Local Government Finance

Debate between Lord Beamish and Bob Blackman

Wednesday 8th February 2012 Commons Chamber

[Bob Blackman (Harrow East) (Con)]

I feel suitably constrained by your introduction, Mr Deputy Speaker.

It is a great pleasure to follow the right hon. Member for Leeds Central (Hilary Benn), not least because he is so eloquent and sets out such a strong case for local government. Of course, he knows a thing or two about it, as he was in local government before he arrived in this place.

My starting point is that this is the second year of a two-year settlement. We must consider how far the Government have departed from that settlement in this second year. The reality is that there been improvements to the financial settlement for local government. The one thing for which local government has cried out for many years is certainty over funding. Even if it is bad news, it is better to be certain about what will happen. I am one of those who praised the previous Government for introducing a three-year settlement, as it was probably one of the few things they did well. Even though the settlement for many local authorities was not good, at least it was certain and everyone knew what would happen.

I listened as many Opposition Members intervened on the Minister to ask about the reductions that their councils will suffer. When fundamental changes are made to any type of funding formula and any process of local government funding, there are bound to be winners and losers. One problem that has been associated with local government financing for so long, as the Minister rightly articulated, is the fact that the funding formula is horrendously complicated and virtually no one understands it. Figures are put in, indices are changed, the numbers are crunched and the figures come out. If those figures are not to everyone’s liking, people seek to change the indices to make the facts suit the result that they want.

[Mr Kevan Jones]

I know that the hon. Gentleman has a long history in local government and will be aware of the old council tax resource equalisation, which took into account the needs of different councils and gave a level playing field. Does he agree that what we have now is a system that redistributes resources from poorer areas to richer areas? Even worse than that, it gets poorer areas to pay for it under the new damping system.

[Bob Blackman]

I recognise the hon. Gentleman’s point. A key issue is that comparisons made year on year must consider the amount per person, per household and so on that the authority has in the first place. One problem under the previous Government was that we saw money moved from London to northern authorities; a deliberate decision was taken and it was quite clear that that was taking place. Now, the balance is being redressed. That is quite right, but the problem is that the hon. Gentleman is comparing one year with another rather than looking at the longer term issues and at how certain authorities have gained substantially over the longer term.

[Mr Jones]

Does the hon. Gentleman also recognise that those northern councils have a different council tax base? In the north-east of England, for example, 50% of properties are in band A, whereas in Surrey that figure is less than 2%, so even if those councils wanted to raise extra finance locally, their ability is severely limited.

[Bob Blackman]

I recognise what the hon. Gentleman says about council tax base. That is a fair point. I notice that over some 13 years the Labour Government declined to review the council tax base or the underlying valuations, and I notice that the Government have agreed to continue that process of not revaluing properties for council tax purposes.

We have the opportunity once again this year for a council tax freeze. That is welcomed by local authorities and hard-pressed taxpayers. The Government are committed to that and it should be delivered. I call on all local authorities to take the opportunity of the grant and to freeze the council tax across the country so that all hard-pressed taxpayers can gain the benefit. It is true that different authorities are doing different things across the country. I shall not go into detail; I leave that to others.

Before the last election, everyone knew that local government finance would be substantially reduced. It was in the Labour party manifesto and in the Conservative party manifesto. Everyone knew that it was coming. Every local authority, regardless of its political persuasion, should have planned for those reductions and should therefore have implemented them over the past two years. A series of measures could be undertaken, and I shall mention a few. The first is to cut executive pay. It is interesting that in the past few days the Labour party, in particular, has been talking about people receiving large amounts of public money. There is no doubt that chief executives and senior executives of local authorities have been the beneficiaries of huge increases in pay over the past few years. At a time when local authority funding is decreasing, it is right that senior executive pay in local authorities reduces.

I am not a great fan of my local council, Harrow council, but I take my hat off to it for the measures that it is introducing. Its chief executive is cutting his own pay. He is cutting the number of senior executives and their pay, and he has introduced a system of pay within the local authority which means that the workers on the ground will be paid the same hourly rate regardless of when they work, but they will work a normal working week.

--- Later in debate ---

[Bob Blackman]

I thank my hon. Friend for reminding me that one of the necessary aspects of procurement is having suitable break points and review points in a contract, so that the contract is long enough for investment to take place but can be changed or terminated by the local authority if the service is not up to scratch.

I also take issue with the view of the right hon. Member for Leeds Central on balances and reserves. I feel very strongly that taking money from council tax payers and putting it into reserves or balances, rather than spending it on services, is theft from the taxpayer, because it is not being invested in the services provided. In my view, local authorities that maintain large reserves or balances are fundamentally fooling their taxpayers and should be exposed for doing so. Local authorities should maintain balances, but only balances that are required for cash-flow purposes or for funding in-year hikes that might take place.

[Mr Kevan Jones]

When the Prime Minister was Leader of the Opposition, he talked about the importance of mending the roof while the sun was shining. Given the uncertainty that the Government are bringing into local finance, is the hon. Gentleman really suggesting that local councils should have no reserves at all to fall back on if their local council tax base goes down following a big closure or some other catastrophe? That is just bad business.

[Bob Blackman]

I thank the hon. Gentleman for his intervention and for pointing out the issues relating to balances and reserves. They should be precisely for funding a local authority’s cash-flow requirements, not for saving huge amounts to cushion unexpected amounts. The reality is that there are authorities up and down the country that are sitting on huge balances. I take the view that no more than 10% of council tax take should be maintained as a balance.

I want to mention three other areas. The Government have changed the whole basis behind local government finance, and that is coming forward in legislation. That will change the whole ambit of how local authorities are rewarded. We had some interesting discussions on Second Reading of the Local Government Finance Bill about the fact that deprivation was a key driver for local authorities. The more deprived a local authority area, the more money it got. The Government are changing the whole ambit and structure of finance. We will have a situation in which house building leads to a new homes bonus, so local authorities will be rewarded for building houses and will receive finance as a result. Under the business rate retention scheme, local authorities will be encouraged to promote employment and job opportunities, so we will have an enterprise-led economy, encouraged by local authorities, and the onus will be on enterprise and not on deprivation..

I conclude by reflecting on what has happened in London this year. I applaud the fact that, after three years of council tax freezes under Boris Johnson, the Mayor of London is reducing—reducing!—his share of the council tax, not only ensuring that we have 1,000 extra police officers on the beat, but reducing crime and improving services to Londoners overall. Let us compare that with the record of the great pretender, the old pretender, who over eight years increased his share of the council tax by 152%. The comparison could not be starker. We get a better service and better value for money under the Conservatives.

Local Government Finance Bill

Debate between Lord Beamish and Bob Blackman

Wednesday 18th January 2012 Commons Chamber

[Bob Blackman]

I will give way in a second. I will cite an example from the past few years, when the previous Government decided to change the rules on the amount of money that was given through the formula for local authorities with large concentrations of black and minority ethnic communities. All of a sudden, funding for local authorities throughout the country with large BME populations would have been decimated because it was one of their great income streams. Huge lobbies took place and the Government backed down.

[Mr Kevan Jones]

I am interested in what the hon. Gentleman is saying. Can he give a specific example of a council anywhere, irrespective of its political persuasion, that has wanted to turn prosperity away from its area?

[Bob Blackman]

The key is not that local authorities turn away business or prosperity; I am pointing out that there is an in-built presumption that areas of deprivation follow extra grant from Government. As a direct result, there has been hardly any change in areas of deprivation across the country. Despite the fact that local authorities—of all political persuasions—with areas of deprivation have had huge amounts of money put in over 30 or more years, those areas of deprivation remain the same.