We come now to the three motions on local government finance, which will be debated together. I must inform the House that Mr Speaker has today certified the third instrument—the Report on Referendums Relating to Council Tax Increases (Alternative Notional Amounts) (England) 2017-18—as relating exclusively to England and within devolved legislative competence. All three instruments will therefore be subject to double majority voting, of the whole House and of those representing constituencies in England.
I beg to move,
That the Report on Local Government Finance (England) 2017-18 (HC 985), which was laid before this House on
With this we shall discuss the following motions:
That the Report on Referendums Relating to Council Tax Increases (Principles) (England) 2017-18 (HC 983), which was laid before this House on
That the Report on Referendums Relating to Council Tax Increases (Alternative Notional Amounts) (England) 2017-18 (HC 984), which was laid before this House on
Local government is the frontline of our democracy. Every day, England’s almost 400 districts, counties, boroughs, unitary councils and metropolitan areas provide countless services to millions of people. They clean our streets, repair our roads and care for our most vulnerable people. They maintain our infrastructure, shape our communities, put roofs over our heads and so much more. It is our job to make sure that they are adequately funded to do just that.
A provisional financial settlement was published late last year. Since then, we have received formal representations from nearly 200 organisations and individuals. I thank everyone who took part in that process. The results of the consultation are before the House today in the shape of the final settlement. It is a settlement that provides councils with the resources required to deliver world-class public services in the year ahead, while continuing to play their part in bearing down on the deficit. Nobody knows local government better than local government itself, so this settlement answers the requests made of us by representatives of every tier of local government and every political party.
The hon. Lady will know that all councils have been asked to make a contribution to deal with the large deficit that the country had in 2010. That does not mean it has not been challenging—it has been for Liverpool and other councils—but many other councils have demonstrated that there are ways to deal with that and have been able to handle the challenges well. It might reassure the hon. Lady to remind her that the Liverpool city region is part of the business rates retention pilot, which I shall address in a moment and which may help to deal with some of the challenges.
I very much agree with my right hon. Friend. I shall in a moment discuss the fair funding review, which is an attempt to do just that.
The measures can broadly be grouped into three areas, which I shall go through during the debate. Later, I would like to update the House on another important source of Government funding for local authorities: business rates.
The first request we have had from local authorities is for increased certainty about funding. For years, councils have called for the tools to improve services and deliver efficiencies over a longer horizon. That is why the 2015 spending review delivered a £200 billion flat cash settlement for local government and why we have delivered four-year funding allocations that provide the financial certainty required for councils to be bold and ambitious. They have used that funding certainty to publish long-term efficiency plans, showing their taxpayers that they can deliver great services and still live within their means.
The story does not end there, though. Last month, we introduced the Local Government Finance Bill, which will devolve 100% of business rates to local government and enshrine in law our commitment to providing funding certainty by establishing a legal framework for multi-year settlements. The revenue support grant will be abolished, so councils will become financially self-sufficient. With services financed locally, councils will be even more accountable to their electorates, rather than to Ministers in Whitehall.
The Secretary of State says that councils are living within their means, but Trafford Council, for which I am the Member of Parliament, is having to draw on its reserves to meet the spending gap it faces as a result of the reduction in the revenue support grant, which, even in a rich authority like Trafford, is not fully compensated by the ability to retain more business rates.
The Under-Secretary of State for Communities and Local Government, my hon. Friend Andrew Percy, who has responsibility for local growth, met Trafford Council recently. I meet many councils myself and listen to some of their challenges. Trafford Council is one of the authorities that is implementing some efficiencies, but there are always more things that can be done, some of which I shall highlight later.
Hull City Council wrote to the Secretary of State a short while ago. In his response, he offered to meet the leader of the council and its chief executive. We waited many weeks for that meeting to be set up, until we received a letter from the correspondence secretary saying that the Secretary of State was not able to meet. Having just said what he did about meeting local authorities, will he now agree to a meeting with Hull City Council?
I assure the hon. Lady that Ministers from my Department have had several meetings with Hull City Council, and I, too, am happy to meet the council. If I remember correctly, I received a letter in November and replied within weeks. I am more than happy to meet—in fact, I contacted Hull City Council only today to offer a meeting.
Under the new system, there will no longer be an annual finance settlement that is reviewed and imposed by Westminster each year. Instead, the Government will set the envelope and the principles for allocating funding over a period, and it will be for councils to grow their income. That could be done in a variety of ways, from attracting new businesses and building new homes to working with local partners to deliver more efficient and more joined-up local services. One hundred per cent. business rates retention is being piloted from next year by Greater Manchester, Liverpool City Region, West Midlands, Cornwall, West of England and the Greater London Authority.
Lancashire has the third lowest tax base of any of the shire local authorities. Preston welcomes the reduction in business rates, but, effectively, what it means is that the 100% tax take will be lower as a result of the reduction in business rates. We do not mind that, but the loss of central Government funding through the rate support grant will be a huge blow to both Lancashire and Preston.
There has been a reset for Lancashire, so it should not lose anything. If the hon. Gentleman wants to provide me with any further information that he thinks we may not be aware of, I will be happy to take a look at it.
The authorities that I have just mentioned will be able to keep more of the growth in their business rates income with no impact on the rest of local government. We plan to undertake further pilots in 2018-19 in areas without the devolution deal, including two-tier council areas.
I very much welcome the roll-out of these pilots right across the country; it is entirely the right approach to take. The Secretary of State’s immediate predecessor came to Bromley to meet the leader and chief executive of our council when they expressed an interest in Bromley becoming a pilot. Will he take it from me that that offer and that interest still stands, and perhaps he might like to come to Bromley to discuss it with us?
I know that my hon. Friend speaks with a great deal of experience when it comes to matters of local government. I am more than happy to meet the leader of Bromley council, and I hope that my hon. Friend will join me in such a meeting.
We plan to undertake further pilots for the two-tier authorities, and I welcome applications from any council waiting to take part in this second trial. The nationwide roll-out of 100% business rates retention will take place across England in 2019-20. Earlier this month, my Department published a consultation seeking views on exactly how the system should look.
All councils that are in two-tier areas.
The second key area where we have listened and responded is funding for adult social care. That issue transcends party politics. Local government may have the statutory duty to look after our most vulnerable citizens, but we all have a moral duty to help it to do so.
The spending review put in place up to £3.5 billion of additional funding for adult social care by 2019-20, but we recognise that the coming year is the most difficult in the settlement period for many councils. There are immediate challenges in the provision of care, and they must be met now before those substantial additional resources become fully available. This settlement creates a new £240 million adult social care support grant, and it allows councils to raise the adult social care precept by up to 3% next year and the year after. Together, those measures make up almost £900 million of additional funding for adult social care available over the next two years. That means that the total dedicated funding available for adult social care over the next four-year settlement period is £7.6 billion.
I recognise that there is more to do on adult social care—especially in the area of reform, to which I shall turn in a moment.
Some local authorities will be able to raise less in precept than others. That is why we have also confirmed that the improved better care fund allocations, worth £1.5 billion by 2019-20, will take into account a council’s ability to raise funding through the precept.
I recognise what the Secretary of State says: the better care fund will be tailored to help authorities that raise less under the precept. However, the fund does not really kick in until the following financial year. Why have the Government not done anything to help councils with a lesser ability to raise the precept in the next financial year, 2017-18?
The hon. Gentleman may not be aware that although the better care fund picks up over time, it has already kicked in. I think it represents £105 million this year, and it rises next year and in the following years. However, he makes an important point; I listen carefully to what he says, especially given that he is Chair of the Select Committee that oversees my Department. I hope he will agree that as the better care fund comes in and builds up, it will start to make a bigger difference.
Will the Secretary of State confirm that all additional funds that have been and will be committed for the purposes of adult social care will be allocated according to the needs-based formula, not the existing local government formula, so that things such as sparsity of population and a deteriorating demographic will truly be taken into account?
I can confirm that the way in which the funding has been allocated overall is based on relative needs. I have mentioned, for example, the new £240 million fund that the settlement sets up for adult social care. That is all based on need as well.
My hon. Friend has been a passionate advocate of ensuring that we think of all parts of our country, including the more rural parts, that face particular challenges. I have had many constructive discussions with him and will continue to do so. He has often highlighted that we must make sure that those needs-based formulae, whether for adult social care or for funding for local authorities more generally, are updated and modern. That is something that I am attempting to do.
I do not have those figures. However, I recognise that the core spending power of many local authorities has changed and that they have therefore had to deal with some of those challenges. He might be reassured to know that in his local authority of Northumberland the core spending power per dwelling is more than £1,700—far higher than the average for that class. I am sure that that helps the people of Northumberland.
I commend the efforts, via the better care fund, to address the demographic issues, which transcend party politics. While the Secretary of State is considering the efficacy of the funding that he has mentioned, will he bring in a fiscal incentive for local authorities such as Torbay that are trying to integrate adult social care with acute hospital care, so that they have a real incentive to drive those necessary reforms and changes?
My hon. Friend leads me directly to my next point, which is about ensuring that we all recognise that more money for adult social care is not the only answer. We want every area to move towards integration of health and social care services by 2020, so that it feels much more like one service. I welcome what I believe is a consensus on both sides of the House that we will need to develop reforms to make social care more sustainable and effective for everyone in the long term, so my hon. Friend’s point—that as we work towards integration, would should look at how we can best encourage that—is an important one.
Another key area concerns the fair funding review, through which we are devising a new funding formula for local government. It is nearly a decade since the current formula was looked at thoroughly. Some parts of it date back as far as 1991, when the Prime Minister was an up and coming young councillor. It is fair to say that a few things have changed since then: the demographic make-up of many areas has altered radically; an ageing population means that demand for different services has shifted; and we are entering a world in which local government spending is funded by local resources, not central grants. We are undertaking a fair funding review to thoroughly consider how to introduce a more up-to-date, more transparent and fairer needs assessment formula. It is vital that the new formula delivers, so we are working closely with local government to get it right.
I welcome many aspects of my right hon. Friend’s statement, but he is aware that rural authorities were unhappy at the end of the last Conservative Government. The Labour Government then brutally shifted considerable funds to the inner cities. There is now a massive discrepancy not just in council tax raised, but in money redistributed from the centre and, above all, services. I will vote with the Government tonight without any great enthusiasm for the settlement, but I would like an absolute guarantee that this review will go back to basics, looking at the needs and significant changes on the ground so that when we discuss this next year, we will have a completely different settlement that reverses the trend and brings wealth back, fairly, to rural areas.
I welcome my right hon. Friend’s support for the settlement and I very much sympathise with the issues he raised about rural communities. He has been a passionate advocate of this for a long time. I am pleased that his local authority, Shropshire, is part of the working group that we have established to look at the specific challenges faced by more rural areas. I reassure him that the fair funding review must look exactly at the kinds of issues that he mentions and that he knows a lot about. We must make sure that we get it right this time.
As we conduct the fair funding review, we need to ensure that it is up to date, more transparent and brings a fairer, needs-based assessment. It is vital that the new formula delivers, so we are working closely with all of local government to try to get that right. We had hundreds of responses to the call for evidence published by my Department last year, and it is clear that people in all areas feel strongly about this, as we have just heard from my right hon. Friend.
Will my right hon. Friend look at whether the funding review will take into account aged-based proportions within the community, not least because of the debate on social care? That may be one way of diverting more money to those at the older end of the age spectrum.
I can confirm that that is exactly the kind of thing that we need to look at more closely. If my hon. Friend allows me to, I will give a bit more detail about the kinds of things that I am keen to ensure are covered by the review.
I have been privileged to hear the views of colleagues from across the House, many of whom have direct experience of service in local government. Various themes have emerged. Foremost among them is the need to ensure that the formula works for all local authorities, wherever they are. Rural councils in particular have unique needs that must be met, and councils have been clear that they want to see action sooner, rather than later. I am happy to confirm what we have previously said on the issue. We will make the changes to the fastest possible parliamentary timetable, and we aim to implement new baselines for every authority in 2019-20, following Royal Assent of the Local Government Finance Bill, the necessary secondary legislation and the completion of the fair funding review. I will update the House as soon as I have further details to share.
I acknowledge that my right hon. Friend said that this will happen in the fastest time that the parliamentary process will allow. May I invite him to be a little clearer on when he anticipates that means the review will have been completed and committed to?
