19:57 - The House divided: - Ayes: 292 / Noes: 197 - Question accordingly agreed to.
The Secretary of State for Communities and Local Government (Mr Eric Pickles)
I beg to move,
That the Local Government Finance Report (England) 2011-12 (House of Commons Paper No. 748), which was laid before this House on 31 January, be approved.
Mr Deputy Speaker (Mr Nigel Evans)
With this we shall discuss the following motion:
That the Limitation of Council Tax and Precepts (Alternative Notional Amounts) Report (England) 2011-12 (House of Commons Paper No. 774), which was laid before this House on 31 January, be approved.
Mr Pickles
Over recent weeks, my coalition colleagues and I have had many conversations with local government. We have spoken to individual authorities, the Local Government Association, London Councils and other representatives, and let me say how much I respect the mature and responsible attitude that all have taken throughout those discussions. They know that we are sailing in choppy economic waters, and that cutting Labour’s massive budget deficit is the responsible and the right thing to do—and many have planned ahead.
Only the most blinkered could have failed to see tough times coming. The House will recall that the right hon. Member for Edinburgh South West (Mr Darling) said in March 2010 that if Labour were to remain in power we would see spending cuts “deeper and tougher” than those of the 1980s—I suppose that that is one Labour pledge we are able to deliver—so let us not pretend that anyone thought that we could spend, spend, spend indefinitely.
Tony Lloyd (Manchester Central) (Lab)
Even if the Secretary of State sets the context in terms of a cuts agenda for local government, why have this Government chosen to hit most harshly local authorities such as my own, the fourth most deprived in the country, while not inflicting the same level of cuts on authorities that are politically from a coalition background and socially in a much more advantaged position?
Mr Pickles
If the hon. Gentleman will forgive me, I will come to that point in a moment. If I do not satisfy him, I will happily give way to him again.
Thanks to Labour, the nation’s credit card is maxed out. The longer we leave it before we start to pay it off, the worse it will be and the more we will have to pay. Unless we tackle Labour’s borrowing, interest—just the interest—on its toxic legacy of debt will hit £70 billion a year by 2014-15. That is more than we currently raise from council tax, business tax, stamp duty and inheritance tax combined.
Mr David Blunkett (Sheffield, Brightside and Hillsborough) (Lab)
The Secretary of State mentions the business rate. Could he tell the House how much, in billions, the Treasury contribution will be in the coming year over and above the yield from the business rate, which has to be redistributed to local government in any case?
Mr Pickles
Last time we discussed this, the hon. Gentleman made some interesting suggestions about the level of the business rate with regard to the surplus. I am happy to confirm to him what I said last time: that the process of distribution from the Government is based largely on the uniform business rate, and any surplus—[Interruption.] The hon. Gentleman needs to understand that the settlement is made within a defined period and that business rate income goes up and down. The Treasury puts money in and takes money out according to the buoyancy of the business rate. The hon. Gentleman is a distinguished Member of the House who is very familiar with these matters, and he should know these things.
Ian Austin (Dudley North) (Lab)
He is right honourable, and he knows a lot more about it than you.
Mr Pickles
The hon. Gentleman is quite right to correct me; I beg the right hon. Gentleman’s pardon. He is indeed a very distinguished gentleman, and of course he knows a lot more than a lot of people in this House, including, I suspect, the hon. Gentleman. [Hon. Members: “Hear, hear!”] It is obvious from my hon. Friends’ reaction that I do not need to put that to a vote.
Mr Pickles
I will give way in a few moments.
The phasing of the settlement will be challenging. Councils can choose how they respond. Some have chosen to wring their hands and say that it is all too hard, or to play politics with front-line services. Others have chosen to step up and to protect vital local services, reducing every trace of waste, protecting the most vulnerable and reforming services to deliver better results for less.
Mr Pickles
The hon. Gentleman must pay more attention. When I say that I will give way in a few moments, that is exactly what I mean, but there is a queue, and he is a little way behind.
Hammersmith and Fulham, Kensington and Chelsea and Westminster councils are merging their back offices to save £35 million. West Norfolk is freezing council tax and car park charges, as well as councillors’ allowances. Reading borough council has decided not to cut but to increase funding for voluntary groups. We have heard today that Ribble Valley borough council has also decided to protect voluntary groups and not to cut front-line services.
I am grateful that many councils have brought the same constructive attitude to discussions about the funding settlement. They have helped us to put the finishing touches to a settlement that is sustainable, fair and progressive. We have focused resources on the most vulnerable communities. We have given more importance to the levels of need within each council. We have grouped councils in four bands. The most dependent on Government funding are seeing proportionately lower falls in grant. The more deprived places will receive far more funding per head than the better-off places. For example, Hackney will receive £1,043 per head and Wokingham will receive just £125 per head. These changes have made the system fairer and more progressive than ever.
Hazel Blears
The Secretary of State knows that I have raised the issue of business rates in this House on a number of occasions. To pursue the point made by my right hon. Friend the Member for Sheffield, Brightside and Hillsborough (Mr Blunkett), the Office for Budget Responsibility has forecast that the business rate take will be £24.9 billion for 2010-11 and £26 billion for 2011-12. The Secretary of State has distributed £3.5 billion less in 2010-11 and will distribute £7 billion less in 2011-12. Is he saying that the OBR forecasts are out of sync by £3.5 billion and £7 billion? Surely the rising trend in business rates means that there is more money in the pot. If he distributed more money, we would not have to have the cuts that we face.
Mr Pickles
I am most grateful to the right hon. Lady. What she needs to understand is that two figures have been suggested—one by the Office for Budget Responsibility. Following those figures, we decided to move some things from ring-fenced grants into the general grant. That accounts for the difference between the two sizes. With regard to the level of potential surplus, there is a possible notional surplus in 2013 and 2014. As I explained to the right hon. Member for Sheffield, Brightside and Hillsborough (Mr Blunkett), what happens is that within the total sum available for grant, if there is a surplus, all is redistributed. However, as happened under the right hon. Lady’s Government and under previous Governments, the amount in the revenue support grant is reduced on a compensatory basis, because the level of the total settlement is fixed. There is no difference; it is just a different way of calculating.
Mr Pickles
How can I turn down the hon. Gentleman? He has been up and down like Tigger.
Ian Austin
I am very grateful to the Secretary of State. Nobody disputes that savings have to be made by local authorities. [Interruption.] Well, nobody does. The Government cannot have it both ways. On the one hand, they say that we were planning cuts slightly smaller than those that they are imposing, and on the other they say that we were not planning any cuts at all. I am not sure what their argument is.
On the sorts of cuts that local authorities are making, is the Secretary of State aware that the axe hangs over Dudley’s benefits shop, which is helping people who have been made redundant during the recession and hard-pressed home owners who face the risk of repossession to sort out their finances? It seems an utterly ludicrous decision when it costs £300,000 a year to run and brings £2 million into the local economy, of which £1.5 million is spent on supporting local businesses. In the light of what he said about local authorities making inappropriate cuts that target the most vulnerable, will he join me in pleading with Dudley council not to close the benefits advice shop?
Mr Pickles
I feel a certain degree of camaraderie and fraternal friendship with the hon. Gentleman, because unlike his party’s Front Benchers, he has said that Labour’s cuts would have been just slightly less than those that we are presenting. I think that is probably true, but the challenge facing local government means that just a couple of million quid would not make all the difference. There are very challenging circumstances.
Joan Walley (Stoke-on-Trent North) (Lab)
Will the Secretary of State give way?
Mr Pickles
In a moment—I need to respond to the hon. Member for Dudley North (Ian Austin) first.
Let us consider a number of local authorities. Some have been talking about thousands of redundancies. I do not want to appear partisan, but Sheffield is talking about 250. Sunderland, a Labour council, is not planning percentage cuts in its Supporting People provision. Walsall is not planning to make an overall cut in its voluntary sector funding. It is possible to deal with the situation.
Mr Pickles
In a moment.
The hon. Member for Dudley North has to understand that these are local decisions. We have ensured that there are sufficient funds to protect the vulnerable, but ultimately local councils have to make local decisions.
Charlie Elphicke (Dover) (Con)
Does the Secretary of State agree that we are hearing a confused argument from the Opposition, but that it seems to involve a spending commitment of about £7 billion? That money would surely have to be made up through about 2p on income tax, would it not?
Mr Pickles
My hon. Friend is of course perfectly right. The Opposition seem to think that it is magic money, but it would actually come out of people’s pockets through business rates or income tax. The reason why we are in this position is that the guilty people on the Labour Benches allowed things to get out of hand.
Mr Mark Field (Cities of London and Westminster) (Con)
Will my right hon. Friend go into some detail for the benefit of the House about his commitment to the vulnerable through the transition grant allocations? I have had a cursory look at them, and they seem reasonably generous and seem to take account of the need to look after some of the most vulnerable parts of the country.
Mr Pickles
We have done three significant things. First, we moved the relative needs threshold to 83% from 73%, which makes a considerable difference and is far more than the Labour Government ever offered poorer communities. We then divided up authorities based on their level of funding, from the most dependent on grant to the least dependent, and ensured that the most dependent received smaller cuts. Then we managed to find an additional transitional amount to ensure that no authority loses more than 8.9%. I will have a further announcement to make about that.
Joan Walley
My constituents do not want the House to make politics of what is happening. Everybody understands the situation in respect of the cuts as a whole, but in areas such as Stoke-on-Trent, where we have deprivation and people out of work, we have made representations to the Secretary of State and his Ministers to say that we want time: we want time to plan how we can keep what is most important. This finance settlement gives us no encouragement whatever that this is anything other than the Government blaming local councils for what is happening.
Mr Pickles
The hon. Lady and her councils were given quite a lot of time. The former Chancellor, the right hon. Member for Edinburgh South West, made it clear that changes were going to be made, and a number of the most vulnerable areas were hit by the fact that it was made clear that the working neighbourhoods fund was going to end in March this year. It seems to me that a number of councils did not make any provision for that and blithely assumed that the money would continue, despite the fact that the Labour Chancellor made it perfectly clear that it was ending. Ladies and gentlemen on the Labour Benches who cheered his Budget announcement did not raise any objection at the time.
Mr Pickles
I will give way in a few moments, but I shall make a little progress, if the Chairman of the Communities and Local Government Committee will forgive me.
The changes make the system fairer and more progressive than it has ever been. The second thing that we did is try to marry the need to tackle the deficit with the need to help councils to adapt, as I told my hon. Friend the Member for Cities of London and Westminster (Mr Field). In December, I said that no council would face more than an 8.9% reduction in spending power and that we would provide a grant to cushion councils that would otherwise have had a sharper fall. Today, we are going further by increasing the transition grant to councils from £85 million to £96 million next year, which means that the average reduction in spending power is just 4.4% and that no council will see a reduction of more than 8.8%.
Let us look at one of the problems that we faced. Concessionary bus travel is a classic example of how the previous Government did things—they made a grand promise without any clue about how it would be funded. Administration of concessionary bus travel under Labour was a shambles. I do not think that councils should have to pay for the misjudgment of the Labour Government, so I am topping up the formula grant by a further £10 million next year to compensate shire districts.
Thirdly, we are committed to protecting local taxpayers. Council tax bills more than doubled under Labour, while front-line services such as bin collections halved. It is only right that we give hard-working families a helping hand.
Caroline Flint (Don Valley) (Lab)
Does the Secretary of State agree with the sentiments of his colleague, the Under-Secretary of State for Communities and Local Government, the hon. Member for Hazel Grove (Andrew Stunell), who in writing to Liberal Democrat councillors about the final settlement, says:
“This final settlement certainly does not solve all problems, nor does it add significantly more money into the pot. I know it will still be very disappointing for many councillors.”
Mr Pickles
Of course the settlement is very disappointing, but the Government would not do what we are doing had we not found the nation’s finances in chaos and with a record budget deficit. The only reason that we are doing this is that the right hon. Lady failed to control her party.
Mr Pickles
I would give way to my right hon. Friend, but I feel like I have been persecuting the Chairman of the Communities and Local Government Committee.
Mr Betts
The Secretary of State said that this is a matter for local decision, and that there is no need for any council to make cuts to front-line services. Can he name one single council in the country that has so far managed to reach a budget decision without any cuts to front-line services?
Mr Pickles
Yes, I can—Reading and Ribble Valley have done so. We have a list, but the hon. Gentleman is ascribing words to me that I did not say. I said that before authorities touch front-line services, they should look at sharing back offices, chief executives and top offices, move back services and improve procurement. That is what I said. There is a very big difference—right across the country—between councils that have attempted those things and those that have decided to cut deep into public services.
Mr Pickles
I will give way to my right hon. Friend, but then in a few moments I will of course do so for my hon. Friend the Member for Rugby (Mark Pawsey).
Sir Alan Beith
Does the Secretary of State accept that it was almost impossible to introduce the required degree of fairness to areas of low council tax income given the historical settlement that many local authorities, such as Northumberland, have suffered over the years and the financial crisis that faced the country? Do we not need to approach fairness again in a more fundamental review of local government finance?
Mr Pickles
My right hon. Friend is absolutely correct. I certainly hope that this year’s settlement and next year’s are the last ones to be put together on the current corrupt, useless and incomprehensible system. It is the Government’s intention fundamentally to review the local government financial system, and I hope to bring proposals to the House later in the year.
Paul Goggins (Wythenshawe and Sale East) (Lab)
The Secretary of State has praised some local authorities for planning ahead for cuts, but he did not mention Manchester, which was planning to make cuts of £50 million. However, because he singled out one of the neediest cities in this country for one of the worst settlements, the council is now having to save £110 million next year and £170 million over two years. When a council has to lop off £39 million from adult services and £45 million from children’s services, how can he say that he is protecting the most vulnerable?
