Budget Resolutions and Economic Situation — House of Commons, 2015-07-09
Topic: Macroeconomics
Clive James Charles Betts (Labour, Centre-left): I pay tribute to those who have made maiden speeches. The hon. Member for Caithness, Sutherland and Easter Ross (Dr Monaghan) spoke passionately about inequality and the disadvantaged. I think many of us will share those sentiments. I have been to his constituency and it is very beautiful. I am pleased that I can still go there on holiday without having to go abroad. The hon. Gentleman was generous to his predecessor. John Thurso chaired the Finance and Services Committee in this House and did an excellent job of putting the internal finances of this House into good shape. He should be congratulated on that. My hon. Friend the Member for Bradford South (Judith Cummins) mentioned her predecessor, Gerry Sutcliffe. I would have to say, with a bit of tongue-in-cheek, that Gerry has certainly left a big hole in the defence of the parliamentary football team, but I will move on The Budget has certainly received big headlines, but I will try to focus on one or two details that probably do not make quite such good reading for Government Members. The Chancellor is coming back in the autumn with his forecast for cuts to departmental spending. Local authorities in the previous Parliament had £10 billion of the £27 billion of Government grant cut—nearly 40%. That has disproportionately affected poorer authorities in the north. The forecast is for another £9.5 billion of cuts in this Parliament on top of that. Local authorities have done very well to be as efficient and effective as possible with the spending they are left with. They simply cannot carry on delivering the services that our constituents want from them if those £9.5 billion cuts follow on from the cuts in the previous Parliament. Why has local government been disproportionately singled out for cuts compared with other services? That is the question the Government have to answer. There are two areas where I think there is a particular problem. I support the principle of the Government’s devolution proposals if they are not simply a mechanism for passing on more cuts for local authorities to deliver. We have to have some concerns about that. I would say, however, that, given that they are primarily about trying to rebalance the economy and with the talk of the northern powerhouse, we should look at what has happened to local authority spending on planning and economic activity. Local Government Association figures show a massive 55.4% cut in spending on planning and economic development in high-cut authorities in the last five years, and even in medium-cut authorities that figure is 47%. Those sorts of figures will not support the economic regeneration and development in the north that the Government and everybody else want, which is a matter of particular concern We have a real problem in social care. The NHS has had some protection, but 300,000 fewer elderly people are getting social care from local authorities now than in 2010, because authorities now offer it only to those in the greatest need. Age UK says that more than 1 million people needing care are not getting it, which puts pressure on the NHS and accident and emergency units and results in beds being occupied by people who should be in their own homes being properly looked after; and this year, there will be a further cut of more than £1 billion to those services We cannot carry on like this. If we are going to have proper joined-up health and social care, social care needs some protection as well. I raised this point with the Secretary of State. Social care has some of the lowest paid employees of any sector in local government or any other service. If the living wage is applied at £9 per hour to everyone in the social care sector, it will cost local authorities about £1.5 billion by 2020. Local authorities cannot find that money on top of the cuts they have to make anyway. They simply cannot do it. This is an added burden that the Treasury must bear by giving that money back to local authorities. Instead of showing in the Red Book, as it does, a £1.5 billion saving in the welfare budget, the Treasury has to give this money back to local authorities to compensate them—and that does not include the cost of paying other workers in a similar way I hoped the Budget would boost house building in this country, but let us look at the hidden effects. The cap on local authority borrowing has not been lifted, but the rents that housing associations and local authorities can charge have been reduced from the commitment by the previous Housing Minister, the hon. Member for Hertford and Stortford (Mr Prisk), who promised rent increases of CPI plus 1% over 10 years, to a 1% reduction per year. The Chancellor said yesterday that it would come from efficiency savings. No, it will not. Housing associations and local authorities cannot cover 4% a year less in rents through efficiency savings. The LGA has said that it will reduce the ability of local authorities and housing associations to invest in new homes and improve existing ones, while the National Housing Federation said today that, on a conservative estimate, it would reduce the amount of money available for development by £3.9 billion and mean 27,000 fewer social homes being built. That did not appear in any of the Budget headlines. I repeat, some 27,000 fewer social houses will be built because of the Budget and there will be a £50 million loss to the housing account in my own city of Sheffield. Those are figures that the Chancellor did not crow about yesterday, but they are there in the bottom lines of the Red Book There are additional problems, particularly for housing associations and local authorities, arising from the impact of welfare reforms, rising rent arrears, extra collection costs and the uncertainty of the right to buy scheme. These are all issues that will affect the ability of associations to borrow more money. They have already borrowed on the strength of the forecast rent increases, and now those increases have been taken away from them. No one can run a business like that, with the Government constantly chopping and changing the forecast revenue streams There is this idea of extra rents for higher-paid social housing tenants. Outside London, I think it is £30,000 a year. That is not particularly high pay for a family. Why should families who have been social housing tenants for years and have suddenly started earning £30,000 be penalised? It does not happen to owner-occupiers. What sort of system will be set up to do this? Will local authorities and housing associations have to means-test their tenants to identify those who earn more than £30,000 a year? Otherwise, how are we going to do it? When someone starts to earn £30,000, will their rent suddenly jump up overnight, or will there be a system of tapers? It is just another system where, as people earn more, the state takes more back. How does that make work pay? How is it consistent with the rest of the Budget? There are some questions that the Government simply have to answer Does the rent increase apply to supported housing with care? Housing association and local authority arrangements mean that wages form about 80% of the cost of those packages and it is not possible to get out of them. If the rent revenue to fund them suddenly drops, those care supported packages and that particular sort of specialist accommodation will no longer be viable. Have the Government thought that through or will they exempt rents in care and supported-package housing Finally, I want to address the issue of 18 to 21-year-olds not having an automatic entitlement to housing benefit. A lot of these people are very vulnerable indeed. The Albert Kennedy Trust told me the other day that 24% of people who go to Crisis and Centrepoint are from the lesbian, gay, bisexual, and transgender community. They are often very frightened and very worried. They have probably just come out to their parents and are frightened to go home because they are not welcome there. Are they now going to be excluded from entitlement to housing benefit? What will the exceptions be? How will the Government set them down, and will they consult on them so that they are actually meaningful A lot of the detail in the Budget did not come out in yesterday’s headlines. I am really worried about the effect of the impact of cuts on local authorities—will the Government fund the living wage?—and about the impact on the development of badly needed social housing, which will be drastically cut by the Budget.