Local Government Finance

Bob Blackman Excerpts

Wednesday 9th February 2011 Commons Chamber

[Bob Blackman (Harrow East) (Con)]

We meet today to review the local government settlement, and no doubt councils throughout the country are looking at their budgets, examining how much they are going to spend and making local decisions. We have at last started to hear from Opposition Front Benchers the recognition that reductions in public expenditure would have happened regardless of which party won the last general election. It has been a long time coming. We have been waiting for that view to creep forward, and slowly but surely the recognition is dawning that reductions would have had to be made regardless of who won the election.

We have inherited a legacy: local government council tax has doubled, but services have not really improved at all. Under the Labour Government, there was a transfer of responsibility to local government but a transfer of funding to the council tax, and that forced local people to pay for those services, which were not really delivered.

Authorities were also inspected and monitored to the absolute maximum, and part and parcel of the settlement before us is a reduction in that monitoring and inspection, all of which can be translated directly into savings that local authorities can make.

[Charlie Elphicke]

Does my hon. Friend agree that, extraordinarily, all that monitoring and inspection never seemed to include the over-inflated salaries of chief executives or the ridiculous pay-offs that occurred?

[Bob Blackman]

I thank my hon. Friend for that intervention, which refers to another thing that took place under the Labour Government. In all those organisations, pay is determined from the top, so as chief executive pay has rocketed, so has senior pay, while the large numbers of people who work for local authorities and do a brilliant job are paid relatively small amounts of money. There is no doubt, however, that the pay of middle management and senior management exploded, and I applaud the Secretary of State’s decision to publish the figures so that the public can see what type of jobs are involved.

We also saw an explosion in the creation of non-jobs, each of which required administrative support, departments and offices, all of which are costs to the taxpayer, specifically the council tax payer. We had a multitude of different grant regimes and ring-fencing so that if local authorities wanted to take decisions, they could not. I therefore welcome the merger of the different grant regimes and the removal of ring-fencing, which allows for local decision making at the right sort of level.

What Labour did was not all bad. The decision to tell local authorities what level of funding they were getting for three years was a good thing because it allowed them to plan ahead. I hope that in future times the settlement from the Front Bench will be offered not just for three years but for four or five years so that there is certainty for local government in planning ahead.

[Henry Smith]

Does my hon. Friend think that as well as certainty in terms of the amounts received by local authorities, it is also important that there is transparency as regards the formula for the way that those settlements are decided?

[Bob Blackman]

My hon. Friend anticipates a matter that I was going to come to later. The outdated Barnett formula, which has transferred money to all parts of the country with no transparency whatsoever, must go and be replaced with a formula that delivers money on a fair and transparent basis that we can all see and understand. Even Lord Barnett himself cannot believe that his formula, which has existed for some 40 years, was not removed or transformed under 13 years of Labour Government, but they did not do it. That is one of the things that has to go.

We should deal with issues relating to the front-loading of reductions in expenditure. The reality is that the Government are having to deal with a deficit inherited from the Labour Government. We get maximum benefit from making public expenditure reductions early because we get four or five years-worth of reductions as a result. That is precisely the reason for doing it.

[James Morris]

As the right hon. Member for Don Valley (Caroline Flint) said, Labour was committed to reducing the structural deficit in four years, which implied that 20% cuts in public expenditure would have been applied to local government. However, we did not hear a single thing from the Opposition about what they would have cut.

--- Later in debate ---

[Bob Blackman]

Indeed; my hon. Friend makes a fair point. We have heard the starting point of the apology and a little about what Labour would have done, but we do not know the detail. If the result of the election had been somewhat different, we would probably be arguing about money around the margins as regards the expenditure reductions.

I ask Front Benchers to consider the area cost adjustment. That is quite a serious issue for London and areas of deprivation, where higher costs are incurred. It appears that the area cost adjustment has not been dealt with reasonably in this settlement, and that needs to be looked at again. There are parts of the country where higher costs apply, and that is particularly true in London.

Capitalisation is just putting off paying today until tomorrow and doing it on a deferred basis. It means having to borrow or spend money on capital that could otherwise be employed. It is a wasted opportunity and the wrong way of dealing with redundancies. If councils wish to make redundancies, they should recognise that they will make savings on their revenue budget and they should use that budget to pay for the costs of those redundancies, not defer them through the capital programmes.

