Communities and Local Government (CSR)

George Hollingbery Excerpts

Thursday 13th January 2011 Westminster Hall

[Mr Clive Betts (Sheffield South East) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Robertson. I am introducing the debate as the Chairman of the Communities and Local Government Committee, and I shall draw heavily on the evidence session that the Select Committee had with the Secretary of State; the Minister of State, the right hon. Member for Tunbridge Wells (Greg Clark); and the Minister for Housing and Local Government on 21 December 2010. I shall try to do so objectively, and I am sure that other members of the Select Committee who are here will do the same. However, we all have to wear our political hats as well, so my interpretation might be slightly different from that of some of my colleagues.

Other members of the Select Committee, particularly from the Labour side, wished to be here, but I am sure we are all aware that two of them have constituencies adjacent to one where a by-election is taking place today. I do not know whether the rumours are true, but perhaps the major Government party has not been quite as enthusiastic about fighting the by-election as some other parties have been.

I thought for an awful minute that the Minister might be late. I thought that he might have been detained in last-minute urgent discussions with the Treasury, and that he would come here and announce a little bit of improvement on the settlement. We would have had even more to discuss in terms of helping local government through what will be a difficult period.

I do not want to get bogged down in the Government’s overall policy on deficit reduction. The Secretary of State mentioned it in the evidence session, and said that everything had to be seen in that context, which was a fair point to make. I might make a different point about the depth of the attempts at deficit reduction and the speed at which the Government are going about it, but that is not our job here today; it is to look at the impact on local government and local services.

Nevertheless, it has to be said that if the impact of the scale and speed of deficit reduction is that the economy stalls and unemployment rises, it could lead to increased repossessions, increased rent arrears, pressure on housing services and housing and benefits advice, increased social tensions in communities, and an increase in crime. All those, of course, have an impact on local government: they increase the demand for local government services and increase the need to spend money at local government level and to switch it away from other important and essential services that local government carries out. I shall say no more about that.

Yes, all right, the Government have embarked on a significant deficit reduction programme which means, in effect, cuts to public expenditure. The average cut among Whitehall Departments will be 19% over the four years. I shall raise several matters which I hope the Minister can come back on. The first is that we have not had an explanation as to why the Department for Communities and Local Government seems to have been ready to offer itself up for the largest cut of all. The central Department’s spending will go down by 68% in real terms over the four-year period.

The Government are saying that that is all right because many of the functions that the Department carries out will be passed down to local authorities—the brand of localism is at the heart of what they are saying. On the other hand, the Localism Bill, which will come to the Floor of the House on Monday, includes a great deal of work for the Department at the centre to do. It provides some 150 order-making powers that Ministers and civil servants will be involved in administering. I have concerns about the effectiveness of future work in the Department, given the scale of the cuts.

[George Hollingbery (Meon Valley) (Con)]

As a matter of correction, I seem to recall from the evidence that the Secretary of State offered that the headline figure for the cuts in the central Department was 68%, but that if one took account of large amounts of direct spending that will be transferred from the Department to local government—not just administration but actual spending—the reduction is actually 33%, exactly equivalent to the Treasury cuts.

[Mr Betts]

That is still a big figure. It might be helpful to take this a stage further. Perhaps we could have at some point a note from Ministers to identify precisely where the difference between the 33% and the 68% actually goes in being passed down, because local authorities have not been claiming that they are seeing the benefit of an extra 35% in their budgets.

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[Mr Betts]

It is a difficult issue. The Minister will say, “Look at all the reserves in local government. They can help mitigate the cuts to services.” They can, but reserves run out; they are spent once and cannot be spent again. During ongoing reductions in spending, reserves can help a council through a problem, but they will not permanently deal with it. Furthermore, reserves are not equally distributed and often they are found in authorities that have made housing stock transfers and have a big dollop of money from that. Some of the reserves cited come from schools and are held at the centre by local authorities, some are housing revenue account reserves with a specific use, and some are needed for the cash-flow issues that councils face on a day-to-day basis. The reserves may help during the first year, but they are not a permanent solution to the cuts.

We know that capital spending on housing will be cut by half in the spending round. We have not been building enough social housing—or enough housing as a whole—in this country, and we can argue on another day about whether the proposals for the new homes bonus and the planning changes will help or hinder that. The Communities and Local Government Committee will produce a report on that issue in due course. Nevertheless, spending will be halved and after the existing commitments to build houses at current rent levels are met, there will be no central Government funding for houses other than those with rents that are linked to market rents—that does not necessarily mean 80% of market rent, but means rents that are linked to the market in some form. Those higher rents will help provide money to build new homes in the future. However, 150,000 new homes will not deal with the waiting list, and of those, any new starts will not have rent levels that many people can afford. That is the real problem.

