Local Government Finance

Grant Shapps Excerpts

Wednesday 9th February 2011 Commons Chamber

[Tony Lloyd (Manchester Central) (Lab)]

I have spent almost my whole political life not wanting to personalise politics, but I must say to the Secretary of State that he should be ashamed of himself for losing the battle in the Cabinet and the spending review so that local government has become the victim of his incompetence. He should be ashamed of himself because the settlement is divisive within the local government family. It will inflict damage on vulnerable authorities while, as we have heard from my hon. Friend the Member for Hammersmith (Mr Slaughter) and the hon. Member for Wells (Tessa Munt), some local authorities are feather-bedded and treated with kid gloves. This political decision of his is an outrage because in cities such as mine it will be the most vulnerable people who suffer, as my right hon. Friends the Members for Wythenshawe and Sale East (Paul Goggins) and for Salford and Eccles (Hazel Blears) and my hon. Friend the Member for Liverpool, Walton (Steve Rotheram) have pointed out. [Interruption.]

The Secretary of State chunters from a sedentary position. The reality is that, like previous Tory Secretaries of State for local government, he has no compassion or consideration for those who will lose their home help or for the children who will lose the life chances that people in his constituency will take for granted. What we have had from him and his Ministers is a campaign of ridiculous disinformation such as the nonsense that has been repeated by Tory Members today about £150,000 going on statues in Manchester or about the Twitter tsar who was an invention of the Minister for Housing and Local Government. [Interruption.] The Minister says something from a sedentary position that I cannot hear, but I am happy to give way to him if he wants to make his point. [Interruption.] He indicates that he will reply when he winds up. No doubt that will allow him to peddle his ridiculous fantasies again.

[The Minister for Housing and Local Government (Grant Shapps)]

Is the hon. Gentleman saying that an advert for a new media expert for £38,000 was not placed by the council?

[Tony Lloyd]

I have checked and there is a communications officer, whom, the House might be interested to know, was asked to have competence in new technologies such as Twitter and is equivalent to a number of people in the Minister’s Department who have the same role, the same salary band and the same competences. His Twitter tsars massively outgun Manchester’s ability to communicate. He should think very carefully, because trading insults at this level does nothing for the people who are going to lose adult social services. [Interruption.] Does the Secretary of State want to intervene?

--- Later in debate ---

[Tony Lloyd]

I think the hon. Gentleman is either a little hard of hearing or not too fast at understanding. My right hon. Friend the Member for Wythenshawe and Sale East made the point earlier. Those balances that the Secretary of State and his Ministers have traded and which they said are there as some luxury cushion are, in the case of Manchester, allocated money.

[Grant Shapps]

Does the hon. Gentleman recognise that there is £108 million of non-schools money held by his local authority? Earmarked does not mean the same as allocated.

[Tony Lloyd]

The £64 million that will now be allocated will be for the redundancies that the Government are forcing the council to make. That is the answer to the hon. Member for Dover (Charlie Elphicke). It is a disgrace that Manchester must spend such a huge amount of money making good local government workers redundant. That is the responsibility of the Secretary of State. As a result, the things that the Housing Minister described as being merely earmarked will now not go ahead, so Manchester will lose provision and facilities because of the Government’s decision.

--- Later in debate ---

[The Minister for Housing and Local Government (Grant Shapps)]

It must have been an incredible experience to stand at this Dispatch Box for the local government finance settlement in any of the past few years and announce on a whim yet more money being piled up and sent around the country in various directions. Unfortunately, we do not live in that kind of world today, and the sad thing is that we did not live in that kind of world even then. The previous Government thought that they had money to spend, but the truth was that it had long since been spent. A year ago, all they were doing was standing here and spending money that had never been raised, that was not available and that would actually have to come from the children of every Member of the House and of all our constituents for many years to come.

At the election, people had a choice, and their decision was to elect a Government who were primarily going to get on with cutting the deficit. Today, however, there has been not a word of apology from the Opposition for getting us into that enormous financial mess that meant that this country had the highest deficit of any country in the western world—of any OECD top 20 country. Do they recognise that as a fact? Do they understand where things went wrong? Are they here today to apologise and to show that they are going to set a new path? Absolutely not, because as we saw at lunchtime the policy vacuum on the Opposition Benches is quite literally a booklet with empty blank pages inside.

