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That is their allegation as independent academics. When one reads the book—I am sure that the Minister has read it, because I know that he is diligent—the case is compelling.

In the current circumstances, where local authorities face financial issues, is it not time for the Minister quietly to kill off any further structural change, particularly when local authorities are doing a great deal of good work together? In Somerset, for example, the county council and district councils of different political persuasions are working together on development, waste and other key issues. Successful local authorities are working together in Devon, and I know that a district and county council in Essex have a jointly appointed chief executive. There is considerable collaborative work in Kent, and a number of London boroughs are working more closely not only among themselves, but with other organisations, such as strategic health authorities and primary care trusts. If the Minister were to get away from the obsession with structural change, we could get on with collaborative working, which would leave governance systems and accountability in place so people would still have a sense of ownership of their communities rather than alienation, which we risk at the moment.

There is a different way forward. The Minister has referred to the White Paper, which is not the way forward—if it is the answer, then the question is wrong. The idea that we will achieve the laudable objective, about which I agree with the Minister, of getting more people from a greater range of backgrounds engaged with local government in more imaginative ways is not met by the White Paper. I do not dispute that the White Paper includes some useful and helpful ideas. At the end of the day, however, the idea that one can cure the democratic deficit, which genuinely exists in this country, by offering people who turn out to vote a free doughnut or entry into a prize draw to win an analogue radio, or by allowing people who are elected not to attend council meetings and text in their vote, trivialises rather than enhances local government. What would enhance local government is the abolition of all the central controls and constraints to which I referred earlier.

This is an opportune time for a debate on local government. I never doubt the Minister’s good intentions, but I fear that he and the Department are presiding over
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a litany of missed opportunities. I have heard nothing today, and I have seen nothing in the White Paper, that suggests that things will get any better until there is a central change, which many people hope for in due course.

4.59 pm

Mr. Ronnie Campbell (Blyth Valley) (Lab): I feel a bit old when I mention this, but I am reminded of 1969, when I was elected to the local authority as a young lad. I remember the first meeting that I went to. I knocked on the door, went to the chamber and sat down, but there were no agendas. I was told that they would come later and that they were being debated next door in a sub-committee or some such. Later, I put all that down to the right-wing Stalinists—in the Labour party, I might add, Minister. They controlled everything and would come into the meeting saying, “This is what we are going to do.” So I had a rough time when I was first elected.

In those days no members of the public were allowed into the committee meetings, and of course none of the press were. I remember fighting with a Liberal on the council to reopen the meetings and get the press in. I was not very popular with the Stalinists, of course, but we did fight. As I listen to the debate today, it is obvious that local government has come a long way since then. It is wide open, and, up to a point, I am very proud of it.

I could be away home—like everybody else, it seems—but I am here to talk about Northumberland. Northumberland is to be one of the unitary authorities mentioned by the Minister; incidentally, the people of the county did not want that. They still do not want it, and we had a ballot to say that we did not want it, but nobody took any notice—perhaps we are back to the Stalinists again. We have to be careful not to drift back to the old days of 1969: we have to listen to what the people say.

The Minister has been up to Northumberland a few times, but I am sorry to tell him that he has been told a few porkies. I said as much in a couple of letters that I sent him—but he replied that, no, everything was rosy in the garden. I am afraid that it is not. Northumberland is in a big plight. The six district councils are being taken over next April and neither I nor anybody else knows what is going to happen; Northumberland is like the banking industry in many ways. It really is in a plight. I am told by our colleagues who sit on the council that no savings of any kind will be made in Northumberland in the next five years—so much for the points made by those who wanted the unitary authority. They said, “We’ll save this and save that. We’ll save £18 million a year.” I do not think that that is on the cards, Minister—that has all gone.

Cuts will be made. This year, the authority is looking at £27 million of cuts—this year alone, until April—and it is talking about a cut over the next five years of £69 million in local government in Northumberland. Where will that come from? The issue is services. Northumberland has an ageing population; just the other day, we got the figures for Blyth Valley constituency—51 per cent. of people there are old. A lot of them will depend on a lot of services. A cut of £69 million would be pretty heavy on social services and the like.

