Local Government Finance (England)

Andrew Gwynne Excerpts

Wednesday 13th February 2013 Commons Chamber

[Brandon Lewis]

Thank you, Mr Deputy Speaker. I am slightly surprised by the comments of the hon. Member for Birmingham, Northfield (Richard Burden). Not only is my right hon. Friend the Secretary of State happy to meet representatives from Core Cities, but I met them myself during the consultation process. They were part of it, so I am not sure where the hon. Gentleman gets his facts.

To help local authorities, we published 50 ways to make sensible savings. [Interruption.] As I might have guessed, the Opposition scoff at the idea that looking after the pennies will take care of the pounds. That is probably why they got us into an economic mess in the first place.

The Opposition should take a leaf from the book of an Olympic hero—Sir Dave Brailsford, the head of British Cycling. His philosophy is the aggregation of marginal gains; tiny changes across the board that add up to the difference between silver and gold. That is what we should be doing. We should not scoff at small savings, because they add up to large amounts.

Thanks to the autumn statement, which exempted local government from the 1% top-slice in 2013-14, councils have time to put their house in order and put people first. As my hon. Friend the Member for Sherwood (Mr Spencer) suggested, they should start by freezing council tax, as Nottinghamshire county council and many others are doing—we know of about 150 already.

Once upon a time under the previous Government, council tax rose exponentially: it more than doubled. We have put money aside to put tax rises on ice for a third successive year. Councils should take advantage of that for the benefit of hard-working people who can ill afford to pay more. Already, 150 councils are taking that high road—councils from Derby to Dorset, from Northampton to Norfolk and Wolverhampton to Watford; but if councils take the low road and put up taxes, they should be aware of the wrath of the taxpayer. We are setting a 2% referendum principle for all principal local authorities, police and crime commissioners and fire and rescue authorities. That is direct democracy in action.

If an authority wants to raise council tax by more than 2%, the local electorate will have the right of veto in a binding referendum. I am sure that some councils may have a case—personally, I cannot see it—but if they do they should put it to the vote. They should stand up before residents and state their case. If they win the argument, so be it, but we will take a dim view of democracy dodgers trying to sneak in under the democratic radar, especially those using levies as places such as Manchester and Rotherham are doing.

I urge hon. Members to think about what we are saying. The Government grant is equivalent to 1%, so councils that are seeking to increase council tax and avoid a referendum are doing so, in effect, for at most 0.99%. What a kick in the teeth for local taxpayers. Any council leader that cannot get their officers and members to work together to find 0.99 % of savings should look again.

[Andrew Gwynne (Denton and Reddish) (Lab)]

Surely the Minister knows how council tax is calculated. The issue is not just about one year—it is about the erosion of the council tax base, which has had a devastating impact in local authorities such as Tameside.

[Brandon Lewis]

I respectfully suggest that the hon. Gentleman does a bit more research, because the Secretary of State stood at the Dispatch Box at an earlier date to say that it was in the base. The hon. Gentleman misses the point about the settlement. Council tax money is not about lining councils’ pockets—it is hard-working taxpayers’ money. Many councils already have more in reserve than they are losing through cuts. Liverpool, Manchester and Leeds have reserves twice the size of their spending power reductions.

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[Hilary Benn]

I agree completely. What makes it even more inexplicable is that elected mayors will be able to keep their right to save for a pension. That is what the Minister announced. Will his colleague, the Under-Secretary of State for Communities and Local Government, the right hon. Member for Bath (Mr Foster), explain when he winds up the debate the difference, in time, effort, commitment and dedication to the job, between an elected mayor and the leaders of Birmingham, Manchester and Leeds city councils, who also work full time and are dedicated and committed to their jobs?

According to the LGA, 19 December was the latest that a provisional local government financial settlement has ever been published. This has caused problems for councils trying to finalise their budgets for the forthcoming year. Council representatives to whom I have spoken talk of errors and double counting in the provisional settlement, which the Under-Secretary of State for Communities and Local Government, the hon. Member for Great Yarmouth (Brandon Lewis)—perhaps not surprisingly—did not mention and which does not inspire confidence. Will he explain how that came to pass and what steps he is taking to ensure that it does not happen again?

When the provisional settlement was announced, the Secretary of State said:

“Concerns that the poorest councils or those in the north would suffer disproportionately are well wide of the mark. The spending power for places in the north compares well with those in the south.”—[Official Report, 19 December 2013; Vol. 555, c. 874.]

I am afraid that the figures simply do not support that assertion.

