Local Government Finance

Luciana Berger Excerpts

Tuesday 26th February 2013 Westminster Hall

[Mr Howarth]

I am grateful to my hon. Friend the Member for Sefton Central for making that point. I have a very great affection for Aintree library, because when it was in my constituency I used to hold surgeries there.

My hon. Friend is right. If he looks at the NAO report, “Financial sustainability of local authorities”, which was produced in January, he will see that the NAO points out that although 93 local authorities

“used reserves in 2011-12, the remaining 260 either made no changes to their reserves or added to them.”

There is an argument about the use of reserves, which the Government have made, but the NAO report goes on:

“There is evidence that local authorities are reducing services, for example in adult social care and libraries”.

Certainly in the Liverpool city region, in terms of reserves there is really nothing left other than what prudentially is needed.

[Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)]

My right hon. Friend mentioned efficiency savings. Does he share my concern that when Liverpool city council was asked to make £141 million of cuts during the last two years, the opportunity to make efficiency savings was limited because so little notice was given that drastic and severe cuts would have to be made?

[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.

--- Later in debate ---

[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.

[Luciana Berger]

The Minister will know that the leader of Liverpool city council has extended an invitation to the Secretary of State to come to Liverpool to tell us how he thinks more efficiency savings can be found, bearing in mind that we now have to make additional cuts on top of the £141 million that have been made so far. Will the Minister also accept an invitation to come to Liverpool to see for himself the extent of the cuts, bearing in mind the levels of deprivation that exist, and tell us where he thinks further efficiency savings can be made?

[Brandon Lewis]

I suggest to the mayor of Liverpool that some of his language has been extremely unhelpful and somewhat unfair, particularly when Liverpool starts with a per dwelling spending power of around £2,700. Many areas of the country, even deprived areas such as those in my constituency, would be keen to have such spending power. I am happy to come to Liverpool during the course of this year. In fact, I will be visiting the fire service soon, and so will be happy to visit the council as well. I suggest the council looks at the booklet, “50 ways to save money”. Part of taking that local power and being a locally directly elected mayor is about having responsibility. There is that old phrase, “With great power comes responsibility.” Instead of looking to everyone else to solve their own issues, councils should be looking at what they can do locally; that is what local accountability and local democracy are about. Through our community and neighbourhood budgets, we are rewiring the system and bringing people together from across the board—local authorities, the police and the health service. We are seeing such alignment with the whole place community budgets. Areas close to Liverpool and Manchester are finding local savings worth millions of pounds, and providing an opportunity to realign the public sector to make it more streamlined and efficient.

Thanks to the autumn statement, which exempted local government from another 1% top-slice, councils have time to put their house in order and put people first. They should start that process by freezing council tax, which rose exponentially under the previous Government—it more than doubled. We have now put money aside to put tax rises on ice for a third successive year. Already a huge number of councils are doing the right thing, including, I am glad to say, Knowsley, as well as Derby, Dorset, Northampton and Watford. Areas such as Lancashire are going further and actually cutting council tax by about 2%. In many cases, councils have far more in reserves than they are losing through cutbacks. Liverpool, Manchester and Leeds have reserves twice that of their spending power reductions. The local funding settlement used to be the end game, but now it is just the starting point.