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Amalgamation has brought the added problem of redundancies. It is a minefield. There is untruth upon untruth—figures here, figures there, but we are all fighting in the dark. I am afraid that the Liberal Democrats are the biggest party on the council and they are running it at the minute. TUPE does not exist for the Liberals—so much for the trade union connections that they like to claim; they do not even recognise those regulations. At least our side does, and does a little bit with them.

Julia Goldsworthy indicated dissent.

Mr. Campbell: They do not recognise them; the hon. Lady should get in touch with the leader of Northumberland council and ask him what TUPE is—he will not know. It is a trade union arrangement for those who are made redundant or sacked, so that things are done properly. But they are not being done properly, and I will say for why. Blyth Valley and Wansbeck are the most populated areas in Northumberland, which has a total of about 300,000 people; the other areas are all rural. When they did the interviews for the chief executive, not one came from Blyth Valley or Wansbeck. Three or four came from Berwick, Alnwick, and Hexham. Blyth Valley council has two “beacon” statuses and an “excellent” status. Last week, it was announced that it is in the top 10 of the best run district councils in Great Britain, yet not one chief officer has been elected to the new unitary authority.

Julia Goldsworthy: Not elected.

Mr. Campbell: Sorry, not elected—appointed. They should be elected; that is a good idea.

I wonder what is going on. Could it be that they do not have a Liberal party card? Is that how it works? These are the two biggest district councils in Northumberland, and not one of their chief officers has been appointed. That worries me.

Now there are going to be redundancies because the six councils disappear next year. The £69 million debt is creating problems. Figures have been bandied around. Even the Liberals on Northumberland county council have said that 20 per cent. of staff will lose their jobs next April. We think that it will be 1,900 to 2,000 people, or perhaps 3,000. What is even worse is that workers at the county council and the shire council are being told that their jobs are safe and that all the jobs that are to be lost will be at the district councils. All the people sitting in the ivory tower in county hall are going to be saved. I do not know how that works, because under the trade union laws they should all be applying for their own jobs. We will leave that to one side and work that one out when it happens.

It is a right plight. Now we are going to have cuts—£27 million this year, £69 million over three years. There have been cutbacks on some projects. The Liberal-controlled authority is already telling the district councils that they cannot spend on the capital programme. We should remember that these councils had a capital programme that they put to the people and got elected. Now they are being told they cannot spend that money—“You can’t do this, you can’t do that, we need all that money because we’ve got a black hole here.” In all fairness to the Liberals, I do not blame them entirely for the black hole, because our previous administration made a mess
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of it as well. [ Interruption . ] However, they are not making a very good job of it at the moment—I can tell them that for nothing.

An even bigger problem in Northumberland is that of the Icelandic banks. My local financial officer, Simon Potts—an excellent officer who did not get a job, by the way; if he put in for one, he did not get anywhere—was told in April that Blyth Valley borough council should get its money out, which he duly did. In April, Northumberland county council was putting money in—in fact, it was doing it as recently as June and July. Everybody seemed to get the news in March or April that they should get their money out because it was not very steady out there, yet Northumberland was still putting it in. The Minister mentioned a few councils—Northumberland must be one of them. I am sure that his lads will come back with the truth—I hope so, because every time anybody goes up there so many porkies are told it is unbelievable.

The officers who were putting money in when they should not have been—when everyone else was told—are now on higher salaries. Of course, not only had they put that money in, but news has just come in, hot off the press, that they had put £11 million of pension money into Lehman Brothers. We are told that that money is okay and is safe, and that we are going to get it back. I hope that the Minister is listening and that he has his team up there. He can inquire about the £11 million in the pension fund for Northumberland county council, which is with Lehman Brothers. Will the council get anything back now that Lehmans has gone bust? That is a problem in itself.

What will happen in Northumberland? Services are going to be cut. It is too late to let the districts run their own councils, as the Tories wanted. I agree with that—I did not want a unitary authority. It is too big, and too far removed from the people. It is better if we have smaller councils running a lot of services, because they are near people and can handle things better. The Minister nearly spiked my guns by announcing that councils are being inquired into. He might have a team up there now, but I was going to ask him to have an inquiry into the running of Northumberland to ascertain the truth.

