Andrew Gwynne
Main Page: Andrew Gwynne (Labour (Co-op) - Gorton and Denton)(12 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text
Helen Jones
My right hon. Friend says that they would. I do not think that that applies to the Under-Secretary of State for Communities and Local Government, the hon. Member for Bromley and Chislehurst (Robert Neill), although I can easily imagine the Secretary of State in a toga, handing down diktats.
Andrew Gwynne (Denton and Reddish) (Lab)
Is it not crucial not only to have a procedure whereby councils can appeal to the Secretary of State, but to put that within a proper time frame? Local authorities get their settlements towards the end of the calendar year in order that they can finalise their budgets by the end of the financial year and set a proper budget for the new financial year. It is therefore crucial to get not only the mechanism but the timing right.
Helen Jones
My hon. Friend makes a worthwhile point. The problem with the whole Bill is that it is difficult for local authorities to know the framework in which they will be asked to operate.
We are not proposing anything that would create a long delay, merely a simple system to allow councils time to check the calculations and respond before the Secretary of State issues a final determination. Most local councils support a levy system, even if they have different views about how the levy should be calculated. We do not anticipate that large numbers of councils would challenge decisions merely for the sake of challenging them. However, it is important for any system to give local authorities a mechanism to make representations if they think that the Department has simply got it wrong. I believe that Members from all parts of the House would want their local council to be able to do that if the need arose, to ensure that the communities that they represent are dealt with fairly.
The amendment would not prevent the Government from exercising the powers that they will be given if the Bill is passed. It does not even seek to change the way in which the levy is calculated—or it would not if we knew how the levy was going to be calculated. It is aimed purely and simply at ensuring that there is fairness in the system. I therefore commend it to the Committee.
Andrew Gwynne
My hon. Friend makes a good point about uncertainty. If a local authority’s income mid-year falls below what is in the budget plans, that causes all sorts of problems. That happened just the other year, with the in-year cuts. Local authorities had prepared a budget on an assumed amount for that year and ended up with substantially less funding.
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.
Ian Austin
Absolutely, Mr Robertson, but the point that my hon. Friend makes is accurate. It is clear that fire services are not funded fairly; that is the point I want to make. Some forces, such as the one in the west midlands, face more challenges than others. It is important that an amendment like amendment 48 be considered, so that we can make up for the shortfall in funding that some forces receive. If you will allow me, Mr Robertson, I shall set out why I think we are in this situation.
It is clear that the way in which funding is provided to fire services is not fair. In October 2010, the Chancellor announced an average cut of 25% to fire service formula grant over the next four years. That settlement was expected to be tougher for those services, such as West Midlands and Cleveland, with a heavier reliance on formula grant, but we were told that it would be fair. When the exact figures were announced for each service, it was immediately obvious that the cuts were anything but fair. Some forces have been handed increases in their formula grant, and clearly would not need the benefit of amendment 48, but others, such as the West Midlands fire service, face severe cuts.
Looking at revenue spending power, it is clear that the West Midlands fire service was hit hardest of all, with cuts that were twice the national average. Even taking into account the effect of the proportion of council tax to grant, and the small special grant to encourage a council tax freeze, some brigades—such as Cheshire, which happens to cover the Chancellor’s constituency—will receive more money in formula grant in 2012-13 than they did in 2010-11. Cheshire is getting more than £400,000 extra in formula grant, Essex is getting an extra £700,000, and Hampshire an extra £800,000. As a result, Cheshire’s total increase in revenue spending power between is 1.84%, or £800,000 extra in cash. When it comes to the fire services, it is absolutely clear that we are not all in it together.
The formula ought to be reviewed to take local factors into consideration. The failure to do that makes the case for special safety nets even more compelling. The formula used to decide on the settlement does not take into account a number of key considerations. For example, many of the most deprived areas are among the worst hit, despite the well established link between deprivation and fire. Four of the five most deprived fire authority areas in the country are metropolitan brigades, and those currently have to find the heaviest savings. Their financial positions are the most difficult.
Part of the reason that we stand to suffer most in the west midlands is that we maintain the lowest council tax precept in the country, at just £47.83 for a band D property, compared to as much as £87 for people in County Durham. We are therefore much more heavily reliant on formula grant than others and receive a greater cut in our overall spending power.
