Local Government Budgets

Richard Burden Excerpts

Wednesday 12th January 2011 Westminster Hall

[Richard Burden (Birmingham, Northfield) (Lab)]

It is a pleasure to follow the hon. Member for Nuneaton (Mr Jones). I could, perhaps, characterise his speech as a bit of an each-way bet, but he will have to answer to his constituents over how he actually feels about large amounts of cash being trimmed off the local budget.

I congratulate my hon. Friend the Member for Coventry South (Mr Cunningham) on securing this debate and a number of debates since the election on matters pertinent to the west midlands. Understandably, he has majored on the situation in Coventry, although the title of today’s debate covers the broader west midlands, which we heard about in the hon. Member for Nuneaton’s speech.

The previous debate that my hon. Friend secured on this matter was on 16 November 2009 on cuts to the police service. Those cuts had a serious impact in all parts of country, but in the debate a succession of hon. Members from the west midlands drew Ministers’ attention to the disproportionate effect of the police cuts on our region due to how Government grants interrelate with the precept. In that debate, we were told that Ministers were listening, but when the announcement came just before Christmas of the settlement for police authorities, we found out that listening had not been matched by action. As a result, a number running into the hundreds of experienced officers will lose their jobs and the back-up support that is vital. In that debate, I said that not only were the cuts to the police service serious, but that we will only see their impact in the round if we relate them to cuts taking place to other public services and, most particularly, to local government.

On 13 December, we heard what the provisional local government settlement would be, and it confirmed all our worst fears. I asked the Secretary of State for Communities and Local Government about Birmingham when he made his statement in the House. His response was significant:

“I am delighted to tell the hon. Gentleman that Birmingham faces a cut in its spending of 8.3%, and 4.3% for next year.”—[Official Report, 13 December 2009; Vol. 520, c. 692.

I think he meant 8.3% next year and 4.3% the year after, but we will allow him that slip of the tongue—I know that Government Members are fond of quoting slips of the tongue at the moment, which can happen from various quarters. The Secretary of State said that he was “delighted” that there would be an 8.3% cut in spending in Birmingham, but there is no delight in Birmingham about an 8.3% cut in spending. According to figures from Core Cities Group, the cuts required to balance the budget in Birmingham in the 2011-12 financial year will be £139 million, with a further £53 million the year after. As with the police cuts, the impact will be much greater in Birmingham, and in other core cities and urban areas, than—surprise, surprise—in more affluent areas, particularly the south-east.

According to the Core Cities Group, Wokingham faces a loss in formula grant of 14.3%, which is a higher percentage than Birmingham. The real impact on real people on the ground in Wokingham is a cut per person of £20.83. In Birmingham that is a cut per person of £75.19. We can then transfer that figure to the spending power per person, which my hon. Friend the Member for Coventry South mentioned. In Wokingham the cut is £4.46 and in Birmingham it is £101. That £101 equates to 8.3%, the precise figure about which the Secretary of State expressed delight in his 13 December statement.

[Emma Reynolds]

Does my hon. Friend feel that the delight in the quote from the Secretary of State for Local Government is due to an ideological commitment to make the state at both central and local government level smaller, because that is what Conservatives have always believed and continue to do so? If they were frank and open about that, we would obviously still have a problem with it, but why should they not come out and say so?

[Richard Burden]

My hon. Friend makes a valid point. I also think we need to question when they talk about making the state smaller. What they really want to make smaller is the benefit that the state can provide to the citizen; the support the state provides; and the way the state can enable the citizen to improve his or her quality of life. I do not get the impression either from this or the previous Conservative Government—if we go back that far—that there was actually much of an attempt to shrink the state in terms of central control. An interesting thing about what they are doing in practice—not the rhetoric—is the increase in central control, not only over local government but also over local communities. I will give a couple of examples of that in a minute.

I chaired the West Midlands Regional Committee before it was scrapped by the Government. Clearly, they found it uncomfortable to have a Committee of this House focusing on our region. That is something that in due course they will have to answer: why they thought it was so much of a problem to have a Committee looking at the strategic issues of our region. The reports we produced on that Committee looked at the impact of the recession on the region and the fragility of the recovery in the west midlands. When cuts come in local government and in other areas of the public services, that is serious. It is really serious for the west midlands, so serious that it makes it even more important that the targeted funds that the previous Labour Government made available to our region are employed effectively.

