Local Government Spending (Lancashire) (Hansard, 8 March 1996)

§ Mr. Peter L. Pike (Burnley)
I am glad to have the opportunity to debate local government spending in Lancashire, and especially the lack of Government support. I am grateful for this chance to discuss the matter, especially after the Minister's answer to me on 27 February when, at the end, he said: If Labour councillors cannot manage, perhaps they should resign."—[Official Report, 27 February 1996; Vol. 272, c. 707.] It is not the Labour councillors in Lancashire who should resign, but him and the Government. They should give the people the opportunity to elect a new Government—and the quicker the better.
When the Tory party was elected to office in 1979, it had said during the election campaign that it wanted to free town halls. Ever since they took office in 1979, the Government have shackled local government by their legislation, and even more by the financial restraints that they have imposed. I refer particularly to Lancashire and its funding, but what I shall say applies to almost every council in the country.
Before I came to the House, I was a member of Burnley borough council, first as chairman of finance and then as leader of the council. I used to think that the position could not get worse, yet, year after year, it gets worse. The best example of saying one thing when not in office and doing another when in office is what the Tory party has done to local government.
Although today I shall concentrate on revenue spending, similar arguments apply to capital spending. The local education authority has no capital available to build or repair schools. Councils do not have the money to build urgently needed housing to rent or to improve housing stock. We are seeing housing standards decline. What a dismal, appalling record of 17 years in office.
According to the Association of County Councils, in Lancashire the band D council tax—I will use band D as an example—in 1996–97 will increase from £528.35 to £557.49, an increase of 5.5 per cent. Yet at the same time, the council has had to cut the services it provides because of the Government's appalling national underfunding of local government. I argue that, in total, they underfunded local government by about £3.66 billion in 1996–97. If we examine that figure, we see that it is even below the current spending level. That is appalling.
For continuation of service at the present level, allowing for inflation and so on, Lancashire county council would have to spend £978.1 million. The standard spending assessment—the figure that the Government say the council should need to spend—is £889.5 million. The capping limit—the limit up to which it is allowed to spend—is £934.6 million. The difference between the continuation of service estimate and the capping limit imposed by the Government is £43.5 million.
Lancashire county council has no intention of breaking the law, so it has been forced to reduce its expenditure budget by that figure. It has done so by several means. It has reduced the services committee estimates by about 626 £18.5 million. Library hours have been cut. It fought hard not to close any library, because it felt that that would be an appalling thing to do. Cuts have been made in museums and the arts, and some £6 million has been cut from social services, which are absolutely crucial. We have had to cut £9 million from our budget for repair and maintenance of roads and road building in the year ahead.
In order not to have to impose further cuts, the council has used balances and reserves and sold some assets. That has brought in £16 million. That sort of thing can only be done once. The council cannot keep selling assets. Once it has sold them, it does not have them to sell. What will it do in future years? If it has no balances left, it cannot use them again.
In the Budget this year, the Government announced that priority was to be given to schools. They said that it had been a tight expenditure round. I would have said that it was not just a tight, but an appalling, expenditure round.
Lancashire has given the £26 million provided for its schools to the delegated schools budget, and the primary and secondary schools' budgets have been increased by 5.1 per cent. So Lancashire has again conformed with the Government's view, but if it gives that money in the way that the Government wish, it has to make bigger cuts in other areas. That means that, within education, leaving aside the schools budget, items such as discretionary grants, youth services and so on have had to bear an even greater burden of cuts than would otherwise have been the case.
I have received today, purely by chance, a letter from Lancashire county council in response to a complaint from a Mrs. Gregory, who is one of my constituents. She is not the only person who has raised this issue. She is connected with the running of the girl guides and brownies in her part of Burnley. They now have to pay for the use of premises, because the county council can no longer provide funding. In this day and age, it is totally unacceptable if we have to make cuts that affect our young people in that way.
The district auditor said: the level of balances is as low as is prudently acceptable in Lancashire. The estimated balance of the county fund at 1 April 1996 will be £14.2 million, falling to £8.5 million at the end of the current financial year on 31 March 1997, which is less than 1 per cent. of 1996–97 net expenditure. The district auditor believes that that is the prudent minimum that the county needs to keep in its reserves and balances.
In a report to Parliament on 30 November 1995, Lancashire education authority was shown to spend 1.5 per cent. on administration, which is well above the average in efficiency and, again, shows how well the county council is run. Lancashire continues to have the support of the district auditor. In his latest management letter, published recently, he said: Prudence and accountability have been features of the financial arrangements in the County Council for many years. This tradition of excellence continues despite the challenges of the present financial constraints. He also said: We remain content that the overall management arrangements of the Lancashire County Council are sound and that a healthy culture exists within the County Council for the achievement of economy, efficiency and effectiveness in service delivery. 627 We also note that, in 1995–96, central administration in Lancashire is 1.87 per cent. of the potential schools budget, against an average for county councils as a whole of 2.09 per cent. and an average of 2.22 per cent. in all local education authorities. Again, that shows that Lancashire county council is not top heavy in administration, but keen to provide the services to the people of the county that are so essential—services that it was elected to provide.
