Local Government Funding

Lord Watts Excerpts

Tuesday 30th November 2010 Westminster Hall

[Mr Dave Watts (St Helens North) (Lab)]

I am pleased to have the opportunity to raise this important matter on behalf of my constituents and of SIGOMA—the special interest group of municipal authorities. There is great concern among MPs in the SIGOMA group that we are facing one of the worst spending reviews ever experienced. It is likely to have a massive impact on every part of our public services, whether in education, health or any other area. I am pleased that so many of my colleagues have attended the debate, and I will try to give way to as many of them as I can. I know they will have major concerns about the impact of the spending review on their constituencies.

I believe we are likely to see massive and devastating cuts in our communities, and that the general public have no idea about the scale of the cuts heading their way. When people see the level of cuts, they will be concerned about their implications and the way that the Government are going about them. From day one, both I and the rest of the Opposition have accepted that there must be cuts in public services. We accept that local government must play its part in reducing the deficit. However, we are concerned about the speed of those cuts, the way in which they are being implemented and the unfairness of the cuts to the SIGOMA authorities.

My constituents accept that there needs to be a reduction in public spending and that local government must play its part in the cuts, but they have every reason to feel aggrieved that, at a time when they face massive cuts in their public services, the Government have cut tax for the bankers, who caused the problem, by £1 billion and have already turned their back on doing anything, realistically, about the massive bonuses that continue to be paid to bankers. They have now decided that they will not even publish the size of the bankers’ bonuses so that people can hold them accountable for their actions.

The least that my constituents should be able to expect is that any cuts are fair, that they protect the most deprived parts of our communities, that they take into account the unfair cuts that have already taken place, in May, and that they allow time for councils to adjust their budgets. That is one of our major concerns—that the cuts are front-loaded.

[Barbara Keeley (Worsley and Eccles South) (Lab)]

I want to ask my hon. Friend about that. The worst aspect of the cuts that people are seeing is the front-loading—the lack of time that there will be between the settlement and implementation. Does my hon. Friend think, as I do, that it is difficult to see any fairness, as was promised in the comprehensive spending review, in a situation in which some councils, in the most deprived areas, will see reductions in their budget next year of, it has been suggested, up to 25, 30 or 38%, whereas other councils, in the south, will see increases of an equal size—25 to 37%? It is hard to see how there has been fairness. The other promise in the CSR was that those parts of the country that depend on public sector jobs would not be hit the hardest. It is very hard to see those things. I wonder whether my hon. Friend can see them, because I cannot.

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[Mr Watts]

It is very difficult to see any fairness in the system so far. We know that more cuts are on the way. We hope that they will be introduced more fairly and will take into account the unfairness of the last set of cuts, which hit the most deprived communities.

[Mr George Howarth (Knowsley) (Lab)]

My hon. Friend is being generous in giving way. Does he agree that this is not just a question of fairness? It is becoming increasingly apparent that there is a built-in unfairness in the system. Some authorities, of which Knowsley is one, as part of the SIGOMA group of local authorities, are likely to be disproportionately affected. Does he agree that in those circumstances it is important that damping be kept in place, so that the losses we will experience can to some extent be mitigated?

[Mr Watts]

We would hope, in relation to any massive cuts, that some damping would be introduced to ensure that local authorities do not face the full loss of grant, as they did under the previous Tory Government, who cut millions of pounds from local authorities overnight. The previous Labour Government, when they made changes, put in mechanisms to ensure that local authorities did not suffer in the same way as they had done with the Tory cuts. I hope that the situation will be fairer, that there will be some damping and that local authorities will have an opportunity to adjust their budgets.

[Michael Dugher (Barnsley East) (Lab)]

I am grateful to my hon. Friend for securing this important debate and for the work he has done over many years on behalf of local government. I wonder whether he is aware of a question that I raised yesterday at oral questions to the Secretary of State for Culture, Olympics, Media and Sport. Along with a number of other hon. Members on both sides of the House, I raised the issue of the threat of library closures in many communities because of the cuts to local authorities. I was trying to explain to the Under-Secretary of State for Culture, Olympics, Media and Sport, the hon. Member for Wantage (Mr Vaizey), that the financial realities are different in different parts of the country. As my hon. Friend has said, in an area such as Barnsley, which has very low council tax receipts but high social needs, the pressures on the budget are hugely disproportionate compared with more wealthy areas in the south. The Minister replied that councils needed to show “a little imagination”, which I think demonstrates—

[Michael Dugher]

Does my hon. Friend agree that that shows how oblivious Ministers are to the financial realities in areas such as Barnsley and St Helens?

