Cheshire (Structural Changes) Order 2008

My Lords, I shall speak to my amendment on the Order Paper. It is true to say that debate over local government reorganisation in Cheshire has raged between the local authorities for more than a year. The decision has gone to replays and extra time, and many are now of the view that we must get behind the Government’s decision. However, this is not the preferred option of Cheshire residents generally and I support all the comments made by my noble friend Lord Harrison and the noble Lord, Lord Wade. Indeed, we three Cheshire Peers have been agreed together, as with the business community and the majority of stakeholder responses, in supporting the county council’s proposal for a single unitary authority. Throughout the debate I have been very encouraged by the Minister. She has listened and has taken forward several reports and submissions that I have introduced to her and to her colleagues in another place. It is very disappointing that all three Cheshire Peers have struggled to get audiences with Ministers on their case. The Government have judged the two submissions for unitary authorities on five criteria; namely, affordability, strategic leadership, stakeholder support, empowering local people and communities, and the quality of public services. The submission for a single unitary authority wins on every one, and in the most comprehensive fashion on the affordability criteria. The affordability case put forward in the submission for two unitary authorities has been the subject of several challenges. Throughout the review process, the county has expressed deep reservations about the financial robustness of the two-unitary option. Indeed, there has been a constant shifting of the figures. The final figures submitted on 1 October 2007 have served only to intensify this concern. The transition costs have increased from £16.6 million to £23.7 million, with the ongoing savings reducing from £30 million to £23.5 million. The Government are less than confident on those figures and have admitted that the objective of creating two new unitary authorities cannot be achieved within the cost and savings envelope set out in the original proposal. The Government called in the IPF. This is highlighted in the Explanatory Memorandum to the order, which imposes new expectations of costs and savings on the shadow authorities. This has been done on the basis of advice received from the IPF, which has not been made public. The county council was assured of transparency in the assessment process and the conclusion that can be drawn is that the Government have perhaps less confidence in the IPF report than they claim. The new figures change the whole basis of the implementation process. They call into question any conclusions of Deloitte, which was appointed to carry out a risk assessment on behalf of the district councils. Surely, the ratepayers of Cheshire should be able to assess the assumptions, the assessments and the working figures of the IPF report which it used to reach its conclusion. This is the basis on which I put forward my amendment in the absence of this report being made fully available. It is now clear however that no matter whether we look at the independent review from Local Government Futures—the assessment done on behalf of the county—or the assessments done by the department, the impact of this reorganisation will be costly. The county will be divided into two. Both unitaries will be faced with direct economic problems and they will both lose money. The Local Government Futures review investigated the potential impact of any local government reorganisation in April 2009 on the allocation of the formula grant within the county. Under the current needs-based national methodology, the report concluded that the west Cheshire unitary would be entitled to £82.7 million for formula grant and the east £54.1 million. However, the proposed two-unitary model allocates only £76.4 million to the west and £60.4 million to the east. This local agreement deprives the west of £6.3 million of formula grant per annum for each of the next three years—the equivalent of almost 2.5 per cent on council tax. Effectively, this funding has been permanently lost in the form of a financial subsidy to the east, as in three years’ time the national grant distribution formula will be applied to the two unitaries using their locally agreed allocation as the base. The latest information from the Department for Communities and Local Government would seem to confirm the intention to recalculate the formula grant in this way. It is unrealistic to assume that one authority will agree to provide a substantial financial subsidy to the other; it could be in breach of an authority’s fiduciary duties to its council tax payers. For the new unitary in the west, there would be genuine concern that the richer east, as defined through the objective needs-based formula, is being subsidised to the tune of more than £6 million per annum on a permanent basis. It is difficult to see how this would be acceptable to the council tax payers of Cheshire West and Chester who would be paying this subsidy through higher council taxes and/or reduced services. For the new unitary in the east, the concern would be the unenforceable nature of this local agreement. Clearly, if the national formula is used instead, this would result in the east losing out by £6 million compared to the current submission by the districts. That would only add to concerns over the financial viability of the districts’ submission for the east. It is vital that a full, independent financial assessment is undertaken when the county council’s view points to a frightening scenario. Reserves are overstated and would be insufficient to meet the cash flow requirements of reorganisation. The two new unitaries would in effect be expected to run out of money in the first year of operation. Far from achieving the required five-year payback, the proposed solution would now cost some £103 million and, therefore, fails to meet the affordability criteria. Both new authorities will begin life with inadequate finances to sustain existing service levels and are highly dependent on quick transformation. The objectives of the reorganisation and of the order are unlikely to be achieved.