Again, I thank my hon. Friend for the role he has played in making sure that this issue is looked at properly. As he will know, the commitment we have made on business rates retention, which we want to start in the financial year 2019-20, means that there will be a requirement to have the proper baseline set for all local authorities before that system can be properly brought in. I hope that that gives him some comfort on the timing that is necessary given that the two things—the fair funding review and the business rates retention plan—are very much interlinked. There will be various staging posts on the way. As always, I am more than happy to sit down with him to take him through those and discuss this further.
Much of what my right hon. Friend is saying is music to my ears as well. Does he agree that this is exactly the right time to address the issue of fair funding, because if unfairness gets baked into the system with the retention of business rates, it will basically be there for ever? It is vital that we get this right now, before the retention of business rates goes ahead.
My hon. Friend is right. As we move to 100% business rates retention and the requirement for local authorities to be more self-sufficient, it is right that we have the correct baselines, and that necessitates a proper review of needs for all areas, including—of course—our most rural areas.
Does my right hon. Friend accept that one of the key bases for this welcome review is the hope that we can eradicate the urban versus rural debate? For those of us who represent rural areas, it is pretty tedious to have that arid debate every year. We are not seeking an unfair advantage for rural areas, merely fairness and transparency. I am certainly encouraged by what he has said at the Dispatch Box this afternoon.
My hon. Friend is correct. This is not about special treatment for one area versus another; it is about recognising the needs of each area. In more rural areas, there are some obvious differences. For example, sparsity can mean that the delivery of certain services is more expensive, while others might be cheaper. This is about having the right data and being more transparent, and then making sure that those needs are met. That is exactly my ambition in looking at this and making sure that we get it right.
I thank the Secretary of State for giving way. I do not agree with much of what he has said, but it is a refreshing change to have a Secretary of State who has given way as much as he has today, because that contributes very much to the debate. Whether he is talking about 100% retention of business rates or the fair funding review, there is a key question for local authorities. Gedling Borough Council has a 62% cash reduction—it is the eighth worst affected authority in the country. This is an opportunity to make sure that it can deliver the services that the Government require it to deliver, as so many local authorities across the country are struggling to do.
I thank the hon. Gentleman for his warm words. The review is about making sure that all areas of England and all local authorities, whether rural or urban, have the right settlement for the long term. Given that the formula has not been looked at properly for years and years now—it is out of date and requires a fresh look—I hope he agrees this is exactly the approach that is required.
Local government funding has to be fair not just to the area itself, but to the people who provide the funds in the first place, including the millions of hard-working business owners who pay business rates. Growing up above the family shop, I saw the impact that an increase in rates can have on small businesses. A rise in the cost lowered the mood of the whole family. Even as a child, I knew that it was not good when I found a stack of bright red final reminders hidden away at the back of a drawer. My dad was never shy about sharing what he thought of out-of-town retail parks and how they took customers away from his shop on the high street in Bedminster. If he were alive today, I am sure that he would be the first to phone and lobby me about the business rates revaluation. In particular, I can just imagine him telling me about how the treatment of large online retailers compares with that of more traditional shops on the high street.
My background helps to explain why I have always been passionate about supporting businesses. It is why as Business Secretary I championed the £6.7 billion relief package that means that some 600,000 small businesses will never have to pay rates again. That is a third of all businesses and the biggest cut in business rates in history.
The current rate revaluation is fiscally neutral. It is not being used to raise a single extra penny for the Treasury. In fact, to do so would be illegal. The amount that most businesses—three quarters of them, in fact— pay will go down or stay the same. As I have said, 600,000 small businesses are being lifted out of business rates altogether, permanently.
Although those three quarters of businesses will benefit or see no change, I am also acutely aware of the impact on the quarter that will see increases. If someone’s rates are going up, it is no consolation to hear that others will be going down. I have long recognised the need to provide support, and that is why we have put in place a £3.6 billion package of transitional relief to help more than 140,000 smaller businesses. However, as colleagues and the media have highlighted in recent days, some individual businesses will face particular difficulties. For example, businesses that are coming off rate relief can face an alarming cliff edge. Independent retailers in some high-value areas are also struggling.
I have always listened to businesses and this situation is no exception. It is clear to me that more needs to be done to level the playing field and to make the system fairer. I am working closely with my right hon. Friend the Chancellor to determine how best to provide further support to businesses facing the steepest increases. We expect to be in a position to make an announcement in the Budget in just two weeks’ time.
As my right hon. Friend trudges around the country, visiting council leaders in various chambers, may I invite him to come to a McMullen pub in Broxbourne? He will be able to meet the chief executive of McMullen, who will explain to him that some of its pubs, which employ many young people in a variety of roles, will see their rates increase by more than 200%. That is not fair. McMullen may not be a small business, but if it has to pay higher rates at that level, it will stop employing young people in my constituency.
I would be very happy to visit that McMullen pub with my hon. Friend. He highlights the importance of pubs—not just McMullen pubs, but more generally—and it is important for the House to note, as we have done so often, that pubs are more than just businesses. They play a very important part in our local communities, which is why I would be happy to come along and learn more from my hon. Friend and the pub itself.
I have some sympathy with the Secretary of State’s points about revaluation. I accept that it is fiscally neutral and that it reflects the change in property prices, but perhaps the Government did not help themselves by delaying it for two years. He has referred to the difference between business rates for high street premises and those for out-of-town shopping centres. Is he therefore considering a more fundamental review of the whole basis on which valuations are made, to try to better reflect the proper cost to businesses on the high street and in out-of-town centres?
I hope that the Secretary of State will not think me discourteous if I disappear to chair my Select Committee in a moment. I welcome his statement and the tone in which it was made. Many of us have raised concerns about the issues that he touches on, and particularly about the fact that land values are high in areas such as mine—but that is no consolation to the independent trader on the high street. Will he undertake to meet me and other London and south-east Conservative MPs who have done some detailed work on this, to see how we can best find a constructive way forward?
My hon. Friend makes an important point about the challenges that businesses, particularly those on the high street, will face in areas such as Bromley. I would be more than happy to meet the leader of his council and other local representatives to learn more about those challenges.
Property-based business taxes have been around in one form or another for many decades—centuries, even. Nobody would argue that the current system is perfect, and it is right to ask whether the time has come for some kind of reform. The Treasury’s 2015 consultation showed little appetite for replacing the whole business rate system. It remains a vital part of the local government finance settlement, and its importance will only increase with the introduction of business rate retention. However, with underlying concerns about globalisation, international tax structures and the struggle between the high street and the virtual world, there is clearly room for improvement. We will look closely at all possible steps to make the system fairer and more sustainable in the short and long term.
I welcome what the Secretary of State says about a review. I am sure he will be interested to know of research conducted recently by Revo with intu shopping centres, which showed that business rates were the single largest deterrent to foreign retailers establishing or expanding in the UK. Would he be willing to meet the researchers behind the report to discuss, in the context of the review, what can be done to ensure that the UK continues to be an attractive destination for foreign retailers?
I want to listen carefully to anyone—any business, individual or Member of Parliament—who has concerns to bring me about the business rate system. I have talked about some of those concerns. The hon. Lady talks about issues to do with foreign retailers and others, and I will gladly look at them. If she wants to furnish me with more information, I will be happy to look at it. I want to make sure that we deal with these challenges. I think we all agree that the tax is not perfect, but it serves an important purpose in funding public services, and we must always look at how we can improve the situation.
Notwithstanding the fact that there will always be speculative and vexatious appeals, will my right hon. Friend dispel the urban myth that the Government are somehow getting rid of the appeals process? Will he confirm that appeals will continue to be open, fair and transparent for those who are unhappy with their business rate assessment?
I am happy to confirm that to my hon. Friend. Appeals are a vital part of the system. Businesses must feel that the system has integrity. If they feel for any reason that their valuation could be wrong, it is right that they should be in a position to challenge it. If anything, I want to make the process more transparent and easier for businesses that have a valid reason.
For example, the changes that we have introduced through the valuation office will allow some smaller businesses to go online to check their valuation. If they are in any doubt, they will be able to contact the valuation office directly, either online or through other forms of direct contact, and get the valuation reviewed very quickly. Contrary to the view of some out there that we want to make it harder, I am determined to make sure that businesses have a proper way to challenge the system, because it is their right to do so.
I must conclude, because I want to make sure that colleagues have enough time for debate. This local government finance settlement honours our commitment to four-year funding certainty for councils that are committed to reform; it recognises the costs of delivering adult social care and makes more funding available sooner; and it puts local councillors in the driving seat with a commitment to support them with a fairer funding formula. I commend it to the House.
With social care in crisis, a huge number of businesses deeply worried about rising business rates bills and the council tax set to increase by 25% by 2020, this local government finance settlement may work for Ministers, but it will certainly not work for anyone else. While it is good to hear that there may be some help for the businesses most affected by the revaluation, the Prime Minister’s spokesperson briefed after today’s Prime Minister’s questions that there would be no more extra money available to help fund this additional support to businesses. When the Minister winds up, will he confirm whether that is the case, because if it is, one group of businesses that were expecting help will be robbed to fund the relief for another group of businesses?
Many businesses will receive new bills next week, and council tax bills are almost ready to be sent out. This is the latest the settlement has been for decades, so one might have expected there to be a little better news in it compared with the original offering in December. There is no new money for local government to tackle the social care crisis, and nothing to help councils to tackle rising homelessness and the doubling of rough sleeping. It just passes the buck on to local councils, while local residents are left paying more in council tax, at the same time as public services deteriorate. No wonder this is being described as a “hugely disappointing” settlement. That is not my phrase, but the words of Lord Porter, chairman of the Local Government Association and Conservative leader of South Holland District Council.
Nottinghamshire County Council has lost £200 million during the past seven years. Given that 40% of the budget goes to adult social care, is it any wonder that, day after day, all of us across the House are getting the most heartbreaking stories from our constituents who are simply not getting the care that their loved ones need?
My hon. Friend makes a very good point, which is why it is all the more worrying that Ministers want to abolish the revenue support grant totally under the Local Government Finance Bill.
Perhaps I should not be too harsh on the Secretary of State. After all, he has had a rough week. He was accused by the former Conservative party chairman of “spinning the numbers”, and I hear that there was concern among Conservative Members that the Secretary of State was being hung out to dry by colleagues, so it was good to hear the Prime Minister’s spokesperson confirm that No. 10 still had full confidence in him. In truth, in just eight short months, the Secretary of State has been found asleep at the wheel twice—with a social care crisis entirely of the Government’s own making, about which he was warned well in advance, and now a business rates crisis, which he must have known might create a problem for many businesses, given that his party delayed the revaluation by two years, yet the seriousness of which it has apparently taken him until now to grasp.
Does the hon. Gentleman agree that if county councils such as Nottinghamshire want to do better on social care, they can look at cutting their costs by going into a unitary authority? Conservative county councillors in Nottinghamshire agreed that that was a good idea, but Labour county councillors, no doubt thinking of their allowances, decided it was a bad idea.
I encourage the right hon. Lady, for whom I normally have a lot of respect, not to make such partisan and, I suspect, inaccurate points, but to look at a booklet published by the LGA Labour group that gives 100 examples of the way in which Labour councils have innovated during the past few years. She may want to encourage some Conservative councillors that she knows to follow such examples.
The Secretary of State sent a letter to all his Conservative colleagues claiming that the concerns raised about business rates by businesses and hospitals were based, apparently, on a
“relentless campaign of distortions and half-truths”.
Leaving aside the question of whether it was right to release the figures just to Members of his own party, the irony is that, as was quickly exposed, the actual bills businesses will receive are likely to be 7% higher than the figures he produced. I gently suggest that the Secretary of State is in danger of getting a reputation for being sloppy in his use of figures.
Ministers have known about the business rates revaluation for a long time. Indeed, when announcing the delay, Sir Eric Pickles explained that it was to prevent “unexpected hikes” in business rates. Why did the current group of Ministers not think to analyse its consequences a little earlier? How can it possibly be fair that the overall business rates bill for Amazon, which has avoided paying much in corporation tax despite making huge profits, has gone down while family-run businesses that have existed on local high streets for decades face huge rises in their business rates bills? To accuse, as the Secretary of State effectively did, the Federation of Small Businesses, the CBI and the British Retail Consortium of distortions and half-truths in their campaigning is a disgrace. He should apologise to them.
While the hon. Gentleman is discussing the revaluation of business rates, will he welcome the Government’s measures in recent years to provide small business rates relief, and its indefinite extension, which has been so advantageous to many of the small businesses he claims the Government will have harmed?
I certainly welcome small business rates relief. We will have to wait and see whether Ministers will raid the pot that some businesses were hoping to benefit from, in terms of that rates relief, to fund support to other businesses that will see even bigger increases than they were expecting in their business rates bills.
