Local Government: Finance Settlement

Lord Greaves Excerpts

Thursday 17th January 2013 Lords Chamber

[Lord Greaves]

My Lords, I, too, had to present council budgets a quarter of a century or so ago. The one that I particularly remember was in 1990, which was the poll tax budget. Pendle was particularly badly hit. The then director of finance and I kept reminding ourselves of what happened to Wat Tyler after he organised poll tax riots 500 or 600 years earlier. The result of it all was that the electors decided to remove me from the council and the director of finance became the chief executive. He is still there and the electors have recanted. Therefore, I declare my interest as a member of Pendle Council, a member of the executive and a vice-president of the LGA.

I want to talk about a group of councils that I think was alluded to by the noble Lord, Lord Smith of Leigh, which I call the sorry seven. They are seven ordinary shire district councils that are being clobbered even harder than everybody else by this settlement. They are Hastings, Great Yarmouth, Barrow-in-Furness, Bolsover, Hyndburn, Burnley and Pendle. They are two seaside towns, with all the problems of declining seaside towns over the decades, and five former industrial areas in the north of England, if Bolsover is in the north of England. I cannot speak in detail on all of them but they are all very similar and I can certainly speak about Pendle, which is a district of 90,000.

The first problem with districts such as this, typified by Pendle, is that 70% of our houses are band A for council tax, so there is no great resource that we can rely on compared with other councils. The problem with business rates is that they have been declining in many parts of the borough over the years because they were based on old mills, many of which have gone and are still being removed. Indeed, the owners of old mills are still demolishing them in order to avoid paying business rates. We need an expansion of our industrial and commercial base. Achieving that in areas such as ours requires public sector investment—not completely public sector but with partnerships and all the rest. At the very least, it requires public sector seed corn and assistance. If councils have no money, they will not be able to do this and the result will be that the business rate base will decline.

The sorry seven councils, because of the lobbying that they have done and the problems that have been pointed out, are now eligible for something called the efficiency grant, whereby Ministers will try to micromanage them in a number of different ways that they think are desirable. Why Ministers such as Brandon Lewis or Eric Pickles should want to micromanage Hastings, Pendle or even Great Yarmouth is a mystery, but there we go.

The Government say that the top cuts for any council are 8.5%, but if you do the sums for councils such as Hastings and Pendle in cash, the cut in cash grant this year is 17%. Even if you include the small amount that these places get for the new homes bonus, the cut is still 15%. It will be even worse in 2014-16.

I have some projections of the total core revenue funding that has been available over the years to my council and is now projected. The total funding for 2009-10 was £13,186,000. Some noble Lords will think that these are tinpot little places but they are shire districts. They are not bad places but we do not have as much money as big councils. The projection for 2014-15, which is five years later, is £6.9 million. When my noble friend said that some councils might have a 30% cut over that period, we are talking about a 50% cut, more or less. That is the scale of the disaster that is affecting the sorry seven—this small group of small councils, whose problems could be solved by the Government with relatively little money but they are not doing so.

As far as we are concerned, we have done everything that they wanted us to do— or almost everything because we have not abolished our chief executive. We cannot understand how you can run a council without one and a half chief officers and directors, which is what it will become. We have an arm’s-length leisure trust and we have stock transferred our council housing at the behest of the previous Labour Government because they were bribing us with vast amounts of money to do that. We have outsourced many back-room services and a front-counter service and got the private sector partner to build new offices in the middle of Nelson. We have a highly successful joint venture with a local development company, whereby it raises two-thirds of the finance, the council raises a third, and most of that is put into land, buildings and so on. However, without any money you cannot go on doing things like that for ever.

We have had a radical stripping-out of top officers. We are supposed to be in the top 10 most efficient councils in the country—I do not know how people work that out, but that is what is said—and we have apparently had more awards than any other council this year. However, it makes no difference. We have to subject ourselves to this extraordinary procedure, whereby Ministers in the DCLG will assess whether we have qualified for this new efficiency grant. Of course, we have to assume that we will get it in order to make any sort of sensible budget. If we did not assume that the £1 million or so in efficiency grant that is being offered will come, we would be in even worse straits—and yet, how do we know that we will get it? The whole system that is set up for this small group of councils is absolutely crazy; nobody could dream it up.

I will say a few words about the new homes bonus, which other noble Lords have mentioned. According to our chief executive, who spoke to me this morning, the new homes bonus is “at the heart of what will kill Pendle and councils like it” in the next two or three years, and that applies not only to the sorry seven. As has been pointed out, the new homes bonus is topsliced; it is taken out of the general fund for local authority spending from the Government. It is then paid to councils where houses are built and occupied. In other words, it is a transfer of funds from areas where housing is not being built to growing areas, where it is. On the face of it that seems quite reasonable, so why not do it?

The first reason is that whether you are able to build and occupy houses in your area is not under local control. Even with social housing we have problems making the figures stack up with the rules laid down by the Government and the Homes and Communities Agency. However, for commercial housing you have to have people who are prepared and want to build houses in a sensible way in sensible places in your area. If you are not in a booming or growing area, that is not very easy. The new homes bonuses that have been allocated so far have not been on the basis of recent decisions anyway, but on the basis of historic actions and decisions—what people put in local plans three, four or five years ago—that bear no relation at all to present policies. There is no damping mechanism on the new homes bonus as there is on the change in business rate system, so it is simply taken away and handed out to other places.

If I understand the figures correctly, the new homes bonus in 2013-14 for new properties—the rest make only a slight difference—will be: £116 million for the south-east councils; £144 million for London; £57 million for the north-west; £21 million for the north-east; and £53 million for Yorkshire and Humberside. In other words, London and the south-east will receive £260 million and the three northern regions will altogether receive £131 million.

I will not say that there are no places in London and the south-east that have needs similar to those of much of the north of England. However, that allocation, on the face of it, seems to amount to a redistribution of funding and resources from the north of England to London and the south-east of England. The Government need to answer the question of how that can be justified on any basis that is in any way related to actual needs and what people do on the ground, and I seriously wonder if the Government will be able to do so.