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8.49 pm

Mr. Austin Mitchell (Great Grimsby): I shall not follow what the hon. Member for Harrow, West(Mr. Hughes) said, but I admire his skill in making a little political padding go a long way. It was fascinating to watch him stretch his speech out--presumably in direct ratio to the unavailability of Conservative Members in the Chamber to defend the financial settlement.

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The Secretary of State started us on the political track with a speech that was delivered with almost religious fervour. It was religious because so much that was blatantly political was put over in such a sanctimonious fashion. It was the performance of the Elmer Gantry of local government and I do not want to follow him down that road.

The Government are clearly putting extra responsibility on local government, depriving it of the financial means to fulfil those responsibilities, and blaming Labour and Liberal local government for the inevitable increase in council tax--the Chief Secretary to the Treasury estimates that council taxes will rise by 8 per cent.--while presenting themselves as benignly and beneficently cutting direct taxation. That is the tactic: it is as clear as day follows night.

I want to talk about the fate of my authority and of the new unitary authorities, which are a unique and very important feature of local government. We shall be embarking on a brave new adventure come April, to which the Government are committed. Indeed, their reform of local government has created the new unitary authorities. We in Grimsby and Cleethorpes--now North-East Lincolnshire--support that reform. We wanted to control our own destiny and we wanted a local government that was close to the people, so we want the new authority to succeed. I hope that the Government also want it to succeed.

The local government experiment--the brave new world of 13 new unitary authorities which come into being on 1 April--cannot succeed in a welter of redundancies, cuts, debts, recrimination and blame, which the financial settlement has prepared for it. The new authorities are a special case, and need to be treated as such.

I would argue that Grimsby is a special case within the special case because most of the assets of the county of Humberside that are to be divided up are on the north bank. We are trying to find accommodation for 400 council employees and are in a particularly difficult position. On the north bank there is a surplus of offices, but on the south bank, and in Grimsby especially because we did not have the county facilities, there is a dearth of offices.

I do not want to recriminate and attack Humberside. Indeed, I have come to praise it as well as--in effect--to bury it. Humberside did a good job, especially on education and social services, where spending and standards were very efficiently maintained, as befits an area with severe social problems and a high level of unemployment. It fulfilled its responsibility. We also have a high level of single-parent families and Humberside gave them a good service.

It is realistic to say, however, that Humberside has left problems--usually problems which were not its fault, such as those in education. School buildings are deteriorating faster than they can be repaired and maintained. That is no investment in the future of our children and that lack will cause real problems.

In the case of the Havelok school, which I visited recently, the county obtained a grant to remove places--and also asbestos--but the money for that was spent in other schools in other parts of the county. The problem remains, but we do not have the money and we cannot apply again. Such are the problems left in parts of the education provision.

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My children went to the Hereford school in Grimsby. I liked them going there; it is the local comprehensive. One should live by one's principles on education matters. That is not at all hypocritical, unlike so many Conservative Members who talk about improvements in state education and send their own children to private schools and public schools out of the state system. The Hereford school, Grimsby is a nice title for a school because it sounds like it should be a public school, but it is a comprehensive.

It is a shame to see the Hereford school nowadays. Some of the one-story buildings that were the house bases when my children were there are deteriorating because the roof is very heavy. The roof is cracking, pressing down on the window frames, which are distorting, and glass is breaking constantly. To support the roof, they have had to put in angle frames, which in turn are cracking. The school roof has needed repair for three years. An expenditure of £200,000 is necessary to make the house bases--still used as kitchens--safe. An expenditure of about £1 million is needed to make the whole school livable in, workable and up to standard, but the money is not available. We have inherited such problems as a new authority, yet it is not our fault. We have not created them, but we have to deal with them.

The other problem that has been left, which is unique to the new unitary authorities, is the lack of balances. Grimsby and Cleethorpes between them have managed to hand on balances of about £1 million, but a local authority needs balances of about £4 million or £5 million if it is to have the necessary flexibility to run things efficiently and manage over time.