With spending at 5.1 per cent. above standard spending assessment, Lancashire has one of the highest spends above SSA of all the shire counties. That largely results from the inadequacies of the SSA system, and the Government need to deal with it. It also results from the high needs of the county. I stress to the Minister that he must consider county councils that have particular needs. In Lancashire, our needs are due to deprivation, poverty, low wages. unemployment, and, in many parts of the county, the industrial heritage that has left us with dereliction that must be cleared as we go forward to the 21st century.
The area cost adjustment overstates the cost differential between the south-east and the rest of the country. By rectifying that discrepancy, the county council would, in our view, gain about £9 million in standard spending assessment. I am sure that the Minister will say that the Government are reviewing that. I know that it is being reviewed, but we had the problem in 1995, and we will have it in 1996–97. He knows that, whatever the review yields—he does not know what the outcome will be, any more than I do—and even if it is favourable in the way that I would wish, it will not solve this year's problems, nor those of the new financial year. which starts in a few weeks.
I shall give one example of what the area cost adjustments will mean for education. Schools in Essex have been provided with an SSA of £2,055 per primary school pupil and £2,791 per secondary school pupil. The comparative figures for Lancashire are £1.964 and £2,615 respectively. If one multiplies the number of children involved, one can see the vast difference in millions of pounds that it makes for Lancashire county council. We accept that some adjustment may need to be made for the London area, but we believe that the present adjustment is too high and needs to be reviewed—Lancashire should get more money as a result.
The Government's assumption that authorities generate interest payment receipts in relation to their size is flawed. Consequently, the Government over-estimate Lancashire's ability to generate revenue receipts by approximately £4 million, resulting in a reduction in the standard spending assessment.
Lancashire has an acute need for more money. It believes in the provision of services. I am sure that the Minister will recognise that, for county councils, the most expensive services to provide are education and social services. That would be so whichever party was in office. I know that, before he was elected to the House, the Minister—like me—had experience in local government, which is extremely useful for any politician.
Education and social services are expensive because they are both labour-intensive and crucial. Social services deal with people in need, whether they be elderly or disabled, and education services cater for young children whose start in life is the biggest investment we can make in the nation's most important asset for the future.
628 Lancashire needs more money from the Government, and we need it now. We need a fairer settlement, and a Government who believe in local government. There needs to be an end to capping. I have always accepted, and have said many times, that the Government, of whichever party, have the right to determine in Parliament what resources they will make available to local government. People may argue that the funds made available are insufficient, but I accept that, at the end of the day, the Government have the final say.
In my view, the Tories have failed local government and Lancashire. More than anything, we need a Labour Government as soon as possible, because the Tories cannot respond positively and make more funds available.

§ The Parliamentary Under-Secretary of State for the Environment (Sir Paul Beresford)
I am grateful to the hon. Member for Burnley (Mr. Pike) for giving me the opportunity to discuss Lancashire's needs as he sees them. It is interesting that his attitude represents the cobwebs of old Labour being drawn back over the new Labour breath of fresh air. His is the classic old labour approach—judging quality by the amount of other people's money being spent.
In a way, I am sorry for the hon. Gentleman's constituency. As I said in answer to his parliamentary question of about 10 days ago, to which he referred, the difficulty is that his constituents have a Labour county council; the hon. Gentleman's other difficulty is that the district county council—Burnley—is also run by Labour. The only thing that is saving many of the people in the area, perhaps through capping alone, is that they have a Conservative Government.
The Government have pushed councils such as Lancashire into recognising value for money, although the councils have been pulled down this road kicking and screaming. Compulsory competitive tendering was anathema to them, but it ensures better services and better value for money. The Audit Commission was introduced by the Government to improve value for money and standards. Those concepts were resisted, but are now slowly being taken on board, by so-called new Labour.
In terms of our general funding for 1996–97, Lancashire compares favourably with the other shire counties. On a comparative basis, Lancashire's standard spending assessment has increased by 3.1 per cent.
Many local authorities draw up a wish list, and we heard a bit of that today. Authorities add new demands, but someone ends up having to pay, be it the general taxpayer or the local council tax payer. Someone has to put up the money to fund the demands if they are accepted. The Government have sought to put an end to that approach once and for all.
