Local Government Finance
Debate between Lord Pickles and Caroline Flint
The Secretary of State for Communities and Local Government (Mr Eric Pickles)
With permission, Mr Speaker, I should like to update the House on the Government’s review of local government finance.
The past year has seen the beginning of a long-awaited and much needed shift in power—from national to local, and from Whitehall to the town hall—but if localism is to reach its potential, new legal freedoms must be matched by freedom over finance. That, of course, is not a new idea. Reviews, from Layfield in the 1970s and onwards, have emphasised that increasing local financial control is the key to strengthening local democracy.
Strangely, the previous Government did nothing to reform the system, despite a local government finance Green Paper, a local government White Paper, the balance of funding report, and, of course, the Lyons inquiry. Amazingly, they did not even bother to issue a formal response to Lyons’s 400-page report.
By contrast, the coalition Government are delivering radical change. Over the past year, we have begun the phasing out of ring-fencing, freed up £2.1 billion from restrictions and simplified more than 90 separate funding streams to fewer than 10. That is real progress, but today we are committed to going further still: to restoring councils’ financial autonomy while ensuring a fair deal for all communities, whether in the north or in the south.
In the first phase of our review of local government resources, we have focused on local retention of business rates. As the House will know, the Government have already taken action on business rates. We have introduced a more generous small business rate relief scheme, we are making it easier to get that relief without filling in paperwork, and we have scrapped the unfair and regressive ports tax.
We are now looking at what business rates mean to local councils. Councils in England collect some £19 billion in business rates each year. No sooner does the cash come in than it is gathered up by the Treasury and then redistributed to councils according to a complex formula. That approach has major shortcomings: it denies councils control over locally raised resources; it deprives them of the certainty they need to plan their finances for the longer term; and it creates a disconnection between the success of local businesses and the state of a council’s finances.
Surely it is common sense for the system to encourage councils to boost local jobs and growth. Radical change is needed, and councils themselves agree. In a major step for transparency, my Department is today publishing every representation made in the recent local government financial settlement. There is a common theme. Councils believe that the current system is complex and opaque. They must talk down their successes and talk up their difficulties in order to secure the best possible deal from Whitehall.
To address that, mere tinkering—adjusting the formula here, amending the area cost adjustment there—will not be enough. This Government are determined to repatriate the business rates. Today, I am publishing a consultation outlining our proposals. No more will proud cities or historic counties be forced to come to the national Government with a begging bowl. Councils will have a greater control over cash, helping them to plan for the longer term. Tax increment financing will let them borrow against anticipated increases in rates, giving them a new way to invest in infrastructure, from transport projects to regenerating town centres. Councils should see a direct link between the success of local businesses and their own cash flow. That will create the right incentives for them to work closely with local businesses.
I am determined that the transition to a new scheme will be both responsible and fair. The Government’s overriding priority continues to be deficit reduction. In the spending review, we set out the level of resources available for local government for the next four years. In the interests of financial stability, for the first two years of the retention scheme, we will continue to stick to those spending plans, but we will allow local authorities to benefit from any growth in business rates above forecast levels. Beyond this spending review period, we will look to align more closely local authority functions and total business rate income.
It is also of paramount importance to ensure that our proposals on local government finance are balanced, fair and equitable, creating the right incentives for all areas to grow while protecting the most vulnerable. We propose a number of measures to safeguard them and to achieve that. First, poorer places will share the increase in growth with more prosperous areas. Those places with the greatest dependency should, and will, continue to receive support, while being allowed to keep the products of enterprise, and those places that raise the greatest sums through business rates should expect to make a contribution. A new system of tariffs and top-ups will ensure that we start from a fair base. As my right hon. Friend the Deputy Prime Minister told the Local Government Association last month, we will ensure that no one will be worse off when the new system is introduced than they would have been under the old system.
Secondly, as the House will well know, some areas have strong natural economic advantages, such as high-value industries or concentrations of skilled workers. There will be no cap on the amount of business growth from which such councils can benefit. A council will be better off as a result of growth, but if an area benefits disproportionately from a growth in business rates, we propose to introduce a special local levy to capture a share of that benefit. The money raised should be used in the first instance to fund a safety net, which would protect authorities that experience exceptional shocks to their business rate take.
