The Secretary of State for Communities and Local Government (Greg Clark)
I believe that our gloriously diverse country will prosper more if the districts, counties, towns and cities that make it up have more power. If we accept that, it follows that we must believe councils to be capable of exercising that power.
Over the past five years, councils have shown great responsibility. Given that local authorities account for a quarter of public spending, it was always going to be the case that they would have to carry their share of the burden of reducing the largest deficit in peacetime history. Not only have they done so, but public satisfaction with their services has been maintained or has improved. I especially want to thank the staff of councils most deeply involved with the recent floods: their commitment to their residents is exemplary. However, I cannot credit councils with acumen and then deny them candour. More savings need to be made as we finish the job of eliminating the remaining deficit.
I listened carefully to councils as I prepared this settlement. Councils asked for the right to spend locally what they raise locally; for help with adult social care costs; for expenditure savings that recognise what has already been achieved by local government; for recognition of the higher costs of providing services to sparsely populated rural areas; for encouragement for cost-saving innovation; for rewards for new homes; for complete transparency with regard to resource allocation; and for a move beyond one-year-at-a-time budgeting. As I will explain, this provisional settlement meets all those objectives.
Local government will be transformed by localism. In 2010, councils were 80%-dependent on central Government grants. By 2020, they will be 100%-funded by council tax, business rates and other local revenues. The retention of 100% of business rates will forge the necessary link between local business success and local civic success. To support that further, we will increase the local growth fund to £12 billion by 2021. This is a Conservative-led revolution, transforming over-centralised Britain into one of the most decentralised countries in the world. Authorities will also be able to spend 100% of capital receipts from asset sales to fund cost-saving reforms. We will publish guidance for local authorities on that matter.
The spending review set out that, based on the forecasts of the Office for Budget Responsibility, overall local government spending would be slightly higher in 2019-20 than in 2015-16. In this settlement, the core spending power for councils will also remain virtually unchanged at £44.5 billion in 2015-16 and £44.3 billion in 2019-20. In real terms, that requires savings of about 6.7% over the spending review period, compared with the 14% required at the beginning of the spending review period in 2010.
The unanimous view across local government is that the biggest cost pressure is care for our growing elderly population. In September, the county councils and the Local Government Association wrote to me, estimating that those costs would require an additional £2.9 billion by 2019-20. Some local government leaders proposed an innovation: a social care council tax precept of 2% a year, guaranteed to be spent on social care. That is equivalent to £23 per year on an average band D home. In the spending review, the Chancellor and I agreed, and we will ensure that the precept is transparently itemised on residents’ bills.
However, we will go further. We know that for some councils, the precept will not raise enough to meet the growing costs, so we have announced a fund of £1.5 billion a year to support councils in working with their local NHS to address the pressures on care. Today, I allocate that £1.5 billion to complement the new precept, so that more goes to councils that raise least from the precept. We recognise in the distribution of resources the particular needs of councils with social care responsibilities.
Local government has asked for £2.9 billion by 2020 as a contribution to the costs of social care. In this settlement, we make up to £3.5 billion available by that year, distributed fairly towards local authorities with social care responsibilities. I applaud the maturity of local government as a whole in telling me that it accepts that this prioritisation implies that, over the next few years, those councils with social care responsibilities should have relatively more resources than those councils which do not have them. Some district councils—those with low council tax bases or those which serve the most rural areas—face particular pressures, so while this settlement maintains the core referendum threshold at 2%, the threshold for the lowest cost district councils will be £5 a year, so that they are not punished for being economical while those who have spent more in the past are allowed to spend more now.
I will increase support for the most sparsely populated rural areas by more than quadrupling the rural services delivery grant from £15.5 million this year to £65 million in 2019-2020, by which time, when 100% business rate retention has been achieved, we will be able to consider what further correction is due. I will also protect, in real terms, the £30 million funding for lead local flood authorities, and the £2 million for those authorities to act as statutory consultees in planning sustainable drainage systems.
The new homes bonus provides valuable funding and, as importantly, encourages house building. I can announce today that I will extend the new homes bonus indefinitely, but with some changes on which I am consulting. All savings will be retained by local government to contribute towards social care.
In a world in which only a small proportion of councils’ funding will come from central Government grant, we require transparency on the components of the financial resources available to councils. I have noted the criticism from the Public Accounts Committee and the Communities and Local Government Committee of previous inclusions of the existing better care fund and the public health grant in councils’ spending power. I will follow their advice and, henceforth, report only resources over which councils have discretion.
In addition, in all the figures in the settlement, I have chosen to understate the maximum resources available to councils. For example, in line with the OBR, I assume that councils will increase council tax in line with inflation, rather than the referendum threshold of 2%. I expect that, as previously, councils will increase bills by less than their full entitlement. Had I assumed the maximum figure, more than a quarter of a billion pounds extra in total resources would have been recorded as being available to councils.
The main reason councils keep liquid reserves is as a buffer against unpredictable year-to-year budgets. Local government has consistently told me, and for generations told my predecessors, that greater certainty about their income over the medium term would allow local authorities to organise more efficiently and strategically, and to put some of those safety-net reserves to more productive use.
