Lord Beecham
Main Page: Lord Beecham (Labour - Life peer)Local Government Finance Settlement
Lord Beecham Excerpts
Lord Beecham
To move that this House takes note of the Local Government Finance Settlement and its implications for the future of local government.
Lord Beecham (Lab)
My Lords, I look forward to hearing the maiden speeches of the right reverend Prelate the Bishop of Southwark and the noble Baroness, Lady Pinnock, of Kirklees in Yorkshire. They, and perhaps others of your Lordships’ House, may recall a well known broadcaster from Yorkshire—one Wilfred Pickles, whose catchphrase was, “Give him the money, Mabel”. The local government world would be surprised if the Secretary of State proved to be related, though the Chancellor might be forgiven for seeing in him the very reincarnation of his namesake. This after all was the first Minister across the door of Number 11 in 2010, offering up to the Treasury the largest cuts of any government department.
Year after year the story has been the same: injury compounded by the insult of meaningless consultations and a last-minute announcement of the annual settlement, this year on the very last day before the Recess. I have had the privilege of serving as a member of Newcastle City Council since May 1967 and I declare my interests in that capacity and as a vice-president of the Local Government Association. I have lived through good times, difficult times, and bad times in local government, but I have never known a time when local government and local democracy were in such a desperate plight as they now are.
Even during the Thatcher era, Secretaries of State such as the noble Lords, Lord Heseltine and Lord Baker, and Lord Jenkin displayed a sympathy with local authorities and understanding of the importance in their role. Such, sadly, is not the case today. What is in some ways worse is the propensity of the Secretary of State not only to promote his obsessions—weekly bin collections or car parking charges, for example—at the same time as he presides over massive cuts, but also to suggest that the damage is not serious, that councils in general are sitting on vast reserves, or that the 50 helpful hints for savings he jotted down on the back of an envelope could avoid difficulty.
The reality, as the Secretary of State must well know, is very different. Capital reserves cannot be used for revenue purposes, revenue reserves must be available to meet contingencies as they arise or be held on a prudential basis, and of course, once spent, are no longer available. Councils of all political colours are in dire difficulties even after making significant efficiency savings. He must also know of the claims of the Under-Secretary of State, Mr Hopkins. Like Mr Pickles, he is a former leader of Bradford Council, though unfortunately both cast from a very different mould from that of the noble Baroness, Lady Eaton, from whom we will hear later, who was also a leader of that council. Mr Hopkins, after all, stated that,
“the settlement leaves councils with considerable spending power”.
That claim is grossly misleading. In the first place, the LGA point out that real-terms cuts since 2010 will reach 40% by the end of 2015-16. In fairness, the National Audit Office figure is a little lower at 37%—but there is, of course, more still to come.
Secondly, the Government's claims about spending power—an artificial construct designed to conceal the reality of what is happening—are utterly misleading. The Government claim a reduction in spending power of 1.8%. But that includes council tax income and the NHS element of the better care fund, which in fairness is a good policy, but which represents money that is not the councils’ money to spend. If those two elements are taken out, the cut becomes 8.8%, and this rises to 11.8% if ring-fenced funding and social care cost new burdens are taken into account, making a like-for-like comparison cut not of 1.8% but 11.8% in all.
This does not, of course, reflect equal misery all round. Hackney’s spending power, a deeply deprived inner London borough, drops by £199.50 per head, and Birmingham’s by £156.77, but Surrey’s goes up by £56.42—and even then, the Conservative leader of Surrey complains that it is not enough. Wokingham, which is frequently referred to by Ministers as a comparator with Newcastle, also gets an increase of just under £50 per head.
The National Audit Office is critical of the Government’s use of spending power, which it describes as,
“an indicator that combines government funding with council tax income”,
and which does not give,
“a measure of the scale of the financial challenge facing local authorities over time”.
Local auditors moreover, the NAO reports, say that 52% of single-tier and county councils,
“are not well placed to deliver their medium-term financial strategies”.
Worryingly, the NAO asserts that:
“The Department has a limited understanding of the financial sustainability of local authorities and the extent to which they may be at risk of financial failure”,
and, moreover,
“does not monitor the impact of funding reductions in a co-ordinated way”.
Of course it, and we, no longer have the benefit of the Audit Commission’s views of these matters since it was abolished in a fit of Pickles pique.
On top of this, there are instances of sleight of hand in the published figures. A £200 million cut in the grant to education authorities for central services for schools is not reflected in the declared spending power, and the £70 million New Homes Bonus going to the Greater London Authority is still included in the spending power figures for the London boroughs, while the Government’s better care fund is not all spent on social care or other services commissioned by local councils.
A number of areas of general application are worrying. In relation to business rates, councils have made a provision of £660 million for back-dated appeal losses, representing local government’s 50% share of the cost, as decreed by the Government, who received all the money in the first place but are meeting only half the subsequent bill. If anything, this provision underlines the need for a prudent level of reserves.