Thirdly, our proposals include the option of resetting the whole system. If councils no longer had enough resources to meet local needs, the Government could recalculate the level of tariffs and top-ups across the whole system.
Fourthly, support for mandatory and discretionary rate relief will continue. Rate relief to the needy will be unaffected. National discounts and rate relief will continue to be supported, meaning no adverse change for such groups as charities, amateur sports clubs, voluntary groups, those in hardship and those who are eligible for rural or small firms relief.
Finally, we have reflected carefully on what our new system means to business. Businesses—the creators of local jobs and wealth—need stability in this process. They need certainty to plan for the long term, so let me spell this out in no uncertain terms: local firms will see no difference in the way in which they pay tax, or the way in which the tax is set, as a result of these changes.
I am placing in the Library a plain English guide so that hon. Members’ constituents can understand what our proposals will mean for them. We intend that business rates should be repatriated in 2013. We will bring forward a local government finance Bill to give our proposals legal effect. The publication of this consultation begins a debate that I hope will be wide-ranging and constructive. I want to work with all local authorities, representative groups and political parties to build a consensus for lasting change. That consensus will be built on putting power back in the hands of local councils and communities; supporting local jobs and local firms; and creating the conditions for renewed, sustainable economic growth. I commend the statement to the House.
Caroline Flint (Don Valley) (Lab)
I thank the Secretary of State for advance sight of the statement. Obviously, we will look closely at the detail of the Government’s announcement today, because on many policy areas under this Government the devil is in the detail.
Let me make it clear at the outset that we would back a funding system for local authorities that supports jobs and growth and encourages enterprise. In government, we introduced measures such as the small business rate relief to support small businesses and, in consideration of the Localism Bill, we are pushing the Government to go further in devolving powers to cities and councils to enable them to drive economic development. Our amendment is due to be debated in the other place on Wednesday, and I hope that the Secretary of State will confirm today that he will tell his colleagues to support our proposals.
We have been clear that any funding system for local government must be fair. It has to ensure that every authority has the resources it needs to meet the needs of its communities, but today I am afraid that—plain English or not—the Government have failed to spell that out. How does the Secretary of State plan to localise business rates without taking funding from the pockets of our poorest communities? The Secretary of State may just want to talk about year one, but we want to talk about year two and year three, and all the years after that. What will the funding system look like then? And will the Secretary of State be able to guarantee today that no council will be worse off in five years’ time as a result of the reforms that he has announced this afternoon?
It is telling that whenever the Government have been challenged on the long-term effects of their reforms to business rates, they have said that it is up to local councils. What that really means is that, after the first year, the Government are washing their hands of the problem—cutting funding and leaving councils to fend for themselves. We all know how incredibly important this is to local communities up and down the country because, as the Secretary of State knows, business rates make up 76% of the formula grant. Vague, empty assurances just will not cut it. No sleight of hand, temporary transition grants or safety nets can hide the consequences of these reforms. If the wealthiest councils are not giving up the rate they collect locally for redistribution, where will funding for those who rely on redistribution to survive come from?
The Secretary of State referred, very briefly, to the fact that areas that raise the greatest sums through business rates will still, at least in year one, make some sort of contribution to less well-off areas, but a report in this morning’s Times said that councils with large yields would only be required to contribute to a safety net in the form of a regional pot. Will the Secretary of State confirm whether the redistribution that takes place in year one—or beyond—will be on a national or regional basis? If it is on a regional basis, and given the size of the business rates yield in Westminster and the City of London alone, many areas outside London and the south-east will be considerably worse off.
Until the Secretary of State clarifies those points, we will continue to press him on what these reforms might mean. We have heard his assurances before. He assured us that the finance settlement was fair. Then we found out that while places such as Richmond and Surrey Heath were losing less than £10 a head, areas such as Hackney and Liverpool, serving some of the most deprived communities in our country, were losing nearly twenty times as much. He assured us that the cuts to local government funding did not have to mean cuts to services, but even his own councillors do not believe that one. The cuts that we are seeing now, right across the country—to home helps, care services, street cleaning and, yes, to bin collections too—are the consequences of his cuts.
