Local Government Finance
Debate between Caroline Flint and Grant Shapps(13 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text
Grant Shapps
The Chairman of the Communities and Local Government Committee is absolutely right: my colleagues and I have been reflecting over the past few weeks, when the representatives of many local authorities throughout the country have been to see us, on what it must have been like to have been in a previous Administration, when one could believe that money was no object—that one could simply get this thing from the money tree and spend it as one wished by giving higher and higher settlements to every authority that came to visit. How wonderful it must have been, but I am afraid that the truth, the reality, has come home to roost, and once again we are left to sort out the mess that Labour has left us with.
Having accepted that there should be some reductions, it was not as if the right hon. Member for Don Valley (Caroline Flint), who shadows the Department, was able to agree with any of the methods that might be used to make reductions without harming front-line services. In fact, she went so far as to ridicule my hon. Friend the Member for Daventry (Chris Heaton-Harris) because he mentioned in an intervention that Hampshire council has just announced that it will cut £7 million next year by cutting the senior management salaries and work force. That was pooh-poohed as impossible. Well, for the sake of clarity, I have managed to get hold of a copy of that detailed information, and my hon. Friend was wrong: it is not £7 million that will be saved by cutting senior management; in fact, it is £7.9 million.
The idea that money cannot be saved or that leadership cannot be shown by example when senior people take a cut, as Ministers in this Government have with a five-year pay freeze, or that that does not have an impact further down the line on the rest of senior and middle management, has been blown apart. The authorities that have taken such steps have found it much easier to sell to the rest of the authority the difficult decisions that have had to be made.
Nor is the right hon. Lady correct when she talks about the £10 billion of reserves. There are £10 billion of reserves for local authorities, as has already been pointed out in an intervention, but the right hon. Lady says that 70% of it has been earmarked, and, in that, she makes a fundamental mistake, which I am surprised about, because she was in this Department when in government. The reality is that “earmarked” is not the same as “spent” or “allocated”. “Earmarked” does not mean that the money cannot be used in the intervening period to ensure that front-loaded reductions, which we have heard a lot about, can be handled in a much better way.
My hon. Friend the Member for Isle of Wight (Mr Turner) raised a serious technical issue that he had already come to ask us to look at again. We did do that, but we could not find in favour of his local authority. However, I say to him and to all other hon. Members that we thought that the concessionary fares mess that had been left by the previous Government required some assistance to sort out between the two tiers of government. I hope that that is helpful.
The Chairman of the Select Committee, the hon. Member for Sheffield South East (Mr Betts), referred particularly to front-loading. As I said to the right hon. Member for Don Valley, it is possible to use earmarked funds that are in the reserves. I invite the hon. Gentleman’s Committee to look at this again, as there seems to be some misunderstanding. I welcome the fact that he welcomes the end of ring-fencing, which had been called for very widely across government and the Local Government Association. Ring-fencing has been un-ring-fenced by some £7 billion, and that has given local authorities a lot more flexibility. We have taken 90 separate budgets and combined them into just 10, meaning that local authorities that are savvy and understand that the situation has changed are able to move much more quickly.
The issue of business rates was raised by the hon. Member for Sheffield South East and others. There is a suggestion out there, which is gaining some credibility, that if business rates were collected at a higher level than the entire local government finance settlement, then the difference could be redistributed somewhere down the line. People need to understand that if business rate collection goes up or down, the amount that goes to local authorities is identical; it makes no difference. The amount that goes to local authorities is set out in the spending review envelope; it is insured by the Treasury, as it were. I hope that that clarifies the situation.
Caroline Flint
There is huge concern up and down the country that there will be a future Tory policy to localise business rates, which would not deal with the inequalities in terms of opportunities to raise funds through businesses. Can the right hon. Gentleman assure me that that will not be a policy of this Government?
Grant Shapps
I am pleased to be able to provide the right hon. Lady with the reassurance that she needs. A redistributive approach will have to remain in whatever system is put in place. I will return to that in a few moments.
My hon. Friend the Member for Harrow East (Bob Blackman) made several good, intelligent points. He called for a settlement that is more predictable because it is provided for more years in a row. As the House knows, we have made a settlement for this year and for next year, after which time we intend entirely to reform the system to do what everyone has called for, which is to dump the failed redistributive formula grant system in which, as the Chairman of the Select Committee pointed out, everybody, even in the good years, complains that it has been poor for them.
My hon. Friend provided a very useful list of different things that local authorities could do before they start savagely cutting the front line, as in the case of some authorities in the past couple of days. Members will do well to refer back to that list in Hansard to see all those different methods. Until an authority has run through each one of the ideas that he presented, it has no right to be cutting the services of the most vulnerable in society.
The hon. Member for Liverpool, Walton (Steve Rotheram) made a very impassioned speech. I have seen some of the things that his local authority has done; the £4.5 million that it saved by cutting some of the senior management is of course the right way forward. However, he says that his council is still incredibly badly off. Let me make this simple point to him: while Liverpool is experiencing a reduction in its funding formula of 11.3%, my Hertfordshire council is experiencing a reduction of 16.1%. This Government have gone out of their way to try to protect the most vulnerable, and it is about time it was recognised that the spending formula was designed to do that.
The hon. Gentleman made another claim that was extraordinary and, as much as he may not realise it, untrue—inadvertently, I am sure. He said that his local authority is cutting Supporting People by 30%. If that is true, his local authority is getting it wrong. Supporting People is one of the budgets that we have protected way more than the general picture. There is a reduction of less than 1% in cash terms on average in the Supporting People budget over the next four years. I will give way to the hon. Gentleman so that he can put pressure on his local authority not to slash it, given that the Supporting People budget is largely protected at national level.
