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10 Mar 2009 : Column 58WH—continued
I do not know how one would set about trying to reconcile those conflicting policy effects in a local council managed by highly professional people. They may be trying to pay off borrowings, but that is not clear from the accounts. It would seem, as my hon. Friend said, that the council has borrowed heavily from the reserves for a major road improvement policy in the city. However, that has been very badly handled. Take Tile Hill library, in my constituency, for example. The pavement around it was a disgrace and the road a real hazard. The council put in a good crossing and rebuilt the library superbly under schemes that might have been around for a while, and it all looks very good. However, the pavement was not touched. What is the sense of a road-building programme that puts in place a good level crossing for elderly citizens, many of whom live in the area, and young children using the library, while leaving the pavement
untouched and very dangerous? There are potholes everywhere. I have raised that matter several times.
That point goes back to the competence of the council. I do not know whether it is in the Minister’s power to authorise an inquiry into any of those matters. I have asked for an inquiry into Coventry’s business improvement district programme. The Government launched the BID programme, of which there are many good examples, and when Labour was in power the local authority left in place a very good scheme. However, it has been so mismanaged that 250—at last count, I think—small local companies have gone to court over promises made, and contractual commitments entered into, in the five-year plan. In the end, they did not refuse to pay; they were just making the point that, especially in respect of CCTV security coverage and broadband, which we all want to promote, the big companies simply have not delivered. I am sure that the Minister will tell me that is not directly the council’s responsibility, but it cannot collect a tax, as is its duty, knowing full well that it will not be used for the purposes for which it was raised. Again, we do not know where that money has gone or what it is doing.
Does the Minister not think that there is something a bit wrong with Coventry council? I do not understand how we have reached a position in which small BID companies, which allegedly voted for the schemes—although the fact that they went ahead on the basis of such a small majority is scandalous—are close to open revolt. I am pleased to say that I have been invited to a meeting with the BID chairman and an acting chief executive to see whether we can get a rebate or, preferably, a re-ballot. Would the Minister be good enough to look into that? The re-ballot might be more difficult, but what about a rebate? Those small companies pay 1.5 per cent. on the business rate—even at this time, in the depths of a recession—for services that they are not getting. I cannot understand how the council can be in such financial schtuck, given that we have increased our contribution. Nor can I understand how it has got itself involved in the BID programme, which is nothing but a disaster. It would be good if my hon. Friend responded to both those points.
1.14 pm
The Parliamentary Under-Secretary of State for Communities and Local Government (Mr. Iain Wright): It is a pleasure to serve under your chairmanship, Mr. Amess, as I have done quite a few times now. I congratulate my hon. Friend the Member for Coventry, South (Mr. Cunningham) on securing this important debate. I greatly enjoyed his robust, focused analysis of the problem. I also enjoyed the contribution from my hon. Friend the Member for Coventry, North-West (Mr. Robinson), who repeated and extended that argument.
The Government have a very good track record of investment in local services. In our first 10 years in office, we increased total Government grant by 39 per cent. in real terms, which provided a full decade of above-inflation increases in Government grant for authorities overall. That contrasts markedly with what my hon. Friend the Member for Coventry, South said about possible proposals from a future Conservative Administration of a real-terms 1 per cent. cut in local
public services, which would have a devastating impact on the delivery of services on the ground for good, decent, hard-working citizens, such as those in my constituency and in Coventry.
This year, the settlement received by local government as a whole has been a good one. Not only have we continued to increase funding to a level that allows local authorities to deliver effective services at an affordable cost, but we announced last year the first ever three-year settlement for local government in England, precisely to give authorities the ability to plan for the longer term to ensure that they have schemes and strategies in place. That, ultimately, will result in cost savings.
As my hon. Friends know, the House approved the second year of the three-year settlement for local government on 4 February 2009. This Government have worked closely with local authorities in the context of the comprehensive spending review—I am looking at my hon. Friend the Member for Coventry, North-West, who is a distinguished former Treasury Minister—to examine all pressures on councils up to 2010-11 and how to manage them. Over the three-year settlement of the CSR period, we are providing an additional £8.9 billion to local authorities—an average 4.2 per cent. cash increase per year in funding. Again, I contrast that with the proposed 1 per cent. slash in local public services advocated by Conservative Front Benchers.
