Local Government Funding

Joan Ruddock Excerpts

Monday 6th December 2010 Commons Chamber

[Caroline Flint]

As usual, my right hon. Friend makes an excellent point, based on facts, and the facts are that the cuts to local government will have a devastating impact on our poorest communities. Not only that, but local authorities up and down the country, of whatever political persuasion, are facing a huge task in having to tackle the front-loading of cuts in a matter of weeks, which is not good for either services, jobs or communities.

The Government like to talk about localism—about devolving power to local councils and empowering local communities. In fact, the coalition agreement boldly states that the Government will

“promote the radical devolution of power and greater financial autonomy to local government and community groups.”

Well, the cuts have come, but we are still waiting for the localism. For all their talk of localism, this Government have imposed the largest cuts to local government funding for a generation—cuts that are much deeper than those to other Departments or those originally forecast in the Budget in June; cuts that fall heaviest in the first year and hit the most deprived communities. So much for fairness, localism, and devolving powers to local councils and community groups. The only thing that this Government want to devolve is the blame for difficult decisions.

[Joan Ruddock (Lewisham, Deptford) (Lab)]

I wonder whether my right hon. Friend recalls the Chancellor saying:

“I am not going to balance the budget on the backs of the poor.”

Does she agree that what we are seeing is breathtaking hypocrisy?

[Caroline Flint]

I do, and whether in local government, education or health, it is the poorest and vulnerable who are being hit the hardest, as well as those hard-working families who pay their way, but who also depend on local services to provide for themselves and their families. They do not ask for much from the Government, but they ask for them to be on their side—to make sure that work pays and that they can look after their families—and this Government are not providing that security. The whole House knows why that has happened—why local councils will lose almost one third of their funding over the next four years.

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[Mr Pickles]

That is just a typical Labour intervention. It is not about the economy; it is all about getting as many bleeding stumps as possible. What we do know, through research, is that despite the various daft claims made about the number of people being made redundant in Birmingham, for example, the majority are going by way of natural wastage, turnover, mutuals and co-operatives being set up—something that Trotsky would have approved of—voluntary redundancies and early retirement. When it comes down to it, the likelihood is that the number of compulsory redundancies will be less than 4%. Frankly, these things can be managed with a will, and it is our intention that councils will manage them sensibly.

Owing to Labour’s planned cuts and the dire state of the public finances, the vast majority of councils have seen these difficult and challenging times coming, and they have been making sensible, constructive plans to address them. I want to support them with action, not meaningless words. I can make councillors’ and councils’ jobs a lot easier by scrapping regulations, tearing up unnecessary guidance and cutting through red tape. The Government are restoring real democratic accountability to local government, giving the power, the freedom and the authority to those who actually make the decisions. We have to be realistic. We realise that there is less money, but unlike the former Government, I do not intend to tell councils how they should spend it. The money given in this settlement will not come with strings attached. As we said during the spending review, with very few exceptions we have ended the ring-fencing of grants, so that councils can decide for themselves how their money should be prioritised and spent.

Under the spending review, we will allow councils to borrow against future business rates. We are also introducing powerful new financial incentives for councils, such as the new homes bonus. In addition, there is the £20 million through capitalisation, referred to by my right hon. Friend the Member for Berwick-upon-Tweed (Sir Alan Beith). Councils can top that up with the sensible use of their £10 billion of reserves—they were prudent and repaired the roof when the sun was shining, unlike Labour, and they can now spend that money when it is rainy. There are a whole range of measures that proactive councils can take—for example, improving transparency, sharing services, cutting out waste, improving procurement practice and bringing senior pay under control.

[Joan Ruddock]

May I tell the Secretary of State that my council of Lewisham has done all the things that he has just mentioned? Over the past five years, it has saved £40 million through efficiency savings. He made the point about jobs. Let me tell him that the council has just taken a decision to cut £16 million from the budget. That would cost 300 jobs, but only 50% of them could be found through natural wastage. However, the council tells me that front-loading means that it will not be able to plan to get down even to that level, let alone the 4% that the Secretary of State has just spoken about.

[Mr Pickles]

The right hon. Lady’s council has just £1 million short of £60 million in reserve. The decision that has been taken is its own, and I would urge it now to look at other measures. I would urge the council to look towards a joint—[Interruption.] It might not be for the right hon. Lady—I know she lives a champagne lifestyle—but £60 million is a lot of money. Let the council look towards sharing a chief executive, or sharing an education authority or planning authority. Let it look at working together right across back-office services.

