Local Government Finance

John Redwood Excerpts

Wednesday 8th February 2012 Commons Chamber

[Grant Shapps]

I am extraordinarily grateful to my hon. Friend for raising that sensitive local issue, which she will understand I cannot comment on as a Minister with responsibility for planning. It is true that councils that have used procurement wisely, for example through online procurement, competitive working, ensuring that they follow through on getting a purchase order, which is pretty basic, and paying only when they can prove that the goods have been delivered, have saved millions of pounds.

[Mr John Redwood (Wokingham) (Con)]

Will the Minister confirm that next year he proposes absolutely no decline in aggregate Exchequer finance, which is going to be about level, and a £1 billion increase in total grants and special grants to local authorities? The Opposition are rather overdoing the gloom.

[Grant Shapps]

My right hon. Friend is absolutely right to pre-empt a later section of this message, which is that the reduction in local government spending power is now coming down to 3.3%. Last year it was 4.4%, so it is true, and it was pointed out many times, that the reductions were front-loaded in order to allow local authorities to adjust properly.

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[Grant Shapps]

I want to make a little progress so I will push on and then take further interventions.

I have already mentioned that an authority such as Hackney receives more than £3,000 per household while those such as Windsor and Maidenhead receive nearer to £1,500. Last year we said that no council should expect a reduction in spending power of more than 8.8%, and I am pleased to say that we have been able to stick to that commitment for the second year running. I also mentioned the £20 million transitional grant, which means that the average reduction in spending power is 3.4%—just a little higher than the figure for the authority of the hon. Member for Warrington North (Helen Jones), which she failed to mention when she intervened.

This settlement delivers on promises already made. It has been recognised across the House and throughout the ages that the revenue grant system needs to change. The previous Government recognised that when in power. Indeed, there were many false dawns under the previous Administration. They set up local government Green Papers and White Papers to look into the issue, and the balance of funding review—remember that? They also set up the Lyons inquiry. What did they do with those reviews? Precisely nothing. They continued with exactly the same system that we are arguing about today, and which, for all sorts of reasons, is far too complex and difficult to interpret or make much sense of.

[Mr Redwood]

I am sure we all welcome the £1 billion extra for schools and education, but will the Minister explain why there will be a 35% increase in environmental special grants? That looks generous given the circumstances.

[Grant Shapps]

I thank my right hon. Friend. One thing that every Local Government Minister knows is that there will always be a reason, a cause, a plea or a demand for expenditure to go into one area rather than another—not just geographic areas but subject matters. He tempts me down a slightly different route, but that illustrates the extent to which the current formula is bust. It is broken, and it was recognised previously that it needed to change, but nothing happened to allow that.

Rather than talking, the coalition is delivering fundamental reform of the local government finance system through the Local Government Finance Bill, which includes our proposals to repatriate business rates—a reform that will create better incentives for councils to drive growth, promote local enterprise and deliver local jobs. Councils will be in the driving seat to expand their local economy. That reform is about not just redistributing the proceeds of growth but creating the conditions to boost growth overall. It is about not just cutting up the cake differently, which is essentially the argument that we are having today, but making a bigger cake in the first place.

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[Hilary Benn (Leeds Central) (Lab)]

I welcome this opportunity to debate local government finance. I am conscious that we are entering a world of strange language—gearing and damping, floors and ceilings—and the Minister did not disappoint. I was slightly surprised, however, to hear so much about Greece and Italy, Ireland and France. Unless I am very much mistaken, when I last checked, those countries were not part of the local government funding settlement, but I stand to be corrected.

Local authorities provide services on which we all rely, and what they do has a huge effect on the quality of life of the citizens we represent and on the neighbourhoods in which they live. They are now having to deal, as every Member knows, with the biggest cut in resources that we have ever seen in our political lifetime. Councils have been forced to absorb a reduction in formula grant of almost 19.3% over the two years of the spending review. The cuts have been front-loaded. What that means, as the Local Government Association has pointed out, is that local government has borne the brunt of the reductions in the spending review rather than the burden being shared equally with other parts of Government.

Having heard the Minister’s contribution, it seems that he is still living on a completely different planet from the one on which communities and their councils have to exist. As the Institute for Fiscal Studies confirms, the total cuts to local government spending will outpace those of the public sector as a whole up to 2014-15.

[Mr Redwood]

We are discussing £72 billion in aggregate Exchequer finance for this year and next year, which is £1,200 for every man, woman and child in the country. That has to be taken off them in taxes in order to pay to local government. Will the right hon. Gentleman tell us how much more his party would like us to take off every man, woman and child in the country to make that Exchequer finance bigger?

[Hilary Benn]

My response to the right hon. Gentleman is that we would not cut so far and so fast, as he knows. We would certainly not have distributed the cuts in the fundamentally unfair way that this Government have done.

--- Later in debate ---

[Hilary Benn]

My hon. Friend is right. It is quite shocking that the Government have done this knowing what it will do, but at no time have they apologised, as they should, for the unfair way in which they have allocated these cuts, but it is time they did, because it is now clear that far from all of us being in it together, some are much more in it than others. This is not just about local authorities, because the same is true of funding for the fire service, which we are also discussing.

[Mr Redwood]

The right hon. Gentleman said that East Dorset and Basingstoke will gain money, but those districts do not get the increases for education and other county services. We are asked to approve a fall in East Dorset from £2.75 million to £2.5 million—a 10% fall—and a fall in Basingstoke from £6.74 million to £6.25 million, which is also quite a big fall because those districts will not get the other increases.

[Hilary Benn]

The right hon. Gentleman obviously did not listen carefully enough to the point I made. If he has not seen the figures produced by Newcastle city council he should do so, because it has looked at the impact of the cuts over three years and has taken account of transition grant and the new homes bonus allocation. In other words, it has looked at the total effect on those authorities of all the decisions the Government have taken, and that is what the figures show.

In relation to the fire service, there are brigade areas with a very high rate of incidents, such as Merseyside, Cleveland, Greater Manchester and West Midlands. What is happening to them? They are all facing reductions in funding per head, whereas areas with a lower rate of incidence, thank goodness, such as Hampshire, Royal Berkshire, and Hereford and Worcester, will get increases in their funding per head for the fire service. What that means for the losers is that fire stations are closing, pumps are going and firefighters are losing their jobs.