Birmingham city council’s ruling Conservative-Liberal Democrat coalition was criticised before the election about its use of targeted funding, in particular the working neighbourhoods fund. With the needs of a city such as Birmingham, it was surprising that the Conservative-Liberal Democrat coalition managed to underspend in the 2009-10 financial year to the tune of £28 million on its working neighbourhoods fund spending. It has a lot of questions to answer about that. The council still received from the Labour Government an additional allocation of £41 million under the working neighbourhoods fund for the 2010-11 financial year. It could use the underspend from the year before and the extra £41 million provided by the Labour Government to help those affected by the cuts that the current Government are implementing. It could be doing that, using it to tackle worklessness and to ensure that the resilience of the region is maximised after the recession. That is not happening. In July, the city council froze initiatives for using that underspend from 2009-10, and it cut £7 million from the 2010-11 budget.

I raised that with Ministers at the time and I was told that it was a good thing, because there was now a new-found freedom for local government, ring-fencing was going and local authorities were free to use area-based grants according to local circumstances. The result in Birmingham has been this. In the week before the Localism Bill receives its Second Reading and at a time when the Government talks about the big society—we may hear of it from the Minister—and empowering local communities and giving them a say, on Friday in Birmingham city council, neighbourhood managers and neighbourhood co-ordinators throughout the city, including my Northfield constituency, were issued with redundancy notices and will no longer have jobs from April.

One of the most positive and creative responses to the MG Rover crisis of six years ago was the setting up of a one-stop advice shop in Northfield town centre. That not only provided much-needed advice for local people but brought together in a real partnership, local businesses, residents and the local authority, to improve the suburban shopping centre of Northfield. Key to that, the glue that held it together, was a town centre manager, initially funded by Advantage West Midlands, which is also being scrapped. Now that town centre manager post is being scrapped under the cuts brought in by Birmingham city council. Those neighbourhood managers and neighbourhood co-ordinators were engaged in incredibly creative work in building local resilience and community self-reliance. Getting those redundancy notices on Friday was a slap in the face for them. It undermines the resilience and self-confidence in communities that—if the verbiage of the big society is to be believed—we should be trying to build.

It will also sap confidence in that local suburban shopping centre at the very time we should be trying to attract investment to it, trying to build confidence, and trying to cut crime and the fear of crime. When I say it is a slap in the face for those local neighbourhood managers and co-ordinators and the town centre manager, it is not just a slap in the face for them. It is a slap in the face for the people of Northfield and Birmingham. It is also a slap in the face for the ideology of the big society.

It will be said—as it was by the hon. Member for Nuneaton—that the cuts are inevitable and that savings would have had to be made anyway. To some extent, that is true: some savings would have had to be made. He says it is all Labour’s fault. Maybe he should listen not just to what comes out of central office but to what Conservative councillors say. At the start of last year, when Labour was in power in central Government, Birmingham city council, despite having had year-on-year increases in grant, was already facing a massive overspend, even though the Conservatives and Liberal Democrats had been in power there since 2004.

When a number of people questioned the council with some force about whether that said something about its financial management, it said, “Absolutely not. The trouble is we do not get enough money from the Government. Labour starves us of money.” It is time for the Government to ask whether it was right or wrong to say that. If those Tory councillors were right that Labour was starving them of money, despite the year-on-year increases, how can the Government justify the extra swingeing cuts to financing Birmingham city council? If they are wrong about that, are they saying that Birmingham city council, run by their friends —a Conservative-Liberal Democrat coalition—was mismanaging the finances of the council? They cannot have it both ways. They have to say in fairness to the people of Birmingham which of those positions is right. The people of Birmingham need to know these things if their neighbourhood co-ordinators are to be cut and when they see rubbish piling up in the streets of Birmingham because the city council is trying to cut the pay of refuse collectors by between £4,000 and £6,000. They need answers from the Government about what they are going to do about listening to the real concerns of real people in Birmingham.

