Local Government: Provisional Finance Settlement

Lord McKenzie of Luton Excerpts

Wednesday 19th December 2012 Lords Chamber

[Lord McKenzie of Luton]

My Lords, I start by thanking the noble Baroness for repeating the Statement. From my perspective, its credibility was undermined almost from the start by the assertion that:

“The Autumn Statement sets out how the coalition Government are putting our public finances back on track”.

If “back on track” is an environment of little growth, increasing debt and the IFS suggesting another £27 billion of so far unspecified cuts, I wonder how much of the cuts will come from local government—a worry indeed. I detected more than a few smiles around your Lordships’ House with the assertion that the Government are,

“shifting power from Whitehall direct to the town hall”.

We shall remind the Minister of that when we debate the Growth and Infrastructure Bill in just a couple of weeks. As ever, with this Statement, the devil will be in the detail, which we have yet to peruse in depth. We ought also to have the opportunity to have a full debate here when we have gone through the detailed figures. The Statement covers details of funding under the new system of business rate retention, and we will need in particular to examine the impact on council tax baselines, tariffs and top-ups, business rate holdbacks, the treatment of the early intervention grant, the topslicing for academies as well as public health funding—although I understand that this is outwith the Statement—and the RSG settlement itself.

As for the latter, for 2013-14 this will presumably utilise the whole of the central business rate share—and more. Can the Minister confirm that? The noble Baroness will recall debates during the Local Government Finance Bill about updating data used in the revenue support grant. Can she say what, if any, are the key changes to the methodology and data sets used in comparison with preceding years? This is particularly important because it is understood that the data will remain fixed between resets of the business rate retention scheme. Can the Minister confirm this? In anticipating this Statement, we should remind ourselves of the recent past and, indeed, the present. The Government have already imposed swingeing cuts on councils of 28%, with central Government grant reduced over the current spending review period.

This is all part of passing responsibility for cuts to services to local authorities and communities. We will have to see how much more is cut as a result of today’s announcement, but the LGA estimated a further £1 billion for next year. Is it right? The Autumn Statement, of course, announced a further reduction of £445 million for 2014-15. Many local authorities have been pushed to the brink, with their long-term viability in question. We know that the poorest areas are shouldering the greatest reductions. Between 2010-11 and 2012-13, the 10 most deprived local authorities are having their spending power reduced per head of population by eight times as much as the 10 least deprived authorities in England. Will the Minister reassure the House that this ratio has gone down, not up, following today’s announcement? The 50 councils worst affected by government cuts will receive reductions of £160 per head on average, despite having on average a third of children living in poverty. By contrast, the 50 least affected councils received a £16 per head cut on average, despite child poverty rates of 10%.

Although the Prime Minister described local government as officially the most efficient part of the public sector, this Government have made bigger and earlier cuts to councils than any other part of the public sector. This front-loading of cuts has made it harder for councils to cope and has hit front-line services hard. The LGA forecasts a rising funding gap, starting this year and growing to over £16 billion by 2019-20. What is the Government’s assessment for this period and how will that gap be closed? This year, we enter new territory with local council tax schemes, business rate retention, top-ups and tariffs. We hear the Secretary of State’s strictures about councils’ responsibility to keep council tax bills down, but the reality is that hundreds of thousands of people—working families on the lowest incomes—will be brought within the scope of that tax, possibly for the first time. In the words of the noble Lord, Lord Jenkin of Roding, it will be a “poll tax mark 2”.

If the 10% cut in council tax benefit support is to be endured, it must surely be right that the 10% reflects actual costs. Will the Minister say on what basis the grant has been allocated? Is it the case that, although at national level the total grant has been made available on the basis of the latest data, with claims having gone down nationally, the allocation to individual authorities is to be based on 2011-12 out-turn data, which for some will have gone up? Why is there this approach, other than because it advantages the Treasury at the particular expense of deprived areas? How much of the transitional grant—the pot of £100 million—is not initially expected to be called on by local authorities? Will the Government commit to recycling any balance to local authorities, especially those whose claim levels have increased during 2012-13?

Another issue which we debated extensively both during the Welfare Reform Bill and the Local Government Finance Bill was the demise of the discretionary Social Fund and the transfer of responsibility—but with no formal duties—to local authorities for provision otherwise met through community care grants and crisis loans. How much has been included in the proposed settlement for this and on what basis will this be communicated to local authorities? Under the Local Government Finance Act 2012, there is a requirement on the Secretary of State to specify the basis on which relevant authorities will make or receive payments under the tariff or top- up provisions. What is the basis of this calculation?

Today’s Statement brings little festive cheer to local authorities and to the individuals, families and communities they seek to serve. Local authorities will continue to innovate, address the awful choices that this Government impose upon them and play their part in fostering growth when the Government have vacated the field. Frankly, local authorities deserve better.