The new unitary authorities cannot control their own destiny like an on-going authority because they cannot manage their finances to ensure the maintenance of balances. We have not inherited any balances. Indeed, the balances might be negative because of the verdict on a lawsuit over school meals, which will impose costs on the successor authorities. We could not control that and it is not of our making, so it should be allowed for in the new authorities' financial allocations.

The result is close to disaster. We are inheriting extremely difficult, if not disastrous, circumstances. If North-East Lincolnshire--the merger of Grimsby and Cleethorpes--is to come under the cap limit of£129.7 million, initial calculations mean cuts of £5.9 million in the existing level of services. In other words, there will be a 4.5 per cent. cut in the budget. And that is without allowing for any working balances. That possible£5.9 million overspend is less than recent, more detailed calculations indicate. Allowing for such things as landfill tax, employer's superannuation contributions and other new burdens, the overspend above the capping limit will be £9.8 million.

It is impossible for an authority to take over responsibilities for the first time in April, welcome the new experiment, make it work and make it acceptable to people on the back of cuts of £9.8 million in spending and services. How can it be done? If the Government expect us to do that, they are being unrealistic. This is the Government's reorganisation. We wanted it, but we are partners in trying to make it work. If one partner is to be handicapped by a requirement to impose cuts of £9.8 million--in a new situation for which it is not responsible but which it has inherited--the burden will be too heavy to bear.

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What are we to do? Staffing accounts for 60 per cent. of total spending. In a budget of, say, £140 million, social services and education accounts for some £100 million. Are we to have massive cuts and redundancies? If we are to achieve such massive cuts, the number of redundancies will be substantial. The local authority has not talked to the unions yet, but redundancies will have to be made as sure as day follows night, and not in tens or twenties but in hundreds. How can a new authority start by handing out redundancy notices to teachers, employees and others who provide services? How can a reputation and decent service be maintained in that situation? Why should the Government ask us to do that? It is just callous indifference to their own reorganisation. We would have to jettison services and make massive cuts in education. If school budgets are cut less, other aspects of service will have to be cut disproportionately, or we shall have to have redundancies. What a way to begin.

When we ask for help and advice from the Government, we get various suggestions, none of them workable. We are told to involve private finance in local government activity, but that takes time; it cannot be introduced immediately. We are keen to work with local commerce and industry, but developing those relationships, particularly when it is a matter of industry investing money, cannot be done overnight.

The Government tell us that the standard spending assessment has increased, but Humberside was spending over its SSA, so that is no benefit to us. We are told that we have a good deal from the single regeneration budget--we have indeed, and we are very grateful, but we deserved it because of the problems that we had to deal with as a result of the SRB grant; the local authority, which is on a tight, limited budget, has to put up a corresponding amount to secure that grant from the single regeneration budget. If we do not get the money, it is disastrous; if we do, it is increased spending.

I know that the Minister takes our problems seriously, and he has taken time to consider the matter. I hope that he will re-examine it, because the situation is becoming desperate. The new unitary authorities must be treated as special cases. They are not a huge special case--there are 13 of them--but the extra financial help that they need will not be a huge burden. It will not create a gateway that all the other local authorities will use to make demands. The reorganisation is a joint effort by Government and the local authorities, and it must succeed. It will not succeed if the Government continue at the present rate.

The Government have approached this reorganisation in far too mean a spirit. They think that they were too lax in the previous reorganisation, that money was pouring out of the dying local authorities, but it was nearly always for beneficial purposes. Indeed, the people of west Yorkshire are grateful for the West Yorkshire Playhouse, which was one of the beneficiaries of the previous reorganisation. Money was provided by the old west Yorkshire county council. It should be called the John Gunnell memorial theatre, because that was really the source of the finance. Benefits flowed from the previous reorganisation, but the Government feel that they were too generous then, and therefore they will counteract that by

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being too mean this time. They want to show themselves to be tough. The result will be that new authorities will be strangled before they start.