At the heart of the settlement, we want to ensure the protection of hard-working families and pensioners; support for vulnerable individuals; help for vulnerable communities; and fairness, for both north and south, and rural and urban England. Practical policies to protect the vulnerable include: £1 billion in extra grant for social care and a further £1 billion from the NHS; a new role for councils in public health, backed up with extra funding; £2 billion for decent homes, improving the quality of life for those in poor-quality housing; and £6.5 billion to support people and allow the vulnerable to lead independent lives. Labour talks about fairness, but when it was in government council tax more than doubled—in some years, above inflation—thanks to fiddled funding and unfunded burdens.

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[Simon Hughes]

I say clearly to the right hon. Lady that, as I have indicated, I have argued publicly and privately that it would be better for the spending reduction to be spread more evenly. I have been into the Department to make that case. A parliamentary committee of Liberal Democrats from both Houses has collectively made that case, and it includes people who have been leaders of local councils. I understand and share the view that it would clearly be easier for local government to manage a gradual reduction than sudden and bigger reductions in the first two years, a small reduction in the third year and then an intermediate reduction. There is no disagreement on this issue between the right hon. Lady and me, and there is not much disagreement between councils of all colours around the country, which are making that point to the Government. I hope that the Government and Ministers in the Department for Communities and Local Government have been able to make some progress on that point, given that they obviously have to start with an announcement made by the Chancellor which reduces their flexibility—we will doubtless hear when the settlements are made.

[Joan Ruddock]

I do not know where the hon. Gentleman’s local authority lies in the indices of multiple deprivation, but mine is the 39th most deprived in the country. I say to him that there is a need for him to advise the Government on how to create fairness between boroughs such as ours and the Prime Minister’s local authority, which has been cited and is in the 5% least deprived areas in the whole country.

[Simon Hughes]

The right hon. Lady would expect me to be sympathetic to that point and I have acted in the past few weeks on that very issue. I have been in to see Ministers; I went to see the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Hazel Grove (Andrew Stunell), and civil servants to discuss exactly that issue. I believe that it would be wrong if all the funding currently given to councils, including the working neighbourhoods fund, which was a top-up in order to assist deprived communities, was not taken into account as the starting point for the calculation for the next grant. I have also argued that it would be inappropriate for there to be a greater decrease in percentile terms for authorities such as hers and mine, which have significant deprivation, than for smaller authorities, just because we happen to have had a larger amount of public money before. I have been given reassurance that an upper and lower percentage reduction will be common across all local government—a band above and below which the reduction cannot happen—and that there is a likely inclusion of at least some, although I hope all, of the other funding, not just the core formula grant.

I understand the point that the right hon. Lady makes, and she would expect me to go into bat for deprived communities, because I represent a borough that has a higher deprivation index than the next-door borough of Lewisham—I believe that is the case. Relative deprivation is not a competition we are proud of, but this is something we have to deal with. Of course one of the things that we have to do is try to get a fair settlement that reflects the needs of and deprivation in all the local authorities in that settlement. Again, I can tell her that I have been doing the job that she, my constituents and my local authority, although it is run by Labour, would expect me to do, just as I would have done when my local authority was run by my colleagues.

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[Heidi Alexander (Lewisham East) (Lab)]

This time last week, my constituency was the scene of violent protests about local government cuts. Town hall windows were smashed, four individuals were arrested and 15 police officers were injured as Lewisham council met to consider budget cuts of £16 million. Although the violence was due to a small minority intent on making trouble, there is no doubt that my constituents are angry, and they are right to be.

Lewisham bore the brunt of public outrage about local government cuts last week. Sadly, the £16 million worth of savings agreed by the council is probably just the tip of the iceberg. In the next four years Lewisham expects to have to save somewhere in the region of £77 million, just under a third of its total revenue budget.

[Joan Ruddock]

Did my hon. Friend hear the Secretary of State suggest that Lewisham council should look to its £60 million worth of reserves to deal with the issue? She knows, as I do and as he does, that of those reserves, the majority is for capital spending. The general fund is simply 2.5% of total budget. Does she agree that it would be utterly irresponsible to spend emergency reserves and do nothing to deal with cuts of up to £70 million?

[Heidi Alexander]

Indeed. My experience on Lewisham council was that the only occasion on which reserves would be considered for use was when that would be a fiscally responsible thing to do.

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[Graham Jones (Hyndburn) (Lab)]

Given the short amount of time left, I shall raise just a few brief points. I want to mention the new homes bonus, a suggestion that could save money, the big society, and residualisation in east Lancashire, which is an important issue in my constituency. I also want briefly to touch on police community support officers.

