Local Government Finance

Thursday 13th July 2017 Lords Chamber

Motion to Take Note

14:58

Moved by

[Lord Kennedy of Southwark]

That this House takes note of local government finance and arrangements beyond 2020.

[Lord Kennedy of Southwark (Lab)]

My Lords, in moving this Motion, I bring to the attention of the House my usual declarations of interest—namely, that I am an elected councillor in the London Borough of Lewisham and a vice-president of the Local Government Association.

I am delighted that a number of Members with expertise in local government and finance are speaking in this debate, as this is an important issue that we need to keep raising and shining a light on.

I have served on two local authorities. Presently, I am a member of Lewisham Borough Council, and many years ago I was a member of Southwark Council, the borough where I grew up.

Throughout my working life, as a full-time official for the Labour Party, I have had dealings with councillors in a variety of local government settings, including larger parish, district, county and unitary authorities, and seen a variety of different methods of governance, both as a controlling majority group, part of a coalition and in the role of an opposition group. Councillors of all parties generally do a difficult job very well, and are supported by dedicated professional staff delivering important services—everything from preschool and nursery provision through to social care towards the end of life, and the more general services such as keeping the streets clean and the street lights working properly.

Local government is ever present in people’s lives. It is the part of the state that they see most frequently, and the council has a leading role in understanding the issues that local people have and in delivering solutions for them. Councils need stability and as much certainty as possible to do their job. I accept that that is not always easy, but where they can, the Government need to help local authorities and not make things more difficult for them. I hope that in responding to the debate the noble Lord, Lord Young of Cookham, can give more certainty. Where he cannot, will he at least agree to take back the concerns raised in the debate and initiate discussions within government, the department and with the Local Government Association to as quickly as possible bring more certainty and stability on the issues raised.

I have a number of general points to make and some specific points in respect of London. Local government is not clear where it is heading beyond 2020. In the last Parliament, discussions and work took place to develop a new system by which local government as a whole would retain 100% of its business rates by the financial year 2019-20. With the calling of the general election, the Local Government Finance Bill was lost, understandably. The Bill set out a framework for local government in England to keep all of the £26 billion it raises locally in business rates, and it is fair to say that there was some surprise that there was no mention of this in the Queen’s Speech that was recently unveiled. Certainly my party had some issues with the scheme, such as how we were going to introduce fairness without making things worse for those councils that do not have the income base to replace the money they received through central government grants. But everyone was surprised that this key piece of legislation does not appear to have made it even to the starting line this time, in a Session of Parliament that is supposed to last two years. Perhaps the noble Lord, Lord Young of Cookham, could shed some light on what has happened to the Bill? Is it is on the back burner, has it been scrapped never to be seen again, or will it resurface at some point in the future? In addition to finding out what has happened, it would be useful if we were given the reasons why that is the case.

Recently, there has been lots of debate and discussion in many forums about austerity, including the Cabinet, which we know from what we see and read in the media. There have been lots of briefings from various Ministers both on and off the record. What cannot be in doubt is that local government has taken a huge hit in the spending decisions made by the Government in recent years, despite delivering some of the services that people rely on the most.

The Local Government Association pointed out recently that funding lost from central government since 2015 and projected further losses will mean that, by 2020, local government will have lost 75p of every £1 it had to spend of core central government grant. That will equate to a £5.8 billion funding gap by the end of the decade, with an estimated additional £1.3 billion required to stabilise adult social care. That gives a total of £7.1 billion as a funding gap—a staggering amount that will result in significant reductions in services that people, sometimes the most vulnerable in our communities, have to rely on.

In addition, the department’s own figures show that funding to local government will have fallen 63% in real terms up to the financial year 2019-20, but overall public spending will have increased by 4% in real terms over the same period. So we have further savings along with increased demand for services, which is particularly stark in London. It would be useful if the noble Lord, Lord Young of Cookham, could update us on the fair funding review which the Government have committed to. If we do move to another system of funding local government, we want to ensure that it is fair and addresses all the needs, as it is often areas with huge social needs that are not going to have the business rate base to replace the funding they lose.

London has unique pressures. It is a growing city with huge challenges that need to be addressed. Adult social care is a problem widely acknowledged but with no sustainable solution identified. In London, the elderly population is expected to rise by 70% between now and 2039. I am in that group of statistics, as are, I suspect, many of your Lordships who are not yet retired and live in London. A long-term solution to adult social care needs to be found, but as the Prime Minister found out during the election, solutions that are not carefully worked out are not going to be accepted and will prove impossible to deliver.