[Mr Watts]

I do. I am pleased that the Minister here is not the Secretary of State, because it is clear from the Secretary of State’s comments that he has no idea of the implications of the cuts he is advocating. The idea that the cuts can be dealt with through efficiency savings or by councils using their imaginations as they have not done in the past is ridiculous. I point out that many of the authorities facing the biggest cuts, including my own, are the most efficient and effective already.

My council is a five-star council that provides excellent education, social services and other council services. It has kept its council tax below inflation rates for the past 10 years, and it runs an effective partnership with the voluntary and private sectors, yet it faces up to £12.7 million in cuts in 2011-12 and up to £24 million in cuts by 2014-15, on top of a previous cut of £5.6 million from the working neighbourhoods fund. We also face the potential loss of enterprise growth funds, which have helped regenerate my area; the money is spent in partnership between the private, public and voluntary sectors. Clearly, it is not inefficient councils that face the biggest problems but councils that are well run and well managed and provide good services.

As colleagues and I have said, the Government’s record on the matter is not good. So far, cuts have hit the most deprived communities the hardest. They have been front-loaded, and the cuts to the working neighbourhoods fund have hit the most deprived communities in Britain. The record so far is not good.

[George Hollingbery (Meon Valley) (Con)]

Does the hon. Gentleman agree that the councils in the south to which he refers so freely as exceptionally well funded by wealthy local populations suffer exactly the same problem as those in the north? The cuts are fair and proportionate and carry on across the country. The level of funding in many northern councils is considerably higher per capita than in the south. I understand, of course, that the level of need is higher, but does he agree that pain is being felt all over the country and that the cuts are in fact fair?

[Mr Watts]

I accept that not all deprived communities are in the north. There are certainly deprived areas in the south, and they have been hit hardest as well. They have not been exempt. I do not say that there are no deprived councils in the south, because there certainly are. We need not go farther than Southwark to see major problems, as there are in many other parts of the country.

However, the tax base in most southern areas puts them in a much better position to deal with cuts than areas where the tax base is low, such as St Helens and the SIGOMA authorities. So far, the south-east has lost 13%, the south-west has lost 12% and the north-east and north-west have lost 16%. That demonstrates how unfair the cuts are. I recommend that the Minister read the SIGOMA document “All in this together”, which dispels the lie that we are in this together by showing that, and supporting the argument that, local authorities in the most deprived areas are being hit hardest.

[George Hollingbery]

I am sorry to interrupt again, but that goes to the heart of what I was saying. The level of subsidy per capita in Sedgefield, for example, is five to six times higher than in Hampshire county council. That means that the cuts can, to some degree, be more easily borne by those with much higher per capita funding. The proportion being removed in this element is right at the margin down in the south, and it hurts.

[Mr Watts]

Before it was changed by the new Government, the system of allocating resources was based on deprivation. A number of factors were to be taken into account, and an academic research document indicated where the grant should go. Unfortunately for many authorities, the Labour Government did not introduce all those changes but left money in some of the southern areas that should have been passed to the north. The changes were not fully implemented.

We would have no problem if an academic study was undertaken on the need to spend that took account of deprivation, if that is what the Government wanted to do. However, the Government are not doing that. Instead, they are finding ways to cut budgets for the most deprived councils without an academic study, and with no research documents to back their actions. Frankly, we think they are gerrymandering the system to ensure that their councils are not hit as badly as ours.

[Mr Marcus Jones (Nuneaton) (Con)]

rose—

[Barbara Keeley]

rose—

[Mr Watts]

I give way first to my hon. Friend.

[Barbara Keeley]

Will my hon. Friend comment on this, as I know he is concerned about the matter and knows the information for SIGOMA authorities? My local authority of Salford is to have a 13% cut, taking only the cuts being inflicted by the Government, but the loss of the working neighbourhoods fund will take it up to a cut of 18% or 19%. The hon. Member for Meon Valley (George Hollingbery) is referring to councils that do not have unemployment problems of the sort that would need the working neighbourhoods fund—problems that the SIGOMA authorities definitely will have.

[Mr Watts]

My hon. Friend is right. That funding has made a tremendous difference for some of the country’s most deprived communities. The cuts will be a massive loss to them. The Government should be ashamed. If they are going to cut, they should do so in a way that protects the most deprived communities, not doing as they are and making cuts in the most deprived areas.