There has been no response and no sense of where those cuts would fall. The Opposition do say that there would be some cuts; it is just that we are not allowed to know where they would fall. The Opposition accept that local government spends a quarter of all government money, but it seems that none of those cuts would be in any way painful under their budget, which, they say, would halve the deficit over this Parliament.

Halving the deficit, however, is not enough. I believe there is a fundamental misunderstanding of how this country’s accounts work. Indeed, perhaps that was the problem over 13 years: the previous Government did not understand that, if we only halve the deficit, we will still pile up debt. The figure of £44 billion, which we are currently spending at record interest rates just on repaying the interest alone, would have gone up to £70 billion and more, yet the Opposition have not a single answer—not a single penny—to offer up to this debate. Therefore, their contribution has been all but pointless.

[Mr Betts]

The right hon. Gentleman refers to past debates. Can he point to any occasion over the years when the Opposition Front-Bench spokesperson said that the Government were providing too much money to local councils? Can he provide one example of a Conservative MP saying, “My council’s getting too much money in this settlement”?

[Grant Shapps]

The Chairman of the Communities and Local Government Committee is absolutely right: my colleagues and I have been reflecting over the past few weeks, when the representatives of many local authorities throughout the country have been to see us, on what it must have been like to have been in a previous Administration, when one could believe that money was no object—that one could simply get this thing from the money tree and spend it as one wished by giving higher and higher settlements to every authority that came to visit. How wonderful it must have been, but I am afraid that the truth, the reality, has come home to roost, and once again we are left to sort out the mess that Labour has left us with.

Having accepted that there should be some reductions, it was not as if the right hon. Member for Don Valley (Caroline Flint), who shadows the Department, was able to agree with any of the methods that might be used to make reductions without harming front-line services. In fact, she went so far as to ridicule my hon. Friend the Member for Daventry (Chris Heaton-Harris) because he mentioned in an intervention that Hampshire council has just announced that it will cut £7 million next year by cutting the senior management salaries and work force. That was pooh-poohed as impossible. Well, for the sake of clarity, I have managed to get hold of a copy of that detailed information, and my hon. Friend was wrong: it is not £7 million that will be saved by cutting senior management; in fact, it is £7.9 million.

The idea that money cannot be saved or that leadership cannot be shown by example when senior people take a cut, as Ministers in this Government have with a five-year pay freeze, or that that does not have an impact further down the line on the rest of senior and middle management, has been blown apart. The authorities that have taken such steps have found it much easier to sell to the rest of the authority the difficult decisions that have had to be made.

Nor is the right hon. Lady correct when she talks about the £10 billion of reserves. There are £10 billion of reserves for local authorities, as has already been pointed out in an intervention, but the right hon. Lady says that 70% of it has been earmarked, and, in that, she makes a fundamental mistake, which I am surprised about, because she was in this Department when in government. The reality is that “earmarked” is not the same as “spent” or “allocated”. “Earmarked” does not mean that the money cannot be used in the intervening period to ensure that front-loaded reductions, which we have heard a lot about, can be handled in a much better way.

My hon. Friend the Member for Isle of Wight (Mr Turner) raised a serious technical issue that he had already come to ask us to look at again. We did do that, but we could not find in favour of his local authority. However, I say to him and to all other hon. Members that we thought that the concessionary fares mess that had been left by the previous Government required some assistance to sort out between the two tiers of government. I hope that that is helpful.

The Chairman of the Select Committee, the hon. Member for Sheffield South East (Mr Betts), referred particularly to front-loading. As I said to the right hon. Member for Don Valley, it is possible to use earmarked funds that are in the reserves. I invite the hon. Gentleman’s Committee to look at this again, as there seems to be some misunderstanding. I welcome the fact that he welcomes the end of ring-fencing, which had been called for very widely across government and the Local Government Association. Ring-fencing has been un-ring-fenced by some £7 billion, and that has given local authorities a lot more flexibility. We have taken 90 separate budgets and combined them into just 10, meaning that local authorities that are savvy and understand that the situation has changed are able to move much more quickly.

