Local Government Finance (England)
Debate between Helen Jones and Andrew Gwynne(8 years, 9 months ago)
Commons ChamberRead Full debate Read Hansard Text
Andrew Gwynne (Denton and Reddish) (Lab)
Will the Secretary of State give way?
Local Government Finance Bill
Debate between Helen Jones and Andrew Gwynne
Helen Jones
Amendment 3 was moved in the other place by my noble Friend Baroness Hollis of Heigham. It calls for one very simple thing: a review of how the new system for council tax support is working three years after the Bill as enacted comes into effect. We tabled amendment (a) to make clear the original intention of the amendment in applying only to England because this is a devolved matter in Wales. When my noble Friend introduced the amendment in the Lords, she made a clear and persuasive case that was supported by a good majority.
The Government opposed the measure at the time, but I understand that they may now decide to accept it; the Minister will tell us. Opposition Members may wonder why that is, but in fact, we know why. The Government know that their policy on council tax is a shambles. It is so bad that they cannot even convince their own Members to support it. Their councils in North Yorkshire, including the Foreign Secretary’s council, have campaigned against its unfairness. The departmental Secretary of State’s own county council says that it has major implications for some of the most vulnerable members of the community. West Oxfordshire, the Prime Minister’s council, has refused to implement any scheme at all and will rely on the default scheme. Westminster, the Tories’ flagship local authority, which we hear so much about, says that it will not implement it because residents are already adversely affected by changes to local housing allowance and other benefit cuts. This is what Westminster said in one of the documents that it submitted:
“The previous Community Charge (Poll Tax) experience shows that there are inherent difficulties in asking benefit claimants to pay small sums of Council Tax. This can make the debt difficult, and in some cases uneconomical, to collect.”
It also says:
“A decision to pass on the funding cut to claimants would be a reputational risk for the Council, as residents will perceive the cut as a local authority decision (rather than a central government given benefit cut).”
Andrew Gwynne
In their consultations, Tameside suggested that it would need to make £3.575 million of savings, while Stockport said that it would need £2.4 million of savings in relation to any new council tax support scheme. If Stockport or Tameside applied for and were eligible for the DCLG’s support mechanism, Tameside would get only £460,379 and Stockport £385,550. This is so unfair.
Andrew Gwynne
My hon. Friend is being incredibly generous in giving way. I have mentioned the £3.575 million that the Tameside council scheme will lose. That comes on top of the council’s delivery of £43 million of savings in 2010-11 and 2011-12 and £22 million of savings this year, and it estimates a further £70.4 million of savings over the next three years. That is the real unfairness of this—it is hitting the same communities time and again.
Helen Jones
My hon. Friend makes his point eloquently. The Government have always failed to acknowledge not only that this policy affects the same economies again and again, but that it has a devastating effect on local attempts to grow their economy. The very people who are losing money are those who went out and spent money in local shops and businesses, because, by the very nature of their low incomes, they have to spend everything they get. Councils are now faced with the most awful decisions and the people being hit hardest are people with disabilities, their carers and, most of all, the working poor—the people who this Government try to pretend do not exist.
We all remember the former Housing Minister, the right hon. Member for Welwyn Hatfield (Grant Shapps), telling a Select Committee that if someone was working they would not get council tax benefit, because they would not need it. He did not believe that people who were in work received council tax benefit. He did not believe in the existence of those 743,000 people who are on non-passported council tax benefit and are in work. I admit that I sometimes find it difficult to believe in the existence of the right hon. Gentleman, because he has so many different identities—I often wonder whether he is an internet marketing guru masquerading as a member of the Government—but those working people on low incomes are certainly there and cannot be ignored.
Among the options that councils are consulting on are: paying no award less than £5 a week; restricting awards to the cost for a band D and, in some cases, even a band A property; restricting awards between 80% and 90% of value; increasing the taper; and abolishing the second adult rebate. The list goes on and it gets worse. One council—Tendring—is proposing residency criteria, so that people will only become eligible for support if they have lived in the district for five years. If someone moves there for work—after all, the Government want people to move for work—and happens to lose their job, hard luck: they will not get a penny. Those of us who know our history will recognise that proposal immediately for what it is. It is a reinstitution of the Poor Law—if someone needs relief, they should move back to their own parish, or in this case their own borough. On that basis, I wonder whether the Government live in the 21st or the 18th century.
It is no wonder that the Government have introduced a £100 million transitional relief fund. There is no better proof of the shambles that they are in than the fact that they have made that announcement after local authorities have begun consultations on their schemes.
