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John Austin: The hon. Gentleman referred to the Mayor of London. Is he aware that the Mayor has placed the biggest financial increase in fares on the poorest people in London? Does the hon. Gentleman recognise that Bromley, the council for the area that he
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represents, was the one that took the Greater London Council to court over the "Fares Fair" campaign to challenge the idea of a fair fare policy for London?

Robert Neill: I well remember what Bromley did. It was absolutely right to do so, and I make no apology for that because that previous regime did not have a proper approach to fares- [ Interruption. ] The hon. Gentleman is showing us his freedom pass, and we have made it abundantly clear that that will continue to be protected. It is funded by Conservative-controlled London councils, I might add, so I will not take any lectures from anyone in the party whose previous Minister with responsibility for local government complained that local authorities were not charging enough and were not charging up to the maximum potential. I do not think that the hon. Gentleman is on very safe ground to make any more interventions of that kind, if I might respectfully say so.

David Taylor: Will the hon. Gentleman give way?

Robert Neill: I will give way to the hon. Gentleman, who has been trying to get in for some time.

David Taylor: The hon. Gentleman is being most generous. He is pinning an awful lot on the band D council tax level, but that is not a good measure of the impact of council tax in the UK. In my constituency of North-West Leicestershire 75 per cent. of properties are below band D, whereas 60 per cent. of the properties in Bromley, which he partly represents, are band D or above. That must alter the argument that he is making.

On inflation, council tax may have doubled since 1997, but it increased at a greater annual rate in the period when the Conservatives were in government before 1997.

Robert Neill: At least the hon. Gentleman makes a considered intervention, unlike some others, and I have a great deal of respect for his knowledge of local government, but I must beg to differ with him. First, the band D measure is universally accepted as the intellectually and academically approved average. One only has to look at the work of Tony Travers, the well-known independent commentator, who has said that on a number of occasions. Secondly, the use of the band follows common sense, as the other bands are set as percentages in relation to band D, so band D gives the average. It is well established by all respectable public bodies-apart from those who may want to make a point of their own-that that is the best means of comparing like with like. I am sorry to have to disagree with the hon. Gentleman, but I am afraid that he is wrong on this one.

Mr. Andrew Pelling (Croydon, Central) (Ind): Will the hon. Gentleman give way?

Robert Neill: I shall make a little more progress, if I may, but I shall give way to the hon. Gentleman in a moment.

We have seen the burden that has been placed on the council tax payer. We have seen a transfer of burdens to council tax payers within local authorities, but we have
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also seen a shift of regulatory burdens and costs on to local authorities. The doctrine of the "unfully funded obligation" is the reality, if not the wording, of Government policy. Many local authorities will have experienced that in relation to concessionary fares, for example, for which the burden was not picked up in full. Free swimming is another example: superficially attractive on the surface but, on further examination, not fully funded.

The problem is particularly evident in this year's local government funding settlement, which refers specifically to the availability of free personal care for adults. Free personal care is another concept worthy of debate, but the funding figures are as follows. The estimation is that it will cost £670 million in a full year: £420 million is covered by the area base grant, as set out in the funding settlement, which assumes that the remaining £250 million will be found from local government efficiencies.

What it does not say, however, is that the Government have already increased to 4 per cent. the target for the efficiencies required of local authorities. The Local Government Association has pointed that out to Ministers, so I hope that the Minister responding to the debate will say clearly whether that £250 million is part of the 4 per cent. in efficiency savings being demanded. If it is in addition to those savings, how is that to be achieved?

The document before us is silent on that. If the £250 million is in addition to the 4 per cent. savings, how do the Government reconcile that with their policy on new burdens, which suggests that there should be funding for those new burdens? We need absolute clarity on that. Despite requests since the LGA issued its statement, that clarity has not yet been received.

So, we have seen transfers of burdens across a raft of areas, but that is not the end of the problem with the settlement. I referred half in jest to the nature of the document, and the complication of it. I am glad to say that it is generally accepted that the one person in the country who understands it is in the Chamber, but he is in the Box and cannot talk to us about it. However, it really is that complex and difficult to follow and that creates the real difficulty that there is a growing lack of trust in the local government world and among ordinary residents about the reliability of the criteria on which distribution takes place. One has only to look at some of the figures in the document for individual authorities to see differences that on the face of it are not readily recognisable, or attributable to an evidence base.

Mark Hunter (Cheadle) (LD): Will the hon. Gentleman give way on that point?

Robert Neill: I will give way on that point.

Mark Hunter: I am grateful to the hon. Gentleman, who has been very generous with his time.

The hon. Gentleman is talking about trust in the Government's figures. Does he agree that part of the problem is that the Government are not delivering to local authorities what their own funding formula indicates that they should? He is quite right to say that anger is building up around the country, and a large part of that is because authorities such as my own in Stockport are being consistently short changed, and are consistently not receiving what the Government's own formula says that they are entitled to. Is it any wonder that there is a complete lack of confidence in the system?

