Local Government Budgets

Debate between Robert Neill and Richard Burden

Wednesday 12th January 2011 Westminster Hall

[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.

West Midlands

Debate between Robert Neill and Richard Burden

Tuesday 7th September 2010 Westminster Hall

[Robert Neill]

If the hon. Gentleman is going to make a bad point, he should at least make an accurate bad point. The fact is that that is not happening. First, the power is being given for the London Development Agency to be merged into the Greater London Authority, so it does not exist as an RDA. Secondly, it has democratic accountability to a directly elected Mayor of London, which is not the case elsewhere. We are, of course, extending to major cities such as Birmingham and Coventry the ability to have a democratically elected mayor. If the hon. Gentleman will forgive me for saying so, I will not take any lectures from him on that issue.

[Richard Burden]

I realise that the Minister is short of time. If he is not able to cover my points now, will he please write to hon. Members present? First, will he confirm the figures that I gave on the budgets for the RDAs compared with those for the LEPs? Secondly, do the budgets for LEPs include staffing or are local authorities meant to compete for a staffing budget in respect of other front-line services? Thirdly, will he list the programmes run by the RDA and say what will happen to them, whether decisions on them will be made by central Government and LEPs and whether they will be scrapped?

[Robert Neill]

I will do my best. A number of those matters, as the hon. Gentleman will appreciate, are under review in the spending round. Once we are in a position to do so, I will ensure that that information is made available.

It is important to stress that this Government are committed to assisting areas such as the west midlands, where private sector employment and growth declined seriously, with the regional growth fund. We have made a clear commitment to proceeding with Birmingham New Street station, which is a key piece of transport infrastructure, and we have made the key commitment to High Speed 2. Those major investments will make a real difference to the economy of that area. Local authorities and airport operators are discussing funding arrangements in relation to the extension of Birmingham airport. Those positive commitments to infrastructure are likely to have a far greater long-term effect on the people of the west midlands than a plethora of institutional initiatives. That is important.

I am conscious of the need for local authorities to work together constructively, because their co-operating is important. We will consider that matter when evaluating the various bids together. The key thing is that there should be a bottom-up process based on local knowledge and incentives, rather than the other way round.

The city of Birmingham was represented in the past by Joseph Chamberlain. He would be sad that there is not greater faith—at least, not in the Opposition Front-Bench spokesman—in the ability of the people of Birmingham and its neighbours to come together and find a way forward to deal with their own challenges and to find their own solutions. We have faith in the people of the west midlands. Joseph Chamberlain would have thoroughly approved of the stance and the philosophy underpinning the Government’s approach.

Given that time is short, I will deal with the specifics that hon. Members have raised in correspondence, as is increasingly the normal practice in such time-limited debates.