Children’s social care is another pressure point, with the growing requirements of the new Ofsted inspection framework. In London, the overspending is twice that of adult social care, and with London’s young population set to continue to rise, this demand is only going to increase.

We all acknowledge that there is a housing crisis. The Housing White Paper was a missed opportunity and we have seen very little from the Government when measured against all the hype and expectation that was generated beforehand. Government policies leaving people without recourse to public funds add significantly to overspending pressure on local authorities, as does homelessness and the requirements of the Homelessness Reduction Act 2017. The Government do not appear ready to provide the level of funding necessary to make this legislation work. The 1% rent reduction on social housing is also making the situation worse.

As I outlined earlier, we need to see stability in local government funding. The Government need to be clear on their plans for 100% business rate retention. If the 2020 plan is no longer on the agenda, what is?

Many in this Chamber and elsewhere have raised the fact that we have not had a revaluation of council tax. Governments of all persuasions have time and again decided to sidestep that issue. The Government need to take a proper look at council tax: is it fit for purpose, is it the right vehicle for local government and does it deliver what is needed? Is the hypothecated precept for social care the right mechanism or just a sticking plaster that is not going to do the job?

The borrowing cap on the housing revenue account should be removed to help address the housing crisis. We need to build more council homes on proper social rents.

On a whole variety of services, local government levies fees and charges for delivering services. The fees are often at rates set by the Government, with no local discretion. If we even got to the point at which there was full cost recovery, it would be progress. I recall our debates in this House on planning fees. Although there was some proposed uplift, local authorities are still not going to be recovering anything like the costs they expend, and that situation is the same across other services.

It is a perfect storm. Local government has no certainty how it is going to be funded post 2019-20. Whatever the funding mechanism, there are huge issues regarding fair funding; there are greater pressures on and more demands for services, especially for those that are vulnerable, in early years and in social care; people are trapped with no recourse to public funds and turning to the local authority as they have nowhere else to turn; there is a housing crisis and a desperate need for more homes to be built at social rents; the housing revenue account is under pressure from enforced rent reductions; and there is no sign that the Government are going to let councils build more homes. I could go on and on. It is shocking: this is a terrible state of affairs that the Government must urgently address.

However, urgency seems to be in short supply at the moment from the Government. No one could suggest that in either House there has been an energetic start from the Government in this Parliament. I know that they have problems, but those are entirely of the Prime Minister’s own making. Local government and the residents it serves need certainty, action and direction. There are big issues to be solved and local government often speaks with one voice on these matters with little to divide the parties. Local government is asking to be allowed to do the job that it is capable of doing through a funding mechanism that is fair. It wants action from the Government to allow it to get on with the job. It is time for the Government to respond positively to the call being made by local government for certainty and stability, and to be given the tools to do the job.

15:10

[Lord Shipley (LD)]

My Lords, I should remind the House that I am a vice-president of the Local Government Association. I thank the noble Lord, Lord Kennedy of Southwark, for initiating this debate, which I think is particularly important given the absence of any mention of local government in the Queen’s Speech—a point that I will come back to. The debate gives us an opportunity to talk about the current financial crisis impacting on local government, as well as on all the people who expect and need the services that local government provides. It also gives us an opportunity to take a step back from the immediate funding crisis and take a look at the principles that should underpin local government funding after 2020.

The noble Lord, Lord Kennedy, explained the financial problems of local government very well: that is, the £5.8 billion funding gap by 2020 and the need for an additional £1.3 billion fund to stabilise the adult social care provider market. The Minister will not be surprised if I draw attention to the fact that it was not difficult for the Government to find £1 billion extra for Northern Ireland. It is broadly the same amount of money and I hope that the Government will urgently seek to solve this problem.

We need the clarity on business rate retention referred to by the noble Lord, Lord Kennedy. It was not mentioned in the Queen’s Speech. It may be that the Minister will tell us that it is going to be delivered through secondary legislation, and I hope that the matter will be clarified today. I also hope that we will hear of a commitment by Her Majesty’s Government to continue the fair funding review, which would ensure that all local councils, including poorer ones, will have enough resource to do their job properly.

We now need a national cross-party debate about the relative powers of national and local government, the consequential responsibilities that should fall on each of them, and the funding needed to deliver those responsibilities; that is, the overall funding available and the sources of that funding, be they national or local. The debate needs to be about partnership working between central and local government, based on mutual trust. I would suggest that it should not be led by slogans about excessive waste in local authorities, which today are frankly well wide of the mark.

