Local Government Finance (England)

Debate between Helen Jones and Graham Stuart

Wednesday 13th February 2013 Commons Chamber

[Helen Jones (Warrington North) (Lab)]

This has been a very interesting debate, with some thoughtful and well informed contributions from my hon. Friends, and even from Members on the other side of the House, especially the hon. Member for North Cornwall (Dan Rogerson). He made some sensible points about the needs of rural areas, and also managed to nip out to attend mass on Ash Wednesday.

I do not have time to go through all the contributions from my hon. Friends, but they have highlighted the unfair nature of this settlement, and how shambolic it has been. It arrived late, and different grants dribbled out at different times, making it very hard for local councils. The Government could not even get basic calculations right. They miscalculated spending power, because they double-counted. They came out with alternative notional amounts that would not only have meant some councils holding a referendum if they wanted to increase council tax by less than 2%, but some having to do so if they wanted to freeze it—and the Government lecture councils on efficiency.

There is no doubt that this is a very difficult settlement for local government. It is so difficult that even the Minister’s friends are starting to complain. Councillor Bob Banks from Wychavon council has said:

“The general thrust is that we’ve been given a lousy funding settlement by the Government which will affect us very badly.”

The Local Government Association, which is Conservative-controlled, estimates that the funding gap will be £16.5 billion by 2019. We have heard about the Secretary of State’s 50 ways to save, but even he cannot think that sacking the chief executive and putting a coffee shop in the library will raise £16.5 billion.

We heard from the Minister—I think someone described his statement as rather bombastic—who said that the settlement was fair. A settlement that ensures that the 10 most deprived authorities in the country are taking spending cuts six times higher than the 10 least deprived is not fair by anyone’s estimation, however much the Government try to use smoke and mirrors to cover it up. That is indeed what they have done. First, they changed the base—the 2012-13 funding base—by including in it cuts that do not start until the next financial year, including cuts to council tax support, to early intervention grants, and to grants for preventing homelessness. Then they added in the public health grant, but that is not only ring-fenced, it is a grant for new burdens on local authorities, so it cannot be used to calculate year-on-year changes.

The reason for those changes is very simple: they want to make it look as though the cuts in spending power are less than they are. But we know what they are. There is a 33% cut in funding for local authorities over the spending review cycle. For some authorities, of course, it is much worse. The Secretary of State has taken to giving out spending power cuts per dwelling now, rather than per person, but even on the Government’s own figures the unfairness is clear. Over the next two years, Knowsley will lose £206 per dwelling, Surrey will lose £14, Camden will lose £200, Wokingham—our favourite council—will lose £43, Liverpool will lose £184, and Windsor and Maidenhead will lose £46. At least we can grant the Tories the merit of being consistent: they always take money from the poorest people, whether it be through a bedroom tax for the very poorest and a tax cut for millionaires or attacking the poorest local authorities in the country. We can rely on them to be consistent.

Perhaps it is not quite the same for the Liberal Democrats, whose leader said in the local elections last year:

“We stand for the whole country not just parts of it”.

Well, if he looks at the heat maps for where the cuts fall, I doubt whether he would say that in the north-east, in the north-west, in inner London boroughs or in our big cities—even in what he used to call “my city of Sheffield”. His city of Sheffield is taking a £50 million cut on top of the £140 million it has already taken. Of course, it will not affect him, because he does not live there.

Then we have the smoke and mirrors applying to the rest of the grant. We have heard about the new homes bonus. In fact, the money for that bonus is taken out of the formula funding by a straight percentage cut, but its distribution is related to council tax bands, which means that local authorities with a higher tax base gain more than those with a lower tax base. That is why Newcastle will lose £6.4 million and get back £3 million; and why Knowsley gets only 15p for every pound it is top-sliced. “To them that hath shall be given” seems to be the mantra of this Government. That is why in this settlement, the relative needs block has been cut by over £500 million. It is because this Government are not interested in funding for need.