I applaud this Government for introducing the pupil premium. However, it will be equally applied across the country, and there are higher costs in London. Surely it must be right that in high-cost areas we increase the premium per pupil to recognise that fact. I ask Front Benchers to consider that.

We need to look at the data that are used to formulate the grant settlements. Certainly in London, those data are hopelessly out of date and inaccurate and therefore money is transferred in an unfair way. That has been true for many years, and I hope that we can put it right.

I will talk about two local authorities that I know well. The first is the London borough of Harrow, which has at last received a reasonable settlement from central Government. It is the third best in London and the 23rd best in the country. The Labour council that came in after the election inherited a transformation programme that reduces costs and safeguards services. We await its budget decisions. It should be satisfied with the settlement, after years of poor settlements from a Labour Government. In London, 27 of the 32 boroughs were on the floor under the Labour Government, receiving below inflation increases year after year. London has had to put up with draconian settlements before, and it knows how to deal with them.

The second is the London borough of Brent, where the Labour council inherited a transformation programme that would have saved £100 million over four years. Instead, it has decided to close six libraries and all the day care centres, to slash the voluntary sector programme, and to decimate services for the weak and vulnerable. That is a political decision. I suspect that that is precisely what is going on all over the country. Certain people are making decisions to close libraries, day care centres and other centres that affect the weak and vulnerable in advance of the Localism Bill, which will give local communities the opportunity to take them over and run them.

[Brandon Lewis]

My hon. Friend is talking about London, but does he agree that what he describes is mirrored outside London? The hon. Member for Sheffield South East (Mr Betts) spoke about areas that are deprived and hard-hit. Great Yarmouth, which is one of the most deprived areas in the country and is the hardest hit by these cuts, has said that it can deal with this situation without it affecting front-line services. It is doing so through shared services, thereby proving that this work can be done by councils that are prepared to be positive and think outside the box.

[Bob Blackman]

My hon. Friend makes a good point. The reality is that the councils that planned ahead, knowing that reductions would take place, however draconian, are coping best. The councils that put their heads in the sand and said that it would never happen are being caught out. They are now being called to account. If councils have not planned ahead, they will suffer.

[Heidi Alexander (Lewisham East) (Lab)]

Like the hon. Gentleman, I represent a London constituency. My local authority faces cuts of £87 million over the next four years, out of a budget of £271 million. It is finding that difficult, having decided to protect care for the elderly and child protection, which amount to £109 million of the budget. It is a disgrace for him to suggest that it is a political choice for councils to look at other front-line services. Does he not agree that the scope for finding savings is limited, should councils choose to protect essential services for the vulnerable?

[Bob Blackman]

I thank the hon. Lady for that intervention. It leads me on to my menu of what councils should do. Have they eliminated unnecessary monitoring? Have they eliminated duplication and multiple handling of applications for grants and other such services? Have they reviewed senior officer pay? Have they co-operated with other local authorities to reduce costs by combining back-office services? Have they cut their communications budgets, or have they chosen to send out publications to the community on a regular basis? Have they removed vacant posts that are unnecessary? Have they rationalised their office space and found office space that is no longer required? Have they taken their efficiency savings seriously and delivered them year after year, or have they continued on the same basis as before? Have they got into smarter procurement and come together with other local authorities to use their buying power to reduce their costs? Have they considered a long-term plan anticipating all the reductions? If authorities have done all those things and still have problems, then it is right that they approach the Secretary of State for help and advice on how to construct their budget at local level, but not until then.

This Government and our Front-Bench team have produced a set of figures and budget proposals that can be supported and that will be recognised in the years to come as a dramatic step forward in ensuring that people get proper value for money in the local services that are delivered to them. I ask that we consider how more money can be raised locally through the transitional business rates and in other such ways, and I ask that we consider how to deal with deprivation in future. It is a disgrace that has gone on for far too long that the deprived areas of the country have consumed more and more money, yet continued to be the deprived areas. That cannot be right, and we have to put it right.

I also urge Ministers to continue the process of helping councils to freeze council tax not just for one or two years but on a continuous basis, so that hard-pressed tax payers do not suffer any penalty as a result of the actions of the councils that operate their services. We can all applaud our Front-Bench team for the work that they are doing.