Local Government Finance

Robert Neill Excerpts

Tuesday 10th February 2015 Commons Chamber

[Kris Hopkins]

I have a lot of respect for the hon. Lady, but I am afraid that poor leadership in Birmingham and the fact that it has not collected some £100 million in council tax arrears may explain some of the issues it is facing. Stronger leadership and the ability to carry out the simple function of placing a charge on an individual and collecting it will assist it.

[Robert Neill (Bromley and Chislehurst) (Con)]

Does my hon. Friend agree that the real way to achieve proper sustainability for local government funding is to reward those councils who go for growth in their area and increase their tax bases—as we are seeing with the increase in business rates income anticipated this year—and make councils less dependent on central Government grant in the long term?

[Kris Hopkins]

My hon. Friend speaks very wisely and he knows from his own experience that local authorities appreciate these tools we have given them to grow their finance base, and there is an incentive for them to carry this out by improving those key services and increasing the resources to those services.

For those who do not freeze the council tax, the referendums principles report laid before the House on 3 February confirms that any increase of 2% or more will require a binding referendum by the local electorate. Councils that want to increase their bills should have the courage of their convictions and seek a mandate from their electorate. It is already the case that a council tax referendum can be held at a reduced cost in 2015-16 when combined with the general election. We announced on 3 February that any savings to the Consolidated Fund as a result of a combination of a referendum with the general election will be redirected to councils, so the cost of the referendum to a local authority is low. This weakens the argument that some might make that holding a local referendum will result in excessive cost.

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[Hilary Benn]

I am going to make some more progress; the hon. Gentleman has had his answer. I accept the point he has made in a number of these debates about the particular challenges facing rural areas. I want to see a fairer funding formula, and I shall address that a little later.

Ministers are in denial about the scale of the challenge that authorities face and are still claiming that the settlement is fair—this is my first and fundamental point. The Minister told the House in December that the settlement is

“fair to all parts of the country, whether north or south, urban or rural.”—[Official Report, 18 December 2014; Vol. 589, c. 1590.]

He said that again today, but let me tell him that nobody else believes it because it clearly is not true. He does not need to take my word for it; all he has to do is listen to what others have had to say about what Ministers have done. The Audit Commission has said that

“councils in the most deprived areas have seen substantially greater reductions in government funding as a share of revenue expenditure than councils in less deprived areas.”

The Joseph Rowntree Foundation has said that

“cuts in spending power and budgeted spend are systematically greater in more deprived local authorities than in more affluent ones”.

The Public Accounts Committee report on the financial sustainability of local authorities said:

“local authorities with the highest spending needs have been receiving the largest reductions.”

The Chair of the PAC, my right hon. Friend the Member for Barking (Margaret Hodge), said:

“These cuts have not hit all local authorities equally, with reductions ranging between 5% and 40%.

Councils with the greatest spending needs—the most deprived authorities—have been receiving the largest reductions.”

At least the former local government Minister, the hon. Member for Bromley and Chislehurst (Robert Neill), had the honesty some time ago to say:

“Those in greatest need ultimately bear the burden of paying off the debt”—[Official Report, 10 June 2010; Vol. 511, c. 450.]

Today’s Minister mentioned council tax, but the one group of people who have not benefited from any freeze in council tax are those on the very lowest incomes, who have been affected by the changes to council tax benefit. There has been no freeze for them.

[Robert Neill]

It is a pity that the right hon. Gentleman quoted selectively, forgetting that I said that that would be because the Labour party would ruin the economy, and only by growing the economy would the poorest benefit. He has said there would be no new money for local government were Labour to come into office, so will he help us by coming clean as to which local authorities he will then penalise so he can distribute money to his political friends and on what basis?

[Hilary Benn]

Once again, I do not accept the charge that this is about distributing funds to friends; it is about having a fair funding formula. I remind the hon. Gentleman that when the coalition Government took office unemployment in this country was falling and the economy was growing—[Laughter.] It is no good Government Members laughing, because the evidence, the statistics, the facts will show that that was indeed the case.

On council tax increases, Ministers have frequently made reference to what happened under the last Labour Government, so I have taken the trouble to look at what actually happened then. The truth is that the biggest increases in council tax between 1997 and 2010 were put in place by Conservative-controlled authorities and the smallest increases were under Labour. Indeed, 11 of the top 15 increases in council tax during that period came under Conservative-controlled authorities, two were under authorities with no overall control and one was under a Lib Dem-controlled authority. I suppose that was a coalition.

--- Later in debate ---

[Robert Neill (Bromley and Chislehurst) (Con)]

In one respect, it is a pleasure to follow the right hon. Member for Leeds Central (Hilary Benn), because he always speaks with courtesy and care. On the other hand, it is regrettable that, yet again, we have seen a classic piece of sleight of hand from Opposition Front Benchers. Labour Members have remarkably selective memories. I give him credit, though, for doing rather better than his party leader in at least managing to mention the deficit.

