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29 Jun 2010 : Column 761
5.52 pm

John Hemming (Birmingham, Yardley) (LD): I congratulate the hon. Member for Wolverhampton South West (Paul Uppal) on his excellent maiden speech. I am pleased that other hon. Members share my concern about how easy the Labour party made it to defraud the electoral process. Obviously, people know in Birmingham how the Labour party stole 4,000 people's votes in Bordesley Green ward and that 273 votes were arrested in Aston ward.

I must explain where I come from. I was a city councillor for 18 years. I believe that local government can do a lot for the communities that it serves. Local councillors from all parties have at the heart of their objectives to serve the whole community, so it is sad that we find ourselves in this situation. Let us recognise that. Part of the situation is an international problem; part of it is an exacerbation of the international problem by the failure of the Labour party. Like Germany, we should have entered this difficult situation in surplus. Instead, we have a deficit akin to that of Greece. Labour Members fail to recognise that there was a sovereign debt crisis in April across Europe. It drove up interest rates on sovereign debt for the countries with the bigger problems-the PIIGS: Portugal, Italy, Ireland, Greece and Spain. Those countries are having to make perhaps more extreme adjustments to their public sector spending than we are.

It is not unreasonable to say that the circumstances now are different from those in, say, March, and that we have to approach things in a different way. Six billion pounds is a lot of money, but it is a relatively small proportion of the deficit of £150 billion. Cuts of 25% in real terms are a lot, but 1% is a movement in the right direction. It is not a massive shift, but it is sufficient to reduce the interest rates paid on Government debt. By doing that, we do not have to make cuts as great as the Labour party would have done had it continued with its strategy, which I believe would have been derailed in any event.

Regardless of what we would like to do, we are driven down a route of making very serious economies. I do not think that people have fully recognised that. We had a debate earlier about 1.08% cuts as opposed to 1.1%. That pales into insignificance when we consider that we have to find 25% cuts in real terms, even over five years. We also have to recognise that it takes time to reorganise things.

The Opposition spokesman complained about Birmingham not spending all the money it had. Birmingham was well aware that financial difficulties were coming down the track and that spending all the money, as the Chief Secretary to the Treasury and the Labour party did-and then told us that we had no money-was not the right strategy. It is worth keeping some few millions in the cocoa tin so that when we face the difficulties after the general election we do not end up in such a mess that we say, "All the money's gone."

Birmingham made an initial announcement of £12 million savings. It is probably more like £20 million. Those figures can be worked out quite straightforwardly. They pale into insignificance when compared with what has to be saved over five years-£250 million to £300 million. That has to be planned now.

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The hon. Member for Sheffield South East (Mr Betts) explained that we could protect adults' and children's services. I am sure he is aware that, of the budget of metropolitan authorities such as Birmingham and Sheffield, something like two thirds is spent on adults' and children's services. The schools grant goes directly to the schools. I am not sure that it will be possible to protect those services. Part of this debate has been the question, "Do we have to do this?" The answer is obviously yes. Another part of the debate is how we make cuts in an equitable manner.

Angela Smith: In Sheffield, the Lib-Dem council has followed a policy of redistributing money from deprived areas to the richer areas of the city. That pattern is now being replicated nationally. Is that fair?

John Hemming: I cannot comment on the detail of what has happened in Sheffield. I agree with the argument that deprivation has to be taken into account. There is no question about that. The idea of the pupil premium is that the money follows the individual rather than catchment areas from the national census. One of the difficulties with many of the calculations is that they have been done not on an individual basis but on a categorised basis.

The hon. Member for Sheffield South East makes a good point that if we cut the Government grant and do not look at the aggregate local government spend, that has an effect. There is an issue to be looked at there. People have asked whether we should cut 25% here, 26% there, 23% there and 27% somewhere else, or whether, given that we face such a severe problem, the same figure should be cut everywhere on a formulaic basis. I am quite tempted by the latter argument. I think that that method was used in Sweden, which faced a serious problem. It had the same sort of deficit and it went through the process of getting rid of it.

Chris Leslie: It took 10 years.

John Hemming: One has to make judgments on the time scale based on the effect within the markets. We are not talking about paying off the debt over five years. There will still be net borrowing in the fifth year.

Alison McGovern: Will the hon. Gentleman comment on how effective we will be in paying back the deficit, making these cuts in-year and cutting programmes to which commitments had already been made? Surely that is waste.

John Hemming: First, there needs to be an understanding of terms, because I heard the phrase, "paying back the deficit". However, the deficit is the forecast difference between income and expenditure in the financial year, the debt is the amount of money that the country as a whole has borrowed, and there is often a lot of confusion between the two figures. This year, if we borrow another £150 billion, that will be added to the debt, and next year, if we borrow some more, that too will be added to the debt. Although we are talking about reducing the debt during this Parliament as a proportion of gross domestic product, our financial strategy does not talk about paying back the debt in cash terms. In fact, at the end of this Parliament we will end up with a higher level
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of debt, so in comparison with Sweden we cannot pay it back. We would like to do so, but we cannot do things that quickly.

