John Hemming
Main Page: John Hemming (Liberal Democrat - Birmingham, Yardley)
Mr Denham
My hon. Friend is absolutely right about that. One of the things that we need to recognise is that, sadly, in large areas of the country, particularly in my own area of the south, as well as in the south-east and the eastern region, local government has for too long been divided between the Tweedledum of the Tory party and the Tweedledee of the Liberal Democrats. The Liberal Democrats have often got away with claiming that they were a progressive alternative to the Tories, but that will no longer be allowed to stand. Somebody has to speak up for the people of the areas suffering cuts, and it will be the Labour party.
John Hemming (Birmingham, Yardley) (LD)
There are perhaps two arguments here. One argument is about whether the cuts should be made now or later, and the other is about how they should be allocated. My personal view is that we must ensure that we fund local authorities on a needs basis—there is no question about that. The basic questions in this debate are about whether or not cuts should be made earlier and whether the quantum should be the size it is. If we do not do this, the interest rates will be higher. If we follow the Labour party’s advice, we will actually have greater cuts because we will have to pay a higher interest rate on a higher level of debt. That is the fundamental truth of this argument, so the right hon. Gentleman is arguing for greater cuts in the long term.
Mr Denham
No, I am not going to give way, because it was not worth it last time. The hon. Gentleman spent an election campaign saying that the cuts should not be made now, but he has spent every week since the election saying that they should be. That is ridiculous and he cannot expect to be taken seriously.
Grant Shapps
I am grateful to my hon. Friend. Of course, the pupil premium is designed to achieve precisely that. We are absolutely doing everything we can to try to protect people and share out the burden of the very difficult decisions that have to be made—decisions that were ducked by the Opposition when they were in government. Labour Members could not outline one penny of how they would have reduced the local government budget—not one single penny. I invite the right hon. Member for Southampton, Itchen to come to the Dispatch Box if he now wants to explain where the cuts were going to come from. Until Labour Members acknowledge that they had no answers and were not proposing alternatives, they will not have earned the right to lecture anybody about what should and should not be done by way of making these difficult cuts, because we have not heard anything about it from them.
We have protected the £29 billion formula grant—the main source of funding for front-line services such as rubbish collections, street cleaning and libraries. Moreover, we have not cut any of the main Supporting People budget, which is in excess of £1.6 billion, despite needing urgently to cut funds from this year.
John Hemming
Does the right hon. Gentleman share my mystification as to why Labour Members are fussing about whether there is a cut of 1.08% or 1.1%, given that the real situation is that over the next five years we potentially face cuts of 25% in real terms, and we should be planning and preparing for that now?
Grant Shapps
My hon. Friend is absolutely right. The simple truth is that Labour Members still have not understood the depth of the problems that they have got us into. Until they acknowledge that and start to address it themselves with some real plans, and identify where some of the money is coming from, nobody will take seriously their complaining and calling of Opposition day debates about this subject.
We will continue to remove the ring fences from non-school revenue and capital funding. This year, we have de-ring-fenced £1.2 billion, and we intend to go a lot further. This gives councils the extra flexibility they need to concentrate on local priorities and to protect these front-line services. We are also reducing the management burden imposed on local authorities from the centre, cutting down on undemocratic and unaccountable quangos, and putting local government front and centre in meeting local residents’ needs. When we took over, there were 27 different quangos relating to the Department for Communities and Local Government. Again, I invite the shadow Secretary of State to come to the Dispatch Box and explain how he was going to hand power back to local people by removing even one of his 27 quangos.
As with every profession, local authorities will need to take some difficult decisions about how to prioritise their spending. Local authorities have already made great strides in achieving efficiencies, but they need to do more. There is still a lot more potential to gain through new practices—for example, shared services, joint working and smarter procurement. Perhaps most important, however, will be radical town hall transformation. We must be clear that councils will need to build in improved productivity as a matter of course. They need to learn from the best commercial practices. Sainsbury’s does not go out and tell people that good food costs more when it comes from Sainsbury’s, but that it costs less, and public services are going to have to do the same thing. In the public services, in future, we have to get more for less. I know that that is a concept that Labour Members struggle with, but it is the reality of the financial mess that they have left us in.
