Local Government Finance (England)

Steve Rotheram Excerpts

Wednesday 13th February 2013 Commons Chamber

[Hilary Benn]

My hon. Friend makes the point about the circumstances his local authorities face extremely forcefully.

What does all this mean for the future financial sustainability of local government? The National Audit Office recently published a report that makes it clear that cuts to councils budgets are having a direct impact on front-line services, even though the former housing Minister went before the Select Committee, I think in 2010, and said that there should not need to be any cuts in front-line services. The Chair of the Public Accounts Committee, my right hon. Friend the Member for Barking (Margaret Hodge) was very direct in her response. She said of the findings from the National Audit Office on local authorities:

“I am alarmed to hear that 12% are now at risk of being unable to balance their books in the future, according to local auditors, with potentially disastrous consequences.”

It is worth reflecting on those words: more than one in ten councils are now at risk of being unable to balance their books in the future—that is what the NAO says. The Secretary of State may say that the graph of doom is scaremongering on the part of the LGA. Will he also say that this is scaremongering on the part of the NAO? If he does not say that, what is the Government’s answer to the picture unveiled by the NAO?

[Steve Rotheram (Liverpool, Walton) (Lab)]

The mayor of Liverpool has invited the Secretary of State to our city to have a look at the books for himself, so that he can point to where the city council is not making the efficiency savings the Government believe it should be making. Does my right hon. Friend believe that the Secretary of State should take up that challenge?

[Hilary Benn]

I very much hope that the Secretary of State is willing to accept that challenge; it would be good for him to see impact of the cuts.

--- Later in debate ---

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

The speech made by the right hon. Member for Leeds Central (Hilary Benn) reminded me of a certain type of popular film. It was technically proficient, but it really ought to have been transmitted in black and white, because it was so full of dated thinking. It was reminiscent of those films that we sometimes see at the British Film Institute or of the re-runs of 1970s sitcoms that we see on television at about 1 o’clock in the morning. That is a shame, because, in all the huff and puff, the seriousness and importance of the local government settlement was rather missed. That became apparent during the interventions on the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Great Yarmouth (Brandon Lewis), whom I congratulate on presenting the settlement admirably. There was a degree of collective denial that I have not seen since I used to visit clients in Wandsworth prison.

The reality is that Labour has never been able to understand that it was committed to making significant cuts in public spending, which would have kicked in in 2014-15, and that because local government accounts for some 25% of public expenditure, it was inevitable that those reductions would have to take place in local government. It is a bit rich of the Opposition to say that we have behaved in an unfair fashion, when we have essentially continued with their formula system—despite my having some thoughts to the contrary when I was the Minister responsible—with an emphasis on the equation of needs and resources.

We have updated their system to give more accurate population figures and to be fair to those in rural areas to the degree that a case could be made. The updating of population figures tends to work to the benefit of London and other metropolitan areas with more transient populations, and no doubt for that reason the helpful Library research paper states:

“Excluding London—”

we all know London has particular circumstances—

“northern regions will receive larger start-up funding assessments—”

that is, in effect, the successor to formula grant—

“than their counterparts. The South East, South West and Eastern regions will receive the lowest levels.”

On spending power the paper states:

“Excluding London, northern regions and the West Midlands will have larger spending power per dwelling than their counterparts.”

That reflects the fact that the Government accept that there are greater pressures in some parts of the country—I always accepted that as a Minister, just as my hon. Friends on the Front Bench do now, and it must be recognised. That is exactly what the Government have done and to pretend otherwise is, if hon. Members will forgive me, disingenuous in the extreme.

[Steve Rotheram]

Following the cuts to Liverpool, is the film the hon. Gentleman identifies, “A Tale of Two Cities”?

[Robert Neill]

That is a good try but the hon. Gentleman must realise that we have a persistent inheritance of underperformance by Labour Governments, and there is an unwillingness—demonstrated by his intervention and many others—to move on with the serious issues about how we deliver the best services for local authorities.

For example, it was significant that the right hon. Member for Leeds Central made no mention of the fact that we have created other funding streams for local government through the new homes bonus. That scheme accounts for the increase in receipts in some councils. They are meeting the housing deficit that Labour left behind and we are rewarding them—of course, Opposition Members have no concept that a local authority should actually be rewarded for efficiency and enterprise. That is alien to their culture, hence the criticism. No mention was made of the fact that the localisation of business rates is the first significant move of devolution in fiscal terms—the Treasury is giving up and forgoing revenue in favour of local authorities—since the second world war. I hope that in due course as the economy grows, the local share of that business rate will increase from its current level of 50%. That is 50% more than was available under local discretion when the rates were effectively nationalised and redistributed, usually under an extremely opaque formula of which the hon. Member for North Durham (Mr Jones) was one of the advocates.