Council tax support sees a £1 billion cut, which is certainly going to make life even more difficult for low-income and, frequently, working households, and the councils which will have to attempt to recover unpaid council tax. Moreover, the Government are cutting local welfare assistance, which partially cushioned the blow of the council tax support cut and simply absorbed it into the funding assessment, which will therefore be at the expense of other services. The LGA has rightly sought the restoration of this funding.
What does all this look like on the ground? Twelve north-east councils stand to lose £240 million in spending power—that artificial measure—next year, on top of a 40% cut in grant thus far; and that is happening in the region with the highest unemployment in the UK, and where the council tax yield is much less than in the more prosperous areas. By 2017-18 Newcastle’s budget will have fallen from £280 million in 2011-12 to £207 million, with a reduction of 48% in government funding.
The pattern is similar in all the metropolitan areas, many of the inner London authorities, and many other places such as seaside towns. However, breaking down the figures in service terms illustrates the problems more vividly. Children’s services, for example, have seen the number of looked-after children increase by 11% in five years, but by 33% in the north-east; yet government funding for core children’s services has suffered an estimated cut of £2 billion, or about 50%, including a cut of 17% or £0.5 billion for 2015-16 alone. Local welfare assistance schemes, a lifeline to the most vulnerable, have been scrapped by the Department for Work and Pensions, and £129 million is now included in the overall settlement but is not ring-fenced and has to be seen in the context of the 11.8% cut overall.
Sure Start everywhere faces cutbacks, although in Newcastle we are managing to maintain provision in the most deprived areas by a reconfiguration of the service. Yet the pressures are palpable across a range of services, from adult social care to the state of the streets and open spaces, from threatened cuts to policing and fire services, and from the provision of library services—although we in Newcastle have managed to retain a reduced service in all but one of those threatened with closure by working with residents’ groups and other partners—to a much reduced youth service. The council faces a cut of £26.7 million in government funding next year as we struggle to meet the rising costs of demographic change, particularly in the light of an increasing number of elderly residents, and huge pressures on children’s services.
The voluntary sector is also under enormous strain—I declare my interest as president of Age UK Newcastle—and unable to meet the increasing demands on it. We are, in 2015, a city with eight food banks and seven low-cost food centres, by no means the only area with such a necessary provision. There are also 5,376 house -holds paying the bedroom tax, which is costing them and the city’s economy £3.75 million this year. Some of these cuts will lead to greater expenditure elsewhere—notably but not exclusively in the National Health Service, as well as in pressures on other services, which is reflected, for example, in a failure to equip youngsters to participate in the local economy. That also impinges on the general welfare of the area and the success or otherwise of local business—as well as, perhaps, on the criminal and family justice systems.
What we desperately need is a fair system of distributing financial support for local government based not on spending power but on spending need, accompanied by the revival of Total Place, or place-based budgeting as it appears to be known now. It is a concept developed by the Local Government Association, adopted by the previous Government with the full support of the Treasury and the Department for Communities and Local Government at that time, but disappointingly not necessarily taken on board by other departments. In any case, it has withered on the vine over the past few years. Under this approach, one would look at all relevant public spending in an area, at the appropriate local level, thereby enabling both efficiency savings and reduced overheads, but essentially allowing a more integrated and effective approach to issues and problems that necessarily cross departmental and service boundaries —whether in Whitehall or the local town hall.
The Motion refers to the settlement,
“and the implications for the future of local government”.
Thomas Hobbes famously described the life of man as “nasty, brutish and short”—epithets which some might be tempted to apply to me from time to time. Unless there is a change of course, I fear that the future of local government is destined to be depicted in those sombre Hobbesian terms.
I hope that the Government will, in their final settlement announcement in February, reflect the widespread concerns expressed across the whole of local government, and of all political colours, as well as by independent bodies, those who deliver services and those who assess their efficiency, and that a more realistic appraisal of what is happening up and down the country will result. I do not have any great confidence about that because the department is not representing, as it were, local government in Whitehall but is merely an instrument for cutting services. That is in part, apparently, in the pursuit of an ideological approach of down-sizing the state in general and local government in particular. That does no service for the people who need our help—whether they be deprived individuals in deprived communities or businesses that need a thriving local economy and investment in skills and infrastructure. The prospect is indeed gloomy. It is not too late to begin to reverse it and, in particular, to redress the grotesque inequalities perpetrated by this Government in their distribution of cuts. We are living in difficult times obviously, but the burden should not be borne by those who are least able to bear it. That has been the hallmark of the Government’s approach to funding local government in the past five years, and it is high time for a change.
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Lord Ahmad of Wimbledon) (Con)
My Lords, I join other noble Lords in acknowledging the excellent contributions and two maiden speeches. I congratulate my noble friend Lady Pinnock on her maiden speech and reassure her somewhat. Her sense of getting lost in the House is something that perhaps those who have been here slightly longer and much longer still experience. That is not an individual experience. From her maiden speech, we have seen that she is going to be an incredible asset, to the party, to the Government and, indeed, to your Lordships’ House.