The decent homes funding is also going to be cut. From the figures provided by the Minister, I calculate that the amount of money for decent homes over the next four years will be just over £1 billion, and the backlog of work still outstanding is around £4 billion. Therefore, it will be about 10 years—probably longer—before all council homes in the country are brought up to a decent standard. That is an awfully long time for people to wait.

[George Hollingbery]

Will the hon. Gentleman acknowledge the plans for flexible tenancies? They will allow more social homes to be recycled through the market place on the basis of need, rather than having homes allocated for 20, 30 or sometimes 40 years, to people who may not need them. Does he acknowledge the enormous pool of assets in the social housing stock, particularly in housing associations? Those could be leveraged in the market place more effectively than presently happens. Would he approve of that?

[Mr Betts]

There is a role for different approaches to the provision of housing such as intermediate market rents, more private institutional investment in housing, or links between housing associations and private institutional investors. Those ideas are interesting, and I would welcome them if we were building social houses at existing rent levels at the same time. My concern is that the Government are withdrawing from that. The other ideas are interesting, and in some cases exciting. I support those ideas, but not to the exclusion of money for social housing or of funds to get all homes to a decent standard. I am worried about that, and my overall concern is that we are approaching a housing crisis. Levels of homelessness will rise as unemployment increases. It is not only a matter of Government funding being cut; it is about mortgage availability. With increased deposit levels, young people are not able to get on the housing ladder at present.

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[George Hollingbery (Meon Valley) (Con)]

I will attempt not to repeat points made earlier, in the interests of time.

There is no getting away from the fact that this matter must be considered in the context of the overall Government settlement, the overall level of spending across Government and the spending plans that we inherited from the previous Government. There was much muttering from the right hon. Member for Tottenham (Mr Lammy) earlier about how this was wrong, irrelevant and did not matter. The simple fact is that the right hon. Member for Edinburgh South West (Mr Darling) announced spending cuts of 20% in the Budget in March last year. The spending cuts announced by the Chancellor this fiscal year are 19%.

If we are to change the settlements for local government, if we are to change the timings—which are as important as the amounts, because a pound saved this year is one saved next and the year after—the Opposition have to make some effort to tell us what they would cut instead. I am a local government specialist; it is my area of expertise, if I have any at all. I spent 11 years in local government and very much believe in the worth of local government to local people. I understand that there are other services out there that will be cut if we get improvements. A simple question to the Opposition: what will they be? Here comes an answer.

[Mr David Lammy (Tottenham) (Lab)]

May I remind the hon. Gentleman that this is a Back-Bench occasion? I know that he understands economics and will appreciate that in seeking to deal with our deficit, the pace at which we deal with it is pertinent, but so is the nature of the tax take. Therefore, there are decisions on tax about which Back Benchers would rightly want to make their views known. The position in relation to the banking levy is felt strongly by the Opposition. It is disingenuous to caricature this as solely a debate about cuts.

[George Hollingbery]

Plainly, this is not a debate only about cuts, and plainly it is an occasion for Back-Bench contributions. It should centre on the evidence given to the Select Committee. Those points were raised in the Select Committee, which is why I refer to them. I notice that the right hon. Gentleman did not answer the question; he did not seek to identify what else he would change. That is fair enough; he is not obliged to do so. However, I posed the question and it was not answered.

The Department has led from the front, and it is right to identify that. The hon. Member for Sheffield South East (Mr Betts), the Chair of the Committee, talked about a 68% reduction in spending within the Department. We have had a small debate this afternoon about whether that is the right number. I understand the point he made about the Department needing to identify exactly what money is being transferred down, such that the figure drops from 68% to 33%. In evidence to the Select Committee, the Secretary of State was adamant that it was 33%, and I think that at this stage we must take that as given. The number of directors general is being cut from six to three; and the number of directors from 26 to 20 in the current year and 16 in the following year. That is a Department leading by example, and we should applaud that.

Considerable efforts have been made in the settlement to protect the most vulnerable authorities. Plainly, those authorities that receive the most grant are those that represent the most vulnerable people. It is a truism that in times of cuts and grants to local government, those that receive the most are likely to see the biggest cuts. We have to admit that that is the case. That is bound to be the case in absolute terms. The Minister for Housing and Local Government admitted such in his evidence. However, the Administration bent over backwards to try to mitigate the effect of those cuts. They would have been very much worse if mechanisms had not been put in place to damp the effects. We saw the new banded floors, the adjustment of the relative need formula and, of course, £85 million of transitional funding.