Grant Shapps
As the hon. Gentleman knows, the grant formula—[Interruption.] Members would do well to listen to this point because it affects many constituencies. The simple fact is that Supporting People is paid for through the formula grant. Given that we know for a fact that there is not a reduction in spending power of more than 8.8% in his constituency, it cannot be the case that the Supporting People budget has fallen by the claimed 30%, so I take him up on his challenge.
My hon. Friend the Member for Dover (Charlie Elphicke) made the worthwhile point that local authorities have been protected from having to raise council tax by the £650 million from central Government.
The hour is late and I do not want to detain the House. There is a clear division between authorities that have taken the necessary steps and those such as Manchester city council, which yesterday claimed that it has to make a 25% reduction.
Caroline Flint
I am aware of the time and I appreciate the right hon. Gentleman giving way. The person who stated that 25% of the net budget of Manchester city council will go over the next two years was its treasurer—a statutory officer of Manchester city council. I suggest that when the right hon. Gentleman is up there, he speaks to that gentleman, because I believe that that gentleman is right and that the right hon. Gentleman is wrong.
Grant Shapps
Here is a simple fact for the right hon. Lady: the reduction in spending power over the next two years is 15.5%. Yesterday, Manchester city council called a press conference to say what it will not do over the next two years. It says that it is going to cut the budget by 25% over that period, when the reduction is only 15.5%.
To conclude, it is that side of the House and those authorities that are failing to protect the most vulnerable in society. Thank goodness for the coalition Government.
Question put.
Oral Answers to Questions
Debate between Caroline Flint and Grant Shapps
Grant Shapps
The hon. Gentleman will know the backdrop to this, which is that when he was a Minister the Government literally ran out of money, and not just money from then taxpayers but money from the future, so some steps had to be taken. Despite that, however, we have still managed to protect all those different budgets, particularly that for Supporting People, which will be very important to his local authority: it is almost certainly where those voluntary services are getting quite a lot of their funding. We also heard the Chancellor announce yesterday a £100 million transition fund. I can further tell the hon. Gentleman that I am today announcing £12.25 million for local authorities and the voluntary sector to help households affected by changes in housing benefits. There is a whole package of services there. We absolutely recognise the need to protect the most vulnerable; it is a shame that his Government did not do the same as they spent all the money.
Caroline Flint (Don Valley) (Lab)
That was very interesting from the Minister, but it is clear that yesterday the Chancellor announced devastating cuts to house building and local government funding. Is it not the case that while across Whitehall Departments average cuts are 19%, town halls up and down the country will lose 28% of their funding?
Grant Shapps
I start by welcoming the right hon. Lady to her new position and to our exchanges across the Dispatch Box.
We have already covered the backdrop. We know that the financial crisis was incredibly sharp and, as has been said, if the Opposition do not have a plan they cannot criticise the plans that have been put in place. Everybody in the country will want to know what the right hon. Lady’s plans would have been. However, as it happens, and as she mentions house building as part of her critique, let me tell her that in the 13 Labour years, there was a net gain of just 14,000 affordable homes. We will build more affordable homes in every single year of our Government than Labour did in all its 13 years put together.
Caroline Flint
I thank the Minister for his words of welcome. There may come a time when we agree across the Dispatch Box, but today is not that day. The Chancellor was right about one thing yesterday: the cuts are the Government’s choice, and their choice is to dump the cuts on local communities. I am afraid the Secretary of State and his team have failed to stand up for local councils. Can the Minister tell me how many jobs in the public, private and voluntary sectors will be lost as a result of the Secretary of State’s failure?
Grant Shapps
It is really no good not having a plan and then criticising the Government when they come up with a serious plan to rescue this country and this economy from the rocks that we were surely headed towards when the right hon. Lady was on the Government Benches. We have set out our plans in great detail, and we look forward to Her Majesty’s Opposition getting round to setting out some of theirs.
Local Government Financing
Debate between Caroline Flint and Grant Shapps
Grant Shapps
I may be living in a parallel universe, but I and Government Members were here last week for the Budget, when all that was described in a great deal of detail, including in the Red Book, which explains that the fund is new and comes out of the total spending envelope. It is fairly straightforward.
Let us make some progress. We will scrap Labour’s plans for new bin taxes, which meant even higher tax bills for local families and harmed the environment by encouraging more fly-tipping and more backyard burning. We need to go green, but we cannot have the bin bullies and the town hall Taliban who seemed to look after town halls before. Instead, we are going to embrace opt-in schemes, such as Windsor and Maidenhead’s recycle bank initiative, through which families are rewarded for recycling and doing the right thing. We will encourage people to do the right thing, rather than punish them when they do not.
Incentives can work for councils, too. Let us reward local authorities for driving economic performance in their area, and for building new homes. Incentives can work for councils in all sorts of ways.
Caroline Flint (Don Valley) (Lab)
On the issue of building new homes, I understand that one of the areas under threat is the Kickstart programme, which was to support private construction by getting sites that had fallen during the recession under way again. Does the Minister agree with the chairman of the Home Builders Federation, who said:
“Cutting Kickstart money, that creates immediate benefits in terms of local jobs and for the wider economy is a cut on investment not waste. Public money invested through Kickstart pulled in many more times that in private sector investment”?
Is there not a false economy in the cuts that are going ahead, which put more homes in jeopardy and do not make sense to the business community?
Grant Shapps
The right hon. Lady will share the concern that I had at turning up at a Ministry and being told that the £1.5 billion that had been presented to the Building Britain’s Future fund exactly a year ago, in July 2009 when programmes such as Kickstart were announced, just did not exist. We are now having to do what we can to support those important programmes. She can expect to hear further announcements on this front.