My constituency is suffering some of the biggest cuts. We are facing 27% cuts across the board, but we are waiting for the actual figures. I am surprised that the Minister will not confirm those figures today. My hon. Friend the Member for St Helens North (Mr Watts), who is no longer in his place, mentioned a report produced by the all-party parliamentary group on the special interest group of municipal authorities—SIGOMA. It stated that Hyndburn was ranked as the 40th most seriously hit area, facing between 30% and 38% cuts. These can have a cumulative effect, and similar examples have been raised by other Members today.

The new homes bonus is frequently used by Ministers as a method by which councils can run for financial sanctuary, but it will have no impact on constituencies such as mine, where there are some 2,500 empty properties. Netting off demolitions will hit hard any areas where there is an over-supply of housing. This policy is a bit like throwing a drowning man a medicine ball.

Let me make some suggestions. Conservative Members say that we have no suggestions, but my right hon. Friend the Member for Salford and Eccles (Hazel Blears), who is not in her place, suggested more flexible use of the business rates, which the Secretary of State touched on earlier. Let me give him another suggestion. If he stopped scratching his head and listened to me, he might learn a thing or two. Hyndburn council calculated that removing the 50% council tax discount on empty properties will raise £660,000—an enormous sum for a district authority. At the moment, this money is clawed back through the revenue support grant deduction. It needs to be looked at. It is interesting to note that The Independent on Sunday reported that the Liberal Democrats were looking at similar initiatives—discounts and removal—for second homes.

Turning to the big society, it concerns me that the Government believe that we are moving towards such a society. I cannot see it. Let me provide an example. My local authority provides £57,000 for citizens advice bureaux. If we face cuts of between 30% and 38%, I cannot see how that is likely to continue, yet this is a time when citizens advice bureaux will see an increase in the number of people coming to see them. This will mean an increase in the work load at a time when Citizens Advice will be laying off staff. It is also affected by many other streams of direct Government funding, which are also being cut. It is obvious that there are going to be real problems. I do not think that the Conservative council of Hyndburn and Rossendale has an appetite for maintaining such funding. It is going to set a 0% council tax—a big issue, as that is going to hit the big society even harder. Many voluntary groups rely on this funding, and I cannot see how they are going to survive. Thanks to the cuts, we have already lost one dial-a-ride minibus, and I imagine that the disabled service will be removed altogether unless we see some sort of public support.

These huge cuts have a cumulative impact, so there is a growing concern in Pennine Lancashire about what I would describe as the residualisation of poorer communities. Ministers need to be aware of that. Indeed, evidence is now emerging that while populations in these areas remain relatively stable, the number of those in higher-income brackets is declining, along with those who have better education and better employment prospects. This is countered by a growth in the number of poorer, lower-income households and those with lower levels of educational achievement. These populations are, by their nature, often more dependent on public services. We therefore see self-reinforcing patterns starting to build up as a result of these cuts.

This is a crucial issue. The latest rankings for the index of multiple deprivation show that right across Pennine Lancashire, with the exception of Ribble Valley—I notice our Deputy Speaker has left—there has been a marked fall as the effects of residualisation take hold. There are real fears that the outcome will be a “ghettoisation” of parts of east Lancashire and other parts of Britain, thanks to a Government focusing solely on areas that can prosper economically rather than getting to grips with the needs of all communities.

Finally, let me touch on policing. On top of all the other cuts I have mentioned, policing is going to be cut. Police officers in my area believe that, without the extra staff, crime will rise. The police cuts are ill considered. Police community support officers are part-funded by local authorities; they tackle in partnership a wide range of social problems. No assessment seems to have been made of the wider impact of cutting PCSOs in areas where local authorities work in partnerships. I will stop there and allow the Front-Bench teams to conclude the debate.

[Joan Ruddock]

On a point of order, Mr Speaker. I think you will know that I have been in the House long enough to take the rough and tumble of parliamentary debates, but earlier today, in response to my intervention, the Secretary of State made a remark about an hon. Lady’s “champagne lifestyle”, which appeared to be directed at me. I found that really offensive and rude. Will you advise me, Mr Speaker, on whether I could expect that remark to be withdrawn?

[Mr Speaker]

Let me say three things to the right hon. Lady. First, good temper and moderation in the use of parliamentary language are always to be encouraged. That principle is set out clearly and explicitly in “Erskine May”, which is our guide. Secondly, I had the privilege of serving on the International Development Committee with the right hon. Lady and travelled to a number of places around the world with her and other colleagues, and I cannot recall her consuming champagne at any stage. Thirdly, let me simply say that my distinct recollection is that the right hon. Lady is a modest person, with very little to be modest about. I hope that that is helpful to her and to the House.