Graham P Jones
Main Page: Graham P Jones (Labour - Hyndburn)(12 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text
Robert Neill
Greater Manchester is protected, because the top-up does not change between the reset periods, save that it is uprated by RPI. So Greater Manchester, as a top-up authority, will be protected from instability. That will be the way with any top-up authority, so Greater Manchester’s situation will not be affected by what happens in its districts, because it is a top-up authority and it has the protection of the RPI uplift until the next reset. That is the answer to that point.
I hope that for those reasons the hon. Member for Derby North will reflect on the fact that his amendment is not the appropriate means of addressing the problem. IRMP does not compare like with like at all, and if we funded to IRMP we might reach the perverse situation in which the locally consulted delivery document drove the funding centrally. That has never been the case; it never was under the hon. Gentleman’s party in government; and it would be illogical. I hope that on reflection he will not press his amendment.
Robert Neill
The hon. Gentleman has not intervened in the debate before, so with respect I will press on to the next point. He has only just come into the Chamber, so I will give way to those hon. Members who have been present and listening to the debate throughout.
On new clause 2, I understand the issue that the hon. Member for Derby North raises, but I hope that he will not press it to a vote, either. I take on board the concerns that he and others have raised about the impact that might occur when there is a major redevelopment and, for a period, a consequential loss of business rates income. None of us would wish to create a perverse disincentive to such major redevelopment. It is fair to say that, if it were to cause a significant loss of income, it would qualify for the safety net, which would be capable of picking things up. I have already said that we will consult on the calculation of the safety net.
I am concerned about the new clause, because it would give 100% indemnity up-front for an early years’ loss of income, so the risk is that it could indemnify delay and inefficiency in such important redevelopment schemes. There is a strong incentive for a local authority itself—alongside the other good reasons that most local authorities have—to get on with things quickly, and for it to press its private sector partners in a redevelopment scheme to do so, if it knows that there is no up-front, 100%, no-questions-asked indemnity.
Helen Jones
My hon. Friend is right, and many hon. Members have made that point in our debates on the Bill. It starts from an unfair baseline and totally ignores the different council tax bases that authorities have.
We believe that any distribution of the remaining balance on the levy account—if the Secretary of State decides to distribute; he does not have to—ought to be done on the basis of need. Without that and the amendments that we have tabled elsewhere, there is a real risk that services will be put at risk by factors entirely beyond a council’s control, as the Government transfer financial risks to it, but keep the power with the Secretary of State. That is why throughout the discussion we have been trying to ensure that the concept of distributing resources according to need is built into the Bill.
Graham Jones
My local authority is bracing itself not only for the cut; it will have to put further moneys aside for the risk element. The economy and incomes may not decline, but the authority has to set aside a further amount of money for risk and that exacerbates the problem.
Helen Jones
That is an important point that we have not considered so far. I believe that local authority finance officers, because of the risks and uncertainties inherent in the Bill, will advise their authorities to build up bigger reserves. Authorities have been criticised by the Government for holding too much money in reserve, but the Bill almost incentivises a prudent authority to do that.
Helen Jones
My right hon. Friend is entirely correct. Local authority finance officers will no doubt respond to this by always working on the basis of the worst possible scenario and therefore by building up more reserves than they may need. Government Members claim that they support distribution on the basis of need, which is not a difficult concept. Why, then, are they so opposed to including it in the Bill?
Graham Jones
We have localisation not only of national non-domestic rates but of council tax and housing benefit, so local authority finance officers will have to put aside risk money for all three. It is a triple-whammy, and that is putting councils in a very difficult position.
Helen Jones
Indeed, that is absolutely right. As we have said many times during these debates, the Government are centralising power and devolving blame so that local authorities will have to take all the risks.
Why not include our proposal in the Bill? The only real answer is that Ministers do not want to be constrained in how they use the money. I entirely accept that it might be necessary to carry over the balance if the account is to be sufficient to fund safety net payments, but if the balance is to be distributed, what is wrong with being clear about the factors that should be taken into account? If the Government reject the amendment, it will be clear that they want simply to collect the money and allow the Secretary of State to distribute it in any way he likes. There will be no fairness in the system and no real account taken of the needs of the poorest people in the poorest communities.
