Clive Betts
Main Page: Clive Betts (Labour - Sheffield South East)(10 years, 9 months ago)
Commons ChamberRead Full debate Read Hansard Text
Brandon Lewis
I suggest that the hon. Gentleman should look at spending power, which is what the Local Government Association prefers to use, because it outlines the amount of money and the way local councils have influence and control. It is the entire spend that a local authority has; it does not just single out one small part of its funding. That is an important change in how local government finance has worked, as we are now moving to a system in which more and more of the money is in the entire control of local authorities with their own autonomy.
Brandon Lewis
I will give way to the Chair of the Communities and Local Government Committee before making some progress.
Mr Betts
I draw the Minister’s attention to what he told the Committee on 27 January. He said that the system is changing from one based on allocation according to need, which now will be reflected merely in the base business line rate in 2013-14. Basically, the Government will distribute grant according to local authorities’ ability to raise their own resources. Is that not a fundamental change?
Brandon Lewis
It is a total change away from the begging bowl system to a reward-and-incentive-based system for local authorities.
Andy Sawford
My hon. Friend makes the point powerfully. The reduction in spending power of areas with higher needs and lower resources, and the increase in spending power in the wealthiest areas, will not just close the funding difference between such areas, but in time reverse it. That is already happening.
Andy Sawford
Of course I will give way to the Chair of the Select Committee on Communities and Local Government.
Mr Betts
My hon. Friend has made a very important point. I come back to the comments the Minister made in his appearance before the Select Committee on 27 January. I asked whether the principle of the grant settlement, which equalises differences in needs and differences in resources between authorities, had been effectively eroded. The Minister said yes, there had been a big shift away from the begging bowl structure of the past to an incentive-based structure for the future.
Andy Sawford
My hon. Friend makes the point powerfully, with all of his experience as Chair of the Select Committee.
Spending power in Leeds will be lower than Wokingham’s in 2014-15, and will fall every year despite higher service pressures. Spending power for my hon. Friend’s own authority of Sheffield and for Newcastle, which has also been mentioned, will broadly match Wokingham’s in 2015-16 and then fall below it in future years despite higher service pressures. The spending pressures that councils face are very different. Newcastle has 101 looked-after children per 10,000 people, whereas Wokingham has 24. Homelessness and supported housing costs are £145 per dwelling in Newcastle and £48 in Wokingham. Statutory concessionary travel costs are £85 per dwelling in Newcastle and £14 in Wokingham. Where is the fairness in a funding system that does not recognise such large differences in need?
The revenue support grant element, which recognises need, will shrink from £15.2 billion in 2013-14 to £9.3 billion by 2015-16. Modelling shows that it could be gone altogether by the end of the next Parliament. The Institute for Fiscal Studies, which the Government are fond of quoting, is clear in its analysis that the poorest areas are feeling the squeeze. Minority communities are particularly affected, too. Of the 30 areas in England with the highest black and minority ethnic populations, 29 face cuts above national average and eight face cuts of double the national average. The Department’s own impact assessment raises concerns about the effect of cuts on BME communities and about services to the very young, the elderly and the disabled. It says it is not possible to make a substantial assessment. I have to ask the Minister why not, given the scale of these cuts? Why has his Department not conducted a full impact assessment, as it was urged to do by the Public Accounts Committee?
Mr Clive Betts (Sheffield South East) (Lab)
I want to address three fundamental unfairnesses in the settlement. The first is the lateness with which the Government made their decisions. Reference has already been made to the threshold for council tax increases. It is simply not fair for local councils to find that out when many of them had already come to their budgetary decisions. The Local Government Chronicle has just done a survey of 160 local council finance officers, 14% of whom admitted that they were basically scrambling around making changes to their budgets at the last minute in an attempt to anticipate what the threshold would be. Local authorities have a difficult job anyway, without the Government making it unnecessarily more difficult in that way.
Secondly, let us look at the cuts that local government is once again facing compared with the rest of government. Around 20% of the grant to local authorities will be cut in this settlement and next year’s. That is far bigger than the cut to other Departments. Even by the Government’s own figures for spending power, the cut over those two years, excluding the ring-fenced grants for public health and the better care fund, is around 10%. Again, that is much bigger than for other Departments. The Local Government Association has calculated the real-terms cuts in Government support to local authorities over the course of this Parliament at 40%—more than twice that for other Departments. Are the services that people receive from their councils—road sweeping, refuse collection, public health, checking food hygiene, local leisure centres and parks—really less important than the services provided by all other Departments? I do not believe they are, but if they are in the Government’s mind, they have to justify that as the basis for extra cuts for local authorities.
Let us look at the distribution of unfairness among local councils. We heard an interesting analysis earlier from a number of my hon. Friends who asked the Minister questions. Essentially it boiled down to this. Councils with the highest grant have had the highest cuts; those councils had a higher grant because they had higher needs; therefore, councils with the highest needs have had the highest cuts. That is the logic of the situation.