The arrangements beyond 2020 will be a complex picture because so much in policy terms is unclear. The relationship between central and local government in terms of devolution has, as expected, become a patchwork with, for example, some combined authorities, some mayoral combined authorities, and powers in some policy areas devolved to some places but in others not devolved at all. Of course, this is what the relevant combined authorities have asked for. Broadly speaking, the level of current devolution is not really devolution at all. It might qualify as semi-devolution and it may prove to be a staging post—but, because it leaves so much power over resources with central government, it is hard to think of it as true devolution.

This picture is also complex because of the different structures in local government which can permit the duplication of overheads and occasionally conflict between tiers. Some parts of the country have unitary councils while others have two-tier structures. As the functions of local government change and budget cuts bite further, it will be necessary for councils to assess how they can reduce their overheads further, pushing ahead with, for instance, much more sharing of services—in which there are many examples of good practice.

Of course, the impact of cuts in central government support have been much greater in the poorer parts of the country, which are more dependent on the central government grant, and that has compounded the problem. Such cuts in areas of high need have become unsustainable and they no longer command public support. I would therefore urge the Government to reverse any plans they have to cut the budgets of local government even more.

I would venture to suggest that the overall crisis in funding will not be resolved until the problems surrounding adult social care are resolved, so let me start there. We need to pool budgets between the NHS and local councils. Joint but separate working is not enough; pooled working has become essential. The Dilnot review pointed to a way forward financially and I hope that the Government may still back it. I should add that I do not think it is appropriate to load the problems of adult social care funding on to council tax payers; council tax was never designed for that.

There is a crisis in local government and the reason is that it is under resourced for what it is expected to do and it is having to cut non-statutory services to pay for statutory services. There are huge stresses in policing, fire, social care and the support of children, as well as in universal services such as libraries, parks and environmental maintenance. All of this begs the question: what should happen?

First, we need to understand better what the public want. The public want greater local decision-making, so we need to be clearer about what “local” means. We used to have very small councils for a specific geographical area—often urban districts or rural districts. They had a strong local identity. There has been a tendency to amalgamate and make democratic structures bigger. The 1973 reorganisation was a case in point. Cities grew outwards and absorbed smaller neighbouring councils. But since 2010, with city deals and combined authorities, those democratic structures are getting larger. I wonder whether the time has come to look again at greater empowerment for smaller, local areas for defined services, building on towns and parishes.

In terms of money and resources, we should remember that members of the public think that they pay council tax to benefit from universal services—but, of course, it is far more complicated than that. I have come to the conclusion that we now need to address the issue of more council tax bands at the top end. That would bring in more income from council tax. I think we also have to engage much more in voluntary taxation. I am thinking in particular of expanding the role and powers of business improvement districts, many of which are now a huge success. We need to maximise the role of trusts and volunteers—the National Trust now has a role in parks in a number of councils—but I do not think that we can ever assume that they are always going to be a satisfactory replacement for public services. Councils need powers to raise other forms of taxes, too. Council tax referendum limits should be abolished and councils need greater flexibility on fees and charges, which will enable them to recover their costs, including their overheads.

There has been a lot of publicity recently about council borrowing powers. The noble Lord, Lord Kennedy, talked about the importance of councils investing in housing. He is absolutely right about that, and the removal of the cap would be a huge help. I had not realised until I read it in the Times earlier this week the extent to which local authorities are investing in commercial developments. It is one thing for people to invest in commercial developments in their own area in order to complete them; it is another for councils to become property developers. I was somewhat shocked to discover that, since 2015, councils have spent £2.7 billion on property—five times the level of the previous three years. It is almost as though something happened when the coalition Government came to an end. It is probably fortuitous, but the reasons for that fivefold increase in property deals need to be looked at, dare I suggest, by auditors—if the department is not already doing that.

I welcome the announcement by the Secretary of State of a housing infrastructure fund that will provide 100,000 new homes in sought-after areas—but, in my view, it is the responsibility of local councils to invest in their infrastructure and in housing as a priority, and not to invest in buildings sited in other local authority areas with which they have no connection.

To conclude, I understand that the Government have a problem with debt and the annual deficit, but they must now clarify how the funding gap will be addressed, their plans for business rate retention, the completion of the fair funding review and their willingness to empower councils to do more financially for themselves. It is poorer people who are suffering from the current level of cuts. I have concluded that we were right at the general election to urge a 1%—or rather 1p—increase in income tax to provide extra resource to pay for some of the services that I have been talking about. My party was right to have the courage to propose that 1p rise, of which I strongly approve.

15:20

[Lord Desai (Lab)]

My Lords, we are very grateful to my noble friend Lord Kennedy for initiating this important debate. Unlike some other speakers, such as my noble friends Lord Smith and Lord Kennedy, I have no experience of local government, but I am an economist.