Mr Pickles
There does seem to be a big difference between how Sheffield and other large authorities are going about this, and how Manchester is going about it. The reduction purely in grant is some 15% over the period, but the council is choosing to cut 25%—above and beyond the reduction in grant. But those figures only really stack up if we completely ignore the level of council tax revenue. That is why we are able to say that no authority is receiving a reduction in their spending power of more than 8.8%. That remains an absolute fact, on a measurement that those on the Labour Front Bench urged us to use. The Local Government Association also suggested that measurement, and it is a very sensible way of doing things.
Henry Smith (Crawley) (Con)
My constituency has some of the most deprived areas anywhere in the region, but for the last eight years we have received among the lowest local government settlements there have been. My local authority has been preparing for the even tougher times we face because of the economic crisis that we were bequeathed. Why does the Secretary of State think that other areas of the country have not?
Mr Pickles
It appears that there are two kinds of authority. There are Conservative and Liberal Democrat authorities that seem to be making a genuine attempt to protect the front line, as are a significant number of Labour authorities, but there are several that are simply grandstanding. They have perhaps made one or two financial mistakes in the past and are seeking to hide them by claiming that the financial settlement is the problem.
Mark Pawsey
My right hon. Friend spoke about the need for councils to control executive salaries. Does he have some words of comfort for Rugby borough council, which has chosen to save £100,000 by not replacing its chief executive and devolving the responsibilities to deputies and the elected leader of the council?
Mr Pickles
Hammersmith and Fulham is obviously the apple of my eye in London, but the decision taken by my hon. Friend’s council is a very sensible one. I am delighted that chief executives have taken a cut in salary, and I am even more delighted that the salaries advertised for chief executives have gone down considerably.
It is only right for hard-working families to be given a helping hand. We are providing an extra £650 million so that local authorities can freeze council tax for a year from April without local services losing out. We give each council that freezes or reduces council tax the equivalent of a 2.5% increase instead. More than 130 councils have already said that they will take this offer and more will follow as they finalise their budgets. No council should think that it can get away with squeezing its residents.
In the long term, local people should have the power to veto excessive council tax rises, but for the time being the Government will use their capping powers to protect them. Today I have laid before the House a written statement explaining the principles that we are using to define what excessive council tax means. An authority will be liable to be capped if it couples an increase in council tax of more than 3.5% with a reduction in its budget requirement of less than 7.5%. However, for most council tax payers, I very much expect this to be largely an academic exercise, because I believe that every local authority will freeze council tax in this difficult period.
The public will be helped in that process by increased transparency. I am pleased to announce to the House that every council in the country has now agreed to publish every amount over £500, so that their council tax payers can judge whether cuts in services or decisions about those services are just. I say “every council in the country”, but I mean “every council in the country with the exception of Nottingham”. The Labour deputy leader in Nottingham says that the council has
“no intention of publishing the data unless it is forced to do so by law.”
He says:
“We have said that we will publish accounts over £500 if it becomes a legal requirement to do so,”
before adding, rather peculiarly:
“We are happy for information to be”
transparent. Well, information cannot be transparent unless it is published. How come every council tax payer in England can look on their council’s website and see how it is spending their money except for those in Nottingham? Is there something peculiar about people in Nottingham that means that they cannot be trusted with that information?
Mr Pickles
I shall give way in a moment, once I have made this point. The right hon. Gentleman is a senior Member of the House, but I would be grateful if he extended me the courtesy of allowing me to make a few points.
The deputy leader of Nottingham city council is a gentleman called Graham Chapman, which is obviously the same name as the late and long-missed member of “Monty Python’s Flying Circus”. It seems to me that the right hon. Member for Don Valley (Caroline Flint) should get on the phone to that gentleman and tell him, as his namesake’s mother did in “Life of Brian”, that he might be the deputy leader of Nottingham city council, but he is a very naughty boy. If it is necessary for me to use the powers that I have to force Nottingham, I will, but why should this process be held back by one obdurate council that simply wants to play politics with transparency?
Hazel Blears
Let me take the Secretary of State back to his assertion that no council will lose more than 8.9% of its grant. Is he not completely ignoring the fact that the poorest authorities get area-based grant? Some 11% of my council’s budget in Salford is ABG, because we are deprived and poor, and we need extra help. Slashing the area-based grant means that our cuts next year will be 15%, which is a massive amount in the first year.
Mr Pickles
I can bring better news to the right hon. Lady, because the figure will not be 8.9%, but 8.8%, which I hope she finds helpful. She arrives at those figures only if she completely ignores the figures for council tax, which are such that we can give her a guarantee that her council’s spending power will not be reduced by more than 8.8%. Because I have enormous respect for her, I shall make just one further point. I thought about this issue seriously, in a situation where money was clearly being reduced, and I came to the conclusion that if I increased relative need, the best way to help authorities such as hers in taking the money down would be to put it into the block grant. That is because the block grant has such a distributive effect. I accept that there is a degree of swings and roundabouts involved, but her authority came out of that process better than it might otherwise have done.
Mr Blunkett
This issue of transparency is absolutely crucial. Is it not a fact that the 8.9% and the distribution of grant took place after the area-based grant—and therefore the specific funding for specific deprivation—had already been taken out?
Mr Pickles
The right hon. Gentleman will forgive me for correcting him: it is not 8.9%; it is 8.8%. We have put some additional sums into the process—[Hon. Members: “Answer!”] I am sorry that he perhaps did not hear the answer that I gave to the right hon. Member for Salford and Eccles (Hazel Blears). I took a view, which I think was correct, that his authority, Sheffield, would have lost out more had we not put those sums into the block grant. He seems to forget that we have moved relative need to 83%.
Thanks to the constructive approach of many councils, we have arrived at a funding settlement for the next two years that is progressive, fair and sustainable. It is important to see this settlement in context. This coalition Government are committed to an historic shift of power and influence. We are seeking to restore real responsibility and authority to councils. We are ending the regional spatial strategies, comprehensive area assessments and local area agreements, and we have made a bonfire of the three-letter acronyms.
The general power of competence in the Localism Bill will give councils confidence to get on with the job. We have already ended grant ring-fencing, with a few exceptions, so that councils can decide for themselves how to spend their money. I am determined that we will continue to push back the tide of bureaucracy, end once and for all the micro-management from Whitehall, and give councils the space to show the ingenuity, ambition and leadership that local people expect. The settlement shows that this coalition Government will not shy away from the tough decisions needed to tackle Labour’s public sector deficit, and we will continue to do everything possible to support local councils as they protect and improve front-line services over the years to come.
Caroline Flint (Don Valley) (Lab)
We have heard it all this afternoon. We have heard every possible excuse and cop-out, but we have not heard a single word of apology to the thousands of councillors up and down the country who give up their evenings and weekends, and much else besides, to make their community a better place to live and who are now being forced to implement the Secretary of State’s cuts. We have heard no apology for the fact that this Government have chosen to impose huge front-loaded cuts on local councils the length and breadth of the country. Those cuts will be deeper and faster than those made by almost any other Whitehall Department, and they will fall hardest on the poorest places. They will cost jobs and threaten vital front-line services.
Today the Secretary of State has tried to pull a fast one, but he has not convinced our own Labour councillors, or even many Tory or Liberal Democrat councillors. In fact, I do not think that he has convinced anyone at all. Once again, he has come up with a whole host of reasons why this finance settlement—which, by common agreement, is the worst funding settlement for local government in living memory—is not as bad as it sounds, but he is not fooling anyone.
Over the past few months the Secretary of State and his team have given us reasons why local authorities should not have to tackle difficult decisions about front-line services in their communities. They have told us that there are other ways in which local authorities can make savings. We have heard that councils are sitting on piggy banks with £10 billion-worth of reserves, yet 70% of that money is already reserved for specific projects, so the figure is nowhere near as high as £10 billion.
More to the point, the cuts to local councils go so deep and fall so heavily that three quarters of single-tier and county councils have less in their reserves than the cuts to this year’s funding. Even if they took up the Secretary of State’s suggestion and spent all their reserves trying to mitigate the damage the Government’s cuts have caused, it would still not be enough. And when next year came, councils would face an even worse funding crisis—but this time with no reserves to call on. That, Madam Deputy Speaker, is
“the economics of the madhouse”.
Those are not my words; they come from a letter from the Conservative leader of Derbyshire county council, Andrew Lewer, who chastised the Secretary of State for peddling “misleading” myths about council reserves. We all know that the right hon. Gentleman likes to talk about bins, but when even his own colleagues tell him that he is talking rubbish, perhaps he should sit up and listen. If he will not listen to them, he should at least take note of his Front-Bench colleagues. However loyally the Under-Secretary of State for Communities and Local Government, the hon. Member for Hazel Grove (Andrew Stunell) nods his head in agreement this afternoon, we know what he really thinks from a private letter he sent to Liberal Democrat councillors. He freely admits that in some cases the figures quoted by the Department for Communities and Local Government were rejected as inaccurate. As I mentioned earlier, another quote from the letter reveals the Under-Secretary’s disappointment that so little has been put into the pot, despite the representations of his Liberal Democrat colleagues.
Another area Ministers have looked at is how to plug the gap by dealing with executive pay. Councils were told that if they could not use their reserves, they could cut executive pay. If they did that, they were told, it would be enough to protect jobs and services. I have made it clear time and time again that local councils have a duty to find the best deal for council tax payers—and that includes ensuring that council executives are not paid over the odds and cutting down the size of management teams at the top of councils. In fact, we have gone further than the Secretary of State’s proposals on pay and transparency in the Localism Bill, and I urge him again to include consultants and contractors hired by local authorities when pay details are published.
The suggestion, however, that simply trimming executive salaries by a few thousand pounds here and there is enough to plug a funding gap of £6.5 billion is just fanciful. If every chief executive of every local authority took an immediate 50% pay cut, it would yield less than 0.5% of the savings that need to be found. Even if the entire senior management team of every council in England reduced salaries by 25% overnight, 97% of the cuts would still need to be made.
Charlie Elphicke
Does the right hon. Lady agree that it is not simply a question of excessive pay, but of excessive pay-offs? Nottingham council was mentioned, and a brief piece of research shows that Sallyanne Johnson received a £250,000 pay-off, Michael Frater £230,000, Adrienne Roberts £500,000, and Tim Render £200,000—all in recent times. Will she condemn the administration of Nottingham council for wasting that money?
Caroline Flint
We can all trade examples, so let me provide the hon. Gentleman with one from Hammersmith and Fulham council—one of the Secretary of State’s favourites. Is it acceptable to hire for £1,000 a day a consultant who has already been retired, on a £50,000-a-year pension, on grounds of ill health from another council?
Value for money and accountability for senior pay are important, which is why we supported those elements in the Localism Bill—but we are going further than the Government suggested, and we hope to gain support for that. However, the reality is that for all the grandstanding on this issue, it does not make a dent in the amount that councils have to find to deal with the front-loaded cuts that the Government have chosen to impose on them.
Graham Stringer (Blackley and Broughton) (Lab)
My right hon. Friend mentioned the letter sent by the Under-Secretary to Lib Dem councillors on Stockport council; she will be aware that his postage bill will go down quickly, as Lib Dems are leaving the Lib Dem group because they know the truth about this settlement. Does my right hon. Friend agree that the Secretary of State is talking nonsense when he speaks about giving power to local authorities and being fair, because local democracy is, in fact, taking a much bigger cut than his own central Government Department?
Caroline Flint
My hon. Friend has made a very good point about the unfairness of the cuts. The Government are passporting the blame on to local councils, and that is not fair. My hon. Friend, like other Labour Members, has long experience of local government that can inform our debate. We are in touch with local government, which is one of the big differences between us and those on the Government Benches.
Chris Heaton-Harris (Daventry) (Con)
The right hon. Lady suggests that cuts in executive pay constitute a mere pinprick in the savings required. Yet according to a press release from Hampshire county council that I received yesterday, the council expects to save some £7 million in executive pay in the current year. That is just shy of 20%—[Interruption.] Opposition Members suggest, in sedentary interventions, that £7 million in a single year may be an unlikely figure, and that may be so, but even if it is over three years—[Interruption.]
Madam Deputy Speaker (Dawn Primarolo)
Order. The hon. Gentleman must resume his seat.
Chris Heaton-Harris
Even if it is over three years, it still amounts to 7% or 8% of the total savings required. Does the right hon. Lady regard that as insubstantial?
Madam Deputy Speaker
I know that the hon. Gentleman heard me earlier; he clearly saw me. Interventions must be short.
Caroline Flint
I do not know how to follow the hon. Gentleman’s intervention, because it is a good example of the grandstanding that has been going on. I should love the hon. Gentleman to send me the figures from Hampshire county council. Seven million pounds a year? I should very much like to see those figures, because I am not sure that they relate only to senior executive pay.
I have made it clear that I am not standing up for those who pay over the odds. [Interruption.] I have made that very clear, as the Minister for Housing and Local Government will see if he consults Hansard. What I am saying is that it is a distraction to suggest that the sort of cuts in executive pay that I have described, whether they involve 50% of chief executives or 25% of the senior management team, can make a significant dent in the savings that councils are having to find.
We are often told that if councils cannot use their reserves and if cuts in executive pay are not enough, they can make their savings by sharing services or merging back-room functions. Let us leave aside the fact that more than 200 councils are already sharing services or facilities, or are planning to do that. If creative service redesign could protect services and stop unnecessary job losses we would support it, as would our local Labour colleagues, but by front-loading the cuts as the Secretary of State has chosen to do, the Government have given councils no choice other than to find immediate savings, which will actually mean cuts in services and jobs.
