Local Government Finance

Dennis Skinner Excerpts

Monday 29th October 2012 Commons Chamber

[Graham Jones]

I am grateful to the hon. Gentleman for his comments, which I will address as I go along.

The system deals with more than £20 billion each year and funds more than 400 local councils, police and fire authorities. It is based on a vast array of data capture, statistical calculations, needs assessments, local taxation and an overall limit of the funding available. The Department for Communities and Local Government does its very best to produce a workable and fair system, and by and large the system is able to do that for the majority of councils. I believe that all Members accept that basis for local government financial settlement.

Successive Governments have recognised, however, that this imperfect system does not deliver the money needed at a local level in particular cases, especially those relatively small and few in number district councils that face severe depravation issues. District councils such as mine in Hyndburn and neighbouring councils such as Pendle and the hon. Gentleman’s in Burnley, as well as others further south, such as Great Yarmouth and Hastings on the south coast, are all disadvantaged by the complexities of the current system, which is not able to place the money collected centrally through taxation into local people’s hands in a systematic way.

All Governments have recognised the additional challenges faced by the most economically disadvantaged district councils and have provided specific additional funding to them over many decades in order to correct those deficiencies. This has been done by a series of extra Government grants under a variety of names, most recently by the current Government through the transition grant. This money recognises the additional challenges that these councils face and that the overall national system of sharing funds between all councils is simply not sophisticated enough to deliver what is needed and what is fair to the handful of district councils that face the same challenges as some of the most deprived urban areas in our metropolitan areas.

I do not believe that this is a race to the bottom or a party political issue. My own constituency, Hyndburn, was Conservative-run for 12 years until last year, yet made the empirical case for extra funding repeatedly. Similarly, Great Yarmouth was Conservative-run for 11 years until last year and has been predominantly Conservative since 1973. Pendle has nearly always had a Lib Dem or Conservative-led council. Hastings has had a Labour-run council for only six of the past 40 years and Burnley has been Liberal Democrat-run for 10 of the past 13 years. Pendle, Burnley, Great Yarmouth, Thanet, Breckland and Hastings all have Conservative or Liberal Democrat MPs. Those constituencies are deprived—they range from 11th to 58th out of the 350 or so local authorities—and it is the economic disadvantages that they face that create the depravation.

I know that there is some concern that the previous methodology of providing additional funding through a series of non-mainstream grants year after year to the most deprived areas appears to be a perverse incentive. However, I cannot accept that Liberal Democrat and Conservative councils and councillors have the ambition of creating greater deprivation or that their vision is simply cash handouts from the Treasury. Hyndburn council has an ambition—and this funding will help it to achieve it—to lift Hyndburn out of the 100 most deprived constituencies in the country and to be in a position whereby local circumstances are conducive to a better local economy that will result in greater prosperity for the people it represents. An 8.8% cut in funding is a serious enough financial blow to the ability of these authorities to meet their ambitions for their residents without it being escalated unfairly and, I would add, cruelly to a 20% to 30% cut.

The Government now have the opportunity, through the changes they are making to local government finance, to embody the transitional funding that those councils have previously received into their baseline funding. By taking that simple step of adding the previous transitional grant to the baseline funding for the 12 most deprived councils, the Government can permanently ensure that the previous practice of local government funding based on evidence and need remains. Without that simple step, there is a danger that those councils, which deal with some of the most economically challenged areas of the country, will, because of the quirks of the distribution methodology and the inability to achieve precision, have significantly less resources to deal with their challenges.

The overall level of funding needed to help solve the problem is very small, at about £20 million, but it would make a vast difference to what the councils in question can achieve, as it would represent a significant proportion of what they can spend. In the case of my council, Hyndburn, the money that the public face losing through general taxation—for it is their money, their council—is the equivalent of almost 24% of its net budget.

I worry that the sheer scale of cuts facing the councils in question may force them to make obscene decisions. I am sure the Minister will argue that Conservative and Liberal Democrat councils did not waste money when they were running the authorities I have mentioned. There is no fat to cut from them and there are no efficiencies to be made. They have already made efficiencies for several years, and most notably for the past two years. It is worth adding that as district councils they have very small overheads.

The 20% to 30% cuts to the core funding of those councils cannot be made simply through efficiencies. They can be made only through large cuts and the axing of services. In a survey of readers of the Eastern Daily Press, which covers Great Yarmouth, nearly half the 750 residents asked stated that they would want council tax to be increased by the maximum possible should transitional relief be lost. Some 41% wanted to introduce car parking charges, and when it came to cuts the arts and sports came top of the list. I would not be shocked if obscene decisions were made to meet the cuts, such as collecting rubbish every four weeks or selling off parks that do not have a protective covenant.

It is not perverse to ensure that the 12 district councils in question have the funds that they need to deliver the economic regeneration required in their areas. Adding to their funding the amounts that were previously allocated to them through the transitional relief grant is necessary and fair. That £20 million should be rolled into their baseline funding on a permanent basis under the new arrangements, to ensure that they do not receive a disproportionate cut above the 8.8% ceiling. Let us remember that some councils received no cut at all, or only a small reduction, in the 2010 autumn statement. The councils in question face the maximum reduction in funding and the loss of transitional relief, and asking them to shoulder unfair cuts will have a dramatic impact in areas that remain some of the most challenging in the country.

[Mr Dennis Skinner (Bolsover) (Lab)]

I congratulate my hon. Friend on raising the matter. His argument on behalf of the towns in question is very important. In Bolsover, every single pit was closed within a space of 10 years following the 1984-85 strike, and every single textile mill was closed at the same time. That thrust Bolsover into the few most deprived councils, which is why, like he says, it needs help.

[Graham Jones]

I am grateful to my hon. Friend. His council faces cuts of £1.93 million, the equivalent of 25.9% of its core funding. In Hyndburn, similarly, devastating economic impacts over the decades have made it hard for the constituency to compete economically. The loss of the cotton industry was the start of that. There now needs to be infrastructure investment in such areas, so that they can compete economically with others.

The figure involved is small—£20 million in the context of an overall budget in excess of £20 billion. Finding the £20 million needed from that £20 billion so that we can continue to have a fair settlement for the 12 district councils in question would require an adjustment of only one hundredth of 1%.