Local Government Funding

Nicholas Dakin Excerpts

Monday 6th December 2010 Commons Chamber

[Mr Pickles]

I do not believe the figures. If that is the case, we are beyond economic ruin, because our country has reached a point where we can no longer afford to level off spending. If the hon. Lady would like the United Kingdom to enter the world of Greece and our friends in Ireland—[Interruption.] Let us be fair. What is the biggest problem? Sovereign debt. Which country has the largest sovereign debt? Had my right hon. Friend the Chancellor not taken those brave decisions in the emergency Budget and in the spending review, and if we did not take those brave decisions to their logical conclusion, we would have been in the danger zone. We all know where the Opposition would have been—they would have been running for cover.

[Nic Dakin (Scunthorpe) (Lab)]

I am interested in the Secretary of State’s references to Trotsky and other people, but how many local government workers does he expect to see made redundant at the end of this year on the basis of his policies?

[Mr Pickles]

That is just a typical Labour intervention. It is not about the economy; it is all about getting as many bleeding stumps as possible. What we do know, through research, is that despite the various daft claims made about the number of people being made redundant in Birmingham, for example, the majority are going by way of natural wastage, turnover, mutuals and co-operatives being set up—something that Trotsky would have approved of—voluntary redundancies and early retirement. When it comes down to it, the likelihood is that the number of compulsory redundancies will be less than 4%. Frankly, these things can be managed with a will, and it is our intention that councils will manage them sensibly.

Owing to Labour’s planned cuts and the dire state of the public finances, the vast majority of councils have seen these difficult and challenging times coming, and they have been making sensible, constructive plans to address them. I want to support them with action, not meaningless words. I can make councillors’ and councils’ jobs a lot easier by scrapping regulations, tearing up unnecessary guidance and cutting through red tape. The Government are restoring real democratic accountability to local government, giving the power, the freedom and the authority to those who actually make the decisions. We have to be realistic. We realise that there is less money, but unlike the former Government, I do not intend to tell councils how they should spend it. The money given in this settlement will not come with strings attached. As we said during the spending review, with very few exceptions we have ended the ring-fencing of grants, so that councils can decide for themselves how their money should be prioritised and spent.

Under the spending review, we will allow councils to borrow against future business rates. We are also introducing powerful new financial incentives for councils, such as the new homes bonus. In addition, there is the £20 million through capitalisation, referred to by my right hon. Friend the Member for Berwick-upon-Tweed (Sir Alan Beith). Councils can top that up with the sensible use of their £10 billion of reserves—they were prudent and repaired the roof when the sun was shining, unlike Labour, and they can now spend that money when it is rainy. There are a whole range of measures that proactive councils can take—for example, improving transparency, sharing services, cutting out waste, improving procurement practice and bringing senior pay under control.

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[Nic Dakin (Scunthorpe) (Lab)]

I draw attention to my entry in the Register of Members’ Financial Interests. It is a pleasure to follow the hon. Member for Bradford East (Mr Ward) who praised my great friend Councillor Ian Greenwood, the leader of Bradford city council, for rolling up his sleeves to get on with the job. I recognise the great honesty of the contribution he has made tonight. In recognising that, the figures look—in his own words—a bit scary.

The cuts in local government spending announced by this Conservative-led Government are of unprecedented severity—27% in four years is a massive amount. As leader of North Lincolnshire council for six years, I inherited a council with the fourth highest council tax in the country. Through systematic and planned savings, the council’s budget had been cut by many millions by the end of my term of office. Council tax at band D was the average for England, and the Audit Commission identified North Lincolnshire as a beacon council, so I know it is possible to reduce spending while developing services.

Like my hon. Friend the Member for North Tyneside (Mrs Glindon), I recognise that innovation has been around for some time in local government. However, to do that creatively and effectively, budget reductions have to be systematic and planned. To cut budgets in a crisis is exactly the wrong thing to do. It leads to the wrong cuts, a lack of service continuity, and disastrous consequences for the organisation’s finances and for the services it delivers. We need look no further than across the Irish sea to see how true that is.

The Education Committee recently interviewed two heads of children’s services to see how it feels at the sharp end. In his opening question, the Chair asked whether the funding reductions made sense. Matt Dunkley of East Sussex county council, the vice-president of the Association of Directors of Children’s Services, answered thus:

“I think we all understand the imperative of the deficit reduction. I think our fears are, managerially, how it is being handled by the Department and how the settlement is being broken down, in terms of the different funding streams that affect us. We are fearful that a combination of front-loading of the reductions into year 1, and the way in which the different funding streams on which we are reliant are being cut at different rates over the four years…could lead to some local authorities having to make very large reductions in the first year of the four years of the settlement. That could have a knock-on effect in terms of the amount of redundancies they’d have to fund, which might produce some unintended consequences”.

Debbie Jones, director of children’s services for Lambeth, added:

“What I want to emphasise…is the front-loading issue. I think all of us have recognised the need to make significant reductions, but the important thing is that we essentially transform the way in which services are commissioned and delivered so you have a reasonable lead-in time. The impact of the front-loading, not just on our overall settlement but also on the grants that we have yet to know the detail of, means that we will have a very short time in which to make major decisions. That of immediate knee-jerk—obviously we’ll do our best to avoid it—could result in those unintended consequences, which could undermine the work that we’re doing in the future.”

That is what the professional leaders on the front line are saying about how this Government are going about their business. They are not whingeing and whining—they are professionals. To use the words of my hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh), they are getting on with the job. That is what professionals will always do, in my experience, when faced with some of the nonsense that we, the politicians, serve up from time to time. They will somehow make sense of the nonsense, and they will make it work, after a fashion. However, what they warn of we have a duty to listen to. They warn that these reckless cuts will lead to unintended consequences, which will impact on the lives and livelihoods of the most vulnerable. These reckless cuts will deliver the Prime Minister’s broken society, not his big society.

As the Tory peer and LGA chair, Baroness Eaton, said:

“the unexpected severity of the cuts that will have to be made next year will put many councils in an unprecedented and difficult position.”

We have heard how Conservative leaders and mayors in the north of England have echoed this in a chorus of concern. The chief executive of North Lincolnshire council agrees. Never before has the council in my area had to take an in-year cut in Government funding after it set its budget, as it had to do this year. The front loading of future cuts means a 10.4% reduction next year. Additional cuts to specific grants will exacerbate this further. It is small wonder that the council concludes thus:

“Revenue spending cuts in excess of £20 million over 4 years are on an unprecedented scale. There will be implications for all areas of council activity. While the council will try to manage as much of this as possible through efficiency measures, reductions in services and staffing levels are inevitable.”

For all the Tory talk of localism and devolving power to local authorities, the Tories are cutting local budgets harder than national budgets. Town hall spending will be cut almost three times more than that of Whitehall Departments—so much for localism. The cuts are front loaded so that the heaviest cuts fall in the first year, giving local councils almost no chance to plan where savings can be made. The cuts are too deep and too quick, putting front-line local services at risk. Many small businesses rely on contracts for local authorities. As my hon. Friend the Member for Lewisham East (Heidi Alexander) pointed out, cuts in local government funding will result in fewer contracts for the private sector, meaning loss of jobs and a knock-on effect for the wider local economy. It is little wonder that PricewaterhouseCoopers forecasts that for every job lost in the public sector, another will be lost in the private sector.

This timely motion gives all Members of the House the opportunity to listen to the people, to pause and to do the right thing. By voting for the motion, we are voting for localism, for small business and for local people. I commend the motion to the House.