Local Government Finance

Lord Smith of Leigh Excerpts

Thursday 13th July 2017 Lords Chamber

[Lord Smith of Leigh (Lab)]

My Lords, in thanking my noble friend for securing this debate I must apologise to him for missing his first sentence. I was coming down on a train today and unfortunately it, like the Government, had a loss of power. Fortunately for Virgin Trains, the loss of power was only in Milton Keynes, not over the whole country.

I need to declare my interests in local government. I am leader of Wigan Council, a member of the Greater Manchester Combined Authority, a vice-president of the LGA and vice-chair of an organisation called SIGOMA.

In looking at the Government’s loss of power, one of the factors that affected the election in June was the impact of austerity. As the campaign went on and as issues such as school funding, police funding, the loss of police numbers when the Prime Minister was Home Secretary and social care, which was a total disaster, came out, it made people understand that if you cut back public services you cut back on the way they affect people’s lives—and people had had enough. I shall say a bit more on this later.

In Wigan, one of the things we do now which we did not do before is that we go around to the different communities to explain to them what we are doing and answer questions from the local community. We were in a former mining village the other Wednesday. It was one of those rare evenings in Wigan when the heat was blasting down and I would rather have been in the garden with a long, cool drink than in the venue—but enough people turned up and they listened to my explanations, and then we got to question time. Again, austerity was the dominant issue.

The first question people asked was about the increase in anti-social behaviour by young people and the lack of police response. In the last few years, Greater Manchester Police has lost 2,000 officers and does not now come out. If somebody now rings the police and says: “We have an anti-social”, the police reply, “It’s category 3 and we only come out to category 1 and 2. You’ve had it. We don’t turn up at all”.

In the same area, people criticise the council for not having enough youth workers on the scene. As the noble Lord, Lord Greaves, was implying, this was a discretionary spend. Where we are looking to make the kind of savings we have to make, we do it, but not as much as we did before.

One gentleman raised the issue of transport. People cannot get in and out of the place early in the morning or in the evening because there is no public transport; the buses stop running. Why is that? Because Transport for Greater Manchester lost funding and can no longer subsidise non-profitable routes, so they go. He made the point that if you want to get a job on a shift pattern, you could not do it. We have also reduced street cleaning. To be precise, I think about £3 billion has been taken out of the neighbourhood services budget nationally.

I think the Government were sleep-walking when they went into the election, not understanding the way austerity was hitting people. In some ways, there is an excuse. The former Prime Minister—as I was stuck on the train, I have not heard on the news today whether the current Prime Minister is still with us, but I assume she is—David Cameron said, “We are all in this together”. That was a totally untrue statement. The unfairness in the way that austerity is applied has come through quite dramatically. In cash terms, local government lost 20% of its budget from 2010 to 2016. There will be a slight increase between 2016 and 2020—which is distorted, as the noble Lord, Lord Greaves, pointed out. Huge amounts are not going into local government services, except for the better care fund for dealing with some of the problems. My authority, Wigan, lost far more in that period. In real terms, we have lost over 40% of our budget, as has the noble Lord, Lord Storey, in Newcastle. All the northern authorities lost out.

If we turn to a place such as the Royal Borough of Windsor and Maidenhead—not perhaps unknown to the Prime Minister—the losses are much less. It has not taken the hit; there has actually been an increase in funding in some of those areas. The cuts taken in more affluent areas have not been the same.

I also want to talk about the continuing unfairness of one of the ways in which the Government tried to fund the social care increase: namely, through the increase in council taxes, the so-called social care precept. The level of cash that can be raised by authorities depends on the level of council tax banding in those areas. In a place such as Wigan, there are not many £1 million properties, I have to confess. Most of the properties are in band A or band B. So if we put a 2% or 3% increase on council tax, it does not raise as much money as more affluent areas raise. SIGOMA gave me some figures that show that in SIGOMA authorities, for every dwelling that raises £713, the figure for the rest of the authorities that run social care is £857—quite a significant 17% difference between the amounts that can be raised in that way. Clearly, those in urban areas and the most deprived areas are having to put more money in to solve the problems of social care.