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Robert Neill: The hon. Gentleman makes an entirely fair point. I have only to look at the circumstances of my outer-London borough, which has many pockets of deprivation but is on the floor again for the seventh or eighth year running. When we see that fully two thirds of all London boroughs-of any kind-have ended up on the floor, we wonder about the reliability of the calculations that gave rise to that situation.

Although the floor system worked in the past, it has stretched many local authorities to such an extent that the gearing, particularly in shire districts, places very high burdens on them. The floor for a shire district is set at 0.5 per cent. Such districts are far more dependent than most local authorities on investment income, which has now fallen to about 0.5 per cent. so as their floor funding is limited to the same figure, the gearing effect means that their council tax rise is much more significant than in any other part of the country. Shire areas are significantly disadvantaged by the operation of the formula system.

Julia Goldsworthy: The hon. Gentleman has been talking about floors and ceilings. He will be aware that many councils near the ceiling are a long way from their targets and are already experiencing massive pressures on the provision of services. Does he have proposals to get rid of floors and ceilings, or to replace them with something entirely different? Some information would be helpful.

Robert Neill: Actually we do. I shall come to our proposals if the hon. Lady will bear with me. I was about to turn to missed opportunities and the things that a sensible settlement could and should be doing to deal with those issues.

Having set out the inadequacies of the system and put them in a broader context, I want to make a final point before I move to the next stage of the argument-what should be in the settlement but is not. The problem is that there are deficiencies not only in the settlement but in the methodology for formula distribution, as has been mentioned. The inadequacy of the population data-a point raised frequently by Members on both sides of the House-has perverse impacts, but the system is also wrapped up in the policy of micro-management and bureaucratic control that has become characteristic of the Government. All recent attempts to suggest otherwise are belied by the facts.

Table 2, attached to the settlement document, sets out no fewer than 39 separate ring-fenced grants. The number of national indicator sets in the comprehensive area assessment regime was originally badged up as a mere 196, but the Government were forced to accept that when the sets are split-which they are obliged to do-between heads and blocks, the number is about 290. Is there any serious attempt to deal with that? No, sadly there is not.

I hoped that the settlement would take a leaf from the good work of the Local Government Association-an all-party body. Its document, "Delivering more for less", demonstrates practical and worked-through means of saving £4.5 billion. Efficiencies could be achieved without damaging front-line activity, and the document sets out specific examples. It goes further. The LGA has come up with 13 local authorities that are prepared to act as pilots. Do I see recognition of that in the Government's settlement? No. Do I see any movement to reflect the
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fact that, for example, in Leicestershire and Leicester, in a Total Place arrangement involving the city and the county-exactly the collaborative model that should be encouraged-more than 3,000 performance data sets, reports or evaluations have to be processed? Is there any reflection of the fact that the average number of documents that has to be passed through by most local area agreements runs into thousands?

Mr. James Plaskitt (Warwick and Leamington) (Lab): The hon. Gentleman talks about efficiencies without damage to front-line services. May I refer him to Conservative-controlled Warwickshire county council, which is currently advocating the closure of seven fire stations and the sacking of 100 firefighters? Does he see that as an example of Conservative efficiency without damaging front-line services?

Robert Neill: Warwickshire county council is consulting on those measures as options following the serving of an improvement notice from the Government. I am sure that the hon. Gentleman does not mean that it is impossible ever to find efficiency savings. If he believed that, he could not support his Government's document, "Smarter Government", which was published only a few days ago. The test is always to try to find sensible efficiency savings, and I point out to him that the Government have a very good example in front of them. The National Audit Office-generally recognised as an independent and reliable body-cited £2 billion in 2006 prices as the cost of administering the inspection and control regime imposed by central Government. PricewaterhouseCoopers, which is a little more conservative, put the upward reporting costs for councils-not even the administration of the regime, just upward reporting-at £1.8 million per authority. That is precisely one of the things that can and should be stripped out. Not only is it a waste of money, but it also skews the behaviour of local authorities, as we have all seen. They are sometimes almost forced to play tick the box to meet the formula requirements, reporting upwards to the Government rather than downwards to their electors, who ought to be driving priorities.

Mr. Geoffrey Cox (Torridge and West Devon) (Con): Does my hon. Friend agree that not only is the reporting burden immense and over-cumbersome, but so too is the inspection regime? I am informed that Devonshire county council has to devote almost permanent employee time solely to the inspection regime under which it labours.

Robert Neill: My hon. and learned Friend is absolutely right. I saw that system in its early days when I was still in local government. I still talk to colleagues in local government. Inspection has become an industry in itself, and the complexity of the regime and the burden it imposes, in terms of direct costs, officer time and the shifting of priorities, is wholly disproportionate to the level of risk involved. It breaches the fundamental rule that any inspection regime should be simple, sensible and rational.

