Local Government Finance Bill

Alex Cunningham Excerpts

Tuesday 24th January 2012 Commons Chamber

[Helen Jones (Warrington North) (Lab)]

It is a pleasure to be here under your chairmanship, Mr Hoyle.

The Minister explained clearly the purpose of the amendments, but the fact that the Government have had to table so many amendments at this stage of the Bill is ample proof of how they are rushing it through the House. The amendments do not deal with esoteric issues. They are not about something easily missed. They simply deal with the situation where a revised calculation is made and an authority may move, as the Minister rightly said, from tariff to top-up or the other way around.

It is typical of this Government’s sloppy thinking and of their desire to rush the Bill through without proper scrutiny that they forgot one simple fact, which the most junior clerk in a council finance department could have told them—that if they want people to pay up, whether that is a council tax payer, a council or a Secretary of State, they must make provision for payment. The fact that Ministers did not even notice that when the Bill was drafted shows how little time they have spent reading it, a fact that was convincingly demonstrated by their performance on Second Reading and on the first day of Committee in the whole House. They are not up to speed on the measures that they are introducing.

We have no objection to the amendments. They are tidying-up amendments, but let us imagine what Ministers would say if a local authority were so sloppy. After all, in determining the baseline for rate income, they would base their figures on what a local authority would receive if it had acted diligently—a term that they have signally failed to define in answer to questions in the Chamber and in Committee. Local councils would be called to account by Ministers for such an omission, and rightly so. It is a shame that Ministers do not apply the same high standards in their own Department. They are as careless in their drafting as they are with the effects of their legislation on local communities. These amendments, straightforward as they seem, epitomise the Government’s attitude to the whole Bill: sloppy, rushed and badly considered.

[Alex Cunningham (Stockton North) (Lab)]

I am interested to hear my hon. Friend advise the Minister that he should talk to local authorities and take an example from them. Will she encourage him to take a trip to Stockton-on-Tees borough council, my local authority, because not only was it named council of the year the year before last, but for the past six years it has been recognised as providing excellent services and financial management and delivering for the people? The Government might learn something there.

[Helen Jones]

I am sure that it would benefit many people to take a trip to Stockton-on-Tees, as my hon. Friend suggests. There are certainly many things that the Department for Communities and Local Government could learn from good local authorities, but it has failed to do so. We do not intend to divide the Committee on these amendments, but they show what a shambolic lot those on the Government Front Bench are and how little they have thought through the Bill.

--- Later in debate ---

[Mr Jones]

They did. If local authorities have to lay people off mid-year and sever contracts, that costs local government more. In County Durham, when we had those in-year cuts, it cost the council more money to sever contracts than it would have cost to allow them to fulfil them. No money was saved, but things were made very difficult for local councils, not only to plan their budgets but to manage services.

[Alex Cunningham]

My hon. Friend mentioned Alcan—a major organisation—and the tragedy in Northumberland. Does he recall when Samsung walked out of the Wynyard Park estate on Teesside, devastating the business rates in that area and throwing many people on the dole? Does he agree that a local authority’s fortunes could rest on the whim of multinational corporations, which can move in and out at will? There is all the more need for a proper safety net for local authorities that face that sort of dilemma.

[Mr Jones]

My hon. Friend makes a good point and Samsung is a good example. Its inward investment provided jobs and income to the local authority. Such situations are more relevant in rural areas or constituencies such as his and mine in the north-east of England. When one single, large employer leaves, there is a disproportionate effect. I do not want to talk again about Westminster city council, but a single employer leaving that area does not have as devastating an effect on the employment base and on the local tax take.

Another thing that the Bill does not take into account is the increased demand on local government services when there are large closures such as the one to which my hon. Friend referred. There is bound to be more take-up of, for example, council tax benefit, even though the Bill cuts it by 10%. The Minister was on the letters page of The Journal in Newcastle trumpeting the Bill and saying how great it is, but he did not mention that it would come with a 10% cut in council tax benefit. He will be pleased to know that I have written to the paper to correct him and to ensure that readers of The Journal have the full facts about the Bill rather than the propaganda he is trying to put out.

Another concern is the centralisation of powers. The Bill gives power to the Secretary of State to decide the levy. In addition, as we have no definition of “disproportionate effect”, that is down to the Secretary of State’s whim. When we look at what the Secretary of State has used his powers for in the past 18 months, we see that he supports and rewards people who vote for his party—I take my hat off to him, because he is quite political. If we do not have a definition of “disproportionate”, what is to say that he will not use the Bill to assist regions that he wishes to assist for political reasons?

