Universal Credit Roll-out

Debate between Debbie Abrahams and Chi Onwurah

Wednesday 18th October 2017 Commons Chamber

[Debbie Abrahams]

There may be many and varied reasons why the claimant count is down, not least the system of punitive sanctions the Government also introduced in 2012.

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

Newcastle was also a pathfinder constituency. As the local MP, I have seen at first hand the absolute misery and destitution that this system has forced many of my constituents into. Our Newcastle food bank was already the largest in the country, and now it regularly runs out of food as a direct consequence of this system. Does my hon. Friend agree that the Prime Minister’s attitude at questions earlier today showed a total lack of understanding of the impact and of the destitution and suffering of so many of her citizens?

[Debbie Abrahams]

This is a real test for the Government; if there is a genuine desire to make life better for everybody across the country, UC is a key way in which we can respond. I am so sorry to hear about the issues in Newcastle as a consequence of the introduction of UC.

Local Authority Funding

Debate between Debbie Abrahams and Chi Onwurah

Tuesday 3rd December 2013 Westminster Hall

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

Mr Streeter, it is a great pleasure to serve under your chairmanship for the first time, particularly in this most important debate, which I was delighted to secure.

Local government finance holdbacks may not, on the face of it, be the most exciting subject to be debated in the House, but the issue is central to the daily experience of so many of our constituents. Indeed, for my constituents in Newcastle upon Tyne Central, this is probably the most important debate that I have secured. It goes to the heart of the delivery of public services—services that are delivered mainly, and increasingly, by local councils—and ultimately affects how many potholes are filled, how many homes are built and how well our buses are run.

I have come here not to ask the Minister for more money, although if he has found some that would be great, but to examine how we might best use what we have and how we can ensure that fairness, which is so ingrained in British values and culture, is at the centre. I hope that he will engage with the debate constructively and that he will not use the autumn statement and the upcoming settlement announcement to hide from what I am sure he knows are the serious concerns of councils throughout the country, of all political persuasions.

We can agree, at the outset, that we all want a system of local government financing that is fair, transparent and allows councils to plan ahead, as far as possible. Although I will speak mainly about the impact on Newcastle, the issues we face there are the same as those faced by many councils across England, particularly, but by no means exclusively, in urban areas.

Shortly after the election, the Prime Minister said,

“This government will not cut this deficit in a way that hurts those we most need to help, that divides the country, or that undermines the spirit and ethos of our public services”.

I was so pleased to secure this debate, because that is exactly what the current local government finance proposals will do. We in this country pride ourselves on a sense of fair play. Fairness is, these days, the political centre ground and everyone wishes to position themselves on it. This Government are finding that if a policy, such as letting energy companies hike up energy prices in the midst of a cost of living scandal, is seen as unfair, you lose—except, perhaps, if that policy is wrapped up in enough accounting doublespeak and councils are blamed for not implementing what the Association of North East Councils has called “impossible cuts”. It seems that, if that is done, one can get away with it. ANEC says that, since 2011, councils have seen a one third reduction in funding—a staggering amount—and estimates that by 2017 funding will have been cut by 50% in real terms.

I emphasise that this debate is about not the overall spending level—I know that the Minister does not decide that—but how we distribute what we have. Analysis of the Government’s proposals for the next local government finance settlement by the special interest group of municipal authorities, which is a group of urban councils within the Local Government Association, found that municipal authorities

“started off from a position of disadvantage; have borne a disproportionate burden of cuts under the Spending Review; and carry the greatest risk of the highest cuts in the future.”

The insidious nature of this Government’s top-slicing and holdbacks in particular will have an impact on services for people struggling through the cost of living crisis in Newcastle and similar towns and cities.

Councils must be in a viable financial position if they are to fulfil the statutory burden that Whitehall places on them. On top of that, we expect them to be—indeed, we insist that they should be—active partners in driving forward economic growth, yet the north-east has endured the biggest cuts, with higher reductions in spending power than the national average. In the spending review, we were told to expect 10% cuts in core funding, yet the north-east is now looking at a real-terms cut of 25% when social care costs are included. That is putting public services under severe strain.

At the beginning of the year, the Department for Communities and Local Government estimated that next year Newcastle would see a cut per dwelling of £126, compared with an average cut in England of £75 and a cut in Wokingham, for example, of £19. It later emerged that those figures for Newcastle were significantly understated. At a time when demand for services in the north-east is increasing, why does the Minister think that targeting areas with higher levels of deprivation to make savings is the fairest way to implement these cuts? Will that not hurt

“those we most need to help”,

to use the Prime Minister’s words? I urge the Minister to respond to that question in particular and I am sure that he will.

