Local Government Finance Bill

Debate between Alex Cunningham and John Robertson

Tuesday 24th January 2012 Commons Chamber

[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.

Education Maintenance Allowance

Debate between Alex Cunningham and John Robertson

Tuesday 2nd November 2010 Westminster Hall

[John Robertson (Glasgow North West) (Lab)]

This is my first opportunity to speak under your chairmanship, Mr Hollobone. I look forward to it and wish you well on the Panel of Chairs. I am grateful to have secured this debate, and for the opportunity to exchange views with the Minister. I look forward to hearing his opinions on the wider issues that I shall raise.

I would like to discuss the education maintenance allowance and the effect that axing the scheme will have on those young people and families who rely on it. Even though I am a Scottish MP, and the EMA was first attacked by the tartan Tories—the SNP—I fight for the rights of young people as a UK MP.

During the previous Parliament, I secured an Adjournment debate on 2 February this year. If hon. Members want a good example of the differences between the previous Government and the current Government, they should look at the policy on the EMA. Last time I spoke, the then Minister, my hon. Friend the Member for Hartlepool (Mr Wright), committed the Labour Government to maintaining the EMA in its current form until 2011 and beyond. Many of the young people who contacted me following that debate with their support and thanks will feel disappointed by politics and by having their fears and hopes raised and then crushed in a matter of months. Let there be no mistake—that is what happened.

I will give an example from the campaign that I support. Since the announcement to abolish the EMA was made in the comprehensive spending review, many young people have posted comments on the website saveema.co.uk. I was struck by comments such as this one from Nick:

“Without EMA I wouldn’t be able to go to college and become what I have always dreamed of being.”

Alex said:

“I need EMA otherwise I will have no education. In other words… no future.”

It is obvious from comments left on the website that the families of pupils who receive the EMA will also suffer. Ms Robson states:

“I am a single parent and work 37 hours a week and have 3 children of whom two of those attend sixth-form college. They both receive £30 EMA and it helps them buy books and helps with their bus fares. Without that, I don’t think I would be able to give them the money for bus fares, books etc. Please don’t scrap it, it is a great help for me.”

[Alex Cunningham (Stockton North) (Lab)]

Does my hon. Friend agree that there will be tens of thousands of students across the country from low-income families who will be anxious about their future chances of going to college aged 16 if no allowance is forthcoming? Worse still, they will find themselves seeking work without the benefit of the future jobs fund, which has also been axed by the Government.

[John Robertson]

My hon. Friend is absolutely right, and I will go on to talk about such people in detail. In my speech, I will refute the Government’s reasoning for scrapping the scheme, and shed light on the path they have taken to arrive at their position. Let me give a brief explanation for those in the Chamber who may be unaware of the EMA and why it is such an essential part of further educational support.

The EMA is a means-tested allowance of £10, £20 or £30. It is paid to 16 to 19-year-olds who stay in education and come from families where the annual household income is below £30,810. The top rate of EMA payment is £30, which requires the student to come from a family where household income is below £20,810. Some 80% of all recipients are on that top rate of £30.

The EMA was introduced nationally in September 2004 in order to reduce the country’s post-16 drop-out rate, which was one of the worst in the developed world at that time. The policy intent of the EMA is to broaden participation and improve the retention and attainment of young people aged 16 to 19 in post-compulsory education. The EMA is already strictly means-tested, so tightening the eligibility criteria further will only harm already disadvantaged young people. The scheme is close to my heart because it is based on providing a platform for poor families so that economic barriers will no longer stand in their way to getting an education and getting on in life.

I expect the Minister to say that the EMA is not being axed but rather “replaced.” However, if we turn to page 42 of the comprehensive spending review, we see that the so-called “saving” from replacing EMA is £500 million from a £550 million budget. It is not necessary to be Einstein or to have a university degree to realise that removing 90% of the budget of any scheme means effectively axing it, or severely undermining its implementation. I say to the Minister: do not insult my intelligence or that of our young people, and be honest.

The Government will tell us that there is a dead weight to the scheme and that according to a poll, only 10% of people say that they need the EMA. However, that argument barely stands up to closer examination. First, that was the only research on which the Government based their decision, despite the weight of widely available evidence showing that the EMA works. One example of how bad that research was is the fact that the Government poll was carried out on school pupils instead of college students. As we know, those still in school are in receipt of free school meals and free travel, as well as a uniform allowance and the full measures afforded to school pupils. In contrast, the National Union of Students conducted a poll this year looking at actual recipients of the EMA in college. Almost 60% of those students said that they would not be able to continue in education without the EMA.

