the imperfections of the formula in a minute, but within the formula that we have, we have increased the weighting given to the needs element to 83%. That is an increase from where it was before and will help more deprived authorities. Also, a number of authorities with significant problems faced the loss of the working neighbourhoods fund, which the previous Government set up but were terminating because it was a three-year programme. The present Government, recognising the difficulty, set up the transitional grant that has been referred to by hon. Members, so we have helped to cushion the loss of the WNF that the previous Government proposed to impose. Therefore, it cannot be said that we have not sought to be fair in the circumstances.
The hon. Member for Nottingham East (Chris Leslie), who is no longer in his place, made some comments about fairness and referred to the House of Commons Library paper. I am afraid that that paper was quoted selectively. The analysis also said:
“Excluding London, northern regions will receive more grant per head than their southern counterparts”.
It confirmed that formula grant per head in the north-east is, at £696, approaching double that in the south-east, which is £374, and that reductions in formula grant for the north-east and north-west were “clearly less” than those in the south-east and the eastern regions. Therefore, it cannot be said that the Government have sought unfairly to discriminate against areas where, we accept, there are difficulties. I hope that that puts some of the comments in context.
Let me deal with a couple of other points raised by the hon. Member for Sheffield South East. He specifically asked about business rates exceeding formula grant by 2013-14. For reasons that I shall come to, by 2013-14 the landscape will indeed look very different as a result of the local government resource review. As he knows, the review will consider allowing local authorities to retain business rates, and obviously we shall have to look at that in the context of the implications for resource equalisation and redistribution. There is a legal obligation to redistribute the business rate, and we do not intend to change that. The assumption was made that there would be a sudden pot of money and that there was no change to what the Government were doing. That is not the case: we have already announced our intention to make a change.
We are making the change because, as was pointed out in the powerful and impressive speeches of my hon. Friends the Members for Peterborough (Mr Jackson), for Meon Valley (George Hollingbery), for Halesowen and Rowley Regis (James Morris), for St Austell and Newquay (Stephen Gilbert) and for Harrow East (Bob Blackman), the formula no longer works. They all queued up, rightly, to say that.
We have recognised that there is a need for significant change to the formula and, rather than beating about the bush, we have established a local government resource review. I expect that the consultation documents will be sent out before the end of this month. We hope to do it from January through to June, and central to it is enabling local authorities to retain the business rates that they collect. Of course, there would also be an incentive for them to grow their tax base by growing their business rate base. That would enable us to rethink the operation of grant. Formula grant would no longer be operating in the same system. I totally accept the point made by hon. Members that in those reforms, it is crucial that we find something that is much more transparent than the Schleswig-Holstein question. Actually, this issue probably makes the Schleswig-Holstein question seem comparatively simple. So that is what we are doing.
Mr Betts
I hope that the Minister responds specifically to this question; it is an important one. Is he saying that when the Government go out to consultation on a new method of funding for local government, including local authorities keeping their business rate, they will also deal with the question of how, in that context, redistribution in terms of need and resources can also be achieved?
Robert Neill
It is intended to be a comprehensive review of local government resource. We shall have to consider all those issues. The hon. Gentleman will have to wait for the document itself. He will understand why I cannot go into detail; I am sure that we shall be laying a statement before the House about the content of the document. However, it is intended to be a comprehensive review of the resource, and I hope that the hon. Gentleman will be satisfied with what he sees in terms of its parameters. I know that the Select Committee will certainly want to discuss with the Department the way in which we carry the review forward, and we will welcome that. Against that background, the Government have sought to achieve a balance.
I accept the points made by my hon. Friends: we must be prepared to be a little less conservative with a small c in our approach to delivering local services. I do not think that small c conservatism is generally found on this side of the Chamber at the moment. Local authorities have worked hard to produce efficiencies—I accept that—but it is clear that yet more can be done. For example, the CBI has pointed out the considerable further savings that could be made by local authorities banding together to use their procurement powers. Baroness Eaton and her colleagues are up for doing that, and I am sure they will. It is not a question of chief executive pay, for example, closing the funding gap, but at times such as these, it is not illegitimate for the Government to say that if we have to prioritise, the message that pay sends is important. It is fair and proper to look at these matters in that context.
I take on board the important points made by my hon. Friend the Member for Harrow East, who was my old comrade-in-arms in the London Assembly. Given the Mayor we had, “comrade” was probably appropriate from time to time. I also agree with a comrade from the opposite side of the London Assembly, the right hon. Member for Tottenham (Mr Lammy), about support for the voluntary sector. It is hugely important, which is why the Secretary of State has repeatedly said that in these difficult times it is important that local councils do not fall back on the usual suspects in their approach to reductions, such as salami-slicing. They get rid of the voluntary sector grants first because they are the easiest, but often it is those voluntary sector groups that deliver public services in the most imaginative and innovative manner. That is where remuneration comes in and is why we are increasing transparency for the public over remuneration in the Localism Bill—that is the right way.
I hope that a director or chief executive on a six-figure salary signing off a report for a council recommending cutting a six-figure grant from voluntary groups will not feel entirely comfortable in doing so when looking at their comparative positions. That is a legitimate point in the context of this debate. We will all have to constrain expenditure that is not directed at the front line. That is not to rubbish the work done in local government, but it is right to accept that people are surprised when they see the salary inflation at that level; people are right to question whether that is the best way to spend the money. That is how the Department has looked forward.
We are, of course, keen to assist local authorities to grow their economies and to rebalance them. That is why, as well as the Supporting People programme, to which I have already referred, we are spending more than £2 billion on the decent homes programme, and continuing to support the disabled facilities grant and to facilitate the passage of the vulnerable into work in the community. The regional growth fund of £1.4 billion taken together with the local enterprise partnerships, set up with business and local councils as key partners, affords an opportunity to refocus economies. We seek to align that regional growth with the equal sum in the European regional development fund. Work is being done to channel such resource as we can afford into areas that will make the most difference.
References were made to housing funding and the benefit changes. It is worth remembering that even with the changes, a third of homes in London will remain affordable. About 17,000 households may be affected, but the choice they will be left with is no different to the choice that the low-waged who are not on benefits face. We cannot continue with a situation in which expenditure on housing benefits has risen from £14 billion to £21 billion. It is about getting the balance right. Of course, we will continue to liaise with our colleagues in the Department for Work and Pensions on those issues.
I see that time is creeping round, and I know that my hon. Friends raised other specific points. With your permission, Mr Robertson, I will respond to them by letter. Detailed matters, such as private sewers, are probably best dealt with in that manner.