Financial Sustainability (Local Government)

James Gray Excerpts

Tuesday 7th January 2014 Westminster Hall

[Ms Stuart]

Indeed, and I shall make that case with regard to Birmingham. Presumably, a true liberal regards the freedom to fail as a freedom, and that is one of the freedoms that our cities have been given.

The cities Minister also said:

“The second thing is to liberate from the central government barons funding that can be better spent locally.”

I cannot improve on his observation. Quite a number of colleagues will agree, in different ways, that the current funding structure is not sustainable. If there were some great vision of how our cities can succeed, we could engage with that, but what is happening at the moment is that, to quote Sir Albert Bore, the leader of Birmingham city council:

“Politicians in Westminster are systematically dismantling services that maintain the very fabric of culture and community here.”

Birmingham’s total budget for 2013-14 was £3.4 billion. That sum has to cover a whole number of things that the council must do and a number of things that the council might do. The money comes from a variety of sources, and the structure of the system is virtually impossible to explain to our voters.

I am wary of quoting figures, for two reasons. One is that we throw the words “millions” and “billions” around as if the difference is a change of just one letter. I have always found it useful to remind myself that 1 million seconds is 11 and a half days, whereas 1 billion seconds is 31.7 years. There is a massive difference. The second reason is that whenever I think I have a handle on the cuts, things change. I turned on the television yesterday and found that the Chancellor was in the west midlands announcing another £25 billion of cuts. I am not entirely sure where they will come from.

The latest figure for Birmingham is that we need to find savings totalling just under £840 million between 2010 and 2018, including £120 million of cuts in the financial year 2014-15.

[Mr James Gray (North Wiltshire) (Con)]

The hon. Lady is making a powerful case for maintaining local government funding across the nation—not just in cities, but everywhere else—but I have one question. Those cuts are necessary because of the financial situation that the Government found themselves in three years ago. Would she prefer savings to come from local government or national Government, and, if the latter, in what areas?

[Ms Stuart]

That is a fair point, but as I will come to later, by the end of this Parliament local government will have taken 33% of the cuts, whereas Whitehall will have taken 12%. I will also suggest some ideas that would not be robbing Peter to pay Paul but would instead give greater liberty, in a managed way, to our cities to survive. At the moment, those areas in the greatest need are being cut most.

This might sound slightly boring, but let us look at the figures per dwelling. In Birmingham in 2014-15, using the Government’s preferred measure—that of spending power—we will lose £145.59 per dwelling, a cut of 5.3%. The national average is £71.58. Leafy Wokingham—Wokingham is not popular in my constituency because of the comparison, although one of my local councillors comes from there and takes slight umbrage that we keep quoting it—gets an increase in funding of £5.20, or 0.3%. In 2015-16 it will be even worse: Birmingham will lose 5.6% and Wokingham will have an increase of 3%. There is a whole list of shires and counties that are also getting an increase. At every turn, the combination of grant reduction and budget pressures widens to the point where—let us be clear on this—it is no longer a question of cutting services: some services simply will not be delivered.

--- Later in debate ---

[Mr Gray]

Like the hon. Member for Birmingham, Edgbaston (Ms Stuart), the hon. Gentleman makes a powerful case for maintaining spending on local government. I disagree with his thesis that cuts are deeper in urban areas than rural areas, but let us leave that on one side for a moment. If I am right in guessing that the hon. Gentleman is saying that spending must be maintained at local government level, will he, a Liberal Democrat, tell us which central Government budgets he would like cut so that the local government settlement could be increased?

[John Pugh]

I am not necessarily making a case for increasing the local authority settlement. I am mainly making a fair case for different distribution, and for spreading it over more years, to enable local authorities to make the appropriate adjustments.

