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Whether the real cost of providing services is being recognised is an issue, and the best example of that was mentioned by my hon. Friends the Members for Cambridge
and for Teignbridge (Richard Younger-Ross): concessionary bus fares. That is a new responsibility, and local authorities are concerned that the real cost simply has not been met. My hon. Friend the Member for Cambridge was trying to make the point that the responsible authority must pay for the outward journey. There is a lot of commuting into Cambridge, and it is paid for by the authorities outside Cambridge, but the return journeys are paid for by Cambridge city council. Clearly, that will have a massive impact on its costs. Can the Minister tell me whether the Government have assessed the true cost of the scheme, as well as the cost of extending it? If they judge that there will be a shortfall, will they meet it?
Richard Younger-Ross: Is my hon. Friend aware that in Devon the scheme has been extended in the past to allow the companions of disabled people to travel? With the new scheme, because funding is so tight and given the fear that, with a good summer, so many tourists will arrive that it will run into deficit, the allowance for companions has had to be withdrawn. Therefore, under the Government’s proposals, fewer disabled people will be able to travel.
Julia Goldsworthy: My hon. Friend makes a good point. I wonder whether there will be regional differences, because areas with a large number of visitors from within the country will face greater costs. That is the same for my local authority as it is for my hon. Friend’s.
Clearly, although the Minister spoke about recognising additional cost pressures, those pressures and costs are increasing faster than the grant increase. Waste is an example. The Office for National Statistics corporate services prices index indicates that prices are rising annually well above the settlement figures, at between 5 and 7 per cent. per annum.
Of course, the obvious example is adult social services, where the gap between funding and demand is growing quickly, where cost pressures are increasing rapidly, and, of course, where the human cost of failing to meet those cost pressures will be felt most acutely. Last week’s report by the Commission for Social Care Inspection made it clear that local authorities across the country are facing similar challenges. Two thirds of local authorities now support only those who have substantial and critical needs, even though councils overall have increased their expenditure on social care for adults in real terms.
The UK’s population is ageing rapidly. The change is more rapid in some parts than in others, but it is clear that Government financial support does not reflect that adequately. The Department of Health’s response to the report was yet another investigation. Perhaps the Department for Communities and Local Government should consider its response, too. The social care reform grant, to which the Minister referred, is back-loaded. A lot of the resources are loaded towards the end of the three-year period, but the Commission for Social Care Inspection has suggested that they should be front-loaded. Will the Minister look at the issue again when he deals with the remaining two years of the settlement?
I am also concerned about another way in which vulnerable people will be affected. The Minister mentioned the supporting people budget, to which
there will be a real-terms year-on-year cut of 12 per cent. by 2011. The programme assists the elderly, those with disabilities and mental illnesses, and those fleeing domestic violence. A lot of those people will go on to rely heavily on adult social services. That is yet another pressure.
The settlement is not just tight; it badly affects the most vulnerable. My concern is that there may be more cost-shunting from other services. Indeed, that is already apparent. A gentleman whose wife is terminally ill with a brain condition came to see me a couple of weeks ago because an argument is taking place about who is responsible for providing his wife’s care. To begin with, it was funded under the continuing care programme, then responsibility was transferred to adult services. The hours of care were then cut, and then he had a telephone call to say that responsibility for provision was moving back to the primary care trust. Clearly, it is an incredibly distressing time for him. He is trying to work to support his family, but he has no certainty about what support he will receive and who will fund it. The concern is that such arguments will continue as cost pressures get ever tighter.
Another issue of great concern is the effect on excellent cross-agency working. Representatives from local children’s centres tell me that the first cuts that they are experiencing are to cross-agency working. Health agencies are pulling out because they cannot support the costs. My concern is that local authorities will soon feel the same. We are losing huge benefits.