While there is a correlation in the graph produced by the Scrutiny Unit that shows that some of the most deprived areas will see the biggest cuts, the effect was hugely reduced by the actions that were taken. I do not think that in the circumstances the Government had any alternative but to reduce spending. Therefore, there was always going to be that effect. However, they have done as much as they possibly could to mitigate that effect.

[Justin Tomlinson]

Does my hon. Friend agree that not all cuts are bad? Those on fixed incomes or facing a pay freeze would welcome plans to freeze council tax and cut out any potential rises.

[George Hollingbery]

Of course I agree with that. There are plans, as Members will know, to freeze council tax in the current year, and money has been provided to do so. There are also many innovations that can be moved forward. It is a terrible cliché, but necessity is the mother of invention, and I hear a lot of extremely exciting plans to save money across local councils. I will return to those in a moment.

In evidence to the Select Committee the Minister for Housing and Local Government said:

“If most of your funding comes from the Government, rather than from other sources as a local authority, even if you take the most extreme measures, which we've taken by increasing the deprivation index and doing all those other things—three specific steps—you still end up in a position where spending power is reduced more in areas where the primary source of function is the taxpayer.”

The Government admit that that is the case and huge efforts have been made to try to get round it. There is recognition of that in other parts of Government. The national insurance contribution holiday for small business start-ups applies to those areas of the country where there is more deprivation. Areas in the east and the south-east are specifically excluded from the NIC holiday. Therefore, we would expect to see a growth in new businesses in those areas that receive that stimulation. That is a substantial budget that should not be ignored.

To return to some of my local councils: Hampshire country council has lost £45 million of formula grant in distribution changes since 2003-04. Evidence to the Select Committee has shown that the grant per head in the south-east is about £375, and £700 or thereabouts in the north-east. Those of us who know about local government will understand that that is right. There should be less funding in the south-east. We are a wealthier part of the world, and that is to be expected. However, Hampshire will lose another £71 million of grant in the current year. To hear the leader of Manchester city council talking today about his cuts in budget as representing

“re-distribution of money from Manchester to more affluent areas”

in the south, beggars belief.

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On resuming—

[George Hollingbery]

It is particularly galling that the leader of Manchester city council should say that. If we look at the raw figures we can see that Manchester is receiving £354 million this year for 480,000 citizens, whereas Hampshire is receiving £185 million for 1.3 million citizens. Although there are deprived areas of the country that need more money, we must look at scale.

I shall cut down my remarks quite considerably because a number of Members still wish to speak. Let me mention the plight of Winchester and of East Hampshire. I know that the Minister is aware of the issue of South Downs National Park funding and that he is meeting my hon. Friend the Member for East Hampshire (Damian Hinds) to talk about it. None the less, it is a difficult pill for East Hampshire to swallow. Hampshire county council, like many other councils from which the Committee has heard over the past weeks and months in our Localism Bill inquiry, is being very innovative and is undertaking an enormous amount of exciting work that will produce new ways of doing things across the piece.

It is interesting to consider what a reduction in service is. Is the closing of a library a reduction in service? It seems self-evident that it is. However, I am not entirely certain that it is. What if someone wants to run their library service in a different way? If they can close down libraries but, at the same time, provide a better service that offers more books to more people in the right place at the right time, is that a reduction in service? I am not entirely convinced that it is. There is a wider argument to be had here about what these changes may mean.

[Mr Lammy]

Let me say gently to the hon. Gentleman that a pensioner who uses their library not just as a place to get books but as somewhere to be warm and to have company might find very hard to swallow the idea that shutting it down is not a reduction in service.

[George Hollingbery]

I understand the right hon. Gentleman’s point, but using a very large and poorly insulated building as a drop-in centre for elderly people seems a rather expensive way of providing social care. It is like providing post offices in rural locations as a social support network. If that is the service that the right hon. Gentleman wishes to provide, perhaps there is a different way of funding it that is cheaper and offers better value not only to the citizens in the area but to the people receiving the service. I am not being flippant. I genuinely understand the right hon. Gentleman’s point that such services provide wider benefits, but perhaps councils should think about how they provide their services.

The other day the leader of Hampshire county council made a useful point to me. Many councils make assumptions about what is important to local people. The leader was very clear that the council had to survey local people to find out what they wanted to see protected if reductions were required in front-line services. The results were very surprising. The obvious things that one would think were terribly important, such as roads, were not necessarily what people came up with. In fact—I welcome this—nearly everyone said that protecting services for the vulnerable was the thing that should be done up front and if that meant having a few more potholes, so be it.

