Local Government Finance

Mike Hancock Excerpts

Wednesday 8th February 2012 Commons Chamber

[Mr Mike Hancock (Portsmouth South) (LD)]

Once again, I declare my interest as a member of local government. I share the right hon. Gentleman’s worries that local authorities are not in a position even to guess what the situation will be next year. Does he agree that what is even more worrying is that the Government do not have a clue about what the position will be, and that that is the problem we face?

[Hilary Benn]

The hon. Gentleman is absolutely right, and we are talking about a change that the Government are apparently determined to push through in a very short space of time. [Interruption.] On the council tax benefit localisation, it is not a change, with the 10% cut, that I agree with. Government Members ought to listen to what council treasurers and leaders up and down the country are saying, and they should make their views forcefully known to their Front-Bench team before they find their constituents asking them, “What is it you voted for? Why did you do this to me?”

All this uncertainty has been created by the Secretary of State, because it is his Bill and his lack of clarity. What would a prudent authority do in these circumstances and faced with such uncertainty? What authorities actually do is build up reserves to guard against it, yet we know what the Secretary of State does to councils that have reserves—he attacks and vilifies them. That is a pattern of behaviour with which councillors of all political colours have become all too wearily familiar.

I shall now deal with council tax and the other motion before us. Let us remember that average council tax bills are lower under Labour-run councils than Conservative ones. No council, especially in the current circumstances, wants to raise council tax if it does not have to do so. Councils will do their best to avoid doing so, unlike the Secretary of State, who says that he wants to protect people from increases in council tax and then the next moment introduces legislation that will impose council tax increases on people on low incomes.

As my hon. Friends have said, this year’s council tax freeze grant is a one-off, unlike last year’s, and that creates a dilemma for councils. The Tory leader of Surrey county council, which I understand is not proposing to take the freeze grant, said very simply:

“The freeze would be a short-term gain for long-term pain.”

Why has he said that? He has done so because the freeze could mean that residents face bigger council tax increases next year and subsequently.

On the referendum proposal, capping powers have of course been in place since the Local Government Finance Act 1992 was passed by the previous Conservative Government. It is right that councils are accountable for the decisions they make, although if the Secretary of State were true to his “localist” principles, he would have allowed local residents to hold the trigger on any referendum. Instead, the legislation will provide that he will determine the benchmark—so he decides what is excessive. He will determine how the referendum is conducted, the question to be put, the publicity and expenditure levels to be permitted and how the votes are counted. He will even be able to direct that the referendum provisions do not apply and decree the council tax requirement that must actually operate. In effect, the Secretary of State will set the maximum level of council tax increase each year.

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[Mr Mike Hancock (Portsmouth South) (LD)]

I will try to take your lead and be as gracious and courteous as you are, Mr Speaker.

Once again, I am very disappointed. First, I have to register my interest as an existing and long-serving member of Portsmouth city council. I would have hoped that in the past month or so those Ministers in the Department who have had experience in local government would have been reading and listening to what their former colleagues in local government have been saying to them about the problems with the current settlement and with what is being stored up for the next year or two.

It was not easy for the Tory leader of Surrey county council to say that Surrey would decline to take the gimmick from the Government to keep the council tax down. I am sure that he did it with a heavy heart, but, as he rightly said—this was recounted again here this afternoon—it is better take the pain when it is evenly spread, and when one is at least in control of it, than to accept a short-term gain only to experience a very long-term pain. I think that there is something seriously wrong when a Minister, such as the Minister who opened today’s debate, can give no explanation whatsoever, and can offer no hope to local authorities such as my own which accepted the 2.5% gimmick cut. I tried to persuade my colleagues not to do it, but they chose to take the opposite view.

For us, that will pose a real problem. In my local authority, the shunted costs—the responsibilities that are being pushed down to us—amount to £1.8 million. That is the extra sum that we shall have to find to pay for services for which we never had to budget before. Examples that have been given are the full recovery of the cost of court proceedings, discretionary housing benefit payments, a 50% cut in the community safety grant, section 117 cases, concessionary fares, what is described as

“Concessionary Fares Increase Care of New Back Office System”

—which has been demanded by the Department for Transport—and the youth justice system. That £1.8 million comes on top of a 10% cut.

I was disappointed when the hon. Member for Beckenham (Bob Stewart) asked whether it would be easier to explain all this in terms of percentages. I do not care how people explain it. It is painful, difficult and awkward for local authorities to do anything, and they have not acted irresponsibly. The days when Ministers were able to cite the irresponsible council are long gone. As was pointed out earlier, no council has avoided making efficiency savings. It is in our interest to make such savings, and we have tried desperately hard to make them.

[Mr David Ward (Bradford East) (LD)]

Will the hon. Gentleman give way?

[Mr Hancock]

Yes, but my hon. Friend must be very quick.

[Mr Ward]

I will be.

My hon. Friend has mentioned percentages. I hope he agrees that the real issue is gearing. A 10% cut in an authority with an 80% gearing of formula grant to the rest of its funding will mean an 8% reduction in its overall budget, whereas if only 20% of an authority’s funding comes from formula grant, it will experience a reduction of only 2%. That is the big issue.

[Mr Hancock]

My hon. Friend’s point is well made, but it is falling on deaf ears. It has been made time and time again. It was made last year, for instance. It is unfortunate that no one is listening, and it is very unfair and very disrespectful to Members who serve in local government. Next year, Tory councillors who will be defending their seats in the county council elections will hope against hope that the Government will pull some sort of rabbit out of the hat to safeguard them from having to impose pretty horrendous council tax rises.

This afternoon’s debate is a fait accompli. We shall vote either for or against the motion. I shall vote against it, and I hope that my colleagues who have served or are still serving in local government will do so as well, because this is not doing the cause of local government and local democracy any good. For Ministers not to be able to answer even the simplest, most fundamental question about where we go from here is totally unacceptable and unfair. As Members have said repeatedly, this is shifting the blame. It means more responsibility, fewer resources, and indeed more blame—not for Government, but for local government.

--- Later in debate ---

[Mr Mike Hancock]

I was confused when that list was being read out. Was the right hon. Gentleman as confused as I was when it was said that local authorities should do more about procurement fraud? Was it seriously being suggested that when local authorities know about such fraud, they do nothing about it? That was mind-boggling.

[Mr Howarth]

I am grateful to the hon. Gentleman for that, but the point is that unless there is a rigorous, properly policed tendering process, the potential for fraud is even greater.

I will conclude as I know that my hon. Friend the Member for Warrington North (Helen Jones) has plenty more to say. Whatever decision my Front-Bench colleagues reached, given the extent to which this motion discriminates against local authorities such as Knowsley, there is no way I could support it today. I am happy to join them in the Lobby because this is a despicable measure, and I suspect that the Under-Secretary, in his quiet moments—if there are any—feels the same as I do.