It is a bit of a bind when the Minister comes to Northumberland—he has been up a couple of times—to make statements but those statement are wrong. He is becoming a bit of a laughing stock. I would rather have the truth. I would rather the Minister sent a team up to Northumberland to find out the truth. It is not all down to the Liberals; most of it happened beforehand, but the way the Liberals are going about things now is just as bad. If it is not too late, I would like an inquiry team to go to Northumberland to find out what the situation is really like. I hope that I can be around at that time.

5.12 pm

Julia Goldsworthy (Falmouth and Camborne) (LD): I was pleased to hear that the hon. Member for Blyth Valley (Mr. Campbell) got on well with the Liberals when he was first elected to the council, but sorry to hear that relations seem to have deteriorated somewhat since then.

Listening to what the hon. Gentleman said, and what the hon. Member for Bromley and Chislehurst (Robert Neill) said, I found they seemed resistant to change.
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There is a real danger in local government that one can turn into a pointy-headed policy wonk who obsesses about finding the right structures to deliver services and interesting new ways of financing local government. It is easy to be sucked into that, but we should not be resistant to change for the sake of it. From the experiences I have had in my constituency in Cornwall, I can agree that the unitary experience has not been perfect, and it may not be right for every community, but we have tried to look at where we would like to be, and the journey we might take to get there, in order to draw down more powers and deliver more locally than the districts have done. We should have ambitions, not just simply say that the status quo is right and should not be changed at any cost.

I can think of countless examples of people coming to me who have tried to navigate their way through the local government system, which can be confusing and complicated, and the existing structures sometimes do not help. An individual came to see me because the roads had not been cleaned on Falmouth sea front. That sounds pretty straightforward. What actually happens is that Cornwall county council give a pot of money to Falmouth town council, which then subcontracts the work to Carrick district council. When we try to find out what has gone wrong, we are sent round in a circle by people saying, “It’s not really our responsibility—the pot of money has gone somewhere else.” If such inefficiencies can be tackled, change surely has to be welcomed.

Robert Neill: I thank the hon. Lady for reciprocally giving way. Do the Liberal Democrats support or oppose the unitary proposals in her neighbouring county of Devon and in, for example, Norfolk? Do they support the proposals for enhanced two-tier working, along with the pathfinder schemes that all the district councils in those authorities have presented?

Julia Goldsworthy: Unlike the Conservative party, we are not trying to impose a central party view unilaterally on our local government representatives. It is interesting to note that many councils that make unitary proposals are Conservative controlled—clearly, the issue is not settled in that party. It is a case of horses for courses. Having witnessed the unitary process close at hand, it is clear that there are problems with it, but we should not throw away opportunities.

The Liberal Democrat party has its roots in pavement politics and local government, as the hon. Member for Blyth Valley remembers. We cannot disagree with the sentiments that the Minister and the hon. Member for Bromley and Chislehurst expressed about the importance of local government, its record on delivering local services and the potential to deliver even more. However, although there may be consensus about talking the talk, perhaps we part company on walking the walk—neither the Government nor the Conservatives are yet in a position to do that. The challenge is not only to talk about but to deliver localism.

I shall focus on local councils’ exposure to the collapse of the Icelandic banks because we have not had an opportunity to debate that on the Floor of the House. We had a statement yesterday, but there has been no opportunity for discussion since the story broke some 10 days ago. It is a fundamental issue for local government
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and has a massive impact on council tax payers’ confidence in their local authorities. We know that 116 authorities—not only councils, but police, fire and transport authorities, as well as other organisations, such as hospital trusts and charities—have been affected so far. Although, on average, the exposure is less than 10 per cent. of authorities’ short-term investment, the experiences of those affected vary greatly.

Some councils have reported investments that they made a year or even longer ago. It was difficult to get out of them and they now have to deal with the problems. I have heard reports of councils that made investments as late as the end of September or the beginning of October, when, as we now know, those banks were experiencing serious troubles and were not a good investment choice.