We have to make people confident that the country is solvent. The country could be liquid at this stage without any great difficulty, but we have to make people confident that it is solvent and capable of paying back the debt so that the interest is paid. We are not paying back the deficit, however. The deficit is the amount borrowed each year. [ Interruption. ] I have another four minutes and am quite happy to explain to the Labour party the basics of finance, because there is a lot of confusion about debt and deficit. "Deficit" is the amount of money borrowed each year on a net basis- [ Interruption. ] I shall get through to Opposition Members at some stage.

Alison McGovern: I really do understand the difference between debt and deficit, but will the hon. Gentleman explain how the waste of cutting programmes in-year will help to reduce the deficit?

John Hemming: That will reduce the deficit because we will spend, and therefore, have to borrow, less money this year. That is not complicated. If we spend less money, we do not have to borrow as much, because the money that we spend has to be borrowed on the gilts market. It would be nice if the reduction were done more cost-effectively at times, but £6 billion is not so great in comparison with the overall deficit. It is appalling for local authorities to pretend that they did not know that cuts were coming down the track, that the country had a major financial problem and that they had to do something. There will be difficulties, but Total Place is part of the solution rather than the problem, and there is no question but that we have to do something.

In the past I have explained how, through various regulations, the people who go round and wash people's feet are different from those who go round and cut their toenails, because they have to have different qualifications. That is not an efficient way of providing public services. If, through Total Place, the same person can go round and wash people's feet and cut their toenails, that will be more cost-effective and involve less travel time- [ Interruption. ] The hon. Member for Nottingham East (Chris Leslie) should make an intervention if he wants to speak.

Chris Leslie: Did the hon. Gentleman mention in his manifesto that he would cut so much money from his local authority area?

John Hemming: Interestingly, we did not ring-fence anything in our manifesto. We were clear that there was a severe financial problem and spending cuts would have to be found. The Labour party revealed so little in its budgets and concealed most of the figures and budget cuts, so it was difficult to put all the figures together, but Members will find that, when I explained the situation in debates during the general election, I made it clear that we faced serious problems. If the Opposition are going to have such a row about what is a minor point compared with the overall magnitude of the difficulty, I do not know what will happen over the next few years. There are some real problems to face, and we need to maintain services.

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The point that the hon. Member for Sheffield South East made about adults' and children's services was very important. In Birmingham we use the brighter futures programme, and there are ways of working more closely with the people whom we support in communities, and of working with mutual bodies to try to ensure that services are provided. There have been problems with assessment systems in the past. The simple approach of just changing the priority on assessment did not result in any savings, because off the back of that, all the assessments were changed. There are serious problems, and the Opposition should recognise that they are responsible for them. They should try to be part of the solution rather than the problem.

6.4 pm

Hazel Blears (Salford and Eccles) (Lab): I congratulate the hon. Member for Wolverhampton South West (Paul Uppal) on his maiden speech, which he delivered with grace and a sense of humour. I am delighted that he is the first Sikh Conservative Member and wish him the greatest of success. Grace and a sense of humour might well be qualities that will stand him in good stead in the coming months. I also congratulate you on taking up your position, Madam Deputy Speaker. I have no doubt that you will be a great champion of us Back Benchers.

When I came to this debate I thought, "Local government finance? It's going to be bland, techie, full of references to area-based grant, formula grant, specific grants, ratios and numbers," but I have been pleasantly surprised, because the debate has been lively and, on occasions, combative. That is quite right, because it shows how much all of us care about our local authorities and how important the services are to the people whom we represent. We must never forget that, behind all the technical jargon that we sometimes hear, we are talking about people who are struggling to bring up their children; people who are often trying to hang on to a job; people who are sometimes caring for their elderly parents, with the tremendous stress that that puts them under; and people who are looking constantly for work in this difficult economic climate.

Under this Tory-Liberal Democrat Government-I refuse to call it a coalition, because it is what it is, a Tory-Liberal Democrat Government-the prospects look extremely worrying. We have already had £6 billion of cuts, but the hon. Member for Birmingham, Yardley (John Hemming) said that that is not a great deal of money and does not know what we are all worried about. Well, I can tell him this: to my local authority it is a great deal of money. It is significant, but I have no doubt that further bad news is on its way, and that tremendous cuts will be made in the autumn. If they are signified by the same unfairness and north-south divide that we have already seen, Opposition Members will have a great deal to worry about. [ Interruption. ] I am delighted to welcome the Secretary of State, who has just taken up his seat on the Treasury Bench. I trust that he has hurried back from Bradford, and at the end of my speech I shall make a couple of remarks in which he might take a personal interest.

The Deputy Prime Minister once said that he wanted to see deep and savage cuts, and then he rowed back from that tremendously. However, he is about to have his wish fulfilled, and that is a bleak prospect. He also said:

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and, most interestingly of all, that

He is wrong on all counts. He will face not only the wrath of his enraged constituents in Sheffield, quite rightly given his decision on Sheffield Forgemasters, but the anger of families throughout the country who will feel the brunt of the cuts that are made in local government services.