I am sorry that the right hon. Gentleman was not successful in his efforts to get on to the Local Government Finance Bill Committee, but if he will bear with me, I will to come on to Wokingham and social care.
The hon. Gentleman now seems very concerned about the burden of business rates on business. Why then, during the Local Government Finance Bill Committee, did he and his colleagues advocate allowing local authorities to increase the multiplier in an arbitrary fashion, thereby putting tax rates up for businesses?
I am glad the Minister got to his feet, because I was coming on to his performance yesterday in Committee. Given the deep and profound concerns about the business rates revaluation, it was a little surprising for the Secretary of State to send out his Minister to reject the idea that any change to business rates was necessary. His spokesperson was still being quoted yesterday as claiming that business concerns were just scaremongering.
In 2005, PricewaterhouseCoopers tracked the tax liabilities of Britain’s biggest companies and found that half of the total came from corporation tax, while just 11% came from business rates. Today, corporation tax has fallen to 19.7% of tax paid by the top 100 group of companies, while the figure for business rates is 21%. Moving away from taxing revenue and profits, and increasing the tax share on businesses more reliant on bricks and mortar is surely going in the wrong direction given the rise of the digital economy.
I welcome the Secretary of State’s decision to have a review of the support for small businesses hit hardest by the business rates revaluation. I look forward to him being able to instruct his Minister, and encourage his hon. Friends, to support the amendment we have tabled to the Local Government Finance Bill on Report, requiring a full review of business rates and their impact on local government finance before the Bill comes into effect.
I just wonder whether the hon. Gentleman is able to clarify something for me. He has consistently said that he supports the 100% retention of business rates for local councils. However, he seems to advocate lower business rates for businesses and more money for local councils, which does not seem to add up. Where will the money come from?
As we have gently suggested before in this Chamber, we simply do not think it is the right time to cut corporation tax for businesses like Amazon, Sports Direct or Britain’s biggest banks. It is important that we get business rates right, because from April 2019 local government will be increasingly reliant on that income stream to fund vital public services. Since the Conservative party came to power, funding from central Government has been cut by over 40% and they want to axe the revenue support grant completely. Councils will spend some £10 billion less on England’s local public services this year than they spent in 2010-11. Ministers have never denied the Local Government Association’s calculation that local authorities are facing a £5.8 billion gap by 2020 just to fund statutory services.
Today’s settlement represents a further cut in councils’ core spending power. Not a single extra penny of new money for local government has been found for the care of Britain’s oldest and most vulnerable citizens. Some £4.6 billion has been axed from social care budgets since 2010. More than 1 million English adults, people who have served our country and deserve to be treated properly and with dignity, are estimated to have unmet care needs, which is a remarkable, almost 50% increase since 2010. The crisis is having profound consequences for the NHS and forcing councils to axe funding for other vital local services to enable them to provide even the most basic service to the most vulnerable.
Last July, the Association of Directors of Adult Social Services warned of serious problems in social care, but the Secretary of State did not act. In October, the Care Quality Commission said that adult social care services were at a “tipping point”, but the Secretary of State dismissed it as an exaggeration. There were briefings that action would be forthcoming in the autumn statement, but that came and went. When the statement on local government finance came around in December, all we were presented with was money being moved from one council funding pot to another and permission to raise council tax quicker than before.
The social care precept raises vastly different sums of money in different areas and is completely unrelated to need. It shifts the burden of solving a national crisis on to hard-pressed local councils and local residents, including all those only just managing to make ends meet. Members from across the House and from all parties have called on the Government to act. The Chairs of the Health, Communities and Local Government and Public Accounts Select Committees have called on Ministers to act, yet the crisis has just got worse. The Association of Directors of Adult Social Services and the head of the NHS have also called on Ministers to act, while Age UK says that the English social care system is facing complete collapse.
The hon. Gentleman is right to talk about the need for social care reform, although I believe that the Government are responding to that need, but would he like to take this opportunity to congratulate Conservative-run East Sussex County Council, which has put its budget alongside that of the local clinical commissioning group and is moving money out of hospitals, so that patients can come out of hospital or need not even go in at all? Is that not a good example of local reform delivering now?
I always support things that improve services to local people, but I say gently to the hon. Gentleman that I am surprised at his complacency and apparent belief that there is no social care crisis at all—that seemed to be the implication of his remarks. Many local authorities up and down the country are deeply worried about the social care situation. I suspect that if he spoke to councillors in East Sussex, he would find that they, too, are deeply worried.
I talk regularly to my councillors—I am here to represent them, as I am all my constituents—but I have an issue with the hon. Gentleman’s talk of a crisis. There are challenges in the system and a need for reform, but the talk of a crisis is scaremongering and sending out a signal that things cannot be fixed locally, whereas my county council is showing that, with hard work, imagination and application, they can be.
If the hon. Gentleman will not listen to me, perhaps he will listen to Izzi Seccombe, chair of the LGA’s health and wellbeing board and Conservative leader of Warwickshire Council. Earlier this week, she said:
“To continue, it is really looking like we are cutting into the bones of services that matter to people”.
According to the LGA’s analysis, 147 of England’s 151 social care authorities are considering or have had approved the introduction of the social care precept for next year, but it estimates that that will raise just over £540 million, which does not even cover the cost of the Government’s national living wage. It will not tackle either the growing crisis in services available to support the elderly or disabled or end the need for cuts to local services, including social care, such is the funding crisis.
The hon. Gentleman referred to the needs within different local authorities. Does he accept that some local authorities are under greater pressure than others? For example, 13 London boroughs were able to reduce or freeze council tax in 2016-17, while many others were not. Is he advocating a system based purely on cost drivers, need and the cost of delivery, rather than regression and the baked-in formulas of previous years?
The hon. Gentleman will remember that he and I had this discussion many times during our sittings on the Local Government Finance Bill. While the hon. Gentleman seeks to champion his constituency, which is a rural area, I gently suggest that he might like to talk to Ministers about why they intend to abolish the rural delivery services grant, which was specifically introduced to help provide additional funding to rural areas such as his.
The hon. Gentleman knows very well that this is happening in a context of much more money coming into the system—an extra £12.5 billion into local government by 2020. That is the relevant context, rather than what he says about withdrawing funding from local authorities.
Given the scale of the funding crisis facing local government at the moment and the abolition of other funding streams such as the £3 billion going from the public health grant, I suggest that the hon. Gentleman should be a bit more of a champion for rural areas and try to defend his own area’s funding through the rural delivery services grant.
I would like to put on record the fact that my constituency covers part of Torbay, which has both a national and an international reputation for integration of health and social care. Despite that, it is now under extraordinary pressure from a number of sources, and it is very important that Ministers are aware of the strain that social care is under.
My hon. Friend was right earlier when he said that even if local authorities are allowed to raise this money, in the longer term, by 2021, it will not cover the costs, because there will be a deficit nationally of more than £2 billion. If we take Coventry and Warwickshire, by 2021, there will be deficit of £33 million. That shows the scope and scale of the problem.
My hon. Friend has taken a number of opportunities of late to champion his local authority in the difficulties that it faces—not only for now, but in the long term. The situation he describes in Coventry is mirrored up and down the country. It is time that Ministers grasped the seriousness of the situation.
The LGA has made clear that the continued underfunding of social care is making it impossible for many local authorities to fulfil their legal duties under the Care Act 2014, leaving open the prospect of a whole series of costly court challenges. It is true that some money, £240 million, has been switched from the new homes bonus to fund social care, but when serious analysts suggest that £1.3 billion is needed urgently now to stabilise the social care system and that the funding gap for social care is expected to reach £2.6 billion by 2020, it is difficult to find anyone, even in the Government’s own party, who thinks Ministers are on track to sort the social care challenges that our country faces.
Is it not disappointing that attempts are now being made to blame local authorities for problems in social care funding that are clearly of central Government’s making? When Simon Stevens came to the Communities and Local Government Committee, he made it absolutely clear that there would be a funding problem for social care in this country—even if every local authority performed at the level of the best.
My hon. Friend makes a very good point. The default position for Conservative Members, whenever an issue is raised about the funding gap for social care and a number of other services, is to blame local authorities. The evidence of Simon Stevens and others rightly rebuts that point.
Conservative Members actually blame Labour Front Benchers for so shamelessly rigging the system in favour of Labour-controlled cities during their time in government. I am sure that the shadow Minister will therefore welcome the review announced today to make sure that the future funding formula for local government is much fairer to both urban and rural areas.
I admire the hon. Gentleman’s chutzpah, if nothing else. On the subject of mates’ rates, I shall deal with Surrey County Council in a moment.
Just last month, the Secretary of State once again told the House:
“In the last spending review, the Government allocated an additional £3.5 billion a year by 2020 to adult social care.”—[Official Report,
Vol. 619, c. 664.]
That was based on £1.5 billion from the back-loaded better care fund and £2 billion from the social care precept, but when we look at those figures closely, we see that the £2 billion was simply rounded up from the Department’s estimate that £1.8 billion would be raised from the precept. The Government had casually added an extra £200 million. That assumption was based on every council’s raising the precept by the full amount, but we already know that not all councils will do so.
When we look even more closely at the detail, we see that it also builds in the assumption that an additional 1.45 million households will be paying council tax. Ministers seem to have disowned the ambition of the previous Housing Minister—the current Minister for Policing and the Fire Service—to build a million new homes by 2020, so I have no idea where the Government plucked that 1.45 million figure from. Perhaps Grant Shapps would be tempted to call this another case of “spinning the numbers”. The truth is that the additional funding that the Government claim to be putting into social care is far from guaranteed, and, in any event, unless they find genuinely new money, there will still be a very significant funding gap by 2020.
Now let us come to Surrey County Council and the sorry saga of the abandoned 15% council tax referendum. Shortly after the announcement, David Hodge, the council’s leader, revealed that he had already made cuts worth £450 million and explained that he would have to take an axe to services if the extra £60 million that the 15% council tax hike would have raised was not agreed.
One reason why Surrey’s announcement was so striking is that it has been able to increase spending on adult social care by over 34% since 2010-11, whereas some councils have had to decrease it by up to 32% in the same period. In fact, only two of the 152 social care-providing local authorities have been able to increase their spending on social care more than Surrey. If Surrey says that it cannot cope with demand for social care, which council can?
In the most deprived areas of the country, social care spending fell by £65 per person as councils were hit particularly hard by Government funding cuts, but rose by £28 per person in the least deprived areas. The social care precept will only further entrench that inequality. Blackpool, the most deprived unitary authority area in the country, faces a 31% reduction in spending power between 2011 and 2019, whereas Wokingham, the least deprived area, faces only a 4% fall in the same period.
Perhaps Ministers will finally take the opportunity today to enlighten us on what discussions took place between their Department and Surrey County Council, but from the outside it looks like policy-making on the hoof: Ministers, embarrassed by one of their own, exposing the fallacy of their argument. They seem to have settled on opening up the business rates retention pilot scheme, but why was Surrey given special access, whereas other local authorities have not been told how they can apply until now?
Let me gently suggest to the right hon. Gentleman that he might like to think about the adequacy of the funding for services that are needed in that area. I suggest that, in that spirit, he might recognise the accuracy of the figures that I have just given.
Between 2010 and 2020, Coventry’s Government grants will have been cut by 50%. The Government are shifting responsibility for grants on to local authorities. Let me put it another way: Coventry will have lost £655 million, and in that respect it will be typical of local authorities throughout the country.
My hon. Friend has made a good point. That is all the more reason for continuing to hold the Government to account for their decision to axe revenue support grant in full under the Local Government Finance Bill.
What this settlement also does not address are the huge pressures that councils face as a result of rising homelessness and temporary accommodation costs, as well as rapidly increasing children’s social care costs. Rough-sleeping rates fell to historical lows under Labour; they have more than doubled since 2010. The number of social homes being built is at the lowest level on record. With more than 1 million people on social housing waiting lists, councils’ spending on housing families in temporary accommodation has gone up by 46%. Instead, Ministers are taking money away from councils through the new homes bonus. Ministers sing the praises of the new multi-year settlement as a way to give local government certainty, and then in their very first year make a late switch, leaving many councils with an unplanned gap in their budgets.
No area of England has been spared from cuts to services. The doors have shut on libraries, day centres and care homes. Bus services, leisure centres and youth centres have all closed or had their hours and range of services restricted. Women’s refuges have been axed, funding and contracts for local charities taken away. Advice services have gone. Investment in parks and street cleaning has been sharply reduced. All these services and others, treasured by local communities, or vital lifelines for vulnerable residents, have been cut.