Therefore, in this settlement, I do something that local leaders have yearned for. For the first time ever, I offer a guaranteed budget to every council that desires one and can demonstrate efficiency savings, for next year, and every year of this Parliament—a four-year budget to give certainty and confidence. It is a settlement that maintains the financial resources available to councils in 2020 at around the same level as they are today, while giving incentives for local government to make significant savings, and it directs up to £3.5 billion to care for our elderly citizens. This historic settlement does what campaigners for devolution thought they would never live to see: local councils answerable to local people, rather than to central Government, and I commend it to the House.
Jon Trickett (Hemsworth) (Lab)
I am grateful for advance notice of the statement. That is particularly welcome given that the Secretary of State’s predecessor rarely turned up in person on these occasions, and when he did it was often with a snarl, rather than with the Secretary of State’s customary smile.
Labour Members join the Secretary of State in rightly paying tribute to local councils and all their staff. The statement contains a number of details that look welcome, and we shall return to them in due course. Sadly, however, the central message is the same as always: cuts, cuts and more cuts.
The Secretary of State admits to a cash decrease of £200 million between now and 2019-20, but he forgets to say that the additional spending pressures amount to at least £6.3 billion, according to the Local Government Association. That is the scale of the cuts that will be inflicted on our communities by this settlement. What calculation has he made of the additional cost to local government caused by inflation? What about demographic change, which means that more elderly people need support than ever before? What about the additional statutory duties that he is giving to local government? How will all that be paid for?
This settlement massively reduces the central Government grant to local government. Does the Secretary of State agree with the House of Commons Library, which has calculated that even if the central Government grant was maintained at its current level throughout this Parliament, the Government would still run an overall surplus on the revenue account of more than £4 billion a year in 2019-2020? Is it not the truth that these cuts are a political choice made in No. 11, rather than an economic necessity?
Does the right hon. Gentleman agree with his Conservative colleague, Lord Porter, chair of the LGA, who said:
“It is wrong that the services our local communities rely on will face deeper cuts than the rest of the public sector yet again and for local taxpayers to be left to pick up the bill for new government policies without any additional funding. Even if councils stopped filling in potholes, maintaining parks, closed all children’s centres, libraries, museums, leisure centres and turned off every street light, they will not have saved enough money to plug the financial black hole they face by 2020.”?
The Government promised not to cut the budget for the NHS, but then they delegated public health functions to councils. Now they have cut that budget. Does the Secretary of State think that anyone is fooled when the Government act in such a way? Is it not a false economy to cut council funding for adult social care and public health? What is his estimate of the impact of those local government cuts on the NHS? Is it not obvious that if there is less care in the community and preventive health action by councils, there will inevitably be more pressure on more expensive acute provision within the NHS? Is that not the worst kind of Osbornomics? It is short-termist and tactical, rather than strategic and long term.
Does the Secretary of State accept that some of the councils facing the greatest needs in social care have the least ability to raise extra funds by levying the 2% precept? What about the northern powerhouse? Does he agree that cuts to northern local councils amount to tens of millions of pounds more than the relatively small sums that constitute the so-called powerhouse? No wonder the latest economic indicators show the north falling further behind.
The Minister mentioned council reserves, as if he thinks that councils are underspending on the revenue account and thereby building them up. What is his estimate of the quantity of the reserves earmarked by the Government for the Government’s specific objectives? What is his estimate of the amount of the reserves that are in schools’ accounts, and therefore inaccessible to councils? In any event, is it not the case that the reserves are often built up from asset sales and should not generally be used to prop up day-to-day spending?
The Secretary of State mentioned business rates. It is right that the money should be directed into town hall budgets—we welcome that—but the question he has failed to answer is this: how will business rates be distributed? Given that that income is notoriously uneven as between one council and another, how does he intend to make an equitable distribution of those funds? Does he accept the wise words of the Institute for Fiscal Studies:
“If you’re somewhere like Westminster, it’s easier to win from this system than if you’re somewhere like Wolverhampton”?
What estimate has he made of the distributional impact of the settlement on different councils? Does it maintain the trend of the past five years, when poorer urban councils lost out relative to more prosperous areas? Does some of his announcement not make the situation worse? The Joseph Rowntree Foundation has said that local authorities in deprived areas have seen cuts of £220 a head while more affluent areas have seen cuts of £40 a head.
Will the Secretary of State agree to look once more at the formula by which the Government distribute support to local government? He was not the author of the formula, but will he now re-examine the patent injustice in the way in which the money is distributed?
Finally, the country needs a new political and democratic settlement. A renaissance of democratic, relatively fiscally autonomous and locally accountable councils needs to be at the heart of a new settlement. The recent floods showed councils and their employees at their best. We welcome any additional funding to help with flooding, and we also welcome the multi-year funding that the right hon. Gentleman talked about—the Opposition proposed it in the Cities and Local Devolution Bill but the Government voted against it. Will he come back to the House with more details as soon as possible?
The Secretary of State pays lip service to local government renaissance, but does not the announcement, with top line cuts of billions of pounds invariably falling on the poorest areas, reveal that the Treasury’s heavy hand means that the Government are unlikely to deliver the renaissance that is so necessary for our country?