The right hon. Gentleman talked about localism, but then made it clear that Labour Members’ version of devolution and decentralisation, which one might think at first was one of the great damascene conversions of our time—not so much a road to Damascus as a bypass, given where they started from—is totally hedged in with centralised control, saying, “We’ll devolve if you go along with our imposed regional template.” Basically, he is a more subtle version of the noble Lord Prescott. He wants to re-impose regional straitjackets on local authorities through the back door. That is the reality of Labour’s supposed devolution agenda.

[Sarah Newton]

I share my hon. Friend’s concern, because what I have just heard is a proposal to reverse what this Government are doing through their regional growth funds: devolving real power and responsibility to Cornwall council. The Opposition are saying that we cannot have that unless we join up with Plymouth or Devon or who knows where.

[Robert Neill]

It is a little like the classic Henry Ford approach of telling people that they can have any colour car they like so long as it is black. The Opposition are saying that people can have any type of devolution they like so long as they sign up to their version of what they now call a county region—that’s a new one! Calling it the north-east or east of England did not work; they are calling them county regions now, but only so long as people sign up to their imposed template.

Local government has not forgotten that this is the same team that introduced capping without giving it the chance to ask for the views of local voters; that introduced comprehensive area assessments; that interfered through the Standards Board and tried to micromanage the behaviour of councillors; and that did nothing to deal with predetermination, which stifled democratic debate. It is the same old Labour. They have not changed at all; they have just reworked the language. This is the same team that, at the end of the day, created the financial ruin of this country which, slowly, the coalition has had to put right. They are the people who damaged the hardest pressed in this country through their economic management, but there has been no apology or word of recantation.

[Mr Redwood]

Did my hon. Friend notice the continued insult to England? The Opposition say absolutely nothing about allowing England to settle her income tax levels, but they want Scotland to settle theirs. They want Scottish MPs to come down here and help dictate to England our income tax while they Balkanise England and pretend that breaking it up into mock European areas is some substitute for proper devolution.

[Madam Deputy Speaker (Dame Dawn Primarolo)]

Order. The right hon. Gentleman has got his point on the record, but you will stick to local government finance, won’t you, Mr Neill?

[Robert Neill]

Indeed I will, Madam Deputy Speaker. As we consider the future shape of the United Kingdom, I hope we will have a genuine debate about serious devolution of financial responsibility to local authorities, but that is certainly not what the Labour party’s proposals will achieve.

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

The hon. Gentleman, like me, has had a long career in local government. Over 40 years, I have heard successive Labour Members say that they will find a fairer system to help local government survive, but the first thing they do when they come into office is find ways to reduce the amount of money going to local government while at the same time increasing its responsibilities. How can we take seriously what the right hon. Member for Leeds Central (Hilary Benn) has said if he is following that same pattern?

[Robert Neill]

That is certainly true of Labour Governments when they have come into office. I would gently add that when this coalition Government came into office we said that we would abolish capping and get rid of the Standards Board and the comprehensive area assessments, and we did so. We actually delivered on what we said. That is the difference between the two.

[Mr Graham Stuart]

My hon. Friend is rightly dissecting the speech given by the shadow Secretary of State, who failed to say, despite having repeated opportunities to do so, that he would seek to redress the imbalance between rural and urban areas. Is it not clear that every rural community in this country should recognise that a Labour Government will put its own political interests ahead of a fair and equitable settlement? They should not be fooled by the words that have come from the shadow Secretary of State’s mouth today, because he refused to commit to a change that would make the situation fairer.

[Robert Neill]

At the end of the day, it is implicit that a Labour Government would carry out a redistribution. We know from experience that the clever—and sometimes surreptitious—tweaking of the weightings in those 270-odd elements that go into the formula grants through the regression analysis was deliberately manufactured to move money away from parts of this country to those that historically tended to vote Labour. There is no getting away from that reality and the same thing will be done again.

My hon. and learned Friend the Member for North East Hertfordshire (Sir Oliver Heald) made a serious point about what would happen to those authorities dealing with housing need, which I thought both parties recognised. The current Government have said, sensibly, that the money should follow the population growth, because that results in the costs of services being given to local authorities. The Labour party wants to scrap that entirely. It is abject nonsense to go down that route.

[Sir Oliver Heald]

If we have to build all these homes in Hertfordshire without the new homes bonus, and if our CIL is cut as the shadow Secretary of State suggested, we will end up with absolute traffic chaos and the whole county becoming a car park. Does my hon. Friend agree that this just does not add up?

[Robert Neill]

I have no doubt that we would also see the imposition of regional planning through the right hon. Gentleman’s delicately termed “county region authorities”. That would be another imposition on local authorities. The new homes bonus has enabled authorities that want to provide homes for their populations to deliver those homes and to pay for the services that such populations rightly demand. There is an inherent contradiction in the Opposition’s argument.

It is significant that Opposition Members are talking about greater devolution. I, too, hope that there will be an increase in the retained element of business rates. Interestingly, that never happened throughout the whole of the Labour party’s watch. They only started to move towards a devolutionary stance after my right hon. Friend the Secretary of State introduced the retention of some of the additional business rate. We have a track record of delivering policies, but they are simply saying that they would do the reverse of whatever they did in the past, which seems fairly normal for the Labour party at the moment.

