Local Authorities: Redundancies

Lord Beecham Excerpts

Wednesday 9th March 2011 Lords Chamber

Asked by

[Lord Beecham]

To ask Her Majesty’s Government what is their estimate of the redundancy costs to be met by local authorities in the current and next financial years; and what they forecast to be the impact on local authority budgets of the proposed restriction to £200 million of permission to capitalise those costs.

[The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)]

My Lords, the Government do not make any estimates of redundancies in local government. Decisions about managing workforce reductions in local government are now rightfully for individual councils to make as employers. Following representations, £300 million of capitalisation will now be available, which will provide important support in 2011-12. That cannot meet all restructuring costs: it will be for authorities themselves to assess how they best manage costs from their own resources, including from reserves.

[Lord Beecham]

I thank the Minister for her reply. However, in the light of the guidance note on capitalisation published by the ODPM in 2004 that capitalisation,

“does not in itself increase public expenditure”,

and the DCLG’s press release of 3 March stating that,

“The Government is not providing authorities with extra funding for this purpose, but simply allowing a managed and affordable extension of existing flexibilities”,

will the Minister invite her honourable friend the Parliamentary Under-Secretary of State Mr Stunell to correct his letter to council leaders in January stating that,

“Whether it is through borrowing or the use of capital receipts … capitalisation scores as public spending, and has national implications for the wider economy and deficit reduction programme”?

Will she also confirm that the Government will reconsider the position if, as anticipated, the cost of job losses in local government exceeds the £300 million thus far announced?

[Baroness Hanham]

My Lords, capitalisation impacts directly on deficit reduction plans. Capitalisation is capital being used for revenue so there is no doubt, I think, that what my noble friend said in his letter was correct. The permission for capitalisation—which has now been increased from £200 million to £300 million, largely because of representations being made—is not intended to be the full way of meeting redundancy costs. Councils are meant to look to their own resources to make up most of what they need when there is a reduction of staff through either voluntary or compulsory redundancies.