Lord Beecham
To ask Her Majesty’s Government what is their estimate of the redundancy costs to be met by local authorities in the current and next financial years; and what they forecast to be the impact on local authority budgets of the proposed restriction to £200 million of permission to capitalise those costs.
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)
My Lords, the Government do not make any estimates of redundancies in local government. Decisions about managing workforce reductions in local government are now rightfully for individual councils to make as employers. Following representations, £300 million of capitalisation will now be available, which will provide important support in 2011-12. That cannot meet all restructuring costs: it will be for authorities themselves to assess how they best manage costs from their own resources, including from reserves.
Lord Beecham
I thank the Minister for her reply. However, in the light of the guidance note on capitalisation published by the ODPM in 2004 that capitalisation,
“does not in itself increase public expenditure”,
and the DCLG’s press release of 3 March stating that,
“The Government is not providing authorities with extra funding for this purpose, but simply allowing a managed and affordable extension of existing flexibilities”,
will the Minister invite her honourable friend the Parliamentary Under-Secretary of State Mr Stunell to correct his letter to council leaders in January stating that,
“Whether it is through borrowing or the use of capital receipts … capitalisation scores as public spending, and has national implications for the wider economy and deficit reduction programme”?
Will she also confirm that the Government will reconsider the position if, as anticipated, the cost of job losses in local government exceeds the £300 million thus far announced?
Baroness Hanham
My Lords, capitalisation impacts directly on deficit reduction plans. Capitalisation is capital being used for revenue so there is no doubt, I think, that what my noble friend said in his letter was correct. The permission for capitalisation—which has now been increased from £200 million to £300 million, largely because of representations being made—is not intended to be the full way of meeting redundancy costs. Councils are meant to look to their own resources to make up most of what they need when there is a reduction of staff through either voluntary or compulsory redundancies.
Lord Vinson
My Lords, will the Minister agree that no Government can enjoy making cuts? It must be difficult to watch when some cuts are made inappropriately by local authorities, but the fact remains that, without these cuts, council tax would rise exponentially as it has done in the past. Would the Minister make it clear that the alternative to cuts is a rise in council tax? I wonder how popular that would be with the British public.
Baroness Hanham
My Lords, I point out immediately that the Government have made it possible for a council tax freeze for the next two years. Indeed you cannot have numbers of personnel rising exponentially every year, which happened under the previous Government, under which there was a widening out in the number of people employed in local government. There have to be, and there will be, rationalisations of services and new ways of doing things. Not all councils are lost in the depths of despair about what is happening, because this is opening up opportunities for them. However, I do not deny that it is a great hardship for people who are losing their jobs without the benefit of having anywhere to go, and none of us would reject that.
Lord Tope
My Lords, the Minister said in answer to the Question that it was for local authorities to make their own decisions on spending. Given that there is no additional public expenditure involved in this, will she say why the Government will not allow local authorities to decide for themselves how they will meet these redundancy costs?
Baroness Hanham
My Lords, they can make their own decisions about it. All that the Government are doing at the moment is providing some flexible resources with the £300 million capitalisation for those that are finding it particularly difficult. They will have to implement that capitalisation against criteria, and if they do not meet those criteria they will not be given permission to do so.
Lord McKenzie of Luton
My Lords, is the Minister aware that the tired mantra that she keeps trotting out that it is all down to local authorities is growing very thin? People are well aware that it is the Government that are responsible for making these cuts and that they are simply hiding behind local authorities and local councils.
Baroness Hanham
My Lords, I suppose I could also produce the statement that I have made frequently in this House that if it were not for the previous Government’s mess we would not have to make these reductions. I point out that the previous Government had also seen the ill of the way in which they were going about this, as they were also making provision for substantial reductions in the budgets for local government in this financial year. The fact that this Government have had to make slightly more reductions than expected should not have been totally unexpected by local authorities—they knew perfectly well that they were going to have to make reductions.
The “tired mantra” that the noble Lord refers to is not a tired mantra; it is just a truth. The truth is that all the money for local government has now been given to local government by this Government. It is no longer ring-fenced—there are now only two areas that are—so local government can use every bit of money that the Government get, except in the areas of education and health, and can decide how to use it. Local government can decide how to provide its services and how to provide the most value to its own communities with all the resources that it has.
Lord Hamilton of Epsom
My Lords, does my noble friend have any figures for natural wastage in local government? Does not natural wastage contribute to the reduction that there will be in the number of jobs—although obviously it will not contribute all of them?
Baroness Hanham
My Lords, I do not have the figures, but the noble Lord is correct. There is always natural wastage—amazingly, people do leave jobs voluntarily—and there are ways of leaving jobs other than through redundancy.
Lord Liddle
My Lords, does the Minister accept that because of the Government’s refusal to be more flexible on the capitalisation of redundancy costs, cuts in current spending are going to be deeper than they would otherwise have been? This will have a particular impact on grants to the voluntary sector and the prospects for the big society.
Baroness Hanham
My Lords, we have made it clear that we expect the voluntary sector to be part and parcel of the future of local government. If local authorities do not wish to do that—although they will be put under great pressure to do so—they will cut voluntary sector grants, but in doing so they will be cutting off their nose to spite their face. Much good work is done by voluntary organisations. Under the Localism Bill, there will be a greater expectation that they will be able to take part in running and managing services.