Helen Jones
I am tempted to say to my hon. Friend, who is the distinguished Chair of the Committee, that I cannot think of a more cack-handed policy, but then again this Government constantly surprise us by coming up with something more cack-handed than we had ever thought of. He is right about the problems with the transitional relief fund. Councils have begun consultation on their schemes, but now the Government want them redesigned to qualify for a transitional grant. Their conditions include the requirement that those currently receiving 100% relief should pay no more than 8.5% of tax, that the taper does not increase above 25%, and that there is no sharp decline in support for people entering work. Having embarked on a system that they insisted should rest on local decision making, they are now dictating how the scheme should be designed.
Even so, that does not solve the problems. There is no legal clarity on whether councils will now have to consult again on these new schemes. Could the Minister give councils some advice about that? There is no indication of how, if they have to do another consultation, its cost will be met, and there is still a £400 million funding gap, even according to the Government’s own figures.
Andrew Gwynne
To return to Tameside council, one of the two authorities in my constituency, it tells me that the recent announcement on transitional funding will cause it added difficulties and that
“the indicative grant would be insufficient to bridge the funding gap, and the money is for one year only.”
Helen Jones
My hon. Friend is entirely right. It is not sufficient to bridge the funding gap. It seems from the indicative amounts that my own local authority will get back £320,000, including money for the police and fire authority precepts, but lose £1.3 million. Birmingham will get back £2.4 million out of £10 million, Manchester £1.1 million out £5 million, Liverpool nearly £1.5 million out of £6.1 million and Haringey £888,000 out of £3.8 million.
Helen Jones
My right hon. Friend is entirely right. I suspect that if a council found itself in financial difficulty and did not have reserves, Ministers would be the first to stand up and accuse it of failing to plan prudently for that eventuality.
The scheme will last only one year. Will schemes have to be redesigned again after that? If so, people will have had to cope with three different council tax benefit systems in three years. Currently, they might pay nothing, but next year they might pay 8.5%. After that, who knows—15%, 20%, 30%? There is huge uncertainty for the poorest people in the community.
As my right hon. Friend says, local councils will also be left with huge financial uncertainty. The Government believe that the number of pensioners claiming council tax benefit will drop, but everyone who deals with benefits believes that it will rise, because in future the sum in question will be shown as a reduction in someone’s council tax bill rather than a separate benefit. If unemployment goes up in an area, if a major employer closes down or if there are increases in part-time working, as there have been recently, local authorities will bear all the financial risk.
Andrew Gwynne
Does my hon. Friend share my confusion about the Government’s thinking and the lack of joined-up decision making between Departments? Universal credit is being introduced, which was supposed to simplify the benefits system, yet here we have the Government making the council tax benefit system more complicated and setting it aside from the universal credit proposals.
Helen Jones
My hon. Friend is quite right. One problem with the system that the Government are introducing is that people will face two tests for benefits, possibly with two different tapers. For someone in the universal credit pilot, it will have to be decided whether the council tax benefit taper is applied before or after the universal credit taper. That clearly has not been thought through.
Helen Jones
My hon. Friend is entirely right. We have said throughout discussions on this Bill that it is about centralising power and devolving the blame—after all, Tory-run Westminster council recognises that. That is the test the Minister set for his Government—the sign of a compassionate society in a modern democracy—but I am afraid the Government have failed that, and failed some of the poorest, most vulnerable people in our society. Benefits for people who are disabled will no longer depend on their disability, but on where they happen to live. We are talking about people who are sacrificing their careers to look after members of their family who are ill or disabled, and those who go out to work every week for poverty wages, because they believe that working—when they can work—is the right thing to do.
The Government seek to stigmatise those people as scroungers and they should hang their head in shame. Those people are doing the right thing, contributing to society and doing their best on a low income. The amounts they are being asked to pay may not seem much to people on the Government Benches, but to an individual or family living on the edge, they are unobtainable. Every penny they have is accounted for and there is nothing left for emergencies. To try and find even a couple of pounds at the end of the week is out of the question; it is just not there. That is why council treasurers are expecting to collect only 40p in every £1, and why we risk a repeat of the poll tax fiasco, when thousands of people left the electoral register to try and avoid the tax, and 5,000 people went to prison.
Andrew Gwynne
My hon. Friend makes a powerful point about how the council tax benefit scheme is likely to hit some of the poorest and most vulnerable people in society, in particular the working poor. They are likely to be the same people who are also caught up with changes to housing benefit, and potentially with under-occupancy rules, and who have seen their tax credits reduced.
Helen Jones
My hon. Friend makes the point I was about to come to. We are talking about many of the same people who have lost tax credits because they cannot get extra hours at work, and many will also be losing housing benefit, as well as having to find money for extra council tax payments. I know the Government do not want to hear this, but we are going to say it again and again because it is true: the Government are introducing these measures on the same day as they fund a tax cut for millionaires. Nothing could demonstrate better how out of touch this Government are with the lives of most people. I wonder whether the Minister is proud of the system he is introducing.
Local Government Finance Bill
Debate between Helen Jones and Andrew Gwynne
Helen Jones
I could not agree with my right hon. Friend more. The Government simply have no idea of the pressures on people on very low incomes.
