Local Government Budgets

Geoffrey Robinson Excerpts

Wednesday 12th January 2011 Westminster Hall

[Mr Geoffrey Robinson (Coventry North West) (Lab)]

May I, through you, Mrs Brooke, thank Mr Speaker for selecting this subject for debate? I congratulate my hon. Friend the Member for Coventry South (Mr Cunningham) on securing the debate, which gives us an opportunity to discuss these issues, albeit a sad one, given the continued relative decline of the west midlands, which was once the industrial powerhouse of the whole country but has been badly affected by successive Governments’ progressive neglect of the manufacturing sector. Now, the Government are making specific attempts to cut local and regional expenditure in all its forms, and we must, sadly, discuss the impact that that is having on the west midlands as a whole and on Coventry and my constituency in particular.

I am sure that all Members have, rightly, been lobbied by their local authorities. I am pleased that all three Coventry MPs are here—I hope all three of us will have caught your eye by the end of the debate, Mrs Brooke—and our authority has been no exception, because it has given us a very full briefing for the debate. I would like to ask the Minister about one point in particular; indeed, if he has time, he could even tell us during the debate whether anything has come of it. The damping process is having a deleterious effect on relatively less well-off councils, to the benefit of those that are manifestly much better off. We have written to the Minister on that, and some officials from the authority in Coventry who have written to me have been to see officials at the Department for Communities and Local Government. They have put forward an alternative, much fairer proposal for the Department’s serious consideration, and I believe that the Department’s officials have promised to give it such consideration. If we are indeed all in this together, and fairness is the essence of what the so-called coalition—it is really a Tory-led Government—is out to achieve, the damping methodology could be simply changed in a way that made it evidently much fairer. I will come to that in a moment, because I do not want to anticipate too much of what I have to say, but I would like to hear whether the Minister and officials at the Department have had time to consider the objective, fair criteria that Coventry local government officers have put forward in good faith.

Even at this late stage, as we consider the cuts in Coventry, we do not know some of the details of the grant funding streams from the Government. The provisional settlement was sent out on 13 December, and two months have gone by but we still do not know the details. However, it is pretty clear that Coventry will face a massive reduction, and so, too, will Birmingham, as my hon. Friend the Member for Birmingham, Northfield (Richard Burden) made clear a moment ago. Over the next year or so, it seems inevitable that we will have to make 500 compulsory redundancies in Coventry. That might seem like a small proportion of the tens, and perhaps hundreds, of thousands of dedicated civil servants in local government who will be made redundant in the next couple of years, but for us in Coventry, those redundancies will follow hard on the cuts we have already felt in the manufacturing sector. More specifically, since the coalition came into being, Ministers have culled two distinguished Government organisations in Coventry in the most abusive and disdainful manner. The Qualifications and Curriculum Authority and the body concerned with purchasing computers were cut—just like that, without any discussion or reason. Now, of course, we will have the overall impact of the local government cuts announced in the provisional settlement.

That will all have a significant knock-on impact on local businesses and employment. It is also being mirrored in the health centre and NHS reforms in the west midlands and in Coventry in particular. Above all, the police will feel a terrible impact. The figure mooted for job losses in the police is much higher than my hon. Friend the Member for Birmingham, Northfield indicated—as many as 1,000 police officers could be made redundant in the west midlands. That, of course, is why the Prime Minister, when challenged at Question Time earlier today, could not give a commitment that there will be no increase in the overall level of crime. We are clearly running a very big risk in making these cuts to the police force. It is all right to talk about back offices and the rest of it, but the simple fact is that these cuts are bound to have a significant and direct impact on policemen in the front line. The Government are preparing to cut—or to redesign, as it is called—control orders, and I hope they have reserve powers and are planning to use them in the event that the new version of control orders does not work. I also hope they have plans to rectify the cuts to the police force in the sad event—we all hope this will not happen—that those cuts lead to an upsurge in crime.

The detail of the local government settlement makes it clear that Coventry will lose £8 million in 2011-12, just as a result of the Government’s damping methodology. The Government’s justification for that loss is that the money will be given to other, more needy authorities, which would otherwise suffer too badly. Taken at face value, that sounds reasonable, but the authority in Coventry has written to me to say that closer inspection shows that the damping proposed in the provisional settlement is simply not having that effect in many instances. There are many examples where damping leads to perverse outcomes. The central problem with the damping procedure and the methodology that determines its outcome is that they consider only an authority’s formula grant position and not the change in their overall resources.

