Local Government: Finance Settlement

Baroness Donaghy Excerpts

Thursday 17th January 2013 Lords Chamber

[Baroness Donaghy]

My Lords, I thank the noble Lord, Lord Smith of Leigh, for initiating this debate, although there is an element of sadomasochism in having to go through this again when we went through it on 19 December. I wish I had had the time to do some research into how often members of the coalition Front Bench have said from the Dispatch Box “That’s a matter for local councils to decide.” Closing libraries; a matter for councils. Shrinking sports facilities; a matter for councils. Closing Sure Start centres; local government. Cutting bus services; that is up to councils.

In her letter to the noble Lord, Lord McKenzie, following the debate on the provisional local government finance settlement for 2013-14, the Minister wrote:

“It is entirely for local authorities to decide how much they are prepared to spend on council tax support”.

We have an “entirely” now. We should state quite clearly that the Government are responsible for what is happening to local authorities. I firmly believe that the population at large, when the impact of these announcements is finally felt, will know that it is the Government who are responsible, not local government. Historically, hand-washing in public has a very bad record.

As has already been said, the Audit Commission has found that the most deprived areas have seen substantially greater reductions in government funding as a share of revenue expenditure, compared with councils in less deprived areas. That says it all. I will not repeat examples that others have given in this debate. My noble friend Lady Smith referred to Joanna Killian, the chair of SOLACE, the Society of Local Authority Chief Executives and Senior Managers. Ms Killian said:

“This settlement will increase the risk of more councils being financially unviable and focus needs to be given to how this market failure is managed”.

How chilling a statement is that?

The single most important reason why I think the Government will be blamed is the localisation of council tax benefit. No Conservative partners in the coalition are participating in this debate, apart from the Minister, of course. So I will try to inject a Conservative view. The noble Lord, Lord Jenkin, said:

“The poll tax was introduced with the proposition that everyone should pay something … We got it wrong. The same factor will apply here, that there will be large numbers of fairly poor households who have hitherto been protected from council tax, who are going to be asked to pay small sums”.

Families already facing difficult choices between heating and food bills will receive a bill for council tax for the first time in March-April. Figures from the Institute for Fiscal Studies show that the average working family will lose £165 per year, while the average non-working family will lose £215. How many will be willing to pay council tax for the first time? One journalist has described this coalition government policy as a “death wish”.

I want to deal with the issue of council reserves. The Secretary of State has accused some councils of,

“stashing away billions, turning town halls into Fort Knox, whilst at the same time threatening to cut frontline services”.

This was in response to the Audit Commission’s report that English councils’ tax reserves stood at £12.9 billion in 2012, £4.5 billion more than in 2007. The Audit Commission considers that the building up of reserves is praiseworthy. Councils increased their reserves by £1.3 billion in 2011-12, despite budgeting to reduce them, and this has been a consistent trend over recent years.

The Audit Commission identified two factors that appear to have driven that growth. Some councils were highly effective in meeting their savings targets, creating underspends, which could be added to reserves. For instance, in 2011-12 the total service spend, excluding education, fell by 7.4% against a target of 6% in single tier and county councils and by 8.9% against a target of 9% in district councils. The second factor identified was that councils were,

“putting money aside to mitigate the risks of the ongoing cuts programme and changes to council funding from April 2013”.

That is all very sensible stuff, I would have thought.

The biggest concern expressed by auditors about the financial problems was that councils might try to address their 2011-12 problems through capitalisation requested under exceptional circumstances or unplanned use of reserves. It seems that councils cannot win, whatever they do. Does the Minister have any tips—perhaps one of the 50—about what is a reasonable level of reserve for a council, and would that be about the same level as the then Councillor Pickles stashed away when he was leader of Bradford Council?

We should not forget the impact on jobs in local government. Thousands have already gone and many more people will lose their jobs in the future. Thousands of years of collective experience will be lost.

Local authorities have had their improved efficiencies thrown in their face. They are subject to needless media attacks from the Secretary of State and at the same time they are to be given the dirty job of sending out council tax bills for the first time to people who can least afford it. I was trying to think of an appropriate song for local authorities to illustrate how unloved they must feel by the coalition Government. The only one I could think of was “Nobody Likes Me (Guess I’ll Go Eat Worms)”. That was not quite right. There was another one, however, an old Gracie Fields song, which was “I’m A Lonely Little Petunia In An Onion Patch, Oh Won’t Someone Come And Play With Me?” Perhaps they are a little twee for such a serious subject; other suggestions would be welcome.