The Prime Minister said that carers were the
“unsung heroes of our society”.
He went on to say:
“We should all support, recognize and celebrate the incredible work that carers do”.
That was in 2010, and times have changed. Now he wants not to support them, but to increase their council tax—another broken promise.
The Government also do not want us to talk about those who are receiving council tax benefit and are in work. The Minister for Housing and Local Government, who is not here this evening, likes to pretend that those people do not exist. He told the Communities and Local Government Committee that
“if somebody is in work they will not be receiving the benefit because they will not need to.”
That is another example of why he is tipped for promotion: it shows his incisive grasp of complex issues. Only someone as wilfully blind as him could come out with that, and only someone with no experience of what it is like to live on a low wage.
Andrew Gwynne
My hon. Friend is coming to the crunch. A substantial number of people in receipt of council tax benefit are in work. It is an in-work benefit, not just an out-of-work benefit as some Government Members would like to portray it. Given that the Government’s statement of intent states:
“Local schemes should support work incentives, and in particular avoid disincentives to move into work”,
can my hon. Friend fathom the thought processes of those who are bringing in this scheme, which will clobber the working poor?
Helen Jones
My hon. Friend is correct and I will come on to some examples of what he says in a moment.
I received a parliamentary answer from the Minister of State, Department for Work and Pensions, the hon. Member for Thornbury and Yate (Steve Webb), which said that in 2010-11, the last year for which we have the figures, 743,660 non-passported council tax benefit recipients were in work. There were 2,860 such people in Stockport, which is the area that the Under-Secretary of State for Communities and Local Government, the hon. Member for Hazel Grove (Andrew Stunell) represents. That is more than 743,000 people who the Minister for Housing and Local Government does not think exist. They do not go to Tory fundraisers, I suppose, or attend the black and white ball. All the time, his implication has been that council tax benefit goes only to those not in work. The further implication, of course, is that they are deliberately not in work, which is what underlies most of what he says. Coming from a Government who preside over unemployment of 2.6 million, that is breathtaking arrogance.
Helen Jones
My hon. Friend is right. The same group of people is being hit again and again. Whatever the Government tell us, we are not all in it together.
Andrew Gwynne
My hon. Friend mentioned in passing the borough of Stockport. I will leave the Minister to speak for the people of Hazel Grove, but I assure her that I am acutely aware that a substantial number of my constituents in the Reddish part of Stockport are in work and qualify for council tax benefit.
Helen Jones
My hon. Friend is quite right. We can go through every local authority in England and find a number of such people.
It is not just people in work and on low wages who will be affected but disabled people deemed unable to seek work, carers, and part-time workers who do not even show up in the figures. An increasing number of people are being forced to seek part-time employment, and they will pay the price of the Government’s cuts.
As my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford) said, there is a form of “doublethink”. The Minister for Housing and Local Government told the Select Committee that people could be protected by
“getting economic activity going so there are jobs.”
The Government are prone to lecturing everybody on getting economic activity going. They lecture councils and the European Union, but the one set of people they do not seem to lecture is themselves. They have no plan for growth at all.
Many people in receipt of council tax benefit are in work or not expected to seek work because of their circumstances. For them, the cut will depend not on their individual circumstances but on where they live and, crucially, how many pensioners there are in their local authority area. That varies hugely from one area to another. Claimants of non-working age make up 34% of the total in East Dorset. In Tower Hamlets, the figure is 68%.
The benefit cut that people receive could vary between 13% and 25%. The worst thing about it is that it is entirely arbitrary, with no pretence of fairness whatever. In fact, in their recently published statements the Government have explicitly rejected the idea of taking into account the number of pensioners in a local authority area when setting the funding level. Many Government Members will have cause to regret that in future years.
As some of the Opposition amendments point out, the new system will hit not only those in work or unable to work but those seeking work. The Government have been in such a rush to bring it in that they have failed to align it with universal credit, to which the Minister referred earlier. If they are so keen to have universal credit, they should have waited to align council tax benefit with it. Their own consultation document acknowledged the problem, stating:
“There is a risk, however, that some of the advantages from the single Universal Credit taper…could be lost if there is a separate and overlapping withdrawal of council tax support through localised schemes. This would produce a marginal deduction rate higher than 76%”.
If millionaires were having to put up with that, the Government would be rushing in to rescue them. What sort of Government include those warnings in the consultation and then ignore them? They are either incompetent or vicious—one or the other. [Interruption.] Both, somebody says, and I am beginning to think so.
As we have seen with business rates, the areas in greatest need will be hit hardest. Let us take the impact on people in work as an example. In Liverpool, there are 6,570 people in work and receiving council tax benefit. In Durham, there are 5,810, in Birmingham a whopping 16,780 and in Hackney 7,910. Just down the road in the City of London, there are precisely 40. In Purbeck there are 580, in Runnymede there are 610 and in Wokingham—I could not pass up another chance to mention Wokingham —there are 780.
