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 Report on Referendums Relating to Council Tax Increases (Alternative Notional Amounts) (England) as relating exclusively to England and within devolved legislative competence. All three motions are therefore subject to double majority voting: whole House and those representing constituencies in England only.
I beg to move,
That the Report on Local Government Finance (England) 2018–19 (HC 791), which was laid before this House on
With this we shall consider the following motions:
That the Report on Referendums Relating to Council Tax Increases (Principles) (England) 2018–19 (HC 792), which was laid before this House on
That the Report on Referendums Relating to Council Tax Increases (Alternative Notional Amounts) (England) 2018–19 (HC 790), which was laid before this House on
Every day, local government delivers vital services for the communities they serve—services that many of us take for granted, provided by dedicated, often unsung councillors and officers in places that we are all proud to call home. As such, as I have said before, local government is the frontline of our democracy and deserves the resources it needs to do its job and to deliver truly world-class services. To that end, late last year we published a provisional settlement for funding of local authorities in England. We invited people to give their views on this via a formal consultation to which we have received almost 160 responses.
My Ministers and I have engaged extensively with the sector, with individual councils, with Members of Parliament, and with the Local Government Association and other representative groups, ensuring that we were available to speak to anyone who wanted to raise particular issues or to ask any questions. I pay tribute to my hon. Friend Mr Jones for his sterling work in this area, not just over this period but for the past three years. I thank the Under-Secretary of State, my hon. Friend
I am immensely grateful to everyone who has contributed to this consultation and our wider engagements with the sector.
The hon. Lady should be assured that Liverpool City Council, like almost every other council, is seeing an increase in its spending power from last year going into this year. She points out the challenges that the council has had in trying to bring about efficiencies. That, as I will come on to explain, has been a theme for many councils, but she should be assured that over the next two years there is a real increase in the core spending power of all councils, taken together.
Perhaps the hon. Gentleman can draw some comfort from my words in due course.
This work, with the feedback that we have received over the past few weeks, has informed the final settlement that we are unveiling today. It is part of a four-year settlement that gives English councils access to over £200 billion in funding in the five years to 2020. It gives them greater freedom and flexibility over the money that they raise, in recognition of the fact that no one knows their local areas, and the opportunities, challenges and pressures that they face, better than the councils who serve them. It strikes a balance between relieving growing pressure on local government while ensuring that hard-pressed taxpayers do not face ever-increasing bills.
Could the Secretary of State explain why Stroud District Council is the only council in Gloucestershire that has no revenue support grant promised under these proposals? Worse than that, the other three district councils in Gloucestershire get some money under the rural services delivery grant, yet Stroud gets nothing. Why does he think that is fair, and how can he defend it?
The hon. Gentleman, like many colleagues in the Chamber, is served both by district councils and county councils, all providing services for his constituents. The whole picture should be taken together. He will know that his county is seeing, for example, an increase of some £10.8 million to provide some very important services. Also importantly for Gloucestershire, including the district councils as much as the county council, the Gloucester business rates pool is part of the 100% pilot, which it estimates will lead to further additional funding this year of about £10 million. I hope that that helps to reassure him.
The settlement comes in the third year of a four-year deal that was accepted by 97% of councils in return for publishing efficiency plans. This gives the certainty and stability that they need to plan for the future. Many local authorities have done impressive work to deliver better value for money and are setting an example for other parts of the public sector. We are keen to continue to work with the sector to increase transparency and to share best practice so that councils can deliver increased efficiency over the coming years and transform services.
In all, the settlement answers calls from councils over many years for greater control over the money that they raise and the tools to make this money go further. This is the approach that we have taken across the board, listening to local authorities and responding to what we hear.
The Secretary of State talks about core funding. I think the average for county councils—[Interruption.] Mine is Durham, by the way, for the Parliamentary Private Secretary who is looking it up. [Laughter.] The average is a 2.1% increase, but for Durham it is only 1.4%. The reason for that—[Interruption.] Durham County Council—the PPS has got the wrong one! [Laughter.] The reason is the low council tax base, as 55% of properties in County Durham are in band A, which affects the council’s funds—County Durham, if the PPS has still not got it.
The hon. Gentleman is obviously familiar with the numbers for his own council, which is good to see, and his council is getting an increase. As I have said, and this will be a theme throughout the settlement, we have to always make sure that we are striking the right balance between providing increased resources and keeping any burden on taxpayers to an absolute minimum. I hope that the hon. Gentleman would support that.
We are creating a whole system of local government that is fit for the future. The current formula for financial allocations has served local areas well over the years.
North Yorkshire is doing its best to make ends meet despite a difficult and tight spending round. Can it be right that spending power in North Yorkshire is £770 a head, when in many other areas, especially in London, it is around £1,100 a head per year? Does my right hon. Friend agree that we need a fairer funding review that delivers fairness for North Yorkshire and other rural areas?
I very much agree with the point that my hon. Friend makes about looking at the fairness of the distribution, and I know that he has spoken powerfully about that in the past. We are looking at it, and I will come to it shortly in my speech.
A world of constant change, involving big shifts in demographics, lifestyles and technology, demands an updated and more responsive way of distributing funding. That means that we have to question the fairness of the current system, which is why I was pleased to launch a formal consultation on a review of councils’ relative needs and resources in December. This is not just a paper exercise. We have an unparalleled opportunity to be really bold and ambitious, and to consider with the sector where the most up-to-date evidence and data lead on drivers of local authority costs and to create a whole new system that gives councils the confidence to face the opportunities and challenges of the future.
I can give my right hon. Friend some reassurance on that matter. I will come to it in more detail in a moment, and I hope that he will be genuinely reassured.
When the fairer funding formula comes into being, I hope that my right hon. Friend the Secretary of State will work with other Ministers to really understand the huge gulf that is starting to appear between city metropolitan areas and rural shire counties. We are becoming second-class citizens in rural areas because of the lack of funding in comparison to socialist metropolitan areas.
My hon. Friend makes a very important point about ensuring full co-operation throughout all Government Departments working jointly with our local authorities on fairness and distribution. One way we have tried to make the settlement fair is by recognising the special factors that affect rural areas, including Shropshire. My hon. Friend’s council in Shropshire will benefit from £6.6 million in rural services delivery grant.
The Conservative portfolio holder for finance on Stoke-on-Trent City Council says that it will lose £15 million of central Government grant over the next two years—that is Stoke-on-Trent with hyphens for the Secretary of State’s PPS, as he diligently searches his folder—but the Secretary of State will tell me that our revenue spending will be going up. Who is not telling me the truth? It cannot be the case that spending is going up when the portfolio holder tells me that the grant is being cut.
Order. Before the Secretary of State answers, I must say that interventions have to be short. A lot of people want to speak. What is unfair is if people make interventions and then leave, and other people have to sit for three hours waiting to speak. That is just not honourable. I appreciate that the hon. Gentleman is going to be here, but I just make the point about short interventions.
I can tell the hon. Gentleman that the core spending power for Stoke-on-Trent—with hyphens—is increasing by £3.5 million in the settlement. Indeed, the core spending power per dwelling for Stoke-on-Trent is higher than the average for the class. I hope he welcomes that.
The consultation on fairer funding closes on
I applaud my right hon. Friend for launching the consultation on fairer funding. Will he be able to reassure the House that, in contrast to some of his predecessors who have said nice words about fairer funding but have not reflected the significant changes that were introduced under the previous Labour Administration, the consultation will inform the next spending review so we will actually to see it put into practice?
I can give my hon. Friend that reassurance and I take this opportunity to thank him for the strong representations he has made on behalf of Shropshire, which have fed into the settlement.
The business rates retention programme will also be introduced in 2020-21. It will give local authorities powerful incentives to grow their local economies. So far, this has been a resounding success. Under the current scheme, local authorities estimate that they will receive about £1.3 billion in business rates growth in 2017-18, a significant revenue stream on top of the core settlement funding that is set to continue into 2018-19.
I welcome the 10 county-wide pilots. Will the Secretary of State consider extending the pilots to include small unitaries such as Southend and Thurrock or areas of the county such as south Essex, if the whole Essex plan does not work?
There will be further pilots and I will come on to that in just a moment.
It is right that we will be going further. It is our aim for local authorities to retain 75% of business rates from 2020-21. This will be achieved by incorporating existing grants into business rates retention, including the revenue support grant and the public health grant. Local authorities will be able to retain 75% of the growth in their business rates from the new base lines in 2020-21, when the system is re-set.
The long-term plan is to allow local government to keep 100% of its business rates. With that in mind, I announced an expansion of the 100% retention pilots that proved so popular in December. As a result, we will be taking forward 10 new pilots covering 89 authorities, instead of the five we originally planned. A further pilot will begin in London in 2018-19, and existing devolution pilots will continue in 2018-19.
My local authority in Hartlepool finds it increasingly difficult to establish a business rates base but will participate in the programme. However, its departments face 40% cuts, and it has a £6 million shortfall. How fair is that?
For the hon. Gentleman’s local council in Hartlepool, there will be an increase in the core spending power of 1.9%, which is £1.5 million. He talks about fairness. It is worth pointing out that the core spending power per dwelling in his local authority is £1,931, which is significantly higher than the average for the class. I hope that that reassures him that his local authority is getting a significant amount of spending power, particularly from a per-dwelling point of view.
I understand the thinking, which is that councils that say they are doing well in terms of business should be rewarded and retain their business rates. However, how will councils in deprived areas be compensated for the fact that they cannot do so well in terms of business? I was a councillor in a deprived local area—it happens to be the Secretary of State’s birthplace—and we tried for many years to encourage more business and enterprise, but it was incredibly difficult.
The hon. Lady’s local authority, Bath and North East Somerset, was part of a business rates pilot in 2017-18. As I said, we have extended that pilot, which gives the local authority the ability to take advantage of that and put in place incentives for local businesses to see growth. The council estimates that it can see millions of pounds of extra income from that, which I would have thought she would support for her local community.
The business rates pilots will help to test the system, to see how well it works in different areas and different circumstances. The purpose of the pilots was to have a broad distribution across north and south, urban and rural, and small and large. The pilot areas will keep 100% of the growth in their business rates if they expand their local economies, which is double what they can keep now. I can confirm that I will open a further bidding round for pilots in 2019-20 in due course. In expanding those pilots, we have responded to what councils have told us, and we are doing the same in other areas.
Rural councils express concern about the fairness of the current system, with the rural services delivery grant due to be reduced next year. In response, I can confirm today that we will increase that grant by £31 million in 2018-19. That is £16 million more than was proposed in the provisional settlement, taking the total figure to £81 million—the highest amount ever paid in rural grant, at a little over the sum paid in 2016-17.
We recognise that the so-called negative revenue support grant is causing concern. Changes in revenue support grant have led to a downward adjustment of some local authorities’ business rates top-up or tariff for 2019-20. We know we must address that problem, and we will consult formally on a fair and affordable set of options for doing so, with plenty of time to reflect on the findings before next year’s settlement.
Following discussions with the sector, we are continuing with the capital receipts flexibility programme for a further three years. That scheme gives local authorities continued freedom to use capital receipts from the sale of their own assets, to help fund the transformation of services and to release savings.
May I ask the Secretary of State about the negative revenue support grant? He has not actually said expressly that there will no longer be a negative revenue support grant. My local councils are saying that the Government cannot be trusted on this, and unless and until the Government commit themselves to saying there will not be a negative revenue support grant, they will have to budget on the basis that there may be one.
My hon. Friend makes a very good point. Such certainty is of course very important for many local authorities, including his own, and I hope I can now make the situation clearer. It is our intention to deal with the problem of the negative RSG, but we have yet to determine exactly the best way of doing so and providing support to the local authorities affected, and that is why it is right to consult on it. I absolutely commit to him that we will do so, and when we do—our plan is to do it in the spring—I hope that he and others will make an input to make sure that we get it right and really deal with this problem for his authority and many others.
Will the Secretary of State reflect on the issue of the transitional grant? It may be important to some authorities, but will he confirm the figures Sheffield City Council has given me showing that the authorities that have had the biggest cuts to their core spending—cuts of over 30%—have between them benefited in this financial year to the tune of £10,000? That is the total figure for the authorities that have had the biggest cuts in grant over the past few years.
My remarks a moment ago were about not the transitional grant but the problem of the negative RSG. I will come on to other grants in a moment.