Let us take a comparison between Wokingham, which the Minister referred to, and Leeds. The final figures in the Government’s documents show that spending power per dwelling in Leeds will be £1,874 in 2013-14, while in Wokingham it will be £1,815. The following year, it will be £1,800 for Leeds and £1,796 for Wokingham—a difference of just under £5. It is clear that the figures do not take account of relative need, because the percentage of children in out-of-work families in receipt of child tax credit is three times higher in Leeds than it is in Wokingham, the percentage of 18 to 64-year-olds claiming income-based benefits is more than three times higher in Leeds than it is in Wokingham, and the percentage of the population claiming incapacity benefit or disability living allowance is twice as high in Leeds as it is in Wokingham. How can that be fair?

[Andrew Gwynne]

I am sure that my right hon. Friend has seen the heat map produced by Newcastle city council. Was he as surprised as I was to notice that the only council in the midlands and the north, from the south-east right the way up to the borders of Scotland, to have a reduction of between zero to £50 per head was Cheshire East—the local authority of the Chancellor of the Exchequer?

[Hilary Benn]

My hon. Friend is absolutely right to point that out. I cannot say that I am surprised, given that the central point I am attempting to make is that the way in which the cuts have been allocated is fundamentally unfair.

If the Minister and Secretary of State do not accept that, then what about the Audit Commission? Last November, it produced a report called “Tough times 2012: councils’ financial health in challenging times”, which said:

“Councils in the most deprived areas have seen substantially greater reductions in government funding as a share of revenue expenditure than councils in less deprived areas.”

It could not be stated more clearly. That probably explains why the Secretary of State is so keen to get rid of the Audit Commission: how inconvenient that such an organisation dares to speak truth unto power.

The Secretary of State came up with the measure of spending power in 2010. Ministers now publish figures on spending power per dwelling but not on spending power per head of population. This is perhaps unsurprising given what the figures show. Taking into account this settlement, in 2014-15 the 10 most deprived local authorities in England will lose six times more spending power per head of population than the 10 least deprived local authorities, compared with 2010-11. No wonder Ministers did not want to present to the House figures based on population. The councils that will suffer the biggest cut in spending power over the two years are Liverpool, Hackney, Newham, Manchester, Knowsley, Blackpool, Tower Hamlets, Middlesbrough, Birmingham and Kingston upon Hull.

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[Andrew Gwynne (Denton and Reddish) (Lab)]

I should inform the House that my wife is a member of Tameside metropolitan borough council, one of the two local authorities in my constituency.

The Minister’s opening remarks beggar belief. Either he is completely out of touch or he does not understand, or does not want to understand, the impact that this settlement is having on local authorities such as Tameside, Stockport and many others represented by hon. Members. As was pointed out by my right hon. Friend the Member for Leeds Central (Hilary Benn), it is extremely unfair. That was expressed to me loudly and clearly at a budget briefing seminar that was arranged for my hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds) and me by Tameside council last Friday. To say that the budget seminar was thoroughly depressing would be a massive understatement.

The starting point is that the comprehensive spending review for 2011-12 to 2014-15 has outlined real-terms reductions of about 28% in central Government funds for public services. However, Tameside will experience an overall cash cut equating to a reduction in funding of 43%. That is massive in any terms.

[Mr Kevan Jones]

Also, does my hon. Friend agree that no matter how many pot plants councils get rid of—indeed, even if they were to cut all chief officers’ salaries—no organisation could absorb such a cut without there being an impact on front-line services?

[Andrew Gwynne]

My hon. Friend is absolutely right. Tameside council is an excellent, four-star local authority. It has been highlighted as having some of the best financial procedures of any local authority. It is well managed, and it has met the Gershon savings put in place by the Labour Government with commendation and improved services at the same time. These new cuts are too far and too deep for an authority such as Tameside, however.

Using the Government’s own notional spending power methodology, Tameside’s funding cut will be 1.7% in 2013-14 and 4.9% in 2014-15, amounting to 6.4% over the two years, which is higher than the England average of 5.5% for that period. Those calculations exclude specific grants, of course, such as capital grants, grants for funding education and ring-fenced grants. However, this analysis does not reflect reality for a number of reasons. First, the starting point is taken as the adjusted start-up funding position used in the calculations for the 2013-14 grant, not the actual amounts received in 2012-13. Secondly, the cost of the council tax support scheme is included in both the council tax requirement figures and the start-up funding level, which distorts the reported position.

As was mentioned earlier, further analysis has shown the reduction in spending power, and as I mentioned in an intervention on my right hon. Friend the Member for Leeds Central, it is telling that no council in any region outside the south, with the exception of Cheshire East, has a reduction in spending power of between zero and £50 per person.

[Fiona Bruce (Congleton) (Con)]

As a Cheshire East MP, may I ask the hon. Gentleman whether he is aware that grant funding means that Manchester has three times more per head than Cheshire East? If Cheshire East had the same funding it would not need to charge council tax at all and would have £30 million left over.