This change is a triple whammy for the poorest areas. First, it will mean that local authorities with more people in work and receiving council tax benefit face a much bigger risk of default in their council tax collection. Secondly, it will make it much harder for them to mitigate the effect of the cut on people of working age. Thirdly, there will be a bigger impact on their local economy, because money will be taken from people who would otherwise go out and spend it. It will come as no surprise to my right hon. and hon. Friends to hear that the New Policy Institute estimates that five of the 10 hardest-hit local authorities will be among the top 10 most deprived in the country—Hackney, Newham, Liverpool, Islington and Knowsley.
In the Liverpool city region, it is estimated that the Government’s proposals will result in cuts of 17.23% for those who are not pensioners. In Halton, a single person will have to find at least £179 more each year. In Sefton, which has a higher than average number of pensioners, a couple in a band A property will have to find an extra £226 a year. That is probably small change to Government Members, but to people who struggle to keep their heads above water—those who have to count every penny to get to the end of the week without getting into debt, and without being driven into the arms of the loan sharks who are on many of our estates and ready to batten on vulnerable people—it is the difference between surviving and not surviving.
I sometimes wonder what Ministers know of that world. Have they ever stood in a supermarket watching people put things back because they cannot afford to pay for everything in the basket? Do they understand the struggle that some families have if a child needs a new pair of shoes? They know nothing of it, and they have no wish to understand it.
Helen Jones
Once again, I am very pleased to follow an interesting, passionate and well-informed speech from my right hon. Friend the Member for Wentworth and Dearne (John Healey). I can add little to the case he made for his amendments, so, given the time constraints, I shall focus on new clause 6, which stands in my name and that of other right hon. and hon. Friends.
We make no apologies for returning to the issue of need and the different levels of need within local authorities —the elephant in the room that the Government want to ignore. This issue has been raised time and again in our debates on the Bill by hon. Friends, many of whom represent some of the most deprived communities in this country and have seen at first hand the impact of the Government’s policies on those communities.
Why are the Government so wilfully blind to the effects of their policies? They have already hit local authorities with cuts that are larger than those inflicted on any Government Department, and we have heard from Opposition Members about the real and serious impact the cuts are having on front-line services—the cuts in school food provision, increases in home care charges, library closures in the poorest communities. However, none of this has any influence on Ministers, so out of touch are they with most people’s lives, and it now appears that they are going to make things worse.
First, they entrench unfairness in the system by basing it on the current local government finance settlement, so the inequalities and unfairness of the current scheme will form the basis of the settlement for years to come. We have heard many times during our debates on this Bill about cities that are losing spending power: Manchester is losing spending power of £186 per person, Birmingham £155 and Nottingham £147. Those are the cities that the Government think will drive the economic recovery; there is no linked-up policy here. Wokingham, of course, gains, however. Basingstoke and Deane gains £6.30 per person. East Dorset gains £3 per person.
According to the Government’s statement of intent—it is one of many, so I am unsure how much weight we can place on any of their statements of intent—each authority will keep 50% of its business rates and the Government will provide a revenue support grant to make up the difference between the local share of business rates at the outset of the scheme and the spending controls for local government. However, they will, it seems, have top-sliced that for the new homes bonus first, which already benefits most those authorities with a high tax base, and it appears that many other grants will also be included, as listed in the statement of intent.
We already know how the grant system has been used to penalise the poorest authorities with communities that are most in need, and there has been a significant reduction in resource equalisation. Under this scheme, the gap between richer and poorer authorities will widen. First, as the Yorkshire and Humberside councils have said,
“a baseline may not reflect the actual levels of funding councils need to deliver services from April 2013.”
They were right about that. Secondly, as we have discussed during the passage of this Bill, some authorities will find it easier to grow their business rates than others. It has been estimated that even if the top-ups and tariffs increased in line with the retail prices index, the gap between the richest and the poorest authorities, and between the north and the south, will widen. Cash growth in the City of London could be 139% over four years and the figure for Westminster could be 90%, whereas the estimate for Liverpool and Knowsley is 21.9% and that for South Tyneside is 22.7%.
When we add into that this Government’s abject failure to take into account the differing tax bases of local authorities, the situation becomes even worse. That failure means that local authorities do not start on the level playing field that the Deputy Prime Minister kept telling us about—although he was the man who said he was not going to raise tuition fees, so I am not sure that anyone takes much notice of him. In the long term, fortunate local councils might reduce or even get rid of council tax, whereas others whose tax base is low and where it is harder to attract investment will be unable to do so. When we also take into account the amount that some councils will lose through changes in council tax benefit, it is clear that they could be heading for the perfect storm.
