Local Government Finance Settlement

Lord Tope Excerpts

Thursday 9th January 2014 Lords Chamber

[Lord Tope (LD)]

My Lords, I thank the noble Lord, Lord Smith, for introducing what I think has become an annual debate in his usual and characteristically reasonable way, in spite of all the provocation that I am sure he feels has been offered to him. I also apologise that I missed the first minute of his speech. My train was cancelled due to a landslip in Surrey, which I suspect at this time is not feeling overgenerously resourced by central government. However, I think I got the main drift of his speech, much of which, of course, I and all the rest of us in the Chamber today with a local government background agree with.

I also have to start by declaring my own interest on this occasion, for the last time in this annual debate, as a councillor in the London Borough of Sutton, and, for the first time in this annual debate, as a vice-president of the LGA. Perhaps this is the point too for me to welcome the Minister to her first outing in this annual debate. I am pleased to see her predecessor, the noble Baroness, Lady Hanham, also present today, probably relishing the fact that she can sit two Benches back and enjoy the debate in a way that has maybe not been possible in the last few years.

Throughout my 40 years as a councillor—and I recognise that the noble Lord, Lord Beecham, regards me as a wimp for giving up after only 40 years, but that will be the case—this has been an annual ritual. Central government, of whichever party is in power, has always said how fair and generous the annual settlement has been, and local government, whoever has the majority there, has always said that it is not fair, not generous and that it means the end of the world as we know it. Then, sadly, local government sets about arguing among itself as to which parts of the country or which types of authority are more or less fairly dealt with. I very much regret that.

One thing that has changed over those 40 years, to which reference has already been made, is the date of the announcement of the settlement. It used to be certainly in early November, it slipped a bit to December and for the last two years it has been, in effect, Christmas Eve. I understand that that timetable is not entirely in the hands of the DCLG—of course it is not—but I think we would all wish to say, through the DCLG, “Please try to bring this timetable forward”. It makes life extremely difficult for all local government, and most especially for the finance staff trying to deal with this in a very short time, however expected the settlement may be.

In my first year as a councillor, way back, the Tory leader in local government, who happened also to be a Sutton councillor, told me that there were really only two parties. I thought that was the usual political comment being made to a Liberal in those days, but he said it was the central government party and the local government party. I have to say that I have increasingly come to recognise how right he was. If I ever have any doubts about it, that is characterised in your Lordships’ debates on local government. Most of us who take part in these debates, for whatever party, have a long background in local government, and inevitably speak in a sense on behalf of the local government party. All too often the poor unfortunate Minister who has to reply, who may indeed belong to the local government party too, has to deal with that. That will go on.

It would be going too far to say that there is good news in this settlement; that is too much to expect given the state of the national economy, the reasons for which we have rehearsed many times. However, there are certainly aspects that even the LGA has been right to welcome, and I am pleased that it has done so. The first is that it is no worse than originally expected. It is a sign of the times that that can be seen as good news. However, it is good news and is a welcome sign that central government has recognised that local government has borne the brunt of the public sector spending cuts, that it is not just the annual ritual of crying wolf and that the financial outlook for local government really is very grim.

The change of heart on the new homes bonus, limited though it is, is welcome, except in London, where the heart was not changed at all, and the new homes bonus is going to the London LEP and not to the London boroughs. I know that London Councils has made strong representations about this, and that the Minister will not be able to give a definitive answer today. However, I hope she can at least confirm that it is being considered seriously and is not the done deal that many in London believe it is.

The slight relaxation in housing revenue account borrowing capacity announced in the autumn Statement is also a welcome move in the right direction, but a very small one. I have argued many times in this Chamber—as have many others—that the HRA cap, with prudential borrowing, should be lifted altogether. In London alone, that would release funds for an extra 14,000 homes. I have no doubt that we will continue to argue for the further relaxation of that cap, but not today.

Despite this relatively good news—I stress “relatively”—it is clear that the financial year 2015-16 will be the crunch year for probably most local authorities. As other speakers have said, so far, most have been able to make significant cuts in ways that have not too seriously affected most residents who are not in receipt of direct support. That may well be one reason why public satisfaction with local councils has indeed gone up in the past two years rather than down. We experienced exactly the same phenomenon in the 1990s, when budget cuts were being made, albeit they were not as serious as the current ones. However, the cuts required for 2015-16 are of such magnitude that the public generally will be affected and will notice. Decisions on those cuts will have to be made in the coming financial year before the May 2015 general election. That is obviously bad news for the government parties, as it will come just when we are trying to convince the voting public that the corner has been turned, that austerity was worth it and that economic recovery is on the way, yet the message from their local councils will be almost exactly the opposite.

I am pleased to see that no one on the Benches opposite is smiling at that. It is not good news for any party. Wise Labour politicians will know that local residents blame their local council for the decisions that are made, the demonstrations take place outside the town halls and that in many parts of the country Labour councils and Labour councillors have to make those decisions, so it is bad news for everyone. I think that it is bad news for all of us who believe in the democratic process. We all know what the threat may be to the healthy democratic process, so the threat is there and is obvious and is getting very close to us. However, I also believe that it is a great opportunity. We are now in the situation where both the level of central government funding is such and the state of play is such that it really is time to introduce the fundamental and radical change to which the noble Lord, Lord Smith, referred towards the end of his speech, and I would like to have had more time to deal with that.

We have seen significant consensus moves right across the political parties with the LGA’s Rewiring Public Services campaign; the work of the London Finance Commission; and the long overdue but very welcome co-operation between London government and the core cities. All parties in local government want to see that fundamental reform that gives local government more independence, more financial freedom, less opportunity to blame central government and less dependence on central government. The questions now are the following. How are we going to do it? When are we going to do it? When will the parties in central government—in that I include the Labour Party as part of the wider central government role—actually come clean and say that they agree and say how it will be achieved, and what is the timetable for that? I look forward to seeing that in all three party manifestos and in any coalition agreement that may appear after the election, and I look forward to more positive debates annually in future.