We have heard a great deal today about Westminster, Kensington and Chelsea, and Hammersmith and Fulham, but as ever, the devil is in the detail. When we go beyond the headlines, we find that although those councils will lose more than £50 million in funding this year, savings for this year amount to only £5 million. We can only conclude either that the Secretary of State is so detached from the real world that he does not understand that, or that this is a deliberate tactical attempt to distract attention from the problems created by the Tory-led Government. In either event, councils and the communities that they serve deserve better.
James Morris
Is not one of the remarkable aspects of the settlement the fact that, in these difficult times, the Supporting People grant has been relatively protected by the Secretary of State? He has done precisely what I think the right hon. Lady wants to do, which is to ensure the protection of the most vulnerable. Should not the right hon. Lady be celebrating that?
Caroline Flint
I am not sure that there is anything to celebrate. Whether we are talking about the Supporting People grant or Sure Start, one thing is certain: neither has not been ring-fenced, and therein lies danger. Manchester city council, for instance, faces a 35% cut in its Supporting People grant.
Mr Pickles
I am sure that the right hon. Lady would not want to put an incorrect statement on the record. Will she confirm that the Supporting People fund was not ring-fenced under the Labour Government?
Caroline Flint
Unlike the Secretary of State’s hon. Friends, we put money into the Supporting People grant to support local initiatives. Now councils face cuts in their Supporting People funding, and have no alternatives to the decisions that they are having to make.
Mr Andy Slaughter (Hammersmith) (Lab)
I will talk about the myths of Hammersmith and Fulham later if I have the opportunity, but for now may I correct my right hon. Friend by pointing out that £2.9 million is the saving for the three boroughs next year—£500,000 from Hammersmith and Fulham—out of £27 million in total savings? The sum the Secretary of State said the three councils would save when he launched the initiative last October was £100 million. That is the sort of voodoo economics we are dealing with here.
Caroline Flint
My hon. Friend always enlightens us as to the true nature of what is happening in Hammersmith and Fulham. Only in the last week we have heard about a building that houses some 30 charities, from which many of the charities are being evicted. I heard only the other day that Hammersmith and Fulham council is so in touch with the big society that refugees from Afghanistan who were seeking support were directed to an Afghan society that happened to be an Afghan hound society. That shows how in touch those people are with the concerns of their residents, and the extent of their knowledge of the charitable and voluntary sector.
Mr Betts
In the last Parliament the Communities and Local Government Committee conducted a report on Supporting People. It accepted the removal of the ring fence, but said that spending on Supporting People should be monitored. Perhaps as a result of that, the day after the Secretary of State appeared before the Select Committee in December, Westminster city council announced a £1 million cut in its Supporting People services.
Caroline Flint
I always bow to the experience and knowledge of my hon. Friend. This will all come to light in the weeks and months ahead as the budgets are set, and I think we will see that no Members on the Government Benches will stand up for Supporting People. We know that the losses on the ground are affecting people, and the services they have relied on for so long.
As all the excuses have fallen away, and as the reality of the pace and depth of the Government’s cuts hits home, so Ministers’ accusations and attacks on local government have become more desperate and outlandish. The real impact of these cuts is becoming clearer day by day. Some 450 libraries around the country are under threat of closure, including four in the Prime Minister’s constituency, 250 Sure Start centres serving 60,000 families look set to close by the end of this year, and despite all the Secretary of State’s exhortations, because of the cuts he has imposed half a million British home owners have had their weekly bin collections scrapped. As for housing, his cuts in the housing budget mean that, for all the current Government’s criticism of the last Government’s record, once the homes that Labour started building are completed no new social homes at all will be built for the duration of this Parliament.
When 70p out of every pound councils spend goes on staff, it is madness to believe that people will not lose their jobs. The only advice we have from the Government comes from their big society guru, Lord Wei, who this week told council workers to cut their hours and their pay and spend more time volunteering. That will be of little comfort to the tens, if not hundreds, of thousands of people who lose their jobs this year. According to Unison, 100,000 people in council, health, police, fire and education services have already been warned their jobs are at risk. The GMB has kept a running tally of the number of workers who have been told their jobs are under threat, and, as of last week, it suggests more than 155,000 posts are at risk.
Let us talk about the organisation that has actually conducted some research in this area: the Local Government Association. It believes that 140,000 council workers will lose their jobs this year. I saw the Minister for Housing and Local Government on TV only last night attempting to argue otherwise, but the LGA’s figures are based on evidence—on research covering 202 councils employing 1.85 million people. The Minister’s arguments are based on the hope that, “If we say something enough times, eventually people will start to believe us.”
Gordon Birtwistle (Burnley) (LD)
Why is Liberal Democrat-controlled Sheffield city council making only 250 people redundant, yet the figures for Labour-controlled Manchester city council and Liverpool city council are 2,000 and 1,500 respectively? Could it be that the Labour councils are not interested in making proper savings, whereas the Liberal Democrat and Tory councils are?
Caroline Flint
Well, so far as Sheffield is concerned, part of the problem is that the Liberal Democrats are running scared. They have deferred the decisions because they think they can pull the wool over the eyes of the people of Sheffield, but I have to say to the hon. Gentleman that that is not going to work.
I want to say something about back-room staff in local government. Efficient administration: yes, of course we need that, but every organisation needs people in the back-room as well—even the Secretary of State’s Department. It is a pretence to believe that administrative jobs are not necessary. Worst of all is the unfairness. The communities who rely the most on the services that their council provides will be hardest hit. Every time the Government hit the airwaves we are told how progressive this settlement is—but I am afraid that they do not know the meaning of the word. What is fair about the most deprived communities facing cuts four times as deep as those in the most prosperous areas? What is progressive about a finance settlement in which every resident in Hackney loses £180, while people in the Prime Minister’s constituency lose only a fiver? Even Liberal Democrat and Conservative councillors know that that is neither fair nor progressive.
The Tory leader of Blackpool council, Peter Callow, told the BBC that this Government had “let down poorer areas”. Perhaps that is why David Faulkner, the Liberal Democrat leader of Newcastle council—the Liberal Democrats’ flagship council in the north-east—agreed that the Secretary of State is
“the worst Secretary of State we have had”.
Perhaps that is why, in a private e-mail sent to Liberal Democrat councillors from the Local Government Association just last week, we learnt that—[Interruption.] I know that the Secretary of State does not want to listen to this. We learnt that
“concerns about the weakness of the Secretary of State have been raised within all three of the main political groups at the LGA and the message has been heard loud and clear by leading figures in the Government. The situation has been likened to having a republican in charge of the monarchy.”
As for the big society, with every day that passes it looks more and more like a big sham. We have heard from Volunteering England, which accused the Government of undermining charities. Last week Liverpool City council had to pull out of the big society pilot because it saw how ridiculous it was for the Government to laud the virtues of the voluntary sector on the one hand, while pulling the rug from underneath it on the other. Just this Monday, Dame Elisabeth Hoodless of Community Service Volunteers warned that the “draconian” cuts to local government were “destroying volunteering”. But as the Prime Minister said earlier this afternoon, what does she know? She is only the mother of the big society, the executive director of Britain’s largest volunteering charity.
Up and down the country, as a direct result of the choices of this Government, councils are being forced to cut back funding to community groups and voluntary organisations. If they cannot pick up the reins, who will take responsibility for providing the services that this Government have dismantled?
However, Ministers’ most insidious claim is that councils that have built up good services to help poor, elderly or vulnerable people will deliberately cut those services, rather than bureaucracy, in order to cause suffering for political gain. That is an outrageous slur, and it is beneath the dignity of Ministers to level the claim. It is a sure sign of how empty the Government’s arguments are that they drag out that myth in order to slander the reputations of decent councillors.
The blame for all this lies solely and squarely with this Tory-led Government, because the biggest myth of all is that there is no alternative. Madam Deputy Speaker, there is an alternative. We do not deny that there is a deficit and that it needs tackling, but the Government’s decision to eliminate the deficit over this Parliament is a choice, not a necessity. Labour’s plan was to halve the deficit over four years. That would have meant local government cuts, but not cuts as deep as this. The Government’s decision to front-load the cuts, so that the heaviest reductions fall in the first year, is a choice, not a necessity. We would have spread the cuts more evenly over four years, giving councils time to plan where savings could be found. The Government’s decision to skew the funding system so that the poorest councils are hardest hit is a choice, not a necessity. We would have shared the cuts much more fairly, ensuring that those with the broadest shoulders bore the greatest burden. The Government have made their choice, and they must take responsibility for the consequences.
Flush with cash from their chums in the City, this Government may be laughing all the way to the bank, but local councils and the communities they serve are crying out for more help and more time. In every part of the country and in all communities, people are rallying together, standing side by side, shoulder to shoulder, against this Government’s reckless cuts. They are the real big society, and they are telling this Government that they are going too far, too fast. The teaching assistants, social workers and street cleaners marching for their jobs: they are telling this Government that they are going too far, too fast. The pensioners occupying their local libraries and clearing the shelves of books: they are telling this Government that they are going too far, too fast. The families going door to door with petitions to save their local Sure Start centre: they are telling this Government that they are going too far, too fast.
The Government are not listening but we are, and that is why, today, Labour will vote against a local government settlement that reflects none of the concerns of councillors and communities about going too far, too fast. I urge all Members to stand up for their communities and the services they hold dear, and join us in the Lobby tonight.
Madam Deputy Speaker (Dawn Primarolo)
I have to announce the results of the Divisions deferred from previous days. In the Division on the question relating to the financial stabilisation mechanism, the Ayes were 297 and the Noes were 45, so the Ayes have it. On the question relating to police, the Ayes were 501 and the Noes were 18, so the Ayes have it. On the question relating to taxation of the financial sector, the Ayes were 295 and the Noes were 223, so the Ayes have it.
[The Division lists are published at the end of today’s debates.]
Andy Burnham (Leigh) (Lab)
On a point of order, Madam Deputy Speaker. I am sorry to interrupt the House, but this is on a matter highly relevant to this debate. At Prime Minister’s questions earlier today, the Prime Minister gave an inaccurate picture about Sure Start funding to this House. He said:
“On Sure Start, the budget is going from £2.212 million to £2.297 million. That budget is going up. That is what is happening.”
There are two problems with that statement. First, those figures do not refer to the Sure Start budget; they refer to the early intervention grant, which pays for 21 separate programmes in addition to Sure Start. Secondly, the budget is not going up. The Prime Minister’s figures compared 2011-12 with 2012-13. If he had compared this year’s budget of £2.483 million with that in 2012-13, he would have found that there is a cash cut of £186 million.
Councils are making some very difficult decisions on these matters right now, and it is only fair to them to put the correct figures on the record and in the public domain. I wonder whether you might ask the Prime Minister to set the record straight, Madam Deputy Speaker.
Madam Deputy Speaker (Dawn Primarolo)
That is not a point of order for the Chair. The right hon. Gentleman is very experienced, and I am sure that he will find other ways to pursue those particular points about statements that have been made in this House. He is right to say that this is a very important debate on the question of local government funding. Perhaps other hon. Members might wish to reflect on what he has said, but we will move on and continue that debate.
Mr Andrew Turner (Isle of Wight) (Con)
I shall keep my comments relatively brief, Madam Deputy Speaker. I wish to start by thanking the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Bromley and Chislehurst (Robert Neill) for receiving a pre-Christmas delegation from Isle of Wight council. During the meeting, the council accepted that it must play its part in tackling the massive structural deficit left by the Labour party. It also accepted the vast majority of the figures and calculations in the draft local government settlement. The council queried only one point in it with him. The argument was solely about the baseline figure used for local transport and concessionary fares. The council contends that a miscalculation has denied it additional grant of almost £900,000, which obviously has an effect on the council’s overall spending power. The Government say that in 2011-12 Isle of Wight council will have £6 million less to spend than in the current year, whereas the council suggests a figure of £7.5 million.
The Government’s spending power figure covers all the council’s income available for it to spend. That is clearly the best way of presenting the figures: looking at the picture as a whole, rather than taking any single figure in isolation. The council has given me details of the notional figure, the effect of damping, schedule D, the transfer of functions between authorities and the baseline figure that it believes is wrong.
I do not, however, intend to go over all that again. Doubtless the council’s view on all those points was put very eloquently during its meeting with the Minister. Figures can be presented in many ways, and they certainly have been, both on the island and nationally, but I am speaking today because I see the very real distress caused to my constituents at proposals that will affect services they value and the fabric of our life on the island. Among other things, island communities might lose libraries and public lavatories unless, in some cases, those services are taken over by town and parish councils, thus putting up the local precept—the town and parish rates. The changes should have been made separately from the Budget, preferably in the period between last June and December. After all, we won the election in May and there was time to do it then rather than making these changes in a last-minute rush. However, we are where we are, as they say.
I understand that the arguments about the draft settlement report have been considered and that decisions have been made, but the council says that the baseline figure that it says has been miscalculated will affect the settlement for future years. We all know that the complete financial mess the coalition Government inherited from the Labour party is the real problem and that neither councils nor the Government can go on as they have in the past, but I urge the Minister to consider the technical arguments that Isle of Wight council put to him. He and the Secretary of State should consider whether those arguments have merit and, most importantly, whether my constituents are losing out because of the way in which the figures have been calculated. I hope that the Minister can assure me that if there is any doubt about that he will enter into further dialogue with the council so that the effects can be addressed as soon as possible.
Mr Clive Betts (Sheffield South East) (Lab)
The Secretary of State has obviously listened to many representations in the past few weeks, but the question is whether he has actually heard what people have been saying and whether he is prepared to act. Today, we have found out that, presumably after prostrating himself on the floor before the Chancellor, he has come away with a further £10 million.