Andrew Gwynne
May I use the example of my constituency to illustrate precisely the issue that my hon. Friend is raising? My constituency covers two metropolitan boroughs that lie side by side; Tameside predominantly contains band A and band B properties, so its ability to increase its income from council tax is less than that of neighbouring Stockport, which contains a much larger amount of properties in a wider range of bands. Is that not the fundamental unfairness of all this?
Helen Jones
It is the fundamental thing that the Government fail to understand: councils are not starting from the same baseline. Those who pay the price for these inequalities, which will increase, are those most in need. Need is the thing that the Government do not want to talk about. That is why our new clause 6 seeks to require the Government to take into account both the likely capacity of an authority to benefit from business rate growth and the authority’s level of need.
When the Secretary of State issued all these statements of intent last week, he sought to dismiss the whole concept of need. He talked of grants as a
“system of Government handouts to local authorities”.
He said that this
“encourages a begging bowl mentality, with each council vying to be more deprived than its neighbour.”—[Official Report, 17 May 2012; Vol. 545, c. 39WS.]
I have never heard such an appalling slur on local councils or such an arrogant dismissal of the needs of many of the poorest people in this country, and he should apologise for that. Is he really suggesting that councils are pretending to represent areas that are poorer than they actually are, simply to get Government grants? That is nonsense. So why is it that under this Government the needs of people who are out of work, of people who have long-term illnesses and of people in poverty can be treated as if they do not exist? These people do not have loud voices, because most of them are just trying to get by from week to week. They do not share mulled wine and mince pies with the Prime Minister or get invited to dinner at Dorneywood. By contrast, those who pay 50% tax—millionaires, who are apparently squeezed beyond endurance—must be relieved of their burdens. [Interruption.] The Under-Secretary of State for Communities and Local Government, the hon. Member for Bromley and Chislehurst (Robert Neill) says that that is a cliché. It is not a cliché; it points out the moral laxity of this Government, who cannot see that treating poor people unfairly while giving handouts to rich people is exactly what most of the country finds wrong.
Andrew Gwynne
My hon. Friend is making precisely the point that needs to be made in these debates, which is that the demands on local services vary widely and that it is often the poorest communities that have the greatest demands. I am very pleased that her proposal recognises children in care, because they are a big issue for local authorities in need. That argument needs to be made in this debate.
Helen Jones
My hon. Friend is right about that, and I shall discuss the number of people in care later. It is important that we recognise that many of the things we are discussing are statutory services, which the local authority has to provide.
Let us examine some of the differences between areas. In Knowsley, whose case was put forcefully in Committee by my right hon. Friend the Member for Knowsley (Mr Howarth), 58,000 people—more than one third—live in areas that are among the top five most deprived in the country. In the north-east, 32.7% of people live in the most deprived 20% of areas. Those are the areas that will struggle as the gap between needs and resources widens. Such authorities are often the same ones that are having to cope with the biggest increases in unemployment. That both reduces the finance available to local councils, because more people are claiming benefit, and increases the demand for their services.
The Secretary of State seems to think that authorities are competing to be the most deprived, so let me ask him something—I would if he were here, but he seems to take these debates so lightly that he has not even bothered to turn up for most of this one. So let me ask this Minister: is unemployment in Birmingham, Ladywood higher or lower than in Henley? In Birmingham, Ladywood, it stands at 11.2%, whereas in Henley it is 1.1%.
Does Middlesbrough have a higher or lower unemployment rate than North East Hampshire? Middlesbrough’s rate is 9.7%, whereas that for North East Hampshire is 1.1%. Is the figure for Liverpool, Walton higher or lower than that for Wokingham? The figure for Liverpool, Walton is 8.5%, whereas that for Wokingham is 1.3%. Does he think that councils are making this up and deliberately causing unemployment to get Government grants? Not even he could get up to argue that. It is not local councils that have caused this recession, yet still we hear from Government Members that councils are “reluctant” to promote economic growth. Coming from this Government that is a bit like King Herod accusing someone of child cruelty. Local authorities are still having to cope with the long-term legacy of heavy industry, followed by de-industrialisation.
Helen Jones
My hon. Friend is quite right and that is true in many conurbations, such as Manchester and London, for example.
Let us also consider the need for children’s services. Levels of child poverty, and thus the demand for services, vary hugely between authorities. In Hartlepool, 29% of children are in poverty. In Newcastle, the figure is 27%, as it is in Liverpool. That is 91,000 children. I could not resist looking at that often mentioned authority, Wokingham, where the level of child poverty is 7%. Which area has the most need for services, yet which is benefiting most and is likely to benefit more from this Government’s plans?
Such high levels of child poverty mean a higher demand for children’s services. In Liverpool, for example, 77% of the children in poverty are in single-parent families, meaning there is an even greater need for child care and support for families to help parents go to work, as well as for other support. Children in those areas need better service, not worse, and they need more help. There is no point in the Deputy Prime Minister’s banging on about the need to address inequalities in education unless the Government recognise that to make a real difference those inequalities must be tackled before children get to school.