[Mr Marcus Jones]

Does the hon. Gentleman not accept that areas such as Nuneaton in Warwickshire were particularly underfunded under the Labour Government? He mentioned gerrymandering, but that seems to have been the case for many years when comparing the funding for shire counties such as Warwickshire with that for the Labour heartlands in the north, and particularly those in the north-east.

[Mr Watts]

That argument is put forward by many councils. They say that everyone should get the same; if everyone does not get the same because deprivation is taken into account, they say that that it is unfair. The grant system took account of the ability of local councils to raise local tax and of the deprivation within their communities. The hon. Gentleman suggests that everyone should get the same, regardless of deprivation. As I said before, I would have no problem if the Government were going about the job by doing some academic work and producing a study that people could consult, taking account of existing need and deprivation. That is not happening, and the Government should be ashamed of their proposals.

The Government cuts will go so far as to hit the most deprived communities, and they are front-loaded. We have lost the neighbourhoods fund. As I said before, the south has been protected but not the north. I was saying that the Minister should read the SIGOMA document, which goes into far more detail about the unfairness of the proposed cuts. He should also read “Hard Times”, a document produced two weeks ago by the Industrial Communities Alliance. Hard times is what our communities are in for. That document shows the devastating effect that the cuts in public spending will have on our areas. Anyone who reads it could not help but understand the deprivation that will exist as a result of the cuts.

We fear that the cuts are heading our way. We could lose 33% of our grant in 2010, and a further 22% by 2011. We hope that that is not the case, but we know from what the Government have done so far that that is the likely impact. There is no way in which efficiencies can stop the wholesale closure of libraries, and we will also have fewer policemen and firemen, and fewer social workers, if that level of cuts is introduced in our communities.

On top of that, the Government have top-sliced the council block grant to pay for the freeze on council tax. That will make the situation even worse in communities such as mine, as they will be less able to provide services. Those communities will lose as much as another £500,000 of grant, which they would have received, had the grant not been top-sliced. We understand that SIGOMA authorities may face cuts of up to £44 million over the next few years.

The new homes bonus scheme, which is also hitting local authorities, is intended to provide resources to encourage new homes to be built. Again, I do not think we will do well out of that. It is not that local authorities such as St Helens and the SIGOMA authorities do not want to provide new homes; but given the devastating effect that the Government’s cuts will have in our areas, I do not think there will be much of a market for building new homes. Where we have real deprivation in our housing, we will have fewer resources with which to provide homes for our constituents.

[Simon Danczuk (Rochdale) (Lab)]

I thank my hon. Friend for securing the debate. He is absolutely right about housing, for which there is a great demand in Rochdale. Another problem with the cuts being inflicted is that local authorities are cutting the money they give to local charities that support homelessness services. Petrus community trust and the Sanctuary trust in my constituency are losing thousands of pounds as a result of the cuts, and now cannot even provide for homeless people. It is vulnerable groups in deprived communities who are feeling the effects.

[Mr Watts]

Most local councils and MPs will know that the voluntary sector is very much supported by local government. It cannot exist without funding and support from local government. I worry that not only will we have cuts in council services, but the voluntary sector will be hit as a result. I fear for the safety net of services that are now provided by the voluntary sector, but which will disappear if the cuts are made.

What are we trying to get from today’s debate? We would like an assurance from the Minister that any further cuts will be fair, that more help will be given to the most deprived parts of the country, rather than less, and that any cuts will be transparent so that it can be easily understood how the Government are making the changes to ensure that those in the most deprived communities get the most support. We would like an assurance that any cuts that are introduced will take into account the cuts that are already disadvantaging us. Any future cuts we face should take into account the fact that we have lost more than anyone else.

[Derek Twigg (Halton) (Lab)]

I congratulate my hon. Friend on securing the debate and on his excellent speech, in which he is trying to be fair to the Government. Halton, which has one of the most outstanding councils in the country, has already had £1.2 million cut from its education budget, compared with £600,000 from Cheshire East and Cheshire West, which are more affluent boroughs. It has lost massively and disproportionately as a result of the cancellation of the Building Schools for the Future programme and the education maintenance allowance cut, which has also hit other deprived communities. Given their track record, how can we expect the Government to be fair to deprived communities such as Halton, St Helens, Knowsley and others? The Government somehow believe that a 28% average cut will not hit the most vulnerable.