Andrew Gwynne
My hon. Friend makes a pertinent point about the way that metropolitan fire authorities in particular are funded. He will know that, similar to the situation in the west midlands, Greater Manchester fire and rescue authority is making £4.6 million of savings this year. For the next two years, depending on which scenario one looks at, there could be between £8.6 million and £16.7 million of savings—very substantial reductions in spending power in an area of high risk. Does he agree that it is crucial that we make it clear to Ministers that we expect a fairer mechanism for funding metropolitan fire authorities?
Robert Neill
With respect to the hon. Gentleman, that is highly unlikely. In fact, I cannot conceive of such a situation—for this reason, which he really ought to know if he has studied the topic. Fire authorities are in the business rates retention scheme because about one third of them are county council authorities. If they were outside the business rate retention scheme, we would have the perverse situation in which one third of all fire authorities—county council fire authorities, in effect—were nevertheless funded within business rates retention, while the remaining ones, including the metropolitan and other combined or stand-alone fire authorities, were funded by a wholly separate means. It is therefore logical to include them all within the same scheme.
Robert Neill
Let me develop the point, because it may deal with the hon. Gentleman’s question.
Given that authorities are, therefore, all within the scheme, they all benefit from the baseline calculation, which already takes as their starting point their current allocation, which in turn already takes account of need and risk in the fire system. Precepting authorities, including all the metropolitan authorities, will be top-up authorities, because almost all precepting authorities—as they currently are—will come under the new scheme. They will therefore benefit from the top-up being uprated by retail prices index inflation in order to protect them throughout the period. So I hope that that has dealt with the point.
Andrew Gwynne
Greater Manchester is one of the metropolitan fire authorities, and I understand that there will be a baseline throughout Greater Manchester for fire and rescue, but, on the retention of business rates, what happens in districts that have had substantial business rate growth as opposed to districts that have had low growth or no growth? Will there be a disparity in precepted funding, or will the precept remain the same throughout the old metropolitan county?
Robert Neill
Greater Manchester is protected, because the top-up does not change between the reset periods, save that it is uprated by RPI. So Greater Manchester, as a top-up authority, will be protected from instability. That will be the way with any top-up authority, so Greater Manchester’s situation will not be affected by what happens in its districts, because it is a top-up authority and it has the protection of the RPI uplift until the next reset. That is the answer to that point.
I hope that for those reasons the hon. Member for Derby North will reflect on the fact that his amendment is not the appropriate means of addressing the problem. IRMP does not compare like with like at all, and if we funded to IRMP we might reach the perverse situation in which the locally consulted delivery document drove the funding centrally. That has never been the case; it never was under the hon. Gentleman’s party in government; and it would be illogical. I hope that on reflection he will not press his amendment.
Helen Jones
My right hon. Friend has hit on the key to the Bill. It is not simply wrong in the beginning; it will increase inequalities—get more and more wrong—as it proceeds.
Inequalities will widen, even if the top-ups and tariffs are uprated by the retail prices index, and the levy will not fully compensate for that. Remember that even if we get a proper definition of what constitutes a disproportionate gain—bearing in mind the earlier debate, that seems unlikely at the moment—councils need to pay only a proportion of that in levy. The logic of that is that some areas will benefit from disproportionate growth. Others will fall further behind.
Andrew Gwynne
All my hon. Friend’s argument supposes that the starting point was fair. Of course, an awful lot of authorities will have had deep and damaging cuts locked into the baseline, which is the real starting point, and would not have the ability to raise additional council tax income even if they were permitted to do so by the Secretary of State. There is a real double-whammy for those areas. That is why we need a fair assessment of need, so that we can get our share of resources through that route.
Helen Jones
My hon. Friend is right, and many hon. Members have made that point in our debates on the Bill. It starts from an unfair baseline and totally ignores the different council tax bases that authorities have.
We believe that any distribution of the remaining balance on the levy account—if the Secretary of State decides to distribute; he does not have to—ought to be done on the basis of need. Without that and the amendments that we have tabled elsewhere, there is a real risk that services will be put at risk by factors entirely beyond a council’s control, as the Government transfer financial risks to it, but keep the power with the Secretary of State. That is why throughout the discussion we have been trying to ensure that the concept of distributing resources according to need is built into the Bill.
Helen Jones
Indeed, that is absolutely right. As we have said many times during these debates, the Government are centralising power and devolving blame so that local authorities will have to take all the risks.