So, we have places such as Middlesbrough—the hon. Member for St Austell and Newquay (Stephen Gilbert) is shaking his head, but anyone in education knows that to make a real difference to educational attainment we need to tackle the inequalities before the children reach the age of five. By the time they get to school, those inequalities are entrenched and, if he does not think that that is true, I suggest he asks some teachers.
Middlesbrough is the ninth most deprived local authority in England and has seven times as many children receiving free school meals as Wokingham does. It clearly needs greater investment in children’s services. Poverty also drives the number of children being taken into care. We spoke earlier in the passage of the Bill about the huge increase in the number of referrals and children taken into care following the case of baby Peter, but the differences between authorities are stark. There was a 10% increase nationally in safeguarding referrals in the period around 2009-10, but in Liverpool the increase was 60%. Those are the differences that we are dealing with. The same applies to the numbers of looked-after children—children for whom the authority has a legal obligation to be the corporate parent and to provide. It cannot cut those services, it cannot trim them and it cannot decide how great the demand is.
Andrew Gwynne
I ought to declare an interest, as my wife, Councillor Allison Gwynne, is the cabinet member for children’s services in Tameside council. My hon. Friend’s point about children’s services and the cost of those services is absolutely correct, not least because children’s services, particularly for looked-after children, is such a resource-intensive service and cannot easily be cut, nor should it be. It is those councils that often have the least ability to raise business rates that are likely to be penalised the most.
Helen Jones
I could not have put it better than did my hon. Friend. These services are demand-led; they are not within the control of the local authority, and they are, as he said, very expensive to provide, as they must be. We are dealing with some extremely damaged and vulnerable children in local authority care. Surrey has 32 looked-after children per 10,000 of population, and Wokingham has 22, compared with 104 per 10,000 in Middlesbrough and 100 per 10,000 in Newcastle. That is a stark example of the differing levels of need in local authorities, and the idea that those services should be left to the vagaries of the market is breathtaking.
My right hon. Friend the Member for Wentworth and Dearne, who is no longer in his place, gave some good examples of how business rates can vary from year to year. It is entirely unpredictable, yet this Government still refuse to recognise those different levels of need within local authorities.
Local Government Finance
Debate between Helen Jones and Andrew Gwynne(12 years, 9 months ago)
Commons ChamberRead Full debate Read Hansard Text
Helen Jones
My hon. Friend will have to forgive me for not giving way, but we are short on time.
Tell that to the people whose community centres, libraries and day centres have closed. The truth, which Government Members have to face, is very simple: people who are wealthy can buy themselves out of those cuts, because they can pay for care and buy their books, but the people the cuts hit most are those who cannot do that. I am talking about the people who have paid their taxes all their life and then find that they cannot get care in their old age and that their sons and daughters are caught between trying to look after them, to work and to look after their children. I am talking about the families on low wages who go out to work every day and want their children to get on but cannot afford to buy all the books they would like and are dependent on their libraries. [Interruption.] I hear the muttering from the Parliamentary Private Secretaries and I know that the Tories are going to say, “We do not do this because we want to, but because we have to.” Let us start nailing that myth, shall we?
In the year from autumn 2009 to autumn 2010 the economy grew at 3.9% and unemployment was falling. So successful have the Tories been that the economy is now in negative growth, the level of unemployment is nearly 2.7 million and, scandalously, one in five of our young people is unemployed—and borrowing is increasing. The Government’s approach has not worked. They could, of course, have worked with local authorities on long-term savings and they could have assisted local authorities to use their spending power to help tackle those problems. Before they started their cuts, the local authority procurement budget was £34.2 billion, most of which was spent with small and medium-sized firms. Councils such as Tameside—it did this through its Tameside investment project—were using their purchasing power not only to build new schools, but to assist local firms; it put £15 million into local companies.
Andrew Gwynne
I am grateful to my hon. Friend for mentioning “Tameside Works First”, the initiative of my local authority. Is she also aware that Tameside council had 700 young people on the future jobs fund, which was scrapped by this Government?
Helen Jones
My hon. Friend makes a good point, and I shall be dealing with that matter in a moment. The Government could have worked with local authorities to use that purchasing power, but what they failed to understand was that when it is cut too far, too fast, those local companies do not expand—they contract or go bust. The Government, while taking that approach, have taken away every lever local authorities had to help their local economies. Nottingham alone lost £6.5 million from the scrapping of the future jobs fund. My hon. Friend the Member for Denton and Reddish has mentioned Tameside—[Interruption.] If the Minister wants to intervene, I will be happy to let him.