Let us take the Minister’s argument to its natural conclusion. His research suggests that 10% of students would be affected, which equates to over 60,000 of the poorest teenagers in this country—the sort of numbers mentioned by my hon. Friend the Member for Stockton North (Alex Cunningham). Does the Minister feel that that is a price worth paying?

For a long time, many supporters of the Conservative party have argued that the scheme is a waste of money and that the allowance is misspent by those receiving it. Before last week, the Conservative party, the Secretary of State for Education and the Prime Minister all said that they would support the EMA. In March, the Secretary of State told The Guardian:

“Ed Balls keeps saying that we are committed to scrapping the EMA. I have never said this. We won’t.”

It is not only the Secretary of State who has said one thing in opposition and another in government. In January this year, the Prime Minster, then leader of Her Majesty’s Opposition, told the Save EMA campaign in an ironically named “Cameron Direct” event in Hammersmith that he supported the EMA. That was after he had refused to give a straight answer on the EMA in an interview with Sky in 2007, so I was pleased to hear that he had seen the light and was supporting the EMA.

A couple of weeks ago, however, we had the announcement on page 42 of the CSR about axing the EMA. It is safe to say that the Prime Minister’s support did not last long. I hope for the Minister’s sake that the Prime Minster does not offer the same level of support for him as he did for the EMA, or the Minister will be out of a job by Easter—then again, perhaps I do hope that.

On a serious note, I do not ignore the fact that there may have been some fraudulent claims, just as there are those who claim other benefits fraudulently or who avoid paying tax by using offshore bank accounts. I despise fraud whether it is by Tory grandees or benefit scroungers. However, if EMA fraud follows the levels of other benefit fraud, we are looking at a meagre 1%. It seems draconian to axe an entire scheme because of the actions of such a minority; it is tantamount to cutting off the head to cure a cold.

I hope that the Minister does not try to link the end of the scheme with the deficit, because that would show a lack of economic competence on his part. First, if he is telling me that taking money out of the pockets of the poorest teenagers in the country is our salvation, we are beyond redemption. Secondly, it makes very bad long-term economic sense to do that, because according to the Treasury, by 2020 the number of unskilled jobs will be half what it is today, meaning that more unskilled people will be fighting for even fewer jobs. I would be interested to know whether the Minister denies that.

Lastly, we need more people in employment. With rising youth unemployment, the decision we are discussing will swell an area that does not need increasing any further. What is more, as the Directgov website page for EMA clearly points out, for every extra skill and qualification that someone earns, they are £3,000 a year better off. Research by the Office for National Statistics shows that people without the minimum set of qualifications earn on average £55 a week less. I am sure the Minister will agree with me that paying people £30 a week in the short term so they can earn £55 a week more in the long term will help us not only to upskill our work force, but to pay down the deficit faster.

A 2009 survey by the Chartered Institute of Personnel and Development found that only 17% of employers were planning to recruit from the pool of 16-year-olds leaving school, and that only one third of employers planned to recruit those leaving school at 18. We know that being unemployed for more than 12 months under the age of 23 has a hugely negative impact on a person’s future, causing a permanent scar of disadvantage. Those who have experienced long periods of unemployment in their youth will suffer sizeable wage penalties well into their 40s.

There has been talk that the Government plan to budget for EMA at local authority level. That concerns me greatly. With no ring-fencing of council spend, how will that be achieved?

The best thing about EMA is that it ensures parity of payments throughout the country. Let us take, for example, someone under 18 who is a care leaver. As payments controlled by local authority children’s or leaving care services vary, young care leavers could fall victim to a postcode lottery of support. A care leaver living in Croydon in south London, where almost 5,000 young people are on EMA, could receive less than someone in Richmond upon Thames, which is only a bus ride away but has only 900 young people on EMA, as there is less demand locally and it has a bigger budget to go round.

The evidence speaks for itself on why we should save EMA. Research by the Institute for Fiscal Studies shows that attainment at GCSE and A-level by EMA recipients has risen by 40% since its introduction, and by even more for those living in the most deprived neighbourhoods.

In addition, RCU market research services carried out research on the national scheme and published in 2007 a report called “Evaluation of the EMA National Roll-out”, which concluded:

“EMA has had a positive impact on the retention, achievement and success of certain groups of learners…traditionally associated with lower levels of achievement”.