Local Government Finance

George Howarth Excerpts

Wednesday 8th February 2012 Commons Chamber

[Hilary Benn]

My hon. Friend is absolutely right, and he anticipates some of the figures I am going to give to the House.

First, however, it is important to note that the Secretary of State lost out to the Treasury—assuming, of course, that he tried to protect local councils in the first place, and there many who would doubt whether he put up much of a fight, given the glee with which he regularly attacks councils for what they do. The consequences of all this are: one, that local government has to deal with cuts that are unfairly distributed; two, that residents are having to come face to face with the consequences of those cuts, as services they rely on change or go; and, three, looking to next year, that councils face nothing but uncertainty about their future financial position. Let me deal with each of those in turn.

Despite the Secretary of State’s claim that what he has done is fair and sustainable, the House knows that the 10% most deprived upper-tier authorities are facing a reduction in their spending power that is nearly four times greater than that faced by the 10% least deprived authorities. That is why the Minister’s argument falls at the very first hurdle. It is also undermined by his Department’s figures.

Newcastle city council has done us all a very great service by laying out the facts. It looked at data taken from the Department for Communities and Local Government showing the cuts in 2010-11, 2011-12 and 2012-13, taking account of transition and council tax freeze grants and the provisional new homes bonus allocations. What do the figures show when all that is taken into account? Basingstoke and Deane will gain—I stress, gain—£6 a person overall, while Knowsley will lose £227 per person. East Dorset gains £3 a resident, while Manchester loses £186. In Greater London, everyone loses, but some lose much more than others. The borough of Richmond is down by £2 a head, whereas Hackney is hit by a whacking great loss of £234 a head. Why is that? Those are the raw figures behind the hard-faced politics that prove that the Chancellor is trying to balance the budget on the backs of the poor.

If Ministers do not like hearing the truth from Newcastle or from their own statistics, what about hearing it from the independent Institute for Fiscal Studies? Its analysis by region shows that London and the north of England have been especially badly hit. Every year it publishes the green budget before the real Budget, and the 2012 green budget shows that overall cuts in local government spending, excluding education, are largest in both absolute and proportional terms in London, the north-east and the north-west.

[Mr George Howarth (Knowsley) (Lab)]

My right hon. Friend mentioned Knowsley a moment ago when he was comparing figures. Does he agree that when we look at the acute levels of deprivation across the spectrum that we experience in Knowsley, those figures are even worse, because some of the poorest communities in the country are being punished severely in comparison with some of the better-off communities which are getting off almost scot-free?

[Hilary Benn]

My right hon. Friend argues the case for his constituents with great force and vigour, and he is absolutely right. This is fundamentally unfair. The reason it is happening—the Minister was remarkably reluctant to admit the truth—is that councils in deprived urban areas rely to a much greater extent than councils in more affluent areas on central grants from the Treasury, which have been cut significantly.

--- Later in debate ---

[Mr George Howarth (Knowsley) (Lab)]

It is a great pleasure to follow the hon. Member for Portsmouth South (Mr Hancock). I think I said that in a debate about a week ago. I meant it then, and I mean it now. The Government really should listen to what the hon. Gentleman has to say, given his long experience of local government and of the problems that he has just described.

The hon. Member for Mid Dorset and North Poole (Annette Brooke) cautioned the Government against blocking in the damping system. I shall make the opposite point, however. The Minister currently on the Front Bench, the hon. Member for Bromley and Chislehurst (Robert Neill), has a long background in local government and understands why arrangements such as floors, ceilings and damping are put in place. Unless that is locked in, Knowsley, which is already suffering very badly from the current system, stands to lose £6 million. I therefore hope the Government give serious consideration to locking in that system—and in particular to locking in the floor, not least because it is especially important for Knowsley.

In order to illustrate the importance of this point, we have to mention the figures. Last year, Knowsley’s cut in revenue spending per head of population was already £156, compared with the average across England of £49.18. The added effect of this settlement will make that problem even more serious.