We expect those increases to be reciprocated by local authority efficiency gains, and we have made clear our intention to realise a further 3 per cent. a year through this route. Delivery of £4.9 billion net cash releasing savings by 2010-11 is key to enabling local authorities to meet those pressures. To help, the Government will provide an additional £185 million funding to support local authorities to achieve that value-for-money ambition.
Mr. Jim Cunningham: Will the local authority be allowed to keep any Gershon savings?
Mr. Wright: As part of the co-ordination package, local authorities will be allowed to reallocate net cashing savings into front-line services. There should be no impact on the delivery of services provided to the citizens of Coventry and elsewhere. I hope that that clarifies matters.
Mr. Geoffrey Robinson: It is good that the Minister can clarify that point so precisely, but why, therefore, is Coventry cutting front-line services so severely?
Mr. Wright: As a result of my hon. Friends’ excellent contributions, I shall certainly look into the matter.
The theme of my Department’s policy is to ensure that local authorities have the powers and priorities in place to respond to local needs. It is also up to them to ensure that they are accountable to the electorate. I am particularly keen to move away from time-limited funding streams for certain things. More grants should be mainstreamed, so that councils can take local circumstances into account. We have done an awful lot on that: for example, we have mainstreamed some £5.7 billion of grants over the CSR period and removed ring-fencing and other controls.
We have also delivered a reduced number of performance indicators, as promised in the local government White Paper. To be frank, we are setting local government free
to ensure that it can do what it needs to do locally to deliver first-class services to its citizens at an affordable cost. I thank my hon. Friends for holding local government to account and for challenging it as much as possible in Coventry.
We have also said that there is no excuse for excessive council tax increases. The Government have made it clear that we will not hesitate to use our capping powers to deal with excessive council tax increases in future years, and we will require authorities to re-bill if necessary.
Coventry city council received an increase of £5.376 million in its formula grant in 2008-09, a 3.8 per cent. increase on the previous year. As my hon. Friends have said, in 2009-10 it will receive an increase of £4.134 million, an increase of a further 2.84 per cent. The provisional figure for 2010-11 is an increase of £3.614 million, or 2.4 per cent. Therefore, over the three years to 2010-11, we are providing the council with an additional £13.124 million. The 3 per cent. of cashable efficiency savings that we expect local authorities to deliver in 2009-10 will make an additional contribution of up to £11 million. By comparison, the city council anticipates a £4.2 million increase in its budget requirement for 2009-10.
In the real world, it is fair to say that local authorities face some challenging pressures from declining revenue streams—for example, there is a marked reduction in planning and building control income. They also face an increase in housing benefit and social care case load and an increase in energy costs. Coventry city council is no different from other local authorities in those respects. As a result, it has identified £9.3 million of efficiency savings in its 2009-10 budget, which has resulted in the loss of 190 jobs. However, the local authority has informed my Department that some of those posts are vacant.
Every council is required to make tough decisions. Coventry, like other local authorities, has to balance staffing levels against other savings to deliver the best possible services in the current economic circumstances. I say to my hon. Friends—they may want to challenge their local authority on this matter—that the latest Local Government Association survey is very interesting, particularly on the impact of the recession. It shows that 84 per cent. of councils do not plan to cut jobs as a result of the downturn, and some 77 per cent. are actively recruiting. I am fully aligned with my hon. Friends here when I say that efficiency savings should not and do not entail service cuts. Between 2004 and 2008, councils made £3.45 billion of efficiency savings. That is the equivalent of £193 off the average band D council tax bill. Councils were free to use the savings either to cut council tax or to reinvest in local services.
Up and down the country, local authorities are innovating to save money and help us through the recession. We know that some local authorities are making considerable progress in reducing the additional pressures that they face: for example, more than 50 per cent. are making efforts to reduce petrol consumption, and more than 60 per cent. are succeeding in reducing electricity consumption, helping to save not only the planet but money for hard-working council tax payers. Compare that with the mere 16 per cent that say they expect to make service cuts. Again, I say to my hon. Friends that they should take those figures back to Coventry city council.