Amendment 35 also deals with how any remaining balance in the levy account is distributed. As the Bill stands, the Secretary of State may decide to distribute the remaining balance to one or more local authorities. In amendments 33 and 34, we set out exactly what factors he should take into account. Strangely, however, even if he does decide to make a payment, he does not have to hand it over. The Bill gives him the authority to pay whenever he likes and to pay in instalments if he wishes; I do not suppose that they would come with interest. What on earth is that provision for? We would not expect anyone else to be treated in this way. If I bought some furniture from someone and said to them, “I’m going to pay you, but I’ll do it when I like, in as many instalments as I like”, I would find myself rapidly being sued for the money and would not have a defence. This is another “Trust me—you know it makes sense” clause, whereby the Secretary of State can say , “I’ll distribute the money any way I like.” He seems to believe that he can treat local authorities in that way by deciding to pay out the remaining balance on whatever basis—we do not know—and as and when he thinks fit.
Mr Kevan Jones
It is a pleasure to serve under your chairmanship again, Mr Robertson.
My hon. Friend the Member for Warrington North (Helen Jones) used a good analogy when she said that this measure is intended to centralise power but decentralise blame. Local councils will be given options over, for example, a 10% cut in council tax benefit. They will face some difficult decisions about how that is to be distributed. When the Minister wrote to Newcastle’s The Journal last year, he did not even mention that in his supportive letter on the letters page. We need to be clear to local people that this is not about decentralisation but about putting power back into the hands of the Secretary of State and, ultimately, those of the Treasury.
We had an interesting discussion on the previous group of amendments about whether there would be any money left to distribute at the end of the year. The hon. Member for Bradford East (Mr Ward) asked the Minister what would then happen, but he did not answer. I suspect that this mechanism is being used so that the Government can use local government-raised finance to offset central Government expenditure. It might be given back to local authorities, but only as a substitute for other types of grant. It is all about centralisation.
In the settlement of the accounts in the first few months of the coalition Government, the Secretary of State was the first Minister to run to the Treasury saying, “I’ve got my plans and I’ll give up my savings to meet the Chancellor’s targets.” If he again finds himself with a large pot of money left at the centre, no doubt he will offer it up to get himself some credence in the Treasury and in the eyes of the Prime Minister as the Secretary of State who is doing best in financially managing his Department, even though the pain of that is being borne on the shoulders of local businesses and local people.
Graham Jones
My hon. Friend makes a good point about offsetting Government expenditure and local expenditure through raising the levy and taking local taxes. Could Jobcentre Plus be an example of where the Government might look to spend local money on what is now essentially a national service given the changes in the delivery of housing benefit?
Mr Kevan Jones
I think that this Secretary of State will be very creative. He will no doubt put out a press release saying that he is giving money to local councils and various initiatives, without telling them that it is their own money. The difference is that he will now have control over how the money is spent, rather than the local councils.
My hon. Friend the Member for Warrington North asked on what basis money will be redistributed. The Government’s track record shows that they do not recognise need as an element in the redistribution of capital. We need only look at last year’s local government settlement to see that.
As my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) said, the baseline will be set for the next 10 years, so councils will not only lose out in the first year but will continue to lose out over the next 10 years. County Durham’s revenue spending power for 2011-12 is £498.2 million, which is a reduction of £35.9 million or 6.73% of its budget. It will see a further reduction of £10.94 million in its spending over 2011-12 and 2012-13, which is a further loss of 4.5%. That will be used as the baseline. This will continue, as my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) said, for ever more.
Which councils did the Government reward in the settlement? They rewarded southern councils with far lower demands on local government services than councils such as Durham county council. I do not think that that was done by accident.
Mr Kevan Jones
Yes, that has quite a ring to it. The council might have to do that to keep in with the Secretary of State.
Helen Jones
I beg to move amendment 65, page 36, line 42, at end insert—
‘(2A) In determining whether or not to pay a grant to any authority named above the Secretary of State must satisfy him or herself—
(a) that the resources available to any local authority (including payments made under Schedule 1 of this Act) are sufficient to meet the needs of the local authority, and
(b) that there has been no significant change in the circumstances of the local authority resulting in a substantial increase in demand for the authority’s services or for reductions in council tax.’.
The schedule removes the Secretary of State’s duty to pay a revenue support grant and replaces it with a power to do so. Like many measures in the Bill, how that power will be exercised remains opaque.
From the consultation, it seems that the Government propose to use discretionary grant more like a section 31 grant to meet new burdens on local authorities, but the point is that the power in the Bill does not say that. The power is given to the Secretary of State to decide whether or not to pay a grant and there is a real possibility of the gap between the resources available to a local authority and its need growing even further.
I have already quoted the concerns of Yorkshire and Humberside councils about how the baseline was set and the possible gap that will emerge by 2013-14 between the needs of a community and the resources available to it. Their view was expressed reasonably, but many local authorities’ justified fears of increasing gaps are much stronger.