This funding settlement will mean that the people of England are left with worse public services. It will deepen the divide between those parts of the country that are well-off and those that rank highest for deprivation. It is a settlement that will not remotely begin to tackle the social care crisis, and it will hit the pockets of those struggling to balance their budgets particularly hard. And it does not tackle the long-term problems facing councils from an increasing dependence on business rates. England deserves better, and that is why we will be voting against this report.
May I begin by paying a handsome tribute to all councillors, wherever they are and whatever political party they belong to? Mr Thomas will be pleased to hear that I am being non-partisan. Good councillors are genuinely worth their weight in gold, whatever their political allegiance—and a half-decent Member of Parliament will work hand in hand with their councillors. I have always tried to do that, whether at parish, district or borough level—and, at the higher tier, at county level, because Broxtowe does not benefit from having a unitary authority, although many other Members’ areas do. We should say a big thank you for the work that so many of our good councillors do. They have, we could argue, a critical role to play in delivering not only democracy but the key and most important of our public services. I have only stood once for a council—I was unsuccessful—but I have never doubted that local authorities do invaluable work. We often forget the value of that work.
I apologise to any Labour members of Nottinghamshire County Council; I do not suggest that they have resisted moves to go unitary because they fear they might lose their allowances, but the reality is—I am being very blunt about this—that many areas, including no doubt some Conservative and Lib Dem areas, have a genuine need for a unitary authority. I am now very firmly of the view that we should go unitary, with very few exceptions. I quickly add that, because I once had the great pleasure of going to Rugby, and I think Rugby Borough Council could de facto be a unitary, because it does a cracking job, so I am not saying every council should be a unitary. It is overwhelmingly the case, however, and I urge the Secretary of State and his ministerial team to look at the desire for more unitary authorities, and to say to many of our councillor colleagues—in the Conservative and other parties—that, “The days have gone when you could sit on a borough or district council, taking not a great deal of money by way of your allowance, and, I accept, sometimes doing a good job for your communities.” We now need to move to a unitary model to reduce costs and deliver services in a more effective and efficient way.
I represent a constituency in north Yorkshire, an area with eight local authorities. There are eight chief executives, eight economic development officers, and eight directors of finance. That cannot be right; we need to remove tiers of bureaucracy and reduce costs in order to maximise the use of our resources.
I could not agree more. My hon. Friend makes a compelling point.
Broxtowe Borough Council has done a terrific job, and I pay credit to the previous authority, run by Labour and the Lib Dems, which started the sharing of back office functions. Obviously I take the firm view that the new Conservative-run council is even better—[Hon. Members: “Hear, hear!”] I genuinely believe that it is, notwithstanding the unfortunate position that it now finds itself in. I shall address that point in a moment; my speech will not be all roses, as you can imagine, Mr Deputy Speaker. We are here to represent all our constituents, and we are also here to represent our hard-working councillors.
Broxtowe Borough Council—now Conservative run—has continued much of the good work on sharing back office functions, but as my hon. Friend Kevin Hollinrake says, there is only so much that such councils can do. Broxtowe continues to share those functions, but we are now going across borders and sharing functions with Erewash and, increasingly, with Rushcliffe. I have already told the leader of our borough council, Councillor Richard Jackson, that I am slightly worried about that. He shares my view that we should move to a unitary arrangement. That is brave of him, as the leader of a borough council—he is also on the county council—but Conservatives are increasingly being brave and considering whether going unitary would be better. If they are to make that advance, however, they will have to work even more with other authorities in the county rather than crossing the border into Derbyshire. So Broxtowe Borough Council is sharing back office duties, but as my hon. Friend said, there is only so much that it can do. Let us look at planning. No disrespect to all my great planning officers, but in reality we need one unitary authority to deal with important planning matters.
I shall turn now to the difficulties that Broxtowe undoubtedly faces. Because of the settlement, Broxtowe Borough Council will lose around £380,000 in 2017-18, and a total of £1.18 million over the next three years. That equates to an increase in council tax of about 5%. We must bear in mind that one of the reasons that the Conservatives came into power in 2015 was our promise not to increase council tax. Broxtowe does not want to put up council tax but it faces a big drop in its income in the coming years. The council, and Councillor Richard Jackson, are agitated even more by the short notice that has been given of the settlement. He told me that the administration had
“hardly any time to plan for the reductions that will be needed”.
It has had only a few weeks in which to balance next year’s budget.
It is tough to say this, but the reality is that all our local authorities are increasingly finding themselves in financial difficulty. They have a desire to deliver excellent services, but the amount of money available to them—notwithstanding the good work that so many of them have done to reduce their costs—is putting a strain on their ability to deliver the first-class services that they are determined to deliver. I make this plea on behalf of Broxtowe Borough Council. It has accepted this cut, which will be difficult—the Secretary of State was good enough to arrange a meeting with representatives of the council, and we are grateful for that—but enough is enough. Really, these must be the last such cuts to good local authorities such as Broxtowe.
I want to turn now to business rates. Having had the pleasure of working with the Secretary of State for 12 months and more, I have absolutely no doubt that he understands the needs, the pressures and indeed the joys of running a small business. He gets that—of course he does—and I am proud that we did so much in our time together to improve the lot of small businesses. However, I have big concerns about business rates. Now is not the time to go into all that, but in my view, it is a bad system. It is inherently unfair. No matter how much money a business makes—or, indeed, loses—it still has to pay its rates, and that is absolutely wrong. A business could occupy a certain space and have only a couple of people working in it, but it could be making millions of pounds in profits because it provides an online service. However, that very same space could be a shop on one of our great high streets, which are frankly struggling. We all want our high streets to thrive. The shop might employ three or four people and have a much smaller turnover, but its rates will be exactly the same as those of the multimillion-pound business in the same space. I am sorry, but that is not fair. As I said, now is not the time to discuss this, but I think the Government get the issue. The trick is to find an alternative that still raises the same amount of money, which I accept is difficult.
I agree with a lot of what the right hon. Lady is saying. On average, small businesses with fewer than 10 employees could face an increase in rates of around £17,000 a year. Now, that is a lot of money and it could put many small businesses, shops in particular, out of business.
I thank the hon. Gentleman for his intervention. We must realise that small businesses are defined in different ways. There is a profound difference between the Government’s definition of a small business, which is any business that employs fewer than 250 people, and the many microbusinesses that so many of us have in our constituencies. We should not underestimate the benefit that many of them have had from the raising of the threshold to £12,000 a year, which has been a real boost. Of course, the difficulty is that many microbusinesses, which may employ five people or fewer, still face the burden of rates. Anything that the Government can do to improve their situation will be hugely welcome.
We do not know all the details of the revaluation yet because it will not be officially announced until March, but we know that the multiplier will be reduced and my office has been asking small businesses about the effect. While some businesses will undoubtedly benefit, my concern about the situation in Broxtowe is that some pubs may face a quite unbearable rates rise. We do not have all the details of the situation yet, but I know that the Secretary of State will want to know them and I will not hesitate to give them to him. We know the value of pubs. They are important to our communities, but they are also important to our economy. They are great small businesses.
There are also concerns that rates will be reduced for some supermarkets while other businesses that employ maybe five to 10 people will find that their rates increase. In Broxtowe, the change will be neutral across the board—not the 0.7% change in the letter from the Secretary of State and the Chief Secretary to the Treasury—but with inequities in who will have to pay more and who will have to pay less. For example, we think that some businesses in Broxtowe’s three retail parks may pay less. There is often a battle between the retail park and the high street, and we think that some high street businesses may pay more than businesses in retail parks. Retail parks have big businesses—Ikea, Boots and Mamas & Papas, for example. I am not saying that they can necessarily afford an increase in rates, but they can probably soak it up in a way that a small independent business cannot. I will provide the Secretary of State with any details as they come out, and I know that he will take them on board.
I have no doubt that the Government absolutely understand the real strains in our social care system. I welcome all that has been done, but much more needs to be done. I reject the use of the word “crisis”, which is horribly overused. Our services are strained, but they are not in a crisis. In Nottinghamshire, the Conservatives have made it clear that if we are successful in May and again gain control of the county council, we will use the good provisions that the Secretary of State has put in place to allow us to raise the additional 3% through the precept. We will do that to ensure that we can raise as much money for social care as possible. However, I gravely fear that the reality is that the Government need to put more taxpayer money into the system.
I spoke to the chief executive of Nottinghamshire County Council on Friday, and such is the strain, for all sorts of reasons—I do not have time to go into those reasons, and this is not the place in any event—that Nottinghamshire is unable to offer homes to unaccompanied child refugees because of the extraordinary cost required to ensure that they are kept safe. It is important that such children get the right services and placements, and so on. At the moment, Nottinghamshire does not have the resources needed to do the right thing by those unaccompanied children. As I said at the beginning, we have to bear in mind the real strains being put on our local authorities and our outstanding councillors.
Finally, I have spoken about unitary authorities, and I urge the Secretary of State to consider being even braver, to take the bull by the horns and say to councils, “Now is the time. You must become unitary.” That is the way forward for many councils in order to save money and, most importantly, improve services.
The obvious point is that there is no change from the provisional settlement. We are talking about the same figures as the Government presented to us a few weeks ago. It is difficult to imagine that nothing any local council has said in that time has been relevant to its financial circumstances to the extent that Ministers feel the need to respond in some way. That is the case: no change whatever to the initial proposals.
The settlement therefore represents a continuation of the cuts that began in 2010. I welcome, as I have previously, the four-year spending settlements being given to councils. The settlements are a helpful step forward that local government has also welcomed in general. This is a cash-flat settlement over a four-year period, which therefore means a continuation of cuts because cash buys less over a four-year period not merely because of inflationary pressures, but because of the additional pressures on services from the growing number of elderly people and the extra pressures of the Care Act 2014 and the Children and Families Act 2014. Local authorities are having to absorb all those pressures within the cash-flat settlement.
The Comptroller and Auditor General, Amyas Morse, has figures showing that the spending power of local authorities, in real terms, reduced by 25% between 2010 and 2016. He has also said that there will be a further 6% reduction up to 2020. Amyas Morse says that the cuts are continuing.
Furthermore, it is very clear that local government has received bigger cuts over a longer period than any other service provided by Government—far bigger than any service provided by any other central Government Department. The reality of the situation is that no other Department has had cuts on this scale, and that cannot be challenged because those are the facts.
The Local Government Association has said that, by 2020, at the end of the spending review period, there will be a gap of £5.8 billion. That is the LGA’s figure, and I know that some people will say, “Well they would say that, wouldn’t they? They want extra money.” Those people might be right, but there may be demands on service provision that cannot be met by the agreed funding settlement.
All I ask of the Secretary of State and the Minister is that they please think carefully when the time comes to make decisions about the scheme for 100% business rate retention and about allocating the extra £11 billion to £13 billion. The Local Government Association is clearly saying that the first call on those resources should be the existing services that cannot be funded with local government’s existing money. That is a fundamental point.
I hear what Conservative Members are saying about the need to get the needs assessment right. One of my Select Committee colleagues, Kevin Hollinrake, is nodding in agreement. The Committee is considering the needs assessment, and we have commissioned work on that, too, but it is no good getting the needs assessment right on the allocation of resources to individual authorities if, at the beginning of the process, we get it wrong on the overall needs of local government as a whole. That is why we need to take particular account of that demand.
My local authority in Sheffield faces challenges next year. It is saying to me that there will be another £23 million cut in revenue support grant; that it will need to make £40 million of savings to meet inflation and the extra demands that it, like any other council, has to deal with, particularly those relating to social care; and that all that will mean reductions in the standard of service provision across the board. It will try to protect social care, but that means less money for other services, such as parks and open spaces, on which the Select Committee has just published a report that shows the stresses and strains on those services.
Social care has rightly been given a lot of attention. Along with the Chairs of the Health Committee and the Public Accounts Committee, I wrote to the Prime Minister to ask for an all-party review of long-term social care funding needs. That still needs to be done; we have to reach a new settlement because the existing system clearly does not work. We have to make the best of it for the time being, but we need to reach a general agreement on something more substantial for the longer term that will stand the test of time, so that review still needs to be done.
Let us look at the immediate situation. The LGA is saying that there will be a £2.6 billion deficit in social care funding by the end of this financial settlement in 2020, and that £1.3 billion of that is here and now. Despite the Government’s proposal to increase the precept by 3%, and the cut in the new homes bonus to allow for extra social care grant, the LGA is still saying there will be a £1.3 billion deficit next year. The Select Committee is currently conducting an inquiry into social care. We will be producing reports in due course, so it would be wrong of me to prejudge the outcome, but I can say that we have had evidence from the King’s Fund, the Nuffield Trust and the Institute for Fiscal Studies, and all gave similar figures about the current funding gap. They may disagree by a few hundred thousand pounds, but essentially they all say there is currently a gap in the money local authorities have available for the provision of adult social care.
