Local Government Finance

Louise Ellman Excerpts

Tuesday 26th February 2013 Westminster Hall

[Mr Howarth]

I think the Government have the illusion that local authorities are stuffed full of people with nothing useful to do, and that all anyone has to do is to identify where those people are and all the problems will be solved. However, the reality is that there is no headroom left at all in most local authorities, and increasingly we will find that that will directly impact on services. If there is a reduction in the number of social workers, it has an impact on adult social care, families under stress, children’s services and so on. There is a real problem.

To highlight my hon. Friend’s point, I will look at the latest settlement in terms of metropolitan areas as a whole and in terms of other sorts of local authority. If we deal with things by region, the Liverpool city region is experiencing a two-year cut of £166 per dwelling; in London, the two-year cut is £129 per dwelling; the English average is a two-year cut of £105 per dwelling; Wiltshire is experiencing a two-year cut of £50 per dwelling; and Surrey—that hotbed of deprivation—is experiencing a two-year cut of £19 per dwelling. There can be no doubt about where the cuts are being targeted.

[Mrs Louise Ellman (Liverpool, Riverside) (Lab/Co-op)]

My right hon. Friend talked about fairness, or rather the lack of fairness. I wonder if he has any comment to make about the fact that if we look at what is happening over a four-year period, we see that the cut for Liverpool amounts to a staggering £329 per head, putting it right at the top of the amount of cuts in local services that the Government are demanding, despite Liverpool being No. 1 in terms of national assessments of deprivation. Does he think that is fair, and does he have any kind of explanation as to why the Government would do that?

[Mr Howarth]

I am grateful to my hon. Friend for making that point. She is absolutely right. To be perfectly honest, I do not think it is any accident that Liverpool, which is No. 1 in the multiple deprivation ranking, is experiencing one of the highest cuts per dwelling anywhere in the country over the period. It is also significant that Knowsley, which ranks fifth in terms of deprivation and is therefore not far behind Liverpool, is experiencing a £206 cut per dwelling over the two-year period, which is one of the highest cuts—if not the highest—in the country.

Of course, that has a real impact. Knowsley council told me, and I have no reason to disbelieve it, that cuts in services and jobs are now unavoidable. It is having to anticipate cuts of £9 million to health and social care and to children’s and family services over that period. It is looking at 340 job losses, which will mean that services suffer, and that in economic terms more people will be thrown on to the scrap heap in areas such as Knowsley, where we have relatively high levels of unemployment.

Is the situation a statistical fault or deliberate policy? When system funding cuts are deepest in the areas such as Knowsley that are least able to bear them, and not in areas with relatively few problems of deprivation, we are bound to conclude that Knowsley is being targeted. As has been pointed out by my hon. Friends the Members for Liverpool, Riverside (Mrs Ellman) and for Sefton Central, surrounding areas that, at least in part, have a similar character are experiencing the same thing. It cannot therefore be an anomaly that relates only to Knowsley, a point to which I shall return in a moment.

No doubt, the Minister will make the point that the Government have brought in innovations that might help. For example, he might talk about the new business rates retention system, but the problem is that it is no longer needs-based. All the evidence is that redistribution will be to more prosperous areas, which will get to keep more of the business rates, so Knowsley will again not benefit. The National Audit Office has pointed out:

“Business rates income has been volatile across individual local authorities.”

I cannot therefore see that as the knight on a white charger that will save areas such as Knowsley.

There is also the new homes bonus, which is supposed to reward councils that boost new house building, but for every £1 lost through the top-slice, Knowsley will get back only 15p through the new homes bonus, whereas, for example, Uttlesford in Essex will get back £19 and Basingstoke will get back £18. Again, the evidence is that the benefits are being shifted away from the areas with the greatest levels of deprivation to those with much lower ones.

It is a similar case with arrangements for council tax support. The Local Government Association concluded that local authorities will have no choice but to pass on the cut in that support to the working poor. People who are in low-paid work and may be in receipt of council tax benefit will feel the greatest impact, because the Government are providing only 90% of the required funding. In fact, the Government have got their sums wrong: the average is 11.4%, but the actual cut in Knowsley is 12%. That cut is not transparent, but is taking place by stealth, even though the Government claim that the arrangement is a new and helpful innovation.

Before I finish, I want to say a quick word about welfare reform. With the bedroom tax, 5,000 households in Knowsley will lose £13 if they are considered to have one bedroom too many, or more than £20 for two bedrooms. I attended a public meeting in Northwood in my constituency on the bedroom tax, and I heard tale after tale of people who will have nowhere to go. They will have no options, because there are no two and one-bedroom properties to move into. Even though Knowsley has comparatively low rents, work done so far shows that 123 families—mainly larger ones, with four or more children, in private rented property—will be seriously impacted by the benefit cap. It is clear that the emphasis is moving away from areas with few problems compared with areas such as Knowsley, and that all the impact will be in areas like Knowsley.

