A letter to Eric Pickles

MONTHS of work on next year's budget will be coming to its conclusion over the next few weeks and it has been extremely challenging and particularly difficult this year due to the Government's major cuts on public spending.

Local government in general has been hit especially hard but Hartlepool has been one of the places worst hit and, in my view, there is a distinct lack of fairness and parity when you compare how other, more well off places have been hit.

What follows is my letter to Eric Pickles, the Secretary of State for Local Government, in response to his consultation on our financial settlement.

I'm sure most councils will complain that they have been hit too hard too soon however, what I have tried to highlight is, as well as the unfairness of Hartlepool's settlement, a few suggestions on how the Government could balance out the cuts more fairly in a way which would not cost them very much more money.

I've already received an acknowledgement that my letter has been received so we'll just have to wait and see whether Mr Pickles actually takes any notice.

We should expect our final funding allocation around about the end of the month but I don't hold out too much hope of any success.

Dear Secretary of State,

Local Government Finance (England) Revenue Support Grant for 2011-12 and 2012-13 Consultation

In view of the significant grant reductions facing Hartlepool Borough Council my Cabinet and I have decided not to seek a meeting with Ministers regarding the Revenue Support Grant consultation, as we do not believe it would appropriate to spend public money sending a delegation (however small) to London.

Perhaps the Minister will consider holding regional consultation meetings in future years in suitable regional locations, rather than rely on everyone travelling to London?

While we will not be seeking a meeting with Ministers, there are a number of extremely important issues which we wish to bring to your attention. More importantly, we wish to suggest how the Government can help Councils which face significant grant reductions over the next two years.

Response to the Revenue Support Grant Consultation

l Fairness of proposed grant settlement

The Spending Review published in October outlined the Coalition Government's choices and explicitly gave priority to "fairness and social mobility, providing sustained routes out of poverty for the poorest". The Prime Minister, Chancellor and other Ministers have also regularly stated that "we are all in this together" when talking about the need to reduce the national budget deficit.

The above principles clearly haven't been applied to local government as many authorities, including Hartlepool Borough Council, face "spending power" cuts of 8.9 per cent – more than twice the national average of 4.4 per cent.

To put these figures into context for Hartlepool, we are the second smallest unitary council in England, but we are being asked to manage the 82nd highest monetary reduction in "spending power" – a reduction of 10.32 million, compared to 12.98 million for Essex County Council, which serves a population 15 times the size of Hartlepool.

The relative harshness of the proposed grant settlement is even more stark when you consider the very low reductions in "spending power" in other areas of the country, for example Kent 1.82 per cent, Essex 1.31 per cent, Hampshire 0.95 per cent, Wokingham 0.63 per cent, and Surrey 0.31 per cent – I could go on.

How is this fair and how does it address the principle of "we are all in this together"?

Surely a fairer and more equitable solution would have been to reduce the extremities of "spending power" reductions so that no authority faced a reduction of more than 6 per cent, rather than the proposed maximum of 8.9 per cent? I accept this would have resulted in higher reductions in other areas than has been proposed, but to me this would be fairer as all authorities would be closer to the average reduction, rather than some being more than twice the average.

l Front Loading of Grant Reductions

We have been planning for reductions in Government funding for over 18 months and had expected some front loading in 2011/12. In preparation for a tougher financial position we introduced new management structures in April 2010 which reduced the number of departments from five to three. This initiative reduced the number of management posts and is saving 2.5 million per year on a recurring basis out of a revenue budget of 93 million.

However, we were surprised that the Government has chosen to significantly front load cuts in grant funding over the next two years. This decision will have significant implications for Hartlepool Borough Council and the services it provides to our community.

As a relatively new unitary authority (established in April 1996) we have never been blessed with the management structures and financial cushioning within budgets that I believe many county and metropolitan councils have enjoyed. Therefore, since becoming a unitary authority we have managed budgets extremely carefully and have already pursued policies of outsourcing services to the private and/or voluntary/third sector where there is a clear business case. Examples include outsourcing ICT support services, outsourcing resident care for older people etc.

The cuts in funding in 2011/12 and 2012/13 will inevitably lead to reductions in services as we have already achieved significant efficiencies. While, the council will continue, as it has always done, to look for new and innovative ways of increasing efficiencies, it is inconceivable that this can be done without impacting on front line services.

It is extremely concerning that when Ministers gave evidence to the House of Commons Communities and Local Government Select Committee on the local government finance settlement that they indicated councils would be able to handle greater budget reductions in the first years of the spending review and budget cuts would not impact on the frontline.

In my view a more honest and mature debate is needed with the public so they understand the implications of the cuts on services. This is something we have been doing at a local level. This debate also needs to address the nonsensical argument that management and administrative efficiencies are all that is needed to balance budgets.

How can the Government help councils

The Council welcomes the Transitional Grant scheme to partly mitigate reductions in 'spending power'.

However, the Council has two keys concerns with this scheme:

l the scheme does not provide sufficient support in 2011/12 as some authorities, including Hartlepool Borough Council, still face "spending power" cuts of 8.9 per cent – more than twice the national average;

l the scheme only provides support for a maximum of two years and in many cases councils, including Hartlepool, only receive Transitional Grant for one year.

To address these issues the council would like the Minister to:

l double the Transitional Grant to 170 million in 2011/12. The additional cost could be funded by increasing reductions in "spending power" to those authorities receiving reductions in "spending power" significantly lower than 8.9 per cent. This would help partly mitigate the wide range of percentage reductions in "spending power", without adversely impacting on individual councils as this reduction would equate to less than 0.2 per cent of total 'spending power' reductions;

l pay the transitional funding for 4 years to all authorities eligible for funding in 2011-12, ideally at the 2011-12 level. Alternatively, I would suggest that Transitional Funding is withdrawn on a phased basis – 100 per cent in 2011-12, 75 per cent 2012-13, 50 per cent 2013-14 and 25 per cent 2014-15.

The council believe the above arrangements would make the Transitional Funding arrangements fairer and more equitable and also reflect the principles adopted for the old "floor damping system".

Under the previous floor damping system Hartlepool Borough Council's 2010-11 Formula Grant was reduced by 2.4 million as a result of the floor damping adjustment. Since 2006-07 the council has lost approximately 11 million of grant through the floor damping system. Clearly, if these arrangements had not been in place Hartlepool Borough Council and more importantly its residents would have benefitted from higher annual Formula Grant allocations for the last five years. This would have provided a more robust financial foundation for managing cuts in grant funding over the next two years.

It therefore seems appropriate to provide a similar level of protection for Hartlepool people during a period of financial austerity as was provided to people in other parts of the country in less difficult financial times.

Even if Ministers adopt these proposals, Hartlepool Borough Council and its residents will still face some of the highest "spending power" cuts in the country. Given the higher levels of deprivation in the town than many other areas I would ask is this fair and how does it address the principle of "we are all in this together"?

Yours sincerely,

Stuart Drummond

Elected Mayor