Greg Clark
In the spirit of Christmas, I will be charitable to the hon. Gentleman, who understandably wrote his response before hearing the statement. Far from its being a tactical settlement—that is how he put it—there could be nothing more strategic than a settlement that, for the first time ever, gives what local council leaders have long called for: the certainty of a four-year funding settlement, previously denied them, which gives them the chance to manage their affairs in exactly the way they want.
As the hon. Gentleman might have expected from our previous exchanges, during the past few months I have spent a lot of time with local government leaders, listening to them talk about the most important pressures on them and the most important concerns that they would like to see reflected. They communicated very clearly that funding adult social care was the major priority for all kinds of councils, and in this settlement we deliver the extra resources that we promised. The distribution among the authorities reflects that—something I would have thought he would give us credit for.
On the overall settlement, few authorities would even a few months ago have expected the Secretary of State for Communities and Local Government to be able to announce, in effect, a flat cash settlement for local government for the whole of the spending review period.
The hon. Gentleman mentioned reserves. The fact is that local council reserves have increased over the past five years from £13 billion to more than £22.5 billion—a 71% increase. We do not assume in the settlement that local councils will make use of them, but they have the opportunity to do so because of the four-year settlement we have granted them.
The hon. Gentleman also mentioned the head of the LGA. I have met all the leading groups in the LGA, including his Labour colleagues. Because we are the biggest party in local government the hon. Gentleman suggests that the LGA is Conservative-controlled, but I have met local government leaders of all sorts. Lord Porter regards our discussions as fruitful and thinks that this is a fair financial settlement for all types of council and addresses the concerns they have put to me during the past few years.
Let me just refer to the expectations and the advice we received from those on the Labour Front Bench. When we had the financial statement last year, the previous shadow Secretary of State said that what councils needed was help with longer-term funding settlements so they could plan to protect services, and more devolution of power so they could work with other public services locally to get the most out of every pound of public funding, and that nowhere was that needed more than in social care. That is exactly what we deliver in this spending review settlement: prioritising social care, exactly what local government asked for; multi-year settlements, for which local government campaigned for many years; and the devolution of power to councils through the localisation of income, with councils responsible to electors and not to Whitehall.
Robert Neill (Bromley and Chislehurst) (Con)
May I, too, wish you, Mr Speaker, and other Members a happy Christmas? I wish I could wish a happy Christmas to those on the Opposition Front Bench, but given that they look as flat as a soufflé that has gone off, we need not bother.
I congratulate my right hon. Friend on delivering what is, frankly, the most imaginative local government settlement I have heard in my time in the House, including those that I had to deliver myself. He has listened to local government. I particularly welcome the reflection he has made on the importance, stressed by the London Borough of Bromley and others, of the pressures on adult social care. Will he ensure that the same can-do attitude, which my local authority and all the people he talked to in the LGA have, is reflected in the health sector? Where we have co-terminosity with clinical commissioning groups, we really need the drive of local government, and the accountability of local government, to take those partnerships forward.
Greg Clark
My hon. Friend is absolutely right and characteristically self-effacing. During his time as a Minister in the Department, he made an enormous contribution to reforming and driving forward decentralisation.
I can confirm that part of the point of the money we have secured for the better care fund is that local authorities and the NHS work closely together, and to recognise that our elderly people, whether they are cared for in hospital, care homes or at home, are our joint responsibility. This provides the opportunity for councils to work together in the interests of our growing elderly population.
Mr Clive Betts (Sheffield South East) (Lab)
To show there is some charity, at least on the Labour Benches, I welcome what the Secretary of State says about the ending of double-counting of the Better Care fund. On the four-year settlement, we may have disagreements about the details, but the principle is correct.
May I draw the attention of the Secretary of State to the 6% real cuts figure? According to the LGA, it does not take account of increasing demand from the growing number of elderly people, nor of the extra costs imposed on local government by specific central Government policies. I also draw his attention to two other things: the increase in the minimum wage will have a particular impact on the cost of social care, and the pension changes will have a cost in national insurance. Do the Government recognise them as new burdens? If they do not fund them as new burdens, does the right hon. Gentleman recognise there will be extra cuts to local government services that are not recognised in his statement?
Greg Clark
I am grateful to the hon. Gentleman for his comments. His Select Committee and its predecessors have long called for four-year settlements and the devolution of powers. We have made a choice, advised by local government, on a flat cash settlement over the spending review period to prioritise adult social care. That is what we have done in this settlement. As I made clear when I talked about candour at the beginning of my statement, that of course means that authorities need to continue to make savings in areas outside those for which we have provided extra funds. That is accepted and understood. We have also agreed that they should be at a lower rate than was necessary at the beginning of the previous Parliament. I think local councils will welcome that.
David Tredinnick (Bosworth) (Con)
Conservative-controlled Leicestershire County Council is one of the best in the country, but its funding is the worst. I am sure the Secretary of State’s innovative statement today will be welcomed in the county, not least because it gives additional freedoms. Market Bosworth is now world-famous since the reinterment of Richard III, something my right hon. Friend can check when he goes overseas and asks anybody. The initiatives for rural areas will be very welcome. In the rural parts of my constituency, there is a feeling that they have been neglected. Will my right hon. Friend explain a little more about the social care precept of 2% and how it will affect hard-pressed Leicestershire, which has terrific difficulties in meeting its social care targets at the moment?
