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Local Government Finance Settlement - Statement

Part of the debate – in the House of Lords at 6:32 pm on 19th December 2017.

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Photo of Lord Beecham Lord Beecham Shadow Spokesperson (Housing), Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Justice) 6:32 pm, 19th December 2017

My Lords, first, I refer to my interests as a Newcastle city councillor, in which capacity this is the 51st local government settlement that I have had to engage with.

I notice that the Statement bears the heading “Check Against Delivery”. I assure the noble Lord that local government will certainly check against the delivery of the Government’s intentions as expressed in the Statement, and it will certainly hold the Government to account for the consequences of this settlement.

Perhaps I may refer in the first instance to the question of business rates. The Statement says:

“The aim is for local authorities to retain 75% of business rates from 2020-21 … From 2020-21 business rates will be redistributed according to the outcome of the new needs assessment”.

I have two questions about that. First, how far have the Government got in developing a system for equalising—or, at any rate, balancing—the distribution of business rates? Secondly, are they now looking at the position of firms such as Amazon with large out-of-town premises, paying next to nothing in business rates and, for that matter, probably diminishing the return of business rates in local authorities with this new economy that is forming? Will the Government look at the implications of that for financing local government, as well as perhaps in other respects?

There is also a distinct question about the funding of children’s social care, which is said to amount to some,

“£200 million on innovation and improvement in children’s social care”.

The present situation is that the funding is £600 million short of what is required to support the existing services. Even if this £200 million were devoted to closing part of that gap, it would still leave those services substantially underfunded. It seems to me that the Government have not taken the right step in adequately funding what is a crucial service and one which, as my noble friend pointed out, is growing and will be an ever-greater call on local government finances.

I also have a question about the slightly odd wording, if I might put it that way, on page 6 of the Statement, in which the Government announce their intention to give,

“local authorities the continued freedom to use capital receipts from the sale of their own assets. This will help fund the costs of transformation and release savings”.

But if these are capital receipts, they cannot be used for revenue purposes—can they?—which the Statement appears to imply. They can be used for capital purposes which might have marginal impact on the revenue side, but they cannot be used to contribute significantly to the revenue situation.

My noble friend referred to the shortfall in education expenditure, but there is clearly also a significant shortfall in social care, to which the Statement made no reference at all, as he pointed out. That is a serious burden on local authorities. Ultimately, and this is the other side of the problem, that will probably increase the costs for the National Health Service. If local government cannot provide social care, the call on the health service, and in particular hospitals, will grow disproportionately. The Statement makes no effort to deal with that situation.

So far, the check against delivery is not encouraging, but it remains to be seen whether, over time, the Government can improve on what has been a pretty downbeat result for local authorities and, more importantly, their citizens.