Local Government Finance Bill
Debate between Helen Jones and Andrew Gwynne(12 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text
Helen Jones
My right hon. Friend says that they would. I do not think that that applies to the Under-Secretary of State for Communities and Local Government, the hon. Member for Bromley and Chislehurst (Robert Neill), although I can easily imagine the Secretary of State in a toga, handing down diktats.
Andrew Gwynne (Denton and Reddish) (Lab)
Is it not crucial not only to have a procedure whereby councils can appeal to the Secretary of State, but to put that within a proper time frame? Local authorities get their settlements towards the end of the calendar year in order that they can finalise their budgets by the end of the financial year and set a proper budget for the new financial year. It is therefore crucial to get not only the mechanism but the timing right.
Helen Jones
My hon. Friend makes a worthwhile point. The problem with the whole Bill is that it is difficult for local authorities to know the framework in which they will be asked to operate.
We are not proposing anything that would create a long delay, merely a simple system to allow councils time to check the calculations and respond before the Secretary of State issues a final determination. Most local councils support a levy system, even if they have different views about how the levy should be calculated. We do not anticipate that large numbers of councils would challenge decisions merely for the sake of challenging them. However, it is important for any system to give local authorities a mechanism to make representations if they think that the Department has simply got it wrong. I believe that Members from all parts of the House would want their local council to be able to do that if the need arose, to ensure that the communities that they represent are dealt with fairly.
The amendment would not prevent the Government from exercising the powers that they will be given if the Bill is passed. It does not even seek to change the way in which the levy is calculated—or it would not if we knew how the levy was going to be calculated. It is aimed purely and simply at ensuring that there is fairness in the system. I therefore commend it to the Committee.
Helen Jones
My right hon. Friend has hit on the key to the Bill. It is not simply wrong in the beginning; it will increase inequalities—get more and more wrong—as it proceeds.
Inequalities will widen, even if the top-ups and tariffs are uprated by the retail prices index, and the levy will not fully compensate for that. Remember that even if we get a proper definition of what constitutes a disproportionate gain—bearing in mind the earlier debate, that seems unlikely at the moment—councils need to pay only a proportion of that in levy. The logic of that is that some areas will benefit from disproportionate growth. Others will fall further behind.
Andrew Gwynne
All my hon. Friend’s argument supposes that the starting point was fair. Of course, an awful lot of authorities will have had deep and damaging cuts locked into the baseline, which is the real starting point, and would not have the ability to raise additional council tax income even if they were permitted to do so by the Secretary of State. There is a real double-whammy for those areas. That is why we need a fair assessment of need, so that we can get our share of resources through that route.
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.
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.
Andrew Gwynne
That goes back to the nub of the problem from an earlier debate—the lack of certainty that is given to council treasurers in enabling them to plan ahead in their council budgets.
Helen Jones
It is nice to see the Minister in his place after the time he spent quivering with fear in the Lobby.
Having convinced a junior Minister of the value of new clause 2, I hope to convince the rest of them of the values of new clauses 5 and 7. The new clauses attempt to tackle the difficult problem of how often the system should be reset by requiring a reset every three years and by establishing a mechanism to allow local authorities to make representations on resets.
All hon. Members accept that there must be a balance between having stability in the system and coping with change, but a system that leaves it too long without a reset will simply increase the disparities between local councils and penalise those in greatest need. The long gap that the Government want will increase the dislocation between the resources available and the funding needed for local services, which we have discussed. There is therefore a possibility that service provision will become a postcode lottery depending on the demands made on a local council and on whether it has been successful in attracting new business.
Andrew Gwynne
Like me, my hon. Friend might have seen SIGOMA research that shows that all councils face a drop in their income when such changes are introduced. The research also shows that over the first five years of the 10-year period, a number of councils manage to make surpluses, but some do not. By the end of year 10, there is a huge disparity between the richest and the poorest authorities. Is not that the basic unfairness of the Bill?
Helen Jones
My hon. Friend highlights the problem throughout the Bill, but the longer the period between resets, the worse it gets. It is not clear what the Government plan, but in their response to the business rate consultation, Ministers say it is their aspiration to have a reset every 10 years.
Helen Jones
My hon. Friend, who is a clear expert in local government finance makes a valid point—[Interruption.] He certainly is, and he ran a very successful local authority.
Throughout proceedings on the Bill, we have tried to get some certainty. But there is no certainty about resets. It is not certain whether the Government’s aspiration will become a policy. The period is too long, and I suspect that in making it only an aspiration, the Government know that and are providing a get-out clause. They will not publish all the responses to their consultation, just a summary, but we know that the majority of respondents wanted a maximum of five years between resets, and many wanted a shorter period. This seems to have had no influence on the Government.
The problem with a 10-year reset is that all the modelling shows that the gap between the richer and poorer authorities will increase, and the Government have rejected all attempts to link resources with need. Indeed, the baseline for the redistribution of business rates is the current local government financial settlement, which has already created disadvantage, whatever the Under-Secretary might seek to tell us.