John Hemming
Earlier the shadow Minister was unable to tell the House how he would allocate the cuts that Labour would make to local government. Has the hon. Gentleman been told what the Labour party would do and, if so, will he tell the House?
Mr Betts
I am sorry, but if the hon. Gentleman wants me to invent a grant settlement in the course of a six-minute speech, I am not going to oblige him.
When the Minister appeared before the Select Committee on Communities and Local Government, he admitted a fundamental change of Government policy, away from a needs-based system. The only needs taken into account are those reflected in the baseline of business rates, which started with the new arrangement in 2013-14. The new term—the settlement funding agreement—is really composed of two parts: the business rate base and the revenue support grant. As the business rate base is held constant or increases with inflation each year, the totality of cuts that the Government make falls on the revenue support grant element of the settlement funding agreement. Within the revenue support grant is something called the council tax resource equalisation adjustment. That has been cut by 25% this year, yet it is the mechanism by which extra resources are given to the poorest areas with the most deprivation. Those areas have had the biggest cuts, with resources transferred away from them. That is how the mechanism works in practice.
We can add to that the new homes bonus, which of course is not a bonus from Government, but is top-sliced from other Government funding—on the basis, therefore, of the grant that authorities already have—and then transferred to authorities according to the homes they are building. The Minister might say that that is an incentive to build homes—that is not what the Housing Minister said last time he was asked—but in the end, that money comes from a top-slice of grant, which means that those authorities with the greatest need and the greatest amount of grant pay the most into the system in the first place, and most of them lose out in the totality of the process.
Reference has already been made to my authority, Sheffield. The Minister likes to make comparisons with other areas that have not had as much grant in the past, saying that the Government are only doing a bit of evening up. Wokingham does not have the same needs as Sheffield, but in 2015-16, if we exclude the ring-fenced public health and better care fund grants that can be spent only on what they are allocated for, the spending power of Sheffield will be the same as that of Wokingham. That is impossible to justify according to anybody’s definition of fairness and reasonableness. Leeds already has less spending power and Newcastle will have less in two years. That is simply unfair. Does anyone on the Government Benches want to justify the idea that Wokingham’s spending power after 2015-16 should be higher than Sheffield’s? That is the system that Ministers are creating.
As the Minister knows, I am not against bringing some incentives into the local government finance system. I understand the desire for some localisation of business rates. I am in favour in the longer term of councils having the chance to raise more money at a local level rather than being dependent on Government, as an important element of localism involves freeing councils up to raise funds as well as giving them more powers.
Mr Betts
I said that I would take only one intervention, so my hon. Friend will have to excuse me. Other Members want to get in.
The system is fundamentally broken and I support the proposals made by the LGA in its “Rewiring public services” document. Let us give local authorities a budget for a whole Parliament so that they can plan ahead and let us consider involving the LGA in the process of distributing grant. I want to go further than that. I want a fundamental review of local government finance based on three principles. First, we should give more powers and responsibilities to local authorities, building on community budgets and city deals and going further than they do. Secondly, let us consider giving councils more fiscal autonomy, as the Select Committee is in the context of fiscal devolution to cities. We can then see whether we can reach some agreement to enable councils to raise more of their own resources. Finally and fundamentally, when the Government distribute money to councils they must do it in a fair way that reflects needs and deprivation. That is the element that the Government have forgotten in this settlement.
The Parliamentary Under-Secretary of State for Communities and Local Government (Stephen Williams)
We have had 15 interesting speeches, plus other speeches from the Front Bench. I remind Members of the context in which the debate is taking place. The Government came to power with the pressing need to balance the nation’s books, and that meant reductions in all areas of Government spending, and local government has had to pay its fair share. Over the last few years the Government have had to make some tough decisions about public finances—tough decisions that the last Government shied away from in their last two years in office. The crash, remember, was in 2008.
But those tough decisions are now paying dividends. The national deficit has been reduced by a third, unemployment has fallen and employment is at an all time high, so it is vital that we stick to the disciplined course that we have set for ourselves. Like every part of the public sector, local government has had to pay its share to reduce that deficit and get the nation’s finances back on a stable footing. If I can characterise the comments made by most Labour Members, with some exceptions, this has all led to total unfairness to all of their cities and constituencies.
To remind Members again about the context, this Government have decided to protect the national health service budget in real terms. This Government have protected the schools budget in cash terms. This Government have put huge amounts of money behind children who, like me, were on free school meals. All of that money will benefit Salford, Liverpool, Sheffield and other places. We have also taken the poorest in society who are working out of the income tax threshold. We have raised the national minimum wage. We have raised the apprentice wage. We have raised the state pension. We have built more social houses than the last Government, and this Government will be the first in 30 years to leave office with more affordable and social housing in the housing stock. Together, we are building a stronger economy and a fairer society, in which everyone can get on in life.
Stephen Williams
I will take one intervention, from the Chairman of the Select Committee.