The Minister for Housing, the right hon. Member for Welwyn Hatfield (Grant Shapps), who opened the debate, claimed that the Government were essentially about fairness, and we heard about them wanting to hard-wire fairness into the country's DNA. Let us straight away end that myth about fairness. Salford still has high levels of deprivation, but we are going to lose 1.1% of our budget, and Salford is of course Labour controlled. If we look at the different impact of the cuts on neighbouring Trafford, which is Tory controlled, we see just how fair those cuts are.

Compared with Trafford, Salford has double the number of people on housing benefit and council tax benefit; 3,000 more unemployed people; average earnings that are £40 a week less; and almost double the number of children in workless households. So, how is it fair for the coalition to reduce Salford's budget by 1.1% compared with a cut of just 0.6% in Trafford? How is it fair that Salford loses £3.5 million and Trafford just £1.5 million? That cannot be fair, because we in Salford have made considerable progress since 1997. We have seen a huge fall in unemployment throughout our area, but people are still looking for jobs, and we need to get them back to work. We will not do that, however, by cutting the council's funding to tackle worklessness. The working neighbourhoods fund-cut. The future jobs fund-cut. That is short-sighted and damaging and will crush the hopes of many young people in our communities.

Angela Smith: Will my right hon. Friend comment on the fact that the working neighbourhoods fund areas account for 71% of the reductions in incapacity benefit claimants since 2004?

Hazel Blears: My hon. Friend has made the extremely important point that despite what some Government Members have said, the working neighbourhoods fund is a long-term programme that is beginning to get results. We are seeing from the evaluation that it works in an intensive, neighbourhood-focused way and is getting people from some of the most difficult cases of intergenerational unemployment back into work. What do we see now? We see a Government who profess to want to reform the welfare system and get people back into work cutting the very programmes that can succeed in our communities.

Nicky Morgan (Loughborough) (Con): Perhaps I misheard, but I thought the shadow Secretary of State said earlier that if his Government had been returned, there would have been £40 billion of cuts from their side of the House. Would any of the schemes that the right hon. Lady has just mentioned have been affected, or would other schemes, on which people also rely, have been cut instead?

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Hazel Blears: We would have made cuts because of the deficit; we have been absolutely straightforward about that. However, we would not have taken an extra £40 billion out of the economy while the recovery was fragile. Wanting to get rid of the deficit totally in the space of one Parliament is reckless and damaging. We will see the effects in each of our communities in the months and years to come.

The one thing that I think we would have protected are the programmes to get people back to work. If we get people back to work, they will pay tax and national insurance and we will not pay out for them in benefits. That is basic common sense. Cutting the future jobs fund and the working neighbourhoods fund, and making sure that the young people involved face the dole, is totally the wrong approach.

We have said that there should be no return to the 1980s. I remember that, in the 1980s, two of my wards in Salford had 50% male unemployment-half the men were out of work. There was 70% youth unemployment. That sounds Dickensian now; it sounds like 100 years ago, but it was not. It was only in the 1980s, as a result of that last Tory recession. There is no way in the world that we Labour Members want to go back to those days.

In Salford, we were also eagerly awaiting a Kickstart bus service. That sounds like a small affair, but it would have linked the whole of the outer part of Salford with MediaCity and Salford Quays. There are fantastic opportunities in MediaCity for getting new jobs in the creative and digital industries. We need to have public transport, so that people in our outlying areas can take advantage of those new jobs. That bus service is now under threat as a result of the cuts. Does it not make sense to fund a bus service to enable people to access the jobs on offer, instead of asking-or even forcing-them to move home? That is simple, basic common sense, but the provision is going to be cut.

We have seen cuts of £600 million in the housing programme, £300 million of that in the market renewal pathfinder programmes: all are targeted at low-demand areas in the north of England. Again, we are seeing the Thatcherite cuts and the north-south divide, with a disproportionate effect on northern cities. We are also likely to see damaging cuts to the police services. If there are going to be 25% cuts-at the Home Office, for example-that will involve about 4,000 police community support officers. The Minister who will wind up the debate is a Greater Manchester Member of Parliament. I should like to hear from him just what effect the cuts will have on the number of PCSOs in Greater Manchester; as I am sure he will know, PCSOs are hugely valued by the community.

As the Secretary of State knows, I am always a constructive politician. I should like to say a word or two about the Total Place programme, which I set up when I was Secretary of State. It is not simply about squeezing out efficiencies-yes, it is about bringing back-office services together, having call centres, not having 10 personnel departments and not duplicating all our services, but it is also about much more than that. It is about integrating services, redesigning the whole way in which public services work, bringing together the budgets of policing, health, education, regeneration and economic development and saying to a local area, "That's your total budget. What are your priorities? What do you want to get out of that investment?" The local area then has the freedom to decide.

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