Local Authority Grants: Impact of Cuts

Lord Beecham Excerpts

Thursday 9th December 2010 Lords Chamber

[Lord Beecham]

My Lords, I congratulate not only my noble friend for introducing the debate but all those who participated in what has been a very thoughtful exploration of the issues which are faced up and down the country. In doing so I declare interests as—like the noble Lord, Lord Shipley—a vice-president of the Local Government Association and a member of Newcastle City Council, and in my case also a president of Age UK Newcastle and vice-president of Newcastle Council for Voluntary Service.

Those few noble Lords who were present two weeks ago may have had the dubious pleasure of hearing me address the House and refer to Engels. Today I want to begin by demonstrating the breadth of my exploration of 19th-century political philosophy by quoting another luminary, Karl Marx, who famously proclaimed that history repeats itself; the first time as tragedy, the second time as farce. I hasten to assure your Lordships that the modern Labour Party owes more to Marks and Spencer than to Marx and Engels, but I invite you to join me on a journey back into the past and to return to 1979, likened on a couple of occasions in a debate in another place the other day, to which the noble Lord, Lord Shipley, referred, to “Life on Mars”. I noticed rather surprisingly that Mr Pickles did not add the word “bars” to that phrase.

Nevertheless, as an exercise it is worth repeating because in 1979, as some noble Lords will recall, the noble Lord, Lord Heseltine, as he now is, campaigned on a platform of setting local government free and within six weeks announced the first round of financial penalties on overspending councils—of which, I confess, my council was deemed to be one—and, incidentally, then set off a chain of cuts and capping which went on for several years. At the same time, the new Government also increased VAT, although by considerably more than the present Government propose to do in a few weeks’ time.

So there is a sense of déjà vu—except for this: the cuts will be much worse this time. They are preceded by extensive cuts in June of this year; they embody 36 per cent cuts in formula funding and, as we heard from the noble Lord, Lord Adebowale, 45 per cent cuts in capital, which will have significant implications for both the private and voluntary sectors. I invite the Minister to indicate what estimate the Government have made about job losses in those sectors.

I congratulate the noble Lord, Lord Bates, on being the only Conservative Back-Bencher to speak in the debate; on being virtually the only one present during it; on coming from the north-east; and, like the Minister, although praying in aid the deficit—the standard mantra we hear from the government Benches these days—on not claiming, at least on this occasion, that the deficit arose solely because of the extravagance and expenditure of the Labour Government. Perhaps he recalls—as no one else on the Benches opposite seems to do—that the Conservative Party pledged itself to spend exactly the same amount of money at least until November 2008.

The noble Lord need not take it from me that there are serious issues here. I can refer him to the Liberal Democrat leader of Newcastle City Council pro tem, Councillor Faulkner, who warned the Deputy Prime Minister that the city cannot take another spending blow similar to the one made over the summer. He did that two months ago and then last week, in endorsing the approach of the north-east councils, he said:

“We believe the Government has been very slow to open its eyes about the impact on local government and in particular of not taking account of deprivation”.

He went on to say:

“It is going to be the most challenging four years that we have ever faced”.

An anonymous council—even in these days of WikiLeaks one has to respect some degree of anonymity—has decided that it will be making substantial cuts in its back-office services and £12.5 million-worth of cuts in children and young people’s services, £4.5 million in adult social care and £2.5 million in housing front-line jobs, exactly fulfilling the warning of the noble Baroness, Lady Eaton, chair of the LGA, that this would follow.

I would like now to deploy another 19th-century writer—this time it is not a political writer but the novelist Charles Dickens—in looking at the Government’s approach. We are being led through great expectations to a bleak house and eventually, of course, to hard times. In the context of local government we are being led by Mr Pickles, who brings all the qualities of that blunt northerner Wackford Squeers, together with some of the qualities of Mr Bumble, in his approach to this local government settlement. He was the first Secretary of State to settle, offering up the biggest cut of any department except Defra in percentage terms but actually seven times more in cash terms—the £5.6 billion to which people have referred—and heavily front-loaded, as others, including the noble Lord, Lord Tope, have said. He has so far refused to authorise capitalisation of redundancy costs, as referred to by the noble Lord, Lord Shipley, and I again ask the Minister to say how, if capitalisation cannot take place, the redundancies can be funded without affecting front-line services.

Faced with criticism from all sides politically in local government, particularly with regard to the effect of the cuts on the areas which are the most disadvantaged, the Minister who was first to settle is now scurrying around to be the last to extract concessions from the Treasury to mitigate the damage that would otherwise occur. To invoke Dickens again, he is a sort of Oliver Twist manqué. Oliver Twist asked for more, but he did not first of all offer half his dinner up in the workhouse as a sacrifice. However, in addition to that, Mr Pickles has engaged in some diversionary activity. He has used a smokescreen to virtually accuse councils of sitting on £10 billion of reserves, as if they were casually lying around. He ought to know that, of that amount, some £6 billion is earmarked; it cannot be used other than for authorised purposes—for example, pensions reserves, major repairs or capital. Capital cannot be used, of course, for revenue purposes unless specifically authorised, hence the request to authorise capitalisation to deal with redundancy payments. In fact, only £3 billion out of £68 billion of revenue is in unallocated reserves. In addition to that, some is in school reserves, and it is not evenly spread about.

An additional diversionary tactic was a rather squalid attack on the chief executive of the Local Government Association and his salary, and indeed on other chief executives promoted by the Secretary of State and the Minister for Housing. It was the same Secretary of State who appointed the chief executive of Doncaster Council at a salary significantly more than that of the Prime Minister. I agree with him that joint services should be brought to bear. There are savings to be made of that kind, but they will not be made overnight. Therefore there is a need to avoid front-loading, and to give the local authorities and others time to develop that approach. That includes, of course, Total Place, although I agree with the noble Lord, Lord Shipley, that progress so far is slow, and it is disappointing that there are only 18 pilots.

Obviously it is good that £2 billion less will be cut from social care than would otherwise be the case. However, it must be borne in mind, first, that the Local Government Association’s prognosis is that a 4 per cent increase year on year is required because of demographic trends. The Government appear only to accept something like 1.4 per cent. Secondly, the deployment of the National Health Service proportion has to be agreed with the National Health Service. It is not simply to be transferred. In any case, it looks very much as though the £2 billion surplus in the non-domestic rate accumulation will be applied effectively to pay for this; but that is money that ought properly to be in local government in the first place. Therefore it is a little much to claim the credit for that. There are issues that arise here. The Association of Directors of Adult Social Services says that the £2 billion over the next four years is good news, but only in a settled state—and, of course, we have not got a settled state, given rising demand and rising costs.

There are then some further questions for the Minister. First, is there an estimate of what is going to happen on eligibility criteria and of how many authorities at the end of the day will be extending assistance to those other than the most critical? That question was asked by the noble Baroness, Lady Sherlock. Secondly, what would be the impact on third-sector providers of social care? Thirdly, in view of the capital restrictions, what estimate has been made of the potential reduction in aids and adaptations? Several of your Lordships speaking in this debate have referred to the need to recognise that social care does not stand alone, a point made by my noble friend Lady Thornton and the noble Lord, Lord Low. A whole range of services are clearly connected with social care—housing, schools, transport, leisure and culture. All are relevant to adult services, not just for the elderly but for younger adults who may suffer from a disability.

In summary, it seems that the new localism is more about localising blame than localising opportunity and genuine decision-making. If I can congratulate the Government on anything, it is that they are going one better than Karl Marx, because on this occasion history is repeating itself at one and the same time as both tragedy and farce.