Local Government: Finance

Lord Shipley Excerpts

Monday 13th December 2010 Lords Chamber

[Baroness Hanham]

My Lords, youth clubs are invaluable and are run by the voluntary sector. Some of the other aspects that noble Lords have raised will come out of Home Office funding, not from local government. Nobody would disagree with a word that the noble Earl says. One wants to prevent people from going into prison because, once they are in, we all know that that just leads to further problems. The aspects that he raises are not really for the local government settlement.

[Lord Shipley]

My Lords, I declare an interest as the other half of the “Likely Lads” from Newcastle City Council, on which I am a councillor. I thank my noble friend for repeating the Statement from the other place. There has been some listening to local government and, indeed, the settlement is, I think, a little better at first glance than what we had feared. I declare an interest also as vice-president of the Local Government Association. On the issue of front-loading, it wanted a limit on loss of spending power of 8 per cent, and the Secretary of State has agreed on 8.9 per cent.

The word “progressive” was used. I have three questions on which I should like a response. First, is this not a progressive settlement in the sense that there has not now been a reallocation of grant from poorer to richer councils? Secondly, reference was made to the grant of £650 million to keep council tax increases at zero in the next financial year, but there is a question about that sum being built into the baseline for many years to come. If council tax is raised by 2.5 per cent, it is always in the baseline for the future. However, if the Government give the equivalent of 2.5 per cent, will that stay in the baseline? That matters. Thirdly, for further clarity on the capitalisation limit and the cost of redundancy, it is probable that the capitalisation limit will not prove sufficient. If it is not, councils will be required to reduce revenue and spending in the next financial year, which will in turn produce further cuts and redundancies. My noble friend referred to other ways in which that might be done; I was wondering what those other ways were.

[Baroness Hanham]

My Lords, the noble Lord, Lord Shipley, asked three clear questions. Is it a progressive settlement and reallocation? I think that we will take it year by year. This is a two-year settlement; whether it progresses on, I do not know. Whether it progresses in terms of how the grant is dealt with, we will have to wait and see. The £650 million is the repayment for 2.5 per cent of council tax if it is frozen. The question of whether that will be carried on next year will have to be decided. If it is, that will determine whether it is part and parcel of the baseline. As the noble Lord knows, capitalisation is treated as revenue by the Treasury, so whatever is spent goes back on to the revenue expectation. If that proves not to be sufficient, it will be a matter for each local authority to deal with.