Funding for Local Authorities

Andy Sawford Excerpts

Thursday 10th October 2013 Commons Chamber

[Mr David Ruffley (Bury St Edmunds) (Con)]

I congratulate my hon. Friend the Member for Tiverton and Honiton (Neil Parish) and the rural fair share group and our chairman, my hon. Friend the Member for Beverley and Holderness (Mr Stuart), who has been the spiritual leader of our campaign to draw Ministers’ attention to the injustice—that is not too strong a word—that many rural district councils feel about the settlements over the past two years, particularly the freezing until 2020 of our iniquitous position.

I want to pay tribute to one particular rural district council in my constituency, namely Mid Suffolk district council. It is a small district council, but under the exemplary leadership of Councillor Derrick Haley from Thurston it has done a lot of what the Government want. It is a Conservative-led council—not that that is a particularly important thing to note—and it has been following the strictures set by the Secretary of State and the Minister. In particular, in less than two years it has effected a collaboration with the neighbouring Babergh district council, so the two councils are still sovereign councils but they operate as a single delivery organisation.

I will give some remarkable statistics on the efficiency savings that Ministers have rightly demanded of Mid Suffolk district council. It is not one of those district councils that is sitting on piles of reserves. The Audit Commission’s financial ratio tools show that the council’s usable reserve levels, compared with gross expenditure, are under 10%. That compares favourably with the district council and statistical nearest neighbour average of nearly 25%.

One result of the work that has been done by Councillor Haley, the chief executive, Ms Charlie Adan, and the rest of the council is that the management headcount is down by 50%, with further reductions projected. There is now one chief executive for two councils, rather than two. There has been a comprehensive review of all other staff and there has been an 11.2% reduction in the staff headcount. There has been a 9% annual net revenue saving. Solely through collaboration with the neighbouring council, Mid Suffolk district council took £1.3 million out of what was already quite a small budget in 2012-13, which is more than was anticipated in its business case. Another £1.3 million of savings is anticipated in 2013-14. That might rise to £1.6 million.

The target of the rural fair share campaign is to reduce the rural penalty from 50% to 40%. I was delighted to hear the hon. Member for North Devon (Sir Nick Harvey) say in his excellent speech that that might even be a little complacent. I am with him in spirit. I look forward to his leadership as the new chairman of the group.

I want to underline an important point that has been made by other colleagues in this well-informed debate. In the 2013-14 settlement, the impact of the sparsity element was approximately doubled. That good news offered a huge ray of hope, as my hon. Friend the Member for Beverley and Holderness said in an intervention. Mid Suffolk district council was pleased with the news. However, nearly all the changes to the formula for that financial year were damped away. The calculation that I have seen is that three quarters of the gains that rural councils expected from that sparsity change were damped away. To put some numbers on that, damping cost Mid Suffolk district council almost £800,000, which amounted to 16% of the council’s grant. I wonder how the Minister can justify that.

The proposal to top-slice a significant sum of the new homes bonus that would have gone to district councils and put it into the single local growth fund for the LEPs will have a severe impact on the medium-term financial plans of Mid Suffolk district council. The inclusion of the NHB in the new growth fund will potentially damage the growth prospects in two-tier areas such as mine.

I understand why the NHB is being vired over to the LEPs: it is meant to facilitate better collaboration between the local authorities in LEP areas. However, there is a justified view that that amounts to a penalty on district councils. Why so? The Government believe that it will reward LEPs in areas where authorities have delivered housing increases. However, it is not easy to see how the LEPs add much value to increased house building, because that is what councils do. Mid Suffolk district council is being bold and saying that new houses are needed in its area instead of acting in a nimby-like fashion. It seems to me that the LEPs are being rewarded with the power to redistribute income that they have not had much to do with generating through the building of more homes.

Mid Suffolk district council’s view, with which I agree, is that if the LEPs are to be given that power, as is proposed, we should measure their productivity to work out what they actually do in exchange. As far as I can see, there is no measure of productivity at all except the number of new houses and the amount of money that will be generated through the new homes bonus, which is what councils do.