Has the Minister considered allocating cuts to councils by an equal percentage, based on spending power? Would that not be fairer? If not, why not? By what process did he decide that his current proposals are fairer and will not disproportionately hit the most deprived? I ask him to publish any evidence that is to the contrary of the Audit Commission’s report, among others, which sets out how deprived areas will suffer more than wealthier ones and to which Sir Merrick Cockrell, the Conservative leader of Kensington and Chelsea council and chairman of the LGA, responded:

“The report highlights a significant variation in the impact of the cuts at a local level, with a number of places taking a disproportionately heavy hit. It provides yet more evidence that the existing system of funding is too exposed to the vagaries of national politics and incapable of delivering the long term certainty that local areas need to deliver consistently excellent services.”

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

My hon. Friend is making a powerful speech. Does she agree that, in addition to the cut in revenue support grant for Newcastle upon Tyne Central, there has been a disproportionate cut in the revenue support grant for Oldham, a metropolitan area with two Members of Parliament? In fact, in 2014-16, that will have decreased by £36.8 million, which will, unfortunately, not be recouped by the new homes bonus, for example, which has raised just £700,000. I support her argument. Does not that cut put dreadful pressure on the council, which provides services such as social care, and does it not impact on constituents?

[Chi Onwurah]

I had the pleasure of visiting Oldham not long ago, and my hon. Friend is absolutely right to highlight the disproportionate cuts that Oldham is suffering under this funding approach. I will speak about the new homes bonus shortly. The Government claim to be giving money to councils such as Oldham and Newcastle, but they are in fact taking away far more than they are giving.

The Audit Commission estimates that one third of councils, many of which are in the most deprived areas, are at risk of financial failure in the medium term under current proposals. An equal percentage cut based on spending power would bring significant benefits to many of those deprived areas across the country, not only in Newcastle and London but in the north-west and the shire counties and districts.

Children’s social care is an area of particular concern as we see growing need and reduced funding. In Newcastle and the north-east, there are real and growing concerns about the pressures on children’s services. Indeed, I recently looked at a website containing anonymous reports from social workers working in children’s services, and it was a frightening insight into the pressures that they face.

The number of looked-after children is growing at 11% nationally, with higher pressures in the north-east. Councils have seen a 4% cash increase in costs, but DCLG and the Department for Education have cut children’s social care funding by 30%. Children’s social care assessment was cut by 30% between 2010 and 2013-14, which is about four times the assumed cut, while the number of looked-after children has increased by 31% in the north-east since 2009. Budgeted spending on children’s social care rose by 4% nationally, but by just 1% in the north-east.

When ANEC raised concerns, the response by Ministers at the Department for Education was that councils would have to find the cuts “somewhere else.” It is difficult to see how a further 25% cut in core funding in the north-east can in any way be justified. How can it be taken out of children’s services over the next two years? Will the Minister explain why spending on children’s social care has been cut so much when the levels of need are increasing?

Ministers like to come up with complex formulas for giving money to councils that tend to benefit wealthier authorities, but when it comes to cutting money, Ministers are increasingly turning to crude holdbacks and top-slicing from the central revenue budget. It is possible that not everyone here is familiar with holdbacks. Indeed, I confess that, prior to entering Parliament, I did not follow the intricacies of local government financing with as much attention as I possibly should have. I dread to think how much excitement I have missed as a result.

A holdback is when Ministers or civil servants decide that money allocated to councils will literally be held back by Whitehall for a specific purpose or on a certain condition, which, again, disproportionally affects the most deprived councils. Money is being cut from the central pot, the revenue support grant, which automatically means that councils with the highest need lose out the most. If the Minister decides that he wants to hold back £500 million, for example, it comes from the central budget, which means that all councils lose a slice. The councils that would have received a bigger slice, because they have greater need, lose out more. A holdback of £500 million would mean that Newcastle loses £4 million, whereas Wokingham loses only £400,000. That is a £32 cut per household in Newcastle and a £6 cut per household in Wokingham. Authorities such as Hackney and Birmingham are even worse off, at £50 and £37 per household respectively. All authorities would then get some money back, but if the funding is skewed to favour wealthy authorities, as it so often is under this Government, the effect is a budget transfer from poor to rich, which is Robin Hood, disguised as a Whitehall accountant, in reverse. That is not a pleasant sight.

Parliament has decided that the money should be used to fund councils for services that they have a legal duty to provide. SIGOMA, ANEC, the Audit Commission and the Joseph Rowntree Foundation have all highlighted the problem, so will the Minister explain whether he agrees with their analysis? With what does he disagree? Why are the Government increasingly using holdbacks to fund projects?

This week, we have been reading in the papers that on Thursday the Chancellor plans to cap business rate rises. With small business Saturday this weekend, it would surely have been more appropriate and beneficial to local economies if he had stolen another Labour policy by cutting and then freezing business rates. The Chancellor should not feel shy.

When councils were told that business rate takings were to be localised, thereby shifting the risk on to the councils, I do not think they expected that any potential reward would be offset by equal cuts to their revenue funding. The business rate safety net is yet another example of how unfair holdbacks can be for poorer areas. Will the Minister tell us whether the business rate safety net is flawed? Was it designed on purpose so that councils such as Newcastle end up funding shortfalls in business rate takings in Westminster by a staggering amount?