Today, the Secretary of State still seems to expect us to be satisfied by his assurances—to believe that no council will be worse off. If we do not believe what he says, the Deputy Prime Minister told the same Local Government Association conference:
“The new system will start on a level playing field. How far you progress from there is entirely up to you.”
That was backed up by comments by the Under-Secretary of State for Communities and Local Government, the hon. Member for Hazel Grove (Andrew Stunell) in response to an Adjournment debate last week. I paraphrase slightly, but he basically said, in answer to a concerned question about what would happen after year one, “You’ll be okay for the first year, but I really couldn’t specify beyond that.” Are those the sort of assurances to give us hope that there will be fair redistribution in the future for those communities in the greatest need?
This proposal just does not add up. The amount of funding going to local authorities over the next four years has already been laid out in the comprehensive spending review. Unless the Secretary of State wants to announce today that he is planning to revisit the level of grant he intends to provide to local authorities, will he confirm that, with a fixed pot of money for any council to gain, other councils must lose? If not, will the Secretary of State tell us where the additional revenue will come from? We know which areas will lose out as a result of these changes. It will be the poorest areas, with the most deprived communities and smallest business base, who will be hit with a triple whammy. First, they saw their area-based grants cut and then they had to deal with the finance settlement, which singled them out for the heaviest cuts; and now, to add insult to injury, the Government want to cut their funding to boost the coffers of the better-off councils by localising business rates in a way that is unfair and that will benefit the best-off at the expense of the most deprived.
However, it will not just be our poorest communities that lose out. Many rural areas and seaside towns—from Southend-on-Sea to Blackpool; in Devon, Somerset and Northumberland—and even Harrow and Enfield in Greater London and Redditch in the midlands will see a loss from these changes.
In government, we were examining the case for tax increment financing, and we will look closely at the details of the Government’s announcement, but however much the Government spin it, it will not be lost on local authorities that the introduction of tax increment financing comes after this Government have already cut local authority capital funding by 45%, and when they have raised the interest rate at which local authorities can borrow. The Government may couch these reforms in the language of localism, but today’s announcement betrays their real intent. Cutting funding to areas with the highest need does not free councils from central control or empower them: it stops them from doing the things their communities need of them.
Yes, we want a funding system that supports jobs and encourages enterprise, but not every area has the same ability to attract investment and new businesses. Not everywhere can be Westminster or the City of London. We will look to support incentives to boost enterprise and put councils and communities in control, but fairness must be at the heart of the system.
Oral Answers to Questions
Debate between Lord Pickles and Caroline Flint
Mr Pickles
My hon. Friend suggests, from a sedentary position, that that was rubbish, and I cannot disagree with him. We are looking at delivering weekly collections and a financial incentive for providing them, but we had to start from the basis of dealing with the legacy—we had first to remove the Audit Commission and the instructions in the waste and resources action programme suggesting that it was best to close these things down after local elections, and we had to ensure that the fortnightly collections, which the right hon. Lady advocated so strongly when she was Minister for Housing, were also stopped.
Caroline Flint
Of course, under Labour, recycling went up, and last week we heard that across our islands, Northern Ireland, Scotland and Wales have higher targets for recycling than England. I think that the record will show that most of the local authorities with fortnightly bin collections are Conservative-controlled. Is not the truth that this chaotic climbdown is a personal humiliation for the Secretary of State? He is making promises he cannot deliver, his own councils are not listening to him and he has been dumped on by his Cabinet colleagues.
Mr Pickles
I understand now why Polly Toynbee is so disappointed with the right hon. Lady’s opposition across the Dispatch Box. I apologise, Mr Speaker, for not directing my earlier remarks to you. She is concerned about the number of Conservative authorities, but their number is due to the fact that the majority of councils in this country are Conservative—she had a big chance in May to rectify that and failed singularly. However, we are removing the incentives for fortnightly collections, and looking at incentives for weekly collections.
Mr Pickles
I think the proposal will be welcome in all parts of the House. We heard opposing views from the hon. Members for Huddersfield (Mr Sheerman) and for Lewisham East (Heidi Alexander), but my hon. Friend has until 30 June, when we will be closing the consultation. The proposal could produce 70,000 new homes over 10 years. I share his commitment to that aim.
