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Local Government: Finance

My Lords, I thank the noble Lord for his response. I cannot say that it was much different from what I would have expected, particularly from someone from the north-east who therefore knows how to call a spade a spade. No one is denying that this is a very tough settlement and, as we discussed briefly last Thursday, any Government were going to have to make substantial reductions in budgets across government, because of the deficit situation. I do not think that either side, even the Government who caused it, has said that there was no deficit. There was always going to have to be a way of dealing with it. The noble Lord opposite says that we have chosen the wrong way of doing it. There may be 50 ways of dealing with the situation and some, if not all, will affect some, if not all, of the services which are provided to the community and which defend our country, including social services There are some ways in which you can cut it and some ways in which you cannot; we have decided to cut our cloth in this way and we are dealing with the situation in what we believe is an appropriate manner. I shall try to go through the noble Lord’s comments in order. He suggests that we have made particular play on the use of reserves. In the consultations that have taken place on the settlement, it is true that the Local Government Association was extremely concerned about front-loading and its impact. Indeed, it was its own suggestion that this should be based on a spending formula. That would mean that not only the government grant but also reserves, council tax and other grants would be taken into account. Where it has been estimated that councils have reserves that can be used, clearly there will be a reduction in the amount of grant. As the noble Lord said, some reserves are earmarked and some are not. However, it is anticipated that those who have reserves ought to be able to employ some of them as well. The noble Lord made some play on the changes to services that it is suggested should come about, such as the sharing of services, the sharing of chief executives and the sharing of human resources—in other words, changes to the organisation of councils. Huge sums may not be saved initially but there is no doubt that useful savings are to be made through councils sharing such services. As the noble Lord indicated, some councils have started to do that and others are looking to see how they should do it. My council, to which the noble Lord referred, is one of the pioneers in doing so. The sums saved will not be insignificant—they will make an impact—and, I am afraid, they are the future way forward. On the capitalisation of redundancy payments, yes, there will be a contribution of £200 million towards it. Councils will be able to ask for capitalisation and, if the amount that they require is not covered by the amount of their grant, there will be other ways, I am afraid, of finding the money. Tony Travers said that this is the harshest settlement since 1945. I do not know whether it is, but it is a difficult settlement for local government and we understand that. We understand, too, that different parts of the country will fare slightly less well than others. The north-east comes into that category, as the figures show. The Government very much support the voluntary sector and its work in the community. We believe that the voluntary sector has real attributes and we hope that local government will not target it with excessive reductions, as it will need to co-operate with the voluntary sector in the future. These cuts will hurt and will not be easy—no one will pretend otherwise—but I am sure that the noble Lord will tweak us about that in the future, if not today.