The special interest group of municipal authorities, or SIGOMA, modelled outcomes based on business rates growing at about 4%, which is 1.5% above inflation; council tax growing at 2.5%; and inflation growing at 2.5% over the same period. On that basis, many councils will suffer a real decline in overall income in the first two years of the scheme, first because the increase in business rates will be taken by the Government, and secondly because all local authorities will suffer an absolute decline in 2014-15 as the funding available to local government is reduced overall in line with the Government’s spending review.
In fact, the autumn statement was clear that the Government are not on target to meet their deficit reduction programme until 2016-17, which is much later than first thought. Local authorities will find themselves penalised, because the Bill is clear that the system can operate only within the overall spending envelope set by that programme.
This change—from a system in which grant is paid to one in which there is a dependence on business rate generation—brings with it real concerns. Levy and safety net payments could mitigate some of the impact, but as we discussed earlier, we still do not know properly how the Government will operate them. We have seen no drafts, yet everything is left to the regulations.
As time goes on, the problems with the system will likely become apparent. The Government have failed to consider the different tax base of local authorities, especially because the council tax base does not feature in the Bill. The Government have nothing to say about their role in helping weaker local economies to grow and have shown repeatedly in the debate that they do not wish to take any account of need, yet it is precisely those weaker local economies that are most likely to face the greatest strains on their resources in the coming years.
We have mentioned several times the problem of child poverty. There is a real problem for councils with weaker local economies that need to deal with levels of child poverty in their areas that are well above average. Child poverty is 29% in Hartlepool, for example, and 27% in Liverpool. Those authorities have much greater problems meeting the needs of their populations than those with fewer problems, such as Surrey. But the charities working in this sector tell us that child poverty is likely to increase, rather than decrease, as a result of the measures that the Government are taking. Their cuts to housing benefit, their Welfare Reform Bill, and the cuts in council tax benefit that they are seeking to introduce in that Bill will all increase child poverty.
One example that may have slipped through the net is the increase in the hours needed to work to qualify for working tax credit. That measure alone will affect 200,000 families and is likely to put 400,000 more children into poverty. What will that mean for local councils? It will mean more demands on their statutory social services; more people moving out of private rented accommodation and requiring emergency accommodation, at huge expense to council tax payers; more people unable to pay their council tax; more demand for council services; and less ability to meet the demand.
Graham Jones
Will my hon. Friend add to that list that, with a reducing income to pay for those needs, those authorities will have less opportunity to invest in business infrastructure to attract businesses—the inverse of what will be happening in the net beneficiary authorities?
Helen Jones
My hon. Friend is right. Instead of a virtuous circle, authorities could end up in a vicious circle that spirals further and further downwards.
If we look at unemployment figures, we see the same problem facing particular local authorities. Unemployment is up 6.9% in Yorkshire, Humber and the north-west. In Denton and Reddish—my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) is not in his place at the moment—it is up 14.5%. In Derby South it is up 16.7% and in parts of Newcastle it is up by 14.6%. All of those are authorities that have already experienced huge cuts in their spending power under this Government and are likely to see further cuts in their resources as the scheme proceeds.
It is estimated that by 2016 the disparity between the richer and poorer areas will become apparent. After 10 years, which is when the Government propose to reset the scheme, the gap between the affluent areas and the poorer ones will be wider still. The Government have said that no council will lose out at the start of the scheme. What will happen in year three, year five and year 10? No one knows, but in the meantime the Government expect local councils to pick up the consequences of their failed policies, policies that are designed to hit the poorest people in the poorest communities. That is why we have tabled the amendment, which would provide that the Government, when deciding whether to pay a grant, must ensure that the resources available to a local authority are sufficient to meet its needs and that there has been no significant change in circumstances that has led to a significant increase in demand for services or reductions in the amount of council tax collected.
The second part of the amendment is designed to tackle the kind of problem that occurs, for example, when a major employer closes down—we discussed that earlier. What happens then is that unemployment leads to more demand for services from councils and a loss in revenue, because more people qualify for council tax benefit at the same time as the council has lost business rate income. How is a local council to cope with that under the system the Government propose? The council will lose rate revenue and council tax, and even if it is successful in attracting new businesses, they will not come in immediately. If, as is often the case, those new businesses are small and medium-sized, they will not generate the same level of business rate. Safety net payments will not kick in until the following year and we do not know whether they will be sufficient to replace the loss of income. We do not know, because the Government will not tell us the basis for their calculation.
