Financial Sustainability (Local Government)

Andy Sawford Excerpts

Tuesday 7th January 2014 Westminster Hall

[Andy Sawford (Corby) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Mr Crausby. I congratulate my hon. Friend the Member for Birmingham, Edgbaston (Ms Stuart) on securing this very important debate and on how she has spoken up for her constituency and her city and made a wider and powerful case on the importance of our cities to the UK economy. Cities have helped to shape local government as we know it.

As my hon. Friend has said, urbanisation and industrialisation in the 19th century created the impetus in cities for the growth of local democracy, whether that was guilds of merchants and craftsmen coming together; the turnpike trusts and the improvement commissions; or the local Acts of Parliament, such as in Newcastle, to ensure that houses had privies attached to them, or those in the west midlands, where councils came together to promote an end to animal cruelty, or those of many local authorities who sought public health measures to tackle diseases such as cholera and tuberculosis. There was also the invention and confidence of municipalism in Birmingham, symbolised by Joseph Chamberlain—he was mentioned by my hon. Friend—who municipalised the gas works and the water supply. London blazed the trail for the national health service. Some 40,000 of the 55,000 hospital beds in the city were run by the county council.

Today, the challenge is even greater for our big cities. They must lead the renewal of local government, not only for local citizens who rely on their local services, but also, as my hon. Friend rightly said, for our national economy. They must do that in spite of Government policies that have hit our cities hardest of all. Birmingham council’s leader, Sir Albert Bore, said that

“these cuts will mean the end of local government as we know it”.

My hon. Friend the Member for Liverpool, Walton (Steve Rotheram) spoke powerfully about how his council has already worked incredibly hard to reform local public services and to make efficiencies. We know that local government, despite receiving the biggest cuts of any part of the public sector, is viewed by the Government as the most efficient part of it. The Prime Minister has said that.

The core funding reductions in local government are an average real terms cut of 33%, and the figures announced in the 2013 spending round envisage a further 10% cut in the local government resource budget, but I believe that it goes further than that. The key issue is the unfairness of the distribution of those cuts. By 2014-15, the 10 most deprived local authorities in England will have lost six times more than the 10 least deprived local authorities, compared with 2010-11.

While Birmingham, Newcastle and other cities will lose most, the Prime Minister’s local authority—West Oxfordshire council, which is one of the wealthiest—is seeing its spending power increase. My hon. Friend the Member for Birmingham, Edgbaston contrasted the cuts to her local authority, as did other hon. Members, with the increases in Wokingham, Hampshire, Surrey and Windsor and Maidenhead. Where is the fairness in a policy that takes most from those with least to give to those with most and a policy that takes from the have-nots to give to the haves? The council cuts are brought to us by the Government who gave millionaires a tax cut while imposing the bedroom tax on the poorest.

We know that the policy is deliberate. The former local government Minister, the hon. Member for Bromley and Chislehurst (Robert Neill), whom we have heard from, is on record as saying that. Both the Audit Commission and the Joseph Rowntree Foundation have said that councils in the north have been hit harder than those in the wealthier south-east. Can the Minister explain why that is right?

The National Audit Office has warned that cuts are having a direct impact on front-line services—we know that from our own areas—and that many councils are at risk of being unable to balance their books in future, with potentially disastrous consequences, not only for the delivery of those discretionary services, but for the delivery of those statutory services that our constituents rely on. The Public Accounts Committee report on the financial sustainability of local authorities found that there had not been a proper analysis of the impact of the cuts. The Committee highlighted the unfairness of the cuts for different areas of the country and raised serious concerns that some councils will simply not be viable.

As my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) has said, it is not just the scale of the cuts but the pace of them that is having such a significant impact on our areas. The Chair of the Committee has said:

“Central government is cutting funding to local authorities by more than a quarter over four years but does not properly understand what the overall impact will be on local services.”

For instance, the Department for Education has failed to provide a proper cost analysis of how funding reductions will affect children’s services. As my hon. Friend the Member for Liverpool, Walton has said, the cumulative impact of cuts in other departmental budgets on local authority public services is affecting our cities most. Nor is enough work being carried out across Departments to determine how funding reductions in one area of spending might affect services in another—for example, how cuts in local authority adult social care are leading to bed blocking in hospitals, as they are in my area.

