Local Government Finance (England)

Clive Betts Excerpts

Wednesday 13th February 2013 Commons Chamber

[Brandon Lewis]

I will make a little progress and then take more interventions.

As I said, areas such as Breckland, Mendip and South Lakeland will feel the benefit of this grant, and that brings me to my next point. This system now works in favour of local councils. Through the Localism Act 2011 and the financial reforms in this settlement, which mean that 70% of local authority income will now be raised locally, councils have more power than ever before. However, they need to understand the implications, act in their residents’ best interests and work hard on their behalf, as I know many authorities across this country do. That could be done by redesigning council tax benefit to cut fraud, promote local enterprise and get people back into work, or by redesigning services to make them more efficient and sustainable. Town halls should not be constructing Maginot line defences against the deficit.

[Mr Clive Betts (Sheffield South East) (Lab)]

The figure the Minister used of councils now raising 70% of the money they spend is obviously going around the Government, because the Deputy Prime Minister mentioned it in the Liaison Committee the other day. Is not the real reason for that percentage increase simply that the amount of money going from central Government to local government has fallen, and therefore the council tax money, which has remained basically the same in most authorities, has risen as a percentage? That is the only reason why that percentage has increased.

[Brandon Lewis]

The hon. Gentleman needs to look at the new business rates retention scheme, which I shall discuss in a moment, as it gives authorities the chance really to be in control of their destiny, and to drive economic growth for their communities and, as a part of their communities, for the country. I thank him for giving me the chance to highlight that we need to get control of the horrendous deficit left by the previous Government.

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[Hilary Benn]

I do indeed stand by the statement my right hon. Friend the Member for Edinburgh South West (Mr Darling), when Chancellor of the Exchequer, placed before the House and the country. I remind the hon. Gentleman that when he and his colleagues came into government the economy was growing—[Interruption.] It was. There is no good shouting about it. The signal achievement of the Chancellor over the past three years has been to put the British economy flat on its back, which is why we are in such difficulty.

The consequences of what is going on are these: first, local government is having to deal with cuts that are unfairly distributed; secondly, residents are having to come face to face with the consequences of those cuts; and, thirdly, the changes to council tax benefit are being made even worse by the effects of the overall cuts to council budgets. I want to address each of those in turn.

The Local Government Association says that

“funding for local government is projected to fall by 3.9% in 2013-14 and a further 8.5% in 2014-15. This means that the grant to local government will fall by 33% in real terms over the current spending review period.”

It is not possible, by any measure, to call that scale of reduction modest. The LGA goes on to say:

“Modelling work from the local government association shows a funding gap of £16.5 billion by 2019-20, if reductions in support continue on current trends.”

It is not modest; it is massive, and it is about time that Ministers started to recognise the truth of what they are doing.

If denial was not bad enough, the language that Ministers have used about those who are serving in local government has been, frankly, extraordinary and offensive. According to The Daily Telegraph, the Conservative council leaders of Derbyshire, Essex, Buckinghamshire, Wiltshire, Lincolnshire, Leicestershire, Kent and East and West Sussex wrote to the Prime Minister last month to complain about the Ministers on the Government Front Bench. They referred to “patronising language” and said that the nature and tone of constant criticisms of councillors’ work by Conservative Ministers is “most worrying”. They also highlighted

“ill-informed…criticism and sometimes highly inaccurate personal attacks.”

They—remember that these are Tory council leaders—concluded by saying:

“We believe it is essential to bring to your attention our concerns regarding some government policy affecting local government, the rhetoric that accompanies it and the effect it is having on our people.”

It is no good Ministers asking local government to take on an enormous challenge—which it is doing—if at the same time the people they expect to step up and respond are criticised, patronised and belittled.

Perhaps the Minister will explain why allowing councillors to save for a pension has, in his words,

“a corrosive influence on…independent thought”—[Official Report, 19 December 2012; Vol. 555, c. 105WS.]

Let us stop and think about that statement. If being able to save for a pension has a corrosive influence on independent thought, what hope is there for all of us in this House? That is an insult to councillors and it shows a fundamental lack of respect for people who are working really hard to cope in difficult circumstances.

[Mr Betts]

Is my right hon. Friend aware that the Communities and Local Government Committee produced a report recently on councillors and the community? We looked at the barriers experienced by people, particularly younger people in work, in becoming councillors. Many of them lose income because they give up work and have to attend council meetings. Is it not an absolute disgrace to suggest that they should give up their pension as well, so that their income suffers in later life, and a discouragement to people of working age from becoming councillors?