We have responded to concerns about proposed changes to the new homes bonus. By the end of 2018-19, we will have paid out £7 billion under the scheme to reward the building of some 1.4 million homes, including £947.5 million for the year 2018-19. When we consulted last year on proposals to link NHB payments to the number of successful planning appeals, it was clear that the sector wanted continuity and certainty. That is what we have delivered, with no new changes to the NHB this year and the baseline being maintained at 0.4%. Furthermore, as we set out in our housing White Paper, we are enabling local authorities to increase planning fees by 20% where they commit to investing the extra income in their planning services. That should provide a welcome boost to local planning authorities and address concerns about under-resourcing.
The final settlement includes small adjustments to top-ups and tariffs for authorities based on corrected Valuation Office Agency data. I know that my opposite number—that is, the opposite number I have today, Andrew Gwynne—has been trying to make some mischief on this point, so let me spell it out very clearly for him. [Interruption.] Well, he raised a point of order on this issue yesterday. I think it is worth spelling it out clearly, because perhaps he has not understood what we have said.
The provisional settlement was based on the VOA’s official statistics, the best published data available at the time. Just ahead of the provisional settlement, officials were notified of an error in the VOA data. Ministers were not told about this until
I am grateful to the Secretary of State for clarifying the position. Of course, the point is this: who runs the Department? The Secretary of State has some responsibility. If his departmental officials knew that the data were incorrect, was it not incumbent on him, as Secretary of State, to have known that and made it clear to the House when he presented the provisional settlement that the data were likely to be changed? The fact is that he came to the House on
As usual, the hon. Gentleman stands at the Dispatch Box and raises his voice, acting like a child again. He has nothing whatsoever to say on the substance of the issue.
Councils have a crucial role to play in helping to deliver the homes that our country desperately needs. However, we all know that we cannot achieve that without having the right infrastructure in place: the schools, GP surgeries, transport links and other essentials. The private sector can go only some way in delivering that infrastructure. It is clear that we must raise our game to match our ambitions, which is why last July we set up the housing infrastructure fund to support local authorities to provide infrastructure and build more homes. In the end, we received a staggering 430 bids, worth almost £14 billion, to deliver 1.5 million homes, demonstrating the incredible ambition that is out there to tackle the housing crisis—an ambition that we are keen to get behind and back fully. Hence our move to more than double the housing infrastructure fund in the autumn Budget, dedicating an additional £2.7 billion to it, bringing the total funding to £5 billion.
Last week I was delighted to announce the first funding allocation: £866 million for 133 successful projects, involving 110 councils, that will help unlock up to 200,000 homes. Those projects promise to deliver a strong pipeline of homes at pace and scale, and represent another important step towards meeting one of the defining challenges of our time.
I will now turn to another major challenge: social care. I am under no illusions about the pressures that councils face in addressing one of the biggest challenges we face as a country, which is why we have put billions of pounds of extra funding into the sector over the past 12 months. I can today announce a further £150 million for an adult social care support grant in 2018-19. This will be allocated according to relative needs and will help councils to build on their work and support sustainable local care. It comes on top of the additional £2 billion for adult social care over the next three years announced at the spring Budget. With the freedom to raise more money more quickly through the use of the social care precept, which I announced this time last year, we have given councils access to £9.4 billion more dedicated funding for adult social care over three years.
The problem with putting up council tax in order to pay for social care is that some of the most disadvantaged areas have a very low council tax base. In Hull, for example, what we can raise through that increase in the precept is very small compared with the needs we have. Are we not moving back to the days when the poor were keeping the poorest, about which George Lansbury protested in Poplar nearly 100 years ago, by putting the onus back on local authorities in very disadvantaged areas?
The hon. Lady suggests that the only way councils can access funds to provide social care is through council tax, which is absolutely not the case, as she knows. It is an important way to raise some of the funding, but an increasing amount is coming from central resources. For example, the £2 billion that was allocated in the spring Budget takes into account the ability of local authorities, including the hon. Lady’s, to raise money locally. It is right that we have that balanced approach, but I know that there is more to do on adult social care, and that funding alone will not help to fix the challenges. This long-term challenge requires a long-term systemic change. The publication of a Green Paper this summer on future challenges in adult social care will help set us on a path to secure that.
Finally, we are responding to calls for more flexibility over setting council tax. Local authorities will be able to increase their core council tax requirement by an additional 1% without a local referendum, bringing the core principle in line with inflation. This will enable them to raise revenue and meet growing demand for their services while keeping taxes low. Having done away with Whitehall capping, we have enshrined these checks and balances into the system. Under the Localism Act 2011, local government can increase council tax as it wishes, but excessive rises need to be approved by local residents in a referendum.
In addition, directly elected Mayors will decide the required level of precept by agreement with their combined authorities, and it will be easier for police and crime commissioners to meet local demand pressure under measures that I have agreed with the Home Secretary. They will allow for a £12 council tax flexibility for police services, raising an additional £130 million next year. We will, however, defer the setting of referendum principles for town and parish councils for three years, and we will keep that under review. In all, I want to see the sector doing everything possible to limit council tax increases and show restraint. I am keen to ensure that these freedoms are not abused, and I am sure voters are too.
My Department’s name recently changed to the Ministry of Housing, Communities and Local Government. That underlines our focus on fixing our broken housing market and getting Britain building, but I remain absolutely committed to the community and local government elements of our work. They are the foundations on which everything else stands. It is not enough to build more homes; we need to build better and stronger communities. Councils acting truly as local government and not local administration will help us to achieve that.
I can confirm that there will be a real-terms increase in resources for local government over a two-year period, rising from £44.3 billion in 2017-18 to £45.6 billion in 2019-20. I should clarify, however, that due to the additional £166 million that was announced this year, that is a real-terms increase over the two-year period rather than year on year.
We have listened to local authorities, and through this settlement we have delivered what they asked for, while at the same time keeping spending in check. We have delivered a real-terms increase in resources over the next two years, more freedoms and fairness, and greater stability and certainty for local authorities to plan and drive value for money. They, and the communities they serve, deserve no less. I commend the settlement to the House.
Thank you, Madam Deputy Speaker. Well, what on earth was all that about? We have been waiting since December to get this detail. We were told that discussions were taking place and that there were journeys over to No. 11 to make sure that we secured money for housing and public services such as adult social care. To see just crumbs off the table being provided is depressing.
On my way here, I often walk past the Department for Business, Energy and Industrial Strategy. I imagine the Secretary of State, when he was in that Department, being fulfilled, happy, contented and enthusiastic about his brief. What a contrast with now! He clearly does not have the energy for this brief and does not understand the detail, to the extent that incorrect information was presented to the House during the December debate.
Probably more telling is how little attention the Secretary of State got from the Chancellor. The social care crisis ought to have been addressed in the autumn statement, but because it was not, he now has to work within the departmental budget.
I am pleased the hon. Gentleman asks that question. At that time, there was already an in-built deficit in the Budget because of the increase in the national living wage and employers’ national insurance contributions, so even within the £2 billion allocated there was a £1.3 billion in-year deficit, because of the need to make sure that the provider market could be sustained. That is my response. It is just not enough money. Everybody in the House and our communities knows that. It is just a shame that the Secretary of State does not carry the weight in the Treasury to get the money into the Department and out to councils and into our communities.
The Local Government Association has calculated that there will be a £2.3 billion gap in social care funding by 2020, having taken account of the 2017 Budget increases, and there are similar figures from the King’s Fund. The National Audit Office did a report for the Communities and Local Government Committee looking at these figures and basically confirmed their accuracy. There is a real problem here that cannot be disguised and that will not go away without extra funding being delivered.
Those figures are absolutely right. The analysis from Age UK shows that 1.2 million people who would have been entitled to social care in 2010 are no longer receiving social care because of cuts to the eligibility criteria by councils.
Coventry City Council has probably lost about £90 million over the past few years. The Government are playing a very clever game: they are shifting the cost of local government on to the local taxpayer, so that they can boast of keeping taxes low. It is really just a double-edged sword.
I agree with that. We are here debating work carried out by people outside this place—local councillors and local government workers—and it is right in this place to thank them for their hard work, their dedication and their grit and determination to make sure that services are provided in the face of severe austerity.
I want to make some progress, because I am conscious of the number of people down to speak.
We need to ask a number of questions when faced with the settlement. First, does it step up to meet the scale of the challenges facing local public services in England today? Does it meet the challenge of 1.2 million older people who would have been entitled to social care in 2010 who no longer get the care they need? Does it meet the challenge of huge increases in the number of child protection and looked-after children cases reported by the LGA? After nearly a decade of Tory-dominated Government, does it begin to rebuild the essential community infrastructure that was taken away after the financial crash?
My view is that it fails on every one of those counts. The funding settlement today is little more than an insult. I want to put this into context—after all, we can have a party political debate about it and attribute blame, but that makes no difference to the day-to-day experiences of local councils.
I want to lay out the case, and then there will be a long time for debate—but only if I rush through this to allow time for people to speak.
Central Government funding of local services has reduced by 40%—less money when demand is increasing—and we all know that it has not been distributed evenly. The overall reduction has hit local authorities with lower tax bases hardest because they are more dependent on central Government grant. The UK Government’s total spending on local government, as a share of the economy, has fallen sharply. In 2010, it accounted for 8.4% of the economy; by 2022, the figure will be down to 5.7%, which constitutes a 60-year low. Yet councils in England still have 1,200 statutory obligations. They have less money, but the same is required of them. That has had an impact on people, in that 811 fewer people now work in local government. The local government workforce today is the lowest since comparable records began, when the central Government workforce is the highest that it has been since comparable records began. Moreover, the figures are not fairly distributed across government, let alone geographically.
If austerity had not kicked in and affected our local council base, councils today would have £14 billion more than they have. That would be sufficient to deal with the crisis in social care and the crisis in children’s services.
I have listened carefully to what the hon. Gentleman has been saying, and it seems to me that his answer to every question is, “Send more money.” My question to him is: where is the money going to come from?
I will come to that a little later. [Interruption.] There is absolutely no such thing as “no cost effect” when it comes to not providing vital services for people. We know that because older people are not being looked after the way that they need to be looked after. We know because social care is not being provided in the home. More than 3 million delayed-discharge days have been attributed to a lack of social care. More than 120,000 hospital beds have been blocked, so there is a cost involved.
Most people who understand public services would say that it is far better to have joined-up public services that are unified at local level, so that money is spent to best effect and spending is tailored to the circumstances of the individuals who are using the services, than for people to have to navigate the ridiculous silos in which money is held. However, we must also accept that people are living longer, which has health and social care consequences that carry a cost.
As a society, we must make up our minds about the type of country in which we want to live. Are we the country that ignores older people who need care because we can ignore them? They are not visible in the same way as ambulances queuing up at A&E. The truth is that 1.2 million people who are in their homes are being ignored by central Government, and by the Treasury in particular. I think that they deserve better.
The hon. Gentleman is making a serious point about adult social care. Would the Labour party work with other parties to bring about a bipartisan approach? Everyone knows that there is a problem, but we should all work together to find a solution.
The problem with health and social care is that so many reports have been commissioned, but by the time a commission has met, considered the evidence put before it and reached a conclusion that can be accepted across partisan divides, the world has moved on and the challenges have changed. Some of this is not difficult, but any idea that it does not come down to pounds and pence is nonsense. Of course we can be more efficient with the money that we have, and we ought to ensure that that happens. We can work better across Departments, and we should do that as well. Ultimately, however, there has to be enough money in the system to meet the demand.
The hon. Gentleman is talking about a very important challenge that we face as a nation. Will he confirm that the Labour party would double council tax to deal with this crisis, as other members of it have suggested? Our voters would need to know that.
Council tax has an important role to play, as have business rates, but it also has significant limitations. I shall explain why a little later.
Any idea that the social care and safeguarding crisis—we should talk about safeguarding as much as we talk about social care and the NHS, because it is all-important—that can be addressed through council tax, through a property-based system that is now 27 years out of date, completely misses the scale of the challenge that faces public services.
I need to make progress.
I want to touch on what the 1% additional council tax means. When we seek to raise money through council tax—through a property-based tax—that takes account of the property values in an area, but it bears no relation at all to local needs or the cost of delivering services in that area. Therefore, the more pressure that gets added to councils to provide that from council tax, the more inequality we are going to see through council tax.
