Local Government Funding

Lord Beith Excerpts

Monday 6th December 2010 Commons Chamber

[Caroline Flint (Don Valley) (Lab)]

I beg to move,

That this House notes with concern that local councils will lose, on average, 27 per cent. of their funding over the next four years, compared to 11 per cent., on average, for Whitehall departments; regrets the frontloading of reductions in funding which means that the heaviest cuts will fall in the first year; believes that the unexpected severity of the cuts will result in substantial job losses in the public and private sector, undermine the voluntary sector and hit frontline services; regrets the inadequate level of capitalisation available to local councils to deal with redundancy costs of up to £2 billion; further notes the commitment in the coalition agreement to ensure that fairness is at the heart of decisions and that those most in need are protected; is disappointed that the most deprived areas will be hit hardest by the reductions in funding; and calls on the Government to revise its proposals before making the provisional finance settlement to ensure that any reductions in funding are more evenly spread over four years and do not fall disproportionately on the most deprived communities.

There is common cause across the House in recognising the need to reduce the deficit. Labour had a plan to halve Britain’s borrowing over a four-year period. That would have meant cuts in spending and would have resulted in reductions to local government funding, but not like the Government’s cuts. I will not let the coalition pass the blame for cuts of their choosing, their design and their timing on to us. Let me, once and for all, nail the myth that there is no alternative. The Government had a choice.

[Sir Alan Beith (Berwick-upon-Tweed) (LD)]

That would be a reasonable position for the right hon. Lady to adopt if she set out in some detail how Labour’s programme of cuts would impact on local government.

[Caroline Flint]

We are dealing with a package, which is what local councils will face. Even on the coalition Government’s most extravagant predictions of what we might have cut, with which I do not concur, the cuts proposed by the coalition Government, of whom the right hon. Gentleman is an ally, would have meant another £2.2 billion worth of cuts over a four-year period, and they are front-loaded in a way that is dangerous for local communities and the services that they need.

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[Mr Pickles]

The hon. Gentleman seems to have left the 1980s for the 1970s and “Jim’ll Fix It”. There is no intention to fix this or to hit vulnerable communities the hardest. We will be doing our best and I hope that the hon. Gentleman will be ready to praise me next week when we produce our proposals. Frankly, he should take with a pinch of salt some of the more alarmist predictions of jobs cuts that have been fed to the media by the unions and others. Such dossiers are based on looking at local media and projecting them out. We see unions being upset by stories that unions themselves have placed.

Reducing the number of posts is not the same as job cuts, as staffing can be reduced through natural wastage and freezing. The unions have intentionally misled on the issuing of section 188 notices, which allow the terms and conditions of workers to be changed to save money. The GMB has claimed that 26,000 staff in Birmingham face “the threat of redundancy”. Indeed, that would be a shocking figure—26,000 workers faced with redundancy. In fact, the process seeks to reform car allowances and staff parking, and is nothing more than that. It is designed to reduce the scope for redundancies. Even Leon Trotsky at his worst would not have taken to the streets over car parking. Such reforms reduce the scope for redundancies and do not increase them.

[Sir Alan Beith]

Speaking of redundancies, my right hon. Friend has some discretion over the limited amount of money that he has to allow capitalisation of redundancies in those authorities that have low reserves. I ask him to look carefully at Northumberland, whose reserves were low because of a forced reorganisation under the previous Government, and there is a very heavy claim on the county council at present because of the incredible snowfalls that we have had in Northumberland.

[Mr Pickles]

My right hon. Friend makes a good point. We warned about the effects of the various reorganisations, and stopped those intended for Norfolk and for Devon. Where money is tight, we cannot afford to waste it on a reorganisation of local government.

I am actively reviewing the amount available for recapitalisation. Clearly, there will be tough choices. The sharing of services and back-office consolidation will reduce the number of staff posts needed over time. The priority of local government is not to be a municipal job creation scheme, but rather to provide quality front-line services, keep local taxes down, and provide a positive environment for private sector job creation and the expansion of local business.

--- Later in debate ---

[Sir Alan Beith]

It is perhaps worth reiterating that some authorities could meet a larger proportion of the redundancy requirement out of reserves and that others, through no fault of their own, are not in that position—I mention Northumberland as an example.

[Simon Hughes]

I remember—my right hon. Friend alluded to this fact—that the situation in Northumberland, which went through an enforced change in its local authority nature, boundaries and so on, was more difficult. Others are in difficult situations, too.

The LGA’s third point concerns accounting for what it calls “missing grants”. There is uncertainty about more than £1.1 billion of specific grants on which councils rely and where the Government have yet to announce future funding levels. I do not know whether the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Bromley and Chislehurst (Robert Neill), can tell us when he winds up whether those announcements can be made at the same time. The sooner they can be made the better.

The fourth point concerns fees and charges that are set centrally, such as licensing fees, which have often been shown to be inadequate in covering the full cost of the related services and I ask the Government to deal with that across Government. There are many sub-issues with fees and charges. I hope, for example, we stop the nonsense of having differential fees for burials depending on which side of a boundary one lives—[Interruption.] This is a serious point. People who happen to have moved across a boundary, having lived all their life in one authority, find they have to pay, say, 10 times as much to have their late husband or wife buried. Those things are offensive nonsense and we need to deal with them.

The last point is that we need fair grant distribution. That is where I make the strongest plea, alongside the right hon. Member for Don Valley. We must ensure that all the funds that have come from Government to local government this year are the starting point for the calculation for the next year. I have been reassured that things are moving in that direction and I want them to move completely in that direction over the next few days.

London Councils makes similar points. Southwark, like Lewisham, is a borough that has had the protection of a floor and cap, as many authorities have had to. Southwark, like London Councils, argues that funding floors should be set at the highest possible level to prevent cuts falling disproportionately on the local authorities with the highest need. That is important. Those points have been made, by and large but not exclusively, by authorities that are not Conservative-run, but authorities run by the Tories are in that boat, too, as well as authorities where there is a joint administration.

Let me make a final couple of points. Also included should be any other local authority funding that has been cut, if for understandable reasons. For example, in Southwark there was the Aylesbury private finance initiative for our largest estate, which was due to be rebuilt. Because that work had not started, the Government have said that they cannot advance the money. I understand that argument, but it needs to be taken into account as part of the picture. I make a specific plea on that point.

I am conscious that the Government will go down the road of returning business rate control to local government. That is a good thing. I am very conscious that in the localism Bill, which I think is coming into the public domain this week, the Government will give much more discretion to local government on how it raises and spends its money. That is a very good thing. I have always argued that the Department that looks after local government should stand up to the Treasury so that local councils can have the power of general competence, including total general financial competence. For example, they can then borrow against their asset base—their housing stock in the case of Southwark—without having to go to the Government cap in hand to get permission. The Treasury’s hand has been unnecessarily authoritative. I understand why, but in any other parts of the world local council spend does not count in the same way and in the same accountancy column towards public sector borrowing requirement totals.

I have a couple of messages to give local councils through the Government. Again, I shall reflect some things that have already been said. Councils must be careful not to pick on the voluntary sector when times are hard for them. It is easy to do that. It is easy suddenly to decide to take all or the bulk of the money away from organisations that are not in-house. Sometimes, councils must reduce their own management and costs. That might be a more effective way of dealing with reductions than taking money away from the voluntary sector, where local authority funding contributes towards a larger whole. I hope that there will not be any such abuse of the relationship. Voluntary sector organisations are often valuable partners and they need to be given as much support and encouragement as possible.