Local Government Finance

Debate between David Burrowes and Andy Sawford

Wednesday 12th February 2014 Commons Chamber

[Andy Sawford]

The hon. Gentleman will have to do a bit better than that. The reduction in business rates is clearly costed by not going ahead with the cut in corporation tax for the largest businesses in the country. It is a clearly costed policy.

The new homes bonus is another top-slice from the formula grant, and the Government seem confused about its purpose. Their website describes it as:

“A grant paid by central government to local councils for increasing the number of homes and their use.”

But the Housing Minister told the House recently:

“I am afraid the new homes bonus is not about encouraging people to build homes.”—[Official Report, 25 November 2013; Vol. 571, c. 11.]

The National Audit Office report on the new homes bonus said it certainly is not about increasing the number of homes, stating:

“Overall we found little evidence that the Bonus has yet made significant changes to local authorities’ behaviour towards increasing housing supply…We found no association between individual local authorities’ planning application approval rates and the numbers of homes qualifying for the Bonus.”

As the new homes bonus is a top-slice without a purpose, I can understand why local authority leaders and members are frustrated by the fact that it compounds the problem of unfairness—because of course it comes from the grant.

London Councils has brought to my attention the Government’s recent decision to require London local government to transfer £70 million of its new homes bonus grant to the GLA. That is a centralising step by the Government in London. Those councils want to know why they are being treated differently from the rest of the country, and I hope that when the Minister responds later he will justify that.

Other changes are having an impact on councils. There is much concern about the localisation of welfare support. The funding has been passed from the Department for Work and Pensions to the Department for Communities and Local Government, and has already been cut in half in the process. There are no plans for any funding to be available after 2015. Do the Government recognise the impact that that will have on the ability of councils to help the most vulnerable people in our communities?

That leads me on to the Government’s new poll tax for the poorest people. The cuts to council tax support mean that many people on the lowest incomes will see their council tax bills jump. These people are carers, the disabled, single mums, war widows and veterans, and they will all have to pay more council tax and, in some cases, the bedroom tax, the impact of which my hon. Friend the Member for Wansbeck (Ian Lavery) powerfully denounced earlier. Today the Prime Minister has again chosen not to rule out another tax cut for millionaires, so we can see where the Government’s priorities lie.

When people face a cost of living crisis, it is right that local authorities do their best to keep council tax down. In recent weeks, the Secretary of State has briefed the press that he would reduce the council tax referendum trigger, but he seems to have been overruled at the last minute by the Home Secretary and the Deputy Prime Minister. The whole process has been a complete shambles. SIGOMA has said that the late announcement of the threshold was unacceptable. Councillor Caitlin Bisknell of Derbyshire county council contacted me on the day of the announcement to tell me that the council was in the middle of a meeting to set its budget for next year when it was informed by the Government of the referendum limit. While the Secretary of State has been posturing and dithering, councils have been trying to plan ahead. Local councils and communities are the ones who are left to pick up the pieces of the Government’s incompetence.

For all the talk of a council tax freeze, more than a third of local authorities put council tax up last year. According to a recent survey by The Daily Telegraph, more than half the local authorities preparing to increase council tax this year are Conservative councils, including Oxfordshire, the Prime Minister’s county council, which plans to raise its bill for a second year running.

[Mr Burrowes]

Will the shadow Minister make it clear whether Labour supports the council tax freeze? I am sure he will come on to what he would hope to do if he had the opportunity in government, which I very much hope he does not. I have been reading the Public Finance magazine, which says that he is actively considering plans for new council tax bands. May we have those details now?

[Andy Sawford]

We are looking at representations that have been made to us by local government as part of our review on how we ensure that the funding formula is fairer in the next Parliament and fair to all councils. The hon. Gentleman mentions the council tax freeze, but there is no freeze. Many councils around the country are planning to put their council tax up. More than half of them are Conservative councils. Who blazed that trail? Councils such as Labour Hackney, which has been freezing council tax for eight years, did so. The three biggest council tax rises during the Labour period in power were by Tory councils.

The Minister has told us that local authorities can deal with the cuts by making sensible savings and reducing waste. The Prime Minister has described local government as the most efficient part of the public sector. While councils have had to make bigger and earlier cuts than any other part of the public sector and make massive savings, the Secretary of State has lumbered taxpayers with a limo bill of close to £500,000, reportedly the biggest of any Whitehall Department. The biscuit bill is rocketing, and the Department has even been fined for running an unauthorised overdraft. The Minister should therefore not patronise councils with his suggestions for savings.

Labour Hackney council’s social care services are supporting people to stay in their own homes and out of formal care, which saves £2 million annually. Bolsover and North East Derbyshire councils have pooled staff and resources and are saving £1.5 million a year. Blackburn with Darwen council saved £2.2 million in one year using pioneering telecare technology. Oldham council is using a co-operative commissioning approach for its children’s centres. The process is producing savings of £220,000 and protecting those vital children’s centres.

Despite the great work to make savings and reconfigure services in the best possible way for communities in the circumstances, the truth is that many local authorities are being pushed to the brink, as hon. Members have pointed out. LGA figures show that there is a big financial black hole in local government finances, which is widening by £2.1 billion a year. It is expected to reach £15 billion by the end of 2020. That is fuelling growing concerns that local authorities lack the ability to continue to deliver front-line services.

The LGA’s Conservative leader, Sir Merrick Cockell told the Communities and Local Government Committee that 86 authorities are near the tipping point of failure. The Government simply do not know how they will respond when councils fall over. When the permanent secretary to the Department for Communities and Local Government was questioned by the Public Accounts Committee, he said that councils have a statutory duty to balance their books. He is relying on that statutory duty in the face of reality. I am sure finance officers will do their best to advise councils on how to balance the books, but they are not magicians. The Minister must tell us what plans the Government have for when an authority becomes no longer viable.

Hon. Members have asked about the next Labour Government’s plans. We will not be able to stop the cuts or turn back the clock, but we will put fairness at the heart of the relationship between central and local government, and at the heart of our approach to local government finance. It is simply wrong that the most deprived local authorities and the communities that can least afford it are being hit hardest. It is often the areas with the highest demand for services that have the least capacity to raise income through business rates or council tax.

It is crucial that we support councils to deliver economic growth in all areas of the country, and to do that we will extend the model of city deals throughout local government and devolve power over housing and planning and jobs and skills—for example, through co-commissioning of the Work programme. We would also take forward our Total Place programme, which, being far too limited in scope, has sadly stalled under this Government, despite its clear potential. Furthermore, the local government innovation taskforce set up by the Leader of the Opposition is developing an ambitious programme requiring central and local government to work together as we transfer much more power and responsibility to councils. In this way, while resources will be tight, councils will have a fair chance to find a way forward for their communities.

In conclusion, in the Chancellor’s spending review in May 2010, he said—[Interruption.] Hon. Members might want to listen—it is their policy, their announcement. The Chancellor said:

“The Government will…limit…the impact of reductions in spending on the most vulnerable in society, and on those regions heavily dependent on the public sector”

and that

“the Government will look closely at the effects of its decisions on different groups in society, especially the least well off, and on different regions.”

Sadly, on local government funding, that promise of fairness is not worth the paper it is written on. Far from being localists, the Government have shown themselves to be mean and meddling at every turn, and nowhere more so than in taking the most from the communities and the people in the greatest need.