Caroline Flint (Don Valley) (Lab)
We have already heard today about the concerns over the level of charges being raised on the old and vulnerable in our communities as a result of the cuts, but it is not only those people who are facing increases in charges. Tory-run Wandsworth and Bexley councils are planning to charge children to play on their swings. Will the Secretary of State join me in condemning this fun tax, or is pay to play now official Government policy?
Mr Pickles
Let us be clear: under the Labour Administration councils were harangued about not charging. Councils were instructed to charge more. We will look at the level of charging in the context of the reform of local government finance, but it ill becomes the Labour party to suggest what the right hon. Lady is now suggesting when under Labour charges went up and the council tax doubled.
Oral Answers to Questions
Debate between Lord Pickles and Caroline Flint
Caroline Flint (Don Valley) (Lab)
May I associate the Opposition with the Secretary of State’s comments about the people and firefighters in Japan? There, as in this country, the emergency services go towards danger to save others and our thoughts are with those in Japan at this time.
It seems that with every passing day Ministers are being forced to rethink ill-thought-through policies. One Government policy that councillors and the public do not understand is the decision to front-load cuts to council budgets. Will the Secretary of State tell councillors, communities and Members of the House why it was necessary for the heaviest cuts to local government to fall in this first year?
Mr Pickles
I am grateful for the right hon. Lady’s remarks about our firefighters. May I respectfully remind her that the Labour party was due to introduce cuts this year and that local government was not protected and therefore would have faced higher cuts under Labour than under the coalition Government?
Caroline Flint
There is no evidence of that and I assure the right hon. Gentleman that Labour would not have front-loaded the cuts to local government. As on many occasions, the Secretary of State has not answered the question and has left us with no idea why the front-loaded cuts were necessary. As was said earlier, the Housing Minister let slip that the Government knew all along that Labour councils representing the poorest areas of our country were getting the worst of the cuts. Is it fair that while the Secretary of State’s own local council loses just £17 per head this year, councils such as Manchester and Liverpool, which he has criticised, are losing nearly 10 times as much?
Mr Pickles
My local council has a budget that would have been lost in the sub-committees of Manchester city council. Labour’s Budget in March 2010 admitted there would be cuts to regional development agency regeneration, the working neighbourhoods fund, the local enterprise growth initiative, the housing and planning delivery grant and time-limited community programmes—and that was just the start. The front-loaded cuts from the Labour party would have meant £14 billion-worth of cuts falling in this year. Under Labour cuts, unprotected Departments would have received an average real-terms cut, over the spending review period, greater than those under the coalition’s deficit reduction plan.
Amendment of the Law
Debate between Lord Pickles and Caroline Flint(13 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Caroline Flint
If my hon. Friend was going to point out that when we go into recession we have to ensure that we do not go into a depression, that is exactly what the Labour Government did. Things may look rosy from the leather seats of the Secretary of State’s new Government Jag, but for ordinary people, the Government’s plans are hurting but they are not working.
Mr Pickles
Mine is a second-hand ex-Labour Jag.
If the Labour Government were doing such a good job, why did the right hon. Lady resign?
Caroline Flint
For goodness’ sake. I have always put on record my pride in what the Labour Government did to ensure that this country recovered from 18 years of Tory rule. Whatever my disagreements with them, I will never take that away from any of our leaders of the past 13 years.
This Budget has offered more of the same. The Government claimed that it was a Budget for growth, but we got nothing of the sort. Only a few weeks ago, the Chancellor told us that it would be an “unashamedly pro-growth Budget”, as though economic growth was something that he would normally be embarrassed about. What the Government should really be embarrassed about is that as a direct result of their policies, the Office for Budget Responsibility has downgraded its growth forecast not once but twice. Now we know that growth was down last year and will be down this year and next year. The only things that are growing at the moment are the prices in the shops and the number of people out of work.
Local Government Finance
Debate between Lord Pickles and Caroline Flint(13 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text
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.”
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.
Local Government Finance
Debate between Lord Pickles and Caroline Flint
The Secretary of State for Communities and Local Government (Mr Eric Pickles)
With permission, Mr Speaker, I should like to make a statement on finance for English local authorities for 2011 to 2013.