Greg Clark
I join my hon. Friend in praising Leicestershire County Council, which was one of those that made representations asking that its substantial social care costs be recognised. As a result of the settlement, by the end of the spending review period, in 2019-20, the resources available to Leicestershire will have increased by 3.5%, which will help to meet the costs he describes. I am certain that a council as well run as Leicestershire will make use of that to the great benefit of his elderly constituents.
Jack Dromey (Birmingham, Erdington) (Lab)
Erdington, which is rich in talent but one of the poorest constituencies in England, lies in a city, Birmingham, suffering the biggest cuts in local government history. The consequences for the city will be serious: for children’s safety when travelling to school, with the cutting of school crossing patrols: for vulnerable families, with the end of Home-Start after 25 years; and for vulnerable and disabled people in need of social care. In my experience, the Secretary of State is a decent man, and he said today he was prepared to listen. Will he therefore agree to meet me and my Birmingham colleagues to hear the case for a fair deal for Birmingham?
Greg Clark
Of course I will. I am always delighted to meet the hon. Gentleman and his Birmingham colleagues, as well as my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell) who shares his commitment to that great city. The spending review recognises the increased costs faced by social services authorities such as Birmingham;, and in recognition of those pressures, by the end of the spending review period, in 2019-20, his city will have a spending power per dwelling £200 higher than the national average.
Dr Tania Mathias (Twickenham) (Con)
Mr Speaker, I wish you and everyone else in the House a very merry Christmas.
I ask the Minister not to penalise councils that are already very efficient. In the £3.5 billion made available for social care, will he please take into account Richmond upon Thames Council, which is efficient but has great needs because of the disproportionate number of over-65s living alone? Will he please meet me and council leaders to discuss next year’s budget?
Greg Clark
I think that my colleagues and I are going to be busy after Christmas meeting many hon. Members, but I am certainly happy to meet my hon. Friend. I pay tribute to the efficiency of Richmond upon Thames Borough Council. The two contributions—the proposed precept and the addition to the better care fund—will be allocated in complementary ways, which is what local government leaders across the country have recommended to us.
Mr Nicholas Brown (Newcastle upon Tyne East) (Lab)
This is a highly political statement dressed up as localism. Will the Secretary of State acknowledge that the distributional effect of his proposal means that every single local authority in the north-east of England will lose out? Will the intervention he announced on social care cover children in care as well as adults?
Greg Clark
The right hon. Gentleman must have second sight to know what the impacts will be before he has looked at the figures for those particular authorities. Of course, by prioritising social care we are directing resources to authorities with responsibility for children’s social services as well as adult social services. Compared with what would have happened in the steady state, as it were, authorities such as his own in Newcastle upon Tyne will benefit.
Mrs Anne Main (St Albans) (Con)
Conservative-led Hertfordshire County Council and St Albans District Council are among the most efficient councils in the country, but they face a large problem in the form of a sinkhole that is costing millions and will be an ongoing event. This is a big deal in St Albans. Will recognition be given to special events, such as the Cumbria floods, that require from councils a significant ongoing commitment to emergency repairs?
Greg Clark
I understand that every local authority has unique circumstances and faces unique pressures. Part of the responsibility of local government is to anticipate and prepare for them. In the course of the consultation on the settlement, either I or one of my ministerial colleagues would be happy to meet my hon. Friend to understand the particular circumstances of her council.
Mr David Winnick (Walsall North) (Lab)
I do not know what happens in Tunbridge Wells, but let me tell the Secretary of State that in the real world of the Walsall borough hardly a week goes by without news of further cuts to essential services and facilities or of services being abolished altogether. Even the Tory leader of the council has made it known how concerned he is at the impact of these cuts on the borough. Would it not be wise to understand that in areas of deprivation and low income, it is essential for the Government to adopt a different direction of policy? Otherwise, it will certainly not be a merry Christmas or a happy new year for the people most vulnerable to the cuts.
Greg Clark
I have some news that might cheer up the hon. Gentleman—it looks as though he may need it. By 2019-20, as a result of this settlement that, as I have said, recognises the pressure on authorities with social care responsibilities, the resources available to the hon. Gentleman’s council in Walsall will have increased by 1.5%.
Nusrat Ghani (Wealden) (Con)
Yesterday, together with my hon. Friend the Member for Lewes (Maria Caulfield), I met the leaders of East Sussex County Council to discuss their budget plans and priorities. They will welcome today’s announcement, especially the focus on longer-term funding and the recognition of the difficulties of rural councils. East Sussex has the highest number of 85-year-olds of any county in the country, and I believe that my Wealden constituency has the highest number in the country. Will the Secretary of State give my council further confirmation that the differing demands on local authorities in respect of adult social care will be taken into account?
Greg Clark
I know my hon. Friend’s constituency very well as she is my parliamentary neighbour. I understand that the pressures on adult social care for elderly people are significant. She will be pleased to know that by 2019-20 the resources available to East Sussex County Council will increase by 1%.
Clive Efford (Eltham) (Lab)
My local authority faces cuts of £77 million next year, and as the Secretary of State has indicated, there will be precious little left to invest back into social care costs. If my council is to meet the growing demand for social care, it certainly needs to be able to ensure that extra funds are made available from the savings it can make. Is the Secretary of State confident that the funds made available will mean that people will not miss out on social care over the next five years?