The one area of local government activity that was in the Queen’s Speech with a promise was the fact that the Government are looking for a solution to social care funding. I think that all sides of the House would welcome a proper approach to that funding, but it cannot be done by the Government. It has to be done working with local government and across parties, because we need a solution that will be satisfying and sustainable in the long term. If we do not do that, a number of local authorities and health services will be overwhelmed by the increase in pressure of the ageing population. I believe this is an urgent problem. It is not an immediate problem but it is certainly urgent, because the longer we do not solve it, the greater the pressures are going to be.

I also want to echo what my noble friends have said about business rates. We need to know what is happening with this promise to return business rates to local authorities, in two ways. The questions that my noble friends asked are absolutely right, but I also want to know what is going to happen to the pilot schemes which are in progress but which we are told will run only until the end of this year. The pilots are meant to teach us things, but how can we learn if we do not know when that will happen? We need to see what we can get from those.

The other issue around business rates is of course the mess the Government got into of their own making on valuations. I remember arguing with the Government—it always seemed to be at 11 pm—along with my noble friend Lord McKenzie of Luton and the noble Earl, Lord Lytton, about their plans to defer the regular revaluation of business rates. We tried to point out to them that if you defer it and then try to come back to the scheme, you will actually get into more of a mess—and of course it proved to be that way. The figures for revaluation were so high in many cases that, as soon as the Government saw what they were like and got such bad publicity, they had to bury it. The third issue around business rates is equalisation because, clearly, the ability of different areas to raise funds through business rates is quite variable. I fully support the principle of return, but the Government still need to find a mechanism by which they can make sure that places that are not able to raise such a big amount of money can do it.

Then of course the other main source of income now for local authorities is council tax, and I welcome the comments of my noble friend Lord Desai on this matter—again, I am banging on. It is over a quarter of a century now since we last revalued houses for council tax. The council tax was brought in as a desperate measure to replace the poll tax: “What can we do? We need to replace the poll tax?”. So allegedly the noble Lord, Lord Heseltine, as he is now, sent round teams of estate agents to run up and down streets with fairly arbitrary rules saying, “Band A, band B, band C”. These bands have stuck for all that period and have not been revalued since. But of course there have been huge changes in the values of properties over that period, and changes in quality. A house built in 2017 will have broadband and different facilities that were not available in 1991. How do you say, “Ah, but if this house had been built in 1991, what would it be valued at?”. It is a rare art to be able to look at a house being built in the current year and think what it might have been valued at all that time ago. As my noble friend said, if we do not have the change in valuations, we have no buoyancy in the tax. Unlike with income tax, VAT and other taxes, the only way to raise more money through council tax is to raise the rate of the tax—and that is not the best way to do it, so we need to do this.

It is easy to have a glass-half-full or even a glass-quarter-full mentality, but I like to see opportunities from what has happened. Many local authorities, including my own, have responded to the cuts in as positive a way as we can by looking to see what we can do for public service reform. Again, I have spoken before about this in the House, but the Government have not really taken much of a lead on this. In a programme that we call “The Deal”, we are looking to see how much more we can help people. We take what is called the asset-based approach on individuals, looking to see what their needs are and what their benefits are. When you do that and look at people, what you find is that the individuals we are dealing with as a local authority are often undergoing health treatments for various things—often mental health problems—or may have housing issues, and probably the police know them. So if we can get a holistic approach to families, we can begin to start turning them around. Rather than waiting until a child has problems and we have to put them into care, we try to support the family so that they can remain in the heart of the family.

We have to do much more on integration, working with all the different agencies to ensure that we can look at the family and help to address those issues. One of the problems we have is getting people back to work. We do not ask people just to rewrite their CVs, as they were often asked to do under the previous job creation scheme; we get them to understand what their issues are. If you do not have a home, you are likely not to be able to get work, so we need to address that.

The final area is working better with the community. I think we are one of the few authorities that puts more money now into the community than we did in 2010. We call it investment because it is an investment. We have attracted visits from various parts of the UK and Europe and we are holding a conference in September 2017, so if any noble Lord wants to come, they should get in touch.

I agree in part with the noble Lord, Lord Greaves, on how we deliver services. We have to go back to units that people understand in terms of delivery. However, we need a strategic role in local government, which is where the larger authorities can work together. I am a great supporter; it has been a challenge and a privilege to be a leader of local government, it continues to be so, and I continue to be positive.