The Bill means that the current or a future Secretary of State could punish councils that he or she does not favour, or that do not support one of his or her central diktats—the current Secretary of State talks about decentralisation but intervenes quickly to decide what local councils should do. If we do not have a definition of, or explanation for, “disproportionate” in the Bill, a lot of council chief executives and treasurers will be in fear each year of not keeping in with the Secretary of State, because he or she will determine whether they will get the budgets that their councils need.

--- Later in debate ---

All fire and rescue services were expecting cuts as part of the comprehensive spending review settlement, and had been planning well in advance to protect the service provided to their communities, but the cuts have presented some with more of a challenge than others.

[Alex Cunningham]

Is my hon. Friend aware of the situation facing the fire service in Cleveland? Teesside is the biggest fire risk in Europe, yet it faces similar cuts. Cleveland has some innovative ideas for cutting costs, and it has done extremely well—I am proud of what it has achieved—but it has been asked to go too far. That is perhaps all the more reason why the amendment needs to be accepted. There should be proper safeguards in place in the highest-risk area in Europe.

[Ian Austin]

rose—

--- Later in debate ---

[Ian Austin]

Indeed, Mr Robertson. It’s a fair cop, I suppose. I shall draw my remarks to a close. It is clear to me that the West Midlands fire service is making all sorts of reforms, more savings in the way the force is managed and run, and cuts to services too, which many other forces around the country are not having to make. It is faced with the prospect of even more severe cuts over the next couple of years. It is not at all clear how it can make those cuts without a huge impact on the services that it provides to people in the west midlands.

Will the Minister meet me, colleagues from the region and representatives of the fire authority to discuss whether a fairer distribution of resources would safeguard services such as those in Dudley? As I said at the outset, will he consider the case for the safety net payments to be made where funding would otherwise not allow forces to meet the integrated risk management plan?

[Alex Cunningham]

I shall speak in support of amendments 30, 31, 32 and new clause 2, but before I start, I seek your guidance, Mr Robertson. I referred earlier to the Cleveland fire authority. Perhaps I ought to have declared the fact that my wife, Evaline, is a member of the Cleveland fire authority.

[The Temporary Chair]

It is up to the hon. Gentleman.

[Alex Cunningham]

Thank you. I so declare, so that people do not think it is my wife’s individual management that has led to the improvements. She shares my anxieties about the cuts that the fire brigade faces there.

I am by no means against reforming the way in which local authorities and central Government work together to collect and distribute tax, or the various mechanisms put in place to protect the system, but I recognise that the current system has its flaws. It is vital that the systematic inequalities in the country are addressed. The provisions suggested by the amendments do that. The Bill fails to recognise the simple fact that different councils must be provided with different levels of resource to meet different needs in order to prevent any form of postcode lottery, which would otherwise exist in the provision of services.

The amendments put a clear requirement—not “may”, but “must”—on the Secretary of State to take specific actions to ensure that all councils are provided with clear regulations within which they must work, and the Government as well, and allows councils the specific right to challenge. New clause 2 provides a comprehensive safety net for local councils which find, as others have described, that a major redevelopment scheme results in a substantial loss of non-domestic rate income for a period exceeding one year. Without specific powers—it is so important that they are specific—and requirements for the Secretary of State to intervene, I fear that countless councils, including those in north-east England, could be left high and dry and unable to continue to provide the range and depths of services required by our communities.

It is no good the Secretary of State having a series of discretionary powers in this area. He must be able to intervene to avoid wide-scale financial hardship which would leave local authorities no option but to slash services. Councils’ differing ability to generate business rates must be taken into account. Many local areas with vulnerable economies require support and Government investment in their infrastructure if they are to grow, particularly in the north-east, where the investment and growth that took place as a result of the positive intervention by the Labour Government are being reversed. The need for councils’ differing ability to be taken into account is recognised by the Tory-led Local Government Association, which strongly advocates the incorporation of safeguards to help authorities that raise relatively low amounts of business rates.

No one would disagree that there is substantially greater need in the north-east because of pressures on local services and smaller commercial and business areas. For example, in my Stockton North constituency there are several times more children on free school meals than in Wokingham, and our local authority faces around double the cost of providing residential and nursing care. Despite the diversification of the north-east economy under the Labour Government and considerable action on health and poverty, which saw the gap in life expectancy narrow, sadly the region still has about 33% of its population living in the most deprived areas of England.