The spending review set out how the Government would tackle the catastrophic levels of public debt by delivering necessary reductions in public spending to accelerate deficit reduction and put the public finances back on a sustainable footing. This has involved difficult, but essential and responsible, decisions. Every part of the public sector needs to do its bit to help to reduce the highest deficit in the UK’s peacetime history and the rapidly rising national debt that this Government have inherited.
Last year, the Government borrowed one pound in every four they spent. That threatened our economic credibility. In contrast, our plans to eliminate the current structural deficit over five years have won the backing of the International Monetary Fund, kept our credit rating steady and held interest rates down. The Office for Budget Responsibility’s forecast confirms we are taking the right steps. Its message is that Britain’s recovery is on track.
I have sought to achieve a fair and sustainable settlement for local government by listening to what the local government community has asked for. It will be a progressive settlement that is fair between different parts of the country. First, we have focused on the most vulnerable communities with significant social challenges. These are often the areas that are most reliant on Government grant, so equal grant reductions would leave the poorest places worst off. We have insulated them by giving more weight to the levels of need within different areas and less weight to per capita distributions. We have also grouped councils into four bands, reflecting their dependence on central Government. More dependent places will therefore see proportionally lower falls than more self-sufficient places.
Secondly, we have listened to concerns about the front-loading of the reductions. The Local Government Association asked me to focus on local government total spending, including not just grants but income from council tax and NHS funding to support social care and benefit health. It said that reductions in spending should be limited to 8%. As far as possible, I have given the LGA what it asked for. I have made sure that no authority will face more than an 8.9% reduction in spending power in either 2011-12 or 2012-13. In fact, the average reduction in spending power for 2011-12 is 4.4%. To fund this, I have transferred an extra £30 million of my Department’s budget to local government for 2011-12. I have also provided a grant of £85 million for 2011-12 and £14 million for 2012-13 to fund councils who would otherwise have seen sharper falls.
The spending review also announced that the Government would protect the public from excessive council tax rises. We have set aside £650 million so every council can freeze council tax next year without hitting local services. We will provide councils that freeze council tax with the equivalent of a 2.5% increase in funding instead. That will provide real help to hard-working families and people on fixed incomes, such as pensioners. The Government also want to ensure that council tax payers are protected against authorities that reject the offer and impose excessive council tax rises. We will introduce powers for residents to veto excessive council tax increases through a local referendum. In the meantime, the Government will take capping action against councils that propose excessive rises.
When the House debates the final local government finance report next year, I will set out the capping principles. I will also publish shortly details of the figures that will be used to compare authorities’ budgets between years, should capping be necessary. The previous Government had planned to cap the police authorities of Greater Manchester and Nottinghamshire after they set excessive increases in 2010-11. Subject to challenge, we will ensure that, should they decide not to freeze the council tax, neither can impose an increase of over 2.5% in 2011-12.
This settlement also supports the Government’s commitment to adult social care, providing councils with sufficient resources to protect people’s access to care and to deliver improved quality of outcome. That includes £150 million of NHS funding in 2011-12 to support social care services, promoting integrated working between primary care trusts and local authorities and benefiting the health system. The settlement directs more formula grant to authorities that deliver social care.
Despite all the actions we have taken, I recognise that local government still faces significant challenges. The vast majority of councils have been making sensible plans to address them. I support that and I am restoring real power to councils, ensuring that Whitehall interference, red tape and the burdens of inspection and regulations are gone. The Localism Bill, published today, will deliver a new democratic settlement to local councils, overturning decades of central Government control.
For too long, councils have been barred from using their initiative and creativity to improve services. The limited “power of well-being” acted as an obstacle to cost savings, such as mutual insurance companies. Today’s Bill will fundamentally change councils’ freedom to act in the interest of their local communities through a new general power of competence. That will give councils the legal reassurance and confidence they need to innovate, drive down costs and deliver more effective services. I am also giving councils greater control over their budgets.
With very few exceptions, we have ended grant ring-fencing so that councils can decide for themselves how their money is spent. We will also allow them to borrow against future business rates receipts. Councils now have the freedom and responsibility to concentrate on what residents want: protecting front-line services. To support them, I have set aside £2 million to help councils to modernise and reduce back-office costs.