Greg Clark
These are, of course, decisions for the local council. In the settlement we have prioritised councils that have social care responsibilities. In his own borough, the un-ring-fenced reserves are nearly a fifth of a billion pounds, so the council can itself make some contribution to meeting those costs.
Jason McCartney (Colne Valley) (Con)
The Secretary of State is absolutely right that local councils are answerable to local people. As he is aware, there is a very lively debate going on in Yorkshire at the moment about the relative merits of a West Yorkshire model and a Greater Yorkshire model of devolution. Will my right hon. Friend update us on when he sees a deal eventually being done in Yorkshire?
Greg Clark
I am keen to see a deal in that great county. I know that discussions are at an advanced stage. I do not think it is going to be an early Christmas present for my hon. Friend, but I hope that early in the new year, the good people of Yorkshire will agree to take on the powers and resources on offer through our devolution programme.
Valerie Vaz (Walsall South) (Lab)
A merry Christmas to you, Mr Speaker, and thank you for calling me earlier. I am afraid I came into the House after the start of the statement, so I did not deserve to be called in that way.
In Walsall South, libraries are closing, there is a disproportionate cut to the public health budget, and it is difficult to recruit and retain social workers. Will the Secretary of State confirm that under the settlement that he has just announced, all those services will be protected and there will be no need for further cuts in those areas?
Mr Speaker
The hon. Lady is a model of candour, whose example should be imitated by all Members.
Greg Clark
I am happy to answer the hon. Lady’s question. As I said to her hon. Friend the Member for Walsall North (Mr Winnick), the resources available to Walsall will increase by 1.5% by 2019-20. Of course, as I said in my statement, savings will continue to need to be made in other areas right across local government. It is for the councils themselves to make those decisions, but they now have the ability with the certainty of four-year budgets and a possibility of reform within those years to make those savings, to protect those services and to make sure that elderly and vulnerable people are well looked after.
Graham Stuart (Beverley and Holderness) (Con)
I welcome today’s statement and the increase in the rural services delivery grant, which will increase the amount per head from around £1.10 to about £5.50, I assume. I also note that in comparison with urban authorities the gap in central Government grant will remain at £130 per head. Will the Secretary of State meet me and other colleagues to discuss the next steps beyond this to make sure that we get a fair settlement for rural and urban alike, and so determine whether rural colleagues will be able to join the Secretary of State in the Lobby in support of the settlement in February?
Greg Clark
I pay tribute to my hon. Friend, who has been a persistent and effective campaigner, drawing attention to the special costs that the most sparse rural authorities face in providing services. We have gone a long way, based on the evidence we have seen, to address those needs. I and my colleagues will be happy to meet my hon. Friend and other colleagues to discuss how it will work out in practice.
Mr Graham Allen (Nottingham North) (Lab)
Does the Secretary of State accept that the paradox of the statement is exemplified by my own city council, which has had a reduction of nearly 50% in its central Government grant since 2010, yet also a massive increase in responsibilities? Pretending that adult social care can be picked up by a 2% increase in council tax is obviously nonsense. He realises, I am sure, that to resolve his dilemma, he should enable—as every other western democracy has—local authorities throughout England to retain and raise funds of their own so that they can effectively no longer be an agent of central Government. That, surely, is the difference between devolution and decentralisation.
Greg Clark
The hon. Gentleman will know more than most that simply looking at central Government grant in an age in which local councils, at their own request and following their own campaign, are increasingly in charge of their own resources, is not the right way to consider the issue. We should look at the total resources available, including the business rate revenues, in respect of which Nottingham and Nottinghamshire authorities are doing very well, rightly attracting more businesses and expanding businesses. That is a buoyant source of income for his city and his county.
Maria Caulfield (Lewes) (Con)
As my hon. Friend the Member for Wealden (Nusrat Ghani) said, we met local councils yesterday and we were told that the counties of East Sussex, West Sussex and Surrey are joining together for a devolution bid, called “The three southern counties” bid. Currently the area’s contribution to the Exchequer’s revenue is second only to that of the City of London. Can the Secretary of State inform us what influence, if any, devolution bids such as “The three southern counties” bid will have on today’s funding settlement?
Greg Clark
I am grateful to my hon. Friend for her question, and I look forward to the discussions with the council leaders about the devolution deal. Today’s settlement does not include the effects of those deals. One proposal that we will consider is for the earlier retention of business rates. I am delighted that such imaginative proposals have been put forward locally.
Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)
The Secretary of State said that he would take account of demography: the ageing population and the density of population. I also urge him to take note of the few places in the country that have an extremely young population. In Birmingham, 30% of the population is below the age of 15. When he meets the group of MPs, can we discuss how his settlement will affect the special needs of the city?
Greg Clark
Of course I will, and when we have that conversation, the right hon. Lady will make the case for Birmingham. As I have said, it is important to recognise the need to help with social care pressures, and that is what we have done in the settlement.
Bill Wiggin (North Herefordshire) (Con)
I welcome this excellent statement on behalf of the people of Herefordshire, but may I ask the Secretary of State to keep a watching brief? I know that he has set four-year budgets, but each county faces specific challenges.