Unemployment is also disproportionately impacting on the north-east, standing at 11.7%, compared to a national average of 8.4%. In my constituency, the local government finance settlement has already determined that Stockton council will receive £77 million in the current financial year. That is a 12% reduction on 2010-11 and higher than the average English reduction of 11.1%. Going forward, the 2012-13 settlement is to fall further by 8.8%, compared to 8.2% across England, so we need the safeguards proposed in the amendments.

Such a significant reduction in income means that councils such as my own in Stockton would no longer be able to provide the same level of public services in their area by charging a similar rate of council tax. They would inevitably have to make deeper cuts in their budgets, thereby putting greater pressure on the delivery of the most essential local services, exacerbating the inequalities that unfortunately plague this country and are worsening under the coalition Government. It should be emphasised that the previous Government made significant gains in bridging the equalities gap in Britain. The north-east especially benefited from a proactive Labour Government, determined to improve the prospects for the whole country.

Based on gross value added per head indices, the rate of growth in the north-east went from being the lowest of the regions during the 1990s to being the second highest during the past decade. Employment growth between the mid-1990s and the 2008 economic downturn increased by 11.2%, compared to 9.2% nationally. Despite the common view that the north-east had become over-reliant on the public sector at the expense of the private sector, between 2003 and 2008 private sector employment rose by 9.2%, whereas public sector employment grew by only 4.1% during the same period. Between 1999 and 2007 the number of north-east businesses rose by 18.7%, just a fraction below London’s business growth of 19.6% for the same period. What a testament to the work of our regional development agency and local authorities in the north-east.

Unfortunately, that hard work is being overturned by a reckless coalition Government, and we need the Bill to address that. One of the Government’s first actions was to abolish One North East, our regional development agency, and the regional Ministers, who had played an important role working with the private sector on large-scale investment programmes. The net effect has been a two-thirds cut to regional development funding and the establishment of a much smaller national fund to which every region must compete for investment.

--- Later in debate ---

[The Temporary Chair]

Order. The hon. Gentleman knows that we are not here to talk about RDAs.

[Alex Cunningham]

I will talk instead about PricewaterhouseCoopers, which evaluated the work of RDAs between 2002-03 and 2006-7 and demonstrated their role in improving economic output from investment. Its report showed that every £1 invested over the period achieved at least £4.50 in economic output. They were extremely successful, yet now we are seeing the reverse. That is all the more reason why we need specific powers for the Minister to intervene and make up for the bad times when investment falls and companies leave the region. The diminishing opportunities in the region mean that a safety net is required all the more to protect our services. To localise business rates in the way the Government propose and create a system that would threaten the already uncertain future of the north-east’s public services at a time of high unemployment, greater deprivation and child poverty, an ageing population and worsening health inequalities is simply madness.

We still need something similar to the organisations that you, Mr Robertson, said I should not refer to, in order to provide a comprehensive, holistic and proactive means of creating growth in deprived areas. Local enterprise partnerships, working with local councils, must be provided with the proper means of attracting investment and creating the jobs our people need. Without that, regions such as the north-east will simply not have the opportunities to grow their businesses and their commercial base, yet the Bill fails to address the likely need for intervention when real growth eludes certain parts of the country and the powerhouse of the south-east ramps up investment and income from non-domestic rates.

Instead, the Government are introducing a system that will increase inequality and, frankly, is insulting to local authorities because it relies on the assumption that they are currently apathetic about growth in their areas. Local councillors would cut off their right arms to create jobs and investment in their areas, and if the Government think that some kind of overnight entrepreneurial revolution will take place as a result of the Bill, they are simply being foolish.

Any discussion of local authority finances must also include the differing ability to generate council tax revenue. The proportion of properties in different council tax bands varies widely from one area to another, making a significant impact on a council’s ability to raise revenue. The Association of North East Councils has calculated that localising business rates will result in the top 10% most deprived areas losing four times as much in spending power as the least deprived 10%. The north-east will experience an average cut in per capita spending power between 2010-11 and 2012-13 of £120, whereas the south-east will receive a cut of £31.

In his first Budget, the Chancellor promised to create

“an economy where prosperity is shared among all sections of society and all parts of the country”.—[Official Report, 22 June 2010; Vol. 512, c. 167.]

However, for those trapped in some of the worst hit areas in 2012, former Chancellor Geoffrey Howe’s “managed decline” might sound like an entirely apt description of the Government’s approach to local government. They must think again and accept the amendments if they are to have any chance of realising the shared prosperity vision that they claim to have.

[The Temporary Chair]

Given the breadth of recent contributions, I do not think that we need to have a stand part debate on schedule 1. Any Members who wish to speak have a chance to do so now or when we debate the next group of amendments.