John Hemming (Birmingham, Yardley) (LD)
I congratulate the hon. Member for Wolverhampton South West (Paul Uppal) on his excellent maiden speech. I am pleased that other hon. Members share my concern about how easy the Labour party made it to defraud the electoral process. Obviously, people know in Birmingham how the Labour party stole 4,000 people’s votes in Bordesley Green ward and that 273 votes were arrested in Aston ward.
I must explain where I come from. I was a city councillor for 18 years. I believe that local government can do a lot for the communities that it serves. Local councillors from all parties have at the heart of their objectives to serve the whole community, so it is sad that we find ourselves in this situation. Let us recognise that. Part of the situation is an international problem; part of it is an exacerbation of the international problem by the failure of the Labour party. Like Germany, we should have entered this difficult situation in surplus. Instead, we have a deficit akin to that of Greece. Labour Members fail to recognise that there was a sovereign debt crisis in April across Europe. It drove up interest rates on sovereign debt for the countries with the bigger problems—the PIIGS: Portugal, Italy, Ireland, Greece and Spain. Those countries are having to make perhaps more extreme adjustments to their public sector spending than we are.
It is not unreasonable to say that the circumstances now are different from those in, say, March, and that we have to approach things in a different way. Six billion pounds is a lot of money, but it is a relatively small proportion of the deficit of £150 billion. Cuts of 25% in real terms are a lot, but 1% is a movement in the right direction. It is not a massive shift, but it is sufficient to reduce the interest rates paid on Government debt. By doing that, we do not have to make cuts as great as the Labour party would have done had it continued with its strategy, which I believe would have been derailed in any event.
Regardless of what we would like to do, we are driven down a route of making very serious economies. I do not think that people have fully recognised that. We had a debate earlier about 1.08% cuts as opposed to 1.1%. That pales into insignificance when we consider that we have to find 25% cuts in real terms, even over five years. We also have to recognise that it takes time to reorganise things.
The Opposition spokesman complained about Birmingham not spending all the money it had. Birmingham was well aware that financial difficulties were coming down the track and that spending all the money, as the Chief Secretary to the Treasury and the Labour party did—and then told us that we had no money—was not the right strategy. It is worth keeping some few millions in the cocoa tin so that when we face the difficulties after the general election we do not end up in such a mess that we say, “All the money’s gone.”
Birmingham made an initial announcement of £12 million savings. It is probably more like £20 million. Those figures can be worked out quite straightforwardly. They pale into insignificance when compared with what has to be saved over five years—£250 million to £300 million. That has to be planned now.
The hon. Member for Sheffield South East (Mr Betts) explained that we could protect adults’ and children’s services. I am sure he is aware that, of the budget of metropolitan authorities such as Birmingham and Sheffield, something like two thirds is spent on adults’ and children’s services. The schools grant goes directly to the schools. I am not sure that it will be possible to protect those services. Part of this debate has been the question, “Do we have to do this?” The answer is obviously yes. Another part of the debate is how we make cuts in an equitable manner.
Angela Smith
In Sheffield, the Lib-Dem council has followed a policy of redistributing money from deprived areas to the richer areas of the city. That pattern is now being replicated nationally. Is that fair?
John Hemming
I cannot comment on the detail of what has happened in Sheffield. I agree with the argument that deprivation has to be taken into account. There is no question about that. The idea of the pupil premium is that the money follows the individual rather than catchment areas from the national census. One of the difficulties with many of the calculations is that they have been done not on an individual basis but on a categorised basis.
The hon. Member for Sheffield South East makes a good point that if we cut the Government grant and do not look at the aggregate local government spend, that has an effect. There is an issue to be looked at there. People have asked whether we should cut 25% here, 26% there, 23% there and 27% somewhere else, or whether, given that we face such a severe problem, the same figure should be cut everywhere on a formulaic basis. I am quite tempted by the latter argument. I think that that method was used in Sweden, which faced a serious problem. It had the same sort of deficit and it went through the process of getting rid of it.