Greg Clark
I will certainly consider the case that my hon. Friend has made. However, one of the advantages of a four-year settlement is that local authorities can prepare for the future and manage their resources well, rather than being subject to occasional year-to-year variations in the national Government income. It gives them a greater proof against the uncertainty that they have experienced for a long time about what is coming each year.
Karin Smyth (Bristol South) (Lab)
I am pleased that the Secretary of State has noted the criticism by the Public Accounts Committee of the handling of the better care fund and the public health grant. However, a year ago the National Audit Office reported that his Department had
“a limited understanding of the financial stability of local authorities”,
and the position is being made worse by the complexity of devolution.
The Public Accounts Committee, of which I am a member, considered city deals, the Care Act 2014, and—as was mentioned by my hon. Friend the Member for Sheffield South East (Mr Betts)—the new burdens that are being imposed. Bristol’s people service was already £6.3 million overspent by November. What assurance can the Secretary of State give us that he is heeding the Committee’s recommendations, and that, given the various announcements about policy and cuts, he really understands and has a grip on the financial sustainability of local authorities?
Greg Clark
The hon. Lady suggests that uncertainty is a source of concern in local government. That is exactly why we heeded the calls of local government for us to provide the certainty of four-year budgets.
Mr David Burrowes (Enfield, Southgate) (Con)
Enfield Council lays the blame for the cuts in adult social care provision fairly and squarely at the Government’s door. It has already consulted my constituents, and it says that the cuts will amount to some £10 million by 2018, including £900,000 of transport cuts that will affect vulnerable people. Can the Secretary of State confirm—not least to Enfield Council and my constituents—that the council will have the resources and the choice that will enable it to protect the vulnerable?
Greg Clark
We responded to what local authorities had said about the need to recognise the importance of social services. My hon. Friend’s borough council has both upper-tier and lower-tier responsibilities, and in respect of the activities that it is required to perform in order to discharge its social services responsibility, it will benefit from this allocation.
Ruth Cadbury (Brentford and Isleworth) (Lab)
My best wishes for Christmas to you and all your staff, Mr Speaker.
I do not think that the Secretary of State answered the question asked by my hon. Friend the Member for Bristol South (Karin Smyth). Let me repeat, according to the National Audit Office,
“The Department has a limited understanding of the financial sustainability of local authorities”.
The NAO advised the Department to
“look for evidence of financial stress in local authorities”
to assure itself that they were able
“to deliver the services they are responsible for.”
May I give the Secretary of State another opportunity to explain in detail—rather than repeating his mantra about a four-year budget—what work he did, before making his announcement, in order to understand the financial sustainability of different authorities?
Greg Clark
Every council has a statutory responsibility and a section 151 officer who is required to report, in real time, on the financial sustainability of the council. I have received no representations from a section 151 officer suggesting that a council is unviable. In recent years, the Local Government Association has been helping councils that require advice and assistance, and I expect that it will wish to go on doing so.
Martin Vickers (Cleethorpes) (Con)
The Secretary of State is shortly to visit my constituency to discuss generation in the local economy. Will he expand a little on how the settlement will help local authorities in that regard? The other major challenge facing my authority is adult social care. When he visits the constituency, will he also discuss that with council leaders?
Greg Clark
I will indeed. My hon. Friend is a long-time campaigner for more independence and autonomy in local government. I know that his council will welcome the certainty of a four-year budget, and I shall be happy to meet its representatives when I visit his constituency again.
Mr Chuka Umunna (Streatham) (Lab)
Whatever the Secretary of State says about available resources and reserves, he should be in no doubt that, in Lambeth and elsewhere, the reduction in central Government grant has led to, and will continue to lead to, cuts in front-line services. It is important that those who object to those cuts, and who demonstrate against them peacefully, protest not about our Labour councillors who have been forced to make the cuts, but about this Tory Government. Protesters should not be doing the Government’s dirty work by misattributing blame.
May I ask the Secretary of State how he expects my borough of Lambeth to carry on providing basic services when the Government have cut its budget by 56% since 2010?
Greg Clark
I think the hon. Gentleman’s local residents will be relieved that a Labour Government were not returned after the general election, not least because it was the Labour party’s stated commitment to cut local government funding. As for Lambeth, we have, against all expectations, been able to protect the resources available to the council so that it can make decisions that will help vulnerable residents, as I know it will wish to do.
Bob Blackman (Harrow East) (Con)
I commend my right hon. Friend’s wise decision to heed the recommendations of the Select Committee on Communities and Local Government. I trust that that will continue into 2016 and beyond.
My right hon. Friend will be aware of concern about the fact that councils are increasing charges for monopoly services above the rate of inflation. What action is he taking to ensure that residents are not overcharged for services that they cannot obtain anywhere else?
Greg Clark
I entirely agree with my hon. Friend. When councils charge for services, the general principle should be cost recovery and no more. I would expect councils then to become more efficient and to pass on their efficiency savings to their residents, as they ought to do.