In Richmond, 1% for social care would raise £36 per person over the age of 65, but in Rochdale it raises just £18, because the tax base just is not there to support an equal increase in cash being taken. So if all we do every year is come back and say that we are going to allow another 1% and another 1%—and perhaps, if things get even worse, allow another 2%—that will just take even more from people who can afford it even less, because although council tax is important, it is regressive; it takes far more from lower income families than any other form of direct taxation in this country. So as much as it is important, we ought to always have an eye on the impact on those who actually pay the bill. After all, as we often hear from Government Members, there is no such thing as Government money; it is all the public’s money. That is right, but we are quicker to take the money from some people than from others it seems. We should focus on that, too.
We know that social care and children’s services are in crisis, and we know the complexities of social care will mean there is greater demand on the public purse. The difficulty is that the Government’s approach has been completely underwhelming and has completely missed the opportunity to set the record straight. Aside from the massive increase in looked-after children and children in receipt of reviews, we also know the way that has been funded is completely unsustainable.
The transition grant and the rural service delivery grant were introduced on the basis of two concepts. First, those who were hit hardest by the reduction in revenue support grant would get greater support to help them in a temporary period of two years to adjust their baseline budgets and organise efficiencies to eventually deliver a balanced budget. Secondly, there was a recognition through the second grant that it costs more to deliver services in rural areas than in urban areas because of sparsity. I am afraid the evidence base for both of those does not hold water and has not even passed the test the Government have set. So the transition grant that was meant to be there for two years has now been extended, and the rural service delivery grant has been completely undermined by a report the Government themselves commissioned by LG Futures in 2014 to assess the additional costs of delivering services in rural as opposed to urban areas.
The report said there were differences in the cost of delivering some services in rural as opposed to urban areas but the net cost in terms of the impact on councils’ overall budgets was felt harder by urban areas as the costs in those areas were far higher. [Interruption.] That is not my report; it is a Government report published on their website that supports the revenue support grant. Given that the evidence base has been decried by the Government’s research, I am staggered that they are putting even more money into a system where the evidence base is completely contrary to the position the Government seem to be taking.
The report found that 11 service areas were affected in rural areas and that accounted for about 15% of the council spend in those areas, but when it looked at the 15 service areas that were not affected, it found that they accounted for 31% of urban local authority budgets, so there was a 15% additional cost because of sparsity in rural areas versus 31% of additional cost in urban areas for service delivery. Therefore, if there was going to be a grant designed to help councils deal with the additional cost of delivering public services, on an evidence base the Government have commissioned, accepted and published on their website, that ought to be directed to urban authorities where the costs have been demonstrated to be much higher. Yet we continue with this farce.
I find it interesting that the Secretary of State does not have the Chancellor’s ear. When he knocks on the door of No. 11 and asks for more money, the Chancellor is not particularly interested in banking that support for the future as much as the Secretary of State is determined to bank the support of Conservative Back Benchers for whatever reason. Perhaps it is to face off a rebellion today or to buy off Conservative shires—a purpose that has not yet been declared. He should be honest about why the money has been allocated.
I do not resent the argument being made by areas with service delivery costs relating to sparsity that that ought to be reflected in their settlement. I do not disagree with that at all, and I commend the MPs who have made that case and have managed to secure progress from the Secretary of State, who on most measures does not seem to understand his brief. However, he certainly understands the need to appeal to Back Benchers and to bank their support for the future.
I resent the view, however, that some councils in some areas can be funded in a fairer way—although still not fair—while others have to sink or swim depending on their council tax base 27 years ago. That is not a fair or sustainable way to fund council services. I have no confidence that the fair funding review will deliver what most reasonable people would consider to be a reasonable and fair funding formula, which would be one based on need that would take into account urban deprivation, rural sparsity, demographics and demographic change, and the difference in unit costs for delivering public services. A fair formula would take all that into account and arrive at a number, but that is not what is on the table today.
The Conservatives who will go through the Lobby later to support the motions should bear this in mind: there is no new money. Money has been moved around from departmental budgets that were set before Christmas. The money in the transition fund and the rural service delivery grant is a one-off that has been taken from the business rate safety net—the Government will not say how that will be funded in future—and from other departmental reserves. How will councils be funded between now and 2022? Do Conservative Back Benchers really want this charade at this point in the calendar every year? We know that there is not enough money to fund public services, but they hold their nose because they have been bought off with a couple of pounds. They absolutely understand, in the way that all Opposition Members do, that the cuts have gone too far and that our communities deserve better.
Order. To accommodate the level of interest in this debate, the time limit on Back-Bench speeches, which the Chair had previously notified would be seven minutes, now needs to be six minutes.
It is a pleasure to lead the debate from the Back Benches today, and I will start by agreeing with one point made by Jim McMahon: his congratulations and applause for the work of local government staff up and down the country in delivering services for local residents day in, day out, with a resource base that is diminishing overall. However, I disagreed with almost everything else that he said.
The hon. Gentleman seems to have a limited recall of local government finance, which may not be his fault, as he has not been in the House for very long. Those who were Members between 1997 and 2010, under the previous Labour Administration, will recall that there was a significant shift of local government resource from rural to urban areas. The hon. Gentleman referred to a piece of research undertaken in 2014, but I encourage him to read more widely. In particular, he should look at the work done by the Rural Services Network, which has carried out considerable research into the additional cost, which it acknowledges, of the delivery of services—[Interruption.] The hon. Gentleman says from a sedentary position that that is not the evidence, but it is the evidence provided by the RSN. I should declare that I co-chair the all-party parliamentary group on rural services, which is supported by the RSN.
I do not have very long to speak—you have given us a tight time limit, Mr Speaker—so I will confine my remarks to a few points. I will give the shadow Minister one example of the unfairness, as I and other Conservative Members see it, between rural and urban areas. The proportion of spending power funded by council tax in rural areas for the coming year, 2018-19, is 69%, while the proportion of spending power funded by council tax in urban areas is 55%. The burden on council tax payers in rural areas is significantly higher, which can be illustrated by comparing almost any urban authority with any rural authority that I care to mention.
My rural authority is Shropshire, which I will compare with Coventry, an urban area not that far away that has a similar population base, Shropshire’s spending power in the provisional settlement, before the additional measures announced this week, is £1,623 per dwelling, whereas Coventry’s spending power is £1,780, so there is £157 more spending power per dwelling in Coventry. Coventry generates £21.5 million more than Shropshire, and as £21.5 million is close to 9% of Shropshire’s total spending power, it represents a significant divergence in capacity at a time when the costs of delivery in rural areas are going up disproportionately.
One of the reasons why the costs of delivery are increasing disproportionately is because of the rapid acceleration in the age profile of our residents in rural areas. I have been surprised to discover that my constituency of Ludlow now has the 11th oldest population in the country, so there are only 10 constituencies in which more than 28.2% of residents are aged over 65. The situation is leading to considerable cost pressures on the delivery of adult social care in rural areas. The cost in Shropshire is going up by roughly £10 million a year, so the increase in core spending that will result from this settlement will be more than absorbed by the increasing cost pressure on delivering services to our increasing elderly population.
I welcome the measures announced by the Secretary of State this week, and I welcome the fact that the Government will publish a Green Paper in the summer on the cost of social care. It behoves us all to get involved, and I am sure that many all-party groups and interested groups outside the House will make representations. The all-party group on rural services, which I have the pleasure of chairing, will certainly make a representation.
My final point, in my last minute, will be to welcome yesterday’s announcement of a £16 million increase in the rural services delivery grant. I am pleased that £900,000 of that will come to Shropshire to reflect the costs I have mentioned. I also welcome the extra £150 million for the adult social care support grant, on top of the £2 billion announced in the past 12 months, about which the Opposition spokesman was so grudging. This reflects the Government’s recognition of the challenge in social care, and we are doing the right thing by trying to meet that challenge.
I also welcome the announcement about the retention of capital receipts for an additional three years, which will be of great help to authorities such as Shropshire Council. I am particularly pleased that the Secretary of State confirmed in response to my earlier question that the current review will be taken forward into the spending review.
This debate has to be seen against the background of a 79% cut in direct funding to local authorities between 2010 and 2020—those figures are from the Institute for Fiscal Studies. Local government has faced bigger cuts than virtually any other part of the public sector, and how well local government has dealt with that is to the great credit of councils across the country of all political persuasions. There have been real cuts to services, and if central Government were as good at managing their resources as local government, we would probably see much better services being delivered by central Government Departments. The reality, however, is that the councils with the biggest needs, such as Sheffield City Council, have faced the biggest cuts. There have been more than £300 million of cuts in grants to my local authority, and we have seen the problems in Northamptonshire only too starkly in the past few days.
On Monday, as we looked at business rates and local government finance, the Communities and Local Government Committee heard from witnesses including Councillor David Simmonds from the Local Government Association and Councillor Paul Carter from the County Councils Network, both of whom are respected Conservative leaders. When we asked them whether other councils were likely to follow Northamptonshire, they said, “Not this year, but unless attention is paid to the growing pressures of adult social care and children’s services, which are becoming an even bigger problem in some authorities, there is a cliff edge that other authorities are going to fall over at some point.” Those Conservative leaders are not going off half-cocked or at a tangent; they are facing up to the real problems that local authorities are having to address daily.
The £150 million extra for social care is of course welcome. We are now somewhat used to having sticking plasters every year to address the social care problem, but it is just that the sticking plaster has got a bit small this year—it is £150 million rather than the billions we had perhaps come to expect. The LGA has said in its assessment that by 2020, the gap for social care will be £2.3 billion. That figure has been confirmed by the King’s Fund and by the National Audit Office in a report for the Select Committee. It is there for everyone to read, so this problem is coming at us—it is here and now, and it is growing. Conservative leaders of local authorities are saying this just as strongly as Labour leaders, and we are talking about a total funding gap of nearly £6 billion. That is the reality, and I have not heard Ministers challenge it in any way. These are the problems that local authorities are facing up to, and without extra resources, they will not be able to deliver the services that our constituents need.
I wish to pay particular attention to two issues, the first of which is business rates retention. Council leaders told us on Monday that there is a great deal of uncertainty. The four-year funding settlement that we are now in the middle of was welcomed by local councils, as they saw a degree of certainty, but they are now uncertain about what will happen in 2020. The Government’s intention is to have 75% business rate retention, which will give an extra £5 billion to the financing of local councils, but the Government intend to offset that by making the money pay for public health grants, rural delivery grants and other grants, so there will not actually be any net new money for local councils as a result. The leaders told us that when the move is made to 100% business rates retention, it will deliver another £5 billion, but local councils need that money to deal with the pressures on them now, and they will grow by 2020. The policy cannot be used to provide a reason for giving even more powers to local government in order to absorb that £5 billion, which is the Treasury’s intention. Ministers really have to think about that. There is a way to solve the funding problems in 2020: use this extra £5 billion from 100% business rate retention to fund dealing with the pressures that local government can identify.
Finally, I wish to talk about the fair funding review, which is a wonderful form of words to keep Conservative Back Benchers happy, is it not? Everyone smiles and says, “Fair funding means we are going to get more,” but one person’s fair funding is, of course, another person’s unfair funding, as we have seen over the years. Local government cannot agree among itself how fair funding should be sorted out. Of course it is right to review needs assessments every so often, and the Select Committee has put forward some evidence, following research we had commissioned on that review. But in the end, this is a zero-sum game, because when one council gains from the review, another will lose. What came out clearly from our evidence session on Monday—I believe that this was said by the Conservative leaders—is that if the cake is not large enough, the fair funding review will probably end up being seen by no one as fair at all. That is the real problem. If additional funding is not identified, the growing crisis in social care will mean that there will be an even worse failure to deliver for some of the most needy in our communities, with the risk that some local authorities will be so financially strapped that they will follow Northamptonshire. That is a warning of which we should all be aware, and we have to bear it clearly in mind in the next few months.
Shrewsbury is one of the most popular places to which to retire in the whole United Kingdom. The beauty of our historic town and the Shropshire countryside attracts a lot of senior citizens to come to live in our community. We celebrate their contribution to our constituencies and to the county, but with that increase in the number of senior citizens comes, of course, additional adult social care costs. I have become interested in the local government finance settlement because, as my hon. Friend Mr Dunne said, our local council has faced increases of £10 million per annum in its attempt to grapple with the spiralling costs of adult social care.
When previously the Labour party ran the local council, it increased council tax by 16.6% in one year. That caused a great deal of distress and concern to people on fixed incomes, especially senior citizens, which is why we have encouraged the council to freeze council tax and do everything possible to limit the increases that local people will have to pay. I am proud that the council has managed to do that.
