Local Government Finance

Jon Trickett Excerpts

Thursday 17th December 2015 Commons Chamber

[Jon Trickett (Hemsworth) (Lab)]

I am grateful for advance notice of the statement. That is particularly welcome given that the Secretary of State’s predecessor rarely turned up in person on these occasions, and when he did it was often with a snarl, rather than with the Secretary of State’s customary smile.

Labour Members join the Secretary of State in rightly paying tribute to local councils and all their staff. The statement contains a number of details that look welcome, and we shall return to them in due course. Sadly, however, the central message is the same as always: cuts, cuts and more cuts.

The Secretary of State admits to a cash decrease of £200 million between now and 2019-20, but he forgets to say that the additional spending pressures amount to at least £6.3 billion, according to the Local Government Association. That is the scale of the cuts that will be inflicted on our communities by this settlement. What calculation has he made of the additional cost to local government caused by inflation? What about demographic change, which means that more elderly people need support than ever before? What about the additional statutory duties that he is giving to local government? How will all that be paid for?

This settlement massively reduces the central Government grant to local government. Does the Secretary of State agree with the House of Commons Library, which has calculated that even if the central Government grant was maintained at its current level throughout this Parliament, the Government would still run an overall surplus on the revenue account of more than £4 billion a year in 2019-2020? Is it not the truth that these cuts are a political choice made in No. 11, rather than an economic necessity?

Does the right hon. Gentleman agree with his Conservative colleague, Lord Porter, chair of the LGA, who said:

“It is wrong that the services our local communities rely on will face deeper cuts than the rest of the public sector yet again and for local taxpayers to be left to pick up the bill for new government policies without any additional funding. Even if councils stopped filling in potholes, maintaining parks, closed all children’s centres, libraries, museums, leisure centres and turned off every street light, they will not have saved enough money to plug the financial black hole they face by 2020.”?

The Government promised not to cut the budget for the NHS, but then they delegated public health functions to councils. Now they have cut that budget. Does the Secretary of State think that anyone is fooled when the Government act in such a way? Is it not a false economy to cut council funding for adult social care and public health? What is his estimate of the impact of those local government cuts on the NHS? Is it not obvious that if there is less care in the community and preventive health action by councils, there will inevitably be more pressure on more expensive acute provision within the NHS? Is that not the worst kind of Osbornomics? It is short-termist and tactical, rather than strategic and long term.

Does the Secretary of State accept that some of the councils facing the greatest needs in social care have the least ability to raise extra funds by levying the 2% precept? What about the northern powerhouse? Does he agree that cuts to northern local councils amount to tens of millions of pounds more than the relatively small sums that constitute the so-called powerhouse? No wonder the latest economic indicators show the north falling further behind.

The Minister mentioned council reserves, as if he thinks that councils are underspending on the revenue account and thereby building them up. What is his estimate of the quantity of the reserves earmarked by the Government for the Government’s specific objectives? What is his estimate of the amount of the reserves that are in schools’ accounts, and therefore inaccessible to councils? In any event, is it not the case that the reserves are often built up from asset sales and should not generally be used to prop up day-to-day spending?

The Secretary of State mentioned business rates. It is right that the money should be directed into town hall budgets—we welcome that—but the question he has failed to answer is this: how will business rates be distributed? Given that that income is notoriously uneven as between one council and another, how does he intend to make an equitable distribution of those funds? Does he accept the wise words of the Institute for Fiscal Studies:

“If you’re somewhere like Westminster, it’s easier to win from this system than if you’re somewhere like Wolverhampton”?

What estimate has he made of the distributional impact of the settlement on different councils? Does it maintain the trend of the past five years, when poorer urban councils lost out relative to more prosperous areas? Does some of his announcement not make the situation worse? The Joseph Rowntree Foundation has said that local authorities in deprived areas have seen cuts of £220 a head while more affluent areas have seen cuts of £40 a head.

Will the Secretary of State agree to look once more at the formula by which the Government distribute support to local government? He was not the author of the formula, but will he now re-examine the patent injustice in the way in which the money is distributed?

Finally, the country needs a new political and democratic settlement. A renaissance of democratic, relatively fiscally autonomous and locally accountable councils needs to be at the heart of a new settlement. The recent floods showed councils and their employees at their best. We welcome any additional funding to help with flooding, and we also welcome the multi-year funding that the right hon. Gentleman talked about—the Opposition proposed it in the Cities and Local Devolution Bill but the Government voted against it. Will he come back to the House with more details as soon as possible?

The Secretary of State pays lip service to local government renaissance, but does not the announcement, with top line cuts of billions of pounds invariably falling on the poorest areas, reveal that the Treasury’s heavy hand means that the Government are unlikely to deliver the renaissance that is so necessary for our country?

[Greg Clark]

In the spirit of Christmas, I will be charitable to the hon. Gentleman, who understandably wrote his response before hearing the statement. Far from its being a tactical settlement—that is how he put it—there could be nothing more strategic than a settlement that, for the first time ever, gives what local council leaders have long called for: the certainty of a four-year funding settlement, previously denied them, which gives them the chance to manage their affairs in exactly the way they want.

As the hon. Gentleman might have expected from our previous exchanges, during the past few months I have spent a lot of time with local government leaders, listening to them talk about the most important pressures on them and the most important concerns that they would like to see reflected. They communicated very clearly that funding adult social care was the major priority for all kinds of councils, and in this settlement we deliver the extra resources that we promised. The distribution among the authorities reflects that—something I would have thought he would give us credit for.

On the overall settlement, few authorities would even a few months ago have expected the Secretary of State for Communities and Local Government to be able to announce, in effect, a flat cash settlement for local government for the whole of the spending review period.

The hon. Gentleman mentioned reserves. The fact is that local council reserves have increased over the past five years from £13 billion to more than £22.5 billion—a 71% increase. We do not assume in the settlement that local councils will make use of them, but they have the opportunity to do so because of the four-year settlement we have granted them.

The hon. Gentleman also mentioned the head of the LGA. I have met all the leading groups in the LGA, including his Labour colleagues. Because we are the biggest party in local government the hon. Gentleman suggests that the LGA is Conservative-controlled, but I have met local government leaders of all sorts. Lord Porter regards our discussions as fruitful and thinks that this is a fair financial settlement for all types of council and addresses the concerns they have put to me during the past few years.

Let me just refer to the expectations and the advice we received from those on the Labour Front Bench. When we had the financial statement last year, the previous shadow Secretary of State said that what councils needed was help with longer-term funding settlements so they could plan to protect services, and more devolution of power so they could work with other public services locally to get the most out of every pound of public funding, and that nowhere was that needed more than in social care. That is exactly what we deliver in this spending review settlement: prioritising social care, exactly what local government asked for; multi-year settlements, for which local government campaigned for many years; and the devolution of power to councils through the localisation of income, with councils responsible to electors and not to Whitehall.