The issue of business rates was raised by the hon. Member for Sheffield South East and others. There is a suggestion out there, which is gaining some credibility, that if business rates were collected at a higher level than the entire local government finance settlement, then the difference could be redistributed somewhere down the line. People need to understand that if business rate collection goes up or down, the amount that goes to local authorities is identical; it makes no difference. The amount that goes to local authorities is set out in the spending review envelope; it is insured by the Treasury, as it were. I hope that that clarifies the situation.

[Caroline Flint]

There is huge concern up and down the country that there will be a future Tory policy to localise business rates, which would not deal with the inequalities in terms of opportunities to raise funds through businesses. Can the right hon. Gentleman assure me that that will not be a policy of this Government?

[Grant Shapps]

I am pleased to be able to provide the right hon. Lady with the reassurance that she needs. A redistributive approach will have to remain in whatever system is put in place. I will return to that in a few moments.

My hon. Friend the Member for Harrow East (Bob Blackman) made several good, intelligent points. He called for a settlement that is more predictable because it is provided for more years in a row. As the House knows, we have made a settlement for this year and for next year, after which time we intend entirely to reform the system to do what everyone has called for, which is to dump the failed redistributive formula grant system in which, as the Chairman of the Select Committee pointed out, everybody, even in the good years, complains that it has been poor for them.

My hon. Friend provided a very useful list of different things that local authorities could do before they start savagely cutting the front line, as in the case of some authorities in the past couple of days. Members will do well to refer back to that list in Hansard to see all those different methods. Until an authority has run through each one of the ideas that he presented, it has no right to be cutting the services of the most vulnerable in society.

The hon. Member for Liverpool, Walton (Steve Rotheram) made a very impassioned speech. I have seen some of the things that his local authority has done; the £4.5 million that it saved by cutting some of the senior management is of course the right way forward. However, he says that his council is still incredibly badly off. Let me make this simple point to him: while Liverpool is experiencing a reduction in its funding formula of 11.3%, my Hertfordshire council is experiencing a reduction of 16.1%. This Government have gone out of their way to try to protect the most vulnerable, and it is about time it was recognised that the spending formula was designed to do that.

The hon. Gentleman made another claim that was extraordinary and, as much as he may not realise it, untrue—inadvertently, I am sure. He said that his local authority is cutting Supporting People by 30%. If that is true, his local authority is getting it wrong. Supporting People is one of the budgets that we have protected way more than the general picture. There is a reduction of less than 1% in cash terms on average in the Supporting People budget over the next four years. I will give way to the hon. Gentleman so that he can put pressure on his local authority not to slash it, given that the Supporting People budget is largely protected at national level.

[Steve Rotheram]

If I can prove that it is 30%, will the Minister give us back the other 29% so that we suffer only a 1% cut, which is the national average?

[Grant Shapps]

As the hon. Gentleman knows, the grant formula—[Interruption.] Members would do well to listen to this point because it affects many constituencies. The simple fact is that Supporting People is paid for through the formula grant. Given that we know for a fact that there is not a reduction in spending power of more than 8.8% in his constituency, it cannot be the case that the Supporting People budget has fallen by the claimed 30%, so I take him up on his challenge.

My hon. Friend the Member for Dover (Charlie Elphicke) made the worthwhile point that local authorities have been protected from having to raise council tax by the £650 million from central Government.

The hour is late and I do not want to detain the House. There is a clear division between authorities that have taken the necessary steps and those such as Manchester city council, which yesterday claimed that it has to make a 25% reduction.

[Caroline Flint]

Will the right hon. Gentleman give way?

[Grant Shapps]

I was going to conclude, but I will give way on this point.

[Caroline Flint]

I am aware of the time and I appreciate the right hon. Gentleman giving way. The person who stated that 25% of the net budget of Manchester city council will go over the next two years was its treasurer—a statutory officer of Manchester city council. I suggest that when the right hon. Gentleman is up there, he speaks to that gentleman, because I believe that that gentleman is right and that the right hon. Gentleman is wrong.

[Grant Shapps]

Here is a simple fact for the right hon. Lady: the reduction in spending power over the next two years is 15.5%. Yesterday, Manchester city council called a press conference to say what it will not do over the next two years. It says that it is going to cut the budget by 25% over that period, when the reduction is only 15.5%.

To conclude, it is that side of the House and those authorities that are failing to protect the most vulnerable in society. Thank goodness for the coalition Government.

Question put.