I challenge councils to ensure that, when they reduce services, they understand what they are reducing and why, and find out whether their citizens think that they are the right things to reduce.

In November 2009, an article on the Total Place initiative in the Municipal Journal said that only 5% of all local spending was under the control of elected councils. So when we talk about substantial reductions in local services, through local councils, there is plainly some truth in it, but huge amounts more of Government spending go on in local areas than just what goes through local councils.

I will pass over the extensive evidence of innovation that we have had from councils across the country. As a Committee, we have been greatly encouraged by the fact that there is a lot of innovation. That will be further helped by the removal of ring-fencing, which will allow councils to spend more money in the way they see fit. Of course, the Localism Bill itself contains a large number of provisions that will make that easier, including the general power of competence, the community right to challenge, provisions for pay accountability, the transfer of community assets and the abolition of the standards board. Those are just a few measures in the Localism Bill that should help to reduce costs, increase flexibility and allow innovation.

In conclusion, this is a challenging time for local councils, and nobody who is interested in local government should pretend otherwise. Nevertheless, there are enormous opportunities out there to innovate. The ring fences have been removed and the gloves have been taken off for local councils; they can do things in different ways, but they must re-examine their services, look very carefully at what local people want and look innovatively at providing better services in newer ways that provide better value for money and are better tailored to their local areas.

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[Mr David Lammy (Tottenham) (Lab)]

I am grateful to the Backbench Business Committee for granting this debate, and I want to associate much of what I say with the comments of my hon. Friend the Member for Sheffield South East (Mr Betts), who is a good friend. I agree with a lot of what Members from all parties present have said, and I do not want to phrase my remarks in too partisan a way.

I want to talk about the impact of the cuts on the very poorest communities in the country, particularly those in London. As the MP for Tottenham, I know something about the issue. What has just been said about the sensitivity around cutting services for the most vulnerable too fast and too deeply is important, because there could be huge social consequences. I hope hon. Members understand that it is hugely important to talk about these matters and to reflect on the history of my constituency.

In representing Tottenham, I represent London’s second poorest constituency. Cuts on this scale will have a huge effect, and there are authorities that are worried not just about the nature of innovation and about back offices and how they share services to make the savings, but about the profound effect on statutory services. Some of those services cut to the heart of the centrality of the kind of civilised democracy that we have to be. In relation to the London borough of Haringey, I am particularly worried that the front-loading of the cuts means that its financial settlement represents a far greater reduction than was expected. We have heard some comments about the preparation that councils could make for the changes, but there are authorities across the country that could not have imagined the scale of the in-year savings that they are being expected to make. Haringey’s funding shortfall for this next year requires it to find £46 million of savings, and a further £41 million over the next two years. The loss comes on the back of the ending of the local authority reward grant, and of the funds from the Department for Work and Pensions for the future jobs fund and from the £2 million in the school development grant.

On the subject of the future jobs fund, my constituency has the highest unemployment in London. A debate is taking place outside the House on a bid for the Olympic stadium, which might involve the Tottenham Hotspur football club leaving the Northumberland Park ward in my constituency. The ward has the highest unemployment in London, and the biggest private employer might be about to leave. Who will pick up the mess if that happens? It will be Haringey council, who will have to step in to provide for the very poorest. Concern for the poorest is not unique to one party; it should be something that we all share. I make my remarks not in a partisan way, but simply to say that we have to think very carefully about the effects of the cuts as they are felt on the ground, and that is particularly important for a local authority that has seen some of the most significant failures in the protection of vulnerable children.

Over the past two years, Haringey has focused on securing improvements to its safeguarding children services, following the death of Peter Connelly and the widely reported problems with the safeguarding of vulnerable children. That has led, however, to Haringey becoming a borough in which 1.2% of all children under the age of 18 are in care—a huge 40% increase since March 2008. In December 2010—just last month—600 children were looked after by the local authority, and our rate per 10,000 was 123. Those figures represent a very high number of young people, and there is a cost attached to them, in particular if we are to ensure that children in care do not continue to come out of care with dire prospects in relation to social mobility, education and all the things that we have seen in this country’s past. There is now a real concern that because of the huge effort to deal with the consequences of the Baby P and Victoria Climbié cases, the cuts will reduce Haringey council’s ability to properly provide the statutory services that the country rightly expects.

