Local Government Budgets

Jack Dromey Excerpts

Wednesday 12th January 2011 Westminster Hall

[Jack Dromey (Birmingham, Erdington) (Lab)]

It is a pleasure to serve under your chairmanship, Mrs Brooke. I, too, congratulate my hon. Friend the Member for Coventry South (Mr Cunningham) on securing this important debate on the impact of what the Government are doing to local government in the west midlands.

I start with an overview. The Government have made choices about the speed, extent and distribution of the cuts, but the cuts are too fast and too deep, and are targeted at deprived communities and vulnerable people. There is a consensus across the House on the need to reduce the deficit, but there are alternatives to these unfair and unreasonable cuts.

The coalition Government have made their choice. They have chosen to hit local government with bigger cuts than Government Departments, and they have chosen to front-load them so that the heaviest cuts fall in the first year rather than being spread more evenly over the next four years. They have also chosen to impose the cuts on the most deprived areas and on lower and middle-income communities, rather than distributing them more fairly. My right hon. and hon. Friends were therefore right to highlight the impact that the cuts will have on the great cities of Coventry and Birmingham.

Before proceeding to examine the impact of the cuts on local government in the west midlands, it is important to tackle the economic mythology that lies behind what is proposed. It is vital that that economic mythology, which has been propagated in defence of what the Government propose, is understood for what it is—mythology. We have heard, and will doubtless hear once again, that the cuts are unavoidable. We have heard, and will doubtless hear once again, that these deeply damaging cuts to local government are all Labour’s fault. However, that is part of the Tory-led coalition Government’s approach of rewriting history in order to justify their ideological vision.

Let us be clear: it was irresponsible bankers that caused the credit crunch and the deficits across the world that followed. We have seen recession on all continents and in all countries. My hon. Friend the Member for Coventry South was right to say that it was decisive action taken by the Labour Government that saw growth return and borrowing fall, and that saw jobs being protected. However, that action was opposed at every stage by the Conservative party.

Borrowing has risen in the UK and throughout the world as we tackle the global financial crisis. It must be brought down with a clear deficit reduction plan that has growth at its heart. It is a deceit for the Conservatives to claim that irresponsible spending is the reason why borrowing is high. Before the global financial crisis, Labour had paid down some of the debt. In 2007-08, as the crisis hit, the UK had the second lowest debt of the G7 countries at 36.5% of GDP. It was low because we had chosen to pay off the debt, reducing it from the 42.5% that we inherited from the previous Conservative Government. Borrowing rose because of the global financial crisis, and the deficit was unavoidable—but the Tory-led coalition’s austerity programme is not.

[Mr Jim Cunningham]

It is worth pointing out that when we were in government and dealing with the crisis, we had a triple A credit rating. We had 14 years to pay off any borrowing. I note that the Government have totally ignored that. I also note that although George W. Bush refused to bail out Lehman Brothers, in the last month of his presidency he allocated billions of dollars to help the banking system in America. The Tories conveniently forget about that; they are on planet Cameron.

[Jack Dromey]

My hon. Friend is right. The leadership given by the Labour Government was followed worldwide. Had it not been for that leadership, we would have seen not recession but a prolonged slump over a decade and more.

No major economy is cutting its deficit at the reckless pace being followed by the UK. The Tory-led coalition’s plans to tackle the deficit, which go too far and too fast, are not only avoidable; they are downright dangerous. However, nowhere are they going as far and as fast as in local government. We should consider the depth and speed of the cuts, and the fact that the Government are in denial about the impact of their choices.

The Secretary of State for Communities and Local Government was so keen to curry favour with the Prime Minister and to become a member of the Chancellor’s star chamber that he signed up to huge front-loaded cuts for local councils without putting up a proper fight. As a result, town halls throughout the country will lose an average of 27% of funding over the next four years, compared with an average of 11% for Whitehall. The Government have also chosen to front-load the cuts, so that the heaviest reductions will fall in the coming financial year. Councils have only until April to decide where to reduce spending. Coventry and many west midlands authorities face cuts to their formula grants of above 10%. With the added pressure of the loss of specific grants and the removal of ring-fencing, those councils must find spending reductions of more than £200 million in 2011-12.

It is a problem not only in the west midlands. The Association of North East Councils, a cross-party group, has said that the Government’s proposed local government cuts are “undeliverable” for some councils; and the president of the Society of District Council Treasurers has called the front-loading “disastrous”. The Secretary of State has not been willing to admit that the cuts are front-loaded; nevertheless, it is clearly another choice that was made by the Government.