The Chair of the Select Committee spoke earlier about a long-term solution for adult social care. He and I went to Germany to look at the care system there, and we were both impressed by how it had achieved cross-party consensus on a future solution for adult social care. Would he advocate our looking at this on a long-term, cross-party basis?
Absolutely. The system in Germany may not be one that we could immediately transfer over here, but the people there said to us that 20 years ago they sat down and dealt with this on a cross-party basis and got cross-party agreement. They are now having to put up their contribution rates, but they are doing so with cross-party agreement and with general public support because they have in place a system that is standing the test of time. That is an example of how to do it. Even if we end up coming up with a slightly different solution, we should at least look at the method they used to reach that agreement so that we can put in place a system that stands the test of time. The hon. Gentleman is absolutely right on that.
The Government have given local authorities the right to increase the precept by 3% in the next financial year, and I welcome the fact that most have chosen to do that. There are problems with council tax—it is not the most progressive of taxes and we could make some reforms to improve it—but in the end, local authorities, faced with the prospect of not having enough money to pay for their elderly people, have explained to their council tax payers why an increase is necessary, and have then taken the difficult decision to do it. That is absolutely right, and they should be congratulated on that.
Nevertheless, the £543 million that the LGA estimates is going to be raised by the precept will just about cover the cost of the increase to the minimum wage, or the national living wage, as the Government call it. In other words, the money has gone straight out the door in extra pay. It is absolutely right that it goes to low-paid workers who in most cases do a superb job—they are under great stress and strain to deliver that care, so it is absolutely right that they get more pay—but the reality is that the money raised by the precept is not even going to sustain the current level of social care, given the extra demands.
Let me just mention the cut in the new homes bonus. Although I live in Sheffield, which is a unitary authority, I do reflect on the issues facing two-tier authorities. County councils, for example, are getting extra social care grant, but the money is coming from the budgets of the district councils and the cut in the new homes bonus. The new homes bonus was not officially part of the four-year settlement, but for the smaller district councils, which had factored it into their future plans, it came as a considerable financial shock to the system to have a whole element of it removed, and it was a very difficult thing to address at short notice. I have a lot of sympathy for councillors and their officials in those small district councils who are struggling as a result of this change, as it creates the very uncertainty that the Government were trying to remove with the creation of a four-year settlement, and that is something on which we should all reflect.
Let me reflect on one or two comments that have been made by Amyas Morse, the Comptroller and Auditor General. I do not know whether Members have read his article in which he talks about social care, cuts in funding, and the NHS. He calls it a lack of “joined-up thinking”. He talks about central Government making decisions. It might be appropriate for me to read the words that he uses. He says that it is easy to allocate savings
“to be made by those operating outside a department’s boundary or with a different mandate, without necessarily understanding their effect.”
In other words, Government Departments are allocating savings for someone else to make without understanding their impact. It sounds horribly true when it is put like that. He talks about central Government being slow to adjust, often acting only when serious failure occurs.
It is a very interesting article, because Morse talks about local councils initially responding to those cuts with efficiency savings—I know that Government Members have called for more efficiency savings from local councils. Morse then goes on to say that that is okay at the beginning, but, over time, while councils could initially respond with “more for less”, we have now got to the point where it is “less for less.” He says that
“during this progressive reduction in funding, I have not seen any evidence-based effort to reconcile funding to local needs. In my view, the policy objectives for local government and the local government statutory duties have not been properly weighted against potential efficiency savings.”
He goes on to say that although local authorities have tried to protect social care, there has, nevertheless, been a 7% reduction in real terms, and that
“Besides the direct effect on care service users, this reduction has a deleterious effect on the NHS... Costs are effectively being shunted from one part of the connected system to another.”
He is blaming not local councils for that but central Government for having got it so badly wrong. He also says—Government Members may not be always willing to accept this—that areas with the greatest needs have lost the most. That comes from an independent review from the Comptroller and Auditor General.
The Comptroller and Auditor General goes on to say:
“Central savings may have been secured, but significant damage has been done.”
Again, that is from a senior official looking at the public accounts of this country. It is a damning indictment of what has happened with regards to cuts to social care—I am talking about the impact on users and the knock-on consequences and damage to the NHS, including bed-blocking, which is a horrible term that I do not like. Basically, this is about elderly people who need to come out of their bed in hospital and receive care in the community not getting that care because it simply is not available. There are also individuals who could, with earlier prevention, have been prevented from going into hospital in the first place, but that earlier prevention is not there either.
Finally, all my sympathy goes to the Secretary of State on the issue of business rates. The revaluation is simply about re-allocating the total payment to different businesses. It reflects the changes in the prosperity of different parts of the United Kingdom since the last revaluation seven years ago: businesses in more prosperous areas with greater growth will find that their rates go up, while others will find that their rates go down. I understand the point that has been made: this is not a way of raising extra money but of reflecting the different changes in prosperity in different parts of the United Kingdom over the past few years.
I welcome what the Secretary of State has said about looking again at how the money raised is balanced between, say, a shop in the high street and a business on an out-of-town retail park, or between a retail business that sells directly to the public and an online business that probably has far lower rates. It will be interesting to see what the Government propose.
Although I disagree with many items in the funding settlement, I say to the Secretary of State that if the Select Committee can help to look at the issue of how business rates reform could take place to reflect more properly who should be paying what in the system, we will be more than happy to work with him.
In Somerset, local government looks pretty small. In the 600 or so square miles of my constituency, there are six, gusting seven bus routes, one of which is under threat at the moment. There is one train station, and library opening hours and bin collections have been reduced. There is a limited number of small road improvement schemes and absolutely no major road improvement schemes. There have been cuts to drug advisory services and youth clubs and there is less funding to support the elderly in their homes and communities.
In return, there is a higher precept for flood protection and adult social care, and higher council taxes. I make no criticism of Somerset County Council, which froze council tax for six years when household incomes were tightest, helping families across the county. Furthermore, it was saddled with the reckless debts of the Lib Dem administration. None of that party’s Members can be bothered to turn up for a debate today on local government finance—presumably because they are too busy in the other place turning their backs on democracy instead of standing up here for the communities that they still pretend to represent. That administration racked up debts of £350 million when it was running Somerset County Council. That means that millions of pounds every year from the council’s budget is spent on the interest of those Lib Dem debts.
All that is happening while petrol prices are rising in rural areas—they are rising everywhere, but in rural areas the impact on the cost of living is felt more quickly. For my many constituents who live off the gas grid, heating oil prices have gone up. My constituents pay the same as those who live in cities for their mobile phone and broadband contracts, yet get a fraction of the functionality and connectivity. Their house prices and rents are well above the national average yet their wages are well below it. It seems so unfair that the solution the Government have come up with for reducing local government funding, widening the gap between urban and rural, is to increase the council tax burden on those living in rural areas when their cost of living is already, in so many cases, so much higher than elsewhere.
Last year, the already unfair gap in funding between urban and rural areas would have widened had it not been for the last-minute intervention of the then Secretary of State, who put in place an interim grant so that rural and urban funding, although being cut, would be cut by the same across the board. But that interim grant did nothing to correct the trajectories of those cuts, so that this year the gap between urban and rural widens by just as much as it was always intended to do. That brings with it no reflection of the cost of rurality or of an ageing demographic and no reflection of our limited ability to grow our economy, given the lack of connectivity and the size of the working-age population as a proportion of the population as a whole.
Somerset County Council and the district councils in our area have now set their budgets for this year. Those painful decisions have been taken, so it is really all too late for this year. However, as my hon. Friend Simon Hoare, who is no longer in his place, said in this debate at this time last year, we have to accept that public services in rural areas have not just been cut to the bone; all the marrow has been sucked out as well.
The disadvantage for rural areas cannot continue, so I warmly welcome the announcement that the Secretary of State has made at the Dispatch Box today. The review to which he has committed is ambitious in scale and scope. This is not about claiming that rural areas should be at an advantage over urban ones; it is simply about making things fair, which requires a full understanding of the cost of delivering public services in rural areas and a formula that allocates funds accordingly. That review is urgent. I note that the Secretary of State said that it will be completed ahead of the introduction of the full retention of business rates for 2019-20, but we cannot leave it until this debate in two years’ time to be clear about the result of the review. Councils need to know the outcome of the review by this debate next year—in January 2018—so that they can know that the jam tomorrow that we have been promising throughout these difficult four years means that their retention of business rates will be baselined at x, and they can start to plan accordingly. Certainty is all they have left to ask for now that it is clear that there ain’t gonna be any more money in the near future.
So, too, must the Government set a mechanism for the ongoing review of the baselining of business rates when the business rates retention has been introduced. I am sure that the Secretary of State and his team will agree that the potential for economic development will vary from region to region, and from area to area. Considering that the economic development team—if, indeed, one is left—in many of the smaller and more hard-pressed county councils is one person, the opportunities to grow the economy are somewhat more limited. We must have an eye to the idea that once we have baselined in 2019-20, some areas, through their entrepreneurial guile, may be able to grow their economies and their rates bases more quickly than others. Therefore, there will be a requirement to reset from time to time so that the deal remains equitable. Or—I am equally happy with either solution—the Secretary of State could direct that the growth deals allocated better reflect the areas where skills, connectivity or workforce availability are most difficult.
The south-west lags behind the rest of the country on infrastructure spending, and we are well behind on connectivity and on our skills base, yet when the growth deals were announced recently, the deal for the Somerset and Devon local enterprise partnership was particularly poor. It would be great to see the growth deals reflecting the areas where the economic development challenge is greatest so that when it comes to this entrepreneurial idea of the full retention of business rates, which I wholly support, we will start with equality of opportunity because we will have the connectivity, skills and infrastructure in place.
I am sure that my hon. Friend is aware that the industrial strategy White Paper refers to having regard to per capita spending throughout the country, rather than spending being concentrated in London and other regions that are getting the lion’s share at the moment.
I absolutely agree. There is something very empowering and very Conservative about giving councils the opportunity to be masters of their own financial destiny, and giving them the means by saying, “If you go out and attract business into your area, the rewards are yours to keep and spend on improved public services for your communities.” We just have to be aware that when we get that going, we need to have stacked the growth deals in favour of areas where the challenge is greatest so authorities really can take things into their own hands and grow their economies as keenly as the areas that already benefit from better connectivity, infrastructure and skills.
It is sad that the Chief Secretary to the Treasury and the Chancellor have already left their seats because I was going to make one other plea in order to alleviate Somerset’s problems in the short term. The Government have encouraged local authorities to do as they wish through mechanisms such as the new homes bonus and the community infrastructure levy. Not too long ago, there was an aggregates levy designed so that the minerals and aggregates that were extracted in certain areas would be taxed. Some 10% of that was supposed to stay locally in order to fund local betterment and mitigation, but it has drifted off into the centre and is no longer benefiting communities that suffer from hosting those industries. Why does that matter to us in Somerset? Well, in Somerset the Chancellor raises £24.7 million a year from the aggregates levy, and the 10% that we have lost is worth £2.47 million. That is an awful lot of bus routes, youth centres, community support for the elderly, library hours, recycling centres, bin collections, and everything else. As the Government offer the community infrastructure levy to communities that might find fracking appealing, and offer the new homes bonus as an incentive for communities who might want to host more housing, will the Chancellor let us have back the 10% of the aggregates levy that was supposed to have been the incentive for hosting quarrying?
In my constituency, we are doing an awful lot to facilitate national infrastructure projects. In Cheddar valley, the lorries going towards Hinkley Point now number more than 300 a day as it has gone on to 24-hours-a-day building. The pylons that National Grid will soon need to build to connect Hinkley into the national grid will roll through my constituency very shortly. All that building work means that all those quarry lorries are having an impact on our roads, causing potholes and congestion. Yet we are getting zero in mitigation while also getting a very poor deal on local government finance.
Public services in Somerset are being squeezed right down, but the adult social care requirements will continue to grow and grow. We should not see libraries, bus services, support groups and day centres as things that can simply be cut in order to divert money towards adult social care. That is a false economy. Those bus routes, day centres, community support groups and libraries allow people to lead independent lives, staying in their own homes independent of the adult social care system. It is only when we make them so isolated and so lonely that we end up needing to spend more and more on adult social care.