Mr Betts
Local authorities are going to get a further £10 million on top of the settlement they were previously promised. Even if that £10 million was given to one authority, such as Salford, instead of its reduction in total spend being cut from 8.9% to 8.8%, there would hardly be dancing in the streets. Authorities such as mine in Sheffield are getting nothing extra out of that small amount of additional money: they will still get a cut of more than 8%.
Mr Pickles
The figure is £10 million extra to district authorities. That is why the cut for authorities is no longer 8.9% but 8.8%. Extra money has gone in—not a lot, but we have been able to drop the cut a little.
Mr Betts
The Secretary of State’s words are very apposite—it is not a lot of money, but there are an awful lot of reductions up and down the country that local government is having to deal with.
My first point, which I made in a Westminster Hall debate but still have not received an adequate response to is that the overall cuts in Government expenditure over the four-year period are 19%, whereas the cuts for local government are 26%. Why is local government experiencing higher cuts than the overall average cuts to Government spending? We know that the services delivered by local government are important to our constituents. Some of those services go to those in most need—social services provision for aids and adaptations and for looked-after children. Some of them concern quality of life—for example, libraries, parks, playing fields and sports centres—and others are essential, such as refuse collection, street repairs and street lighting.
Most local authorities are doing all they can to protect their social services provision and to protect looked-after children and children with particular disadvantages, so it should come as no surprise that even when they have looked at back-room services and sharing services with other authorities, councils throughout the country of all political persuasions are cutting services such as libraries and bus services and changing their methods of refuse collection.
Henry Smith
Will the hon. Gentleman acknowledge the billions of pounds added to social care budgets in the comprehensive spending review?
Mr Betts
There were ear-marked allocations, including some transferred money from NHS funding, but even so local authorities are facing severe reductions. Westminster, a flagship Conservative authority, is cutting £1 million from its Supporting People budget. Hammersmith and Fulham was named for cutting eight community centres, I understand. Gloucester and Somerset councils are cutting libraries and closing them. Those are cuts in front-line services. Even authorities that are sharing services and cutting management costs still have to cut front-line services. Why has local government been singled out for bigger cuts than the rest of central Government combined?
Brandon Lewis (Great Yarmouth) (Con)
Does the hon. Gentleman acknowledge that local authorities across the country, such as my own in Great Yarmouth—we are a deprived area that has been hit with cuts—have said that they can deal with the changes without affecting front-line services? They are looking to do that through back-office savings and cross-working with other authorities.
Mr Betts
All I can say is that the hon. Gentleman’s authority must have had a much more favourable settlement than many others that are making those cuts. That is not happening on a party political basis. Conservative and Lib Dem authorities are making cuts as well. I am more than happy to receive a list from the Secretary of State of all the authorities that are managing the process without any cuts in front-line services. It will not include many Conservative and Lib Dem authorities, which are presumably making cuts not to spite the Government, but because of the position that they have been put in by the Government.
Mr Betts
I am sorry, but I must make progress. Other Members want to speak in the debate.
My next point is one made by the Local Government Association on a cross-party basis. Why are the cuts front-end loaded? Will someone explain? Even if the Government feel that they have to make the cuts over the four-year period, why are they front-end loaded?
Simon Kirby
Does the hon. Gentleman think it is right that this country is paying £120 million per day to service the interest on the debt that his Government ran up?
Mr Betts
That is not the intervention that I was expecting. I thought that as those on the Front Bench could not help me, the Back Benchers would.
Why are the cuts front-end loaded? Why do nearly half the cuts come in the first year? I was in Croydon council on a Select Committee visit on Tuesday. Croydon council is a flagship Tory authority. It has participated in Total Place, it has community budgeting, it is part of the big society project and it is enthusiastic about it. The leader of the council sat across the table and said to me, “The thing that is really affecting us and may stop us delivering on projects like community budgeting and the big society is the front-end loading of the cuts, which is making it impossible for us to deal with them in a planned and organised way.”
That is a Conservative authority, and the Local Government Association is saying exactly the same. The front-end loading is forcing the cuts up front, which makes it harder to reorganise and to provide services in a different way. It means more money being spent on compulsory redundancies. It is a major problem, and nobody will explain why the cuts must be front-end loaded. Why?
Charlie Elphicke
Do not many local authorities have substantial reserves? The reason for having reserves is to provide a cushion. Manchester, I believe, is cutting 2,000 staff, yet it is sitting on £100 million of reserves. How can that be justified?
Mr Betts
—over which authorities do not have discretion. The figures include the housing revenue account and working capital that is needed to manage the cash flow of an authority, and they probably include identified sums in the authority’s capital accounts for major projects. All those things tend to get lumped together. The Secretary of State says that is not true. If he produced a list of figures for each local authority that extracts all those sums, that would be very interesting to see. I look forward to a copy of that being placed in the Library.
Paul Goggins
My hon. Friend might like to comment on the claim made by the hon. Member for Dover (Charlie Elphicke), because Manchester city council will have to spend £60 million of its reserves simply making people redundant as a result of the cuts.
Mr Betts
The Secretary of State has had an exchange of letters with the Conservative chair of the Local Government Association, who has complained bitterly that if more than £200 million is required nationally in capitalisation to pay for redundancy costs, that will result in a further cut in the grant to pay for it.
I will move on to the spread of the cuts. It is undoubtedly true that local authorities in the most deprived areas are getting the biggest cuts. Government Members will say that those authorities have the biggest grants, which by and large is true, but that is because they have the biggest needs and the most deprivation. The reality is that my local authority is getting more than an 8% reduction in its spending powers and Dorset county council is getting an increase. That is simply not fair.
Mr Betts
I have already given way to the hon. Gentleman and think that that is reasonably fair. The spread of the cuts is simply not fair. I accept that the Government have provided an element of transitional grant to help those authorities with most deprivation, but they simply have not gone far enough to protect those with the most needs and the most deprivation. That is why those areas now face the biggest cuts in services.
Ms Louise Bagshawe (Corby) (Con)
Does the hon. Gentleman think that it is right that only months before announcing these job loses, Manchester city council spent £150,000 on a statue, which could have funded nine junior posts for a year?
Mr Betts
Manchester city council has to make its own local decisions, and I am not here to support or defend every action of every local authority. I thought that leaving such matters to local councils was what localism was all about. We must not put them in the position where they have to make cuts in front-line services, as Somerset, Gloucester and other authorities are having to do.
I support what the Government are doing on ring-fencing. I believe, as I have been saying for many years, that abolishing ring-fencing as far as possible is the right thing to do so that local authorities have more discretion in how they spend the money available to them.
On the question of business rates, I followed up with the LGA the issues I raised with the Minister for Housing and Local Government in my Westminster Hall debate. It has received legal advice on the matter from Bevan Brittan solicitors, which states that in this instance the Secretary of State has not set the distributable amount as a sum equal to the difference, but has chosen to budget for a surplus and set the distributable amount some £100 million lower at £19,000 million. That is simply unlawful, and that is the legal opinion the LGA has received—[Interruption.] I am raising the issue with the Secretary of State and giving the advice that the LGA has given me. If it is inaccurate, will he publish a precise assessment on whether he intends to budget for a surplus on the business rates and whether he believes to do so is lawful so that Members have the full and proper picture?
Mr Pickles
The hon. Gentleman occupies a senior position and so should know that all business rates have to be redistributed to councils by law. It is not possible to do what he is suggesting we are doing, because nothing can be done with a surplus other than giving it back to local authorities. He does not seem to appreciate that total public expenditure is within an envelope, but revenues from business rates go up and down, so councils are compensated by central Government.
Mr Betts
I understand that revenues from business rates go up and down, so when they go up more should be distributed to local authorities as a result. [Interruption.] Rather than engaging in further debate on this, I am happy to pass on to the Secretary of State the legal advice that the LGA has given me and ask him, if he believes that it is wrong, to issue a detailed correction. That seems an appropriate way to proceed.
Mr Betts
I will of course send the letter to the Secretary of State, and I look forward to his response.
On the question of putting salaries above £58,000 into the public domain, the point made by my right hon. Friend the Member for Don Valley (Caroline Flint) ought to be pursued. If the Secretary of State is right, and he encourages local authorities to put more and more services out to the private sector, to the voluntary sector and to social enterprise, he will find that fewer people on those salaries are employed in the local authority sector. Somebody with responsibility for a service might be “TUPE’d” outwith that service to the private sector or to a social enterprise, in which case his transparency will therefore decline. So, when services are contracted out, could the requirement for transparency about salaries of more than £58,000 be transferred as well, and applied to contractors across the piece? That would be a way forward for the Secretary of State, and his Cabinet colleagues might like to look at it as a good example of transparency in practice.
The figures on Sheffield are misleading. The figures that have been quoted are for those redundancies that have been announced so far. Many vacancies in Sheffield are being held unfilled, and they are going to affect services. We know of several hundred posts that will not be filled by one means or other, and we also suspect that the Lib Dem administration there is trying to delay and avoid decisions, waiting to pass them on to the new Labour administration that will take office in May. The budget has not yet been finalised, however, so no one can quote a figure of 250. Several hundred jobs are likely to be lost as a result of the budget—many times the figure given today.
There are real problems with the settlement, but the fundamental question that comes across from local councils and the Local Government Association is, “Why are the cuts front-loaded?” Can the Government please provide an explanation? That fundamental problem is causing chaos in local authorities and massive cuts to services throughout the country.
Bob Blackman (Harrow East) (Con)
We meet today to review the local government settlement, and no doubt councils throughout the country are looking at their budgets, examining how much they are going to spend and making local decisions. We have at last started to hear from Opposition Front Benchers the recognition that reductions in public expenditure would have happened regardless of which party won the last general election. It has been a long time coming. We have been waiting for that view to creep forward, and slowly but surely the recognition is dawning that reductions would have had to be made regardless of who won the election.
We have inherited a legacy: local government council tax has doubled, but services have not really improved at all. Under the Labour Government, there was a transfer of responsibility to local government but a transfer of funding to the council tax, and that forced local people to pay for those services, which were not really delivered.
Authorities were also inspected and monitored to the absolute maximum, and part and parcel of the settlement before us is a reduction in that monitoring and inspection, all of which can be translated directly into savings that local authorities can make.
Charlie Elphicke
Does my hon. Friend agree that, extraordinarily, all that monitoring and inspection never seemed to include the over-inflated salaries of chief executives or the ridiculous pay-offs that occurred?
Bob Blackman
I thank my hon. Friend for that intervention, which refers to another thing that took place under the Labour Government. In all those organisations, pay is determined from the top, so as chief executive pay has rocketed, so has senior pay, while the large numbers of people who work for local authorities and do a brilliant job are paid relatively small amounts of money. There is no doubt, however, that the pay of middle management and senior management exploded, and I applaud the Secretary of State’s decision to publish the figures so that the public can see what type of jobs are involved.
We also saw an explosion in the creation of non-jobs, each of which required administrative support, departments and offices, all of which are costs to the taxpayer, specifically the council tax payer. We had a multitude of different grant regimes and ring-fencing so that if local authorities wanted to take decisions, they could not. I therefore welcome the merger of the different grant regimes and the removal of ring-fencing, which allows for local decision making at the right sort of level.
What Labour did was not all bad. The decision to tell local authorities what level of funding they were getting for three years was a good thing because it allowed them to plan ahead. I hope that in future times the settlement from the Front Bench will be offered not just for three years but for four or five years so that there is certainty for local government in planning ahead.
Henry Smith
Does my hon. Friend think that as well as certainty in terms of the amounts received by local authorities, it is also important that there is transparency as regards the formula for the way that those settlements are decided?
Bob Blackman
My hon. Friend anticipates a matter that I was going to come to later. The outdated Barnett formula, which has transferred money to all parts of the country with no transparency whatsoever, must go and be replaced with a formula that delivers money on a fair and transparent basis that we can all see and understand. Even Lord Barnett himself cannot believe that his formula, which has existed for some 40 years, was not removed or transformed under 13 years of Labour Government, but they did not do it. That is one of the things that has to go.
We should deal with issues relating to the front-loading of reductions in expenditure. The reality is that the Government are having to deal with a deficit inherited from the Labour Government. We get maximum benefit from making public expenditure reductions early because we get four or five years-worth of reductions as a result. That is precisely the reason for doing it.
James Morris
As the right hon. Member for Don Valley (Caroline Flint) said, Labour was committed to reducing the structural deficit in four years, which implied that 20% cuts in public expenditure would have been applied to local government. However, we did not hear a single thing from the Opposition about what they would have cut.
Bob Blackman
Indeed; my hon. Friend makes a fair point. We have heard the starting point of the apology and a little about what Labour would have done, but we do not know the detail. If the result of the election had been somewhat different, we would probably be arguing about money around the margins as regards the expenditure reductions.
I ask Front Benchers to consider the area cost adjustment. That is quite a serious issue for London and areas of deprivation, where higher costs are incurred. It appears that the area cost adjustment has not been dealt with reasonably in this settlement, and that needs to be looked at again. There are parts of the country where higher costs apply, and that is particularly true in London.
Capitalisation is just putting off paying today until tomorrow and doing it on a deferred basis. It means having to borrow or spend money on capital that could otherwise be employed. It is a wasted opportunity and the wrong way of dealing with redundancies. If councils wish to make redundancies, they should recognise that they will make savings on their revenue budget and they should use that budget to pay for the costs of those redundancies, not defer them through the capital programmes.
I applaud this Government for introducing the pupil premium. However, it will be equally applied across the country, and there are higher costs in London. Surely it must be right that in high-cost areas we increase the premium per pupil to recognise that fact. I ask Front Benchers to consider that.