Furthermore, it is important to understand that if the money is given to the LEPs—in my case, the LEP covers the whole of Norfolk and Suffolk—it will work against localism, which should surely dictate that the rewards go to Mid Suffolk district council for achieving more house building. They should not be put into a pot for the whole of Norfolk and Suffolk for the LEP to do with as it sees fit.

Mid Suffolk district council is innovative and has helped to deliver the astonishing and heartening statistic in the BBC-ICM poll published last night, which is that in the majority of services—potholes and services for old people are the exception—six out of 10 of our fellow citizens believe that services have got better in the past five years, notwithstanding the fact that austerity started to kick in in 2009 and accelerated from May 2010.

[Andy Sawford (Corby) (Lab/Co-op)]

Will the hon. Gentleman give way?

--- Later in debate ---

[Andy Sawford (Corby) (Lab/Co-op)]

It is a great pleasure to speak for the first time as the Opposition local government spokesman on a subject of such importance. It is very close to my heart, as I represent a rural and urban area and a local authority that is a member of SPARSE—the Sparsity Partnership for Authorities delivering Rural Services—and has supported the call for today’s debate and for action.

I congratulate the hon. Member for Tiverton and Honiton (Neil Parish) on securing this important debate and on the way in which he spoke strongly for not just his own area but rural areas across the country. He spoke for some of my constituents and those of many hon. Members, and I was pleased that he said he is not seeking to steal money from urban authorities. On that basis, I can say that, like all hon. Members, I am very sympathetic to the case he has made for a fair deal for his area.

The same case was made also by: the hon. and learned Member for Sleaford and North Hykeham (Stephen Phillips), who spoke knowledgeably about the way in which his local authority is making savings; the hon. Member for Worcester (Mr Walker), who championed localism and devolution in a way that I have sought to do in roles before I came to this place; the hon. Member for Penrith and The Border (Rory Stewart), who painted a powerful and evocative picture of our rural areas and the way they are changing; the hon. Member for Beverley and Holderness (Mr Stuart), who gave us a masterclass in how to win friends and influence people, with his complimentary appeal to the Minister’s good graces; and the hon. Member for Newton Abbot (Anne Marie Morris), who spoke for not only her constituency, but her region, giving a perspective from an area of the country that must be heard and was heard today in this House. I also welcome the way in which my hon. Friends the Members for Gateshead (Ian Mearns) and for Coventry South (Mr Cunningham) made strong interventions to argue that the unfairness is felt keenly in many areas of the country, both rural and urban, because of a range of factors. As the hon. Member for Mid Dorset and North Poole (Annette Brooke) highlighted when she talked about the range of issues that impact on local authorities, there is also an impact on town and parish councils at the first tier of local government. I was pleased to hear her put that on the record today.

My hon. Friend the Member for Penistone and Stocksbridge (Angela Smith) spoke about the rural-urban mix in her constituency. She correctly diagnosed the funding problems as being about the level of cuts overall, rather than what could otherwise be a divisive debate about rural-urban. Had she been in her place, I would have associated myself with the congratulations she offered to Sir Steve Houghton. I had the pleasure of working with Sir Steve in my former life, when I was chief executive of the Local Government Information Unit, and he is a champion for local government.

Like the constituencies of many Members in the Chamber today, my constituency is very varied. Corby is mainly urban whereas east Northamptonshire, in contrast, is a rural area. I remember that just after I was elected I had a conversation with Mr Deputy Speaker, in which we spoke about engaging with our rural areas and farming communities. I know that that is very dear to his heart.

Let me highlight a particular issue faced by my area, which was also mentioned by the hon. Member for Cambridge (Dr Huppert). He spoke about the impact on areas with fast-growing populations of the failure to take proper account of that in the funding formula. Corby is the fastest-growing place in the country and has the highest birth rate. I know that the hon. Gentleman’s constituency is growing too and we hope that the Minister will assure us that by moving away from a formula fixed to the 2012 baseline we can take better account of population growth.

