Local Government Funding (Hackney)

Debate between Diane Abbott and Lord Stunell

Tuesday 21st December 2010 Westminster Hall

[The Parliamentary Under-Secretary of State for Communities and Local Government (Andrew Stunell)]

I am grateful to the hon. Member for Hackney North and Stoke Newington (Ms Abbott) for providing hon. Members with the opportunity for this debate. As she said, it has been a momentous year for her and also for me—I, too, did not expect to be where I am. However, that gives me the opportunity to address the concerns raised by the hon. Lady, and those in a wider context that relate to the economy and local government.

When the coalition Government took office, they had clear objectives. Right at the top of those objectives was the desire to shift power from Westminster—and more particularly from Whitehall—to people and communities at grass-roots level, and to promote decentralisation and democratic engagement. We are doing that by giving new powers to councils, communities, neighbourhoods and individuals.

The backdrop of the economic crisis that we inherited meant that we also needed to identify better ways of funding local government. The spending review and the provisional settlement provide opportunities to do that, and we are working hard to ensure that it happens. Managing the impact of the funding reductions requires tough choices.

I do not accept the hon. Lady’s view that the cuts are ideologically driven. I am sure that if someone comes to her surgery and says, “I am having difficulty paying my rent or my electricity bill but I’m going on holiday to Corfu next week”, her advice would be to cancel the holiday to Corfu and concentrate on delivering the essentials. That is what the Government are doing. Each day, £400 million must be borrowed—perhaps the figure is even larger. We are increasing income and we must reduce expenditure. We are doing that to the best of our ability by protecting the most vulnerable people. I understand the hon. Lady’s points; they are heartfelt and based on her experience as a vigorous and active constituency Member. However, we need to put that in a context where the revenue funding to local government from central Government must be reduced. The comprehensive spending review confirmed that the revenue would reduce by 26% in real terms during the CSR period, excluding expenditure on schools, the fire brigade and police. However, it is very important to understand—and I am sure that the hon. Lady does understand—that local government spending will reduce by far less than 26% because councils also get money from council tax. She is wrong to discount the contribution that council tax will make to the spending power of Hackney.

[Ms Abbott]

I am not discounting it; I am saying that it is misleading to claim that it is only an 8.9% cut, when the cut to the money that the Government give to councils is more than 14%.

[Andrew Stunell]

I understand the point that the hon. Lady is making, and I will come on to the detail of the sums in a minute or two, if I may. However, the Government, the Department and the Secretary of State have made it clear that we are talking about the spending power available to councils, which is what is crucial to the council’s delivery of services and its employment of staff, as I am sure she understands. It is about how much money the local authority has to spend. She is right: the contribution from central Government is reducing and will reduce further over the period of the CSR. However, the capacity of the council to spend money will not fall below the figures we announced.

Even in these difficult financial times, we have protected those in most need of support. We have provided £1 billion of NHS funding to support social care services, which will build up by 2014-15 and is front-loaded, with £800 million of it coming in the next financial year. That includes £650 million paid through PCTs next year, and Hackney will benefit from a share of that money—as will all social services authorities—by receiving approximately £3,700,000. In a throw-away remark, the hon. Lady said that that would be for new duties; it is for managing the junction between health and social services, which service deliverers on both sides understand can make real economies and add common sense to their joint budgets, as well as improve care. In addition, the Department of Health is rolling £2.4 billion of social care funding into the formula grant over the next three years. That is made up of existing social care grants, which will rise in line with inflation and reach £1.4 billion by 2014, and an additional £1 billion, which will come from the funding to the NHS to councils to support social care.

We have protected investment in the homelessness grant and are prioritising services with the Supporting People programme over the spending review period. We are also giving more flexibility to local authorities. We are ending the ring-fencing of all revenue grants from next year, except school grants, and there will be a new public health grant from 2013. We have simplified and streamlined grant funding, and have shifted a wide range of other budgets, including GP and police and crime commissioner budgets, to the local level where they can be pooled and aligned. An important further step will be the creation of community budgets starting in 16 pilot areas next year, but it is possible to extend that to all local authority areas by 2013.

Turning to Hackney, I welcome what the hon. Lady had to say about high-powered salaries in the local government sector. I think that she and I are of the same mind on that. I hope her words will be widely listened to across London and elsewhere. We have produced a settlement that ensures that no council will see its revenue spending power decrease by more than 8.9% either next year or the year after and is progressive in its impact—I will come to that in a moment. It also confirms the transfer of control of finances from Government to local authorities, giving local authorities discretion. It is in that context, and the context of the council tax freeze and next year’s supporting grant, that I want to assure the hon. Lady that we have responded to the pressures that undoubtedly exist in Hackney for public services and for strong local government.

[Andrew Stunell]

I can if necessary fight a war on two fronts, but that intervention probably makes the point for me. The settlement that we have produced protects Hackney and, it perhaps could be said, at the expense of Bromley. We have subdivided local authorities, in relation to the allocation of grants, by what we have described as banded floors. There are four bands, based on their dependence on Government grant as a fraction of their total spending.

[Ms Abbott]

If the local government settlement is as benign as the Minister says, why have leading Liberal Democrat councillors and local government leaders and leading Conservative local government leaders attacked it? I believe that one Liberal Democrat local authority leader went so far as to refer to the Secretary of State and the Minister for Housing and Local Government as Laurel and Hardy. I would not dream of being so disrespectful, but those are not the words of people who are happy with the settlement.

[Andrew Stunell]

The hon. Lady and I have been around for longer than probably either of us wants to admit. With every local government settlement, every council finds a reason to complain that it has not been dealt with fairly. I understand that. This is the local government settlement in which every local authority faces a reduction, so it is not unexpected that the pain is felt and sometimes expressed.

However, we are protecting Hackney through the introduction of the banded floors, which means that its proportion of grant reduction is less than the proportion of grant reduction for those in the most independent sector of the local government family. In fact, Hackney is 3% better off than it would have been if we had stuck to the previous Government’s grant formula system.

We have adjusted the distribution of grant to give greater weight to relative needs, raising the figure from 73% to 83%, so that the per capita element is reduced and the element dependent on the deprivation of the area is increased. We have also introduced the transitional fund. That directly benefits Hackney to the tune of about £5,800,000. The introduction of the transitional grant means that we have been able to limit the losses of the councils that would otherwise have been most severely hit. The transitional grant goes to Hackney; it goes to some 70 councils in all over the two-year period, ensuring that any council that in either year would go over the 8.9% threshold will receive transitional grant funding to bring it back to that level. We are currently consulting on that and, in making our final recommendation, we shall look with interest at the feedback that we get from councils.

I want to deal with the hon. Lady’s point about the comparison between Hackney and Wokingham. That is not to say that Wokingham is like Hackney. It is to point out to hon. Members that the Government understand that Hackney is more vulnerable than Wokingham, which is why for every pound of grant going to a person in Wokingham, £8.36 goes to a person in Hackney—a multiple of 8.36. That is the amount of Government grant going to Hackney compared with Wokingham. That is not because we are saying that they are the same, but because the Government freely acknowledge their differences and the need to respond differently and appropriately.

The hon. Lady suggested that there was some kind of conspiracy, perhaps at the expense of her party. The formula grant reduction for Conservative single-tier authorities is 11.9%. For Labour authorities, it is 10.9%. For Liberal Democrats, as she might think is appropriate, it is an 11.3% reduction. Therefore, there is no political conspiracy. Labour authorities have on average £1,092 spending power per head; Conservative ones £862; Liberal Democrat ones £929. Those figures come from the House of Commons Library.