Let us move as quickly as we can to carry out the review that the Secretary of State has promised. It is very welcome announcement for which I and, I am sure, many colleagues are extremely grateful. I have every confidence that that review will make a huge difference to rural areas, perhaps in terms of the money that we get, but much more importantly, in terms of our constituents’ perception that the system is not stacked against them—that they get a fair cut of the Government’s cash. I know that the Secretary of State wants to be bold in the scope and scale of the review that he embarks on, but I also urge him get it done this year so that when we have this debate next year we can offer our councils much more certainty on what full business rate retention looks like and what the advantage to them will be.
I led St Helens Council for many years and was a councillor there for 38 years, so I know a little bit about local government. The council has a fixed grant settlement for four years. It is also subject to the production of an efficiency plan that is accepted by the Department for Communities and Local Government. That would not always be a great task, because it is an efficient council—it is well run and manages its finances well. It has 10-year grant reductions of £90 million by 2020—a reduction in grant support of 75%, or £511 per person.
St Helens Council and St Helens clinical commissioning group have a very strong joint working relationship. Indeed, St Helens was awarded the first council partnership scheme and it was the first to have a public-private partnership. We have very strong working relationships, and this has enabled jointly agreed priorities for the use of the better care fund on social care and health. St Helens is the leader on integrated adult social care and health.
It was with pride that I asked a former Health Minister to visit Whiston hospital. It was the current Under-Secretary of State for Health, David Mowat who undertook the visit and he was amazed by what he saw there. The work it does is unbelievable. In fact, St Helens and Knowsley Teaching Hospitals NHS Trust has just won the out-of-hospital tender for providing district nursing, community matrons, treatment rooms, adult continence services and outreach and reablement teams. That will lead to even more integration, with the hospital out in the community.
The commissioning process has begun for telemedicine in care homes. There will be 30 pilot telemedicine units in care homes so that the elderly will not need to go to A&E. They will have 24/7 access to a senior nurse who will be able to help them in the care home. Many older people who turn up at A&E are from residential and care homes that do not provide nursing care. If they are taken seriously ill during the night, they have to be admitted to A&E. The pilot will cut those numbers.
A falls response car was piloted in December and it worked over the Christmas and new year period. It meant that 40% fewer elderly people who had had a fall went to A&E. Patients were able to access services more rapidly, including a handyman service, occupational therapy equipment and clinical nurse support within two hours. They were in their own homes and they stayed there. Integrated access to social care is superb—there is no doubt about it. People who are not fit to stay at home but not bad enough to go to hospital can go to a centre for few days, perhaps when their family are away.
St Helens Council, the clinical commissioning group and the hospital work really well together, but that is not the only answer. Whiston hospital is still short of beds and we still do not have enough money for social care, even though we will get just under £1 million from the cut to the new homes bonus. That is useful, but it is not the answer to everything. We continue to work together.
Local government is the most efficient part of government, and it is unfair that it has to bear the hardest burden. Despite everything that is thrown at it, it is resilient and has a committed workforce. The way in which they are abused is shameful.
Even given all the joint working and integrated care, elderly people are still languishing in Whiston hospital. Some people have to go to hospital in the end, because they are really poorly. Some are waiting to go to a residential or care home, whose staff sometimes have to assess up to five people for one place. It is inevitable that they will choose the least complex case, because, as my hon. Friend Mr Betts has touched on, the most complex cases require a lot more staff. Yes, we want the living wage, but the homes are not receiving money and they do not have the staff, so the most complex cases are left languishing in bed.
Some years ago, we surveyed our elderly people—anybody over the age of 55—asking them whether they wanted to spend their old age in a residential setting or stay at home. Every single one who lived in a residential home said that they wanted to stay there. They did not want to go home because they were settled, but they did not have the support they needed. We set up a successful programme to fund the residential homes to provide care. Sadly, we now have dozens of homes because we are all living much longer, with much more complex needs, so the funding problem is not going to go away. Each one of us can look forward to a much longer life, but we will have complex needs. Let us make sure that the necessary services are available.
The county works well together to provide efficient care and other services, but every single service is being cut. It was a pleasure to follow James Heappey, who seemed to have been listening to what is going on in my area. We proudly built those services. All local governments are proud of the services that they have built. Those services are not there for frivolous reasons; they are there because the public want and appreciate them, but every single one of them is being looked at.
I am sorry to say that every care package will be revisited, because the funding will not be available. The director of social care in Liverpool, a neighbouring Merseyside authority, is resigning because the funds are simply not available to deliver services. Every single director in the area is saying that we are, sadly, coming to a time when all we will be doing is feeding people, getting them out of bed, washing and toileting. That is not what our elderly people deserve. They deserve dignity and care. They have given much to society, and our society should be looking after them.
I have listened carefully to the Secretary of State, and I plead with him to do his best. I think that he is listening. We need to keep people happy, because if they are happy, they will stay healthy for longer. We need to keep children happy, but youth services are going. It is a crying shame that facilities such as refuse collections, park rangers and golf courses are going. We tell people that they need to stay happy, energetic and healthy, but all the services that have been provided are going.
It is a pleasure to follow Marie Rimmer. I echo the praise from my right hon. Friend Anna Soubry for councillors and the amazing work that they do. I particularly want to pay credit to the parish councillors who are working so hard to cover the gaps left by Cornwall Council, in my neck of the woods, as it retreats from delivering services in our rural areas. The parish councillors are doing jobs that they never expected to be doing, but they are doing fantastically. We need to do what we can do to support them.
I am really looking forward to the review of funding allocation for local government, but I want to refer particularly to the Council of the Isles of Scilly and the pressure that it is under. I am privileged, as a Member of Parliament, to represent a constituency with off islands. The Isles of Scilly had their own unitary authority long before everyone else followed suit. The islands are home to 2,200 people and are an incredible and unique environment.
The council is a stand-alone, single-tier unitary authority. Unlike other local authorities, it has no means of devolving powers to local parishes. The council’s responsibilities are extensive. I am visiting the islands this Friday and Saturday, and it is no exaggeration to say that almost everything I see, touch or use while I am there will be the council’s responsibility. It is in charge of public safety; it operates the airport on St Mary’s; it runs Park House care home, which is the only residential care home on the islands; and it maintains the islands’ swimming pool and other leisure facilities. It is the only local authority in England and Wales that also acts as a water authority, providing water to some 1,070 homes on St Mary’s and Bryher, as well as the sewerage infrastructure across St Mary’s. That is a huge undertaking, and the council is the first in England and Wales to do so. Unfortunately, the fact that it owns next to no public assets that can be used to raise council revenue makes fulfilling those responsibilities more difficult. In fact, most of the land on the islands is owned by the duchy, so house building is a particular challenge.
In the local government financial settlement, the Isles of Scilly’s proposed allocation fails to take into account fully the uniqueness of this unitary authority. The provisional new homes bonus has been reduced by £22,200. The new adult social care support grant allocation is only £12,700—a reduction of nearly £10,000. The proposed improved better care fund allocation is zero. In the light of the fact that residents on Scilly have high needs but a very low council tax base, this funding decision does not appear to be fair or to recognise the specific needs of this remote island community.
The allocation for the rural services delivery grant is still zero, despite the assurances given by civil servants in 2016—the Secretary of State will be pleased to know that this was before his time—that they would look closely at that issue. There is no more rural an area than the Isles of Scilly, yet it gets no rural services delivery grant whatever.
During my visit to Scilly this weekend, I will discuss the challenges it faces in transport, adult social care, housing and marine safety. Ever since I was elected in 2015, I have been working with the council and Ministers—they have been keen to help and support us—to ease some of the pressures, particularly the pressure on council finances. This task has been made more difficult by the fact that the current funding allocation does not reflect the specific challenges and costs faced by Scilly. Right now, there is a real risk to the social and leisure amenities on the islands, and there are fears—I have had a number of emails about them just this week—that the care home will no longer be able to stay open. That is partly to do with funds, but it is also to do with the difficulties of attracting the staff needed, because of a lack of housing and an inability to build more housing.
Members of the Council of the Isles of Scilly are of course working hard to identify how to save money and become much leaner. Over the years, the council has worked extremely hard to become much leaner and more efficient, and it has probably become as lean as it possibly can, yet the pressure is on for it to make further savings, remain viable and ensure that it delivers a sustainable future for the islands. As such, the current funding proposal places increased pressure on a small council with huge responsibilities, threatens essential public services and leaves an undeniable need for reconsideration. As I say, a review of council funding is certainly needed for the Isles of Scilly.
I want to move on to the mainland part of my constituency and to business rates. The truth is that many businesses in Cornwall are small, and many in my constituency are being taken out of business rates altogether. That is hugely welcome, and the Government have achieved a fantastic piece of work. However, I have the rather peculiar situation that independent stores in the town of St Ives, which accounts for only about 8,000 people out my whole constituency, will have business rates increases sometimes of 62% or even of well over 100% this April. In fact, across the independent businesses in the town of St Ives, the average increase is 24%, which is particularly difficult.
I listened to the Chief Secretary to the Treasury talk about the prosperity of St Ives on Radio 4 at the weekend, but the reality is that while big businesses there certainly are prosperous—they can cope with difficult times, particularly during the winter months when there is just nobody around—independent businesses, which rely on doing their business for a few months in the summer, are required to pay business rates all year round however successful or unsuccessful they are.
There are definitely winners and losers from the business rates review, but many farm tourism businesses—farm cottages, riding stables and others—are being given a much greater value and their rates are going up 60%, 70% or 80%. That is just too much for those businesses, and we need the Government to help them in some way.
I welcome that intervention, and that is absolutely the case.
In total, 32 independent businesses have contacted me just from the town of St Ives alone. One business will see its business rate rise from £2,000 to £3,000 a week, but this small high street business already faces considerable charges from operating in that town. Some businesses are saying that there is no way that they will remain viable or can continue.
I want to raise something that would never have been the intention of a Conservative Government. In Penzance, all the supermarkets will see a drop in business rates of about 15%, but business rates for high street businesses are going up by 10%. I cannot believe that that was ever the intention of a Conservative Government, and I very much want that unintended consequence of the review to be reversed. I think that I have said all I need to say.
My hon. Friend is wrapping up, but may I say that he speaks with great passion and knowledge on behalf of Cornwall, as do all his Conservative colleagues? Does he share my suspicion that the appearance of a Liberal Democrat in the Chamber reflects the significant anger in Cornwall that no Lib Dem could find the time to be for the first hour and a half of the debate?
The temptation was too great.
Does the hon. Gentleman share my concern that between now and 2020 predominantly rural areas, including Cornwall and rural Norfolk, will lose out and that the proportion of total spend from council taxpayers in rural areas is significantly greater than that in urban areas? This is happening under a Conservative Government. Is he concerned, as I am, about the impact on rural areas?
I welcome that intervention, if only to say that that has been covered in the previous two and a half hours of debate.
If we were able to achieve fairer funding for schools, police and health and fairer support for local government, and for that to be in permanent legislation, that would be a significant result that south-west MPs could celebrate. For many, many years that was unobtainable.
I will bring my speech to an end by asking the Minister to look at the Isles of Scilly immediately. The pressures are there now and we need to do what we can to help. It is not right that older people face having to move off the islands to receive residential care. Please look at the situation in St Ives and Penzance, where supermarkets seem to be benefiting from the new arrangement. High street shops are the backbone of our local economy. They drive our economy across Cornwall, yet they seem to be the unintended victims.
I refer the House to my entry in the Register of Members’ Financial Interests. I also serve as a local councillor on Bradford Council. Mr Deputy Speaker kindly added my name to the list of speakers. I promised him that I would be as brief as possible.
I will confine my comments to the revenue support grant, to which an hon. Friend alluded earlier. I am disappointed that the Secretary of State did not come to the House with any real proposals, even after the consultation, to increase funding for struggling councils. Before I come on to that, however, I want to comment on two or three points that were raised by the Secretary of State and others.
On business rates, I think that Members on both sides of the House welcome the review. It cannot be right for high street shops to be paying more than some other businesses, so I look forward to that review. I hope that it incorporates factors such as the deprivation that affect the poorest communities.
On social care, the precept in councils with some of the most deprived communities will not go towards addressing the gap in social care funding. Sadly, I have heard nothing today to convince me that the Government have got the social care crisis under control. Some Members have said it is not a crisis, but it is.
My hon. Friend is absolutely right to raise the cuts to social care, given that 1.2 million elderly people are living without the care they need. In addition, since 2010, 450 libraries, 380 Sure Start centres and more than 600 youth centres have closed. Does he share my concern that the cuts to local authorities are undermining the very fabric of our society?
