Local Government Funding

Baroness Keeley Excerpts

Tuesday 30th November 2010 Westminster Hall

[Mr Dave Watts (St Helens North) (Lab)]

I am pleased to have the opportunity to raise this important matter on behalf of my constituents and of SIGOMA—the special interest group of municipal authorities. There is great concern among MPs in the SIGOMA group that we are facing one of the worst spending reviews ever experienced. It is likely to have a massive impact on every part of our public services, whether in education, health or any other area. I am pleased that so many of my colleagues have attended the debate, and I will try to give way to as many of them as I can. I know they will have major concerns about the impact of the spending review on their constituencies.

I believe we are likely to see massive and devastating cuts in our communities, and that the general public have no idea about the scale of the cuts heading their way. When people see the level of cuts, they will be concerned about their implications and the way that the Government are going about them. From day one, both I and the rest of the Opposition have accepted that there must be cuts in public services. We accept that local government must play its part in reducing the deficit. However, we are concerned about the speed of those cuts, the way in which they are being implemented and the unfairness of the cuts to the SIGOMA authorities.

My constituents accept that there needs to be a reduction in public spending and that local government must play its part in the cuts, but they have every reason to feel aggrieved that, at a time when they face massive cuts in their public services, the Government have cut tax for the bankers, who caused the problem, by £1 billion and have already turned their back on doing anything, realistically, about the massive bonuses that continue to be paid to bankers. They have now decided that they will not even publish the size of the bankers’ bonuses so that people can hold them accountable for their actions.

The least that my constituents should be able to expect is that any cuts are fair, that they protect the most deprived parts of our communities, that they take into account the unfair cuts that have already taken place, in May, and that they allow time for councils to adjust their budgets. That is one of our major concerns—that the cuts are front-loaded.

[Barbara Keeley (Worsley and Eccles South) (Lab)]

I want to ask my hon. Friend about that. The worst aspect of the cuts that people are seeing is the front-loading—the lack of time that there will be between the settlement and implementation. Does my hon. Friend think, as I do, that it is difficult to see any fairness, as was promised in the comprehensive spending review, in a situation in which some councils, in the most deprived areas, will see reductions in their budget next year of, it has been suggested, up to 25, 30 or 38%, whereas other councils, in the south, will see increases of an equal size—25 to 37%? It is hard to see how there has been fairness. The other promise in the CSR was that those parts of the country that depend on public sector jobs would not be hit the hardest. It is very hard to see those things. I wonder whether my hon. Friend can see them, because I cannot.

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[Mr Marcus Jones (Nuneaton) (Con)]

rose—

[Barbara Keeley]

rose—

[Mr Watts]

I give way first to my hon. Friend.

[Barbara Keeley]

Will my hon. Friend comment on this, as I know he is concerned about the matter and knows the information for SIGOMA authorities? My local authority of Salford is to have a 13% cut, taking only the cuts being inflicted by the Government, but the loss of the working neighbourhoods fund will take it up to a cut of 18% or 19%. The hon. Member for Meon Valley (George Hollingbery) is referring to councils that do not have unemployment problems of the sort that would need the working neighbourhoods fund—problems that the SIGOMA authorities definitely will have.

[Mr Watts]

My hon. Friend is right. That funding has made a tremendous difference for some of the country’s most deprived communities. The cuts will be a massive loss to them. The Government should be ashamed. If they are going to cut, they should do so in a way that protects the most deprived communities, not doing as they are and making cuts in the most deprived areas.

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[Mr Watts]

My hon. Friend has made an excellent contribution. Our concern is not just about cuts in local government services, because we have already had cuts right across the board and face even bigger cuts in welfare. As the “Hard Times” document demonstrates, many of our communities are not in a position to fight back and will go to the wall. We are throwing those communities into abject poverty, which will have serious implications for our communities and the country as a whole.

I advise the Minister, before those draconian cuts are made, to take into account all the losses of grant that are taking place. A substantial amount of money is already being taken out of the local economy, which is having an impact on the private sector in our communities. Many of the shops, retailers and suppliers already face major problems. I spoke recently to a gentleman in the construction industry who told me that all his orders have now run out and that within six months he would be laying off hundreds of workers as a consequence. The economy cannot generate itself; it needs the support of the Government. That is why all our previous policies took into account deprivation and the need to spend.

What do we want? We certainly want any changes that are made to take into account the tax base and the ability of local government to raise money. We have already seen some scandals, such as the fact that Westminster council’s ability to raise millions of pounds every year from car parking charges is just ignored and not taken into account, which allows it to provide good services at a low cost to local taxpayers. It is a scandal that that has been allowed to continue for many years. I hope that when the Minister is looking at any change, he takes into account that some very wealthy councils are in a much better position than my authority and the SIGOMA authorities to deal with the levels of cuts that we have seen.

[Barbara Keeley]

Yesterday the Chancellor was optimistic about the recovery. So would my hon. Friend, like me, like DCLG Ministers to approach the Treasury about re-phasing the cuts to local government budgets, so that they will not be so front-loaded? That would help.

