Local Government Finance
Debate between John Hemming and Clive Betts(10 years, 2 months ago)
Commons ChamberRead Full debate Read Hansard Text
Mr Clive Betts (Sheffield South East) (Lab)
I want to address three fundamental unfairnesses in the settlement. The first is the lateness with which the Government made their decisions. Reference has already been made to the threshold for council tax increases. It is simply not fair for local councils to find that out when many of them had already come to their budgetary decisions. The Local Government Chronicle has just done a survey of 160 local council finance officers, 14% of whom admitted that they were basically scrambling around making changes to their budgets at the last minute in an attempt to anticipate what the threshold would be. Local authorities have a difficult job anyway, without the Government making it unnecessarily more difficult in that way.
Secondly, let us look at the cuts that local government is once again facing compared with the rest of government. Around 20% of the grant to local authorities will be cut in this settlement and next year’s. That is far bigger than the cut to other Departments. Even by the Government’s own figures for spending power, the cut over those two years, excluding the ring-fenced grants for public health and the better care fund, is around 10%. Again, that is much bigger than for other Departments. The Local Government Association has calculated the real-terms cuts in Government support to local authorities over the course of this Parliament at 40%—more than twice that for other Departments. Are the services that people receive from their councils—road sweeping, refuse collection, public health, checking food hygiene, local leisure centres and parks—really less important than the services provided by all other Departments? I do not believe they are, but if they are in the Government’s mind, they have to justify that as the basis for extra cuts for local authorities.
Let us look at the distribution of unfairness among local councils. We heard an interesting analysis earlier from a number of my hon. Friends who asked the Minister questions. Essentially it boiled down to this. Councils with the highest grant have had the highest cuts; those councils had a higher grant because they had higher needs; therefore, councils with the highest needs have had the highest cuts. That is the logic of the situation.
John Hemming
Earlier the shadow Minister was unable to tell the House how he would allocate the cuts that Labour would make to local government. Has the hon. Gentleman been told what the Labour party would do and, if so, will he tell the House?
Mr Betts
I am sorry, but if the hon. Gentleman wants me to invent a grant settlement in the course of a six-minute speech, I am not going to oblige him.
When the Minister appeared before the Select Committee on Communities and Local Government, he admitted a fundamental change of Government policy, away from a needs-based system. The only needs taken into account are those reflected in the baseline of business rates, which started with the new arrangement in 2013-14. The new term—the settlement funding agreement—is really composed of two parts: the business rate base and the revenue support grant. As the business rate base is held constant or increases with inflation each year, the totality of cuts that the Government make falls on the revenue support grant element of the settlement funding agreement. Within the revenue support grant is something called the council tax resource equalisation adjustment. That has been cut by 25% this year, yet it is the mechanism by which extra resources are given to the poorest areas with the most deprivation. Those areas have had the biggest cuts, with resources transferred away from them. That is how the mechanism works in practice.
We can add to that the new homes bonus, which of course is not a bonus from Government, but is top-sliced from other Government funding—on the basis, therefore, of the grant that authorities already have—and then transferred to authorities according to the homes they are building. The Minister might say that that is an incentive to build homes—that is not what the Housing Minister said last time he was asked—but in the end, that money comes from a top-slice of grant, which means that those authorities with the greatest need and the greatest amount of grant pay the most into the system in the first place, and most of them lose out in the totality of the process.
Reference has already been made to my authority, Sheffield. The Minister likes to make comparisons with other areas that have not had as much grant in the past, saying that the Government are only doing a bit of evening up. Wokingham does not have the same needs as Sheffield, but in 2015-16, if we exclude the ring-fenced public health and better care fund grants that can be spent only on what they are allocated for, the spending power of Sheffield will be the same as that of Wokingham. That is impossible to justify according to anybody’s definition of fairness and reasonableness. Leeds already has less spending power and Newcastle will have less in two years. That is simply unfair. Does anyone on the Government Benches want to justify the idea that Wokingham’s spending power after 2015-16 should be higher than Sheffield’s? That is the system that Ministers are creating.
As the Minister knows, I am not against bringing some incentives into the local government finance system. I understand the desire for some localisation of business rates. I am in favour in the longer term of councils having the chance to raise more money at a local level rather than being dependent on Government, as an important element of localism involves freeing councils up to raise funds as well as giving them more powers.