My hon. Friend is absolutely right, and I will come on to that later in relation to my own local authority, where the cuts are having a devastating impact.
The Secretary of State talked about the fair funding formula, as have many other hon. Members. I accept that, as some Members have rightly said, the needs of rural and urban areas need to be looked at. He rightly said that this was multidimensional and that the fair funding formula had to take account of all aspects. I must say, however, that the distribution of cuts so far—nine of the 10 most-deprived councils in the country have received above average cuts—has not been fair. For the formula to be fair, its administration must be directly opposite to the wholly unfair manner in which the local government cuts have been administered, given that some of the poorest councils with the highest deprivation have felt the harshest end of the cuts.
On the revenue support grant, I am a little disappointed. Pleas were made by many councils across the country. I welcome the fact that the Secretary of State has been proactive and gone out to meet councils and council leaders, but part of that is actually to listen to the serious concerns of local authorities and come back. According to figures for this year, the grant to my local authority is down by 25%—the percentage is much higher compared with 2010. We are down to the bone in Bradford Council. Tomorrow, the council will hold a budget meeting at which councillors from all sides will have to make some tough decisions. Of course, some services absolutely need protecting, but many others, including libraries, youth facilities, social care and other important services, will be up for discussion, and perhaps the level of service that should be provided will not be provided in the future.
I again urge the Secretary of State to listen to the pleas and visit the leader of Bradford Council to discuss the matter. He still has time, alongside his other reviews, to reconsider the equitable nature of the allocation and to look again at those authorities that are in serious trouble. The stark reality is that a good percentage of local authorities up and down this country might not make it as far as 2020 because the funding available for the services they provide will not be adequate. I ask him to look at that again.
I start by welcoming the Secretary of State’s statement, which was constructive both in content and tone, and I am personally grateful to him for the assurance he gave me earlier following my intervention regarding his willingness to work with my London Borough of Bromley on a pilot for business rates retention. Bromley is ambitious to grow its business base and has the scope, the ability and the connections into central London, as he probably well knows, to do so. So we will be pleased to work with the Government on that.
I also support the philosophy that underpinned the statement—the continuation of the move towards four-year planning, as longer term planning for local authorities is desirable, and the completion of the move towards 100% business rates retention. When I was at DCLG, the then Secretary of State, my right hon. Friend Sir Eric Pickles and I were able to make a start on that with the Local Government Finance Act 2012, and I am delighted to see my successor, the Under-Secretary of State for Communities and Local Government, my hon. Friend Mr Jones, in his place and taking through the final bit of that legislation now. It is an important devolutionary step, which I welcome. I hope it will not be the end of devolutionary steps for local government finance.
As we look at devolution deals, it is important to recognise the strong argument for more and more local authorities to become dependent on raising their own resources rather than central Government grant. Compared with many of our competitor countries, we have a narrow suite of revenue-raising powers for local government. We should perhaps think further about whether other taxes could be localised in a cost-neutral way. Obvious examples include stamp duty land tax and so on. That is further down the track, but it is important to be prepared to look seriously at that option.
I am sure that the Secretary of State will be aware of the work of the London Finance Commission—I declare my interest as a member of it—which is a cross-party commission established by the Mayor of London, following on from the previous London Finance Commission established by my right hon. Friend Boris Johnson when he was the Mayor of London. Sensible suggestions have been put forward to build on the devolving approach that Ministers are currently developing. That is desirable.
Given the financial constraints that the Government have inherited, the settlement itself is sensible, and I particularly welcome the way in which a number of grants will be rolled into business rate retention, which makes for a more sensible and appropriate approach. I am glad, too, that following representations made by local government, the devolution of attendance allowance funding will not happen. Authorities such as mine have a growing elderly population. In fact, Bromley has the highest population of pensioners in London—I have not quite tipped over yet, but I sometimes regard it as forward planning—and such pressures are important.
I welcome the commitment to doing more work to join up health spending and adult social care. I hope that the Secretary of State will talk repeatedly with his colleague, my right hon. Friend the Secretary of State for Health, about implementation. All too often, I have found, in my own area and from contacts elsewhere in local government, that it is not working on the ground as one would wish. The better care fund was a good initiative, and the principle is right, but these services are not being joined up in the way they should. Unfortunately, I have to say that that is all too often not for want of willingness on the part of local authorities of any complexion. The very ‘silo’ and hierarchical nature of how the health service and health economy work means, I am afraid, that there is a considerable lack of willingness to engage on that side of the equation—and it takes two to tango.
Does my hon. Friend agree that, just as there is a duty to co-operate between local authorities in planning, it would be helpful if there were a duty to co-operate between our social service providers at local government level and clinical commissioning groups? That would be enormously helpful in bridging the gap.
That is an immensely helpful and constructive suggestion. I honestly hope that the Minister will take that idea away and raise it with ministerial colleagues. Unfortunately, our experience is—certainly it was my experience when I was a member of the North East London Strategic Health Authority before I entered this place—that the health economy and health system always look up, towards the Department, and tend not to look out towards the community of which they are part. They do not have the culture of engagement and joint working that local authorities have developed over many years. To achieve that, we need pressure—serious political pressure—from the top that must be listened to. This should be viewed as a further part of the work that needs to be taken forward.
Does my hon. Friend also agree that part of the whole picture is the ability of local government to help to finance the infrastructure that will allow joined-up working between the health service and local communities? If the two sides cannot talk to each other through the connectivity of their platforms, people cannot be cared for in the way that we need to them to be.
That is absolutely true. The connectivity is important, and the culture is important as well. Many of us have come across very good medical people on CCGs who, given the nature of what they signed up to do, are not keen to be managers and budget-holders, which people in local government are well used to being. In many instances, the local authority is willing to engage, but the CCG, with the best will in the world, does not have as great a capacity in terms of its infrastructure and management systems. Those could easily be hosted by the local authority, and the two bodies could work on a collaborative basis, but because of the silo, bottom-up culture in the health service, the CCG is unwilling to engage. What is needed is a political steer from the Department of Health.
I totally agree with the hon. Gentleman about the difference between the culture in the NHS and the culture in local government. Does he share my view that we should aim for unified health and care commissioning in a locality, with democratic accountability through the local authority, rather than the ridiculous silo approach that exists at present?
The right hon. Gentleman is right. He and I both experienced that approach when we were Ministers in the same Government. What he has suggested is precisely the objective that we should work towards, but we need a steer from the top.
Let me make two more brief points. The first is about the fair funding review, which I also welcome, but it will be necessary to be bold and comprehensive. When I was a local government Minister, we had to go through about 275 bits of regression analysis to establish the formula, but we had knocked it down from about 400. Such material is not comprehensible; it is extremely opaque, and it produces consequences that are often difficult to reconcile with what any of us in local government see on the ground.
May I make a plea for one particular factor to be taken into account? I understand that, inevitably, there will be a “needs versus resource” matrix, but thus far it has proved almost impossible to build into the system a proper weighting for historically efficient authorities. A local authority that has historically been efficient and run its services well at low cost receives no credit for that. If anything, such authorities tend to be penalised. Bromley, for example, is a comparatively low council tax authority, the second lowest in outer London, but it is also the lowest in terms of the cost per head—the unit costs—of its service delivery. The system has never taken account of that, and we ought to incentivise it within the system.
My hon. Friend said earlier that his local authority area contained the highest percentage of the London population. Bromley’s total spending power is £795 a head, whereas Camden’s is £1,171 a head. How can that be right?
The simple truth is that it cannot, although we have broken down some of the artificial barriers. The idea that there is a major distinction between costs in inner and outer London has gone. Many of the outer London boroughs now have much more in common with the inner London boroughs, socially and economically, than used to be the case.
My second point is about the business rates. I welcome what has been said about the review, and especially what has been said about transitional reliefs. I think that the Secretary of State has hit upon the key issue of businesses in high-cost areas such as mine. May I suggest that he consider putting the multiplier on to the consumer prices index rather than the retail prices index? That would be more logical. In the long term, we need to think about how we can capture businesses that do not have a large physical footfall, such as online competitors. We need to deal with the issue of out-of-town supermarkets being treated much more favourably than shops because of the way in which land values come into the equation. When it comes to transitional relief, perhaps we could move from the current sledging to something akin to the sliding scale that we apply to stamp duty land tax.
I hope that those are constructive suggestions that can be implemented in the future.
I am delighted to contribute to this important debate. I welcome the presence of the single representative of the Liberal Democrats, Norman Lamb; they were late to the party today, but it is very good to have them here eventually. They tell us so often in Cornwall how important they think local government is, but that has not been reflected in today’s debate, sadly.
Local government is on the frontline of delivering services to our residents. I know that from my time as a Cornwall councillor and from the sheer weight of correspondence I get in my office about things that are actually delivered by our local council, whether it is picking up the dog mess, cutting the grass and filling the potholes or more important issues such as adult social care. We must value local government, therefore, and see it as a central part of delivering services.
It is also clearly right that local government is going through a period of dramatic reform. We need to bring it into the modern age, drive out the inefficiencies and the waste so often found in local government, and make sure that it is fit for purpose and as well-run as possible.
I really appreciate the welcome the hon. Gentleman gave me. Does he agree with the Rural Services Network, which believes that the impact of the changes for predominantly rural councils, compared with urban councils, is
“not only discriminatory, but also unsustainable for rural local authorities”?
That will have a particularly pernicious effect in counties such as Cornwall and my county of Norfolk.
The right hon. Gentleman might have been reading the notes of my speech, because that will be my main point.
We undoubtedly need to reform local government, and I broadly welcome the changes the Department are introducing to the way local government is financed, making it much more directly accountable for raising and spending its own finance and far less dependent on central Government. I also welcome the renewed interest in the Rural Fair Share campaign to address the imbalance that has existed for far too long between the levels of funding received by rural councils as opposed to predominantly urban councils.
I will not take any further interventions, as time is short.
Local government spending still accounts for a large proportion of central Government spending, and it is understandable that we have had to make savings and cuts while we have been dealing with the legacy of the huge and record deficit we inherited from the previous Labour Government. We have had to find those savings across government, including local government. That is the context in which we must see the current situation.
However, I welcome the Minister’s confirmation that a fair funding formula for rural councils, based on the cost of delivery and need, will be brought forward. My concern is about the timing of bringing the review forward. I remember standing on this very spot in last year’s debate, and at the last minute the then Secretary of State provided some transitional funding to ease the huge cuts that rural councils faced, to make sure that the funding gap between rural and urban councils was not further extended.
On that basis, I supported the Government position last year, with the promise that this would be looked at. It is disappointing that we are here again 12 months later and so little progress has been made in addressing the issue. I welcome the fact that some transitional funding is still available for this year, but that will run out next year and there will be no cushion to ease the impact on the rural councils and the widening of that gap.
We must urgently bring forward this review and address this issue. As I said to the Secretary of State in an intervention earlier, if we do not deal with it now, the unfairness and the lack of funding for rural councils will be baked into the system when we go to 100% retention of business rates. So it is important that the review is brought forward. We can no longer live with what we in Cornwall would call a “dreckly” approach. For the uneducated, that describes something that will happen at some undetermined point in the future. It is a bit like mañana, but not quite so urgent. It feels as though that is the approach that has been taken with the fair funding review, but we need to get on with it. We need to stop talking about it and actually deliver this for our rural councils as a matter of urgency.
I am happy to say that, based on the fact that last year’s funding agreement was a four-year agreement and the fact that the majority of councils have now set their council tax, I will support the motion and the Government’s position tonight. I will do so with a heavy heart, because I am disappointed at the lack of progress that has been made, but I take the Minister and the Secretary of State at their word when they say that these issues will be addressed. I will continue to make this case as strongly as I possibly can and to work with colleagues to ensure that the unfairness that has existed for far too long is addressed so that our rural councils will be much more fairly funded in the future.
It is an honour to follow my hon. Friend Steve Double. I shall keep my comments very brief, because I have been told to do so by the Whips and by Mr Deputy Speaker when he was in the Chair earlier. My comments are simple ones. I understand that the Secretary of State has a lot on his plate at the moment, but he is sitting on a golden opportunity—a once-in-a-parliamentary-generation opportunity, perhaps—to fix two fundamental problems in the system. The first relates to fairness in the rating system. The second involves fairer funding for local authorities. In relation to rates, I must refer Members to my declaration in the Register of Members’ Financial Interests, in that we have quite a lot of shops around the UK that are subject to the rating system. I believe that a fairer system would be a sales tax. It would disadvantage my network, but it would nevertheless be much fairer.