Mr. Robinson: If I have the figures right—I am sure that the Minister will correct me if I am wrong—84 per cent. of councils are making no cuts because of the recession and some 77 per cent. are recruiting. We will go back to the council on that. On his third point, when he again said that we could go back, what we were trying to say was that as MPs, our job is very much here. He has a whole Department and his own leadership to use in getting to the root of the problem. We will do our bit, but I hope that he does his, too.
Mr. Wright: I believe that my hon. Friend has done his bit in bringing the matter to our attention in this Chamber. He has done an excellent job in making Coventry city council’s politicians accountable for their whole strategy and their financial delivery programme. He has tried to ensure that they can make efficiency savings, while providing the best possible services for local people.
To my mind, energy costs illustrate the fact that cost pressures are not all one way. The latest Audit Commission report identifies that fuel costs dropped by almost 12 per cent. in July to October 2008, to below April 2008 levels. Since then, petrol prices have dropped even further, by almost 30 per cent. from their peak in July last year. Such price falls are already being fed into the cost of other goods and should impact on energy bills in due course. I hope that local authorities will take advantage of that.
The level of inflation expected in 2009-10 also means that the Government grant will go further than it would otherwise have done. Although I accept that there may now be additional pressures on local government as a result of rising costs and falling revenue streams—Coventry is no different from any other local authority in that respect—I have to say in the strongest possible terms that those authorities that demonstrate good leadership and financial management are finding innovative ways of dealing with such pressures.
In recent years, the city council has been fortunate in the expertise on which it has been able to call. The previous chief executive was instrumental in developing a strong local strategic partnership and agreeing a robust local area agreement. I understand that she has now moved on. I know that my hon. Friends would not want to attach any criticism to officers, who are merely carrying out the instructions of their political masters and mistresses. We need to challenge the political direction of the authority to ensure that it delivers efficiency savings—the theme of today’s debate—provides good value for money in a time of recession and maintains first-class services.
I have touched on flexibility. The watchword of Government policy is flexibilities for local authorities. I would like to see Coventry capitalise on the flexibilities that we have given councils. For example, I know that it has agreed to revisit its local enterprise growth initiative package to respond to an increasing number of small-scale redundancies with smaller employers. I was disturbed to hear what my hon. Friend the Member for Coventry, North said about the council imposing a 1.5 per cent. increase in rates while providing no services. I promise that I will take that point away and respond to my hon. Friends in due course.
I also know that council officers are working closely with the new Homes and Communities Agency to find innovative ways of maintaining regeneration, delivering
affordable housing and minimising the impact on mortgages. The council will also need to make effective use of the value for money strategic partnership that it has developed with PricewaterhouseCoopers in response to the Government’s transformation agenda. If properly managed, that should realise up to £5 million of sustainable savings per annum by 2010 without any cuts to front-line services.
My hon. Friends suggest that the city council is struggling to deliver an appropriate level of service to its citizens within the agreed budget. I agree that challenge and accountability are necessary to ensure that political priorities are considered. We in central Government have set in place sufficient financial support and flexibilities to enable Coventry city council to maintain services. The fact that other councils are doing just that is testament to what I have been saying. We will continue to support local government through these difficult times, but we look to local authorities such as Coventry to take the right political and financial decisions and to demonstrate the best possible leadership to minimise the impact on services that has been the subject of this excellent debate.
Audit Commission
1.29 pm
Mr. Ian Liddell-Grainger (Bridgwater) (Con): This is the first time that I have had the honour to serve under your chairmanship, Mr. Amess, and I am delighted to do so. The Minister is attending back-to-back debates, which is the latest sport. Perhaps we could have a whole week of debates with the Minister simply staying where he is.
Much of what the Minister said in the previous debate is pertinent to this one. However, I am grateful to be discussing the Audit Commission, and I would like to offer a brief history lesson. In 1846—the Minister may remember it well—the first sewing machine was developed in America, the Irish potato famine began and, believe it or not, official audits were introduced in English local government. We should have come a long way in the intervening 162 years, but progress does not always follow an upward path—certainly not when it comes to auditing local councils.