[Mr Betts]

Will the hon. Gentleman give way?

[Robert Neill]

I will of course give way to the Chair of the Select Committee.

[Mr Betts]

I agree with the hon. Gentleman on the business rate—the direction of travel is right, and it is sensible to move towards total retention—but is there any evidence that the new homes bonus has led to the building of one additional home?

[Robert Neill]

Yes, it is very clear that more new homes are being built. The right hon. Member for Leeds Central talked about need. One of the biggest recipients of the new homes bonus has been the inner-London borough of Tower Hamlets. It has built homes in a needy area, and it has been one of the biggest beneficiaries of the new homes bonus. There is therefore a direct correlation, and that correlation also relates to need. With respect to the hon. Member for Sheffield South East (Mr Betts), his point was not the best he has made in debates in the Chamber.

It is worth observing that local authorities have calculated that they will see an increase in business rate income in 2014-15, thanks to the Government’s economic policies. Some 91% of local authorities anticipate that their business rate income will grow during 2014-15, because we are starting to get the economy back on track. Having record levels of jobs and economic activity would be prejudiced by the Labour party, but that is the real way to create sustainable funding for local government, not a culture dependent on tweaking handouts.

My hon. Friend the Member for Hornchurch and Upminster (Dame Angela Watkinson) made an important point about why we need to move away from the culture of dependency. Historically, there were disparate levels of resourcing between inner and outer-London boroughs. Once upon a time, that to some degree reflected the demography of London, but that demography has changed significantly. As I know from the experience of my London borough of Bromley, the pressures facing outer-London boroughs are now much closer to those of inner-London boroughs. As my hon. Friend the Member for Beverley and Holderness (Mr Stuart) observed, the artificial inflation of the weight given to density has made the problem worse in some cases. Throughout this Parliament, my right hon. Friend the Secretary of State and his ministerial team have gradually sought to rectify such wrongs, and I hope that in the next Parliament we can build on the very solid foundations built so far.

At the end of the day, I hope that we can move away from the artificial argument about dependence on the central Government grant. We should give local government the tools to invest, which is why the new homes bonus and the retention of business rates are so important. A fairer and more transparent basis for funding is critical, and that is what the coalition Government have delivered.

There is still more to do, although none of us would disagree that local government is probably the most efficient part of the public sector. That is why I was pleased to see the excellent work done through the better care fund. I represent a top-tier authority, and most such authorities regard adult social care as one of their principal funding pressures. Once the better care fund is established, I hope that much more work will be done to align adult social care with health services. Local authorities can often deliver many of the health-related aspects of services for elderly people more efficiently than the traditional health service model. Again, my right hon. Friend the Secretary of State is to be congratulated on opening up that new opportunity, which sensible authorities, such as mine in Bromley, have already seized. We must ensure that health authorities and commissioning groups understand that too, and that they fully co-operate and do not seek artificially to hang on to money—often, their local government colleagues may be best placed to get the best bang for local residents from the available buck. I hope we will see more of that important development.

Although not directly part of the grant settlement, I hope my right hon. Friend will continue to point out to colleagues in the Department for Education that we could look for greater flexibility in the operation of the dedicated schools grant. That is a good thing in itself, but some types of educational spending currently fall outside its parameters, and we could consider that issue for the future.

None of that takes away from the fact that every local government Minister has to do a balancing act when they set out the local government finance settlement. I believe that the DCLG ministerial team has done a good job, and above all we must keep bearing down on the deficit and keep public finances under control. Equally, we should continue to reward councils that do the right thing. In due course, as my right hon. Friend the Member for Wokingham (Mr Redwood) was hinting—I will say this in a way that does not make me out of order, Madam Deputy Speaker—I hope that as we consider future funding arrangements for the whole United Kingdom, we will be able to give more weight to councils such as Bromley that have historically shown high levels of efficiency. Bromley delivers its services at the lowest unit cost per head of any London borough, and it also happens to have the second lowest level of central Government grant. The more we remove local authorities from the need to depend on that ratio of central government grant the better, and the more likely it is that they will profit from their own efficiency. That is the way forward.

I hope that in the short term we will look again at some elements of the way the grant is calculated and give greater weight to efficiency. It is probably right that there should be a greater relationship in local government between behaviour and out-turns, and between behaviour and consequences. The best thing would be to ensure that a higher percentage of local government spend is raised locally, and the Government are on course for that. They have made a good start but can always continue to do further work in future. At least we are able to offer local government a realistic programme as we go into the general election, building on achievements that have been delivered, rather than on the inherently contradictory flights of fancy from Opposition Members. We respect local government—I spent many years of my life in local government, and there are good people and authorities of all colours. For all the words of the right hon. Member for Leeds Central, imposed centralism is not the answer, and we must build incrementally—as the Secretary of State rightly has done—to return powers increasingly to local government. This finance report is consistent with that path, and I hope the House will support it.