Once again, I am very pleased to follow an interesting, passionate and well-informed speech from my right hon. Friend the Member for Wentworth and Dearne (John Healey). I can add little to the case he made for his amendments, so, given the time constraints, I shall focus on new clause 6, which stands in my name and that of other right hon. and hon. Friends.
We make no apologies for returning to the issue of need and the different levels of need within local authorities —the elephant in the room that the Government want to ignore. This issue has been raised time and again in our debates on the Bill by hon. Friends, many of whom represent some of the most deprived communities in this country and have seen at first hand the impact of the Government’s policies on those communities.
Why are the Government so wilfully blind to the effects of their policies? They have already hit local authorities with cuts that are larger than those inflicted on any Government Department, and we have heard from Opposition Members about the real and serious impact the cuts are having on front-line services—the cuts in school food provision, increases in home care charges, library closures in the poorest communities. However, none of this has any influence on Ministers, so out of touch are they with most people’s lives, and it now appears that they are going to make things worse.
First, they entrench unfairness in the system by basing it on the current local government finance settlement, so the inequalities and unfairness of the current scheme will form the basis of the settlement for years to come. We have heard many times during our debates on this Bill about cities that are losing spending power: Manchester is losing spending power of £186 per person, Birmingham £155 and Nottingham £147. Those are the cities that the Government think will drive the economic recovery; there is no linked-up policy here. Wokingham, of course, gains, however. Basingstoke and Deane gains £6.30 per person. East Dorset gains £3 per person.
According to the Government’s statement of intent—it is one of many, so I am unsure how much weight we can place on any of their statements of intent—each authority will keep 50% of its business rates and the Government will provide a revenue support grant to make up the difference between the local share of business rates at the outset of the scheme and the spending controls for local government. However, they will, it seems, have top-sliced that for the new homes bonus first, which already benefits most those authorities with a high tax base, and it appears that many other grants will also be included, as listed in the statement of intent.
We already know how the grant system has been used to penalise the poorest authorities with communities that are most in need, and there has been a significant
reduction in resource equalisation. Under this scheme, the gap between richer and poorer authorities will widen. First, as the Yorkshire and Humberside councils have said,
“a baseline may not reflect the actual levels of funding councils need to deliver services from April 2013.”
They were right about that. Secondly, as we have discussed during the passage of this Bill, some authorities will find it easier to grow their business rates than others. It has been estimated that even if the top-ups and tariffs increased in line with the retail prices index, the gap between the richest and the poorest authorities, and between the north and the south, will widen. Cash growth in the City of London could be 139% over four years and the figure for Westminster could be 90%, whereas the estimate for Liverpool and Knowsley is 21.9% and that for South Tyneside is 22.7%.
When we add into that this Government’s abject failure to take into account the differing tax bases of local authorities, the situation becomes even worse. That failure means that local authorities do not start on the level playing field that the Deputy Prime Minister kept telling us about—although he was the man who said he was not going to raise tuition fees, so I am not sure that anyone takes much notice of him. In the long term, fortunate local councils might reduce or even get rid of council tax, whereas others whose tax base is low and where it is harder to attract investment will be unable to do so. When we also take into account the amount that some councils will lose through changes in council tax benefit, it is clear that they could be heading for the perfect storm.