Ministry of Housing, Communities and Local Government

Part of Department for Work and Pensions – in the House of Commons at 5:02 pm on 2nd July 2019.

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Photo of Clive Betts Clive Betts Chair, Housing, Communities and Local Government Committee 5:02 pm, 2nd July 2019

I thank the Library and the National Audit Office for the briefings we have had, as usual. Laraine Manley, the director of place at Sheffield City Council, has given me some information about housing as well.

The Housing, Communities and Local Government Committee has produced a number of reports over the years covering many of these areas. The whole remit of the Committee is unique in Government in that while the Ministry has limited budgets of its own to deal with certain specific issues, it has oversight over local government as a whole, including spending by other Government Departments. The Ministry is supposed to act as a glue that brings all that together. However, there are concerns, as highlighted by Amyas Morse when he commented that there are no evidence-based efforts in Government to reconcile the funding to local needs. That is really quite a dramatic statement to make. In other words, Government do not have a clue what local government should be spending. That is not a direct comment about the Minister on the Front Bench or his colleague; it is a comment about Governments over the years. There has not been oversight of local government and an assessment of what it needs. All we get is, every so often, a divvying up of the money that is available between different councils, or the new burdens rule where something new is added and a council will get a bit more to pay for it—a bit more out of the system.

The figures are there. We have seen a 50% cut in Government grant to local councils since 2010, the biggest local government cuts to any service—not denied, I think, by Ministers—and a 30% cut in spending power. The pressures on social care, both for adults and children, continue to rise. The Government’s response to our report on children’s services is out today, and I think they have accepted a lot of the problems that exist. There will be a lot more work to do on this. As care has taken a bigger slice of a smaller cake, all the other important services such as parks—which we have done a report on—highways and buses, libraries, environmental services and refuse collection are getting cut even more, by between 30% and 60%. I am really worried, as I have said before, that we are seeing a hollowing out of local democracy where, in the end, councils just become the messenger boys and girls doing what the Chancellor and the Secretary of State want on a very narrow range of statutory services. That is a real worry, and we should all take account of it.

In the end, councils can only do their best. They have done marvellously well with efficiency savings: we are now making real cuts to real services that are affecting real people. Yes, council tax has been put up in many cases, but that is a regressive tax. On business rates, in the end local authorities have virtually no discretion at all anyway.

There is massive uncertainty now. We may possibly have the four-year spending review—nobody is quite sure whether it will happen; I do not really think the Minister even is. The other day, the Chief Secretary to the Treasury seemed to indicate that it was not going to happen. As Gary Porter said the other day at the Local Government Association conference, local government is in a state of complete uncertainty—it has no idea at all what is going to happen from next year. Are we going to have a spending review for four years or for one year, because the four-year one will be postponed? If we have the one-year review, we cannot do the fair funding review because there will not be enough time for it to work through.

What is happening with the 75% business rate retention? Can that be done at the same time as all the other changes or will that be too much for local authorities to absorb? The Minister accepted at the Housing, Communities and Local Government Committee evidence session the other day that the business rate retention scheme is probably the most complicated part of a very complicated system. Can this all be brought together and made sense of? I have not yet mentioned the shared prosperity fund, which is somewhere out there, to be considered at some point. All those things give massive uncertainty to councils and councillors providing important services to the people who matter at the end of the day. Councillors are uncertain and so are the communities out there about what they are going to get as a result of the changes.

As the LGA and the Institute for Fiscal Studies have said, what is really worrying is the prospect that 90 councils will simply run out of money during the next spending review unless more is provided. Council treasurers are saying that; that is the situation. Councils have done terribly well, but they cannot carry on using reserves as they are having to now.

I turn to the issue of housing, which represents the other part of the money spent directly by the Department. Everyone wants to see us meet the ambitious target of building 300,000 new homes in this country. My personal view is that that cannot be delivered unless about half are provided by the public sector—councils and housing associations; historically, the private sector has never consistently gone above 150,000. If we are going to do that, it is not enough to say that we have lifted the housing revenue account cap and councils can start to build. I hope that they can, but Laraine Manley, director of place at Sheffield City Council, has spelt out the situation there.

We have a really ambitious council in Sheffield, including Councillor Paul Wood, the new cabinet member, and Councillor Sophie Wilson, who is down today to celebrate 100 years of council housing. Both want to build council houses, but the issue is not just the borrowing but the revenue to support the borrowing. That also matters. The revenue comes from rents. One of the most damaging things the Government did was to restrict rent increases on local authority and housing association homes in the last spending review. Sheffield City Council estimates that that took a startling £800 million out of its long-term business plan—money that would have gone into supporting new house building and important maintenance of existing homes. That figure is staggering. Although the rent increase in the next round will be the consumer prices index plus 1%, that will not be sufficient to build back the loss that has already occurred. At some point, the Government will have to consider greater freedom for councils and housing associations to raise rents to fund new building in the future.

Apparently, about 70% of the costs for building new homes will come from existing rents in the housing stock; the rest will come either from grants from Homes England or from receipts, although apparently receipts and grants cannot be used for the same home. The Government may also want to have a look at that—and, again, address the issue of why more right-to-buy receipts cannot go to councils to support house building in future.

Those are big issues, and the Select Committee will shortly do an inquiry into social house building and how we can ensure that the homes needed are actually built. That will be interesting.

Finally, I will mention the other big issue that we have to mention today: cladding on not just high-rise buildings, but high-risk buildings. The Government have so far put aside £400 million to take ACM cladding off social housing and £200 million for doing so in the private sector. I have to say that the social housing figure is not likely to be enough, and the private sector figure certainly will not be enough. More money will have to be found to get that cladding off and make those homes safe. The Government are now doing a review of 1,600 more properties with non-ACM cladding that may be just as dangerous. If it is as dangerous, it is going to have to come off, as the Minister for Housing has already said. If it has to come off, the Government will have to find the same money as they are doing for ACM cladding. If we add the ACM cladding budget of up to £1 billion to another £1 billion for other types of cladding, we are at over £2 billion. That does not even deal with the issue of materials that are not in those categories but are not of limited combustibility.

Under the changes the Government have made, they are insisting that those materials will not go on new buildings, yet they are saying that materials not safe to go on new buildings can still be left on existing buildings and that they will not help to remove them. I think there is a very big additional bill coming down the road, and when we see the estimates for the Department in one or two years’ time, they may well be very different.