Financial Sustainability (Local Government)

Steve McCabe Excerpts

Tuesday 7th January 2014 Westminster Hall

[Steve Rotheram]

That is absolute nonsense. It is possible to pick individual statistics, but cumulatively the cuts and other Government policies have a disproportionate effect on my city. It is a greater effect than the hon. Gentleman could ever understand.

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

I do not know the source of the evidence cited by the hon. Member for North Wiltshire (Mr Gray), but I think the Audit Commission showed that one in 10 of the best-off areas suffer only a fraction of the cuts being suffered by the poorest 20% of areas in the country. Has my hon. Friend seen that evidence?

--- Later in debate ---

[Jesse Norman (Hereford and South Herefordshire) (Con)]

Thank you, Mr Crausby. I am grateful to you and to the hon. Member for Birmingham, Edgbaston for calling this important debate.

I absolutely applaud the measures that the Government have taken over the past couple of years, not merely to bring the national economic crisis under some kind of financial control, but to make specific improvements to local government in the hope of making it more relevant, more accountable and more autonomous. The hon. Lady made the very good point that local government was glorious in the 19th century, and one reason for that was how autonomous it was. It is very important that we restore proper dignity to town halls, and I think the Government are doing that.

It is remarkable that the Government have been able to do that in the extremely difficult financial conditions in which we find ourselves. It is extraordinarily hard to change embedded funding decisions and disparities that have been left over from times past. In my county of Herefordshire—although we are talking about cities and the wider impact, I hope that we can strike a rural note, as the hon. Lady acknowledges the differences between them and the effects that each can have on the other—levels of funding have always been extremely low. The culture is one of making do and mending. To take one example, it was a minor miracle when we moved from having the third worst-funded schools in the country to the fourth worst-funded schools in the country, in the past year or two. I hope that we will continue to motor rapidly up the tables thereafter.

Above all, the issue is not only about local government, but about the totality of public services, because, as I think all Members would recognise, the services interlink with each other and the cumulative and interrelated effect of them makes all the difference. I am perhaps somewhat unusual in that I commissioned an independent study of underfunding in Herefordshire in 2010, which concluded, based on a comparison with other authorities, that it had been underfunded to the tune of £174 million over the previous five years—the period from 2005 to 2010. That is £35 million a year or roughly 10% of local government spending.

Those totals broke down across the public services as: police, £11 million a year; fire, £4 million a year; schools, £30 million a year; and health, £44 million a year. Each of those sums, in turn, was dwarfed by the underfunding of local government, which was £85 million over that period, or £17 million a year.

It is important to put that in perspective. It is not only about underfunding in some of the leafy suburbs to which people like to refer, because there are areas of deprivation in Herefordshire. It is not a rich place; it is a county in which the average earnings are significantly below the averages for the west midlands and for England as a whole. It is well known to those who have studied the issue that public services are harder, not easier to deliver, and more expensive, not cheaper to deliver, in rural areas than in cities, whether that involves filling potholes or the number of women whom a midwife can see in a given year.

[Steve McCabe]

I want to see whether I understand the essence of the hon. Gentleman’s point. Is he arguing that his area is underfunded, as a number of us would think of our areas, and therefore that central Government need to do something to relieve that underfunding? Alternatively, is he arguing that money should be taken off other areas and given to his area to address what he perceives as the underfunding problem in his area alone?

[Jesse Norman]

I am arguing that the situation in Herefordshire is the result of well over a decade—possibly two decades—of underfunding and that therefore, although every area has been hit badly because that is the nature of the tough times we are in, the case for treating with care and attention areas that have suffered from that inherited imbalance of underfunding is clear.

Let me give an example. In many parts of the country, local councils have reserves—indeed, large amounts of reserves that they have stored up over many years against a rainy day. That is not true in Herefordshire. Herefordshire council is only 10 or 15 years old. It does not have large inherited reserves. All the reserves it has are spoken for, more or less, and therefore it is not in the position that some cities are in of being able to draw on inherited reserves.