I think it is right to say, and the figures will be published shortly, that the increase in the numbers of children in care is not just in the borough that has had the scrutiny—Haringey. All Members, certainly those who represent large conurbations, have experienced constituents coming to them and saying, “My children have been taken into care.” We get both sides of the story, and we have seen an increase in the case load. When we see the figures very shortly, I think that right across the country we will recognise the huge consequences of that story from just two years ago.

[George Hollingbery]

The right hon. Gentleman makes a powerful and emotional case for the needs in his constituency and throughout his two boroughs. I have enormous respect and great admiration for that. But does he agree that in other areas of the country, which are more prosperous and where budgets are lower, the people who are being helped by those budgets are the poorest in those areas, and that the cuts are felt equally throughout the country whether or not there is more money going to a certain area?

[Mr Lammy]

I do not want to disagree with the hon. Gentleman, except to say that all local authorities have fundamental statutory services that they must provide. Children are in care in every local authority throughout the country, and local authorities cannot scrimp on services for those young people, and young people at risk of harm. Having seen that acutely in my constituency, I want to impress on the Minister—I do not expect a response on this––the need to look carefully at the situation in the London borough of Haringey and other local authorities, to ensure that the means to provide those services and the pressures of front-loading do not militate against those very high standards that they are rightly now being set.

I hope that the Minister appreciates––he will be familiar with the issues, but they have not been raised today––that as I represent an outer-London authority, it is right for me to raise the serious concerns that exist about homelessness and its costs, and about the decision that has been made on housing benefit, and the costs that are flowing from it. The London borough of Haringey also has the highest homelessness rate in London, with 5,000 people on the register as I speak. The consequences of the decision on housing benefit are already being seen in relation to where people are now being housed by local authorities such as Westminster and Camden, who are already saying, on the record, that they are now placing 70% of their homeless people in outer-London boroughs. That brings real pressure at a time of cuts, and it is not clear where those funds will come from.

I do not want to put this in unnecessarily extreme language, but I am deeply worried about excessive overcrowding in constituencies such as mine. One sees it in other European countries, and I do not want to see it on that scale in the city of London. These are statutory services that local authorities must provide, never mind the libraries and support for the voluntary sector, and it is not clear to my local authority how this will pan out, and where the funding will come from to meet these statutory obligations. Will the Minister say something about that, and about his liaison with his colleagues at the Department for Work and Pensions, given that it is they who have landed him, in part, with the problem?

A point has been made about the voluntary sector. I am deeply concerned about some of the services that are offered in cities such as London that involve close liaison with the Metropolitan police and mental health in particular. There are some very excluded communities in this country; there are young men in this country who present as extremely vulnerable, who are subject to extreme views. I might say that once upon a time, I was one of those young men. When I was growing up under a previous Conservative Administration, when things were tough and there were real pressures between the police and the local community, Neil Kinnock spoke to me sufficiently to keep me in the mainstream, and I was not seduced by some of the extremism that was around.

I hope the Minister appreciates that some of the services that fund some of the voluntary sector in constituencies such as mine, working in youth services and liaising with the Metropolitan police––the hon. Member for Harrow East (Bob Blackman), who has experience of Brent, will be familiar with such services––are absolutely crucial. The funding for a Turkish liaison officer who is working with some of those involved in the extreme gangland criminality that we are seeing in parts of that community is being cut. That funding, which came from the local authority, is no longer there to support that work with the police. I am very concerned about the consequences of that. Will the Minister reflect on other parts of the DCLG empire, and what that means for social cohesion?

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[Alison Seabeck (Plymouth, Moor View) (Lab)]

It is a pleasure to speak under your chairmanship, Mr Robertson. To avoid misunderstandings, I should draw the Chamber’s attention to the entry in the Register of Members’ Financial Interests for the right hon. Member for Greenwich and Woolwich (Mr Raynsford), who is my partner.

I thank the right hon. Member for Tottenham (Mr Lammy) for seeking this debate, and the Backbench Business Committee for agreeing to allocate time for this extremely important matter. I commend the work of the Select Committee on Communities and Local Government, and the members of that Committee who have contributed today.

The debate has been wide ranging and well timed on the day when Manchester city council has had to announce 2,000 redundancies on the back of 1,400 job losses in Greater Manchester police as a result of the Conservative Government’s decisions—they made the decisions. We have been reminded all too clearly of the immediate relevance of the cuts to people’s lives, and to families throughout the country who will be watching the post every day for redundancy letters as the result of the cuts brought forward. I fear that Manchester will be the first of similar stories, which are tragic for the individuals and hard-working families involved.

[George Hollingbery]

Will the hon. Lady confirm that all the redundancies announced in Manchester today are voluntary, and that none is compulsory?