Local Government Finance (England)

Part of the debate – in the House of Commons at 6:37 pm on 10th February 2021.

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Photo of Bob Neill Bob Neill Chair, Justice Committee, Chair, Justice Committee 6:37 pm, 10th February 2021

It is a pleasure to speak in this debate. The funding settlement with an above inflation increase, given the circumstances and the economic pressures, particularly those of the pandemic, is very welcome to my local authority in Bromley and elsewhere. However, I hope the Minister will recognise that that ought to be the product purely of those extreme circumstances and that we should return to multi-year settlements as soon as possible—next year, I very much hope. I hope he will confirm that that is the Government’s intention, and I hope that in the long run we can move beyond two to three-year settlements to perhaps three to four-year settlements to give local authorities much greater mid-term financial stability.

Within the welcome settlement, there are none the less still pressures that need to be recognised. The covid funding is very helpful to my authority and others, but of course that element was consulted on and published before we found the new variants and before the likelihood of further extensions of the lockdown. That will inevitably mean some continued recession in the economy for more months than was perhaps anticipated at the time, and that therefore means business rates are likely to be collected at much lower levels than those forecast in the settlement. Some businesses, of course, may well close permanently, sadly, and others will take longer to gear up, and of course there is uncertainty at the moment about new reliefs coming through. That, of course, means that the tax base is likely to be much lower than was assumed for the five-year average that was taken in the settlement figure. That is affected, too, by the pause in construction that happened during the spring 2020 lockdown, which will affect new homes and other premises coming up. I do hope there will be a means of revisiting those figures in year, perhaps, or with an adjustment next year to make sure that that is properly picked up.

Bromley has noticed that the slowdown in economic activity will have an effect on fee income, as well as the business rate and new homes bonus elements of the tax base. Parking fees, other fees and charges, and other commercial activities are much reduced, so local authorities’ incomes will be reduced in that area as well. There is a need to monitor the situation throughout the year, and I hope that the Minister will be open to some additional financial support in year, if it is proved that the position of local authorities is becoming particularly stressed.

In relation to the various business grants, Bromley received an additional £55 million in covid-related business rate relief for 2020-21. I hope that that will be extended into 2021-22 to reflect the ongoing pressure on the broader economy.

I want to touch on adult social care, which is perhaps the biggest cost pressure for top-tier authorities such as my own. With a growing population, Bromley has the largest population of over-65s of any London borough. A one-size-fits-all approach does not work for us, and we have particular pressures that I hope the Minister will bear in mind. The real issue here is that the increase across London will not keep pace with the growing funding gap in adult and children’s social care. Across London, that was estimated to be about £400 million pre-pandemic.

We have found that there is a strong interdependency between social care and NHS provision, and the two need to work together. Unless social care is properly funded and delivered, the job of the NHS is very often made harder, and it is not always possible to get people out of NHS facilities into local authority social care facilities. Of course, the substantial increases that the NHS has received in funding are still significantly more than what has been made available to adult social care within the settlement figures, even allowing for the use of the social care precept. There is a need to revisit the interdependency of the two and link the funding together. If that cannot be done this year, I hope it will be regarded as a priority for the future. I hope that the Minister will take that on board, too.

We need a better mechanism for properly and fully funding new burdens. That has always been the approach of the Conservative Government, but frequently we have found that there is a lag time in the calculation of the amount that is made available for the spending incurred by local authorities. It is important that we develop a swifter and more precise means of funding new burdens to the full extent that local authorities have to pick up the tab.

The last point I will make is that Bromley is historically a very low-cost authority—an efficient authority. That has been a problem since I sat in the Minister’s place and had to deal with these matters. The system does not incentivise efficiency, of itself, in the local government financial settlement. There is no financial incentive in the system to keep unit costs low. Ours is the lowest unit cost for delivering services in London, but there is no recognition, at the moment, of historical financial efficiency. If an authority has a low base to start with, it does not get rewarded for that; it can potentially be penalised, given that the system depends to a great extent on uprating.

That is an important long-term matter, and we need to start work on it straightaway. I know that the Minister gets that point, and I know he has ambitions to look at the system. I hope he will bear that in mind and start work on it. Authorities such as mine are very happy to co-operate with the Department in finding ways forward from our own experience in these matters.