Andrew Gwynne
I am sorry to intervene again, but this issue is a hobby horse of mine. The general unfairness of the baseline locks in the in-year cuts that we saw in 2010-11, and the very poor settlements that Tameside in particular will receive in 2011-12, 2012-13 and 2013-14, so that those will be the baseline for the 10 years of this business rate redistribution.
Helen Jones
My hon. Friend makes a very good point and I have discussed with representatives of his local authority how badly they will be affected by this. No one will believe the Under-Secretary when he tells us that fairness is built into the system and that the Government will take account of need. A man who cannot even find the right Lobby is not likely to be believed to be an expert on local government finance.
Many of the councils who will suffer most have the weakest economies, the highest unemployment and significant barriers to business rate growth, so it is likely that they will be caught in a spiral of disadvantage, with local people paying the price. Labour Members have a real fear that the link between resources and needs, which has already been eroded by this Government, will be undermined further. Authorities with a high tax base will benefit more from the same amount of growth than those with a low tax base, even after taking levy payments into account.
No account is being taken, as we have seen, of the differing council tax bases of local authorities. That means that those authorities with many properties in band D and above will benefit much more from the same rise in council tax than those with a majority of properties in the lower bands. Some councils will end up struggling to protect the most vulnerable, while others might find that they have been successful enough to reduce, or even abolish, their council tax. The result will be that the system of delivering local services will no longer be seen as fair or reasonable, with huge implications for people’s support for the system of business rates and council tax. We saw in the extreme case of the poll tax what happens when public confidence in a system of local taxation collapses—when they no longer see it as fair. I suggest that that is also a risk with this system.
Local Government Finance Bill
Debate between Helen Jones and Andrew Gwynne(12 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text
Helen Jones
Indeed—my hon. Friend makes a very good point. Later, we will debate the provisions for safety nets and how the Bill can cope with risks.
Andrew Gwynne
Will not some of the disparities about which my hon. Friend is talking be exacerbated by the new system? The analysis from the special interest group of municipal authorities—SIGOMA—shows that there will be an absolute decline over the next two years in funding across all local authority areas, that by 2015-16 some of those authorities will have recovered their position and that by 2020 there will be a huge disparity between the most rich and the most poor.
Helen Jones
My hon. Friend highlights a real risk of the Bill. All the modelling shows that the gap between rich and poor will become wider. That is a problem because, in my experience, local authorities have worked relentlessly to tackle these issues and to regenerate their communities. It is a long-term project, however, and it is much more difficult in some areas than in others for a whole host of reasons, including poverty, a local authority’s inheritance, its location and so on.
Helen Jones
I know the hon. Gentleman made a thoughtful speech on Second Reading, but he is wrong on both counts. First, there is nothing on the face of the Bill about resets. Secondly, resetting the whole system is different from the way in which the system is run in the meantime. The baseline has nothing to do with the number of public sector workers anywhere. The baseline is the current local government financial settlement, which we argue is completely unfair to many local authorities anyway.
Andrew Gwynne
Because many of the children’s services that my hon. Friend mentioned are statutory, is it not the case that local authorities will have to find the money to provide them? The real pinch will come in the budgets for non-statutory services. There will be huge differentials from local authority to local authority, with some able to provide libraries, parks and other wonderful things, and other local authorities barely able to make their statutory arrangements.
Helen Jones
Indeed. My hon. Friend hits on a point that is important to local government as a whole. Local authorities cannot avoid their statutory responsibilities, so other services are squeezed. In future we may well see richer authorities developing a Pickles park here and there and naming public libraries after this beneficent Secretary of State, but it will be very hard for other authorities.
We have included unemployment in the factors that the Secretary of State must take into account. There are a number of reasons for that. Unemployment increases ill health, it forces more families into poverty, and it is an indicator of the state of business in an area. But high levels of unemployment also increase the demand for local authority services. As one of my hon. Friends said earlier, it will increase the demand for council tax benefit, for example. As more people become unemployed, many more rightly receive discounts on other services, such as leisure services. So unemployment increases demand at the same time as locking the authority into a cycle of falling revenue.
The theory behind the Bill is that local authorities can resolve that problem simply by expanding their business rate base and attracting more jobs. This was the theory that the Deputy Prime Minister set out when he explained the Government’s proposals to council leaders. He said:
“The new system will start on a level playing field—where you progress from there is up to you.”
It is a wonderful thing to be a Liberal Democrat. They can conduct politics exactly as if they are writing a “Focus” leaflet. But in the first place, there is no level playing field. We have debated endlessly what we see is the unfairness of the current local government financial settlement, which forms the basis for rate redistribution and penalises the poorest local authorities most. The simplest statistic is the most telling and it bears repeating. The 10% most deprived authorities lose four times as much as the 10% least deprived. The cumulative cuts in per capita spending hit the poorest hardest.