I thank my hon. Friend the Member for Sheffield South East (Mr Betts) for his kind words about my new role and also, in particular, for the opportunity to serve under his excellent chairmanship of the Select Committee on Communities and Local Government, where I learned a great deal from him, as we all did today when he highlighted the scale of cuts faced by local government. With his experience of the sector in this House and as a former councillor and council leader, he warned us and the Government that we are facing a very serious situation indeed.

My hon. Friend the Member for Easington (Grahame M. Morris) illustrated the severity of the cuts when he talked about the 40% cuts his council faces. My hon. Friend the Member for North Tyneside (Mrs Glindon) spoke strongly for her constituency and the impact on her local council as well as on the north-east region. I have been pleased to receive the briefings from ANEC and to hear from many Members from that region today.

The hon. Member for North Devon (Sir Nick Harvey), in a powerful speech, predicted that complete areas of public services would cease. I was pleased to hear him praise the days when councils were properly funded under the previous Labour Government.

It is not just that funding is being cut. We all recognise that this is a time of rising pressures. In particular, Members have spoken about the costs of looked-after children and social care, which are rising. The demands on local authorities are going up while income is coming down significantly—so much so that, as my hon. Friend the Member for Sheffield South East said, the LGA’s Conservative leader, the highly respected Sir Merrick Cockell, has called the cuts “unsustainable”. The Tory leader of Kent county council states that his county cannot cope with further reductions and is “running on empty”. As the hon. Member for Cambridge said, we are now cutting to the bone in many councils.

Ministers know that local government is the most efficient part of the public sector—the Prime Minister has said so—but they decided to reward councils for that efficiency by cutting more from them than from any other part of the public sector. The Institute for Fiscal Studies is clear that the total cuts to local government spending will outpace those in the public sector as a whole. The situation will get worse rather than better. The LGA’s excellent report, “Future funding outlook for councils”, incorporates the additional 10% cut in this year’s spending review, which came on top of the 33% cut that councils face over this Parliament.

No doubt the Minister will tell us that the cut amounts to 2.6%, but councils do not recognise that figure. It does not stand up to scrutiny. The LGA estimates that there will be a £15 billion black hole in finances by 2020, but the Secretary of State has called the cuts to councils “modest”. No wonder the Conservative council leaders of Essex, Buckinghamshire, Wiltshire, Lincolnshire, Leicestershire, Kent, East Sussex and West Sussex wrote to the Prime Minister to complain about the language that is being used by Communities and Local Government Ministers, because the cuts that councils face are not modest; they are massive.

The National Audit Office warned that cuts are having a direct impact on front-line services. It warns that 12% of councils are at risk of being unable to balance their books in the future, with potentially disastrous consequences. The recent Public Accounts Committee report on the financial sustainability of local authorities found that there had not been a proper analysis of the impact of the cuts. The Committee highlighted the unfairness of the cuts to different areas of the country, and it raised serious concerns about some councils simply not being viable, such as Tory-led West Somerset.

What actions will the Government take in the event of multiple financial failures of local authorities? If the Minister will not reply to me today, I am sure that in due course he will reply to the Chair of the Public Accounts Committee, who has rightly put that question to the Government. Do the Government have a plan for what is about to happen?

The impact falls on both statutory and non-statutory services. Too often, it is assumed that statutory services will be safe because they are a legal requirement, but the truth is that councils already, throughout the country and increasingly, are restricting eligibility criteria, so older people in my constituency and those of my hon. Friends who have spoken today are losing their care. Children are losing their transport to school. The brunt of the cuts will fall on the non-statutory services that Members have mentioned, such as road maintenance, cultural and leisure services, street lighting and libraries.

We must be honest that were a Labour Government now in office, of course there would be cuts to local government. But they would not go as far as the cuts that this Government are making, and they would certainly not be allocated to local authorities in such a fundamentally unfair way. It is not just organisations such as ANEC and the Special Interest Group of Metropolitan Authorities that point that out to us; so too has the Audit Commission, 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.”

Perhaps it is that kind of speaking truth to power that has caused the Secretary of State to abolish the Audit Commission, which I regret.