There are things that the Government could do to make matters a little better. They could structure the transitional grant to local authorities differently. They could ensure that transitional grant is available to local authorities that face a cut in their revenue spending power of 7.5%, rather than the 8.9%, which is proposed in the provisional settlement. They could change the resource equalisation formula, so that it does not take money away from poorer areas and give it to richer ones, as is happening at the moment. A number of other suggestions have been made by the Core Cities Group.

When the Minister responds, will he say whether he is considering what Core Cities is saying and, if so, what the response will be? Could he give me a bit more comfort than I received in the debate about police cuts, when I was told that the Government are listening, only to find that listening led to absolutely no action in the final announcement? Will the Government listen this time and match their listening with action when we have their final figures?

One thing is clear. Whatever the Government do, is it not true that people in Birmingham and the west midlands as a whole, including Coventry, deserve just a little better from the Secretary of State for Communities and Local Government than a pat, off-the-cuff remark expressing delight at the fact that spending power in their area will be cut by more than £100 for every citizen or by 8.3%?

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Communities and Local Government (Robert Neill)]

It is a pleasure to see you in the Chair, Mrs Brooke. I congratulate the hon. Member for Coventry South (Mr Cunningham) on securing the debate; I know that he takes great interest in local government affairs.

Some serious and interesting points have been made today, but let us start with the reality, which is that the damage was done by the incompetence of the previous Government. It is a bit rich, therefore, for the hon. Member for Birmingham, Erdington (Jack Dromey) to end on the note that he did, but it is a pretty good starting point for me.

There will always be disagreements between hon. Members over the cause of the recession, but the truth is that this Government are picking up the tab for what went wrong under their predecessor’s watch. It does not advance some of the detailed technical arguments that I shall come to later, to go into denial about that or to try to say that the situation is entirely the result of something that blew in from north America thanks to the bankers. That is not the reality, and the public do not believe that. We need to deal with that legacy; that is a fact of life. I am sure that, in reflective moments, Labour Members recognise that as well, because those who served under the previous Government know that that Government intended to make very significant reductions because they had to, and because we cannot sustainably continue with a deficit of £156 billion, and interest payments of £120 million a day; that simply is not viable. That is money that will not be available for any kind of public service because it is going to pay the debt charges. That is why the coalition has had to tackle the problem swiftly and head on.

Reference was made to the country’s credit rating. I suspect that if the coalition Government had not come up with clear, credible proposals that the international markets knew would get a grip on the deficit, our rating would not have been as secure as all of us wish it to be. There is no pleasure in doing this; our economic inheritance necessitates this action. Denying that gets no one anywhere. It is fine for the Opposition to criticise; that is what happens. None the less, one hears very little apart from the words, “It needn’t be so far or so fast.” When one seeks anything more specific than that, very little is forthcoming. We are doing the job. I understand why the Opposition will be carping from the sidelines, but they are not putting forward a convincing argument.

Let me deal with the specific points that have been raised. First, there is the question about the nature of the settlement itself. When Opposition Members attack my right hon. Friend the Secretary of State, it is the highest compliment that they can pay him because it shows that he has got them rattled. Perhaps that is because he has more experience and understanding of local government than many people in this House put together. The reality is that we have sought, within the difficult financial constraints, to produce a settlement that does reflect a fair balance.

Let us look at what we have sought to do in some important material matters that were referred to. The question of dependency was raised by a number of hon. Members. The introduction of the differential bands for the floor damping was specifically intended to reflect differing levels of dependency. Some local authorities are significantly more dependent on central Government grants than others. It was this Government who, for the first time ever, introduced the refinement of differential bands to reflect that. I know some criticism was made of the whole question of damping. With respect to the hon. Member for Coventry South, it is not a new concept. As a local authority leader many years ago, I used to argue the toss about damping with Ministers. I know that it has changed over the years, but the concept is not new. We have inherited two things—a financial crisis and a commitment to pass down much more power, including financial power, to local authorities. We also have a local government formula that has been in place for many years but is rather creaking at the seams.