The Secretary of State should use his power to pay a grant where there is a real gap between needs and resources. If not, we will see—we have made the point throughout discussion of the Bill—the gap between rich and poor increase. The motto of this Bill seems to be to them that hath shall be given, but that is not the way to run services, especially statutory services, in a civilised society.
Graham Jones
Does my hon. Friend agree that it is grotesquely unfair that constituents in those poorer areas are paying for goods and services, the profits from which furnish plush offices and pay high executive wages in the likes of Westminster and the City of London? The poor are effectively paying the rich, because there are no head offices in deprived local authorities. Westminster and City of London will be able to keep those resources and that is grotesquely unfair.
Helen Jones
My hon. Friend raises a point that I had not considered before, but he is right about that effect. Part of the problem in this country is that headquarters of major companies are often concentrated around London and the south-east, unlike many other economies, in which it is common for major companies to have their headquarters in the regions. There is huge unfairness built into the system that the Government propose.
The Parliamentary Under-Secretary of State for Communities and Local Government (Andrew Stunell)
The descriptions I have heard of myself today have varied enormously. The hon. Member for Birmingham, Erdington (Jack Dromey) described me this morning as a Leninist, and earlier in these debates the hon. Member for North Durham (Mr Jones) sought to name a street after me and suggested that I might be pickled. I want to respond to this debate using neither the extreme ideology of the left nor the extreme ideology of the right. I want simply to say that we have brought to the Committee a set of proposals to give local authorities control over their resources for the first time in 30 years, including not only their council tax but their business rates.
I can understand, and will respond to, the concerns that have been expressed about the precise details of the proposals. However, hon. Members will not be able to interpret correctly what we are doing if they make assumptions about an ideological direction, other than the ideology of localism, which involves getting decisions and money out of Westminster and Whitehall and returning them to town halls and local communities.
I cannot accept amendment 65, because it would place a requirement on the Secretary of State to undertake an unnecessary assessment of need, which could risk undermining our objectives to create long-term certainty for a strong growth incentive and to reduce local authorities’ dependence on central Government grants. Need is already incorporated as an important part of the system, and the different circumstances of authorities will be taken into account as the scheme is set up.
Graham Jones
Has the Minister made any assessment of the risk management carried out by local authorities, and of how much money they will have to put aside as a contingency to deal with any liabilities or deficits that they might incur as a result of the Bill? That could involve housing benefit, council tax and non-domestic rates. Has he assessed how much money councils will need to bank as a contingency measure?
Andrew Stunell
The hon. Gentleman’s point was raised in an earlier debate on the way in which local authorities will assess the risks that are inherent in any new proposals, and in these ones in particular. In my time, I have served on three different local authorities and with about eight different chief finance officers, and their approach to these matters was that although they might get a bonus if there was money in the bank at the end of the year, they would be likely to get the sack if there was none. The job of those who control local authorities—the democratically elected representatives—is to strike the correct balance between the risks calculated by a chief finance officer and the real risks in the real world. I hope that the hon. Gentleman will be a force for good in that regard, and that by the time I have finished speaking, he will see that some of his worst fears have been grotesquely exaggerated. I hope that he will understand that there are real opportunities for every local authority in England to benefit from the system that we are bringing in.
Graham Jones
My local authority, Hyndburn borough council, has put away almost £1 million as a contingency for the next three or four years, mostly in anticipation of the passage of this Bill. Will the Minister comment on that, because it refutes the suggestion he has just made?
Andrew Stunell
Actually, it confirms it absolutely. In another debate, the hon. Gentleman and I had an interesting discussion about whether he was receiving good advice from his council about housing policy and it transpired that he was getting very poor advice. If we were having another debate, I would ask him whether his local authority had now registered as a registered provider of housing, as it was failing to do so and was therefore losing out on opportunities for Government money. Given that fact, I would not necessarily accept that the decision it has taken to retain money in its accounts was based on the soundest available interpretation of its future financing.
Need is already incorporated as an important part of the system and the different circumstances of authorities are taken into account. I shall give some practical examples in a minute or two. Local authorities’ baseline funding levels will be set on the basis of the 2012-13 formula grant process. To pick up on the points made by the right hon. Member for Knowsley (Mr Howarth) about damping, floors, ceilings and so on, we consulted last year and asked consultees for their views on retaining damping. He will, perhaps, not be completely surprised to hear that the answers depended strongly on whether the writers were recipients of the benefit of damping. We have considered that carefully and we are minded to retain the current damping in the assessment of formula grants, so I hope that will provide some reassurance to him and to his local authority. I know, however, that there will be others in the House for whom it will be a major disappointment.