I want to draw a few conclusions. The worst effects in finance and other support for local government have been targeted on areas with the highest levels of deprivation. The statistics I have presented, including those provided by the Local Government Association, point to that as an inescapable conclusion. Whichever way we look at it, frankly, it is shameful that the poorest areas in the country are asked to bear the brunt of the cuts. Without doubt, critical services—they are more critical in areas that suffer high levels of deprivation—will be cut severely.

Similar conclusions can be drawn about welfare reform, particularly in relation to the bedroom tax, the benefit cap and universal benefit. Those hit hardest will be those who work—described as the working poor—the disabled and those dependent on benefits, who are least able to bear the brunt of the cuts.

Where are we and where are we heading? I do not want to push the comparison too far, but we are very much heading back to the days of the Poor Law and the Speenhamland system of outdoor relief. With the bedroom tax, I can even imagine that we will need a modern equivalent of workhouses, because people will have nowhere to go. If we can make comparisons with the worst aspects of the 19th century, the Government should hang their head in shame at what they are doing.

Targeting the poorest areas is wrong in principle but, as the National Audit Office suggests, the Government are making no effort to monitor the effects of the changes. Before we know it, we will find families spiralling into debt or greater deprivation after April, with no plan for that when it comes about. Perhaps the Minister will not share my analysis of the problem—I am almost sure that his briefing will lead him in a completely different direction—but I hope that, at the very least, he will agree that all those matters need to be closely monitored after April, on almost a daily basis. The Government need a back-up plan for how they will respond if the sorts of problems that I have described arise. If they do not have one, frankly, they do not deserve to be in government.

--- Later in debate ---

[Brandon Lewis]

That argument might hold more weight if such areas were not getting almost 50% more than the national average in the first place. Even a constituency such as my own, which has three of the most deprived wards in the country, gets around £2,200. I struggle to have sympathy with the right hon. Gentleman’s argument that getting almost 50% more than the national average is a hardship.

In all the deficit denial and doom mongering that some people have been engaged in, an important message is in danger of not being heard. However, the recent move by Moody’s has once again reminded us of that message. The size of the deficit and the simple fact that local government accounts for a quarter of public spending mean that local government cannot remain immune. It is one of the biggest players in the public sector and it has its part to play in reducing the deficit.

I want to make it clear to hon. Members that this settlement is a fair deal to both the north and the south. Manchester, Liverpool, Nottingham and Newcastle all have higher spending power per dwelling than the national average. I have already commented on the fact that Knowlsey has the highest settlement in its area.

[Mrs Ellman]

Will the Minister explain how it can be fair that the areas with the highest deprivation such as Knowsley and Liverpool—Liverpool is right at the top of deprivation levels—are suffering the harshest level of cuts?

[Brandon Lewis]

I dispute whether that is even correct, bearing in mind that the base point that such areas start from is so much higher than anywhere else. It was the previous Government who left areas with high deprivation, such as Hastings and Great Yarmouth, with a cliff-edge drop in funding of up to 20%, which this Government have had to fix. Places such as Wokingham have been mentioned before in debates on the settlement—Surrey was also mentioned today—but it must be remembered that all the councils under discussion today are at least £500 better off per household than Wokingham is in 2013-14. Knowsley itself is pretty much at the average with regard to its reduction, but it has a spending power of £3,122, compared with an average of just £2,200, so this settlement is fair. Thanks to the new efficiency support grant, the seven authorities that face the biggest hit to their spending power in 2013-14, a couple of which I have just mentioned, are eligible for a funding boost, which ensures that no council faces a spending power decrease of more than 8.8%, despite the previous Government leaving them with one closer to 20%.

Vitally, the system now works in a council’s favour. Through the Localism Act 2011 and the financial reforms in this settlement, some 70% of local authority income will be raised locally. Councils now have more power than ever before, but they need to understand the implications of this settlement and to act in their residents’ best interests and work harder on their behalf. They can do that by redesigning council tax benefit to cut fraud, promoting local enterprise to get people back into work, or redesigning services to make them more efficient and sustainable. There are still savings that can be made. I disagree with the earlier comment about the council tax support position. The money the Government have put in, the opportunities that exist for savings and the flexibilities that have been given to the sector can more than make up for what is needed to be found. Last year, local government showed commendable skill in reducing its budget while still protecting front-line services. Many residents thought services had actually improved. This is about not how much money is spent, but making sure that it is spent in the right way.