In 2014-15, the 10 most deprived local authorities in England will lose six times more than the 10 least deprived local authorities compared with 2010-11. The councils that will suffer the biggest cuts in spending power per head, even on the Government’s own measure, which is designed to mask the real effect, are Liverpool, Hackney, Newham, Manchester, Knowsley, Blackpool, Tower Hamlets, Middlesbrough, Birmingham and Kingston upon Hull. My hon. Friend the Member for West Ham (Lyn Brown), who has also joined the Communities and Local Government team, in Newham, knows the impact of that on her constituents, as I do on mine in Corby and east Northamptonshire.

In contrast, the Prime Minister’s own local authority, West Oxfordshire, one of the least deprived in the country, ranking 316th out of 325 in the indices of multiple deprivation, is getting an increase in spending power of 3.1%. That is all we need to know about the Government’s priorities. And we know that it is not an unfortunate accident; it is a deliberate strategy. The former Local Government Minister, the hon. Member for Bromley and Chislehurst (Robert Neill), put it like this:

“Those in greatest need ultimately bear the burden of paying off the debt”.—[Official Report, 10 June 2010; Vol. 511, c. 448.]

He told us that quite clearly and frankly, and we know that in our communities.

Is that not exactly what this Government are about? They are not interested in the people in the communities that are being hit hardest. They are so brazen about it that when, earlier this year, the additional funding for rural areas was announced, they inexplicably removed Durham—one of the poorest rural areas—from that list.

Do the Government also acknowledge that it is not just councils that are affected? Costs are increasingly being passed on to our hospitals, our prisons, our police service and our welfare system. In my area, for example, the local hospital has found that it has had to pay for care home beds out of the budget for acute hospital services, making a nonsense of the Government’s claim that they have protected NHS spending.

If my party comes to power, as I hope it will, times will still be very tough and we will need to look at what we can do to help councils. First, we will need to make a reality of Total Place—of community budgets—on which this Government have sadly been dragging their heels. People may call it what they like, but the principle is absolutely sound. We must get local services properly joined up, we should put councils in the driving seat to do that, and we need truly to break down the barriers to it, not least in Whitehall.

That is why Labour will look at powers in areas such as training, skills, infrastructure, transport and investment in order to help our local authorities to get their local economies going. That is why we will return the control of back-to-work schemes to councils. That is why we will launch, with our local authorities, the biggest house building programme in a generation and celebrate council house building again across the country. That is why we will give councils the right to grow, with the incentives they need to acquire land and put in the infrastructure, and that is why we will truly integrate health and social care to realise the vision of Nye Bevan, the founding father of the national health service.

That is why we will back those things that councils are doing well, even though money is tight. We want to celebrate good things in local government, but I was very surprised to hear the hon. Members for Shrewsbury and Atcham (Daniel Kawczynski) and for Bury St Edmunds (Mr Ruffley) crowing about the BBC ICM report. I have the full survey here. In not one of the 15 service areas do the majority of people think their services are getting better. In some areas, such as road maintenance—my constituents who experience the potholes every day know about this—66% were clear that they were getting a worse service. I am sure hon. Members will have an opportunity to correct the record of the remarks that they made earlier. One thing that people are clear about in the survey is how frightened they are about the impact of the cuts that this Government are imposing.

Labour councils are working hard to mitigate the impact of the damage being done by this out-of-touch Government. That is why I am delighted that many more Labour councillors were elected earlier this year and many councils turned to Labour control. Whether we are implementing the living wage, schemes to bring household energy bills down, promoting apprenticeships, building social housing or attracting new investment into our local high streets, I am very proud of what Labour councils are doing. It helps us to plan for our return to office in 2015. That is why the work of our local government innovation taskforce is helping to shape the policies of the next Labour Government.

Finally—

[Dr Huppert]

Will the hon. Gentleman give way?

[Andy Sawford]

I have no more time.

Finally, on funding, we will review the formula. We will make the formula fairer, but for today let us accept that the Government’s approach to local government funding needs to be seen for what it really is—it is unfair and it is unjust. It is unfair to local residents who rely on local services, and it is unjust in the way it hits the poorest areas and the poorest people hardest.