Shropshire Council has reduced some of the operating costs, as we have asked it to do since we came into office, and a lot of the fat has been cut away. In fact, the council is one of the most efficient in the whole United Kingdom. However, having made the efficiency savings, it is now really struggling to meet additional costs, which is why my hon. Friend the Member for Ludlow and I have spent so much time in discussions with the council leader, Peter Nutting, and the chief executive, Clive Wright, to hear at first hand about some of the difficulties they face.
As a result of those discussions, my hon. Friend the Member for Ludlow and I, along with other Conservative MPs from rural shire counties, decided to meet the Secretary of State and the Chancellor over the past few weeks to highlight the difficulties that rural shire counties face. I wish to put on record my thanks to my hon. Friend and my right hon. Friend Mr Paterson. My right hon. Friend is not able to join us today because unfortunately he is in hospital after an accident but, as my hon. Friend the Member for Ludlow will acknowledge, my right hon. Friend has played an important part in the campaign for funding for Shropshire Council.
May I reciprocate by thanking my hon. Friend for the leadership he has shown in those meetings and for his determination, which has meant that rural counties have got a better deal? Equally, I thank the Front-Bench team for listening to us and being so helpful to people who need their help so badly.
My hon. Friend is not quite Salopian, but he is certainly our neighbour, and I thank him.
Whether we look at funding for local government, education or, indeed, health, we can see, as my hon. Friend Bill Wiggin will acknowledge, large gaps in funding—a disparity between rural and inner-city areas.
I completely agree with my hon. Friend that rural sparsity and above-average ageing populations, such as Wiltshire’s, do increase costs. Does he agree that deprivation is not confined to urban areas, as the Opposition believe, but can actually be found in rural areas such as our constituencies?
My hon. Friend makes a critical point. When Labour were in government, I brought Labour Ministers to parts of Shrewsbury, including Harlescott, Ditherington and Sundorne, where there are some of the highest levels of deprivation throughout our county and the region. They were amazed. The Opposition just think of Shrewsbury as a quiet, sleepy, beautiful little historic town. They do not understand that there are significant levels of deprivation in rural shire counties.
I am very grateful to my right hon. Friend, the Secretary of State, and to his colleagues in the Department for treating us with a great deal of civility and decency and for listening so attentively to our representations. I thank him for the additional £166 million, as a result of which Shropshire gets an additional £2.3 million. However, the taskforce that we have created will continue its work until we get a fairer funding settlement. I am very grateful to him for taking the first step in ensuring that the fair funding settlement is implemented. He has announced the start of a public consultation process, which is something that none of his predecessors did, so we can now acknowledge that he is taking our concerns seriously and is putting forward the mechanics to ensure that we finally have a fairer funding settlement between rural and inner city areas.
When the dust settles on this local finance settlement, I will continue to lobby my right hon. Friend, as will my right hon. Friend the Member for North Shropshire, to ask for Shropshire to be considered for the next tranche of business rate retention pilot schemes, because that is a very good initiative and something from which our county could benefit significantly.
I will end by inviting the Secretary of State to Shropshire. He has been there before—he represents a constituency not far from us—and we have been very grateful for those visits. None the less, I invite him again to come to spend a day looking at how services are provided across a rural county, and how there are huge additional costs in providing those services. I say to Jim McMahon that, in contrast to what he attempted to say in his contribution, those additional costs do exist. In dealing with a lot of very small schools in rural villages, meals on wheels and getting support to remote rural villages, there are, of course, additional costs, and until they are taken into consideration, we, in the shire counties, will continue to lobby strenuously on this matter.
I know that I will not be alone in observing that the level of casework coming through my constituency office these days has never been so high. The reason it is so high reflects a number of things. It certainly reflects the fact that 7,500 people used just one of our local food banks, the B30 food bank, last year alone; it reflects the changes in the benefits system; it reflects the persistent problem of low pay; and it reflects real problems of crime and antisocial behaviour that was covered in the previous debate.
The reality, though, is that so many of the cases that I take up today relate to services provided by Birmingham City Council. Yes, Birmingham does not always get things right, but then neither does any other local authority. However, as a council under Labour, it has continued to prioritise children’s services; kept most libraries open when many other authorities have closed theirs; and taken an active role in boosting jobs and skills for young people, leading to initiatives to manage and reduce the numbers of young people not in education, employment or training. It is also leading in the co-ordination of the response to the collapse of Carillion locally. It is building homes and has a programme to improve fire safety in tower blocks—we are waiting for a Government response on this—which needs and deserves help from the Government.
The truth is that so many of the problems that I see at my advice desk are down to the fact that Birmingham City Council is simply not allowed the resources by Government that it needs to provide the services that my constituents deserve. Figures in the provisional local government finance settlement show that Birmingham’s core spending power will drop by 2% over the period between 2015-16 and 2019-20, even if Birmingham City Council raises its council tax by the maximum 3% each year. In comparison, over the same period, Hampshire’s spending power will increase by 4.8%, Surrey’s by 4.7% and Warwickshire’s by 7.5%. Government funding to Birmingham City Council has been cut by almost £650 million since 2010. That is more than 75% of the current net budget. It has lost 40% of its workforce, and adult social care, which has rightly attracted a lot of attention in this debate already, has had to be cut by 48%. We all see the consequences of that.
Fairways, a day care centre in my constituency, is under threat of closure. In proposing that closure, Birmingham City Council has got it wrong. I hope that service users and I will persuade them to change course. However, the council has been put in this position and is on the brink of making the wrong decision due to the 48% cut in the budget for adult social care.
But the point I really want to make is not just that Birmingham needs more support, but that it deserves a fair deal in the formula used by the Government. The Government have failed to correct an historical error in the funding formula, which means that Birmingham is £100 million worse off today than it should be. Why? Because the Government cut grant allocations to local authorities in 2014-15 and 2015-16, pro-rated to the level of grant received, and they disregarded the ability to raise council tax income. The result was that the authorities receiving more Government grant because they were least able to raise council tax income—because of the generally higher levels of deprivation—received the largest cuts proportionately.
Birmingham City Council met the Government to discuss changes in approach to the distribution of the cuts made to local government, so that the cuts would take account of the ability to raise council tax. I am pleased to say that the Government did change their approach to allocating cuts from 2016-2017 in order to take that into account. However, the inherent unfairness of the first two years’ cuts remains. Based on the latest local government finance settlement, Birmingham City Council estimates that it will receive £100 million less funding in 2018-19 than if the cuts were made fairly.
Like all local authorities—particularly those with the highest levels of deprivation—Birmingham needs greater support from the Government. But I am not just making a special case for Birmingham because of that. I am asking that all local authorities are treated equally in the level of cuts made annually. And if they are to be treated equally, Birmingham City Council should receive £100 million of extra funding. The Government have not agreed to that. My question is, why not?
What we get in our local government grant is key to delivering the standard of living that all our constituents want. I thank the Minister, because we have been fortunate in Devon, where core spending has gone up 3.3% to £537.8 million. We have an additional social care grant of £2.2 million and a rural services delivery grant of £7.5 million, although the business rates pilot money of £10 million has perhaps been the most valuable to us, as it has doubled what we might otherwise have received. Hon. Members might be expecting me to say, “Thank you—that’s enough.” And I do thank the Minister. But, in a sense, the case has largely been made by my Shropshire colleagues: even that money is not enough, because we have a shire county with an ageing population and infrastructure challenges. I will not repeat the valuable case that has already been made.
This debate is not just about how much money authorities receive, it is also about how it is spent. I have a real concern that some of the money sent to local authorities by the Government will not actually be spent on what the Government imagine. That happened with the last chunk of additional money for social care funding. My local authority is—forgive me—strapped for cash, so it decided to reduce what it was going to spend itself, and instead included the extra chunk that came from the Government. The bottom line is that it was not actually social care providers, and particularly care homes, that saw the benefit. That does not seem right.
There is no oversight of the commissioning of social care or, indeed, of many other commissioning functions of local government, so the level of service provided is a postcode lottery. My constituency has some really good private providers, but they do not take any patients or inmates from the public sector because they simply do not offer sufficient rates. Nursing care homes in my constituency—the ones actually provide nursing care—have largely gone because they simply cannot be paid enough to provide support. It is those nursing care homes that we need, almost more than the standard care homes. I would suggest that the Government think not just about how much is spent, but how we supervise and have some oversight of how local authorities spend that money.
Children’s services are in an equally dire position. The department is overspent in Devon and the weighting has been inadequate, yet to try to save even more money, the council is looking not at outsourcing, which is what it did before, but at bringing in-house its provision of public health services for children. I am concerned that what the Government are doing, while well intended, is not delivering the right result.
In education, I certainly welcome the increase, and indeed the new funding formula, but it is not delivering what we need. Yes, it is more, but for the same reasons of sparsity, it is not enough. As a result of the formula, some schools will actually be worse off now than they were before the formula was introduced. The formula is opaque and unfair, and it is not designed to re-address the situation when, hopefully, the good times roll again. I urge the Minister, working with the Department for Education, to look again at how we can make the funding formula really fair.
My real concern, however, is special educational needs. Devon has one of the most critical situations in this regard. Much of the provision is out of area and consequently very expensive. We need a hub, which requires initial capital investment from Government. Something that has rather surprised and horrified me is that when any child is what we used to call statemented—that is, needing support, usually about £10,000, which is about what is needed to pay for a teaching assistant—the local council gives the school only £2,000 and the school is expected to find the difference. The school is not a business; it is there to provide a public service. That does not seem right, but I am sure that the Department could fix it if it wanted to.
Mental health provision is also inadequate—we know that; there are no surprises. We welcome the offer of a person specifically focused on mental health within schools. However, this must about providing an additional person, not just trying to retrain somebody who is already fully employed.
The funding settlement for education does not cover costs such as salary increases, pension increases or the apprentice levy, nor the extra cost of children having to be supported up to the age of 26—well, they are not children any more. It seems to me that there is still a lot more work to be done.
The Government and the Department have made a good start. I believe that their intention is in the right place, and the financial support offered is welcome, but they absolutely have to address the underlying unfairness and challenges for rural areas, which are not understood in any formula that I have seen in any of the spending areas. It is critical to get this right before—if the Government have what they want—the system whereby all funding is generated locally is put in place. If we do not understand the need in rural areas, we will never be able to ensure that whatever we do locally is going to meet that need.
I came to this place having represented my community on Nottingham City Council for six years—something that I enjoyed greatly and that was a real privilege. However, being a councillor between 2011 and 2017 was quite a difficult proposition. We saw massive real-terms decreases in our funding every year as the Government downscaled their commitment to our city. That meant service cuts, council tax increases, and business rates being increasingly vital. It meant local people paying more so that the national Government could pay less. All this in pursuit of an austerity agenda that decimated demand in our local economy, leading to a historically slow economic recovery, and is now to pay for tax cuts of little social value.
I am afraid that is the picture we see again this year: spending cuts. I used to think—I do not know if it was a naive or an optimistic view of the world—that Ministers did not understand local government and that that was why there were cuts of such a scale. My hon. Friend Mr Betts, who is not in his place, said that local government has been targeted as much as anywhere else in the public sector. I thought that it was because Ministers did not understand it, and thought that the services were unimportant and wasteful. Actually, it is quite the reverse. Ministers target local government because they know exactly how it works. They know that hard-pressed councils like mine in Nottingham have to set balanced budgets, so if they pull a lever and say what the reduction is, they will get that reduction, to the penny, from local government, and they can go to their Treasury colleagues having done their job. They will have had none of the responsibility and will get all the benefit. What an easy cut to make!”
That would be bad enough, but these spending cuts have been incredibly unevenly distributed. Between 2014 and 2016—around the transition grant period—Nottingham households lost 250 quid each in spending power, while those in Windsor, to pick one area out of dozens that would fit into this category, lost just £34. But it was those very communities such as Windsor that benefited from the £300 million transition grant to help them to deal with the cuts. In Nottingham? Not a bean.
Inevitably—what else could it do?—that has led to council tax rises in my community. One of the poorest communities in the country, with the lowest discretionary spend, we will now again receive a near 6% increase in our council tax. We have a small council tax base, as others have mentioned, so that will be less helpful for us than it will be for other communities. Our gap in Nottingham starts at £33 million. The Secretary of State talks about increased spending, but the reality of the situation—I suspect it is the same for all hon. Members here today—is that my council will have to make reductions. If I tell my council leader that he has more money, he will tell me that he has to make a £33 million reduction in services. If he gets £6 million in council tax, that is still £27 million that has to come from elsewhere as we deal with the toxic combination of losing grant and having significant increases in demand.
