Financial Sustainability (Local Government)

Brandon Lewis Excerpts

Tuesday 7th January 2014 Westminster Hall

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

One would be forgiven for believing that there was some golden inheritance for local government when this Government came in. Many council leaders across the political divide would struggle to recognise the description given by the shadow Minister. Having been a council leader under the last Government, I find the idea of the Labour party favouring anything involving flexibility or partnership with local government, as opposed to top-down central control through one mechanism or another, almost laughable.

We should put this debate in context. We still have not heard anything from the Labour party about the £52 billion in cuts to local government that they outlined—local government still has something to fear. Members have also talked about money for areas. We have heard the debate about the difference between rural and urban areas. We would argue that we have created a fairer position, but we should also remember the backdrop outlined by the right hon. Member for Birmingham, Hodge Hill (Mr Byrne): the previous Government basically spent all the money. As my hon. Friends the Member for Bromley and Chislehurst (Robert Neill) and for Hereford and South Herefordshire (Jesse Norman) rightly said, we are working within the tight financial envelope left to us by the mess of the last Labour Government.

Having said all that, I must also congratulate and thank the hon. Member for Birmingham, Edgbaston (Ms Stuart) for securing a debate on this important issue and for her thoughtful opening speech. This Government have armed local government with a fair funding deal for all parts of the country—rural and urban, district and county, city and shire—which means that councils can plan budgets and deliver sensible savings while protecting front-line services. I will come back to the context of “fair” in a moment.

As has been outlined, every bit of the public sector must do its bit to pay off Labour’s deficit, including local government, to account for a quarter of all public spending. Our hats should go off to local government for the impressive work it has done, because we have shown that we can make those savings and still deliver good front-line services. Public satisfaction is at an all-time high, especially compared with 2010.

The autumn statement ensured that local government is protected from further spending reductions for 2014-15 and 2015-16. Councils now have the stability and certainty to plan their budgets and move ahead with transforming local services and ongoing efficiencies, which they absolutely need to do.

[Richard Burden (Birmingham, Northfield) (Lab)]

Will the Minister give way?

[Brandon Lewis]

No, I will not, due to the time constraints.

Councils now have stability. A number of local authorities have already done much work to prove that efficiencies deliver not only savings, but better services for their residents. Ultimately, that is the key. It is not about Government money or councils’ money; it is about taxpayers’ money being spent on good front-line services for local residents. I encourage authorities to look at the good councils out there doing great work with efficiencies and innovation, such as those that have done work through the community budget programme and the public service transformation network.

Their work is becoming more efficient and effective for council residents. Independent reports show that it is saving about £20 billion a year in this country. More importantly, areas going forward with such innovation show better outcomes for residents, not the least of which is being highlighted through the work of the better care fund, which involves work between the Department for Communities and Local Government and the Department of Health, and is showing benefits. I will touch on Members’ individual points in a moment, and I will write to the hon. Lady with some details about the better care fund, particularly with relevance to Birmingham. I am happy to meet her separately on that issue as well.

The average spending power reduction for councils in 2014 is expected to be limited to 2.9% per household. Members have mentioned the top 10% and the bottom 10%. Let us be clear that authorities’ spending power in the most deprived areas is much higher. In 2014-15, it is up to about £4,200 per dwelling in the 10 most deprived authority areas, compared with about £2,100 per dwelling in the 10 least deprived. That absolutely reflects, as the hon. Member for Southport (John Pugh) said earlier, ensuring that need is recognised.

The hon. Member for Birmingham, Edgbaston mentioned better care, as I have said, and education, which I will feed through to the Department for Education. I appreciate the invitation to Birmingham. I will look at the diary and see whether we can work out a visit, to ensure that we get up there. However, I gently point out to Members from Birmingham, Liverpool and Newcastle that we are holding consultations right through January—councils are coming to see me to talk about the financial settlement—and at the moment those individual authorities have not even asked for an appointment to come and see the Department. I gently suggest that those Members go back and say to those authorities that if they feel they need to talk to the Department they should make appointments to come and see us. I am seeing the councils from the north-east next week, but at the moment Birmingham and Liverpool councils have not asked to come and see us.

[Several hon. Members]

rose—

[Brandon Lewis]

As I have said, I am not giving way, either to tide or time.