We need to look at the data that are used to formulate the grant settlements. Certainly in London, those data are hopelessly out of date and inaccurate and therefore money is transferred in an unfair way. That has been true for many years, and I hope that we can put it right.
I will talk about two local authorities that I know well. The first is the London borough of Harrow, which has at last received a reasonable settlement from central Government. It is the third best in London and the 23rd best in the country. The Labour council that came in after the election inherited a transformation programme that reduces costs and safeguards services. We await its budget decisions. It should be satisfied with the settlement, after years of poor settlements from a Labour Government. In London, 27 of the 32 boroughs were on the floor under the Labour Government, receiving below inflation increases year after year. London has had to put up with draconian settlements before, and it knows how to deal with them.
The second is the London borough of Brent, where the Labour council inherited a transformation programme that would have saved £100 million over four years. Instead, it has decided to close six libraries and all the day care centres, to slash the voluntary sector programme, and to decimate services for the weak and vulnerable. That is a political decision. I suspect that that is precisely what is going on all over the country. Certain people are making decisions to close libraries, day care centres and other centres that affect the weak and vulnerable in advance of the Localism Bill, which will give local communities the opportunity to take them over and run them.
Brandon Lewis
My hon. Friend is talking about London, but does he agree that what he describes is mirrored outside London? The hon. Member for Sheffield South East (Mr Betts) spoke about areas that are deprived and hard-hit. Great Yarmouth, which is one of the most deprived areas in the country and is the hardest hit by these cuts, has said that it can deal with this situation without it affecting front-line services. It is doing so through shared services, thereby proving that this work can be done by councils that are prepared to be positive and think outside the box.
Bob Blackman
My hon. Friend makes a good point. The reality is that the councils that planned ahead, knowing that reductions would take place, however draconian, are coping best. The councils that put their heads in the sand and said that it would never happen are being caught out. They are now being called to account. If councils have not planned ahead, they will suffer.
Heidi Alexander (Lewisham East) (Lab)
Like the hon. Gentleman, I represent a London constituency. My local authority faces cuts of £87 million over the next four years, out of a budget of £271 million. It is finding that difficult, having decided to protect care for the elderly and child protection, which amount to £109 million of the budget. It is a disgrace for him to suggest that it is a political choice for councils to look at other front-line services. Does he not agree that the scope for finding savings is limited, should councils choose to protect essential services for the vulnerable?
Bob Blackman
I thank the hon. Lady for that intervention. It leads me on to my menu of what councils should do. Have they eliminated unnecessary monitoring? Have they eliminated duplication and multiple handling of applications for grants and other such services? Have they reviewed senior officer pay? Have they co-operated with other local authorities to reduce costs by combining back-office services? Have they cut their communications budgets, or have they chosen to send out publications to the community on a regular basis? Have they removed vacant posts that are unnecessary? Have they rationalised their office space and found office space that is no longer required? Have they taken their efficiency savings seriously and delivered them year after year, or have they continued on the same basis as before? Have they got into smarter procurement and come together with other local authorities to use their buying power to reduce their costs? Have they considered a long-term plan anticipating all the reductions? If authorities have done all those things and still have problems, then it is right that they approach the Secretary of State for help and advice on how to construct their budget at local level, but not until then.
This Government and our Front-Bench team have produced a set of figures and budget proposals that can be supported and that will be recognised in the years to come as a dramatic step forward in ensuring that people get proper value for money in the local services that are delivered to them. I ask that we consider how more money can be raised locally through the transitional business rates and in other such ways, and I ask that we consider how to deal with deprivation in future. It is a disgrace that has gone on for far too long that the deprived areas of the country have consumed more and more money, yet continued to be the deprived areas. That cannot be right, and we have to put it right.
I also urge Ministers to continue the process of helping councils to freeze council tax not just for one or two years but on a continuous basis, so that hard-pressed tax payers do not suffer any penalty as a result of the actions of the councils that operate their services. We can all applaud our Front-Bench team for the work that they are doing.
Steve Rotheram (Liverpool, Walton) (Lab)
When I spoke on local government funding in December, Government Members accused me of pre-empting the final settlement and of scaremongering. They superciliously lauded my passion but suggested that I await the Government’s definitive announcements before jumping to conclusions regarding how Liverpool would fare. Well, I have done that.
The formula has been decided, the figures have been published, the maths has been done, and I repeat vociferously now what I said back then. Not only will the scale, pace and nature of these draconian measures imposed in the name of fiscal restraint have a devastating impact on Liverpool, but in the wider scheme of things, the cuts will prove an utterly false economy.
I stated in December that Liverpool would be disproportionately hit, and I repeat that claim today. I should declare at this point that I am still a sitting Liverpool city councillor, at least until May. At Prime Minister’s questions earlier, a Tory Member had the temerity to say “Shame on Labour councillors” when the Prime Minister tried to blame Liverpool for his big society failures in the city. It did not take long for the malevolent Tories to revert to type and put the boot in to Liverpool, did it?
That comment shows the Conservatives’ lack of understanding, because it is not just Labour in Liverpool that is saying that the Tory cuts will savage our services. The whole council—Labour, Green and Liberal and even the Liberal Democrats, who used to run the council—is up in arms. The books are there for all to see, so I am happy to invite the Secretary of State to come and have a look at them to see the dilemma that he alone has created. We in Liverpool now know that we will have to save a budget-busting £92 million in the financial year ahead, and the council has very little, if any, room for manoeuvre. For all its valiant efforts to balance the books, both jobs and front-line services are to go. As we have heard, some 1,500 redundancies are predicted over the next two years.
Before hon. Members shout me down, I fully acknowledge that Liverpool is not alone. Local authorities up and down the country are facing crippling cuts, but I shall explain what is particularly galling about the situation in which Liverpool city council finds itself. In December, the Minister for Housing and Local Government was reported as pontificating:
“If councils share back office services, join forces to procure, cut out the crazy non-jobs and root out the wild over-spends then they can protect frontline services.”
The implication was clear: profligate and irresponsible local authorities needed to get their act together. The Minister was preaching to the converted in Liverpool. Having long been tightening its purse strings, it has achieved a total of £70.4 million of savings in the last three years, about £40 million of which was saved in the current financial year under a Labour-controlled council.
How Liverpool managed that might be of interest to the hon. Member for Harrow East (Bob Blackman). Liverpool did it by making proven efficiency savings in management, administration and back-office services, and through economies of scale achieved by sharing, outsourcing and collaboration. Simultaneously, the authority has managed to reduce and stabilise council tax. In fact, our approach was commended in this very House by the Secretary of State.
Liverpool has been there and done all that, and is both able and willing to continue in the same vein, but it cannot perform miracles. That is why the Prime Minister was wrong today, and why Liverpool city council was absolutely right last week to refuse any longer to prop up the Government’s sham, big society agenda, which was always a cover for a cynical exploitation of community and voluntary tradition to obtain public services on the cheap.
What is most objectionable is the way in which Ministers have banged on about protecting the most vulnerable communities, believing, it seems, as my right hon. Friend the Member for Don Valley (Caroline Flint) says, that if they say something often enough, people will eventually believe it to be true. Well, not in Liverpool they won’t.
Our city is a city transformed. We are a great city do a business in, and once again I make the offer to the Tories to hold their party conference in Liverpool so that they can see what a great city it is first hand, just as the Lib Dems did last year and the Labour party will do this year.
Andrew Bridgen (North West Leicestershire) (Con)
The hon. Gentleman has told the House of his scepticism in respect of the future of the big society. However, does he believe that the previous Government’s policy of big government has served either the people of Liverpool or this country very well, considering the devastating economic landscape and legacy that they left for the coalition Government?
Steve Rotheram
Dear me. It’s the same old mantra, isn’t it? We have had the debate on the deficit and the argument about whose responsibility it was. The hon. Gentleman will say one thing—I think Government Members get brownie points if they stand up and mention £120 million, and the Whips must be going, “That’s a good girl, that’s a good lad. They’ll go far in the Government”—but I am not going to rehearse the same argument today. That is why I confined my argument and contribution specifically to what is happening in my city. The Government cannot keep cutting without social consequences. My contention is that the formula that is being used is unfair to Liverpool, and the cumulative effect will be devastating.
I have explained the transformation of our city, and I hate to acknowledge this, but it is common knowledge: Liverpool is the most deprived local authority in England. I wish it was not. Seventy per cent. of its areas are classed as falling within the most deprived 10% nationally in terms of health and disability, and 57% of the population has been assessed as “employment deprived”.
What is more, the city relies disproportionately heavily on the now-threatened public sector. If that does not make Liverpool extremely vulnerable in these difficult times, I do not know what does, yet the Government persist in hiding behind averages. The Government told us earlier that the average spending power reduction is around 4.4% nationally. Okay. I will state now—without, by the way, the authority of my local council—that we will accept the national average cut. We will take that now. If we are all in this together, we will take our fair share of the pain, but Liverpool is faced with a maximum spending cut of almost 9%, even after receipt of the transition grant moneys.
It is absurd that while the most deprived community in the country faces the maximum level of spending reduction, the least deprived, Wokingham, faces a cut of just 0.63%. The Government can bandy around per capita figures until they are blue in the face, but the bottom line is that the areas facing the biggest spending squeezes—Liverpool, Manchester and Knowsley—are the poorest. So much for protecting the vulnerable. And so much for facts—not only did the Secretary of State have the audacity to claim on television recently that spending power in Liverpool would not be affected any more adversely than anywhere else, but he said that funding for supported people would be “entirely protected”. That simply is not the case. Liverpool city council has advised that its Supporting People funding has been slashed by 30%. But why let facts get in the way of an unsound policy and a soundbite?
Despite all this, Liverpool city council has sought to work with Ministers in a bid to comply with Government diktat. In a spirit of collaboration and compromise—allegedly so de rigueur with the Tory-led Government—the council has requested flexibility on two specific fronts. First, we are asking the Government to grant us capitalisation permission to help to meet the estimated redundancy costs of £45 million. The council does not hold out much hope, however. As we heard earlier, capitalisation permissions have been capped at £200 million for the whole of England, and a recent letter circulated to local authority leaders held out little promise of a relaxation in that limit. That leaves Liverpool city council in the invidious position of being unable to afford to keep employees on or to let them go. Believe me, it is with a heavy heart that we are making these proposed redundancies—it is not a political game.
Secondly, the council asked Ministers to rethink and recalibrate the front-loaded spending cuts, allowing it to spread them less abruptly and less painfully over the four-year spending review period. The Government are not prepared to budge on this, apparently. Instead, they will magnanimously reduce the maximum spending power cut from 8.9% to 8.8%. Thanks for the crumbs. This is a parlous state of affairs. Those who challenge the severity of local government cuts are the ones who are deficit deceivers. The so-called localism agenda is looking less and less like an experiment in local autonomy and more and more like a monumental exercise in fiscal buck passing—a wily move, but transparent.
It is becoming increasingly apparent that, for all the slick rhetoric, this is not a reconstructed Tory party, but the same old nasty Tories with a Lib Dem human shield. This Government do not give two hoots about poverty, disadvantage or inequality.
Charlie Elphicke (Dover) (Con)
I shall try to keep my remarks brief.
The Secretary of State has set out our position in relation to debt and the public finances. We all know that we have a structural deficit of £109 billion, and we all know how much interest per day is being paid—£120 million. The hon. Member for Liverpool, Walton (Steve Rotheram) made an impassioned plea on behalf of his city and said that we had had the discussion about the deficit and we should now move on. But that is the problem: we have had the discussion about the deficit and now we are seeing the consequence of years of overspending. We cannot get away from it. I wish we could. I did not stand for election and get sent to this House to be part of the difficult decisions that we have made. All of us as politicians love to hand out lollipops, kiss babies, cut the ribbon at the fête and do the nice things, but the sad reality is that we also have to take the difficult decisions when the nation is in the most difficult position it has been in for years.
Mr Speaker, you will recall that some years ago you sat on Lambeth council when it was under Labour control. At that time, you were a powerful advocate for the Conservative party. After your period in office, I was elected when it was a hung council. You were not able to influence events dramatically in Lambeth as you were in a minority under a majority Labour administration. In a hung situation, things were much more discursive—
Mr Speaker
Order. May I say very gently to the hon. Gentleman that although I am sure his advertisement of my curriculum vitae is well intentioned, it is on the whole undesirable for right hon. or hon. Members to invoke the past positions or experience of the Chair in support of their own arguments? I feel sure that he is dextrous enough to advance his own argument without any assistance from me.
Charlie Elphicke
I meant no discourtesy, Mr Speaker.
Moving quickly to my own history, when I was elected in 1994 we had a hung council. We had a mess to sort out. All three parties worked positively together to do that and, frankly, to look at how to un-bankrupt a council that by then had £1 billion of debt. Difficult decisions were made. The emphasis was very much on ensuring better front-line services. My experience was that although we made difficult rebalancing decisions, we were able not only to protect front-line services but to improve them quite dramatically. People on the doorstep were saying that they were now getting front-line services, as opposed to excessive bureaucracy and—I regret to say in the case of Lambeth in those times—in some cases corruption, so positive changes can be made when difficult decisions are taken and things are reworked.
One thing that I particularly welcome is the council tax position. Council tax has been increased in the last decade or so—I believe that it has doubled—to the current level of £1,439. That is an awful lot of money and a massive increase. We know that, because of the deficit, it is not possible to increase local government spending on the grant settlement side of things. We also know that people have been flayed alive for over a decade, given the amount of council tax that they have been asked to pay. I therefore particularly welcome the Government’s decision to work positively with local authorities to freeze council tax. That is important to constituents such as mine who live in deprived circumstances. Many of them are elderly, and many are poor. Stopping council tax rises benefits them massively, particularly those on fixed incomes. Therefore, on the one hand, we have a set of tough decisions aimed at ensuring that we make those efficiencies, and on the other, we have managed to stop council tax rising, which is important.