Why not include our proposal in the Bill? The only real answer is that Ministers do not want to be constrained in how they use the money. I entirely accept that it might be necessary to carry over the balance if the account is to be sufficient to fund safety net payments, but if the balance is to be distributed, what is wrong with being clear about the factors that should be taken into account? If the Government reject the amendment, it will be clear that they want simply to collect the money and allow the Secretary of State to distribute it in any way he likes. There will be no fairness in the system and no real account taken of the needs of the poorest people in the poorest communities.
Amendment 35 also deals with how any remaining balance in the levy account is distributed. As the Bill stands, the Secretary of State may decide to distribute the remaining balance to one or more local authorities. In amendments 33 and 34, we set out exactly what factors he should take into account. Strangely, however, even if he does decide to make a payment, he does not have to hand it over. The Bill gives him the authority to pay whenever he likes and to pay in instalments if he wishes; I do not suppose that they would come with interest. What on earth is that provision for? We would not expect anyone else to be treated in this way. If I bought some furniture from someone and said to them, “I’m going to pay you, but I’ll do it when I like, in as many instalments as I like”, I would find myself rapidly being sued for the money and would not have a defence. This is another “Trust me—you know it makes sense” clause, whereby the Secretary of State can say , “I’ll distribute the money any way I like.” He seems to believe that he can treat local authorities in that way by deciding to pay out the remaining balance on whatever basis—we do not know—and as and when he thinks fit.
Andrew Gwynne
That goes back to the nub of the problem from an earlier debate—the lack of certainty that is given to council treasurers in enabling them to plan ahead in their council budgets.
Mr Kevan Jones
I think that this Secretary of State will be very creative. He will no doubt put out a press release saying that he is giving money to local councils and various initiatives, without telling them that it is their own money. The difference is that he will now have control over how the money is spent, rather than the local councils.
My hon. Friend the Member for Warrington North asked on what basis money will be redistributed. The Government’s track record shows that they do not recognise need as an element in the redistribution of capital. We need only look at last year’s local government settlement to see that.
As my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) said, the baseline will be set for the next 10 years, so councils will not only lose out in the first year but will continue to lose out over the next 10 years. County Durham’s revenue spending power for 2011-12 is £498.2 million, which is a reduction of £35.9 million or 6.73% of its budget. It will see a further reduction of £10.94 million in its spending over 2011-12 and 2012-13, which is a further loss of 4.5%. That will be used as the baseline. This will continue, as my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) said, for ever more.
Which councils did the Government reward in the settlement? They rewarded southern councils with far lower demands on local government services than councils such as Durham county council. I do not think that that was done by accident.
Andrew Gwynne
My hon. Friend is making an interesting point. I commend to him a study that produced a heat map showing the areas that face the largest cuts in local government funding. If that is superimposed on to a map showing the most deprived areas and the areas of greatest need according to socio-economic data, the two maps marry up quite well.
Mr Jones
My hon. Friend makes a good point. One of the very deprived local authorities that the Government were determined to help last year was Wokingham in Berkshire, which saw its budget increase by 0.2%, meaning that every person there has had an additional 30p spent on them.
We must take need into account. There are services that County Durham and northern cities need. For example, County Durham has a growing population of elderly people, who are high users of services. Added to that, we have the Government’s reduction of the public sector and deficit reduction strategy, which are affecting the economic viability of regions such as the north-east of England. More individuals will therefore use local councils’ services. More people will certainly become eligible for council tax benefit as unemployment rises. Need has to be an important element in redistributing this money.
We are leaving it up to the Secretary of State to decide how the money will be distributed. In the last debate, the Minister failed to define “significant”. He used the word on several occasions and was pressed by Members on both sides of the Committee to define what it meant, but he could not come up with an answer. We are again being asked in the Bill to trust the Secretary of State. It will not come as a great surprise to hon. Members that I do not trust the Secretary of State. He is a very political individual who is clear in his philosophy: he will help people who support the Conservative party at the expense of northern councils. He does not care whether those councils thrive or not.
Although need is not part of the assessment, let us look at some of the figures. In County Durham, 31% of people live in the 20% most deprived areas of the UK, and 22,805 children, or 21.8% of children, live in households that are defined as living in poverty. In Wokingham, it is just 7% of children. Between January 2011 and January 2012, unemployment in the north-east rose by 19%. It now stands at nearly 12% across the region. As I said earlier, as unemployment rises, the demand on local government services increases, just when the ability for councils such as Durham county council to raise finance is being constricted.