Regarding Liverpool more generally, I will happily see Mayor Anderson. In fact, I saw him just a few months ago, and the next time I am in the north-west I will make a point of ensuring that I go to see him again. I appreciate the kind invitation that has been made to visit him, but if it is a working visit it will be even more efficient for the taxpayer.

My hon. Friend the Member for Hereford and South Herefordshire quite rightly made the point about the backdrop we are working with. He also made the point about rural and urban funding. I appreciate his comments on the work we have done in that regard, which recognises the problem for young councils.

As I have said, some councils have been mentioned today whose representatives have not yet made an appointment to come and see us. I hope that they will do so, but I particularly want to point out that my hon. Friend the Member for Bromley and Chislehurst quite rightly highlighted the key role for moving the relationship between local and central Government, particularly on funding, so that we have a system that is much more based on reward rather than handouts, and on giving local authorities the power—the autonomy—to decide their own future and their own destiny, which is something we are very keen to do. That is about ensuring that we get efficiencies, and that we encourage local government to move away, as some councils are doing—not all councils are doing so but there are some really good councils doing great work, across the political divide. As has been highlighted, Manchester is a good example, with its community budgets work.

However, councils must not do what they do just because they do it. They must go even further than the occasional stop and pause to think, “Can we do this better and quicker and faster?” They should start from the beginning by asking, “What is it we are looking to achieve? What is the outcome we want for our residents and how do we best supply that?” The councils that do so are finding substantial savings.

There is significant scope—with small things as well, in some cases—for small authorities with a small budget of £5 million to £20 million to merge back office services to do more joint working. Councils that are doing that are finding up to 18% in savings—substantial money. They can get more for less that way and do better with the £60 billion-a-year procurement budget that local authorities have; they could tackle the £2 billion of local fraud that is still there; they could reduce the £2 billion of lost money in council tax arrears, with arrears substantial in some areas such as Liverpool; or they could use their record £19 billion of reserves and get better value for money from the billions they have in property assets.

We touched on spending power this morning in the House and the Government grant is, of course, not the only way councils receive their money. People need to understand why we look at spending power. Local councils have income from a wide range of sources, so it is right and accurate to look at their overall spending power. The Government have again looked at all of a council’s income, from council tax, settlement funding assessment figures, specific grants, new homes bonus and, as I have said, from 2015-2016 the pooled money that will come from the NHS to support health and social care.

Councils still have a long way to go in terms of the work they can do to be efficient. They can look at the transformation fund—there is a new fund of £330 million. There is a £200 million extension of the troubled families programme to support 400,000 more families that need help and to build on the progress that has already been achieved. There is £100 million to enable efficiencies in service delivery; a £30 million revenue fund; and £45 million to drive transformational change just in the fire and rescue service.

There are rigorous safeguards in place to protect local authorities’ sustainability. Local authorities are legally required to balance their books and are responsible for managing their cash budgets within each financial year. The chief finance officer plays a key role in positively influencing the budget-setting process, including setting out the key risks associated with the budget and helping to find sustainable solutions in future. Chief finance officers have a duty to stop council spending effectively instead of allowing an overspend, and there is an audit process in place to ensure that the books are balanced. I encourage authorities to look at the 50 ways to save for local government and at what good authorities are doing to find those savings, and to learn from them.

Authorities have considerable flexibilities to set income and spending levels and to move money between years to help themselves. We have given more flexibility and more local autonomy, and councils are now directly able to benefit from local business growth for the first time in a generation, with around £11.5 billion per annum available through business rates and the annual growth on their share. Therefore, there is a strong incentive to support and develop local businesses, and to help people get into work and to see those businesses grow. There are cutting-edge councils that are doing this work—they know how to do it and they are leading by example in developing best practice for the rest of the country to follow.

I know that getting the ball rolling can be a hard part of overhauling local services. We have seen that. That is why the transformation challenge award was brought in. We were pleased to announce 18 successful schemes just last year, including projects looking at shared services and integration of health care and council services.

Local government has shown commendable skill in reducing its budget and protecting front-line services. With the economy now in recovery and more job opportunities being created, councils are managing their budgets and have a once-in-a-generation chance to step out from Whitehall’s shadow and be masters of their own destiny.