We have heard a lot about demands in adult social care, which are important, but we should not forget children’s social care and the extraordinary pressures it creates. So for my community there will be service cuts. Lest people think that this is an efficiency issue, I want to share with the House the proposals in Nottingham—[Interruption.] I am glad the Chancellor has joined us: I will be able to make a personal plea. The proposals in Nottingham include job cuts in adult social care; reducing funding for weight management, smoking cessation and drug and alcohol services; reductions in youth services; reducing funding for the careers service; reviewing transport services for vulnerable adults; reviewing fees and charges for leisure centres and bereavement services; and increasing fares and reducing frequency on the Link bus services. We have our political differences, but I doubt that anyone would say that those are “nice to haves”.
More importantly, as well as being vital services in my community, those are all stitches in time that save nine. Every single one of those reductions will lead to an increase in spending in public services elsewhere, and that is why this settlement is an act of vandalism. It is short-sighted and ill-judged. But as we all know—and I suggest this is why the Secretary of State is so attached to the idea—my council will receive all the blame. It should not; it is doing an excellent job in impossible circumstances. The fault lies at the door of the Secretary of State.
As for the fair funding review, I have no problem with systems that are a generation old being looked at, but we should be clear when we talk about fairness. I know there is an enthusiasm for capitation, but we should be clear what that would mean for communities such as mine. I am happy to accept, and I almost hoped I would get, an intervention on that point.
Does my hon. Friend agree that areas of high social deprivation end up bearing the brunt of cuts? In particular, in my constituency, the council has had to contend with £54 million in cuts, £12.4 million of which is to schools, thereby hampering the education of the next generation.
I share my hon. Friend’s perspective. I know that he will work with his council to try to mitigate those cuts, but there is a point at which that becomes impossible. I am sure that in Slough, as in Nottingham—and, as we heard from my hon. Friend Richard Burden, in his area—they have received reductions that are significantly over the national average. The reductions are not just ill conceived, they are unfairly distributed. When we look at the fair funding formula, we must look at that.
I have heard persuasive cases from Shropshire about the needs there. That is why we should look at hard deprivation indices to make our judgments, not special pleading or bartering for votes. We need hard figures that say where the need is greatest, because that is where the funding should go.
I have not been here very long, but I have noticed a couple of curiosities that have been in full force today. Earlier in the day, at Prime Minister’s questions, the Government Back Benches erupted with stories of how great things are going in Members’ constituencies and what a wonderful job the Government are doing. Fast-forward a couple of hours to this debate and suddenly we hear how hard-pressed those communities are and how much more money they need—and need now. As I have said, this is a zero-sum game, and the money would come from poorer communities such as mine. That is one of the odd spectacles.
We also often hear from Ministers at the Dispatch Box that the answer to public service issues is not more money, and councils should not just ask for more money. But then we have had a series of speeches this afternoon asking for just that. When the challenges are in better-off communities, the answer is always more money, but it is always less money for us. I come from Robin Hood country, and it is a sort of reverse Robin Hood. It is particularly galling to have lectures on the state of local public finances from communities that never put their council tax up, use that as a political article of faith and then say, “Look at the shortfall we’ve got.” We have always had to put our council tax up, because that is the only way we can hope to stay anywhere near in line with our demands. Those are our challenges. As we move to the fairer funding review, let us use fairness in its proper and most evidence-based form.
It is a great pleasure to follow Alex Norris, who made a passionate case for his area and touched on the issue of fairer funding. He is absolutely right that a fairer funding review has to be done after a period of time. I can remember making that argument to Labour Governments. The problem is that when a fairer funding review is done people then say, “Gosh, that area needs more money, but we’ve got to cap somewhere else” and Governments are not very keen on cutting elsewhere. So while I think the fairer funding formula is essential, and it is clear that county areas such as Northamptonshire should benefit, it is not the answer to all evils.
One clear issue in this debate—Members on both sides of the House have mentioned it—is adult social care. It strikes me that there is no Tory solution to adult social care, and there is no Labour or Liberal Democrat solution either. We need to work together to find a solution to a broken system. We need to do it now, way before the next general election when we start playing party politics again.
You would expect me, Mr Speaker, to talk primarily about Northamptonshire County Council, because by definition it is now the worst council in the country, having effectively said that it has run out of money. It would be very easy for me to get up and say it is all down to the Government not giving the county council the right amount of money, but that is entirely not the case. Other county councils have managed their affairs better—much better. The problem with Northamptonshire County Council is its governance over a number of years. I have to say that it has been the most difficult organisation to deal with. It does not respond to communications—to be honest, it would be easier to get through to God.
All seven Northamptonshire MPs have issued a statement saying that we have lost confidence in the leadership of the county council. The Secretary of State and the previous Secretary of State have known our concerns. I am very grateful for all the effort the Secretary of State has put into tackling this problem and putting in an inspector at the county council earlier this year. I hope that the inspector can report as soon as possible. It is clear that the solution is Lords Commissioners. The county council cannot resolve its own affairs.
How did we get to this mess? It seems to me to be partly due to the cabinet system of government. We have had the same local politicians in the cabinet year after year. They just recycle the jobs. The vast bulk of county councillors in Northamptonshire, of whatever political persuasion, are very, very good, but the fact that they do not get any information from the cabinet has not allowed them scrutinise the mess that has been going on. In fact, we could say that a clique ran the county council, and that is where it failed.
I am sorry to stop the hon. Gentleman in full flow, but I have heard him say that a few times now. For the budget to have passed, the very same councils that he says are outside the clique and ready to save Northamptonshire County Council must have voted for it, either thinking that the budget was a good one or thinking that it was not a good one but doing so out of party loyalty. Either way, would that not disqualify them from leadership as well?
In this particular case, the budget was passed on the assurances that were given by the cabinet, and those assurances were given to the local MPs. We said, “Are you sure you’ve got the money to do this? We’re worried,” and they said, “Oh no, everything’s rosy. The budget is fine.” They produced a budget and passed it. In year, it was clear that the savings they had suggested were not happening, and they had to take emergency measures. The budget will have to be set in February or not, and that is a dilemma for the council at this very moment.
My hon. Friend hits on a key concern that I have about the cabinet system in local government. When I was a councillor, we had committee chairs, and we had all parties round the table, having to justify what action they were going to take. There was immediate accountability. The cabinet system has taken that away too much.
I could not agree more. I was a councillor for seven years, and there was a committee system. It was a Conservative-controlled council, and I have to say, I was as much of a pain then as I am now. I remember persuading the leader of the council to take back the proposed budget because it was wrong. Nothing has changed there, I suppose.
I will not. I apologise, but other Members have to speak.
The cabinet system per se is not wrong, but it can go wrong, and it has gone terribly wrong in this situation because the information just was not there. The vast majority of officers at the county council are superb, as are the vast majority of members, but the fact that the information was not there meant that the scrutiny did not occur. Had there been a committee system, there is no way that the council could have got into this mess.
We are in a situation now where drastic measures have to be taken. I do not see any solution except Lords Commissioners. There will have to be a restructuring of local government in Northamptonshire. I hope that that can be done as quickly as possible, but whatever future local government system we have in Northamptonshire, it must have a committee system, not a cabinet system.
I commend Mr Bone for his speech. The simple answer in his case is that the Conservative councillors on Northamptonshire County Council could find the fortitude simply to no-confidence the existing leader, rather than trying to get the Lords Commissioners to do the dirty work for them, but it seems that they would rather abdicate responsibility in that sense as well.
While I am on my feet, I wish to draw attention to the comments made earlier by the new Secretary of State for Housing, Communities, Local Government and other subjects—the list seems to be growing every day.
Yes, obviously he is the Minister for Bins.
The Secretary of State said that Stoke-on-Trent City Council would see an increase in its funding abilities. I have just double-checked the figures published by the Conservative portfolio holder for finance on Stoke-on-Trent City Council, and they say that £32 million needs to be cut over the next two years. Either the Conservative Minister in this place was misinformed or the Conservative deputy leader of Stoke-on-Trent City Council is providing misinformation to the public. Those two statements cannot be reconciled without someone saying they are wrong. That is the nub of today’s debate. Conservative Members are quite happy to throw around terminology and certain figures simply to prove a point that they are not cutting local government, but anybody in this place who has been involved in local government knows that they are.
I apologise, Mr Speaker. I should have drawn attention at the beginning of my speech to my declaration in the Register of Members’ Financial Interests: I am a serving district councillor in a shire county, so I understand the points made by Daniel Kawczynski about the deprivation that exists in shire counties. However, I represent Stoke-on-Trent, and what he fails to understand is that this is not necessarily about the absolute level of deprivation, but the number of people for whom those services are needed—the number of children in care and the number of older people requiring complex social care. That simply cannot be compared in a city and a county as though it is apples and apples, because it is not; it is apples and pears at best.
As my hon. Friend Alex Norris made clear, the cuts being inflicted on local government are causing councils to make very short-term decisions year on year to balance budgets, because they cannot make illegal budgets—they are not able to deliver any budget that is not balanced. In the case of Stoke-on-Trent, £1 million will be taken out of the homelessness budget. That will not end homelessness, but drive more people towards A&E services and peripheral services funded by the clinical commissioning group, the police and crime commissioner or other funders that will then be asked by their departments to make their own savings. We have a circular system of cuts that do not help the individuals on which they are focused. Again, Stoke-on-Trent City Council is looking to cut £751,000 from its drug and alcohol support service by 2019-20. If, as the Secretary of State says, there is more money coming into Stoke-on-Trent, I do not understand why such political choices are being made.
“Years of unprecedented central government funding cuts have left many councils beyond the point where council tax income can be expected to plug the…gaps” alone. If Conservative Members will not listen to Labour Members, perhaps they will listen to their own peers who are experts in this field. Quite frankly, if Lord Porter is saying that there is a problem with local government funding, we should all sit up and listen because he knows what he is talking about.
I want to touch briefly not on the funding arrangements in Stoke-on-Trent, but, although the Secretary of State is no longer in his place, on the issues in Bromsgrove. It is one thing for the Secretary of State to tell me that my council has no problems, but another for his own council in Bromsgrove to predict a £1 million shortfall over the next three years and to have to put up council tax by 3% and for the county council to predict a £32 million deficit over the next year and to have to put up council tax by 4.94%. The leader of the county council said in a cabinet report:
“The current…financial year has faced significant financial challenges”.
This is not scaremongering by Labour councils or Labour Members. Tory councils with Tory MPs are making it quite clear that Tory Government cuts are affecting the provision of local government in their own communities.
I am not entirely convinced that the report, for all its fancy words and funny fudging of figures, will actually deliver anything to give the necessary help and support to councils that need it. I will now finish to leave some time for others, but my hon. Friend the Member for Nottingham North said that he is from Robin Hood country. The motion does not give us the redistributive polities of Robin Hood; it is more about robbing the cities and robbing the poor.
The report is about taking money out of areas of deprivation to make sure that rebellious Back Benchers do not decide to sit on their hands and cause the Government a problem this evening. I welcome the fact that the hon. Member for Shrewsbury and Atcham, who is not in his place, has been able to succeed in getting additional funding for his council on a one-off basis, but that is not a long-term solution for the problems faced by local government. As more and more services are pushed by this Government towards local government, it is incumbent on us all to make sure that local government is funded properly and fairly.
It is a pleasure to follow Gareth Snell, not least because he, like me, has local government experience in a shire county setting.
Rather like my hon. Friend Mr Bone, it would be impossible for me not to speak about the situation at Northamptonshire County Council. It has been a very difficult week for local government in the county. I want to preface my remarks by saying that the vast majority of the staff at Northamptonshire County Council work tirelessly—day in, day out—on behalf of local people to deliver key public services, and no blame whatsoever lies with them for the situation in which we find ourselves.
It is no secret that we, as the seven Northamptonshire MPs, have been exceptionally concerned about the situation at Northamptonshire County Council for some time, and I appreciate the steps that the Secretary of State has taken to try to address those concerns. For example, there is the appointment of the inspector, who is currently conducting a thorough piece of work looking at what has gone wrong. As I said in the urgent question yesterday, I would welcome an interim recommendation from the inspector as quickly as possible, so that we can try to provide certainty for local people.