We must recognise the importance to the economy of the way in which local authorities spend their finances. Approximately 25 per cent. of Government expenditure is local government expenditure. It is just as important for local government to squeeze effectiveness out of every drop of other people's money spent as it is for central Government. Local authorities must consider that point and take account of it.
They must realise that they can squeeze full value out of every pound they spend; they must be more effective, and they must provide better services. It is an old, but 629 true, local government motto that the authorities exist to provide more and better services for less cost. That can be done—I know that it can be done, and so does the hon. Gentleman: it is a case of "More, better, for less". But that attitude is not being shown by the hon. Gentleman's local council of Burnley.
I understand that Burnley borough council is getting a reputation for being top heavy. I was given the example of an anti-poverty officer who earns £30,000 a year, which is a burden on the poorer people of the area. An equal opportunities officer was appointed; the post turned into a department with its own sub-committee. As a result, the band D tax level has risen from £87.13 three years ago to £143.99 now—an increase of 65 per cent. in three years. That is inefficient.
Other forms of inefficiency have been shown to me. I understand that Lancashire county council is on course to underspend by £3 million on home helps and related services. It has been calculated that the county's residential and non-residential care service—because it is in-house—costs £15 million a year more than if it was in the private sector.
Every district auditor's management letter is a curate's egg. We have heard about the good parts from the hon. Gentleman, but the district auditor has also reported that sickness among employees is costing the council £12 million a year. That matter should be looked into and sorted out.
The county council has formed an anti-poverty unit as part of its welfare rights committee. It has a starting budget of £100,000 a year, which would pay for 16,000 more home help hours. But the unit is nothing more than a talking shop.

§ Mr. Pike
Does not the Minister understand that Lancashire county council pays so much attention to poverty because such a high percentage of our people work in Burnley and Lancashire for less than £80 a week? That is a poverty wage; it is appallingly low pay; it is scandalous slave labour.

§ Sir Paul Beresford
I do not know whether the hon. Gentleman is right with his figures, but it ill behoves local authorities to load people with extra taxes when they could do more, better, for less. It would be better to look into ways of providing better services for less cost.
The hon. Gentleman highlighted particular issues; each local authority has its own problems. He and I know that, because we have both been keen members of local authorities. It is possible to do something about providing individual services in a better way, but it is not right for the hon. Gentleman or me to participate in individual discussions about them.
Burnley ranks 33rd out of 274 shires in terms of SSA distribution. Lancashire is right at the top: it ranks fifth out of 35. Its SSA went up by 3.1 per cent. this year, and its SSA per head went up by 2.8 per cent. this year. 630 Its education SSA went up by 5.1 per cent. this year. If other local authorities can manage, Lancashire can and should. If the controlling Labour party in Lancashire cannot deal with the issues, it should resign and let someone else take over.
Every year, we have to set the demands of local authorities in the context of what the country can afford. Local government spending accounts for a quarter of all public spending, and no Government, of whatever political complexion, can afford to ignore it. Public spending decisions are made in the context of the financial strategy to promote sustained economic development and to ensure higher living standards overall. The best way to protect local government services is to ensure that the national economy is strong, and inflation is under control.
To this end, we must continue to seek better use of existing public spending and keep control of public wage bills, and both local government and central Government have an essential role to play in that. There is no doubt that there is still scope for increased efficiency in Lancashire. It can be done by efficiency, yet the hon. Gentleman referred to cuts. If a successful private business—the people who pay the council tax—can do it, it behoves the public authorities to do it as well.
We have ensured that local authorities have an opportunity to move within their budgets—they have been given the greatest of opportunity to move, except for one or two ring-fenced areas. The SSA is only a sign of what the Government feel is a means of breaking up the total expenditure available for local government as a whole. Within that, every local authority has the opportunity to move, to flex, to use different ways of approaching problems and to use private sector methods—including the private finance initiative, compulsory competitive tendering and other methods—to produce more and better services for less. Local authorities must be answerable to their electorates in the way in which they exercise their responsibilities.
It seems to me that Lancashire county council needs an education. Its budget for 1996–97 has been set at £935 million, an increase of 3.2 per cent. above the level of inflation. It is one of the highest spenders in the country, with a budget that is more than 5 per cent. above its SSA. Its council tax is £557 for a band D property, the second highest figure for a county council. Last year, the council reported that it would have to draw heavily on reserves to maintain services, and now it expects to add £7 million to its reserves during 1995–96. Despite that, the authority plans to increase its spending in 1996–97 by 4.2 per cent.
There is no doubt that this county could do better with its money. It is loading costs on its local community, and it is crying out for more central Government funding. To repeat what I said in answer to questions last week, the Labour councillors who are in control of the county are obviously not in control; they should stand down and let the Conservative councillors take over.