There is a familiar theme to all those problems. Responsibility is increasingly being passed to the front line, but without adequate resources. The Government are not being honest about the real pressures facing local authorities. That is reflected in the fact that their grant increase is 1.5 per cent. or less in real terms over the next three years. However, the Government are working on the assumption of council tax increases of up to 5 per cent. If there was parity in funding, council tax increases would match increases in central Government grant. There should also be parity in the increases for Government Departments. Overall, there is to be a 2.1 per cent. real increase in public expenditure. There is to be a 3 per cent. increase for education, 3 per cent. for transport, and 3.7 per cent. for health. There is no parity there.
The Minister says, somewhat disingenuously, that local authorities could deliver council tax cuts if they were more efficient, but local authorities are performing well on efficiency targets. According to the latest published figures, councils are set to beat the overall efficiency target by 41 per cent., achieving £4.25 billion of savings, compared with a target of £3 billion. The figures are even more pronounced when we consider cashable efficiency gains: councils beat their target by 122 per cent. In any case, assumed efficiency savings are factored into the settlement that we are debating.
In many respects, local authorities are doing better than the Department. One need only consider the 60 per cent. overspend on the FiReControl IT project to realise that perhaps there are lessons that the Department for Communities and Local Government could learn from local authorities, rather than it being the other way round. The Government are using the efficiency debate to sidestep the accusation that none of their actions on local government finance sit easily with
their proclaimed fervour for the devolution agenda. There is no transparency and, most importantly, it is difficult to see a clear line of accountability.
It would be better if the Government acknowledged that council tax is fundamentally flawed, and that there is desperate need for its reform. The Conservatives accept the need for reform but have not come up with an alternative. The Government’s performance is disappointing, and again real opportunities for effective change have been passed up. The local government finance system should be designed to be fair to local taxpayers and open in its procedures and finances, and it should reflect priorities at local level. It must be local, so that decisions are made and cash is raised in a manner accountable to local voters, as they simply do not understand how that is done at present. It must be fair, so that it reflects people’s ability to pay—the current system does not do so—and open, so that people can see what they get, and could reward or punish their local council accordingly.
Local income tax will achieve much of that: it is fairer on the individual, because it is related to their ability to pay; there is no need for council tax benefit, so millions of people who are entitled to it but do not claim it would benefit; and it is a more buoyant form of revenue, which would give authorities the opportunity to focus on their priorities. However, it is not enough on its own. We need a fundamental change in the balance of central and local funding. The gearing system means that 75 per cent. of local expenditure is still funded centrally, and only 25 per cent. is raised through council tax, which is one reason why there have been larger increases in council tax. Addressing that balance would make the system more transparent. We need to move away from capping and ring-fencing.
Mr. Neil Turner: Does the hon. Lady not accept that if the gearing were shifted, we would have to ask the local council tax payer for an awful lot more money in the first place? Is she proposing that council tax payers should pay substantially more?
Julia Goldsworthy: We have proposed cuts to national income tax as compensation, so there would be a much clearer relationship between what people pay for local services and what they receive. As I said, we need to move away from capping and ring-fencing, and we need a simpler grant mechanism, so that people can understand its relationship to the services that they receive. Surely that is in the spirit of the central-local concordat: indeed, that is what it was designed to achieve. If the Government do not make those changes to local government finance, they will reveal their true colours. They are not committed to devolved decision making, because they are not putting their money where their mouth is.
The Minister who introduced last year’s debate said that council tax was not broken. Does the Minister of State accept that this year’s settlement pushes it further towards the point of no return, if it has not reached it already? Surely it is time the Government faced up to that reality.
9.16 pm
Mr. George Mudie (Leeds, East) (Lab): I shall be quick, because a number of Members wish to make speeches.