I turn to the excellent and reflective speech of the right reverend Prelate the Bishop of Southwark. Everyone has laid claim to the diocese of Southwark. I suppose that, being Lord Ahmad of Wimbledon, I can also lay claim to being part of the diocese of Southwark. I look forward to working with the right reverend Prelate as another representative voice of the town of Wimbledon. I welcome his contribution today. We look forward to the contributions of both noble Lords in future debates.
It would be remiss of me not to pay tribute to the noble Lord, Lord Beecham. I was listening very attentively to all the contributions and I want to single out the description that the noble Baroness, Lady Armstrong, gave. She said that she described her relationship with him, when she was Local Government Minister, as one of deep respect, at times friendship as well—I would add to that—and she did not always agree with the noble Lord. I think that sums up my relationship with the noble Lord as well, although I was a bit concerned when the noble Lord, Lord Liddle, said that he would pose a challenge. He then talked about the 47 years of experience of the noble Lord, Lord Beecham, in public life. I must admit I have not been around for 47 years, so I thought he was going to pose the challenge that I would have to account for every year. I am sure that when he writes his autobiography we will all reflect on those worthwhile years. In thanking him, he will not be surprised to hear that I cannot agree with most of what he said about the challenges of the settlement.
The Government have inherited the largest deficit in post-war history. Thanks to the actions that we have taken as part of our long term economic plan, the deficit is falling, the economy is growing and employment is at a record high. The Government are putting our public finances back on track. Of course, we could not have done this alone, and I fully acknowledge the incredible effort and significant contribution that local government, like every part of the public sector, has made. Councils all over England have responded strongly to the challenge of delivering public services in this new context. I thank my noble friends Lord True and Lady Eaton for their words of support and for highlighting some of the challenges that remain.
Of course, there is much still to do. English local government accounts for about a quarter of all public expenditure, more than £114 billion this year. So the Government still need to take difficult decisions on local government funding to ensure that the public finances are on a sustainable path. Local councils will continue to play their part in this.
Much has been made of the delivery of a fair settlement. The noble Lords, Lord McKenzie, Lord Liddle and Lord Rooker, and the noble Baroness, Lady Jones, all mentioned it. We announced the provisional local government finance settlement on 18 December, as many noble Lords acknowledged. With this settlement, we have kept the overall reduction in local authorities’ spending power to 1.8%, one of the lowest levels of reduction under this Government. If we include the funds that the Government have provided to support local transformation, the overall reduction is even lower, at 1.6%.
I acknowledge that councils are facing the highest demand for services. They continue to receive substantially more funding and we are continuing to ensure that no council will face a loss of more than 6.4% in their spending power in 2015-16, which is the lowest level in this Parliament. The noble Baronesses, Lady Armstrong and Lady Farrington, talked of relative needs. These were reflected in the funding baselines at the outset of the new system of business rates retention in 2013-14.
Growth is also a key part of this Government’s agenda. Throughout this Parliament, we have deliberately shifted the emphasis from keeping authorities dependent on grant to providing councils with the tools they need to grow and shape their local economies.
The noble Lord, Lord Beecham, asked about the LGA and the NAO figures. The NAO estimates a 37% reduction in spending power, but the Government’s spending power figures are transparent and allow others to calculate their own figures. The NAO does not include the better care fund or public health, which are two important policy initiatives worth more than £6 billion. Various figures for settlements and spending power were cited—we could have this debate all evening and further into the night. There is no doubt that some authorities have had reductions, but, when we look, for example, at the new homes bonus, we see that Leeds has seen an increase of £1.92 million, Salford £27.94 million, Warrington £22.67 million, Ryedale £40.59 million, East Riding of Yorkshire £5.02 million and Kirklees £3.86 million. Those are positive figures.
We have also given councils a real stake in stimulating local growth. Authorities up and down the country are benefiting from the greater powers and incentives that we have provided to invest in growth. These include Newcastle. I am delighted that the noble Lord’s council has also benefited and has frozen its council tax for the past four years in response to the challenge laid down by the Government. The noble Lord shakes his head. Is it not true?
Lord Beecham
My Lords, I will say three things very briefly, given the time. First, I think the Minister for his usual courteous response—actually there are four things, because that was the first. Secondly, I congratulate again the maiden speakers, from whom we will hear a great deal to our benefit in future. Thirdly, the noble Baroness, Lady Eaton, referred to surveys showing that people have not noticed a particular difference in services. I remind her that a year or so ago, Conservative councils and the Conservative-led Local Government Association warned that with these present policies, councils would be curtailing services except those which are statutory duties by the end of this decade, with nothing else being provided.
Finally, I note the call of the right reverend Prelate the Bishop of Derby for an increase in local democracy. I would certainly endorse that, but it is not really consistent with what has been happening. The Minister has just called upon councils to freeze council tax or have a referendum. This is a bit odd, coming from a Government who came into office with, Mr Cameron said, no plans to increase VAT. They increased VAT by 2.5% within six months of taking office. That raises £13 billion a year—and, oddly enough, they did not hold a referendum.