The extent of exposure has also been different. For example, Kent is at one extreme, with an exposure of £50 million. However, some of the smaller amounts might prove more troublesome. For example, a small amount in absolute terms that is frozen or in a bank in Iceland might represent smaller district councils’ reserves.

I am slightly troubled by the noises from the Local Government Association and the Department to date. We were initially told that no councils had made reckless decisions or faced immediate short-term difficulties, but that statement was subsequently qualified, and we heard that many councils had made sound investment decisions. However, finance officers and rapid response teams are going into several authorities to assess their situation and their ability to deal with the short-term position. That suggests that matters are more serious than we were first led to believe.

Local authorities may struggle in the short-term with their ability to pay Government business rates, because maturing deposits were intended to cover those payments. There might be difficulties in balancing the agreed budget because interest receipts are a major source of revenue, especially for smaller councils, in funding services. Capital projects may have to be rescheduled and there may be a need for greater short-term borrowing, which could prove more expensive. In an extreme case, if there is no repayment for some of those affected, their reserves may be exhausted.

Given that context, it was worrying to hear a claim that nobody would be affected in the short term and that all the bills would be paid. There is potential for significant problems and I hope that the Minister can comment on that. Could he give us any indication of the kinds of councils that are alerting the Government to the shorter-term problems? Is it the smaller authorities that are struggling, or is it those across the whole gamut of authorities that have been exposed? Any detail that the Minister could provide might help us to understand the more general problems. The feedback that I have received suggests that district councils might be experiencing the most difficulties in managing the treasury services that they offer, because they do so on a much smaller scale.

Yesterday’s statement was helpful in providing more details about the Government’s programme of support. We support the action that the Government are taking. We know that officials have gone to Iceland and that there are discussions with the UK subsidiaries. There have been indications on BBC news that Ernst and
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Young has said we may know by mid-November how much of those assets could be returned. Will the Minister say how optimistic he is that all those deposits will be returned and when councils might hope to see them back in their accounts?

I also welcome the analysis of the effects of the exposure that the Department has commissioned, but will the Minister say when he expects it to be completed? From what he said earlier, it sounds as though it should be completed fairly shortly, but can we expect an oral statement, so that there is an opportunity to discuss the issue in the House?

I was going to ask whether the rapid response unit had been called out, but we now know that it has been. It is reassuring to know that there is a team of experts going out to support those councils that need support. My only question is whether they are in-house experts or whether the Department is seeking advice from external organisations. If so, could the Minister say which ones?

John Healey: The financial experts who have gone to the three councils that I have mentioned today are from other local authorities. It is entirely within the spirit of the arrangements in place for the sector to offer support within the sector wherever possible. These experts are not people from our central Department.

Julia Goldsworthy: I am grateful to the Minister for that helpful reply. Councils are concerned not only that some councils have deposited money in Icelandic banks, but that they have made loans to other councils. If those councils are affected, that might have a knock-on effect on other councils. Can the Minister therefore enlighten us on what contact there has been with those councils that are not directly exposed, but which might be indirectly exposed?

We have a five-point plan, but there are other things that the Department could be doing. I hope that the Minister will reassure us that the Department is keen to take steps to ensure that it stays on top of the situation. Concerns have been raised that responses could have been made a bit quicker. I feel that we are learning that the Government are responding to events rather than anticipating them. Part of that worry is down to the fact that there is still such a lack of clarity about what is going on. For example, we do not just need an urgent analysis of the effects of local authorities’ exposure to those banks; we need an analysis of what the causes might be.

When I raised that with the Secretary of State yesterday, I was accused of trying to play the blame game when we should be trying to resolve the issues. However, unless we know what has gone wrong, how can we prevent it from happening again? With so many councils affected, we are not talking about one council making a fundamental mistake; we could be talking about a structural problem that needs to be addressed. We need to find out what went wrong.

There also needs to be an investigation into whether the guidance was explicit enough. It seems to be widely drawn and has been interpreted in many ways. Councils have responded to the guidance in different ways, either by looking ahead to see whether the banks’ ratings would be downgraded in future or by reacting only when the ratings have already been downgraded, when it is too late.

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