I raised my concerns in an intervention on the Minister, so he will not be surprised to learn that, while I welcome the statement, I am upset—and so is the city of Leeds—by the fact that Leeds has been excluded from the working neighbourhoods fund. He was dealing with statistics when I raised the matter, but some of his statistics put a gloss on the problem, so they should not have been used. If it had been in the fund, Leeds could have expected to receive £54 million over three years. In fact it will receive £12 million. The first year, it will receive over £8 million; the second year, it will be down to £4 million; and in the third year, it will receive nothing. A ratio of 60:40 sounds good, but it disguises or masks the fact that in the third year, Leeds will receive nothing at all from the fund for work in deprived neighbourhoods.
It gets worse. The Minister suggested that funds from the Department for Work and Pensions are tied to the working neighbourhoods fund. The £42 million that we will lose could be the tip of the iceberg if, as a result of the linkage, we do not get into the relevant list of authorities and thus do not get the DWP money. I should like the Minister to deal with that figure when he replies to the debate.
On the same issue, in his final sentences, the Minister indicated another, I think, £30 million—perhaps it was £50 million—was going in to deal with immigration in cities. He said that he had put the figure on the website, and that that money would be distributed. However, it will be distributed only to those authorities in the working neighbourhoods fund, so that is another pot of money that could be used to help the Government and Leeds city council, which is not Labour-controlled, to deal with the huge problems in inner-city Leeds. I would like the Minister to send the leader of Leeds city council and me information on exactly how much we will lose in the three years.
The worst aspect is the fact that we lose the money because of maths—we come down to statistics again. There is a calculation that means that 20 per cent. of areas have to be in the most deprived 10 per cent. nationally. Leeds has 95; if it had 96, it would have qualified for £52 million. In three years’ time, it will get nothing because it is one short. That 95 as a percentage of 400-odd works out at 19.96 per cent. The city is excluded for the sake of 0.04 per cent. The Minister will say, and I understand this, “That’s tough. When you draw a line, you’re either on one side of it, and you cheer”— as my hon. Friend the Member for Wigan (Mr. Turner) cheers—“or you are on the other, in which case, tough!”
As the hon. Member for Falmouth and Camborne (Julia Goldsworthy) knows, because we have debated the issues in Westminster Hall, if people meet the criteria for social care and home care, for example, they get it. What is not said is that, if people do not meet them—many do not, despite their grave problems—they do not exist as far as the Government and local authorities are concerned. There are 149,000 people in deprived areas of Leeds who in three years’ time will effectively not exist. There will be no help for them because they have not qualified by 0.04 per cent.
The other aspect is about working neighbourhoods funding and trying to get people into work, which is
laudable. In Leeds, 63,000 people are on benefit of one type or another, and are not working. That is the fourth highest level in the country, but Leeds does not qualify for working neighbourhoods funding because of 0.04 per cent.—which will be on the Minister’s gravestone at some stage.
I finish by saying this. I plead with the Minister to come to Leeds. I will personally drive him around; he can bring his whole office for protection if he likes. I would not have to take him anywhere other than my constituency—it is desolate. I have made speech after speech, and got into trouble with Whip after Whip, because of what I see in my constituency in the inner city after 10 years.
Every city bar Coventry, which is smaller—Liverpool, Newcastle, Manchester, Birmingham, Middlesbrough, Newcastle—gets the funding because big cities in the western world have prosperous centres, prosperous suburbs and dire poverty in the middle. We all know that, but in the eyes of the Government Leeds has done what New York, Paris and Rome have not managed: its inner city has disappeared. That happened at an administrative stroke because of 0.04 per cent. Poverty, deprivation, crime, drugs, bad health and bad housing have been abolished in Leeds—hallelujah! The reality is pretty dire.
The Minister has said that he is not content with statistics. I hope that there will be a review to see whether the statistics justify taking Leeds, one of the major cities of this country but one with severe inner-city problems, away from Government help on those important issues.
9.24 pm
Mr. David Curry (Skipton and Ripon) (Con): The first thing to say about this settlement is that it takes place under the iron hand of capping. Capping works, because local authorities do not have to rewrite their budgets, and, as this is a three-year settlement, the next three years will be governed by capping—that is as plain as a pikestaff. Secondly, the reason why that is happening is that the Government’s finances are in a mess. Years of profligate and ill targeted public spending increases have led to the current difficult prospects. The Government say that the settlement is tough but fair, which is a very British formulation. In a sense, council tax is atrophying because of capping.