[Andrew Gwynne]

There we have it! That highlights just how much Government Members do not get it. I am not here to speak for Manchester. I am a Tameside and Stockport MP, and the reduction in spending per head of population in Tameside is £160.98, yet Tameside is the 56th most deprived area in the country with real social needs. That is why this reduction is so unfair, and the hon. Lady just does not get it.

The savings requirements are £26.5 million for 2013-14, £13 million for 2014-15, £31.94 million for 2015-16 and £46.685 million for 2016-17, amounting to a total of £118.125 million over the next four years. That is just wrong—it is not fair in any sense of the word.

Let me briefly run through the kind of savings—cuts—that Tameside’s council is having to make. On adult services, the council is having to: redesign day services for adults; reduce home care packages; streamline care pathways; reduce voluntary sector grants by 20%; withdraw financial support from luncheon clubs; reduce employment services; outsource further homemaker services to the independent sector; and cut health and well-being services. We are talking about £3.485 million of cuts in 2013-14 and £1.388 million of cuts the year after.

On neighbourhood services, the council is putting in place: new operation structures for district assemblies—that means reducing grounds maintenance, and making cuts to parks, street scene and litter removal functions; an amalgamated parks and countryside service; efficiencies in third sector funding; a new, single, risk-based highways function—that means filling in pot holes; and more savings from the libraries review.

[Mr Kevan Jones]

Does my hon. Friend agree that his local council not only faces pressure on employment and other things, but has about 25% more looked-after children than Cheshire East council?

[Andrew Gwynne]

My hon. Friend makes an important point, which brings me on to what is happening to children’s services. Next year, cuts to children’s services in Tameside will be £4.636 million and the year after the figure will be £6.509 million. This just is not right; the services being cut are for some of the most vulnerable people, both young and elderly, in our society.

Let me briefly mention the issue of reserves, because it has been raised before. My hon. Friend the Member for Sheffield South East (Mr Betts) rightly says that most of the reserves are tied up for schools and capital schemes in any case. By 2015, Tameside’s council will have £12 million in reserves. That is not enough to deal with the equal pay claims, because they continue to be major areas of risk for the council, not least in view of the judgment made against Birmingham city council in its case.

Stockport faces the same situation; Stockport metropolitan borough council is losing £96.59 per person over these four years. Stockport’s council is much more affluent than Tameside’s, but this settlement is still unfair to it and worse than the settlement anticipated by its Liberal Democrat council. Come the end of this week, that council, too, will be looking at huge cuts to park services, to libraries and to support for children. This is just not fair. It is not fair on places such as Greater Manchester, it is not fair on most of the north of England and it shows that this Government just do not get it.

[Several hon. Members]

rose—

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[Julie Hilling]

The deficit is going up too.

The Government will not even take responsibility for these cuts, because they simply try to pass on the responsibility to hard-working councillors up and down the country. They are masters of the politics of passing the buck. They try to say that it is the fault of Wigan and Bolton that services are reduced, that libraries are closing and that youth workers are being made redundant. How dare they? They like to paint a picture of profligate local authorities wasting taxpayers’ money, but that is not true of the councils in my constituency.

One of the senior officers in Bolton told me that he had worked in local government for 24 years and never known a year in which the council had not had to make savings of £3 million or £4 million from the main budget area. However, he went on to tell me that he had never seen anything like what is happening now. Bolton has already had to find cuts of £60 million to its budget since the election, and it will now have to find an extra £43 million over the next two years, out of a controllable budget of £178 million. Of course services will be affected; it would be ridiculous to suggest otherwise.

The Secretary of State has told us all to go and challenge our local authorities on the cuts, so I did. I took his list of 50 ways to save, and asked people on my council what they were going to do about it. Their response was illuminating. They asked me what on earth I thought they had been doing over the years. They also said that most of the changes would save only pennies, in comparison with the £43 million savings that they needed to find. As Members would expect, however, I did not accept that. I went through every one of the 50 suggestions with them. They said that they already share back-office services and, where possible, procurement and IT. They pointed out, however, that those things could not be achieved overnight because contracts came up for renewal at different times in neighbouring local authorities. They control spending, they have transparency and they take cheats to court. Their reserves are already committed. The Yorkshire Purchasing Organisation was set up 30 years ago to enable combined procurement. They collect 99% of the council tax due, which is a great achievement in the 36 most deprived areas.

[Andrew Gwynne]

I am sure that Bolton and Wigan councils will be really concerned, just as Tameside council is, that their collection of council tax will start to drop as a result of the council tax benefit changes.