There is nothing in the settlement to deal with issues that could sensibly have been dealt with, which is a major disappointment. The Government seek to get around things by quoting figures, but as I demonstrated, the impact of their figures is not borne out or supported by experience on the ground.

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John Howell (Henley) (Con): Before my hon. Friend moves away from the "more for less" report, does he agree that one of the great difficulties faced at present by upper-tier authorities in particular is that they have already calculated how they can make efficiency savings and have made the hard decisions, so the imposition of further efficiency savings-for example, for social care costs-are a particularly unwelcome burden because they come out of cycle?

Robert Neill: My hon. Friend is completely right. That is why it is a serious dereliction on the part of the Government not to have given the explanations that the LGA has been asking for. Given that the announcement came out on 26 November, it would not have been too difficult to produce the figures. Not to do so is a serious breach of the Government's own rule on new burdens and I fear that it indicates where their heart lies-to shift the burden on to local authorities for the sake of convenience.

I shall now consider what could and should be done in the local settlement. We are all agreed about one thing-that the three-year settlement regime is sensible and one that we hope continues for the future-but it is the only thing the Government got right. The rest does not stack up.

Lack of clarity undermines the credibility of the document. It does not deal with proper reform of the local government system, which is what is actually needed. Proper reform should take a number of steps. The first, most important step that the Government should take at a time when the country is in recession is to assist council tax payers-the hard-pressed families who are already suffering. A sensible local government settlement would have put in place mechanisms to support local authorities in freezing council tax, so that council tax payers did not suffer the burden that they are suffering as the country comes out of recession. The Government are not doing that. Another one, I hope, will be in a position before long to do so.

Secondly, longer-term reform of the methodology is necessary. In this day and age, it is quite inexcusable to use population data that are so out of date, and there should be a swift move to the use of updated data. Several local authorities have made a compelling case for having been significantly disadvantaged by the situation.

Thirdly, it is necessary to bring back a measure of independence to the evidence base for the distribution criteria, and that is why my party has always proposed an independent body. I hope that others will support us. We suggested the Audit Commission, but the body could be the National Audit Office. In any case, the body should be independent and tasked with evaluating on an evidential basis- [ Interruption. ] The Secretary of State laughs, but it works perfectly well in Australia. It seems to work very effectively. [ Interruption. ] I shall come back to him and his quangos in a moment if he wants to go down that route. That system works in Australia, and it provides an evidence base. The body would be tasked with reporting to Parliament, so that this House could properly debate the distribution criteria. There would be a debate about the criteria, and it would be separate from the political decision that Ministers make about the size of the pot that will be distributed. That long-term institutional change would, if properly dealt with, restore some credibility to an unbalanced system.

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I have referred to Australia being able to perform that task and this Government not being able to. I should have made the point that the council tax freeze is perfectly practical and deliverable, because it happens in Scotland. If it is good enough for Scotland, it should be good enough for England; if it is deliverable in Scotland, it should be deliverable in England. What is lacking is not the methodology, but simply the political will to do that.

There should also be significant long-term reform to encourage local authorities to grow their tax base, because that has been completely lacking. That is why the Opposition have proposed that local authorities be able to keep the proceeds of growth by keeping the council tax that new development in their area generates. It is why we have proposed that they also be able to keep the growth in national non-domestic rates-business rates-that is generated by new commercial development. That would give them a stake once more in growing their tax base. Not only have the Government failed to take up any of those ideas, they strangled at birth the local authority business growth incentives-LABGI-scheme, which although small was at least a step in the right direction. They killed off any attempt to provide an incentive. In fact, the real argument, as all the evidence makes out, is that we should go much further and allow local authorities to keep all proceeds.

The Government have failed to give local authorities the freedom to raise funding by going to the market for, for example, bond finance. The Government have failed to give them the opportunity to set their own targets, and instead imposed them from above.

Ms Karen Buck (Regent's Park and Kensington, North) (Lab): Does the hon. Gentleman accept that broadening the revenue base has several risks? My local authority, Westminster, has been heavily dependent on parking income; indeed, it has the largest parking income of any authority in the country. As soon as difficulties hit the authority and parking income started to fall, we found a £20 million hole, and that has led to a large number of redundancies and cuts in services. Does he understand that such reliance on other sources of money is fraught with risk?

Robert Neill: I am sorry, but I do not think that the hon. Lady understands the concept, because broadening the base by enabling local authorities to retain the additional national business rate would spread the risk, rather than increase their reliance on it. If we were to broaden the tax base, we would be less dependent on any individual income stream. That is the reverse of her proposition.

Mrs. Joan Humble (Blackpool, North and Fleetwood) (Lab): The hon. Gentleman started to talk about allowing local authorities to borrow. Does he agree with the prudential borrowing rules that the Government introduced? They enabled local authorities to purchase capital assets from which they are receiving income streams through rent and other uses.

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