Many authorities will be forced into taking damaging crisis measures. The hon. Member for Nuneaton (Mr Jones) is absolutely wrong: it is not true to say that local government was expecting the scale and speed of the cuts now being imposed upon it. Local government faces much deeper and faster cuts than expected, and they will come about in a few months’ time. Indeed, the Conservative chair of the Local Government Association said precisely that. That gives councils no time for innovation or to think of efficient solutions. Instead, there will be huge job losses and cuts to front-line services; and voluntary organisations funded by councils in the midlands will also face cuts.

Why is local government taking a 27% front-loaded cut, when Whitehall faces an average cut of 11%? Did the Government consult local authorities on the front-loading and other aspects of those cuts, and what steps did the Government take to satisfy themselves that the proposals were reasonable and workable? I suggest that the Government are in denial on all fronts.

The impact of the cuts is clear. The Local Government Association has calculated that 140,000 jobs will be lost in 2011-12. The Government deny that—or do they think that, as in the 1980s, unemployment is a price worth paying? The LGA said that councils will need about £2 billion for redundancy. The Government deny that, and have set aside £200 million to meet the cost of those job cuts. The Government have no idea of the cost of the redundancies, nor of the human cost of rising unemployment. The private sector, too, will be hit hard. For every job lost in local government in the west midlands, one job will go in the private sector.

The Government say that front-line services in the midlands can be protected. Before the general election, the Prime Minister said:

“But what I can tell you is any cabinet minister if I win the election, if we win the election, who comes to me and says, ‘Here are my plans’ and they involve frontline reductions, they’ll be sent straight back to their department to go away and think again.”

I would like to know the precise nature of discussions between the Secretary of State for Communities and Local Government and the Prime Minister. However, it is clear from what is happening in the west midlands that front-line services will be hit—and hit hard.

Birmingham city council, which is run by Conservatives and Liberal Democrats, has already announced measures to restrict social care funding to those assessed as “critical”, the highest level at which eligibility is set. Those people with substantial or moderate needs will instead be signposted to private and voluntary sector providers.

In Birmingham, children’s social care services are likely to see cuts of £10 million in 2011-12 and £16 million in 2014-15. Youth services will be slashed to save £3 million in the next financial year, and up to £4 million in the following year. Those cuts are just part of the £170 million that will be taken out of Birmingham city council’s budget. Much-needed services to the people of Birmingham will be lost.

The leader of Coventry city council has described the cuts as hideous, saying that the people of Coventry are paying the price for the bankers’ follies. My hon. Friend the Member for Coventry North West (Mr Robinson) was right to say that the cuts are not just restricted to local government. He pointed to the impact they will have on the west midlands police service. Up to 2,400 jobs are set to go, with more than 1,000 officers going over the next 12 months.

As my right hon. Friend the Member for Coventry North East (Mr Ainsworth) rightly said, the proposals are grotesquely unfair. There are many criticisms one can make of them, but the strongest must be that they have a disproportionate impact on deprived areas and on vulnerable people. In his statement to the House, the Secretary of State said that he sought to achieve

“a fair and sustainable settlement for local government…that is fair between different parts of the country.”—[Official Report, 13 December 2010; Vol. 520, c. 679.]

Yet data from the Department for Communities and Local Government demonstrate exactly the reverse. Even on the Government’s own measure of revenue spending power, the west midlands is being hit disproportionately hard compared with the leafy shires of Surrey and the Bracknells and Wokinghams of this world. Data from the House of Commons Library make that absolutely clear. They show that the most deprived authorities in shire districts will receive an 8.5% cut to their revenue spending power, while the least deprived face only a 4.9% cut. Wokingham borough council, the least deprived unitary authority in England, will have a cut to its revenue spending power of just 0.6%. The Government have chosen to hit hardest the regions that are already hard hit, and that includes the midlands.

My hon. Friend the Member for Birmingham, Northfield (Richard Burden) was right to say that the city of Birmingham, which is the 10th most deprived authority in Britain, faces cuts on a huge scale—£170 million next year. Yet, Solihull, right next door and ranked 199th in the deprivation index, will see a cut of less than half that, at 3.5%.

We all agree on the need to cut the deficit—of that there is no doubt—but there is an alternative to the speed, extent and distribution of these cuts to local government budgets over the next four years. The cuts are too deep and too quick. They will have a devastating impact on communities all around the country, with the most dramatic impact being felt in the west midlands. The Government have failed to listen to the concerns expressed by the communities and local authorities of the west midlands. The Opposition are determined to speak up for the communities and councils of the west midlands, and we call on the Government to rethink these cuts before lasting damage is done to the very fabric of our society and the most vulnerable within our communities.