The same is true if we look at the early intervention grant. Money in the settlement has been top-sliced supposedly to account for nursery places in schools for two-year-olds. In the autumn statement of 2011, however, the Chancellor promised that that would be new money. It is not new money; it is money taken from some of the most deprived children in the most deprived areas of this country. By the end of next year, the funding gap will be £488 million—and it will go on rising. I do not know how any Liberal Democrat who has trumpeted the need for support for the poorest children can possibly vote for such a settlement.

Let us look at the other part of the settlement—the localisation of business rates. The Government have determined local councils’ allocation based on a two-year average, but their own consultation recommended a five-year average. The reason is very simple: it was to reflect appeals over a full cycle. Now under great pressure, they have put money back in for appeals, but it is nowhere near the costs that local councils will face. What will happen when the appeals come in? Councils will have no choice but to cut services yet again to fund backdated appeals.

The Government have, of course, come up with a figure by which they expect business rates to grow. No one knows quite how they have reached that figure. I think that they have probably plucked it out of the air. The Office for Budget Responsibility has been wrong in every estimate it has made of business rate income since it was set up. It has always overestimated it. So, local authorities are then told to grow their business rates. They must bring in more jobs and businesses, but they are facing a flatlining economy and a double-dip recession. The Government have no plan for growth, yet they lecture local authorities on promoting it. It is like King Herod lecturing people on child care. What is more, they make it more difficult for the poorest economies because of the amount of money they are taking out of them.

Let us consider the reductions in council tax benefit funding. Birmingham alone will lose at least £10 million. Newham will lose £3 million, and Gateshead £2.9 million. Only a fraction of that will be returned in transition grants. Then there are the benefit cuts. Liverpool will lose £7.3 million per annum in bedroom tax alone, and Knowsley will lose £3.4 million. Newcastle estimates that the incomes of 27,000 families will be cut as a result of the Government’s tax and benefit changes. That money would otherwise be spent in local shops and businesses, funding the local economy. The Government take money away from the local economies that are struggling most, and then lecture authorities on how to grow those economies.

[Mr Graham Stuart]

Will the hon. Lady give way?

[Helen Jones]

I am sorry, but I must end my speech in a minute.

Nothing could better illustrate the doublethink that prevails in the Department, and that is why we will vote against this settlement tonight. It is unfair. It takes money that they need from the local economies that are struggling most. It does not help them to grow, because it is economically illiterate, divisive and ill-conceived. I urge my hon. Friends to join me in voting against it.

Local Government Finance Bill

Debate between Helen Jones and Graham Stuart

Tuesday 24th January 2012 Commons Chamber

[Helen Jones]

I am going to make a bit of progress, because we have to get through this.

The way to avoid those problems is to have a reset at regular intervals. Some have suggested three years, and some five. We have opted for three years in our new clause 7, because we believe that local authorities have become used to three-year financial settlements and that they have operated very well. That option is also in line with the responses to the consultation, where only 23% of respondents felt that 10-year resets were appropriate. So much for the Government taking note of the consultation.

In new clause 5, we have also suggested that local authorities should have a right to be consulted each year about whether a reset is required before the Secretary of State publishes the local government finance report. We have done that because we think that local government is the best judge of what is happening on the ground. It should be treated as a partner in the process and allowed a say. Councils would be able to make such representations if they felt that unforeseen problems had been discovered, if major changes had occurred or simply if the system was not working as the ever-optimistic ministerial team assures us it will. Such a mechanism would recognise the key role that councils play in representing communities. That right is fundamental, if we in this House believe that councils have a democratic mandate of their own—as I think we all do—and should be able to participate in the process. The Secretary of State would have to consider representations received, and publish his decision and the reasons for it.

[Mr Graham Stuart (Beverley and Holderness) (Con)]

rose—

[Helen Jones]

If the hon. Gentleman will forgive me, I want to wind up, because others want to get in before 10 pm.

We believe that such a proposal would introduce more clarity and accountability into the procedure. We have often been told—particularly by Government Members—that sunlight is the best disinfectant. We now have a chance, with our new clause, to let a bit of sunlight into the DCLG. We believe that both our new clauses would improve the system no end. It might help, Mr Amess, if I give the Committee notice that we will seek a vote on new clause 7. I commend new clause 5 to the Committee.