Mr Iain Wright (Hartlepool) (Lab)
Hartlepool Borough Council’s grant has been reduced by 40% over the past five years. That equates to a cut in spending power of £313 per Hartlepool resident, which is twice the national average. In addition, the council has lost—this year, and in recurring years—£3.9 million from the business rates of the nuclear power station, which previously equated to a quarter of all business rates collected in the town. The council had no say, no power and no influence in regard to that decision, which makes a mockery of the Secretary of State’s claim in his statement that retaining 100% of business rates would “forge the necessary link between local business success and local civic success.”
Given the real threats to the provision of local services, and the somewhat distinctive nature of the local economy and the business rates base, will the Secretary of State acknowledge that Hartlepool faces a real problem, and will he agree to meet me and discuss ways of mitigating the massive pressure on the council’s budgets?
Greg Clark
Of course I recognise that in particular instances—such as the nuclear power station that the hon. Gentleman mentioned—there is a very specific impact, and I shall be happy to meet him to discuss that. However, as Chairman of the Business, Innovation and Skills Committee, he will know that businesses have long called for a closer connection between councils and the businesses in their areas. The 100% retention of business rates will create an unbreakable link between the success of businesses and councils, and I would expect the hon. Gentleman to welcome that in his capacity as Chairman of the Committee.
Kevin Foster (Torbay) (Con)
Coastal communities such as Torbay, which has both an ageing and a younger population, face a range of unique challenges. How will the settlement deal with the needs of such communities?
Greg Clark
My hon. Friend has made a good point in drawing attention to the fact that coastal communities such as his contain a high proportion of elderly people, and often require child social services as well. The settlement will direct funds to authorities such as his for precisely the reasons that he has mentioned.
Tom Brake (Carshalton and Wallington) (LD)
Following your earlier entreaty, Mr Speaker, that Members should demonstrate candour, I should perhaps start by declaring an interest in that my wife works for a district council.
The Secretary of State casually shrugs off the impact on councils of the cuts they will have to make by 2020, ignoring the fact that now the number of children’s services rated as inadequate outnumber those rated as good, well-run councils are having to consider closing youth centres and adult social care services are under huge pressure. Does he accept that a shortfall in central Government funding for local services risks hitting the most vulnerable first and that devolving responsibilities to local councils without associated funding simply puts councils in charge of implementing his Government’s cuts?
Greg Clark
From listening to the right hon. Gentleman, we would think he wanted to centralise the power and take the resources back to the centre. I seem to remember working with his colleagues in government who purported to be in favour of decentralisation. When I was in the Department at the beginning of the previous Government, of which his party was a member, the savings that were required of local government were higher than we are proposing in this settlement.
Mr David Nuttall (Bury North) (Con)
Does the Secretary of State agree that the ongoing need to control costs means it is more important than ever for local councils to look at innovative ways of combining back-office functions across local authority boundaries?
Greg Clark
I agree with my hon. Friend and, as I have said throughout the statement, prioritising social care means savings do need to be made in other parts of councils’ operations. An excellent way to do that is to combine councils’ administrative services that cross borders.
Mr John Spellar (Warley) (Lab)
May I put it to the Secretary of State, the Member for Tunbridge Wells, that while the Government talk about the revival of our great cities of the north and midlands, this statement follows the long-standing policy of discrimination against the metropolitan boroughs, with disproportionate cuts not only to local council budgets, but to police and fire services as well? Will he now answer the question posed by the Opposition spokesman as to how he will deal with the dramatically different income levels from the business rate to boroughs, especially those in central London compared with the rest?
Greg Clark
I would have thought the right hon. Gentleman would have taken the opportunity of being here today to applaud the success of the west midlands. It has agreed a devolution deal that will bring £1 billion of extra resources into his area. On the 100% business rate retention, of course that needs to recognise that some places will need to contribute to others. That is well understood and during the months ahead we will be working with local government to find the best way to address that requirement. That is not part of this settlement because that comes in from 2019-20.
Tim Loughton (East Worthing and Shoreham) (Con)
I applaud the certainty of long-term budgeting that the Secretary of State has brought in, but what is not certain is how the 2% precept for elderly social care will stretch for areas with very high very elderly populations such as mine. Some 4.6% of the population of Worthing is over the age of 85; they live a long time in Worthing, thank goodness. What consideration has he given to those additional costs on social care for the very elderly?
Greg Clark
I understand the point my hon. Friend makes. In moving money within the system to authorities with social care responsibilities, we have taken account of the pressures. I am sure he will want to meet me and my colleagues to talk about the particular circumstances of Worthing. West Sussex as a whole has the responsibility for this, and I can tell my hon. Friend that its funding will increase by 2.9% by 2019-20, which will provide a big help in meeting these costs.
Andrew Gwynne (Denton and Reddish) (Lab)
The full integration of health and social care in Tameside has already led to £30 million of recurring savings being identified, but that still leaves £40 million to find through other efficiencies. The Chancellor’s social care levy on the council tax only raises £1.4 million because of the low council tax base, against a social care shortfall of £16 million. So how much of that extra money announced today will Tameside receive—not as a percentage, but in real cash terms—and how much of that £16 million social care gap does the Secretary of State anticipate will be filled?
Greg Clark
What I can tell the hon. Gentleman is that the allocation of the better care fund is done in a way that is complementary to the 2%, to recognise the particular pressures in authorities such as his. The answer to his question is that the package for adult social care, including both elements, will add almost £16 million to Tameside by 2019-20.