My principal comments relate to fairer funding for local authorities. I have heard many comments from Members across the House about how this issue affects rural areas in comparison with metropolitan areas. The shadow Minister, Mr Thomas, knows what I am going to say about this. The biggest iniquity by far is the way in which London is treated in comparison with the rest of the country. That is the reality. I am grateful to Leicestershire County Council for producing a report, which I urge Members to download, in which it has collapsed all district and county councils into one, pooled their resources and divided the sum by the number of people in those areas to give the spending power per local authority. The reality is that nine of the 10 local authorities with the highest spending power are in London, yet nine of the 10 authorities with the lowest council tax are also in London. That is simply unfair. It would be perfectly appropriate as long as the need drivers were taken into account. Let us take Harrow as an example plucked out of thin air. Harrow has £80 a year more spending power than North Yorkshire, yet it has a richer and younger population. How can that be right? [Interruption.] That cannot be the explanation, surely.
Would my hon. Friend concur, having looked through those figures, that rural areas also have poorer education funding, poorer police funding and poorer health spending, and that we therefore get hit on all sides?
That is the central point of my remarks.
In 2016-17, 13 London boroughs either froze or lowered their council tax. That is not possible in areas such as North Yorkshire. To show that I am not just plugging rural areas, let us look at the lowest spending local authorities. We have York with £615 per head, Trafford with £639, Kirklees with £673 and Leeds with £696, and yet we have Westminster with £1,100 a head and Kensington and Chelsea with £1,168 a head. This simply cannot be right.
This is happening, as my hon. Friend Robert Neill said, because the system is based on what happened before. Einstein once said:
“We cannot solve our problems with the same thinking we used when we created them.”
We created the problems and we need new thinking. The simple solution must be to use cost drivers. Cost drivers can be only two things: need and the cost of delivery. It is as simple as that. The simpler the formula that we use and the more understandable it is, the more we will all buy into the system.
The fair funding review commissioned by the Secretary of State is critical. I support that method, but we need a blank canvas and a new approach to the problem. The clear opportunity is that more money is going into the system. Whatever the Opposition may say, between £11 billion and £13 billion will be going into the system by 2020 because of the retention of business rates, and there must be a quid pro quo for that. Ultimately, more money is going into the system, and it is said that a rising tide will lift all boats. It is difficult to rebalance a system when no new money is going in, but more money is going in. Spending rounds are clearly tight, and the Secretary of State will have to be careful about where that money goes to ensure that he gets bang for his buck, but this is an opportunity. However long it takes—be it five or 10 years—if we set off on the right path, we can turn a system that is fundamentally unfair into one that is fair and equitable, and that delivers fair resources to my local authorities and to those in the rest of the country, including London.
If I may be so bold, may I say that it is a pleasure to speak with you in the Chair, Mr Speaker? Long may that continue. We have had an interesting debate, with many representations from Members on both sides of the House about the chronic state of local authority funding. There has also been some reflection on the fact that little has moved on since the provisional statement to provide councils with the funding they need to provide the services that our communities rely on. What is the point of having a consultation if responses from hundreds of local authorities, the LGA and third sector organisations, and representations made here by Members of Parliament, lead to no new money? We talked about the crisis in adult social care, but there is no new money. We talked about the loss of libraries, youth centres and day care centres, but there is no new money. We talked about the pressures on local authorities, which are wondering whether they can make ends meet, but there is no new money.
The Local Government Finance Bill Committee sat for 10 sittings, and I am sure that the Minister will share my delight in all that we gleaned from them. It was an education, but unfortunately it was the worst of educations because we learned very little. We talked a lot, we were slightly disruptive at some points, and there was a bit of chatter in the background from the naughty classmates towards the back, but little new information was shared to aid our education and understanding along this financial journey. Where is the money?
Before coming in today, I thought that I should be a bit more charitable. The Minister had quite a hard time in Committee. I found the Committee enjoyable, but I suspect he did not. I also had a perhaps uncharitable view of the Secretary of State. I felt that he did not really enjoy his position in the DCLG team. He came out in a different way today when he talked about business, because that is where his heart really is. He clearly cares about business and enterprise, and when discussing that element of the pressures of business rates he was convincing in his desire to do something about it. He was less convincing when we talked about adult social care, when we talked about the 1.2 million people who need support in their homes and just do not get it, and when we talked about people who are stuck in hospital and desperate to get back home but cannot because the support is not there when they need it. That is the crux of the issue. We have a Secretary of State who does not want to do the job that he has been given: it is temporary; he is just passing through; he is waiting for the better opportunities that lie ahead. Unfortunately, there is a cost to the temporary nature of his attitude, and the Minister has to deal with that.
When we hear further details of the financial settlement, we hope that there will be new money. I suspect the new money will not be focused on adult social care in the way we hope. It is far more likely that it will be used to offset the business rates revaluation that has sent a shockwave through the business system. Let us be honest: the business rates scheme, as it stands, is not fit for purpose. There is absolutely a need for a property-based tax, and we know how to collect it—if people do not pay, we knock on their door—but it has its limitations. We can go only so far with it, just as we can go only so far with council tax. A 25% increase on council tax to spend even more at local level to fund social care is just not sustainable.
If we do not grapple with the situation and find a different way to fund social care and health, we will continue to have this debate every month and every year. Every time we have the debate, more and more people will be let down. I believe in a decent society, and our older people deserve better than contributing all their life, working hard and making that change for the generations to come only to be let down when they need it most.
I have a number of hopes. First, I hope that the fair funding settlement and equation will be quick and delayed no more than they have to be. I hope that businesses are supported through the transitional phase in the way they should be. I hope that older people are supported, as a matter of urgency, to live longer, healthier lives in their own homes. That will require additional funding—not just the sweet talk that Surrey County Council’s leader had from the Secretary of State, but meaningful additional money where it is needed.
More than that, because I believe that every person should fulfil their potential, I hope—for the DCLG team, for this country and not least for himself—that the Secretary of State finds a job he wants quite soon.
I thank hon. Members for their contributions to this debate, which it is my pleasure to close. The settlement comes at an important time of reform for local government finance. It provides a sustainable path to the reforms that will be introduced by the end of this Parliament, through which 100% of business rates will be devolved to local government, giving councils control of an additional £12.5 billion to spend on local services.
The reforms are being made through the Local Government Finance Bill, which was introduced to the House last month. The Bill will enshrine in law our commitment to provide funding certainty by establishing a legal framework for multi-year settlements, which is a key feature of this settlement and something that has been called for by local government for decades. By putting the framework in place now, we can continue to work with local government over the coming months on the detail of the reforms, much of which will be set out in secondary legislation. Many local authorities welcome that approach.
Thanks to this Government’s action, 600,000 businesses are being lifted out of business rates altogether. A revaluation is overdue, and most businesses—three quarters of them, in fact—will end up paying either the same or reduced rates. Although three quarters of businesses will benefit or see no change, I am all too aware of the impact on the quarter that will see their bills rise. We are looking closely at what can be done to help the hardest hit.
As ever, my hon. Friend makes an important point, which is generally due to his experience of running a business. The Government have made it clear that we want to move to a system of more regular revaluation.
As my right hon. Friend the Secretary of State announced earlier, he is working closely with the Chancellor to determine how best to provide further support to businesses that are facing the steepest increases as a result of the revaluation. We expect to be in a position to make an announcement at the time of the Budget, just two weeks from now.
One hundred per cent. business rate retention is being piloted from next year. It will mean that participating authorities will be able to keep more of the growth in their business rates income, with no impact on the rest of local government. As we have said, in 2018-19 we plan to undertake further pilots in areas without devolution deals, including two-tier council areas. The nationwide roll-out of 100% business rate retention will take place throughout England in 2019-20. Earlier this month, my Department published a consultation to seek views on exactly how the system should look. I look forward to discussing the matter further with colleagues from both sides of the House in the coming weeks.
While we rightly look forward to the longer-term reform that will make local authorities financially self-sufficient and provide greater incentives for growth, the settlement we will vote on today reaffirms our commitment to funding certainty for local government. The 2015 spending review delivered a £200 billion flat cash settlement for local government, and last year we delivered four-year funding allocations, which provide the financial certainty required for councils to be bold and ambitious. The settlement is the second year of a four-year offer that was debated in this House a year ago and that has been accepted by 97% of local authorities.
The settlement before us delivers on our promise and provides councils with the resources required to deliver world-class public services in the year ahead while continuing to play their part in bearing down on the deficit. We have consulted carefully, and I am grateful to hon. Members for bringing their constituents’ views to us during the consultation.
As we have heard, adult social care, which is an issue close to all our hearts, transcends party politics. I take seriously the representations made today, and I take seriously the need to ensure greater respect, dignity and independence for people who receive care. In the spending review, we put in place up to £3.5 billion of additional funding for adult social care by 2019-20, but we recognise that the coming year is the most difficult in the settlement period for many councils.
There are immediate challenges in the provision of care that must be met now, before the substantial additional resources become available, which is why we have created a new £240 million adult social care support grant and are allowing councils to raise the adult social care precept by 3% next year and the year after. Together, the measures make available almost £900 million of additional funding for adult social care over the next two years, so the total dedicated funding available for adult social care over the four-year settlement period is £7.6 billion.
As we look to the future, local government spending will be based on local resources, not central grant, so we are devising a new funding formula for local government that is fit for purpose. Earlier, the Secretary of State acknowledged the many representations that have been made, including by many colleagues here today, about how demographic pressures, such as the growth in the elderly population, have directly affected different areas in different ways as the cost of providing services has grown. We are undertaking a fair funding review to consider thoroughly how to introduce a more up-to-date, more transparent and fairer needs assessment formula. We have been working closely with local government to make sure that it works for both local government and local people, and we will make changes on the fastest possible parliamentary timescale.
I wish to deal with a few of the issues that were mentioned during the debate. First, Mr Thomas is never backwards in coming forwards. It was interesting that, although many of his arguments were reasonably inconsistent, he was consistent on not coming up with a single idea for how we might solve the complex challenges faced by this country or by local government. I was also interested to hear the comments made by Jim McMahon. He said, “Where is the money?” Well, it might be a good idea for him to take some advice from Liam Byrne; I am sure he could tell him where the money went.
My right hon. Friend Anna Soubry made some very pertinent points, particularly about unitary authorities. We are certainly willing to listen to proposals, but those proposals must be driven from a local level, and be bottom up. If her area is willing to do that, we would be more than happy to listen to its views. She also mentioned local authorities’ funding challenge. We are providing a four-year settlement, so that councils, which have additional reserves and resources, can use them to bridge their funding gap, because they will know what their situation will look like in the third and fourth year of the settlement.
It was good to hear the comments of Mr Betts. He welcomed the principle of the four-year settlement, to which 97% of councils have signed up. He advocated that any additional funding from the 100% business rates retention should go directly to help local government fund services that are currently provided. Although that may sound tempting, may I remind him that we have been very clear that the situation would be fiscally neutral? New responsibilities would come with the additional £12.5 billion that we expect to go to local government.
It was good to hear from my hon. Friend James Heappey, who is a strong champion for his constituency. I was pleased to hear his support for the fair funding review, but I did hear his concerns as well. A similar sentiment was expressed by my hon. Friends the Members for St Austell and Newquay (Steve Double) and for Thirsk and Malton (Kevin Hollinrake), and I take their comments on board. My hon. Friend the Member for Wells also mentioned the business rates baseline and the principle of resetting the system, which is an important part of the whole system. Finally, I know that he has spoken to the Secretary of State about the aggregate levy, and I will certainly look into the further points that he made today.
I certainly take on board the important points that my hon. Friend Derek Thomas made about the uniqueness of the Scilly Isles. My hon. Friend Robert Neill has vast experience in local government and as a local government Minister. I was pleased that he welcomed the idea of not including the attendance allowance in business rates retention. He was right that more needs to be done on the integration of health and social care. He was also right to advocate that the business rates multiplier uprating should be changed from the retail prices index to the consumer prices index, which the Government fully intend to do.
In conclusion, this local government finance settlement honours our commitment to four-year funding certainty for councils that are committed to reform. It recognises the cost of delivering adult social care and makes resources available sooner, and it puts councillors in the driving seat with a commitment to support them with a fairer funding formula. It will give Government the resources they need to govern and I commend it to the House.
The House proceeded to a Division.
I remind the House that the motion is subject to double-majority voting: the whole House and those representing constituencies in England.
The House divided:
Ayes 269, Noes 158.
Votes cast by Members for constituencies in England:
Ayes 253, Noes 141.