The Public Accounts Committee says that the Government do not understand the impact of their cuts on vulnerable groups. We know that, and it is reflected in other policy areas across government, not least welfare reform. We want to know what actions the Government would take in the event of the financial failure of multiple local authorities. As my hon. Friend the Member for Sheffield South East (Mr Betts) said—he is the Chair of the Select Committee on Communities and Local Government, and I hope the Minister will listen to him—we must hear from the Government what action they will take if councils cannot balance the books.

The hon. Member for Bromley and Chislehurst told us that the shifting of funding is aimed at reducing dependence, but the truth is that often the areas with the highest demand for services have the least capacity to raise income through business rates or council tax, as I am sure he knows. Although some of the changes to business rates can be built on and are to be welcomed, on the issue of fairness, he is not right. It has compounded the problem for some of the toughest areas of our country with greatest need.

In the Government’s spin operation following the provisional finance settlement, they said that there would be no more cuts to local government. I was astounded to read august publications such as the Local Government Chronicle reporting “No more cuts to local government”, when we know that next year, the year after that and—to listen to the Chancellor yesterday—in the five years that follow, if the Conservatives are in power, there will be substantial further cuts to local authorities. The Chancellor has said that 10% will be cut in the next two years, but I ask the Minister to take this opportunity to correct the record. The Local Government Association, a cross-party organisation, is clear that without including NHS support for social care, which is not available for all councils, the reduction over the next two years will be 15.9%.

The Minister and I are having our own groundhog day; we were here a few weeks ago debating holdbacks. I welcome the Government’s U-turn on holdbacks, particularly the decision to return some of the money held back as part of the new homes bonus, which was the subject of a debate led by my hon. Friend the Member for Newcastle upon Tyne Central (Chi Onwurah), who was here earlier. The second U-turn that we heard about was to adopt Labour’s policy to act on business rates, which have increased for small and medium-sized businesses by £2,000 under this Government. However, we would go further, freezing and then cutting business rates for 1.5 million small and medium-sized businesses. If the Minister were to confirm that the Government are willing to take that U-turn, I am sure it would be welcomed around the country.

My generosity to the Minister does not extend to the fairy tale that we are likely to hear about council tax and the notion that it will again be frozen. When will we hear the details of the council tax freeze grant for 2014-15? What is his response to the recent report in The Daily Telegraph that at least 42 councils, more than half of which are Conservative-led, plan to reject the Government’s additional funding and raise council tax this year? The leader of Conservative-led North Yorkshire said that

“settling for the additional funding for another year could place the council’s finances in a perilous position.”

The next Labour Government will not be able to turn back the clock, but we can offer hope to local authorities and local government around the country that we understand the depth of the financial challenge that councils face and are committed to finding a way forward. We will start by putting fairness back at the heart of the relationship between central and local government. We will acknowledge the difficulties that councils face, not try to sweep them under the carpet. We will respect decisions made by councils at local level about how to use resources, not criticise and carp from Whitehall, as the Secretary of State does about everything from the level of reserves to bin collections.

The next Labour Government will, of course, want councils to meet communities’ needs, but our approach will be one of partnership. It is crucial that we support councils to deliver economic growth in all areas of the country with fairness. We will consider the report of the London Finance Commission and some of its proposals, and the LGA document “Rewiring Public Services”. We want to devolve power over housing and planning, and jobs and skills. Councils will have to come together to decide how best to use those powers, not just in our cities but across England, as part of what my right hon. Friend the Member for Leeds Central (Hilary Benn) calls the English deal. We will take the process of devolving power from Whitehall further, through Labour’s “Total Place” programme, which has sadly stalled under this Government, but whose pilots in places such as Greater Manchester show that there is much potential.

The local government innovation taskforce, set up by the Leader of the Opposition, makes it clear that Labour in local government is already innovating in responding to the challenges faced by our communities. As my hon. Friend the Member for Liverpool, Walton said, our councils are doing a great deal already, even in these difficult circumstances. That taskforce will press for a growing role and greater freedom for local government. Labour’s localism will be an ambitious programme requiring Whitehall and local government to work together as we transfer much more power and responsibility to local councils. In that way, although resources will be tight, councils will have a better chance to find a sustainable and fair way forward for their communities.