In 1983, the Conservative Government established the independent Audit Commission. It seemed like a good idea at the time, but unfortunately the work load has snowballed. The commission was given more councils, authorities and trusts to keep a watchful eye on, and today it is responsible for checking the books of 11,000 complex public bodies that spend £200 billion of our money, including everything from town halls to health trusts, fire authorities and the police, which is a pig of a lot of paperwork to handle in anyone’s book.
However, delightfully, the commission is not exactly overstaffed. It employs 2,500 people, which is slim government. I have no problem with that, but it works out at one harassed human being for every four public authorities. In other words, the work is a superhuman challenge. I have not come here to decry what the commission tries to do—I have absolutely no doubt that those people give it their best shot given their resources—but I am seriously worried about some of its operations.
I shall go into detail about the local authority that I have the terrible misfortune to know best: Somerset county council. We are all painfully familiar with the tales of mismanagement and greed from the world of banking and it is widely acknowledged even by senior Cabinet Ministers that light-touch regulation was a dangerous error. There are growing calls for the Financial Services Authority to be beefed up or got rid of so that we can tackle tomorrow’s Fred the Shreds. I am concerned that the bad practice that almost wrecked the reputation of British banking is now creeping into the public sector.
The Minister will be delighted that we have our own Fred the Shred in Somerset. His name is Alan Jones, the chief executive of the county council. He was taken on in 2003 for £90,000 a year, which makes MPs look cheap, and now takes home £160,000, which is more than the Prime Minister. That scale of inflation is enough to make any grown man groan. Actually, Jones the Groan is in charge of a so-called four-star authority. Listening to him, one could be mistaken for thinking that every element under the county’s control is pure heaven, but that is highly deceptive, to say the least.
The star awards are a denigrated currency. So many councils have collected them that the commission is scrapping the prizes. Like green shield stamps, the awards have become tacky and worthless. Star ratings do not even register at my favourite Somerset local, “The Dog and Duck”. People care only about the quality of service and how much it costs, not about stars. Unfortunately, the commission’s stars have also bred a greedy race for high salaries. Today, we see the ludicrous spectacle of many chief executives earning far more than the Prime Minister. That cannot be right.
The executives behave like premier league football managers, shifting from council to council on still richer packages, simply because they are on some silly star rating system. Research by the commission recently found that council chief executives’ pay has risen by more than a third in the past four years. We are envious of that. It is a shameful legacy of the commission that it has created a market for local government fat cats and bloated egos, few of whom have larger egos than Jones the Groan.
Jones the Groan had a big, expensive business idea. Like all great schemes, it was destined to be paid for by the likes of us. I was deeply suspicious from the word go and brought it to the Government’s attention. Last year, I secured a debate in the Chamber about the formation of a new joint venture company, which is now called Southwest One. A joint venture implies partnership, but that partnership is far from equal. Three public bodies, which are all meant to be answerable to the commission, are involved: Somerset county council, Taunton Deane borough council, and the Avon and Somerset police. They did a deal with IBM, a multi-billion pound company, and took over hundreds of staff, mostly in information technology. Together, they intended to trade throughout Britain as Southwest One.
Before the company even started, it was heralded as a great success story that was guaranteed to save £200 million for the hard-pressed taxpayers of Somerset. The Government will not be surprised that so far it has not saved a brass farthing. Unfortunately, IBM continues to own 75 per cent. of the company, which means that every time it provides a service to its joint venture clients, three quarters of the returns go into IBM’s pockets. IBM did not get where it is today through charity. Last year, it turned over $98 billion and made $10 billion profit.
The Somerset deal means that IBM always gets its rake-off and other partners cannot be encouraged to join. Jones the Groan and his team have not persuaded any other council to get involved. Through the commission, Devon and Cornwall looked at the arrangements. Because they did not join, Jones the Groan called them “institutional chauvinists”—it seems we do not do charm in Somerset. The initial contract was signed in September 2007 with the commission’s knowledge and amended in March last year when Avon and Somerset police joined. The contract, which runs to 3,000 pages, is still secret. I asked the commission to look at it, but that is not in its remit. Councillors are allowed to inspect the paperwork only if they sign a gagging order to prevent them from revealing anything about any aspect of the deal. That is bizarre and, I suspect, highly undemocratic. The odour of rotting fish is quite normal in county hall these days.
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