Councils can protect front-line services by sharing services and back-office functions, improving procurement to get more for less, bringing increasing senior pay under control and using transparency to cut waste. Proactive councils are already taking the opportunity radically to rethink and transform their services. There are also substantial incentives available for councils to invest in long-term projects, which include the new homes bonus and £1.4 billion of regional growth funds over three years—a fund that goes well beyond the working neighbourhoods fund. There will now be a statutory consultation on the settlement for 2011-12 and I look forward to hearing representations from councils.
Finally, this is a transitional settlement, using an inherited system. That is why I have set out details only for the next two years to strike a balance between the need to help councils plan and the need to reform the system. This system, based on redistributing business rates, makes councils heavily reliant on handouts from central Government—some depend on us for up to 75% of their spending power. It is part of the trend that has led to some areas of the country becoming completely dependent on the public sector. It makes planning difficult, weakens local accountability and stifles local innovation. There is no incentive for councils to invest in their local economy as they will see most of the proceeds disappear.
That is why I have set up a review of business rates with the intention that, in future, local government will be able to keep more of what it collects. Ultimately, the councils that invest and support the local economy will be able better to use the finances themselves. The local government resource review will begin in the new year. I commend the statement to the House.
Caroline Flint (Don Valley) (Lab)
I thank the Secretary of State for giving us 40 minutes’ advance notice of his statement and its 11 attachments. Obviously, we will have to look very carefully at the detail of today’s settlement because, as we all know, the devil is in the detail. I welcome his acknowledgement of the concerns about front loading caused by the comprehensive spending review profile. Many have made that case, although even today the Minister for Housing and Local Government seemed to deny, on a programme that we both appeared on, that front loading would be a problem. The fact is that it still exists, even after the Secretary of State’s statement, but it is a shame that it was not uppermost in his mind when he raced to the front of the queue to settle his Department’s cuts with the Chancellor.
At first sight, there is little else to be thankful for, because today’s announcement includes heavily front-loaded cuts to local government that are not only damaging but deeply cynical. The Secretary of State comes to the House with his statement in one hand and a localism shovel in the other, because he thinks that today is a good day to bury bad news. We have been inundated with empty rhetoric about localism, three written ministerial statements on localism, the publication and First Reading of the long-awaited and much-delayed Localism Bill and a stream of articles and briefings over the weekend, including appearances in which he has waxed lyrical about devolving power to local government. All those promises ring hollow when at the same time he imposes unprecedented cuts on town halls the length and breadth of the country. He is offering councils devolution while holding a gun to their head.
Today we find out what the Government really plan to devolve to local councils: the most devastating cuts in funding for a generation and the blame for difficult decisions. What is worse, the Secretary of State does this with barely disguised relish and to the cheers of his Back Benchers. Time and again, he has spoken of the virtues of local government. He promises to free local councils from the shackles of Whitehall and pledges to give them extra freedoms and powers, but if he really believes in local government, why has he imposed cuts on town halls up and down the country bigger than those for almost every Whitehall Department? Does he really believe that the regional growth fund, which has been sliced enormously, can make up for the losses that local government is facing? Why has he still front loaded the cuts so that the heaviest reductions will fall in the first two years and why has he refused to give councils the help and flexibility they need to meet the cost of redundancy payments? I think that he meant to refer to £200 million to help with costs rather than £2 million, which is what he said. Even so, the Local Government Association is asking for £2 billion-worth of flexibility to handle the redundancy payments that will have to be faced across England.
What further assurances can the Secretary of State give that the poorest councils will not bear the heaviest burden? Like others, I was intrigued when he talked about the spending power of local authorities. Will he explain in more detail how he has worked out each council’s total spending power to enable him to claim that no authority will face more than an 8.9% reduction in spending power from 2011 to 2013? Why does he not talk about the revenue support grant and the cuts to that rather than mixing in council tax revenues and spending provided by the NHS? For someone with so much to say about town hall communications, bin collections and Christmas celebrations, and given that barely a speech passes without being spiced up by a reference to curries, the Secretary of State has so little say about the impact of these cuts. Local councils, the people whom they employ and the communities they serve deserve better than that, as do their partners in the big society. Today’s settlement means that far from community groups and the voluntary sector being liberated to do more, as the Government promise, they might be so hampered that they end up doing much less.