Let me give one more set of statistics before I address the substance of my argument. SIGOMA—the special interest group of municipal authorities—represents the local authorities of several Members, and my right hon. Friend the shadow Home Secretary prayed it in aid earlier. It tells a story about funding growth. The lowest ranking local authorities over the period it addresses are Liverpool with growth of 21.9%, Knowsley with 21.9%, Bury with 21%, Wirral with 21% and South Tyneside with 22.7%. These statistics are pretty meaningless unless we know what to compare them with. Perhaps the best comparison is with those authorities that will have the greatest growth. They are the City of London with a staggering 139.6%, Westminster with 90.7%, Hillingdon with 40.6%, Camden with 37.5% and—guess what—Kensington and Chelsea with 34.5%. That cannot be fair.

The Minister who opened the debate, the right hon. Member for Welwyn Hatfield (Grant Shapps), engaged in quite a bit of sophistry, and my hon. Friend the Member for Sheffield South East (Mr Betts) exposed, as it were, the raw nerve in his argument. Astonishingly, the Minister argued that a local authority with high need will probably already have a high level of grant and therefore should expect to have more grant cut in the future. I do not think there is a better term to describe that argument than “sophistry.”

The Minister also said there was plenty of room for cuts and for reform and changes to the system. He stated that we could improve things and that lots of money would be saved. Specifically, he said he wanted to cut the red tape in tendering. The Minister is not in his place at present, but no doubt he will return at some point in the proceedings. I do not know whether he has ever sat in on a local authority tender-opening process, and I certainly do not know what he is thinking about when he refers to red tape in that regard. As several other Members present will be able to confirm, this is what happens in such a tendering process: people go into a room, the envelopes are opened, and the amount of money each contractor has tendered for the job is read out, and in the end, unless there is good reason to do otherwise, the process concludes with the declaration, “We accept tender X”—or Y or Z—“subject to checking.” The red tape is contained in precisely that term: “subject to checking.” The checking involves council officers working out whether the firm involved can do the job and has the resources to ensure that it is completed. That is what the red tape, on which we are going to save millions of pounds, consists of.

[Mr Mike Hancock]

I was confused when that list was being read out. Was the right hon. Gentleman as confused as I was when it was said that local authorities should do more about procurement fraud? Was it seriously being suggested that when local authorities know about such fraud, they do nothing about it? That was mind-boggling.

[Mr Howarth]

I am grateful to the hon. Gentleman for that, but the point is that unless there is a rigorous, properly policed tendering process, the potential for fraud is even greater.

I will conclude as I know that my hon. Friend the Member for Warrington North (Helen Jones) has plenty more to say. Whatever decision my Front-Bench colleagues reached, given the extent to which this motion discriminates against local authorities such as Knowsley, there is no way I could support it today. I am happy to join them in the Lobby because this is a despicable measure, and I suspect that the Under-Secretary, in his quiet moments—if there are any—feels the same as I do.

--- Later in debate ---

[Robert Neill]

I shall give way once and once only, to the right hon. Member for Knowsley (Mr Howarth).

[Mr George Howarth]

I am grateful to the Minister. He is making a speech about local government finance. Has he noticed that he has not mentioned a single figure yet?

[Robert Neill]

Since the settlement is set out in reams of paper, I need not trouble the right hon. Gentleman too much with that, though he might like to know that the right hon. Member for Leeds Central (Hilary Benn), I regret to say, fell—unintentionally, I am sure—into error in his point about expenditure. The disabled facilities grant has in fact been increased this year, as it was last year. It was increased by a further £20 million. It has gone up from £167 million to £187 million, and it will go up to £207 million next year.

It is worth saying that central Government are providing £27.8 billion in all by way of formula grant to local authorities. In addition there are further specific grants. It is also worth saying, if the right hon. Member for Knowsley would like some figures, that we are providing a further £20 million in transition grant this year. That makes up for the slack in budgets that came when the Labour Government brought working neighbourhoods funds to an end, quite deliberately and in a planned fashion.