[Hilary Benn]

I agree completely. What makes it even more inexplicable is that elected mayors will be able to keep their right to save for a pension. That is what the Minister announced. Will his colleague, the Under-Secretary of State for Communities and Local Government, the right hon. Member for Bath (Mr Foster), explain when he winds up the debate the difference, in time, effort, commitment and dedication to the job, between an elected mayor and the leaders of Birmingham, Manchester and Leeds city councils, who also work full time and are dedicated and committed to their jobs?

According to the LGA, 19 December was the latest that a provisional local government financial settlement has ever been published. This has caused problems for councils trying to finalise their budgets for the forthcoming year. Council representatives to whom I have spoken talk of errors and double counting in the provisional settlement, which the Under-Secretary of State for Communities and Local Government, the hon. Member for Great Yarmouth (Brandon Lewis)—perhaps not surprisingly—did not mention and which does not inspire confidence. Will he explain how that came to pass and what steps he is taking to ensure that it does not happen again?

When the provisional settlement was announced, the Secretary of State said:

“Concerns that the poorest councils or those in the north would suffer disproportionately are well wide of the mark. The spending power for places in the north compares well with those in the south.”—[Official Report, 19 December 2013; Vol. 555, c. 874.]

I am afraid that the figures simply do not support that assertion.

Let us take a comparison between Wokingham, which the Minister referred to, and Leeds. The final figures in the Government’s documents show that spending power per dwelling in Leeds will be £1,874 in 2013-14, while in Wokingham it will be £1,815. The following year, it will be £1,800 for Leeds and £1,796 for Wokingham—a difference of just under £5. It is clear that the figures do not take account of relative need, because the percentage of children in out-of-work families in receipt of child tax credit is three times higher in Leeds than it is in Wokingham, the percentage of 18 to 64-year-olds claiming income-based benefits is more than three times higher in Leeds than it is in Wokingham, and the percentage of the population claiming incapacity benefit or disability living allowance is twice as high in Leeds as it is in Wokingham. How can that be fair?

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[Mr Clive Betts (Sheffield South East) (Lab)]

Clearly these are difficult times. As my right hon. Friend the Member for Leeds Central (Hilary Benn) said from the Front Bench, there will have to be reductions in local government spending. Our task today is to examine whether the cuts that have been made are fair and reasonable.

Let us look at what the Local Government Association has said. It calculates that, over the four-year period of the comprehensive spending review, local council spending power will be reduced in real terms by a third. That is a significant reduction—indeed, a massive reduction. We are not just talking about local council spending; we are talking about the services that the money is spent on and the effect of the withdrawal of those services on our local communities. The Minister talked about hard-working council tax payers, and, of course, council tax payers are, by and large, hard working; but not once did he refer to hard-working recipients of council services. People will now lose those services, which in many cases they rely on. It seems as though the Government are saying to our country and the public at large that libraries, parks, environmental health and adult social care are, in some way, second-rate services that we should have less regard for, because they are prepared to make cuts of a third to those services, but cuts of only 20% across the board to other Government services. What they are really saying is that those local services, which our communities value so much, are worth less and should be esteemed less than other things the Government do.

I have to say that a little bit of me has started to wonder whether it is more comfortable for Ministers to see councils and councillors as something of a human shield—people they can hide behind or to whom they can say, “You’re the people to blame in your local council chambers.” They are the people the public can get at for making the cuts that are affecting them. There is someone between Ministers and the impact on local communities of the cuts they are making to council services. The councillors can always be blamed, and I am very concerned that it is easier for Ministers to make cuts in this area.

Councils have always been very good. Under the Labour Government, when we used to have increases in council funding each year, councils were always required to make 2% efficiency savings a year. It is interesting that in the latest MORI poll two thirds of the public said that they had not yet noticed any impact from council cuts on their lives. That will change, but it shows how good councils have been so far in absorbing the savings and achieving the efficiencies that have been requested of them. But people will be affected and, frankly, the Secretary of State’s 50 ways to save the world will not save our local service.

The Minister talked about the pennies being important. Of course saving pennies is important. When I went to a meeting at Sheffield council the other day I did not get tea or coffee and biscuits. They were not provided. When I do my surgery at Crystal Peaks library on Saturday morning, there is a private coffee shop in the foyer which the council has rented out. Those are the sorts of things that are being done. Sheffield has a brilliant record of collecting council tax—a 99% collection rate—although that is likely to change with the changes to council tax benefits, when it will have to try to get £2, £3 or £4 from people who cannot afford it. We have saved more than £2 million a year through going to an alternate-week bin collection, and I have not had a single member of the public write to me with a discarded chicken masala in hand saying, “Our human rights have been breached by this terrible change.” It has gone very smoothly, and recycling is now rising as a result.