Helen Jones
It is nice to see the Minister in his place after the time he spent quivering with fear in the Lobby.
Having convinced a junior Minister of the value of new clause 2, I hope to convince the rest of them of the values of new clauses 5 and 7. The new clauses attempt to tackle the difficult problem of how often the system should be reset by requiring a reset every three years and by establishing a mechanism to allow local authorities to make representations on resets.
All hon. Members accept that there must be a balance between having stability in the system and coping with change, but a system that leaves it too long without a reset will simply increase the disparities between local councils and penalise those in greatest need. The long gap that the Government want will increase the dislocation between the resources available and the funding needed for local services, which we have discussed. There is therefore a possibility that service provision will become a postcode lottery depending on the demands made on a local council and on whether it has been successful in attracting new business.
Andrew Gwynne
Like me, my hon. Friend might have seen SIGOMA research that shows that all councils face a drop in their income when such changes are introduced. The research also shows that over the first five years of the 10-year period, a number of councils manage to make surpluses, but some do not. By the end of year 10, there is a huge disparity between the richest and the poorest authorities. Is not that the basic unfairness of the Bill?
Helen Jones
My hon. Friend highlights the problem throughout the Bill, but the longer the period between resets, the worse it gets. It is not clear what the Government plan, but in their response to the business rate consultation, Ministers say it is their aspiration to have a reset every 10 years.
Helen Jones
My hon. Friend, who is a clear expert in local government finance makes a valid point—[Interruption.] He certainly is, and he ran a very successful local authority.
Throughout proceedings on the Bill, we have tried to get some certainty. But there is no certainty about resets. It is not certain whether the Government’s aspiration will become a policy. The period is too long, and I suspect that in making it only an aspiration, the Government know that and are providing a get-out clause. They will not publish all the responses to their consultation, just a summary, but we know that the majority of respondents wanted a maximum of five years between resets, and many wanted a shorter period. This seems to have had no influence on the Government.
The problem with a 10-year reset is that all the modelling shows that the gap between the richer and poorer authorities will increase, and the Government have rejected all attempts to link resources with need. Indeed, the baseline for the redistribution of business rates is the current local government financial settlement, which has already created disadvantage, whatever the Under-Secretary might seek to tell us.
Andrew Gwynne
I am sorry to intervene again, but this issue is a hobby horse of mine. The general unfairness of the baseline locks in the in-year cuts that we saw in 2010-11, and the very poor settlements that Tameside in particular will receive in 2011-12, 2012-13 and 2013-14, so that those will be the baseline for the 10 years of this business rate redistribution.
Helen Jones
My hon. Friend makes a very good point and I have discussed with representatives of his local authority how badly they will be affected by this. No one will believe the Under-Secretary when he tells us that fairness is built into the system and that the Government will take account of need. A man who cannot even find the right Lobby is not likely to be believed to be an expert on local government finance.
Many of the councils who will suffer most have the weakest economies, the highest unemployment and significant barriers to business rate growth, so it is likely that they will be caught in a spiral of disadvantage, with local people paying the price. Labour Members have a real fear that the link between resources and needs, which has already been eroded by this Government, will be undermined further. Authorities with a high tax base will benefit more from the same amount of growth than those with a low tax base, even after taking levy payments into account.
No account is being taken, as we have seen, of the differing council tax bases of local authorities. That means that those authorities with many properties in band D and above will benefit much more from the same rise in council tax than those with a majority of properties in the lower bands. Some councils will end up struggling to protect the most vulnerable, while others might find that they have been successful enough to reduce, or even abolish, their council tax. The result will be that the system of delivering local services will no longer be seen as fair or reasonable, with huge implications for people’s support for the system of business rates and council tax. We saw in the extreme case of the poll tax what happens when public confidence in a system of local taxation collapses—when they no longer see it as fair. I suggest that that is also a risk with this system.
Mr Jones
I do. In regions such as that represented by my right hon. Friend, there will be regional disparities between councils. We are told that this Bill is about giving local government the powers to grow business rates, for example, but it will lead to an increased cycle of deprivation in those constituencies and make it harder for councils to attract businesses and grow their council tax base.
Andrew Gwynne
Is the situation not worse than that, because the plans do not just lock in the funding from one period of time? Instead, on top of those real cuts in local government finance we will also have a huge increase in demand for statutory services in those areas of deprivation.