I totally agree with the Secretary of State when he says that we need smarter procurement. We are doing that in Kent, with the Kent Buying Consortium. He has said that we need better asset management, too. Many people are more than aware of the position in Newham, where there is a new, flashy building that has cost an awful lot of money. We have to be much more cute about using asset management. We have the streamlining and merging of operations, and in Dover and Shepway we increasingly have shared services, so that there will be a shared chief executive and shared back office. That agenda has been embraced in Kent, which is important. It is also important to consider how best to deliver services. Suffolk county council has at times been a bit over the top with its chief officers, but it has led the way on how services can be run, with care homes operating as social enterprises. In my constituency, I am promoting the case for a care home in Deal to be transferred to a community interest company when the local authority feels unable to continue running it.
That is the right way forward. I do not think that this is a debate in which we should necessarily be partisan or throw rocks at each other, because we know the financial position. I could quote the figures showing that Labour was going to cut the budget by £5 billion—that was in Labour’s pre-Budget report—and all the rest of it, but would that help matters? No, because we know the position of the nation’s finances.
Andrew Bridgen
Does my hon. Friend agree that the fact that my local council in North West Leicestershire is facing budget cuts of 10% somewhat undermines the complaints made by the previous speaker, the hon. Member for Liverpool, Walton (Steve Rotheram), about Liverpool’s budget being cut by 9%? Does that not prove that we are indeed all in this together? We all know who put us in it, and we should not let them forget it for one moment.
Charlie Elphicke
My hon. Friend makes a fair point. Just as when all parties in Lambeth worked together positively in the local authority’s interest, it would be best if we all worked together in the national interest to ensure that all councillors, from all parties, did not try to score political points, which we have seen far too much of lately, but instead worked positively, thinking not about advancement, aggrandisement or the headlines that they might be able to get, but about their constituents. At the end of the day, we were all sent here by our constituents—whether in Liverpool, which is seeking a bit of attention, or anywhere else, it does not matter. All local authority leaders have a responsibility to give their constituents the best possible services and assistance in these extraordinarily difficult conditions.
Hazel Blears (Salford and Eccles) (Lab)
I shall keep my remarks brief, because I know that many Members want the debate to wind up. I shall have the opportunity tomorrow afternoon to meet the Minister for Housing and Local Government together with my hon. Friends the Members for Manchester Central (Tony Lloyd) and for Blackley and Broughton (Graham Stringer). I can tell the Minister that I am looking forward enormously to looking him in the eye as I make my points on behalf of my community, which I feel incredibly strongly about.
Today, I have a terrible feeling of déjà-vu. When I came into the House 13 years ago, it was at the end of almost 20 years of Conservative Government. Before that, I was a local councillor in my community for eight years. I had spent every one of those eight years as a councillor under a Tory Government cutting budgets year on year. When I came here, our public services were on their knees. Two of my inner-city wards had 50% male unemployment, and we had 70% youth unemployment. My local council had been absolutely decimated. That was the reality of being in local government under a Tory Government, and I am sorry to say that it feels as though history might be about to repeat itself. All the progress that we have made over the past 10 to 15 years is in the process of being unravelled; we are going to go backwards instead of forwards.
Recently, I had a meeting with my chief constable, Peter Fahy, to talk about the police cuts, which we discussed here earlier today. I have a huge amount of time for him; he is an extremely good officer. He told me that what worried him most was that we would go backwards and undo all the progress that had been made. He was particularly worried that the advances that we have made for young people would be undone, because young people are the foundations for the future.
I put it to the Secretary of State that the cuts that he is imposing are unfair. They are unfairly targeted at the poorest communities, and they will undermine the foundations that we have built for the future. The education results in my city are now immeasurably improved, crime has gone down dramatically, and housing and regeneration have gone forward apace. We have Media City at Salford Quays, and we have the opportunity to build a fantastic future. This year, however, we are facing £47 million of cuts in Salford. Next year, it will be £48 million, and the year after, it will be £55 million. Those are not political choices. I do not know how the hon. Member for Harrow East (Bob Blackman) can stand up in the Chamber and make the outrageous claim that councillors who are doing their best to protect their communities are making deliberate, unnecessary political choices to cut services. That is an insult not only to Labour councillors but to Conservative and Liberal Democrat councillors. I have been a councillor, and I know how hard it is to make the kind of choices that are having to be made now.
Chris Leslie (Nottingham East) (Lab/Co-op)
Does my right hon. Friend agree that some of these grant choices are not simply about fairness? For example, some of the settlements for the fire and rescue authorities could be very dangerous. In Nottinghamshire, the number of fire tender appliances is apparently going to be reduced from 36 to 30. These funding decisions are creating really serious risks.
Hazel Blears
My hon. Friend is absolutely right; we share the same concerns. The Greater Manchester fire and rescue authority has had to make even further cuts because the figures changed halfway through its budget process.
I want to make just a few observations about the position that Salford is in. The Chancellor of the Exchequer said, “We will not balance the books on the backs of the poor.” However, Salford is one of the poorest authorities. We are in a consultation process with our community, and I spoke to my leader this afternoon. We are looking at the possibility of having to close libraries and one of our sports centres, as well as taking £1 million out of our youth service and £500,000 out of adult social care. Unlike many local authorities, ours has said that it still wants to provide services to elderly people who have moderate, as well as critical, needs. That has always been a priority for Salford, but we are still going to have to take £500,000 out of that service. We will also have to make a 42% cut in the Connexions service. I want my youngsters to get the skills and to have the ambition to get those jobs in Media City, but how can they aspire to that kind of future if they do not have a proper careers guidance service?
We are having to cut the citizens advice bureaux by 15%—it is the minimum we can do, but we know that people will be out of work, as we are looking at losing 450 jobs in the city. People will have debts and will need advice, so what do we have to do? We have to cut the CAB and the 60-odd independent financial advisers that we funded through the financial inclusion fund, which is about to be slashed. The amount of advice left available will be absolutely minimal. Our voluntary organisations will have to be cut perhaps by 10% to 15%. Again, Salford council is really trying to make sure that it protects those voluntary organisations, but they cannot be immune from the cuts that the rest of the service has to take.
I mentioned area-based grants. I feel strongly about them because area-based grants were specifically directed at poor and deprived areas that had extra needs. The slashing of area-based grants has disproportionately affected those living in the poorest parts of our community. In Salford, it was 11% of our total budget, and much of that money was used to tackle crime and antisocial behaviour, to provide youth services and diversion schemes and to keep young people off the streets and make the community safer. All that is about to disappear.
I genuinely feel that these cuts are unfair, despite the Secretary of State’s smoke and mirrors about spending power, his new definitions and all his obfuscation of the real situation. The cuts in spending power in his area are of less than 1% next year, yet we are looking at 15% cuts in Salford. For the area of the Leader of the House, the cuts are less than 1%; for the Home Secretary’s area, less than 1%; for the Culture Secretary’s, the Transport Secretary’s and the Education Secretary’s areas, less than 1%. These are some of the most affluent parts of the country. I believe that if cuts have to be made, which they do, they must be fair—but they are simply not fair.
I say to the Secretary of State that I have a huge amount of respect for the people of this country: they are not stupid; they understand that hard decisions have to be made, but they also have a well-developed sense of justice and fairness. They will see right through what the Secretary of State is doing. Transparency will come for the Tory party’s actions; people will see right through them.
I commend the campaign launched in the Manchester Evening News. It is a massive campaign against the cuts, urging local people to sign a petition. The Manchester Evening News is not a partisan paper; it represents people right across the conurbation. They, too, can see the unfairness. Nine of our 10 boroughs in Greater Manchester have cuts higher than the national average. The only borough that does not is in the constituency of the Under-Secretary of State for Communities and Local Government, the hon. Member for Hazel Grove (Andrew Stunell); that has a below-average amount of cuts. People across Greater Manchester—people in Rochdale, in Oldham and in places right across the area—know that these cuts are deeply unfair. I have no doubt that action will be taken at the ballot box in May.
My final point is about what else could be done. We heard a lot from the Secretary of State about community budgets. As he well knows, I started off my time in the Department with Total Place, which meant bringing together and pooling budgets, co-location, integrated services, systems engineering, and service redesign—all those things that Government Members have talked about. However, for major service redesign, time for planning is necessary—it cannot be done at the drop of a hat, because different skills and competences are involved and people might have to be made redundant. We have heard about the lack of capitalisation for that sort of project; it cannot be done all at once. I echo the points made by my hon. Friend the Member for Sheffield South East (Mr Betts), the Chairman of the Select Committee. Why are these cuts front loaded, which makes it so much more difficult to do the systems redesign that could result in efficiencies without the need for front-line cuts?
The Secretary of State will tell me otherwise, but I genuinely believe that the reason for having the cuts early on is that more freedom to manoeuvre—and to be more generous—will be possible in the two years leading up to the next general election. The Government will hope to reap the rewards from that. I hope that it is not the Secretary of State’s intention to make a partisan political budget in this way. I would like some reassurance that he is trying to be fair rather than to seek political advantage. When we reach the two years before the election and we will have had these massively front-loaded cuts in the first two years, I will be amazed if we do not see the Secretary of State seeking some room for manoeuvre for electoral advantage.
Mr Pickles
I am grateful to the right hon. Lady who, as always, is giving a thoughtful speech. I can assure her absolutely that that it not the intention, and I can assure her absolutely that that is why we have put in extra protection for the most vulnerable.
Hazel Blears
I think that if the Secretary of State came to Salford—as the Minister for Housing and Local Government did recently—and said that he had given extra protection to the most vulnerable members of our community, he would receive the sort of typically robust Salford reply that I could not possibly use in the House.
Over the last couple of weeks, we have heard a great deal about the big society. Apparently Lord Wei is unable to do quite as much as he used to because he no longer has time to volunteer, which I thought was a wonderful irony. As the Secretary of State will know, I strongly support the underlying principles of involving the community, devolving power and introducing more plurality to the provision of public services. However, as has been pointed out by Dame Elisabeth Hoodless of the Community Service Volunteers, Thomas Hughes-Hallett, chief executive of Marie Curie Cancer Care, Sir Stuart Etherington of the National Council for Voluntary Organisations, and Sir Stephen Bubb of the Association of Chief Executives of Voluntary Organisations—none of whom are partisan people—while the Government talk of the need to empower voluntary organisations and local communities, they are making massive, deep, draconian cuts in the voluntary sector. That simply does not add up. It is totally contradictory, and it is increasing the sense of cynicism and disempowerment that exists in our communities.
If the Government have any genuine commitment to giving people the power to change their own lives, they must recognise the total incoherence and inconsistency that lies at the heart of their so-called big society. This is not community action; it is do-it-yourself. The Government are telling people, “You are on your own, with no back-up and no ability to take on roles of this kind.” I know that some Members genuinely support these principles, but I fear that, given the cuts that we are seeing, they are going absolutely nowhere except into the sand.
My final plea to the Government relates to community budgeting. For goodness sake, let us get on with it more quickly. We will be able to ameliorate some of the pain that our communities will feel only if we can re-engineer our services, pool the budgets, achieve the necessary co-location, and start to address many of our current problems. At present that programme is minimalist. I think we have been told that four areas in the country might adopt community budgeting. We know what happened with the four big society areas. I ask the Secretary of State to enable us to support many more areas, so that they can provide services in a new and, I believe, more integrated way that could lead to a transformation in the provision of local government services.
Tessa Munt (Wells) (LD)
I do not wish to rehearse arguments that have been presented by Members on both sides of the House. Instead, I shall focus on the case of Somerset county council.
Before any funding announcements had been made, Somerset county council’s leader announced to local people that he wished to make cuts amounting to £43 million. Then, in early January, he announced that he wished to make a further tranche of cuts amounting to £20 million. He said that he would close some libraries, cut bus subsidies, cut the community safety budget by 100%—which would mean the loss of our wonderful police community support officers—cut funds for the Duke of Edinburgh award and the youth clubs by nearly 100%, and cut arts funding and the voluntary sector by 100%. He also said that he would sell the county farms, which seemed ludicrous to me given that they provide a return of some 6% or 7%—more than could be obtained from any bank.
The leader of Somerset county council seems obsessed with the idea of clearing debt. He does not seem to understand that for most businesses it is quite all right to have a mortgage or a loan. They know what the repayments will be, and they schedule them. There is nothing extraordinary about that. I do not think that I know a farmer or small business man who has saved up all his money before buying stock. Such people go to the bank and take out a loan. They know how long it will take them to repay the loan, and it is scheduled. They increase their assets, and tuck the money back into the business. That is what has happened over many years in Somerset under the Liberal Democrats.
The leader of Somerset county council has said that he wishes to make his cuts over three years rather than four, which strikes many people as a frantic attempt to clear debt. It is a bit like people paying off their mortgage or their car or fridge loan and realising that actually they do not have any money and they cannot buy food because they are so obsessed with clearing their debt.
Chris Leslie
The hon. Lady is making an important point about how politicians who are obsessed with debt reduction at the cost of everything else may well find themselves in jeopardy. Does that not remind her of the Chancellor of the Exchequer’s attitude, whom I think she is supporting?
Tessa Munt
I disagree, because the situation here is that the county council has £29 million in reserves, excluding the money attached to schools, yet we have a man who wishes to put aside £15 million for redundancies, which is going to decimate the council staff, and to make cuts over three years instead of four. If he was to reschedule his debt over four years, it would be a lot less difficult for people in Somerset. Happily, as a result of campaigning by local people, three libraries have been saved: Shepton Mallet, Glastonbury and Cheddar. However, the library in Highbridge, an area that probably needs a library more than any other because there are so few facilities in that town, is still under threat.