As a result of damping alone, Coventry faces a 5% reduction in funding. It is worth mentioning other authorities, as my hon. Friend the Member for Coventry South has, in all fairness, already done. Some £130 million is being reallocated through the damping process to such needy authorities as Wokingham, Richmond upon Thames, Buckinghamshire, Hampshire and West Sussex. They are all fine authorities and belong to the great body of English local authorities, but it is perverse to pretend that they need money while Coventry, the west midlands, Northfield and all the other areas represented on the Opposition Benches in the debate today do not. It is perverse to concede money to them.

I can scarcely imagine that the Minister will seek to defend that arrangement, when he has such an easy, fair and more objective alternative that he could follow. That alternative has been explained to him by officials from Coventry—in all fairness, it is not difficult to understand. I do not know why Ministers do not seize it with both hands. Actually, I do know why: it would mean that they would have to go to their friends in the counties of the south-east to ask them to contribute. Those counties constitute the most successful part of the whole English—indeed, British—economy, and we should welcome that, because they are better able to contribute to the whole. If the idea of contributing was put to them reasonably, in terms of fairness and of those with the broadest shoulders bearing the biggest burdens, I am sure they would contribute. However, we do not do that; instead, we seek to compensate them further and allow them, under the Government’s formula, to take more from less well-off constituencies.

Very simply, we are saying that the unfairness that has been built into the system as a result of the application and methodology of the damping procedure is taking money and jobs out of Coventry and 77 other authorities throughout the country. A damping approach based on overall resources would be far simpler and fairer than the approach proposed in the provisional settlement. That is the essential point that I want to keep repeating to the Minister. It has been put to him, but can we have a reply today? If not, does he intend that the Department will reply to our proposals? Our approach would avoid any of the perverse outcomes that have been illustrated. To repeat, the local authorities getting the additional £130 million, as well as hardly any cut at all in their funds, include West Sussex, Wokingham, Richmond, Buckinghamshire, Hampshire and Surrey. Indeed, Surrey is benefiting more than any other authority. I think Surrey was recently considered the most affluent of all areas in the UK—and one of the most affluent, thank goodness, in the whole of Europe.

Officers at Coventry city council carried out an analysis of such an alternative damping methodology, whereby the total funds available would be taken into account. I understand that that has recently been shared with civil servants. We recommend that they strongly consider changing over to that; and if they do not, we should like to know why they will not accept it.

--- Later in debate ---

[Robert Neill]

The hon. Gentleman raises two points that I was about to come on to. First, I was setting the context. We all accept that a system that has worked but that has come to a point where it needs change must be readdressed, so I hope that Opposition Members will support the local government resource review and the alternative means by which, for example, we can enable local authorities to keep much more of the product of the business rate that they raise, in the same way that we want to give them much more flexibility. Indeed, we have already given them much more flexibility by significantly reducing the amount of grant that is ring-fenced, so that even within the tight settlement that we have at the moment they can move money around to reflect their priorities.

Secondly, however, the hon. Gentleman makes an error when he makes the comparisons that he did. That is because another part of what we have sought to achieve is to recognise not only that dependency upon a grant varies but that the formula grant is, of course, not the whole picture. That is why we use the concept of spending power, which the Local Government Association raised with us, because councils also have reserves and the ability—within some constraint—to raise council tax. Council tax doubled under the previous Government; there is a limit to how much more one can expect people to pay, so we do not want to encourage council tax rises.

The hon. Gentleman forgets something when he looks at the amount of settlement that is received by local authorities; in fact, the amount of settlement is very instructive. He quotes figures about certain authorities because it suits the purpose of his argument. For example, he refers to Wokingham. Actually, let us make the comparison between Wokingham and Birmingham. Birmingham receives formula grant of £663 per head; Wokingham receives formula grant of £125 per head. So Wokingham gets something like a quarter of the support from central Government that Birmingham gets. That is a reflection of the fact that there may well be greater needs in Birmingham, but the suggestion that that element of need is ignored in the system is inaccurate, because we must look at not only the changes within the grant but where we are starting from. That is one of the points that has not been mentioned in this debate.