What is so frustrating is that, time after time, when Members of Parliament asked whether the county council would be able to balance its books, we were told, “Absolutely. You have nothing to worry about.” Such requests for clarification were made as early as last March and April and as recently as December. The responses were unequivocal—senior cabinet members at the county council were unequivocal in giving such guarantees—but we are where we are.
I believe that the concerns we have raised have been vindicated by the issuing of the section 114 notice. It is not just Members of Parliament who have raised concerns; 21 back-bench councillors now say that they have no confidence in the leadership. The independent LGA report is damning. It states that
“there is a very short-term focus on solving the financial problems of today…
There is no financial strategy to deliver a sustainable position for the Council… The Council has a poor record of delivering its approved budget…
Key decisions are not always taken in the understanding of the financial implications, risks and options…
Financial information is not presented clearly and transparently…
Decisions taken by the Cabinet need greater transparency…
Some portfolio holders readily accept the information they are given without systematic and robust challenge.”
Those are damning findings. It is no secret that the inspector who is currently carrying out the thorough inspection of the county council is equally concerned.
I am grateful to my hon. Friend for that intervention. I am keen to return to that point later in my remarks.
It is not good enough for cabinet members simply to shrug off all responsibility and try to apportion blame elsewhere, because there has to be accountability. The question we have to ask is this: why is it that many local authorities in similar circumstances—with similar settlements and populations—have managed to handle the challenges of recent years much more effectively than Northamptonshire County Council has? It would also be wrong to suggest that Members of Parliament and members of the Government have not tried to do our bit to help with those challenges, but being able to help relies upon the frank exchange of information and an honest dialogue. What has happened suggests that that has not been the case. At every opportunity, we have tried to help.
I welcome the commitment to a fairer funding review. It is a little rich for Opposition Members to talk down a fairer funding review, because we did not have one in 13 years of Labour government. Actually, Northamptonshire has been chronically underfunded, in local government terms, under Governments from both sides; we do not do well out of funding formulas relative to more metropolitan areas. I hope that the local government finance review will help address some of those anomalies.
I have talked regularly in the House about the cost pressures created for Northamptonshire County Council by unaccompanied asylum-seeking children. I welcome the Secretary of State’s announcement in December of an additional £18 million to tackle those cost pressures, and I hope that the county council will bid for some of the money; it will be entitled to some of it, because the cost pressures are acute.
It is also vital to note that the core spending power in the period up to 2020 is up by 7.6%, which is worth £31.1 million more. Members of Parliament have raised concerns, but the Government have also taken steps to help tackle directly some of the challenges. It is clear to me, as night follows day, that a fairer funding review in itself will not solve Northamptonshire County Council’s problems. I take absolutely no pleasure in saying any of this, but I will not moderate my remarks for party political convenience, because my primary concern in all this is continuity of service for the most vulnerable of my constituents.
Where do we go from here? We obviously need to wait for the inspector’s findings. I would like to see an interim report as soon as possible, because we need that certainty. I suspect that commissioners may well need to be appointed, because the failures are systemic and need to be dealt with robustly. We need to have a serious conversation in the county about the future structure of local government. To me, it seems clear that a two-tier model just is not financially viable in the current climate.
My hon. Friend is making a powerful speech. He will know that we have very good district and borough councils—in fact, we share one. They have reserves and if we move to a unitary system—I think that is what will happen with two unitary authorities—what does he think should happen to those reserves?
I suspect that my hon. Friend’s assessment of what the future structure might look like is correct. The reserves are very important. I am frustrated on behalf of the district and borough councils in the county that have managed their affairs properly, budgeted responsibly and put reserves away. I would like to see a model that protects those reserves for the individual communities in question. In my constituency, I think it right that the reserves that Corby Borough Council has responsibly accrued are spent on Corby and services there, and the same should happen in East Northamptonshire. That is exactly the sort of thing that we need to factor in.
I hope that councillors will engage proactively in the process of helping to shape the system. I do not want to see Government having to step in and impose a model. I want us in our communities to shape the system of local government for the future and councillors to take a very active lead in doing that. I agree that a committee structure would be the best way forward. I worked under a committee structure system. I always found it a good, constructive way to do business. It was good to have the input of opposition members and backbench members into the democratic decision-making process.
As I said, absolutely no gloss can be applied to any of this: the situation at Northamptonshire County Council is an absolute disaster. I welcome the Government’s commitments in the local government finance settlement. More can always be done and we should always keep the support that we provide under review. I look forward to hearing more about the support for unaccompanied asylum-seeking children, but in the county, we now have to focus on getting our local government back on a sustainable footing.
Since 2010, Durham County Council has had its expenditure cut by £224 million, although after hearing the Secretary of State speak today, we might think that local government is somehow in a strong position. My hon. Friend Mr Betts was right: the root cause of this is the austerity during the last seven years. I will not let the Liberal Democrats off the hook for their responsibility for that, because they were in government and agreed to it.
This year alone, Durham County Council faces pay inflation of £4.8 million and general inflation of £3.2 million. The impact of the national living wage increase of 4.4% means another £3 million. There is a £3 million cost relating to the demographics of elderly people, and an additional £5 million due to pressures on children’s services, which has been mentioned. That means that, in 2018-19, Durham County Council will have to make further savings of £15.3 million.
Much reference has been made to the fairer funding formula, but I think it should get done under the Trade Descriptions Act, because the Government are doing what they have been doing for the last seven years. This is about the pork barrel—they put the money where they can get the votes. That is why, for example, it is not surprising that rural sparsity funding is going to Conservative-controlled areas. Lo and behold, even though Durham is a beautifully rural county, it does not get any of that funding.
If we look at core spending power, the average increase for county councils for 2018-19 is 2.1%; for County Durham, it is 1.4%. The reason for that is what we heard in our debate on police funding: it comes back to areas with a low council tax base. If we look, for example, at the effect of an 1% increase in council tax, it is not surprising that the ones that score for core spending on that are Wokingham, with 0.8%, and Buckinghamshire, Surrey and Dorset. It was interesting to listen to the hon. Members for Wellingborough (Mr Bone) and for Corby (Tom Pursglove) talking about Northamptonshire, because under the system that is being brought in, their core expenditure will rise by 3.8%, compared with County Durham’s at 0.5%.
The root cause lies in the clamour for so-called fairer funding back when the coalition Government entered office. I hear what people say about need, but the needs assessment was taken out of the formula, and that has continued under this Government. As a result, the formula does not recognise that areas have particular needs, such as in relation to looked-after children or growing demand for elderly care. Instead, the Government are rewarding their own areas. I do not for one minute accept the idea that there is not poverty in rural areas—there is—but, as my hon. Friend Jim McMahon said, the evidence does not prove that it is more costly to deliver services in those areas than in the constituency of my hon. Friend Gareth Snell, for example, or some other urban conurbations.
Government Members are comparing apples and oranges, and we should think about the pressures in urban areas such as those of my hon. Friends the Members for Stoke-on-Trent Central and for Nottingham North (Alex Norris) regarding looked-after children, to take just one example. I am sure that the number of looked-after children in those areas is larger than that in some rural counties—even one such as County Durham—and that creates great pressure. It is not one of those services in which councils can pick and choose what they deliver. They have to deliver the service, and, whatever anyone says, it is very expensive to provide.
In 2010, the Government set out, as my hon. Friend the Member for Sheffield South East said, to make savings from local government. I was interested in what my hon. Friend the Member for Nottingham North said: the Treasury could guarantee getting the money because it was the councils that would have to do the implementation. We are now suffering as a result, however. If we are to make local councils more reliant on raising finances from council tax, areas such as mine—55% of its properties are band A—will always be at a disadvantage, even though our elderly population is growing and the demands on our services across the piece are growing.
I agree with the hon. Member for Wellingborough about social care. We need to take a cross-party look at this, because the problem will not go away, whoever is in government. The situation is not made any easier, however, with some of the nonsense in this funding formula, such as the 7% cut to public health, which will have a direct impact on that area. What we have is more of the same: a Conservative Government rewarding Conservative areas and dressing that up as a funding formula, when it is actually a pork barrel. Unless we address the situation fairly and prioritise need, this scandal in local government—and it is a scandal—will continue.
I say, with apologies to Jane Austen, that it is a truth universally acknowledged that all councils complain about a lack of money to all Governments, irrespective of which party is in control. Like many colleagues, I served as a councillor. I was a district councillor for a dozen years and a county councillor for three, so I remember having to juggle the income reductions that started under a Labour Government in 2006-07. It just sort of happens.
I welcome the announcement that Dorset will receive an extra £1.2 million to deal with adult social care and that our total rural services delivery grant, which is hugely important, will be £1.5 million. I agreed very much with a lot of what the shadow Opposition spokesman said—I appreciate that he was not quoting his own commissioned report—but whichever idiot came up with the answer that the cost of delivering services in a rural area was equal to that of delivering them in an urban area needs to be certified, because we all know that geography and population sparsity lead to increased costs. I also welcome last week’s announcement by the Department of a successful bid to the housing infrastructure fund of £4.1 million, so it was not too bad a week of news for Dorset. I agreed with Mr Betts when he pointed to the huge debt of thanks that we parliamentarians owe to our councillors for the work they do, against the backdrop of a challenging financial position, in continuing to deliver services and to keep the wheels on the bus—if Members will forgive that analogy—at a time when incomes have been falling and savings have had to be made.
My constituency is served by three councils: East Dorset District Council, North Dorset District Council, and Dorset County Council. Although we have a two-tier authority, the county council provides, on average, 85% of the services enjoyed by the county. Over the last few years, my postbag, my inbox and visitors to my surgeries—as well as the leader and the chief executive of the county council—have made it clear that there is real, tangible pressure on the delivery of adult social services, services for children with special educational needs, and wider children’s services, as well as, of course, rural transport.
All the Dorset councils, district and county, have made great strides in reducing their costs and making themselves more efficient, and the tri-partnership between West Dorset, Weymouth and Portland, and North Dorset District Councils has made huge savings. The councils have cut through the fat and the flesh, have gone through the sinew and the muscle, have been chipping into the bone, and are now starting to suck out the marrow. They are trying to author the next steps of their future in order to deliver the services that hard-working council tax payers demand and need, taking account of the demographics, as 65% of my constituents are over the age of 70.
Those councils have submitted a proposal for the reorganisation of local government. They recognise that it is a question of not just trying to demand extra income, but of trying to deal with what they receive in a smarter and better way. The “two-unitary” solution for the county that we are seeking, which is with the Department at the moment, commands 62% of public support. It is supported by seven of the eight Dorset MPs and eight of our nine councils, as well as Bournemouth University, Poole Harbour Commissioners, the local enterprise partnership, Dorset chamber of commerce and industry, the clinical commissioning group, the police and crime commissioner, and the Dorset Association of Parish and Town Councils.
I plead with the Government. I entirely accept the need to reduce expenditure and to balance the books. I entirely understand why local government has shouldered a very large proportion of central Government savings. I support the Government absolutely in that endeavour: what Conservative who understands the importance of proper control of public money would not? However, I cannot stand by, and will not stand by, if the proposal that was submitted to the Government is delayed still further, or rejected out of hand. The continued provision of services for children and elderly people in my constituency is now solely reliant on this change, so it needs to be delivered.
I represent beautiful Bath. Obviously not everyone in Bath is wealthy, but on the whole it is a wealthy area. I am, perhaps, unusual, in that I lived in the north-west for 25 years, and for 10 years represented a local council area that was very deprived. I can tell Conservative Members that that was a real eye-opener. Anyone who wants to see real deprivation should visit the post-industrial towns of the north.
It is disappointing that such a partisan approach has been taken today. Yes, we should represent our own areas—I do that—but we should also make decisions in the round and look at fairness in the round, and we should make the right decisions for the whole country. The proposal we are discussing today is simply not fair. It will disadvantage the disadvantaged further, and it will increase the gap that already exists. I urge Conservative Members to think again and, if necessary, to spend a few years in local government in one of our northern towns.
I want to make a separate point about the overall proposal. The finance of local government and the way we deliver local services have changed beyond recognition in recent years, and that matters for democracy. We talk so much about taking back control these days, but the clearest evidence of democracy in action is at a local level. We deliver so much of what matters in people’s lives through local government, from bin collections and street cleaning, to planning, housing and adult care services.
