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Local Government Finance

Part of the debate – in the House of Commons at 3:21 pm on 5th February 2020.

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Photo of Kevin Hollinrake Kevin Hollinrake Conservative, Thirsk and Malton 3:21 pm, 5th February 2020

It is a pleasure to speak after Florence Eshalomi, who made some interesting points, particularly on Grenfell and the cladding situation, which I have spoken about many times in this Chamber. I agree with some of the points she made about that. It was also a great pleasure to listen to Kate Osborne, who made an excellent maiden speech, as did my hon. Friends the Members for Orpington (Mr Bacon), for Keighley (Robbie Moore) and for North Norfolk (Duncan Baker), who are no longer in their places. I have definitely tasted some Cromer crab in my time and probably more than my fair share of Tim Taylor’s Landlord beer.

It is good to see that the Opposition acknowledge the need for a fairer system of spending distribution, and I concur with that. The Government started on this road to try to make the system fairer, as it is certainly not fair at the moment. It is not fair in the amount of money allocated to shires and to cities; there is a huge disparity there. We are talking about more than twice as much money—in some cases, almost three times as much—per capita in cities compared with counties. Let us look at overall spending power. North Yorkshire, if we add in both tiers of local government, has about £770 of spending ability per capita, whereas in London—in the top 10 authorities—the figure is about £1,000 to £1,100. That is despite the fact that their populations are younger and better-off than my local populations in North Yorkshire. It is simply an unfair system and it needs to be rectified.

Council tax in many shires, including in North Yorkshire, is almost twice as high as in many places around the country. The Opposition say, “That means you can raise more money more easily by increasing council tax.” That is, of course, true, but there is a failure to see the irony: the iniquity whereby, despite getting less money, we contribute much more locally for our services ourselves, because lots of these cities are getting a far bigger slice of the pie from central Government moneys. That is where the iniquity lies.

I am glad the Opposition see that we need a fairer system, as I agree with that. We also need to make the system fairer progressively. I do not think it is right to rob Peter to pay Paul, but that is not what this consultation is about. It is about introducing extra money over a period of time, so all boats are lifted in a rising tide. That is exactly where we need to be. The system has to be progressive so that those who are not getting a good deal now are better treated than those who are getting a much larger slice of the pie today, and, as the consultation says, it happens over time—three to five years. I absolutely accept that it would not be right for some people’s share to go down, but that is not what the consultation is saying.

The key to all this is that the biggest area of discretionary spend by local authorities is in adult social care. That is the major problem that we need to solve. The Government are absolutely right to say that we need to do that on a cross-party basis, because that is the only way we will get a sustainable solution. Otherwise, the Opposition will say at the next election that they are campaigning to do it differently and the issue will become a political football again. We need to move away from that and agree on something cross-party. The Government have said that, and I absolutely accept that we need to bring forward a Green Paper so that we can look at the options.

However, it is not right when someone like the shadow Health Secretary says, “We’ll agree to cross-party talks as long as you agree to our preconditions before we start; we want our solution to be the solution.” I have heard that from Opposition Members a number of times, although I do not think that this shadow Minister is of the same view, and I have been given that answer on the Floor of the House. It is simply wrong. We must have cross-party talks on the basis that everything is on the table, we sit down and discuss it, and we see where we can find common ground.

We do that, of course, in Select Committees. The most constructive thing that any of us do in this place as Back Benchers is to sit on a Select Committee where we discuss things cross-party. I have served on the Housing, Communities and Local Government Committee for four and a half years. It has a fantastic Chair in Mr Betts. We have done dozens of inquiries over that time and have never had a single falling-out: all the reports are published with unanimous support. That means that we can get to a position where we can agree on some basic principles to take policies forward, which is what we have to do with social care.

Last year, the HCLG Committee held a joint inquiry with the Health Committee on future funding of social care. In our report we came up with a number of options, all of which we should discuss in the cross-party talks. One of them was to adopt a social insurance-style system similar to the one introduced in Germany in 1995. It is great to see Opposition Members nodding in agreement with that. Until that point, Germany also had a local authority-funded system, but that was seen as an inappropriate way to raise money to pay for social care because there was no correlation between the need for social care and the money that could be raised at a local level. They need to be totally separate. We held a long inquiry. In fact, the HCLG Committee visited Germany to look at its system, which is simple, scalable, and—critically—will stand the test of time.

We cannot solve the issue through general taxation. A report by the Office for Budget Responsibility said that if we carry on taxing things as we do today in terms of the need for things like social care, healthcare and pensions, our debt-to-GDP ratio will rise from 80% to 280%. The taxpayer simply cannot pay for that out of general taxation; we have to find a different solution. For me, an insurance-based solution is the best thing. We developed a similar system for pensions with auto-enrolment, although that is not mandatory and this does need to be mandatory. So we do have a precedent in the UK for something that is scalable and sustainable.

The 22 members of the Select Committee, cross-party, endorsed the German system. It is a very good, simple system. It is based on about 2.5% of earnings, some paid by the employer and some by the employees. The basic principle is that everybody gives something so that nobody has to give everything. In my business life, whenever we were faced with a big problem, we always looked for somewhere else that had solved it. This has been solved over in Germany. The biggest benefit of the system is that when someone needs care, they are independently assessed and choose either to take that care from a provider such as the local authority or to draw down the money and pay it to a relative, neighbour or loved one who can look after them. It is by far the best system. We need to develop this whole policy area cross-party, and I look forward to doing that with Opposition Members.