Local Government Funding

Part of Opposition Day – in the House of Commons at 4:19 pm on 28th March 2018.

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Photo of Maria Eagle Maria Eagle Labour, Garston and Halewood 4:19 pm, 28th March 2018

I rise to support the motion in the name of my right hon. Friend the Leader of the Opposition and other right hon. and hon. Friends, in particular the part that suggests that

“councils are reaching a financial breaking point” and calls on the Government to

“initiate a review into the funding of local government to ensure that the sector has sustainable funding for the long term”.

I am sorry that the Secretary of State is leaving at this point, because I hoped he might listen to what Back Benchers have to say—but apparently not. I think the level of cuts is too great and threatens the very future of local government as we know it.

Two councils cover my constituency of Garston and Halewood. Liverpool has lost 64% of its central Government funding, or £420.5 million in real terms since 2010. At the beginning of the Lib Dem coalition Government—I am sorry the Lib Dems have absented themselves, because they cannot absolve themselves of responsibility for the cuts that have happened and that continue to happen as a consequence of the Government they supported and were in—we lost £350 million from Building Schools for the Future, £127 million from the housing market renewal initiative, and all the money that recognised the levels of deprivation in Liverpool.

Consequently, the council now has 3,000 fewer staff. It has taken out most of its middle management and saved £5 million a year by cutting the performance-related bonuses of its remaining staff. Councillors’ allowances have been frozen since 2010 and special responsibility allowances have been cut by 10%. There remains a £90 million gap to be filled over the current three-year period.

The other authority, Knowsley, is smaller but has been bashed equally hard by the Government. It has lost 45% of its Government funding so far, which is over £100 million. That is £485 for every person in the borough, which is double the England average of a loss of £188. Consequently, the authorities are struggling to meet the requirements they have to support their residents.

The future the authorities face will be even more difficult, because by 2020 Government grant will be cut further and they will have to rely on council tax and business rates. Liverpool has the further disadvantage that 60% of its properties are in band A—the lowest yielding council tax band—and 90% in bands A to C. The money raised by council tax in Liverpool is £72 million below the average UK figure. It can raise only £1.4 million for every 1% increase in council tax.

The council tax base is such that it will never be as easy for a city like Liverpool to do as well as more affluent areas on the basis of council tax and business rates alone. Last year, 72% of Liverpool City Council’s funding came from Government grant and only 11% from council tax. It has to spend more on adult social care than it can raise in council tax. That is the situation it faces. It is doing what it can. It has built almost 11,500 new band D properties since 2010, yielding an extra £13.5 million a year in council tax. It is doing its best to grow the council tax base, but it is difficult.

Knowsley has made particular efforts to grow its local economy to deal with similar issues, and has managed to do so pretty well. However, it has to spend 80% of its resource on statutory services that it cannot avoid and adult social care, so there is not much space for it to make further savings. It can raise only £477,000 for each 1% increase in council tax. It is therefore fantasy for the Secretary of State and Government Members to argue that this is about efficiencies and just doing things a little bit better. It is far more fundamental than that.

When the Minister responds, I wonder if he might deal with the admitted errors that have been made in section 31 grant calculations in respect of authorities such as Knowsley. Apparently the council was told, after the legal deadline for setting its budget, that there was going to be clawback, because the Department had miscalculated the money due under section 31. To repay that money, Knowsley Council might have to raise council tax by an extra 2%. It cannot do so, however, as it has already set its budget. I hope the Minister will deal with the mistakes made by his Department. The effect on poorer councils such as Knowsley and Liverpool could be devastating. It is bad enough to lose 64% of resource and bad enough to lose 45% of the money used to carry out statutory duties, but to then have further monies clawed back because of a mistake by the Government is completely unconscionable. I hope the Minister in his reply will at least be able to give me some assurances about that clawback and what the Department is going to do about it.