I approached one of the Secretary of State’s Ministers because I wanted to understand. There is so much confusion among local people about what is actually involved, because there is one grant and another grant, and little bits of money get thrown back and forth in conversation, and nobody really understands what is happening. I asked the Minister in question to explain to me in simple terms the situation facing Somerset. In simple terms, this year—the year ending on 31 March—Somerset has £368 million to spend, and next year, starting on 1 April, it has £360 million. That is a difference of only £8 million in spending money, which amounts to 2%. Somerset has had a fantastic deal therefore, so I do not understand the obsession that this gentleman has. Moreover, the Government have been generous in granting £42 million in capital grants. That means we can fix the roads, which are in a shocking state, and do something about school buildings. As far as I can see, the county is £20 million better off than it ever has been, and, as I understand it, the capital grant is cash, and that £42 million is about £41 million more than anyone ever expected to have.
As far as I can see therefore, Somerset has an increase in funding from central Government, and that funding is relatively generous in the current economic circumstances. I therefore do not understand why the county council leader is going to announce a series of cuts next Wednesday. If those cuts proceed and he makes those announcements on Wednesday, I will ask the Secretary of State to give me an appointment so I can come along with the leader of Somerset county council to ask that gentleman to explain himself and his actions.
Mr Andy Slaughter (Hammersmith) (Lab)
Hammersmith and Fulham council is closing nine of its 15 children centres this year, and by doing so it will generate about £2 million in savings. That is part of the £6 million savings in children’s services, which in turn are part of the £13 million savings in social services, which in turn are part of the £27 million that the council aims to save in the coming financial year. The total over the three years is £65 million, or about a third of its budget.
Because of the policies the Secretary of State is pursuing, many councils are having to make unimaginable cuts of this kind. I want to focus on two points in respect of Hammersmith and Fulham council. First, in making those very difficult decisions it has chosen to target the most vulnerable people, and the services that all parties represented in this House say that they wish to be preserved. Secondly, it maintains a charade, with which the Secretary of State has colluded and continues collude, that it is doing this in a new way—that these are new cuts that will not affect front-line services.
In particular—this picks up the point just made by the hon. Member for Wells (Tessa Munt)—the council says that it will pay off debt, and in that way generate revenue income. It says that it will merge back-office services and in that way avoid affecting front-line services. I will break the spell immediately by saying that even if those two ideas—the merger and the disposals to pay off debt—are both successful, which is by no means certain, the total amount of money generated would be about £1 million, or 4% of the total cuts. That is what we are being led to believe is the new way of making cuts.
Before I came to this debate, I had two meetings this afternoon about Sure Start. The first was of an all-party group, to which the Minister with responsibility for children came to speak. He is an honourable man, as well as being an hon. Gentleman, and I believed what he said, which is what I have heard all the Education Ministers repeat. They believe that there is sufficient money to maintain the network of children’s centres and that there is no need to attack their budgets, particularly the phase 1 centres that serve the most vulnerable groups.
That appears to be Government policy, but this is what is happening in Hammersmith and Fulham. First, the closure of the nine centres was announced between Christmas and new year—on page 34 of a report called “Family Support”. Secondly, when that report came up for decision—by that time, thanks to the Daily Mirror and other great organs of state, a lot of the local population had been alerted to the situation—the council said, “You’ve misunderstood what we’re doing. We’re not closing any children’s centres,” but it then proceeded to vote through, on 10 January, the 50% budget cut that meant that those centres had to close. Having made that decision, it then began a consultation process—but that process identifies phase 1 children’s centres, the budget for which is to go down from £473,000 to £19,000. Threats were made to the staff, who were not informed before the closure of their centres was announced in the press. Heads of centres were told that they could not talk to me, or even to the Government, about what was happening.
To her credit, the Minister of State, Department for Education, the hon. Member for Brent Central (Sarah Teather), did say during a Westminster Hall debate that she was concerned about, and was monitoring, what was happening in Hammersmith and Fulham. If the Government want to hold their line on Sure Start, they need to address the situation in Hammersmith and Fulham. It is not just Sure Start centres; youth clubs are closing too. I received a deputation representing 1,000 young people who use a youth club just outside my constituency that is closing, and I am told that all but one of the youth centres will close. Council estates are being demolished.
I went to a meeting at an old people’s home last Friday where, in order to raise £250,000, the air rights over the car park are being sold to a private school next door, so that no light will reach the old people’s home. Some of those old people spend 100% of their time in that home. This is what is happening in a Conservative-controlled council in London at the moment. This is the reality of the “painless” cuts.
Those are the things that we do not hear about in Hammersmith and Fulham. What about the things we do hear about? What about the paying off of debt—that prudent way of reducing debt? That happened on Monday, when, at a meeting of the council’s cabinet—I believe that the Chairman of the Select Committee, my hon. Friend the Member for Sheffield South East (Mr Betts), referred to this earlier—the disposal of nine community buildings was agreed to. Those buildings include four community centres used by more than 100 voluntary groups, all of which will be made homeless, and alternative provision will not be made for them. Those buildings include Palingswick house, an imposing building in central Hammersmith in which 22 voluntary groups occupy space. My right hon. Friend the shadow Secretary of State alluded to one of those earlier: the Afghan refugee group.
Because councils have to produce equality impact assessments when they are booting voluntary organisations out on to the street, Hammersmith and Fulham did that. It produced one for the Iranian Association, which caters mainly for refugees from the oppressive regime in Tehran: the Iranian Association was told that the alternative provision was to go to the Iranian embassy. The Kurdish Association for Refugees is also based in the building, and runs not only a cultural advice centre but a museum—one promoted by Boris Johnson on his tourist trail of London. It was told that the alternative to being booted out on to the street was to go to an organisation for the south Asian population based somewhere in east London. The Afghan refugee association was told that there were two alternative sources of provision for Afghan refugees in London, one was an Afghan restaurant and the other—as my right hon. Friend the Member for Don Valley (Caroline Flint) has already said—was the southern Afghan club, for the promotion of Afghan hounds. That is how my local community in Hammersmith is being treated by a Conservative council.
Three other community centres all came up with viable business plans that would have allowed them to continue operating from their community centres and pay a commercial rent, which would have meant that over a period of two or three years, the council would not have lost money. Without listening any further to those ideas the council voted through the proposal, and all these buildings will be sold off to produce an income of about £500,000 a year. The opportunity cost for the tens of thousands of people who will no longer have those facilities available to them, including the elderly people and the 750 kids from deprived backgrounds who go to dancing classes at one of these places, is unimaginable. But this is what the council is proud of.
The other thing that the council is proud of is the merger with Westminster city council and Kensington and Chelsea borough council, which was announced yesterday. I alluded in an earlier intervention to the Secretary of State’s claim last October—he associated himself with this claim—that the move would save £100 million. When the report was published yesterday, it said that in the dim and distant future—no detail was provided—this would save about £34 million between the three councils. That is already only a third of the sum that was claimed some two to three months ago. The actual quantified savings for next year, between the three councils, was less than £3 million, and the actual sum for Hammersmith and Fulham council was £500,000. That is the big new idea. [Interruption.] I hear the hon. Member for Ealing Central and Acton (Angie Bray) making a sedentary comment. She represents my previous seat, and I always give her credence. She is absolutely right that £500,000 of genuine saving of back-office cost is well worth having, but it is not £27 million, £10 million or £100 million.
That sum is worth having, save for the fact that what those merger proposals envisage is not what hon. Members would like to hear—which is that the savings would come from economies of scale, procurement, and other such administrative matters. We would all support that, but instead the proposals are about creating a new entity that is not Hammersmith and Fulham, not Kensington and Chelsea, and not Westminster. It will be entirely unaccountable to the citizens of any of those boroughs, and it absolutely flies in the face of devolution and localism. No proper risk assessment has been done of the proposal, and £20 million of the notional £35 million will come from cuts in social services. I hate to think about the number of baby Ps that there will be, and the number of elderly people who will be put at risk as a result of these crazy, ill-thought-out and half-baked proposals.
There is no accountability in the arrangement. Two of the authorities have traditionally been Conservative and one has traditionally been Labour. The clear intention is to bind the hands of that authority, so that when it returns to Labour control, as it will doubtless do in three years’ time, it will no longer have jurisdiction over its own spending, because that will be centred in a holding company over which none of the individual councillors has control. Is that really the future of localism in this country? That is the brave new world that the Secretary of State’s favourite council has in store for us.
Mr Slaughter
The Secretary of State may shake his head, but he is very welcome to intervene. He has called the council the apple of his eye, but it is a rotten apple of his misty eye. He needs to have a closer look and clear his vision a little.
The next time people hear about Hammersmith and Fulham council they should think not about the white heat of efficient local government, but about those Sure Start buildings that now stand empty, and the community buildings being sold to property developers or used for pet Government schemes such as Toby Young’s free school. They should think, as my right hon. Friend the Member for Don Valley has said, about the old mate of the chief executive being paid a total of £700,000 over three years to manage an arm’s length management organisation at the council. They should think of the six chief officers who are paid more than £150,000 a year and the £250,000 they wasted because they could not be bothered to turn off the lights at the town hall for five years.
That is the reality of Tory local government. They do not care when they waste money, and they take pride in cutting services such as the nine Sure Start centres. The second meeting I went to this afternoon was with the heads of those Sure Start organisations, who met here to campaign to keep open one of the Labour Government’s great achievements. The Conservatives say they are committed to Sure Start, but the reality of Tory local government on the ground means that those services will be shut down before we can draw breath.
Tony Lloyd (Manchester Central) (Lab)
I have spent almost my whole political life not wanting to personalise politics, but I must say to the Secretary of State that he should be ashamed of himself for losing the battle in the Cabinet and the spending review so that local government has become the victim of his incompetence. He should be ashamed of himself because the settlement is divisive within the local government family. It will inflict damage on vulnerable authorities while, as we have heard from my hon. Friend the Member for Hammersmith (Mr Slaughter) and the hon. Member for Wells (Tessa Munt), some local authorities are feather-bedded and treated with kid gloves. This political decision of his is an outrage because in cities such as mine it will be the most vulnerable people who suffer, as my right hon. Friends the Members for Wythenshawe and Sale East (Paul Goggins) and for Salford and Eccles (Hazel Blears) and my hon. Friend the Member for Liverpool, Walton (Steve Rotheram) have pointed out. [Interruption.]
The Secretary of State chunters from a sedentary position. The reality is that, like previous Tory Secretaries of State for local government, he has no compassion or consideration for those who will lose their home help or for the children who will lose the life chances that people in his constituency will take for granted. What we have had from him and his Ministers is a campaign of ridiculous disinformation such as the nonsense that has been repeated by Tory Members today about £150,000 going on statues in Manchester or about the Twitter tsar who was an invention of the Minister for Housing and Local Government. [Interruption.] The Minister says something from a sedentary position that I cannot hear, but I am happy to give way to him if he wants to make his point. [Interruption.] He indicates that he will reply when he winds up. No doubt that will allow him to peddle his ridiculous fantasies again.
The Minister for Housing and Local Government (Grant Shapps)
Is the hon. Gentleman saying that an advert for a new media expert for £38,000 was not placed by the council?
Tony Lloyd
I have checked and there is a communications officer, whom, the House might be interested to know, was asked to have competence in new technologies such as Twitter and is equivalent to a number of people in the Minister’s Department who have the same role, the same salary band and the same competences. His Twitter tsars massively outgun Manchester’s ability to communicate. He should think very carefully, because trading insults at this level does nothing for the people who are going to lose adult social services. [Interruption.] Does the Secretary of State want to intervene?
Rory Stewart (Penrith and The Border) (Con)
Will the hon. Gentleman give way?
Tony Lloyd
I will give way to the Secretary of State. I hope the hon. Gentleman will forgive me.
Mr Pickles
Some of the problems that the hon. Gentleman is talking about relate to the working neighbourhoods fund, which was cut by the Labour party. Where was he then? Why was he not lecturing the Labour party about those cuts? He criticises us but he was silent on his constituents’ behalf then.
Tony Lloyd
I invite the Secretary of State to come to my constituency any day of his choosing. We will walk around and talk to local people, and we will ask them about the record of local government under a Labour Government and under previous Conservative Governments. As my right hon. Friend the Member for Salford and Eccles said, when the Labour Government came into power in 1997, Manchester had seen services consistently destroyed. They were fragile and vulnerable. Under a Labour Government there was an improvement in standards in education, health—a much more difficult task—housing and crime and disorder. All those improvements strengthened our communities and put the cement back into our society.
That Secretary of State, who chunters away to his friends, is putting all that at risk and he is doing so deliberately. There was choice. There was choice in the Budget process that he lost with his friends in Cabinet. There was choice when he decided to put money into local authorities such as Somerset, and not to put money into local authorities such as Manchester. That is a particularly cruel cycle of choice and a cruel deception.
The Prime Minister stood at the Dispatch Box earlier today and told the House that he was guaranteeing that Sure Start centres would continue to operate. Let us talk about the reality in a city such as Manchester, which is having to cut children’s services by some 25%. It has had to say that it will give up control of those Sure Start centres, and it hopes that the running of them will be taken over by the voluntary sector or possibly schools. There is no guarantee for the young people in Manchester that the Sure Start centres, which are praised by everyone on the Government Benches, will continue to operate.
My hon. Friend the Member for Hammersmith says the political choice of the Tory council is to cut the Sure Start centres. In Manchester, a Labour council has to put those Sure Start centres at risk because of the actions of the Secretary of State and his friends.