Be in no doubt: these cuts will hit front-line services and cause massive job losses in the public and private sectors. For all Ministers’ traipsing around the TV studios pretending that savings of this magnitude can be made by efficiency drives and sharing back-room functions alone, the reality is very different—and everybody knows it. Even Baroness Eaton, a Conservative peer and the chair of the Local Government Association has admitted:
“These cuts will hurt. We know this means there will be fewer libraries, more potholes going unrepaired, parks shutting earlier and youth clubs closing.”
This is not about whether or not local government funding should be reduced. Across the House, we all accept that the deficit needs reducing—[Hon. Members: “Ah!”] Yes, and that would have meant cuts to local government funding whoever won the election—I made that clear in last week’s debate and I say it again today—but the Government have made their choice. They have chosen to impose cuts on local government harder and faster than in almost any Whitehall Department. There is nothing localist about that. We on the Labour Benches are in favour of empowering local councils and giving people a greater say in the way they run their local communities and in how services are provided, but if the Secretary of State thinks that he can get away with using localism as a smokescreen for unprecedented cuts to local government which still, even after today’s statement, fall heaviest in the first two years, he had better think again.
The Secretary of State announced today the dawn of a new constitutional settlement. I therefore look forward to his confirmation that, in line with convention, the Localism Bill will be considered in Committee on the Floor of the House.
In last week’s Opposition day debate I set the Secretary of State three challenges: to spread the cuts more evenly over four years; to protects jobs and front-line services by ensuring that councils have sufficient capitalisation funds to meet the cost of redundancy payments; and to ensure that the burden of cuts is spread fairly around the country and between our communities. Despite today’s assurances, he has not convinced us that his localism is any more than a cover for cuts. People up and down the country will pay the price for his failure.
Mr Pickles
Well, so much for gratitude. I do not want to start up the hunting debate again, but we have shot the right hon. Lady’s fox and she has been less than gracious. The first thing we did was to change relative needs level from 73% to 83%. Then we introduced banded floors, and then we introduced a special damping for authorities more dependent on grant than others. This settlement—this formula—is more progressive, protecting vulnerable communities, than anything that the Labour party has produced.
As for the right hon. Lady saying, “What are these figures?”, it is not so long ago that the hon. Member for Derby North (Chris Williamson) was demanding this way of measurement—that we should not just take basic grant and that we should include the question of council tax and money coming from other grants and from the national health service which primary care trusts are spending. It is good to see along the Front Bench my right hon. Friend the Health Secretary, who has done so much to ensure that local government is getting additional powers in this area.
We have delivered everything that the Opposition identified. We have protected the most vulnerable. The right hon. Lady seemed to start saying that we had not done too bad a job, but found that she had notes prepared earlier condemning us.
Local Government Funding
Debate between Lord Pickles and Caroline Flint
Caroline Flint
That is another example of the devastating impact of the cuts in the first year. I say to the Secretary of State: is that a fiction?
Caroline Flint
I am very much looking forward to the missives I can hear being typed out in town halls in London and across the country to put the Secretary of State right on that one.
Mr Pickles
I am most grateful to the right hon. Lady for that, and, to start on a positive note, may I say that the entire Front-Bench team likes her new hairstyle?
There is not a £3.5 billion surplus in non-domestic rates in the year coming. There is a potential £2 billion surplus in 2013-14. It is hoped that the new system of local government finance, which I will be making some reference to in the statement, will be in the process of being brought in, so it is theoretical at this stage.
Caroline Flint
The right hon. Gentleman teased the House a few seconds ago when he told us to wait and see what the financial settlement provides. Local council leaders have been pressing him to give some hint on, and recognition of, the problem of front-loading and whether that can be looked at. Can he not give some steer that the Government have listened to some of those concerns, because at present they are planning for huge cuts, based on what they expect to have to deliver come April 2011-12?
Mr Pickles
May I reassure the right hon. Lady both that we will be making a statement to the House, unlike last year when the statement was relegated to a written ministerial statement, and that we are going to ensure that the distribution is fair?