Until 2014, as I said, I was a councillor for 10 years in a unitary authority. We had clear spending and decision-making powers, and there was a clear line of accountability, but even then our council budgets were dominated by two pressures: efficiency savings and ballooning adult care costs. No Government have properly addressed the problem, but this Government have led a relentless crusade to destroy local government and local democracy. Most schools have been forced to become academies and are now overseen by Whitehall, our local facilities are run under PFI contracts, and more than half of our councils no longer own any social housing stock. Meanwhile, regulatory functions such as trading standards and building regulation control services are outsourced, which is a polite word for privatisation.
Where is the commitment to new resources for social care funding following yet another NHS winter crisis? The figure announced today will not cover the annual £2.3 billion funding gap that is expected by 2020. As homelessness increases and one in 111 children spend Christmas in temporary accommodation or bed and breakfasts, where is the commitment to new social housing so that people have a home to go to? The net cost to councils of providing temporary accommodation has tripled in the past three years. Rising homelessness is costing local government more and more in the long term. The Homelessness Reduction Act 2017 increases the demands on local authorities, but does not provide adequate resources. Even in Bath and North East Somerset, an affluent area, the council’s estimated shortfall will be over £16 million by 2020. Most of the council’s budget—75%—is spent on adult social care services. Just a small increase in that bill will mean that my council faces a financial crisis, and that is in my affluent council area. The situation at Northamptonshire County Council is just the tip of the iceberg.
As with most of what the Government do, their approach is driven not by pragmatic policy, but by small-state ideology. The public sector is to be weakened and replaced at every opportunity by private providers. Local decision making is becoming increasingly powerless.
There is an alternative, and it is rooted in the belief that the public sector can provide good services for local people. Bin collections, schools and care services can be run by councils. A service that is run by local people for local people is normally better than a service managed from many hundreds of miles away. A service that is run for the public interest has different values from a service run for maximum profit.
The debate is yet another dismal display of the Government’s deliberate destruction of local government, and that will continue until crisis after crisis, and tragedy after tragedy, force the Government to rethink. My party is the champion of local government. We believe in local democracy and delivering the best possible services locally.
I have enjoyed the hon. Lady’s merry dance around the history of her party in government, but her party was relentless in cutting local government to the bone when it was part of the coalition. For her to say now that her party is suddenly the salvation is frankly beyond the pale.
I thank the hon. Gentleman for making that point. I was a councillor in local government. As he knows, when any party is in national government, its members include people on the ground who need to agree to the decisions it makes. Many of us often pointed out how difficult things were for us at the local level, and our party listened and did not support the cuts beyond 2013.
My party is the champion of local government; I am a champion of local government. We believe in local democracy. We believe in delivering the best possible services locally. We believe that local government should be properly and openly funded. Today’s funding proposals leave a gaping hole of £5.8 billion by 2020. This is another terrible settlement for local government, and it does not have the Liberal Democrats’ support.
I will not detain the House for long. The local government finance settlement is of particular interest to me due to the significant challenges that councils face in areas such as Suffolk in delivering services, particularly adult social care and children’s services. I am the chairman of the county all-party parliamentary group and in that role, along with many colleagues, I have made my concerns known to my right hon. Friend the Secretary of State and to my right hon. Friend the Chancellor. I am grateful to both of them for listening to those concerns and to the Secretary of State for providing an additional £150 million of funding for adult social care and an extra £16 million for the rural services delivery grant. From all that, £78.4 million will go to counties to help in the delivery of vital services. For Suffolk, there is an additional £2 million for the additional social care grant and £500,000 for the rural services delivery grant. The additional funds are welcome, as is the business rates retention pilot, which should provide Suffolk with an additional £10.5 million for economic growth-related projects.
However, additional money only goes some way towards meeting the rising costs of social care, both in Suffolk and other counties across England and Wales. Such areas face unique pressures as they are home to the largest and fastest-growing elderly populations. It is vital that the Government deliver a properly resourced, long-term, sustainable fair funding system to meet the estimated £2.54 billion county funding gap in 2021. I acknowledge the Secretary of State’s firm commitment to the fair funding review, which must result in a properly and fully researched, up-to-date, evidence-based solution that recognises both the demographic pressures of an ageing population and the actual cost of providing services in county areas. I sense a real strength of feeling among colleagues on both sides of the Chamber representing constituencies in county areas about the need for additional funding to plug the £2.54 billion gap, and I hope that the Under-Secretary of State for Housing, Communities and Local Government, my hon. Friend
In some ways, I find it sad that we appear to be dividing counties and metropolitan areas with a “them and us” attitude. My constituency of Waveney is in a county area—north Suffolk—and believe me, Lowestoft is not a wealthy place and, looking at the current figures, I do not believe that we get the resources we need to tackle the deep-seated pockets of deprivation. We need to do something in a sensible and, dare I say it, collegiate way.
Let us bring the debate back to where it needs to be. I do not think that this is about “us and them” or counties versus metropolitan areas; this is about the sheer unfair nature of the cuts. The 10 most deprived councils see the highest cuts while the wealthiest councils do not. Will the hon. Gentleman at least accept that?
As I said, I do not represent a wealthy area, and many sacrifices have had to be made on all sides, but we need to consider things in a calm and rational way to try to come up with a solution that is fair to all. That may well involve putting additional funding into the Budget, which may be the only way to find a solution that gets approval from the majority, if not everyone.
The financing of local authorities and local government has caused problems for many Governments over the years. It arises from the fact that parts of the country with a lot of businesses or a lot of rich people are able to raise quite a lot of money locally for some of the services that have to be provided. However, there are many constituencies and many parts of the country where that is not the case, where there are issues of deprivation and where there are issues that require money, and where local authorities are unable to raise the money from their constituents or from the local area. When national Governments decide how much money to give to different areas, it is therefore important that those issues are properly considered and addressed.
My constituency of Bolton South East is high up on the indices that judge poverty and health and education issues. The mortality rate is higher in my constituency than in the rest of the country. The number of people with a university degree is not in proportion with the rest of the country. The number of people who own their home is not equivalent to the rest of the country. On many issues and in many areas, the local council is not able to fulfil its obligations.
Having said all that, Bolton Council has been run by Labour for many years, and it is regarded as an incredibly sensible and financially prudent council—it has even received four-star ratings in the past. Despite that, there has been a 54% cut to Government funding since 2010. Those cuts are not acceptable. My local council is basically spending all its resources on its statutory obligations such as social care and services for the elderly and the young, including children in care, looked-after children and protected children.
Does my hon. Friend agree that austerity just does not work? When we compound cuts to our councils and to the services that our residents so deserve and need with police cuts and cuts to other services, it leads to a bad situation becoming even worse.
I entirely agree with my hon. Friend. I was going to make this point later, but I will make it now. I am not being party political, but I find it appalling and galling that the Tory councillors of Bolton complain that the council is not doing some of the things it needs to do—Chris Green, a Conservative, recently complained to the local newspaper that the council has not filled the potholes. Well, the council cannot do those things because its grant has been cut by 54% since 2010. The council has to spend the money it has on vital services such as looking after our elderly and our children.
There is no money left for potholes or for environmental services. In some parts of my constituency young people cause a lot of social nuisance and a lot of problems, such as breaking car windows and breaking people’s doors and windows. The local authority is being blamed for all of that, and people are saying, “You are not doing anything.” The political parties, especially the Conservative opposition, try to put it on the council. But, again, the council does not have the resources. It is doing everything it can. Where it can find some money, it is spending on the local area to try to improve the roads, get street lighting and help look after those communities affected by crime. The council is spending its money, but it does not have enough to give. When the hon. Member for Bolton West complains about things, I always say that he should be going to his own Government and Ministers. He should be asking them for that money. We have had a 54% cut in our budget over the past eight years and they are the people responsible for the situation we are in. He should be going to them asking for that extra money—the same thing applies in respect of policing cuts. Since this Government came to power 30,000 police have been cut—
Order. May I help the hon. Lady a little? We did have the police debate before. I presume that as you were going to name Chris Green in the way that you have and quote the newspaper, you made him aware that you were going to speak about him. Did you do that? I am just a bit concerned that he has not been notified.
My apologies, Mr Deputy Speaker. I will let the hon. Gentleman know after this debate that I have referred to him.
Let me get back to the facts. Certain parts of the country need extra resources, and any funding formula that is created must take account of that. Many areas are unable to raise the money that they need and it is a big challenge for local authorities. While I am on my feet, may I ask for some extra money to fix the potholes in Bolton? May I also ask about an application that the council has made in respect of a mill on Crescent Road and a brownfield site being turned into housing? We still have not heard any response from Ministers about whether they are giving permission for building to take place. Finally, on housing, when the Labour Government came to power in 1997 they spent £18 billion on repairing homes. They did that in their first few years in office. So when people say we did not look after the issue of housing, I say that we did. We then also started building homes as well. We need more of those.
It is great to have you in the Chair, once again, Mr Deputy Speaker.
The contributions to this debate on both sides of the House have been interesting and wide-ranging. On one level there is the political aspect, and I challenged Jim McMahon, the shadow Minister, to say whether there was any question to which his answer was not more money. I also asked him where the money is going to come from. That provoked the most interesting discussion in the debate; it is not always just about more money, it is also about how we organise the fundamentals of government. I sometimes wish that we were not shackled in this place by constant debates where the Opposition say that we should spend more money and we say we have to generate it first. We should look at how we organise government best and most effectively.
Let us examine the case of social care. We all know that the health service sits in one place and social services sit in another, and that, broadly, the overlap is huge and the potential efficiency savings are massive if we are able to bring them together successfully. We should all be working on that together, on a cross-party basis, to the extent that it is possible to do so within our partisan political system. We should be working on how to get the best deal for an ageing population and we should rework our public services. We need to navigate the Scylla of the trade unions and the Charybdis of public spending restraints and pressures in order to come up with ways of reworking the systems—the NHS, social services and county council systems—to make sure that we can deliver, particularly for older people where we are facing challenges.
I welcome the fact that more money was found for social care in Kent. Kent MPs were deeply concerned at the situation and the leader of the county council was concerned about the funding settlement. As a team we all worked together and met the Minister to make a strong case for Kent. I welcome the extra £166 million for social care, some £3.9 million of which will go to Kent. The increase in core spending power is also really welcome.
When we talk about local government finance, we tend just to look at core funding or the amount of money for social care, but we need to look at it in the round, because a whole load of it comes from, say, the Department for Education. I am concerned about Home Office funding. In terms of the local government finance settlement, the Home Office does a fantastic job for Calais. Over the years it has handed out £200 million, but it does not give quite the level of funding we need at the frontline in Kent and in Dover, where we take a lot of unaccompanied asylum-seeking children. The county council has been making a powerful case that it does not get the kind of funding compensation from the Home Office that it should get for the fact that Kent is bearing the brunt in terms of the number of unaccompanied asylum seekers.
Let me set out the issues and challenges. The total cost of net funding from the Home Office is £25.4 million. In the current year, the shortfall is £4.6 million. If there are no changes to the financing arrangements, the coming year will see a further deficit of £3.9 million. That affects public services for the residents of Kent, because services have to be provided to people who have come to this country who are not from Kent or normal residents of Kent. That is challenging.
There is a challenge with care leavers, with a funding gap of £3.1 million. If someone turns 18, the amount of money given to the county council falls dramatically, yet the costs on the council stay very high indeed. We should remember the cost of the Millbank reception centre near Ashford in Kent. For unaccompanied asylum-seeking children there is a gap of £0.6 million, because the regulations entitle all children living in foster care at their 16th birthday to remain living with their carers, if they so choose. There is also £300,000 of ineligible costs.
There is a large funding gap. I know that there is always pressure to hand out another cheque to Calais and to France—the amount over the past two years now totals £200 million—but I put it to the Home Office that we also need to fund the frontline in Kent and Dover. We need to make sure that we get a decent and fair settlement for the residents of Kent to cover the costs of the county having stepped up to the plate by caring for and doing the right thing by vulnerable unaccompanied asylum-seeking children, many of whom are children fleeing war zones who are in fear for their lives. They are not fakes—children who are really economic refugees—as has been a concern.
We need to make sure that proper funding is in place for the county council so that there is not an impact on public services that means others lose out. I very much hope that the Home Office will take those points on board and recalibrate the funding to ensure that Kent does not lose out.
It is a great pleasure to follow my hon. Friend Charlie Elphicke.
I shall make an extremely short contribution on behalf of the people of Redditch, which is quite a unique place. It is a semi-urban area in the middle of a rural county, Worcestershire. It shares many of the characteristics of neighbouring Birmingham, yet it is in a rural area. I wish to make the point strongly to the Front-Bench team that they must take that into account in their work on fair funding for areas such as Redditch and Worcestershire. I know that the Minister will do that.
