The Chamberlain News

Lords Rooker and Whitby clash over ‘unfair’ local government spending settlement

Members of the House of Lords have been advised to read a “master class” account of the ‘unfairness’ of local government funding by Chris Game in Chamberlain News. Lavish praise for the article came from Lord Rooker. But the former Birmingham Labour MP was challenged in a rare intervention by Lord Whitby, the former Tory city council leader, writes Paul Dale.

The Government has designed an unfair and confusing system “that is meant to confuse” to allocate funding to councils, Lord Rooker told peers in a debate on the 2015-16 local government finance settlement.

He highlighted a Chamberlain News article by Chris Game from the Institute of Local Government Studies at the University of Birmingham which criticised the Government’s use of the concept ‘spending power’ which was designed to disguise huge cuts in grant.

Lord Rooker said: “As Dr Game points out, grant funding and spending power are not the same. Revenue spending includes council tax receipts, certain grants, and NHS social care funds. That gives a fuller picture. But income from fees, charges and investments is not included in spending power.

“So in this confusing system—which is designed to confuse—total government funding to local authorities is really down 13.7 per cent. Furthermore, if council tax income is excluded from spending power, since it is a different kind of income from government grant, the reduction is not 1.8 per cent but 3.7 per cent.

“Then if we remove the NHS portion of the £3.5 billion better care fund, and include in spending power only the £2 billion for social care by local government, the reduction becomes 8.8 per cent — nearly five times the figure that Ministers have used. Chris Game has done anybody who reads that piece a great service.”

Lord Rooker described Birmingham’s financial settlement as unfair. The Labour controlled council says it has to find at least £72 million in savings next year to cope with cuts in Government grant.

He added: “The cut in spending power for Birmingham is six per cent – very close to the government maximum of 6.4 per cent. If one checks all the London boroughs, the metropolitan districts and the all-purpose authorities, the only ones with a cut of six per cent or more are Hackney, Knowsley and Birmingham.

“Yet the recent Kerslake report, which I very much support, and am pleased to see is being implemented quickly, pointed out that Birmingham has: “more poor children than anywhere else in England.

“In terms of multiple deprivation it is the 13th on the list. Things are so bad that the Government have had to send in both a social services commissioner and an education commissioner. It appears that Ministers, on a whim, can choose to define spending power to mean what they say it is, or is not, as in Alice in Wonderland. This is not sensible. It is misleading and unfair to Birmingham.”

Lord Whitby, Conservative leader of Birmingham city council in a coalition with the Liberal Democrats from 2004 to 2012, claimed the Government was decentralising power and budgets to local councils “in an unprecedented manner” and this was especially true in Birmingham.

He said: “Sadly, our cities have underperformed the economic performances of most of our major European cities. It is imperative that we recognise that.

“I believe that the coalition Government are rectifying this dilemma and meeting the challenge. As a former city leader of the largest local authority in the United Kingdom I welcome the debate on the local government finance settlement, the implications of devolved power and the ramifications of direct funding to our cities.

“The coalition Government have listened and delegated, in an unprecedented manner, power, decision-making and direct funding—especially to Birmingham —in addition to the financial settlement. While the settlement reduces Birmingham’s revenue spending power by six per cent, the revenue spending power per household in Birmingham is still £2,461 per dwelling—considerably larger than almost all local authorities. Its gross expenditure is still in the region of £3.2 billion.

“The Government has devolved power and funding in a sophisticated and imaginative manner. Birmingham Council and the city are benefiting from a range of new freedoms and funds being made available.

“During the period of my administration, we grew tourism from £29 million to £34 million, generating formidable wealth for local industry and small businesses.

“We left a city that was proud, pointing outward, attracting Chinese investment, and building a whole range of entities that allowed us to be quoted, by the Mercer survey, as one of the only English cities in the top 100 in the world for quality of life.

“It was local government doing what it should do—making its city globally relevant but caring for its community.

“As someone who has worked with Labour and Conservative-led Governments, I know the evolution of devolution has been, at times, extremely slow. Ultimately, however, the coalition Government’s attitude to local government —in particular, their generosity to the city of Birmingham —has to be measured not simply by the financial settlement but through the devolution of power and the many hundreds of millions of pounds that Birmingham has received through the direct, innovative funding streams that are now acceptable through the coalition Government.”