Over a four-year period, Sheffield council will have to save £230 million. That is a reduction in spending power of £200 a head, but other councils—such as Windsor and Maidenhead, and Richmond upon Thames—have to make savings of less than £40 a head. That is five times more in Sheffield than other authorities. The Minister will say that Sheffield gets more grant, and because it has had more grant, there is more grant to cut. But Sheffield, like other cities, has had more grant because it has fewer resources and more need than other areas. Ministers are taking grant from areas that have traditionally had more grant, but those are the poorest, most deprived communities where the cuts are hitting hardest. That is simple reality.

[Dan Rogerson (North Cornwall) (LD)]

The hon. Gentleman is right to say that deprivation is a key part of the formula. It always has been and it always should be. But, as I understand it, a density factor was added to the formula by the previous Government for which there is no justification, as it is cheaper to provide services in areas that are more densely populated. That is the sort of issue that we need to resolve in coming years.

[Mr Betts]

There are lots of factors that have been put into the formula in the past. We can all make arguments about the details. For example, it is more expensive to provide services in Sheffield because of its topography. We have hills, so construction costs, such as for the tram, go up. But on the index of deprivation, the most deprived areas will get the biggest cuts. There is no argument about that—if there were, Ministers would be jumping up to the Dispatch Box to deny it.

The Secretary of State says, “It is all right, councils have got reserves. There is no need for cuts.” That is not true. Yes, Sheffield has around £150 million of reserves, but more than £25 million of it is held for schools, and it cannot spend that; £25 million is in the housing account, ring-fenced and dedicated; some £50 million is to be allocated for capital projects; and then there is the money that has to be used to match-fund a PFI scheme that the Government have just approved—I give credit to them for taking forward that Labour scheme. That leaves around £11 million of reserves, and it would be folly for the council to put that money into services next year and leave itself with no reserves. So the council is being prudent and appropriate, as are most councils, in how it deals with that issue.

[Mr Kevan Jones]

Does my hon. Friend agree that there is a sleight of hand in things like the new homes bonus? The Government are giving with one hand and taking away with the other. Newcastle, for example, will get £6 million for 2018-19, but will lose nearly £17 million. The 12 councils in the north-east will lose some £275 million over the period.

[Mr Betts]

There are smoke and mirrors all over the place. Ministers talk about the new homes bonus as if it were new money as well as new homes. It is not: it is top-sliced from the grant. In Sheffield’s case, the figures are very stark. For every 55p the council gets from the new homes bonus, it would have received £1 if the money had been allocated through the grants system. It is not that Sheffield does not want to build new homes. There is a reason. The market is flat in the private sector, the money for housing associations comes through the Homes and Communities Agency and the money for council housing is not there because the Government have capped the amount councils can spend from the housing revenue account. That is why not so many new homes are being built in Sheffield—it is not through want of trying or want of effort on the part of the council.

I note that the council was blamed by the Deputy Prime Minister the other day when he said that it was cutting front-line services. Yes, it is. There is a proposal to close the Don Valley stadium where Jessica Ennis trained because there is not enough money to keep it going. There are cuts to early-years provision because the council has lost more than £6 million in grant directly, so it cannot be kept going. There are cuts to the eligibility criteria for adult social care.

The Deputy Prime Minister ridiculed the council for cuts to libraries. What the council is doing is a very detailed and proper consultation, recognising that it simply cannot afford to keep libraries going in the way they were funded in the past. It is looking at 10 different models from 10 different authorities across the country. Those are out for public consultation on the different ways of doing things. That is a responsible way to try to approach a very difficult situation.

The council was also ridiculed by the Deputy Prime Minister for spending £2 million on council meeting rooms. No, it has not done so. It has had to make some essential repairs to a grade 1 listed building, the town hall, and it is putting money into reorganising the council accommodation to save £30 million in running costs over a 10-year period. It is not just Labour-controlled Sheffield that is doing that; many councils up and down the country and of all political persuasions are approaching things responsibly in that sort of way.

The Government should listen to the siren voices—Sir Merrick Cockell, Baroness Eaton, the leader of Kent county council. These are not just siren voices, but voices of reason. The graph of doom, whether it comes from Birmingham, Barnet or Sheffield, is a reality. The reality is that if we keep on cutting council funding and the demand for social care goes up, other council services are going to get squeezed out of existence.

Ministers are fond of saying that localism is not just about councils. No, it is not; it is about communities as well. At the end of the day, these cuts are not going to hit councils; they are going to hit communities, and they are going to hit the most deprived communities hardest. When the public, already sceptical, see these cuts become a reality, the anger against this Government will grow considerably in the coming months.