My fourth point, which has not been stressed in the debate so far, is that local authority spending is now significantly unbalanced. Because of the nature of the cuts, local authorities have had to concentrate on their statutory services, which primarily means social services. Most ordinary punters and electors do not ordinarily interact with social services. That is a democratic problem as well as a financial one. We have all heard of the graph of doom and the view that some local authorities will end up spending on nothing but social services. If that happens, neither electors nor the authorities will welcome it.

The hon. Member for Birmingham, Edgbaston is right about the situation. She did not say that it was not sustainable; she said that the trajectory we are on is not sustainable, and I agree. Various things could be done about it, and she suggested some. I shall not cover the same ground that she did. We can spread good practice and develop community budgets—the Select Committee did some work on that. We can talk about possible savings from the integration of health and social care, which would be good, or about possible benefits from the repatriation of rates, and accompanying incentives.

We can talk about things on a grand scale, as the Local Government Association is doing at the moment with the Rewiring Public Services campaign, which would also be good. All those ideas are ways forward, but they will not work at all unless we sensibly and intelligently—starting in this Chamber—stop the dishonest conversation and look at the facts for what they are. If we concentrate on formulae designed to present the Government’s or a local authority’s case polemically in a particular way, we will never get central and local government speaking the same language, or succeed in making local authorities sustainable as a result.

[Steve Rotheram (Liverpool, Walton) (Lab)]

It is a pleasure to serve under your chairmanship this afternoon, Mr Crausby. I congratulate my hon. Friend the Member for Birmingham, Edgbaston (Ms Stuart) on securing today’s debate.

I was disappointed at the contempt with which the Minister dealt with my question to him in response to the statement on the local government finance settlement before Christmas. Liverpool’s settlement is so dire that I offered personally to fund two rail tickets for him and the Secretary of State, so they could visit my city and look at the books. If they truly believe that Liverpool has not done everything they say a responsible council should do to mitigate the cuts, surely the Minister should have bitten my hand off and accepted the offer. It is still open—to avoid confusion, I want to make it clear that it would not cost taxpayers a penny: I would fund it from my own pocket—so perhaps the Minister will respond.

The cuts to Liverpool’s funding are deadly serious. They deserve not light-heartedness or levity, but sombre deliberation and scrutiny. That is why I felt so strongly about the lack of an adequate response from the Minister in December. Far from being a good news story for local government, as he injudiciously claimed, his statement was a disaster for local government. He also argued that the cuts he announced were fair to all parts of the country. However, far from that being the case, they disproportionately hit core city regions—those least able to absorb their severity and those with lower levels of gross domestic product.

I want to concentrate on what that so-called good news day for local government meant for Liverpool. Unsurprisingly, but none the less shockingly, Liverpool city council was once again hit hardest. The latest cut of 5.5% will have a devastating impact on a city that is working tirelessly to pull itself up by its own economic bootstraps. Even the Prime Minister has recognised the work that Liverpool has done to cut out waste and restructure its services.

Indeed, despite the latest savage cuts, Liverpool’s entrepreneurial spirit is alive and kicking, and in a few months we will host the international festival for business on behalf of the UK. Hundreds of thousands of businessmen and women will once again be able to see our city and feel the warmth of our welcome. That will happen despite what the Government are doing to us, but our resilience is legendary. It is crucial to understand that Liverpool, like all the core cities, is asking not for handouts but for a fair local government settlement, so that when the Government wield their axe it will not be hit disproportionately.

[Mr Gray]

I have great sympathy when the hon. Gentleman speaks up for his wonderful city, but I feel uneasy about the way the debate is centred on how the cuts focus on poor areas and cities. Leafy, Conservative Wiltshire this year received 18.2% cuts; next year it will have 26.8% cuts; the year after that they will be 7%. We are going from a revenue support grant of £76 million down to one of £45 million. That is a great deal deeper than Liverpool’s.

[Steve Rotheram]

That is absolute nonsense. It is possible to pick individual statistics, but cumulatively the cuts and other Government policies have a disproportionate effect on my city. It is a greater effect than the hon. Gentleman could ever understand.