Mr Pickles
The right hon. Lady’s council has just £1 million short of £60 million in reserve. The decision that has been taken is its own, and I would urge it now to look at other measures. I would urge the council to look towards a joint—[Interruption.] It might not be for the right hon. Lady—I know she lives a champagne lifestyle—but £60 million is a lot of money. Let the council look towards sharing a chief executive, or sharing an education authority or planning authority. Let it look at working together right across back-office services.
At the heart of the settlement, we want to ensure the protection of hard-working families and pensioners; support for vulnerable individuals; help for vulnerable communities; and fairness, for both north and south, and rural and urban England. Practical policies to protect the vulnerable include: £1 billion in extra grant for social care and a further £1 billion from the NHS; a new role for councils in public health, backed up with extra funding; £2 billion for decent homes, improving the quality of life for those in poor-quality housing; and £6.5 billion to support people and allow the vulnerable to lead independent lives. Labour talks about fairness, but when it was in government council tax more than doubled—in some years, above inflation—thanks to fiddled funding and unfunded burdens.
Caroline Flint
The right hon. Gentleman mentions funding for public health, which is estimated to represent at least 4% of the NHS budget. Will that move across to local government?
Mr Pickles
The right hon. Lady is playing a game whereby if money moves from the health service it represents a cut in the health service, but if it moves to local authorities it fills a hole. Conservative Members have been saying for years that there is a role for councils in public health, and we are backing that. I recall, at the Opposition Dispatch Box, asking the then Government for the kind of financial commitments that we are currently giving to deal with adult social care. Frankly, the right hon. Lady should be thanking us—[Interruption.] Well, I’m glad you’re supporting it. Just get behind the programme then, dear. That’d be marvellous.
Working families, pensioners and, indeed, the squeezed middle were hit the hardest. The hikes were equivalent to 3.5p on income tax, and the Labour Government were planning further local tax rises, as their local government manifesto for a fourth term revealed: removing the retail prices index cap on business rates, hammering local high streets; a council tax revaluation and rebanding, hitting cash-poor pensioners; and new taxes to empty bins, punishing struggling families. Labour’s answer to every policy problem was an extra rise in tax or more red tape. But, in six months, the new Government have scrapped Labour’s bin taxes, called off the council tax revaluation, increased small business rate relief and found £650 million a year of funding in each of the next four years to help to freeze council tax next year. Let me make it clear: that is completely new money; it is not top-sliced.
I intend this settlement to be the last ever to rely on such a complex and outdated system, which is not fit for purpose. It has trapped too many councils, making them financially dependent on central Government, and there is no incentive for them to invest in their local economy, given that the proceeds simply vanish to central Government to share out nationally. It makes planning difficult, weakens local accountability and stifles local innovation. It is part of the same trend that has led to some areas of the country becoming almost completely dependent on the public sector.
All that will become clearer when I present the full settlement to the House, but let me reassure Members that I and my ministerial team are doing everything possible to ensure that local government has a fair and sustainable settlement, to the good of the country and to the good of local communities.
Oral Answers to Questions
Debate between Lord Pickles and Caroline Flint
Caroline Flint (Don Valley) (Lab)
It is not really turning out to be a very good day for the Secretary of State, but you know what, it has not actually been a very good fortnight since he told council leaders on 6 November that talk of front-loaded cuts was “fiction”. Now it seems that reality is beginning to dawn on him. According to a report in the Local Government Chronicle, he has been attending emergency meetings with the Treasury to plead for more money to mitigate the effect of those cuts, which could mean some councils losing up to 20% of their funding by April 2011. Whether or not it is true that the Secretary of State has been lobbying the Treasury to come up with more cash, may I urge him to start listening to the concerns of local government and ensure that councils get a fair deal that stops the damage caused by the heaviest cuts falling in the first year?
Mr Pickles
I am sorry to say to the right hon. Lady that I have not necessarily found the Local Government Chronicle a very accurate reflection of what is going on in my Department, ripping read though it undoubtedly is. I must also admonish her in the mildest possible terms for using a partial quote. What I said was ridiculous was the idea that councils would face a 20% cut in their total spending ability in the first year.
The right hon. Lady has to recognise that she needs a policy. She knows, I know and the House knows that the Labour party Government were going to impose £5 billion-worth of cuts on local government, which would have been front-loaded.