Stephen Williams
Many Members have contrasted the spending power of cities with that of southern authorities. However, it is absolutely clear that the spending power of authorities such as Newcastle is far in excess of that of many other authorities with similar responsibilities but entirely different demographics. It is completely wrong to say that unfairness is built into the system, given that the top 10% of the most deprived authorities in the country are the authorities with the most power to spend on their citizens.
As has been acknowledged during the debate, we are moving to an entirely new system of local government finance. I accept that there is more to be done and that there is a need for reform in the system, but I am sure that that reform will come when the economy has fully recovered.
Reference has been made to the amounts that are raised through council tax, and the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Great Yarmouth (Brandon Lewis), was criticised for his “language of begging bowl”. As someone who, when I was a council opposition leader in Bristol, went on deputations to local government Ministers in both the other parties, let me put it this way: local government had a supplicant relationship with central Government, and that is what this Government are trying to change. We are putting more incentives in the system for local authorities to build more houses. The business rates retention will encourage local economic growth: for the first time, local authorities will retain more of the benefit from economic growth in their own areas rather than handing 100% of it to the people in the Treasury, so that they can decide how much should be distributed around the country according to their own formulas and principles.
Another of the new incentives is the new homes bonus. I am sure that the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Keighley (Kris Hopkins), will be pleased that his authority in Bradford is to receive £2 million in new homes bonus. Leeds will receive £3 million in new homes bonus, and my city of Bristol will receive £2.2 million.
The other major criticism that we have heard today is that some parts of the country have lost out at the expense of others, either as a result of this settlement or over a long period. However, the settlement represents a fair deal for every part of the country—north and south, district and county, city and shire. As I said a few moments ago to the Chairman of the Select Committee, councils have an average spending power of £2,089 per household, and the average spending power reduction will be just 2.9% in the forthcoming year. Moreover, protection is built into the system for the most deprived areas of the country, which are the most dependent on grant.
We have also recognised that services are sometimes more difficult and expensive to deliver in rural areas. Many Members, particularly those on the Government Benches, recognised the real difficulty that rural authorities experience in delivering services to their constituents. I certainly recognise that poverty is found in all parts of the country. It is not necessarily concentrated only in city-centre constituencies such as mine; it is found in Barnstaple, in St Austell, and in many other rural and sparsely populated parts of the country. That is why we have already set aside £9.5 million—£1 million more than last year—to help the authorities in the most sparsely populated rural areas.
I thank my hon. Friend the Member for North Devon (Sir Nick Harvey)—there were many Devonian speakers in the debate—for saying that we ought to go a little further. In fact, today we have announced a significant amount of extra money: £2 million. That means an extra £44,000 for North Devon district council. My hon. Friend the Member for St Austell and Newquay (Stephen Gilbert) said that the average per authority was £30,000, but Cornwall’s unitary authority will have just over half a million pounds extra.
Local authorities need to protect taxpayers by keeping their council tax down. For many of our constituents, the council tax bill represents a huge part of their monthly outgoings. In many cases, it is much more significant than other utility bills, so to denigrate the Government’s policy of encouraging local authorities to freeze council tax is to miss a major point of what the Opposition call the cost of living crisis. If they do not recognise that council tax is part of the cost of living pressure that all our constituents face, they are living in another world.
It is no surprise to find that Labour Members live in another world. Under the previous Government, council tax more than doubled, pushing a typical bill up to £120 a month for hard-working people and pensioners. This Government, however, have done everything possible to protect families from further increases. Over the past three years, council tax bills have been cut by 10% in real terms across England, and we are encouraging local authorities to continue to freeze their council tax. We will further incentivise them to do that not only by offering them a grant but by putting that grant into the baseline so that they can have certainty for future years.
Already, 137 local authorities have confirmed that they intend to reduce or freeze their council tax bills, including—as my hon. Friend the Member for Mid Dorset and North Poole (Annette Brooke) pointed out—almost all the Liberal Democrat local authorities. They include the local authorities led by directly elected mayors in Watford and Bedford, and the Liberal Democrats in my own city of Bristol want our city’s mayor to follow their example.
The referendum principle has been mentioned by many speakers today. The hon. Member for Sheffield South East criticised the Government for taking time to announce what the referendum threshold should be. We confirmed on 5 February that it will remain at 2%, which was the assumption that the local authorities were working on when planning their budgets. The hon. Gentleman was around during the last Parliament, and I must gently remind him that the previous Government frequently capped local authority council tax increases without announcing the cap until March, after the local authorities had set their budgets and started to prepare the bills to pop through people’s letter boxes. We have certainly improved on that situation.
There are many things that local authorities can do to balance their books in an efficient way. The Government are encouraging such efficiencies, and there is still plenty of scope. For instance, the Liberal Democrat council in Kingston-upon-Thames is investing in a combined heat and power system that will benefit its council buildings and private sector buildings, saving money and carbon at the same time. Cambridge council is protecting and enhancing local shops, which is good for local residents, good for tourists and good for local economic growth. The process is now being incentivised by the retention of business rates.