John Hemming
One has to make judgments on the time scale based on the effect within the markets. We are not talking about paying off the debt over five years. There will still be net borrowing in the fifth year.
Alison McGovern
Will the hon. Gentleman comment on how effective we will be in paying back the deficit, making these cuts in-year and cutting programmes to which commitments had already been made? Surely that is waste.
John Hemming
First, there needs to be an understanding of terms, because I heard the phrase, “paying back the deficit”. However, the deficit is the forecast difference between income and expenditure in the financial year, the debt is the amount of money that the country as a whole has borrowed, and there is often a lot of confusion between the two figures. This year, if we borrow another £150 billion, that will be added to the debt, and next year, if we borrow some more, that too will be added to the debt. Although we are talking about reducing the debt during this Parliament as a proportion of gross domestic product, our financial strategy does not talk about paying back the debt in cash terms. In fact, at the end of this Parliament we will end up with a higher level of debt, so in comparison with Sweden we cannot pay it back. We would like to do so, but we cannot do things that quickly.
We have to make people confident that the country is solvent. The country could be liquid at this stage without any great difficulty, but we have to make people confident that it is solvent and capable of paying back the debt so that the interest is paid. We are not paying back the deficit, however. The deficit is the amount borrowed each year. [Interruption.] I have another four minutes and am quite happy to explain to the Labour party the basics of finance, because there is a lot of confusion about debt and deficit. “Deficit” is the amount of money borrowed each year on a net basis—[Interruption.] I shall get through to Opposition Members at some stage.
Alison McGovern
I really do understand the difference between debt and deficit, but will the hon. Gentleman explain how the waste of cutting programmes in-year will help to reduce the deficit?
John Hemming
That will reduce the deficit because we will spend, and therefore, have to borrow, less money this year. That is not complicated. If we spend less money, we do not have to borrow as much, because the money that we spend has to be borrowed on the gilts market. It would be nice if the reduction were done more cost-effectively at times, but £6 billion is not so great in comparison with the overall deficit. It is appalling for local authorities to pretend that they did not know that cuts were coming down the track, that the country had a major financial problem and that they had to do something. There will be difficulties, but Total Place is part of the solution rather than the problem, and there is no question but that we have to do something.
In the past I have explained how, through various regulations, the people who go round and wash people’s feet are different from those who go round and cut their toenails, because they have to have different qualifications. That is not an efficient way of providing public services. If, through Total Place, the same person can go round and wash people’s feet and cut their toenails, that will be more cost-effective and involve less travel time—[Interruption.] The hon. Member for Nottingham East (Chris Leslie) should make an intervention if he wants to speak.
Chris Leslie
Did the hon. Gentleman mention in his manifesto that he would cut so much money from his local authority area?
John Hemming
Interestingly, we did not ring-fence anything in our manifesto. We were clear that there was a severe financial problem and spending cuts would have to be found. The Labour party revealed so little in its budgets and concealed most of the figures and budget cuts, so it was difficult to put all the figures together, but Members will find that, when I explained the situation in debates during the general election, I made it clear that we faced serious problems. If the Opposition are going to have such a row about what is a minor point compared with the overall magnitude of the difficulty, I do not know what will happen over the next few years. There are some real problems to face, and we need to maintain services.
The point that the hon. Member for Sheffield South East made about adults’ and children’s services was very important. In Birmingham we use the brighter futures programme, and there are ways of working more closely with the people whom we support in communities, and of working with mutual bodies to try to ensure that services are provided. There have been problems with assessment systems in the past. The simple approach of just changing the priority on assessment did not result in any savings, because off the back of that, all the assessments were changed. There are serious problems, and the Opposition should recognise that they are responsible for them. They should try to be part of the solution rather than the problem.