The most interesting background to this matter is the report by the Audit Commission, “Positively charged”, which shows that £11 billion now comes from fees and services. I did not realise that car parking would emerge as one of the great functions of local government, although it is certainly one of the major functions of Network Rail. That is an important development that can have a disproportionate impact. Some councils are in a position to benefit substantially from charges while others are much less so. The Government have picked at the Lyons report, and Sir Michael has moved on to grander things. He must be disappointed at the small amounts that have been picked out of his report.
I have to say to my own Front Benchers that to the extent that Tory policy is represented by Salome, she is very largely still clothed, and I look forward to having greater revelations than just the ankle, which appears to be the proposal to threaten councils with local
referendums so that local people impose the capping instead of the Government, with precisely the same effect as far as councils are concerned. Meanwhile, the Liberal Democrats recite the case for local income tax rather like old believers in a remote monastery hoping that somebody will eventually attend the services. It has very little to commend it other than the fact that it exists as a policy, which is somewhat distinctive for that party. On business rates, a total silence has descended right around the Chamber—it is a subject that does not speak its name any more.
Three-year settlements are even more subject to things going wrong than annual settlements, and the problems that are faced could get worse. We see rising commodity prices, most particularly in energy, but I also draw the Minister’s attention to what has been happening to food prices and the impact that that could have on the costs of local government. We see the relentless demographic pressures. Care of the elderly is the most obvious example, and the cuts there are the easiest to make because they are the least visible. Cuts in education are pretty visible because an articulate group of people has an interest in fighting them. In social services, the impact is much more scattered and so the ability to resist is much reduced. We could see more abnormal weather phenomena, as the Environment Agency calls them. One need only drive on any road that is not a main road to see its deteriorated, rutted, pot-holed condition.
The move to single status has a major impact on many local authorities. Let us hope that in seeking to deal with this settlement at least some councils will have the courage to remove some of the surplus school places, which are a major problem. However romantic it might be to save village schools from closure, the fact is that we cannot afford to maintain in the education system capacity that is not needed.
The Government make great play of what they have done about devolving power—there is supposedly a great devolution agenda. However, as in the case of Lyons, there is precious little real substance. It is desirable, but it does not deal with the issues of financial resources and autonomy, or redress the essential balance of power and competence. It remains a sort of constitutional alms-giving, handed down by Government to a grateful and supplicant local authority.
I want to raise one local issue. On concessionary bus fares, the Government have not got it right, and I hope that for the next two years of the scheme they will look again at the formula. This is bad government. Places such as Harrogate and Scarborough are in exactly the same position as Cambridge; a huge shortfall is projected from any reasonable forecast. The Minister is not going to alter that now, but I hope that he will consider it for future years. He should realise that for district councils, which have a budget of £20 million to £25 million, little pressures such as damping arrangements costing £200,000 or increases in Audit Commission fees accumulate into a significant hit.
Huge issues remain to be addressed in local government: how accountability can be achieved in the important public services of policing and health, one of which has no level of accountability at all; the assertion of representative democracy, rather than the irresponsible empowerment of national quangos or small local boards; and how agendas based on choice can be made manageable
and affordable. The settlement does not address those crucial issues and, in effect, the devolution proposals do nothing else.
Meanwhile, we drift. The Government will not take decisions. The Opposition are by and large happy to impale the Government on the unpopularity of council tax increases and coo as far as devolution is concerned, and the Secretary of State is a cheerful cooer. Concordats get us nowhere. I leave the Minister with the thought that there have been two famous concordats in history: one between the Pope and Napoleon, and one between the Pope and Mussolini. I hope that this one has a better fate than those two did.
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