[Mr Watts]

My hon. Friend has made an excellent contribution. Our concern is not just about cuts in local government services, because we have already had cuts right across the board and face even bigger cuts in welfare. As the “Hard Times” document demonstrates, many of our communities are not in a position to fight back and will go to the wall. We are throwing those communities into abject poverty, which will have serious implications for our communities and the country as a whole.

I advise the Minister, before those draconian cuts are made, to take into account all the losses of grant that are taking place. A substantial amount of money is already being taken out of the local economy, which is having an impact on the private sector in our communities. Many of the shops, retailers and suppliers already face major problems. I spoke recently to a gentleman in the construction industry who told me that all his orders have now run out and that within six months he would be laying off hundreds of workers as a consequence. The economy cannot generate itself; it needs the support of the Government. That is why all our previous policies took into account deprivation and the need to spend.

What do we want? We certainly want any changes that are made to take into account the tax base and the ability of local government to raise money. We have already seen some scandals, such as the fact that Westminster council’s ability to raise millions of pounds every year from car parking charges is just ignored and not taken into account, which allows it to provide good services at a low cost to local taxpayers. It is a scandal that that has been allowed to continue for many years. I hope that when the Minister is looking at any change, he takes into account that some very wealthy councils are in a much better position than my authority and the SIGOMA authorities to deal with the levels of cuts that we have seen.

[Barbara Keeley]

Yesterday the Chancellor was optimistic about the recovery. So would my hon. Friend, like me, like DCLG Ministers to approach the Treasury about re-phasing the cuts to local government budgets, so that they will not be so front-loaded? That would help.

[Mr Watts]

As I understand it, most—in fact, all—local authorities believe that the way the Government have front-loaded cuts is wrong and does not give them time to adjust their budgets. The Government could have switched it round and had the most severe cuts in the latter part of the period. We know why they are doing this: frankly, we are seeing all sorts of political shenanigans going on because they want to make all these draconian cuts now, so they can have some tax cuts in the run-up to the general election. That is a short-term view, given the problems that will be created. The Government’s view of the economy as a whole is very optimistic, and what we fear will happen with local council spending will shove most of our economy into recession, if not depression. There are areas around the country that may take 50 years to recover from the cuts that are on their way—places such as Barnsley and some of the north-east councils. They will have a dramatic effect for a very long time.

I hope the Minister will take those things into account when he responds. I hope he can give us some assurance that, when he makes changes, they will be fair and transparent, will take into account deprivation factors and will put resources where they are most needed; and that he will look at the tax base to ensure that those who can afford to pay a bit more council tax and can afford to receive less grant than they are receiving do not continue to receive higher levels of grant. There was a time when—and I do not think things have changed from when I was council leader many years ago—if we received the sort of income Westminster gets from grants, car parking and all the other things, we could have had no council tax at all and sent every one of our constituents on a holiday to Spain every year. That is the level of fiddle that has gone on with the system, and it needs to come to an end. Fairness needs to be put back into it.

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[Mr Marcus Jones]

Will the Minister give way?

[Mr Watts]

Will the Minister give way?

[Robert Neill]

I shall make a little progress before I give way. Neither will I take lectures from Opposition Members about the need to reduce the deficit and how we should do it. The simple fact is that, thanks to their Government’s policies, about which I have not heard a word of apology, we are paying £120 million a day just to pay off the interest on their debts. That money is lost for ever to council services on the front line. If we carried on down the Opposition’s route, the pressure on local authorities would be all the greater because we would be paying up to about £100 million more by the end of the Parliament in debt interest. I am not taking lectures from the Labour party about our attempting to balance the nation’s book, when it is its prodigality that has placed local authorities under such pressure.

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[Mr Watts]

The Minister must get off the rant that we hear regularly from the Front Bench. There has been a world recession caused not by the Government, but by banks. At a time when the general public face such draconian cuts, they want to know why the Government have given the bankers a £1 billion tax cut, refuse to act on the bonuses and are now refusing to publish the size of the bonuses that bankers are receiving. The real enemy is not the previous Labour Government. They were faced with a meltdown of financial systems in this country and throughout the world, so it is not good enough for the hon. Gentleman to blame the financial crisis on that Government. As he knows, the crisis is worldwide and it is one that has been caused by the bankers, not the Government.

[Robert Neill]

That is as discredited an alibi as we hear nowadays, but I credit the hon. Gentleman for his loyalty in still trotting it out.

Council tax payers throughout the country know that their council tax doubled during the 13 years or so of the Labour Government. That was not anything to do with the world crisis. It was to do with mismanagement of the economy and, ironically, the sometimes perverse workings of the system of local government finance which that Government put in place.