The safety net—again, this a technical description of a complex area—provides funding for any council for which business rate receipts fall more than 7.5% below its baseline funding level. The safety net is funded by a levy on councils for which the increase in revenue from business rates outstrips the increase in its funding level and holdbacks.

A holdback of £25 million was originally created to fund the difference between levy funds and safety net payments so that all authorities would fund the safety net. The history is quite complex, but what is crucial is that, because the estimated levy amount has proved inadequate, the top-slice holdback has been increased to £120 million next year. That is a staggering increase, and SIGOMA says that, because of the system’s design, Westminster city council will claim more than two thirds of the national £79 million safety net pot next year. That is two thirds for one of the richest councils in the country. Again, funding is disproportionately going from poorer areas to richer areas.

--- Later in debate ---

[Chi Onwurah]

My hon. Friend makes an excellent point. I was in the Chamber when it was revealed that the new homes bonus’s purpose was not to build new homes, which reveals a subtlety of language that I confess is beyond me. It is clearly of concern, and I am sure that the Minister will explain not only what the bonus is achieving, but how we can ensure that it is more fairly distributed, so that Newcastle and other authorities are not disadvantaged.

Will the Minister also explain why the figure in the settlement paper for 2015-16 is £210 million higher than that quoted in the new homes bonus consultation, which was based on an estimate from the National Audit Office? Would he consider using the National Audit Office figure? The Local Government Association estimates that £210 million would cover the cost of filling 4 million potholes or 30% of the country’s street-cleaning bill for a year. It would be good to know what has happened to and what is being done with that money.

Finally, I want to discuss the stability and transparency implications of the Government’s use of holdbacks. It is essential that councils get consistent figures when planning budgets. Newcastle city council has identified several other holdbacks, amounting to over £550 million next year and a massive £1.5 billion the year after, that would be better either returned to core funding or funded through other means. The holdbacks include capitalisation, the collaboration and efficiency fund, the fire transformation fund, the independent living fund, the troubled families fund and the money for the new social care burdens. I would welcome the opportunity to discuss them in more detail with the Minister if he feels that he does not have the time to speak to each today.

[Debbie Abrahams]

I congratulate my hon. Friend on securing the debate and on her speech. We are really getting to the nub of the issue. Although we have been discussing cuts to council funding, it is ultimately about the cuts to services and the impact on our constituents’ lives. The independent living fund and the social care issues, with a particular focus on children, are affected, but so are adult carers. People’s lives are being detrimentally affected, but it does not seem a priority for the Government.

[Chi Onwurah]

My hon. Friend is absolutely right. I pay tribute to her for the passion that she brings to the subject.

As I said at the beginning, the subject appears dry, but my post box and surgeries reveal the daily impact of cuts to the funding of services and the progressive and cumulative impact on the lives of often vulnerable people, who find not only an impact on housing and social care, but that their streets are not as clean, that their environment is more depressing and that schools do not have the same resources. That impact is partly a consequence of holdbacks. These dry financial mechanisms are holding back the services that my constituents and so many others need. We need to focus on that. It is important that the Minister identifies and explains why this is happening and what he can do to stop the impacts that we are talking about.

I have one overarching point for the Minister. The mechanism is regressive and effectively moves money to better-off areas, but it is also opaque and severely limits councils’ ability to plan in advance. Will he work to ensure that future rounds of local government finance settlements are conducted more transparently? Ministers have found ways to give varying protection to some more visible services, but that increases the pressure on other funds. When the Minister chooses to protect London transport funding by 6%, money for children’s social care and libraries is squeezed in Newcastle.

I want to bring the Minister back to the Prime Minister’s quote about tackling the deficit:

“This Government will not cut this deficit in a way that hurts those we most need to help, that divides the country, or that undermines the spirit and ethos of our public services”.

Does the Minister think that the Government’s approach to local government finance has been fair and in the interests of councils’ ability to plan for the long term?

I urge the Minister to listen to councils throughout the country, to find an alternative way to reduce the additional cuts by reducing council holdbacks and top-slices. That will help all councils to prevent further unnecessary service cuts and job losses. It will also help them to stabilise their finances, at a time when one third of them face serious financial failure in the medium term.

Two weeks ago, I visited St Paul’s Church of England primary school in my constituency and was given an excellent tour by the head, Mrs Judith Sword. I also held a question-and-answer session with the year 6 pupils. One of them asked me why the council did not spend its money better, so that the libraries could stay open. I explained that the council was losing a third of its budget, or more than £100 million—at that figure, there was big “Oh!” of shock in the room—but that it had consulted more than 50,000 residents to decide the fairest way to implement the cuts. I did not add, because I did not want to over-complicate my answer, that there was not really any such thing as the council’s money any more, because so much of it was being held back by the Government and redirected to other purposes, so that the council could not plan. I hope that the Minister understands how unfair that is to the children and adults of Newcastle and, indeed, to all the children and adults in our constituencies throughout the country.