In the context that the hon. Gentleman refers to, it is also very significant that it was this Government, in refining the formula after consultation with local government, that actually increased the weighting given to what is called the relative needs element of the formula. That is the element that reflects greater pressures, elements of deprivation and other demands. So we as a Government—as a coalition—increased that weighting to 83%, which is more than it had previously been. That change was made to assist councils that are under pressure.

It was also this Government that set up for some authorities—generally including those in the west midlands —a transitional grant to cushion the loss of the working neighbourhood fund. The working neighbourhood fund was set up by the previous Government as a three-year fund and they were going to end it in May 2011 anyway. As far as we know, they were not planning any transition arrangement. To alleviate the difficulties for local authorities that are under pressure, this Government made available moneys even in difficult times to put in place transitional funding.

So, with respect, there is a little bit of protesting too much by Opposition Members that this Government have not recognised the difficulties that local authorities in the west midlands face. We have tried, within the constraints that we inherited, to do something about those difficulties.

The right hon. Member for Coventry North East (Mr Ainsworth) referred to the specific representations that have been made about the damping formula. Perhaps I can take those representations on board. We have received a number of representations about the formula. The consultation period has not yet closed; I think it closes next Monday. Therefore, I am sure that the right hon. Gentleman will understand why I cannot say today what our response to that consultation is. I am aware of the suggestions that have been made. We will give a proper response to the consultation, but it is obviously right and correct that I do not make any response to the number of local authorities that have written in until we have had all of the material from the consultation process in.

[Mr Robinson]

The Minister has confirmed that the discussions are taking place. Of course we understand why he cannot necessarily tell us today about those discussions. However, can he just assure us about what he has just said, namely that the consultation will be taken seriously and that we will, in due course, receive a reply to the specific points made by the city council in Coventry? I am sure that such a reply would be well received.

[Robert Neill]

Certainly I can do that and I hope that in the future, when we have the local government resource review, Coventry city council and other interested local authorities will put forward views about how we can take the new system forward.

The Government are making the best of the difficult hand that we have inherited. However, we have done so with a determination to pass down more flexibility to local authorities. The number of separate grants has been greatly reduced—from 90 to about 10—and considerably more money has been rolled into the formula grant, which is generally regarded as being more equitable in its distributional effects than the various specific grants that had existed previously. We have also increased the weighting given to a needs formula.

Of course I accept that regeneration is important for the west midlands in particular. It is worth remembering, however, that outside the limited area of formula grant the Government are in fact spending very considerable sums of money to support regeneration, and that money includes money that will benefit the west midlands. More than £20 billion is being provided to support regeneration, including regeneration of housing, which is important in the region. We are honouring existing Homes and Communities Agency contracts and existing regional development agency contracts, investing some £4.5 billion to deliver new affordable homes. In addition, there is £1.4 billion from the regional growth fund, which we are seeking to align with a similar sum in the European regional development fund. There is also investment in transport, including some £750 million for High Speed 2, which will have a particular impact on regeneration by speeding up journey times to Birmingham and the west Midlands.

So I think it is fair to say that the Government are putting in money to try to assist the councils in the west midlands and we are seeking to do so in a way that will encourage private sector investment. That is why the RDAs, which many of us believed had become unduly cumbersome although others may not agree, are being replaced by local enterprise partnerships that genuinely have private sector businesses working with local councils. It is also why we are committed to a new homes bonus, to encourage private sector investment in house building, and to the review of local government resource, which will actually make it worth while for councils such as Birmingham and Coventry that have a good history in relation to business, industry and commerce to grow their tax base once again.

So the Government are adopting a very positive approach. First, the settlement deals with difficult immediate issues. We have endeavoured to be fair and we believe that the settlement is fair and progressive, for the reasons that I have set out. Secondly, there is a plan that goes beyond the settlement, with the review of local government resource, which is consistent with both the current requirements and our commitment to localism. Of course, we will be entrenching that commitment when we introduce the Localism Bill for its Second Reading in the House next Monday.