Mr Jones
Exactly. Hidden in the Bill is the localisation of council tax benefit, which the Minister does not like to talk about and which comes with a 10% cut. As unemployment is rising in the north-east under this Government, more people will qualify for that benefit. Where will the money come from if it is locked into this system? The only other option for local government would be to increase the domestic rates, but there is an inbuilt problem in doing so. For example, in the north-east, 50% of properties are in band A, so the amount that can be generated is limited. In Surrey, only 2% of houses are in band A, so it is easier for some of the wealthier areas to generate that cash if they wish to do so. An increase of 1% in council tax in Durham, for example, gives a lot less in the long-run than the same increase would in Surrey.
Mr Jones
That is right. This issue is highly political. All credit to the Secretary of State—he knows exactly what he is doing. As my hon. Friend the Member for Warrington North (Helen Jones) has said from the Front Bench, the measure will end up pushing on to local councils some of the tough decisions on spending that will have to be taken. There are two ways of dealing with this—increasing local rates or cutting services—but that will be happening at a time when demand for local government services in deprived areas such as some of those my hon. Friend the Member for St Helens North (Mr Watts) represents is going up. One has only to look at some of the statistics we have heard on Second Reading and in our debates in Committee. Demand for adult services and other services in County Durham, south Tyneside and Liverpool, for example, will be a lot higher than in Surrey and the south-east.
I do not know what the Government have to fear from the reset being on a five-yearly or three-yearly basis. They think they can lock that unfairness into the system, and it is clear that when local people realise that not only are their services going to be cut but they face council tax increases as well, the Secretary of State will say, “Oh, well, it’s your profligate local council that’s doing this.” But in fact, the problem is the system of local government finance being introduced that will directly cause that. We need to keep repeating that point. It is quite clear that the Local Government Association and even some Conservative councils are working on the basis that what the Secretary of State says is not always true. For example, he can offer money for the freeze in council tax, but only for three years. If people take that, they have to realise that there is no guarantee about what they will get just before the next general election.
The measures build in unfairness and we need to make sure that the Minister explains why the period will be 10 years. That figure seems to have been plucked out of thin air—there is no justification for it and local governments do not support it—so what is the rationale behind it? The Under-Secretary of State for Communities and Local Government, the hon. Member for Bromley and Chislehurst (Robert Neill) said earlier that there could be in-year adjustments for councils that fall on hard times in terms of their business rate income going down, and that is mentioned in the Bill, but we have not seen exactly how that will be distributed. There is no guarantee that a council faced with large redundancies and the closure of a big provider of local business rate will get any benefit at all, because it will be down to the Secretary of State’s determination. On present form, it seems quite clear what the Secretary of State will be doing—looking after Conservative councils.
Andrew Gwynne
We spoke earlier about the need for local government to have certainty and the fact that the Bill does not provide adequate certainty for local government, particularly for council treasurers, in planning their budgets. Is it not ironic that although the 10-year reset provides a degree of certainty, the certainty for councils such as Tameside and Durham is that we will have pretty poor settlements for the whole decade?
Mr Jones
Indeed. I know that the Secretary of State will say, “We are giving you these local responsibilities”, but how are authorities going to plug the gap? It will be either by cutting services even more or by increasing domestic rates.
Another point on which we need clarification is the “exceptional circumstances” mentioned in the Bill. I should like to know what “exceptional circumstances” are. In what circumstances would the Secretary of State look at a reset during the 10-year period?
Local government needs certainty, and not just in providing services. For example, three-year budgets allowed councils to take decisions that led to efficiencies. If councils are not sure how much money there will be each year, that uncertainty will prevent them from making strategic decisions, savings and investments. That flexibility will be lost. The argument is that this is a localism Bill giving local councils a say, but as we have explained clearly, it actually gives more powers to the Secretary of State and Ministers to decide the future of local government. I should like to know from the Minister why 10 years was chosen for the reset.
Earlier, there were some comments about revaluation. When the Secretary of State was in opposition he argued vigorously against the revaluation of domestic rates. It is time to look at domestic rates, because in all our constituencies we see disparities between different properties. The revaluation process was rushed, which led to a record number of appeals. The Bill will give rise to a situation where the inequality set in domestic rates in the 1990s will be set in the business rate assessment too.