That is why, regarding the future, we decided that it was appropriate that although the comprehensive spending review period runs for four years, we would have a two-year settlement to deal with the immediate issues and after that we would institute a comprehensive resource review of local government. That review starts this month and I anticipate that hon. Members will be able to see the consultation document very shortly. The review will enable us to take an overall view of how we resource local government. That issue has been kicked around for a long time and we need to come to a view on it. So the review will enable us to address some of the points that have been raised in this debate.

[Richard Burden]

Will the Minister give way?

[Robert Neill]

I will just finish my point and then I will, of course, give way to the hon. Gentleman.

Against that background, the Government have recognised that there needs to be a change. We have to deal with that change, but we also have to deal with the immediate needs and the immediate financial pressures. That is what we have endeavoured to do.

[Richard Burden]

I am grateful to the Minister for giving way. I want to put two points to him. First, if he is saying that the formula as it stands is unfair, why is he imposing the greatest cuts in the early stages rather than phasing them in with the changes to the formula that he is talking about? Secondly, does he believe that it is fair that Wokingham will receive a cut in its spending power of £4.46 per person when Birmingham will receive an equivalent cut of more than £100? Is that fair—yes or no?

[Robert Neill]

The hon. Gentleman raises two points that I was about to come on to. First, I was setting the context. We all accept that a system that has worked but that has come to a point where it needs change must be readdressed, so I hope that Opposition Members will support the local government resource review and the alternative means by which, for example, we can enable local authorities to keep much more of the product of the business rate that they raise, in the same way that we want to give them much more flexibility. Indeed, we have already given them much more flexibility by significantly reducing the amount of grant that is ring-fenced, so that even within the tight settlement that we have at the moment they can move money around to reflect their priorities.

Secondly, however, the hon. Gentleman makes an error when he makes the comparisons that he did. That is because another part of what we have sought to achieve is to recognise not only that dependency upon a grant varies but that the formula grant is, of course, not the whole picture. That is why we use the concept of spending power, which the Local Government Association raised with us, because councils also have reserves and the ability—within some constraint—to raise council tax. Council tax doubled under the previous Government; there is a limit to how much more one can expect people to pay, so we do not want to encourage council tax rises.

The hon. Gentleman forgets something when he looks at the amount of settlement that is received by local authorities; in fact, the amount of settlement is very instructive. He quotes figures about certain authorities because it suits the purpose of his argument. For example, he refers to Wokingham. Actually, let us make the comparison between Wokingham and Birmingham. Birmingham receives formula grant of £663 per head; Wokingham receives formula grant of £125 per head. So Wokingham gets something like a quarter of the support from central Government that Birmingham gets. That is a reflection of the fact that there may well be greater needs in Birmingham, but the suggestion that that element of need is ignored in the system is inaccurate, because we must look at not only the changes within the grant but where we are starting from. That is one of the points that has not been mentioned in this debate.

In the context that the hon. Gentleman refers to, it is also very significant that it was this Government, in refining the formula after consultation with local government, that actually increased the weighting given to what is called the relative needs element of the formula. That is the element that reflects greater pressures, elements of deprivation and other demands. So we as a Government—as a coalition—increased that weighting to 83%, which is more than it had previously been. That change was made to assist councils that are under pressure.

It was also this Government that set up for some authorities—generally including those in the west midlands —a transitional grant to cushion the loss of the working neighbourhood fund. The working neighbourhood fund was set up by the previous Government as a three-year fund and they were going to end it in May 2011 anyway. As far as we know, they were not planning any transition arrangement. To alleviate the difficulties for local authorities that are under pressure, this Government made available moneys even in difficult times to put in place transitional funding.

So, with respect, there is a little bit of protesting too much by Opposition Members that this Government have not recognised the difficulties that local authorities in the west midlands face. We have tried, within the constraints that we inherited, to do something about those difficulties.

The right hon. Member for Coventry North East (Mr Ainsworth) referred to the specific representations that have been made about the damping formula. Perhaps I can take those representations on board. We have received a number of representations about the formula. The consultation period has not yet closed; I think it closes next Monday. Therefore, I am sure that the right hon. Gentleman will understand why I cannot say today what our response to that consultation is. I am aware of the suggestions that have been made. We will give a proper response to the consultation, but it is obviously right and correct that I do not make any response to the number of local authorities that have written in until we have had all of the material from the consultation process in.