Local Government Finance

Debate between Derek Twigg and Lord Beamish

Wednesday 8th February 2012 Commons Chamber

[Mr Jones]

Well, it will not make it fairer; it will make it more unfair. The Secretary of State knows exactly what he is doing politically; he is rewarding the people who vote Conservative.

The formula grant for children’s services is another element that puts pressure on councils in the north of England, especially if we look at the detail. That grant has been cut, and I have to tell the hon. Member for Mid Dorset and North Poole that the number of children in care in councils such as Middlesbrough is huge in comparison with the number in Dorset. The cut thus has a disproportionate effect on councils in County Durham and in other northern cities in comparison with councils in the hon. Lady’s area. Another issue is the damping mechanism. Nine out of 12 councils in the north-east lose out under that process.

I must take my hat off to the Secretary of State for his clever use of percentages when what we should really look at is cash. When cash is taken into account rather than percentages, we find councils like South Tyneside, Hartlepool and Middlesbrough losing money through the damping mechanism, so that they have to pay to help “deprived” areas like Windsor, Maidenhead, Richmond upon Thames and, my old favourite, Wokingham. Let us compare Hartlepool to Wokingham. Under the damping mechanism, Hartlepool pays to support Wokingham. Hartlepool faces a cut of £142, that is 5.7%, in spending per dwelling and then has to provide under the damping mechanism £5—0.2%—for every dwelling, which helps to protect Wokingham. Wokingham faces only a £27 cut per household, or 1.5%—only half what the Minister says is the average.

We heard it said in last week’s debates on the Local Government Finance Bill that the system is complex and that the Government are simplifying it, but they are not. They are putting in place a mechanism that will reward affluent areas. It takes away the one thing that equalisation did, which was to ensure there was a level playing field. That will no longer be the case under this system. Northern councils such as those mentioned in earlier examples are taking disproportionate cuts as well as having added costs in running their services because of high levels of unemployment, high numbers of individuals needing social care and the numbers of looked-after children. Those services place huge costs on those councils, which other councils do not have.

[Derek Twigg]

My hon. Friend is making a very good speech. Does he recall the Chancellor saying:

“We are all in this together. I am not going to balance the budget on the backs of the poor”?

As my hon. Friend has heard tonight in relation to Knowsley, Halton and other areas, that is exactly what the Chancellor is doing—he is hitting the most deprived areas the most.

[Mr Jones]

Exactly. We hear a lot of this nonsense and the soundbite that we are all in it together but we are not. The Government are protecting their own affluent areas at the expense of others. I think that under the Thatcher Government, Liverpool was written off at one time, and the current Government are clearly writing off certain areas.

The other alternative is to raise council tax. We heard earlier the new localisation of business rates being trumpeted as something that will bring in huge amounts of cash, but it is a damn sight easier to raise investment and to attract business to parts of the City of Westminster than it is to parts of Ashington in Northumberland or Seaham in Durham. The ability of councils to attract business will be limited, so the areas that will gain from that change will be those affluent councils. Similarly, the councils that will benefit from the changes regarding the new homes bonus will be those where house building is still going on. The house building market in the north-east is flatlining, thanks to the economic policies of this Government, and people are not building many new houses, so even those areas that have available sites are not going to gain.

Another issue is the ability of local councils to raise funding through council tax. In the north-east, 50% of properties are in band A, whereas the figure in Surrey is about 2%, so even if there were an equal council tax rise in both areas, Surrey would have a greater ability to raise large amounts of money than the north-east. The difference is quite stark. In addition, there is the problem that is coming down the road with the localisation of council tax benefit, which will come with a 10% cut. That is another cut for councils that have large numbers of people. My hon. Friend the Member for Warrington North (Helen Jones) has made the very good point, which I keep reiterating, that people on council tax benefit are not all on benefit; many of them are in low-paid work and they will be disproportionately affected by these proposals.

The Government know exactly what they are doing. They are devolving responsibility to local councils and with it devolving the blame. They are trying to give the impression to local people that they have nothing to do with the cuts that are coming in County Durham and other northern councils because of this mechanism, but they have. Only one person is responsible for this: the Secretary of State.