Charlie Elphicke
The hon. Gentleman talks of political choices. Yes, we can talk about statues, Twitter tsars, creative directors and the junket in the south of France, but the key political choice in Manchester is to axe 2,000 jobs while there is £100 million in reserves. How can the hon. Gentleman justify that?
Tony Lloyd
I think the hon. Gentleman is either a little hard of hearing or not too fast at understanding. My right hon. Friend the Member for Wythenshawe and Sale East made the point earlier. Those balances that the Secretary of State and his Ministers have traded and which they said are there as some luxury cushion are, in the case of Manchester, allocated money.
Grant Shapps
Does the hon. Gentleman recognise that there is £108 million of non-schools money held by his local authority? Earmarked does not mean the same as allocated.
Tony Lloyd
The £64 million that will now be allocated will be for the redundancies that the Government are forcing the council to make. That is the answer to the hon. Member for Dover (Charlie Elphicke). It is a disgrace that Manchester must spend such a huge amount of money making good local government workers redundant. That is the responsibility of the Secretary of State. As a result, the things that the Housing Minister described as being merely earmarked will now not go ahead, so Manchester will lose provision and facilities because of the Government’s decision.
Charlie Elphicke
The hon. Gentleman speaks of the £64 million earmarked for redundancies. What we did in Lambeth, what happens in most authorities, and what the Government are doing, is to examine the possibility of natural wastage and introduce a slower programme of voluntary redundancies, which would not mean as great a shock as the hon. Gentleman is talking about.
Tony Lloyd
Let me try to bring the hon. Gentleman forward a little in his thinking. Manchester would love to have done that. Manchester has not made compulsory redundancies—possibly it is true to say—in my lifetime. Manchester is now having to do that because the pace of the cuts that his Secretary of State is making is so rapid that it has no choice. For an authority such as Manchester, 25% of the budget cannot be taken out of the pot without that resulting in compulsory redundancies.
Paul Goggins
Does my hon. Friend agree that the comments, remarks and challenges coming from Government Members reveal a complete lack of understanding of the nature of a city like Manchester? Manchester is a world leading city. It is founded on two things—first, a strong partnership with the private sector and secondly, over recent years, having the money to invest in the communities that need it. Does my hon. Friend share my concern that their ignorance and arrogance mean that the progress that we made is put at risk?
Tony Lloyd
The only thing I disagree with is that my right hon. Friend’s words are too mild, because what the Secretary of State is doing is the result of political malice. It is political malice because the simple reality is that he chose not to exercise the options that were available to him. He chose to make a local government settlement that puts at risk not only money—if it was only money perhaps we would move on—but the resources on which people depend for living their lives. It puts at risk those things that saw crime and disorder diminish in Manchester and that began to give young children in inner-city areas like mine opportunities in life that he would take for granted—the Secretary of State smiles. He is smiling while I talk about children being denied the opportunity to get on in life, because that does not matter to a Conservative Government, or to their Liberal Democrat friends and supporters. It does matter enormously, because they are brutalising our society.
Andrew Gwynne (Denton and Reddish) (Lab)
Earlier, the Secretary of State mentioned extra resources for the concessionary fares for shire district councils, yet two weeks ago the Conservative and Liberal Democrat-led Greater Manchester transport authority scrapped the young people’s concession and the peak-time pensioners’ concessionary fare. That is the reality on the ground, and is it not another example of the unfairness?
Tony Lloyd
My hon. Friend makes an important point, because all of this is about political choice, and we have to face that squarely. The Secretary of State knows that it is about political choice, because he has form in local government. I remember when he was a national figure in local government; he is now a national figure in national government, but sadly the rhetoric and the reality have not changed. I believe that local government is fundamentally important to the lives that my constituents live. I believe that things such as swimming pools and leisure centres really do matter as part of the process of making our society more decent and more liveable and of properly giving our young people some stake in that society and some opportunity for the future. Frankly, he does not share the view that local government is the answer to our nation’s problems; he regards it as part of those problems.
I must admit that I genuinely like the Housing Minister—I am sorry if I damage his future by saying so—because he is a nice man. He said that he was going to Manchester next week, so I hope that he will come and talk seriously with the people in my town hall, and perhaps in the other local authorities around Greater Manchester, because he needs to recognise that the Government have simply got it wrong. If he wants to stand at the Dispatch Box, as he will in a moment, and tell me that the cuts are not the result of brutal, cynical, malicious and political choices, he can offer to come to my city and talk through the finances. If I am right and he is wrong, and Manchester cannot possibly manage without making serious cuts in public services, perhaps he will have the good grace to admit that the Government must change their minds. I hope that that will happen, but I fear that it will not.
The Minister for Housing and Local Government (Grant Shapps)
It must have been an incredible experience to stand at this Dispatch Box for the local government finance settlement in any of the past few years and announce on a whim yet more money being piled up and sent around the country in various directions. Unfortunately, we do not live in that kind of world today, and the sad thing is that we did not live in that kind of world even then. The previous Government thought that they had money to spend, but the truth was that it had long since been spent. A year ago, all they were doing was standing here and spending money that had never been raised, that was not available and that would actually have to come from the children of every Member of the House and of all our constituents for many years to come.
At the election, people had a choice, and their decision was to elect a Government who were primarily going to get on with cutting the deficit. Today, however, there has been not a word of apology from the Opposition for getting us into that enormous financial mess that meant that this country had the highest deficit of any country in the western world—of any OECD top 20 country. Do they recognise that as a fact? Do they understand where things went wrong? Are they here today to apologise and to show that they are going to set a new path? Absolutely not, because as we saw at lunchtime the policy vacuum on the Opposition Benches is quite literally a booklet with empty blank pages inside.
There has been no response and no sense of where those cuts would fall. The Opposition do say that there would be some cuts; it is just that we are not allowed to know where they would fall. The Opposition accept that local government spends a quarter of all government money, but it seems that none of those cuts would be in any way painful under their budget, which, they say, would halve the deficit over this Parliament.
Halving the deficit, however, is not enough. I believe there is a fundamental misunderstanding of how this country’s accounts work. Indeed, perhaps that was the problem over 13 years: the previous Government did not understand that, if we only halve the deficit, we will still pile up debt. The figure of £44 billion, which we are currently spending at record interest rates just on repaying the interest alone, would have gone up to £70 billion and more, yet the Opposition have not a single answer—not a single penny—to offer up to this debate. Therefore, their contribution has been all but pointless.
Mr Betts
The right hon. Gentleman refers to past debates. Can he point to any occasion over the years when the Opposition Front-Bench spokesperson said that the Government were providing too much money to local councils? Can he provide one example of a Conservative MP saying, “My council’s getting too much money in this settlement”?
Grant Shapps
The Chairman of the Communities and Local Government Committee is absolutely right: my colleagues and I have been reflecting over the past few weeks, when the representatives of many local authorities throughout the country have been to see us, on what it must have been like to have been in a previous Administration, when one could believe that money was no object—that one could simply get this thing from the money tree and spend it as one wished by giving higher and higher settlements to every authority that came to visit. How wonderful it must have been, but I am afraid that the truth, the reality, has come home to roost, and once again we are left to sort out the mess that Labour has left us with.
Having accepted that there should be some reductions, it was not as if the right hon. Member for Don Valley (Caroline Flint), who shadows the Department, was able to agree with any of the methods that might be used to make reductions without harming front-line services. In fact, she went so far as to ridicule my hon. Friend the Member for Daventry (Chris Heaton-Harris) because he mentioned in an intervention that Hampshire council has just announced that it will cut £7 million next year by cutting the senior management salaries and work force. That was pooh-poohed as impossible. Well, for the sake of clarity, I have managed to get hold of a copy of that detailed information, and my hon. Friend was wrong: it is not £7 million that will be saved by cutting senior management; in fact, it is £7.9 million.
The idea that money cannot be saved or that leadership cannot be shown by example when senior people take a cut, as Ministers in this Government have with a five-year pay freeze, or that that does not have an impact further down the line on the rest of senior and middle management, has been blown apart. The authorities that have taken such steps have found it much easier to sell to the rest of the authority the difficult decisions that have had to be made.
Nor is the right hon. Lady correct when she talks about the £10 billion of reserves. There are £10 billion of reserves for local authorities, as has already been pointed out in an intervention, but the right hon. Lady says that 70% of it has been earmarked, and, in that, she makes a fundamental mistake, which I am surprised about, because she was in this Department when in government. The reality is that “earmarked” is not the same as “spent” or “allocated”. “Earmarked” does not mean that the money cannot be used in the intervening period to ensure that front-loaded reductions, which we have heard a lot about, can be handled in a much better way.
My hon. Friend the Member for Isle of Wight (Mr Turner) raised a serious technical issue that he had already come to ask us to look at again. We did do that, but we could not find in favour of his local authority. However, I say to him and to all other hon. Members that we thought that the concessionary fares mess that had been left by the previous Government required some assistance to sort out between the two tiers of government. I hope that that is helpful.
The Chairman of the Select Committee, the hon. Member for Sheffield South East (Mr Betts), referred particularly to front-loading. As I said to the right hon. Member for Don Valley, it is possible to use earmarked funds that are in the reserves. I invite the hon. Gentleman’s Committee to look at this again, as there seems to be some misunderstanding. I welcome the fact that he welcomes the end of ring-fencing, which had been called for very widely across government and the Local Government Association. Ring-fencing has been un-ring-fenced by some £7 billion, and that has given local authorities a lot more flexibility. We have taken 90 separate budgets and combined them into just 10, meaning that local authorities that are savvy and understand that the situation has changed are able to move much more quickly.
The issue of business rates was raised by the hon. Member for Sheffield South East and others. There is a suggestion out there, which is gaining some credibility, that if business rates were collected at a higher level than the entire local government finance settlement, then the difference could be redistributed somewhere down the line. People need to understand that if business rate collection goes up or down, the amount that goes to local authorities is identical; it makes no difference. The amount that goes to local authorities is set out in the spending review envelope; it is insured by the Treasury, as it were. I hope that that clarifies the situation.
Caroline Flint
There is huge concern up and down the country that there will be a future Tory policy to localise business rates, which would not deal with the inequalities in terms of opportunities to raise funds through businesses. Can the right hon. Gentleman assure me that that will not be a policy of this Government?
Grant Shapps
I am pleased to be able to provide the right hon. Lady with the reassurance that she needs. A redistributive approach will have to remain in whatever system is put in place. I will return to that in a few moments.
My hon. Friend the Member for Harrow East (Bob Blackman) made several good, intelligent points. He called for a settlement that is more predictable because it is provided for more years in a row. As the House knows, we have made a settlement for this year and for next year, after which time we intend entirely to reform the system to do what everyone has called for, which is to dump the failed redistributive formula grant system in which, as the Chairman of the Select Committee pointed out, everybody, even in the good years, complains that it has been poor for them.
My hon. Friend provided a very useful list of different things that local authorities could do before they start savagely cutting the front line, as in the case of some authorities in the past couple of days. Members will do well to refer back to that list in Hansard to see all those different methods. Until an authority has run through each one of the ideas that he presented, it has no right to be cutting the services of the most vulnerable in society.
The hon. Member for Liverpool, Walton (Steve Rotheram) made a very impassioned speech. I have seen some of the things that his local authority has done; the £4.5 million that it saved by cutting some of the senior management is of course the right way forward. However, he says that his council is still incredibly badly off. Let me make this simple point to him: while Liverpool is experiencing a reduction in its funding formula of 11.3%, my Hertfordshire council is experiencing a reduction of 16.1%. This Government have gone out of their way to try to protect the most vulnerable, and it is about time it was recognised that the spending formula was designed to do that.
The hon. Gentleman made another claim that was extraordinary and, as much as he may not realise it, untrue—inadvertently, I am sure. He said that his local authority is cutting Supporting People by 30%. If that is true, his local authority is getting it wrong. Supporting People is one of the budgets that we have protected way more than the general picture. There is a reduction of less than 1% in cash terms on average in the Supporting People budget over the next four years. I will give way to the hon. Gentleman so that he can put pressure on his local authority not to slash it, given that the Supporting People budget is largely protected at national level.
Steve Rotheram
If I can prove that it is 30%, will the Minister give us back the other 29% so that we suffer only a 1% cut, which is the national average?
Grant Shapps
As the hon. Gentleman knows, the grant formula—[Interruption.] Members would do well to listen to this point because it affects many constituencies. The simple fact is that Supporting People is paid for through the formula grant. Given that we know for a fact that there is not a reduction in spending power of more than 8.8% in his constituency, it cannot be the case that the Supporting People budget has fallen by the claimed 30%, so I take him up on his challenge.
My hon. Friend the Member for Dover (Charlie Elphicke) made the worthwhile point that local authorities have been protected from having to raise council tax by the £650 million from central Government.
The hour is late and I do not want to detain the House. There is a clear division between authorities that have taken the necessary steps and those such as Manchester city council, which yesterday claimed that it has to make a 25% reduction.
Caroline Flint
I am aware of the time and I appreciate the right hon. Gentleman giving way. The person who stated that 25% of the net budget of Manchester city council will go over the next two years was its treasurer—a statutory officer of Manchester city council. I suggest that when the right hon. Gentleman is up there, he speaks to that gentleman, because I believe that that gentleman is right and that the right hon. Gentleman is wrong.
Grant Shapps
Here is a simple fact for the right hon. Lady: the reduction in spending power over the next two years is 15.5%. Yesterday, Manchester city council called a press conference to say what it will not do over the next two years. It says that it is going to cut the budget by 25% over that period, when the reduction is only 15.5%.
To conclude, it is that side of the House and those authorities that are failing to protect the most vulnerable in society. Thank goodness for the coalition Government.
Question put.