I thank the Minister for listening to my representations and my lobbying on behalf of the people of Redditch. I welcome the increased funding for Worcestershire, which is equivalent to a 3.1% increase in the core spending power and could total £14.8 million if all the flexibilities are taken into account.
Like many colleagues, I have raised the issue of adult social care. My local council colleagues, who do a fantastic job in Worcestershire for the people of Redditch, are happy that they are going to receive an additional £1.5 million, on top of the £2 billion in the Budget. We urge the Government, in their future discussions, to think carefully about the pressures of the living wage on the delivery of services to the most vulnerable people in our population.
I thank the Government for the good news on the revenue support grant. I find it astonishing when I hear Opposition Members talk about crumbs from the table. How is £2 billion and the billions and millions of pounds that are put into local communities crumbs from the table? Of course we would all like to see more money spent, but the reason we cannot spend it is the dire economic situation that was left to us by the Labour party. That is a real shame. We should welcome the hard work that our local councillors do. I thank the Government for this settlement and ask them to look carefully at the people of Redditch.
I begin by thanking colleagues from all parts of the House who have contributed to this debate, including my hon. Friends the Members for Sheffield South East (Mr Betts), for Birmingham, Northfield (Richard Burden), for Nottingham North (Alex Norris), for Stoke-on-Trent Central (Gareth Snell), for North Durham (Mr Jones) and for Bolton South East (Yasmin Qureshi), and the hon. Members for Ludlow (Mr Dunne), for Shrewsbury and Atcham (Daniel Kawczynski), for Newton Abbot (Anne Marie Morris), for Wellingborough (Mr Bone), for Corby (Tom Pursglove), for North Dorset (Simon Hoare), for Bath (Wera Hobhouse), for Waveney (Peter Aldous), for Dover (Charlie Elphicke) and for Redditch (Rachel Maclean).
I pay tribute to everybody who serves in local government, both councillors and officers. Let me make a special mention of Denton West councillor Brenda Warrington who, a couple of weeks ago, became the first ever female leader of Tameside Metropolitan Borough Council, and a very fine leader she will be.
It is clear from the contributions from both sides of the House that there is massive concern not only about the growing crisis in funding local government, but worse, about this Government’s inaction in addressing it adequately. Only this week we have seen a council effectively declare itself bankrupt. The issuing of a section 114 notice in Northamptonshire, a Tory-controlled council, should send shivers down the spines of Ministers, because they know that this is a crisis caused in part by them and their actions. The warning signs at Northamptonshire had been obvious for some time, but only in this Government would the Secretary of State toddle along formally to open the council’s new £53 million headquarters that it is now being told it may have to sell off. Perhaps that was the fault of his officials, too.
Northamptonshire completely overshadowed the Secretary of State’s big announcement yesterday of an additional £150 million found from the magic money tree of the Ministry of Housing, Communities and Local Government. When local government budgets have been slashed by £5.8 billion since 2010, it seems that the Secretary of State cannot even shake that tree effectively. We all know from reports in the media and from Tory MPs’ tweets on Monday night that this is solely about trying to prevent a rebellion on his own Back Benches.
The £150 million extra going into social care this year is still a cut. The Secretary of State, with his banking background, might be able to kid his Back Benchers with this sop, but this year, additional Government spending on social care, even with this sum, is still facing a cut of £177 million. It is not the first time that this Government have tried this trick, because two years ago the transitional grant scheme provided an additional £300 million of funding, and what happened? Eighty per cent. of it went to Conservative-controlled councils, 70% of which were county councils. In contrast, metropolitan districts got only an additional 2% of additional funding, despite the fact that many of them were among the hardest hit. Places such as Nottingham, Knowsley and Liverpool received no additional money. When the Government talk about fair funding, they must mean funding for all councils, irrespective of their political persuasions and none, based on the services they need to provide to the communities they represent.
Let me provide Members with a few quotes:
“Councils in England face an overall funding gap that will exceed £5 billion by 2020.”
Then there is
“£1.3 billion…needed right now…to stabilise the…care provider market”,
“Councils also face an unprecedented surge in demand for children’s services and homelessness support.”
Those are not my words; they are the words of Conservative peer and head of the LGA, Lord Porter. How out of touch can this Government be? How long can the Secretary of State bury his head in the sand, telling himself, “Yes, we’re making cuts, but they’re having no real impact on the ground”? He should speak to Tory councillors, because we know there is a real problem in local government when even Tory councillors are saying today what Labour councillors were saying five years ago.
I commend the work of all councillors in these difficult times. They need commending for doing all they can to support local services and local communities, despite this Government’s best efforts. This incompetent Secretary of State even thought he could come to the House of Commons in December and pass a provisional settlement off as fact, when he tells us today that his officials were to blame. He knew that it was riddled with errors. He can blame his officials today, but his letter to me, which he signed only two days ago, was far less definite. He said:
“My intention is always to provide local authorities with as much certainty as possible…We published the Provisional Local Government Finance Settlement before Christmas to give councils notice of the figures they should use to plan their budgets…At that time…we knew the overall scale of the error in the…published data….We therefore published the Provisional Settlement on
Those were his words, and it was his signature. The Secretary of State is either so incompetent that his officials do not bother to tell him about important details ahead of him making a statement to the House of Commons, or he does not read the letters that go out in his name, which is perhaps why he needs to place a corrected version of the letter in the Library.
I have written to the Prime Minister today to draw her attention to this sorry affair, because it has done incredible damage to the Secretary of State’s reputation and to the Department’s reputation in the local government sector. Councillors deserve better. Many councils are doing all they can to help people live independently in their communities and reduce demand on hospitals, but with unprecedented funding cuts since 2010 and social care services facing a £2.3 billion funding gap by 2020, that is becoming increasingly difficult.
It is not just adult social care. As Labour’s first health check report showed, demand for children’s services is also placing growing pressure on local authorities. Funding to support children and their families has been cut by 55% over the last seven years, and the result of those cuts has been appallingly clear. Cuts to early years intervention meant that a record number of children—some 72,000—were taken into care last year. The number of serious child protection cases has doubled in the last seven years, with 500 new cases launched each day. More than 170,000 children were subject to child protection plans in the last year, which is double the number seven years ago.
Many of us hoped that the Budget would contain the genuine new funding that our children’s services need, but the Secretary of State failed to get that put in place. We then hoped that yesterday’s announcement might offer some hope for children’s services—another let-down. When is the Secretary of State going to stand up to the Chancellor and demand the money that the sector so desperately needs? The financial crisis engulfing local government should be giving the Secretary of State sleepless nights. The Local Government Chronicle suggests that there are already at least 10 authorities preparing to follow Northamptonshire and issue section 114 notices, and the Municipal Journal reports that one in 10 council bosses fear that their local authority will not have enough funding to fulfil its statutory duties in 2018-19. Ministers cannot afford to stand by and wait for that to happen.
Today’s vote offers all Members on both sides of the House an opportunity to send a very clear message to the Government that things have to change, that vital public services should be properly funded, and that our communities deserve better than this botched and rushed settlement. I hope that all Members will join us in the Lobby to stand up for their communities, their public services and their councillors, and to get this Government to think again about their damaging approach to council funding for next year.
It is a pleasure to close this debate. I thank hon. Members on both sides of the House for their valuable contributions. I pay particular tribute to all Members who are either former or serving members of local authorities and have brought that expertise to bear today. I pay a special tribute to my predecessor, my hon. Friend Mr Jones, who has left impressively large shoes for me to fill.
Local government and the hard-working, dedicated people who work in it deliver vital services every day at the heart of the communities they serve. I am deeply honoured to represent them in government—to listen to them, learn from them, and work with them to build communities that people are proud to live in. I am therefore delighted that this settlement delivers on our promise to local government. It confirms the third year of an unprecedented four-year deal accepted by 97% of councils, providing long-term certainty to local government. It is a deal that delivers more than £200 billion over a five-year period, allowing councils to be bold and ambitious in planning for the future.
But there is no room for complacency. This Government are under no illusions about the pressure on local services, so today’s settlement seeks to ease that pressure while shielding taxpayers from unaffordable bills. We have gone above and beyond the four-year deal to listen and respond to what the sector wants.
We have gone above and beyond the four-year deal in listening and responding to what the sector wants. That is why last year we allowed increased flexibility in the use of the adult social care precept, and why this year we have proposed additional flexibility on the core council tax referendum principle.
On adult social care, of which we have heard much today, on top of the extra £2 billion announced at the spring Budget last year, we have now announced an additional £150 million extension to the adult social care support grant, and we have increased the rural services delivery grant to its highest-ever level.
We are also building on the highly popular business rates retention scheme. Local authorities estimate that in the year just finishing they will keep about £1.3 billion in business rates growth, and we expect this to be maintained going forward.
The Minister knows that I have raised a number of times the issue of people avoiding paying both council tax and business rates on holiday homes by converting them to business use and enjoying small business rate relief. Councils in tourist areas are losing out from that. Will he commit to trying to close that loophole?
I thank my hon. Friend for his intervention. He rightly points out that he raised this issue in Prime Minister’s Question Time earlier and has made representations to me about it. I am pleased to confirm that my officials and I are looking into the matter. He makes the point well. The existing system does leave some scope for ambiguity, and we will look into that.
The vital funding that comes from business rates retention—over £1 billion—is a direct result of local authorities driving economic growth in their areas, and it is on top of the core settlement funding that we have announced today. Over the long term, local government will be transformed, becoming increasingly self-sufficient with local resources funding local services. But to achieve that, we all know that the funding formula needs to become fairer, more transparent and more responsive to changing demands. Getting it right will of course be a challenge, but the prize if we can do that is a system that will be truly fit for the modern world and allow councils to face the future with confidence.
The business rates retention proposals that we mentioned earlier are a key step in this journey, and we hope to see local authorities retaining 75% of business rates from 2020-21. There is a great deal of enthusiasm across the country for this new model, and I can assure the House that I and my Department are committed to working with the sector to make this a success.
I turn briefly to some of the specific points that have been made. Mr Betts and my hon. Friend Simon Hoare were right to pay tribute to local councillors who have, we acknowledge, made difficult decisions and have done an extraordinary job over the past few years. My hon. Friends the Members for Shrewsbury and Atcham (Daniel Kawczynski), for North Dorset, for Waveney (Peter Aldous), for Redditch (Rachel Maclean) and for Ludlow (Mr Dunne) talked about rural areas and the need for fair funding. I can assure them that we are committed to that. The fair funding review will specifically take a fresh look at how council tax should be taken into account when redistributing income, and relative costs of delivering services will also be considered.
My hon. Friends the Members for Corby (Tom Pursglove) and for Wellingborough (Mr Bone) rightly talked about the role of governance and leadership in local councils. They were followed by my hon. Friend Anne Marie Morris, who rightly said that it is not just about how much, but how it is spent. Unaccompanied asylum seekers and the costs that councils have to bear were raised by my hon. Friend Charlie Elphicke. I am pleased to announce that the Government have allocated funding from a £29 million pot for exactly that. My hon. Friend the Member for Corby will be pleased to know that Northamptonshire will receive £231,000 from that grant, and the hon. Member for Dover will know that Kent will receive more than £1 million.
Opposition Members talked a lot about whether the funding was fair. They pointed to Knowsley, so they will be pleased to learn that it receives core spending power per dwelling 26% higher than the average. Indeed, across the country, the 10 most deprived local authorities receive core spending power per dwelling 23% higher than the least deprived. We heard a lot from the Opposition about money. Indeed, the hon. Member for Dover put it well: there is no question to which the answer is not more money. We all know where that money has to come from—our hard-working taxpayers. Under the last Labour Government council tax doubled, and that is what we would have to look forward to again.
This is a settlement that honours our commitment to local government—delivering certainty, recognising the challenges and making additional resources available, all while keeping excessive council tax rises in check. It gives councils the resources they need to provide the world-class services that their communities expect and deserve. I commend it to the House.
Division number 117
The House having divided: Ayes 287, Noes 223.
Question accordingly agreed to.
That the Report on Local Government Finance (England) 2018–19 (HC 791), which was laid before this House on
More than three hours having elapsed since the commencement of proceedings on the first motion, the Deputy Speaker put the Questions necessary for the disposal of business to be concluded at that time (Order,