Local Authority Grants: Impact of Cuts

Lord Shipley Excerpts

Thursday 9th December 2010 Lords Chamber

[Lord Shipley]

My Lords, I declare an interest as a member of Newcastle City Council and a vice-president of the Local Government Association.

At the beginning of November, in a debate on the comprehensive spending review, I raised a number of issues relating to the part of the announcement that affects local government. None of those has yet been answered, and I hope that some of the representations that have been made in recent weeks may have an effect when the announcement is made, as I understand it will be on Monday.

The issues related, first, to the scale of the cuts, and we have heard more about that this afternoon. Secondly, they related to the front-loading of those cuts, which is a cause of quite a number of serious problems particularly for the redundancy costs of local authorities. Thirdly, I raised the issue of the abolition of the working neighbourhoods fund, at £0.5 billion—of our local authorities, Birmingham was much the highest, losing some £37 million. That budget enabled money to be paid to voluntary organisations across some 65 council areas where deprivation rates are highest. In particular, the working neighbourhoods fund was used, and is still used, for welfare to work initiatives, one of the core agenda items of this coalition Government. Fourthly, I raised the issue of place-based budgeting because the Local Government Association has estimated savings from £20 billion a year if we can bring the public sector more closely together—sharing services, overheads and so on. In that debate, I urged us to have a much faster delivery of place-based budgeting simply because, if you delay two more years before rollout from the pilot that is taking place, the impact will be delivery that is too slow.

Since the beginning of November, two matters have become starkly clearer. First, the £200 million capitalisation powers that have been set out in the CSR were identified as being completely inadequate. The LGA now estimates costs of some £1.5 billion over the next 18 months, caused by the front-loading impact of the revenue cut. Secondly, it became clear that the working neighbourhoods funds simply could not be abolished if the Government are to fulfil, first, their fairness agenda and, secondly, their welfare to work agenda. Allowance for that has to be built into the overall grant baseline of the councils that receive it, otherwise there would be a massive shift of government grant from poorer to richer areas of England. We await the grant settlement announcement; we do not know the outcome. The other place debated the issues around the CSR and the grant announcement earlier this week, and I noted the comments of the Secretary of State, who said that:

“I and my ministerial team are doing everything possible to ensure that local government has a fair and sustainable settlement”.—[Official Report, Commons, 6/12/10; col. 50.]

That is one that protects the most vulnerable communities and spreads the impact in a manageable way.

I look forward to seeing the detail at the beginning of next week. It sounds as though there is some movement and some understanding of the problems that the CSR has created. If there is no shift, there will be many more announcements of the kind made by Birmingham recently, which announced a few days ago that, over the next four years, it will have to cut some £200,000 from its budget every day of the week in order to deliver the Government’s spending clampdown.

The pressures faced by councils and public services are very grim. We have heard many individual examples of those. The noble Lord, Lord Lipsey, talked about the £1 billion extra on social care for adults. That extra £1 billion for local government and the extra £1 billion for the NHS are very important. However, the LGA estimates that local authorities currently spend £14.4 billion a year on adult social care, and that could rise by 2015 to some £20 billion. The issue is pretty stark.

Secondly, we welcome the transfer of public health responsibilities to local government, but the proposed ring-fencing of that budget could perpetuate patterns of spending that currently see 96 per cent of spending on treating illness, and less than 4 per cent spent on keeping people well. We have to address that prevention agenda much more keenly than we currently do.

Thirdly, I am looking for much greater collaborative working now between local authorities and the National Health Service. In terms of joint planning, budgeting, prevention and reablement, particularly for people leaving hospital who need to regain their independence quickly, these things matter very much. It is essential that the NHS reforms—when they take place—reduce management and administration costs but eliminate in particular financial incentives to keep people in hospital, and increase the financial support for prevention and reablement. The Local Government Association has put forward a five-point plan to deal with the current problems. It covers reducing the impact of front-loading, increasing capitalisation limits and accounting for missing grants. I hope that some of those will be announced more clearly at the beginning of next week.

Fourthly, there is the power to raise more income from local sources, particularly from things such as licensing fees; and, fifthly, there is a need to avoid unfair grant distribution.

We have to reduce the impact of front-loading, because sharing services, the big society approach to service delivery, will take time and money, as we have heard. Indeed, fire authorities have not had front-loaded cuts because they have convinced government that they need more time and money. It is also very important that capitalisation limits can be raised, with perhaps 140,000 jobs likely to be lost in local government.

I hope that in the consultation period after Monday, a number of things will happen. First, I hope that there will be an impact assessment on the voluntary sector and the delivery of the big society vision. Secondly, I hope that there will be an impact assessment on poverty, particularly child poverty. Thirdly, I hope that there will be a clear statement on individual councils’ revenue budget to ensure that we are not redistributing from poorer to richer areas, and that no council suffers a disproportionate drop in income, thereby requiring a higher rate of redundancy funded out of their revenues.

We need to know more about the role of business rates, because I understand from the debate in the other place on Monday night that the Government are heading for a surplus on business rates, and that needs to be addressed. There may well be a problem for some councils in setting a legal budget this year unless capitalisation limits are raised, otherwise councils are going to be forced to fund them from revenue, not from capital, and that is a very serious problem that must be addressed.