I ask the Minister to examine the issue again, because we are in a mess. The only way out is to raise the capping limits. If Grimsby had spent to the capping limit, there would not be a substantial increase in council tax. A special case was made last year for the inner London boroughs, so it can be made again for the new unitary authorities. If there is a case for capping limits, it is as a discipline on existing authorities, but a new authority cannot manage its finances in that fashion. The discipline is of no use if there are no balances to inherit. If an authority cannot manage to hit its capping limits this year and the next, capping limits are a form of strangulation, a garrotte, rather than a necessary discipline on local authority spending. Capping limits are totally unreasonable for new authorities.

Another way out, as my hon. Friend the Member for Glanford and Scunthorpe (Mr. Morley) said, is to raise the SSAs for the new unitary authorities, because that brings in revenue support grant money. It is depressing to see the difference between the consultation SSAs for places such as Grimsby and the settlement SSA. Whereas Buckinghamshire--presumably the last Tory council--saw an improvement of 1.32 per cent., or £5 million, between the settlement SSA and the consultation SSA, we lost £500,000. We lost 0.3 per cent.--and we are a new authority that desperately needs the money. So I ask the Government to reconsider raising the SSAs for the new unitary authorities.

Thirdly, I ask the Government to allow the new unitaries, especially that for north-east Lincolnshire, the authority in which I am passionately interested, to capitalise the overspend. There will be an overspend, so why not allow us to borrow to cover it?

The Government say, and I am sure that they are right, that the reorganisation will bring financial benefits and economies to the areas concerned. They therefore want those areas to pay for it, on the grounds that they will inherit the benefits. Fair enough, but please allow us to pay for them over time, by allowing us an increase in our borrowing to finance the capital overspend. The costs will still fall on the area, and when we get the better times that will come from the greater economy and efficiency provided by the unitary authority, we shall be able to pay off the borrowing.

To allow us to borrow and to capitalise now would avoid disaster. Disaster now would alienate the people from the new unitary authorities. They will not be interested in the performance in five years' time, or in greater efficiency a decade hence; we are talking about now. We are talking about how a public, many of whom, especially the teachers, have been reluctant to accept the reorganisation, can be brought to accept it.

Fourthly, I ask the Government to give us an element of greater flexibility in the spending that is allowed for the costs of reorganisation, such as redundancies. Greater flexibility within the categories would be a small matter, but every little helps.

I have tried to avoid the political knock-about that is almost implicit when the Government begin to try to pass the parcel of blame to local authorities by saying, "Labour increases your council tax, while we cut your income tax."

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That is what is happening now, but I do not want to get involved in that argument today, because the situation in the new unitary authorities is too serious for that.

The test is: will there be a seamless, efficient transfer that improves the quality of the service offered, and makes it more immediate to the people because they have a more direct say and are more involved with it? Given time, and the ability to make a seamless and graceful transition, that will happen. But we must have that ability and that freedom.

At present the prospect, which must be seen in its full starkness, is of a transition accompanied by heavy redundancies--not in tens or twenties but possibly in hundreds--and by substantial cuts in services. We shall have to lop off entire functions, which we shall not be able to afford--industrial development, for example, which is vital to encourage jobs to an area of high unemployment, but which is financially vulnerable if we must have massive cuts. There will also have to be cuts in areas that I regard as sacred, such as education and social services.

Do not force those cuts on us, Minister. I ask the Government not to sabotage their own creation, the local government reorganisation. Let it work. Help it in its hour of need. It would be awful to see it ruined by the alienation, rejection and hostility that would be caused by massive cuts and redundancies, followed by a long argument between the Government, local authorities and politicians in general about who is to blame--that most unseemly, undignified and unnecessary of political arguments.

Something must be done: only the Government can do it--and they must do it soon.

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