Marcus Fysh (Yeovil) (Con)
Somerset County Council, of which I am a member, has faced significant challenges over the last few years both on account of the fact that it is a rural council, which means it has not had as much money as some of the urban ones, and because it has had to deal with nearly £400 million-worth of debt, which the previous Liberal Democrat administration had run up. Will my right hon. Friend meet me and the council leaders to help to welcome this, and also to talk about how things will work for Somerset in practice over the next four years?
Greg Clark
I and my team stand ready to meet colleagues to discuss local circumstances. I can tell my hon. Friend that as a result of this settlement Somerset will receive an increase in its spending power of 4% by 2019-20, which I know will be a big help.
Christian Matheson (City of Chester) (Lab)
Cheshire West and Chester Council’s budget is being cut by central Government by £47 million. I hope the Secretary of State is clear that when local services are scrapped or cut, responsibility for that will lie squarely at the feet of himself and the Chancellor.
May I ask the Secretary of State about the new homes bonus grant, particularly in the light of his longer-term and four-year budgetary proposals? I understand that when it was first introduced, payments were to be made to councils for six years, and councils have planned their income on that basis. We understand now that payments might be made for only four years, which will of course restrict the ability of councils to respond to that grant. Will the Secretary of State clarify the situation?
Greg Clark
If the hon. Gentleman believes councils should be in charge of their own destiny and count on their own resources, he will need to understand that we are moving into a world in which councils are financed locally, not centrally. He will want, I am sure, to discuss with his council how it is going to make spending decisions.
On the new homes bonus, the good news for councils across the country is that we are continuing that very successful policy. We are consulting on some possible changes, and one option is to reduce the period from six years to four for new developments. Councils will continue to receive the funding that they have expected for developments they have approved. If we do go with that option, the funds that are released will be invested in social care.
Matt Warman (Boston and Skegness) (Con)
The people of Lincolnshire will particularly welcome increased funding for rural, sparsely populated areas, but may I ask the Secretary to State to continue—he has done this previously—to bear in mind that in areas such as Fenside in Boston and Skegness there is also genuine deprivation? Can he tell us a little more about what he will be able to do for those areas of deprivation through means such as the attendance allowance?
Greg Clark
One of the things we will be doing over the years ahead is looking at what services and responsibilities can be devolved to local councils, recognising the fact that if we are going to devolve 100% of business rates, it is an opportunity to devolve some functions that have previously been in central Government. Attendance allowance has been suggested, and we will consult on that, alongside other services that could potentially be in the hands of local councils.
Stephen Pound (Ealing North) (Lab)
I congratulate the Secretary of State on the appointment of his Parliamentary Private Secretary, the hon. Member for Burton (Andrew Griffiths), who has demonstrated the most remarkable level of assiduity this afternoon, ripping off crib sheets on every single constituency—and let me just say, for the sake of clarity, Ealing. [Interruption.] And here it is! But my question is not about Ealing—we have suffered enough. My question is about the new homes bonus, which has not been markedly successful. The Secretary of State has announced that he is extending it indefinitely, but at the same time he says he is consulting. Why is he extending before the consultation period finishes, what form will the consultation take, and how will he report it to the House?
Greg Clark
I am very disappointed that the hon. Gentleman has not asked me about Ealing, as I now have lots of information about Ealing that I could have shared with him. Perhaps I will give it to him at another time. The answer to his question on the new homes bonus is very simple: we are going to continue it, but in doing so, there will be different options as to how it might work. That is what we are consulting on, and we will publish the consultation. I am sure that the Select Committee will want to give its advice, as will other hon. Members.
Julian Knight (Solihull) (Con)
In Solihull, we have an average age of 43 compared with a UK average of 39. We have an ageing population, so the focus on adult social care is particularly welcome for my constituency. Can my right hon. Friend tell the House what specific discussions he is having with local government on the funding of adult social care? What assurances can he give us about councils not using up the £22 billion of reserves, bearing in mind that it is six weeks’ worth of cash?
Greg Clark
In the case of Solihull, there will be £12 million available from the social care package for it to use. The great advantage of a four-year settlement is that reserves can be used to smooth the transition over the spending review period with the certainty and confidence that comes from knowing what the budgets are going to be for each of those years.
Mr Dennis Skinner (Bolsover) (Lab)
In the hour since the Secretary of State got to his feet, he has not once acknowledged that this statement today is set against a background of Derbyshire, for example, having a 40% cut in its grant a few years ago. It has still not recovered from that £157 million cut. That is what he does not recognise. And I will tell him something else, in a question. Does he understand that this is like a Budget statement made by his pal Osborne, of the northern poorhouse variety? It is going to unravel as it goes along. The Minister had better glory in these few moments because by tomorrow, and certainly by next week when the detail is out, people will realise that it is nothing but another Tory con.
Greg Clark
The hon. Gentleman is characteristically churlish. If he had listened to my statement, he would have heard me pay tribute to the savings that councils have made, and of course they had to make them because we had the biggest deficit in peacetime history bequeathed to us by the party of which he is a member. What we are doing in this settlement is providing extra resources to meet the pressures on social services that have been identified. In the case of Derbyshire, that includes an increase of nearly £50 million in funding for adult social care from the package announced in the spending review.