[Mr Watts]

As I understand it, most—in fact, all—local authorities believe that the way the Government have front-loaded cuts is wrong and does not give them time to adjust their budgets. The Government could have switched it round and had the most severe cuts in the latter part of the period. We know why they are doing this: frankly, we are seeing all sorts of political shenanigans going on because they want to make all these draconian cuts now, so they can have some tax cuts in the run-up to the general election. That is a short-term view, given the problems that will be created. The Government’s view of the economy as a whole is very optimistic, and what we fear will happen with local council spending will shove most of our economy into recession, if not depression. There are areas around the country that may take 50 years to recover from the cuts that are on their way—places such as Barnsley and some of the north-east councils. They will have a dramatic effect for a very long time.

I hope the Minister will take those things into account when he responds. I hope he can give us some assurance that, when he makes changes, they will be fair and transparent, will take into account deprivation factors and will put resources where they are most needed; and that he will look at the tax base to ensure that those who can afford to pay a bit more council tax and can afford to receive less grant than they are receiving do not continue to receive higher levels of grant. There was a time when—and I do not think things have changed from when I was council leader many years ago—if we received the sort of income Westminster gets from grants, car parking and all the other things, we could have had no council tax at all and sent every one of our constituents on a holiday to Spain every year. That is the level of fiddle that has gone on with the system, and it needs to come to an end. Fairness needs to be put back into it.

[The Parliamentary Under-Secretary of State for Communities and Local Government (Robert Neill)]

It is a pleasure to see you in the Chair, Mr Betts, and a pleasure to respond to this important debate initiated by the hon. Member for St Helens North (Mr Watts), to whom I am sure we are all grateful. It is an important topic. It arises at this time of year every time the local government finance settlement is coming up. Inevitably, there are debates in advance of the settlement and, understandably, hon. Members seek to get the Minister to say things about the detail of the settlement. The Minister, regardless of party, says, “You’ll have to be a bit more patient because the detail as far as it affects local authorities is set out in the settlement itself, which will be laid before the House shortly”. I say that because that is the factual position. I want to respond to some of the matters raised, but I am sure that you, Mr Betts, and hon. Members who have participated in the debate, who are well experienced in local government matters, know that I am not in a position today to set out the individual impacts of the funding settlement on particular local authorities. However, I can make it clear that the provisional settlement will be done in the usual way. It will be announced shortly, and we will provide as much information as we can to enable local authorities to set their budgets.

This debate gives us a chance to look at the overall position. It is a position that arises, first, in relation to the financial situation, but it is actually broader than that. It is unfortunate that the opportunity has not been taken to put what has to be done on local government finance in the context of the Government’s broader agenda of handing more power and flexibility to local authorities. I agree with the hon. Member for St Helens North: the fact is that we need to reduce the deficit. Reductions in spending have to be made, and local government, as a significant part of the public spend, has to play its part. That much is common ground, but we are seeking to reduce spending constructively, and there I have to part company with the hon. Gentleman.

With respect to those on the Opposition Benches who have participated in the debate, there has been almost a competition—dare I say it—to come up with the most overcooked, overheated and exaggerated language possible. Frankly, it does no justice to the seriousness of the subject. Opposition Members have chosen to adopt a regrettable approach. It will make cheap headlines in a press release, but it does not advance the argument.

[Barbara Keeley]

The Minister must know—and if he does not, he should know—that councils in the north-west are now looking at having to make cuts of £35 million, £40 million and £50 million. If he thinks that that is fair and balanced, we will all be very upset next week. Last night, Stockport council, a Lib-Dem council, announced the cutting of 400 jobs, and the Local Government Association has suggested that the number of job cuts will be 140,000.

[Robert Neill]

I have seen those figures. I have also seen the SIGOMA document, which I read with interest. I have met SIGOMA representatives and I am happy to continue to do so. I want to take the hon. Lady to task a little. She referred to the reduction in funding for the working neighbourhoods fund. Yes, absolutely right—and who decided to do that? Her Government. The Labour Government made it clear that the working neighbourhoods fund was a three-year fund due to end in March 2011. The previous Government—the Labour Government—were committed before the general election to cutting it, so I am not taking any lectures from anyone on the impacts of that.

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[Robert Neill]

That is entirely right, which is why the rage is synthetic, and why I hope that hon. Members, including Opposition Members, will welcome £650 million of additional money that the Government have put in to support the council tax freeze and which will be embedded in the base budgets of those authorities. I hope that they recognise the steps that we have taken specifically to protect services for the most vulnerable, such as £1 billion of grant funding for social care by 2014-15 within the £2.4 billion that we have rolled into formula grant. By rolling more money into formula grant, we give local authorities more flexibility to reflect their own priorities and demands.

[Barbara Keeley]

Will the Minister give way?

[Robert Neill]

I shall make a little more progress. An extra £1 billion of extra funding has gone in through the NHS budget to break down the barriers between health and social care. As I said, we are fully funding the council tax freeze and embedding it into the base. We will make £200 million of capitalisation available in 2011-12 to deal with restructuring costs. Those are positive things.

It being Two o’clock, the sitting was adjourned without Question put.