In all the years I have spent in your Lordships’ House, local authority revenue has haunted British politics. I am old enough to remember what was there before the poll tax. It was the biggest crisis in British politics that there was a need at that time, with the rating system, for the Government in charge to take the bull by the horns and revalue properties, because property prices had risen. Governments were proud that they had. Rising house prices is a fundamental part of British politics and we are alarmed when property prices are not rising. But when it comes to earning the state’s share of the rising capital value, we are suddenly very shy. Because of the Conservative Government under Mrs Thatcher, we do not want to go into the tricky idea of revaluing property and then passing on the standard rateable value calculation.

Then we got into the poll tax. We all remember what happened with that. It was a complete disaster. Then we had the council tax. I remember taking part in the debate on council tax and trying to point out that it would not be adequate unless there was flexibility to increase council tax or add new property bands, because property values would rise. We know that; it is a fundamental fact. So here we are discussing a variety of revenue sources. The noble Lord, Lord Shipley, talked about a variety of sources that his party has been proposing over the years—local income tax and various other things—but we are not taxing the most valuable asset local authorities have. It is like the elephant in the middle of the room: we know that when we talk about that we are going to talk about every little bit—business taxes and this and that.

At some stage, one of the political parties has to bite the bullet and say that we need a royal commission or some other official body to sit down and examine how much property prices have risen since the council tax was introduced. We all know that it is a gigantic sum. I have lived in a house in south London since 2004. I might not be too far wrong in saying that the property price has risen by three times. I am still paying the same council tax. It would be fair for me to pay a bigger local authority tax so that my local authority does not have to shut down local libraries. Yes, I can join the campaign to not shut down local libraries, but that will not solve the problem. They need money. If you unlock that particular source of local authority wealth—houses cannot run away; they have to be there, so you can be pretty sure it is your asset—then they will have a flexible and buoyant source of revenue. You could even cut the council tax rate and increase the revenue. It is a win-win solution. You could say, “If we get into power we’re going to cut the council tax rate but we’re going to revalue properties”. It could be done—if the Government want, I could do it in 15 days—and we would release this buoyant source of revenue and solve a lot of the problems local authorities have.

As I said, this could be done keeping the current structure of council tax intact. You do not need to be predatory or increase the tax rate. As some people may know, there is the philosophy of Henry George, who said in the 19th century that countries need only one tax: on the improvement of landed property. If you had that one tax you could abolish all others. I have done some work on that—I will go down that route—and we have a source of taxation that we are deliberately not using because we think it will be very unpopular. We are willing to go through austerity and all the hardships local authorities have. Even local authorities are not thinking about this as a source taxation.

Being an academic economist, I do not have to worry about the real world; I can think about ideal solutions. One feasible solution is to keep council tax but have a panel that revalues properties across the country. It does not have to rely on anything subjective; there is enough evidence in estate agents’ records. We know what transactions have taken place in each area and we know how much property prices have gone up. We could easily treble, if not quadruple, local authority income from council taxes. I know it will not happen. I have spent a lot of my life saying things here that will not happen that ought to, but we ought seriously to consider, on a bipartisan or all-party basis, that the time has come and we cannot deprive our local authorities of a fruitful source of revenue and go through torturous negotiations between central and local government.

Every party in one way or another tells us how valuable local initiative is, how much we want to decentralise and, once we have delegated power to local authorities, how power should be near the people. The Conservative, Labour and Liberal parties have slightly different philosophies, but we are all for it. It is only when it comes to giving the money that we suddenly become centralist. If we stay centralist we will deprive local authorities of proper revenue. That is unfortunately a sad truth, as some speakers have said, and more will talk about it. I suggest to the Government that they have a panel to revalue properties across the nation. They have enough problems on their hands anyway; one more will not make much difference, so they may as well bite the bullet. Then, we can have a proper yield from council tax. That will solve the problems of local authority financing.

15:29

[Baroness Donaghy (Lab)]

My Lords, I thank my noble friend Lord Kennedy for initiating this debate. His commitment to local government is well known. He is known as “Mr Local Government” down our way.

With so many local government experts in this debate, my contribution should be taken as one from a lay member. I am not a vice-president of the Local Government Association, nor have I been a councillor or even a candidate for a local council. I was an unpaid branch officer in a trade union for more than 30 years, which provided all the joy I needed.

I have worked with hundreds of local government staff who were members of NALGO and then of UNISON. I witnessed their pride in their job and their community, which led me in turn to see the importance of local government to society. I will start with a question to the Minister—it has already been asked, but it is incredibly important: what has happened to the missing local government finance Bill? His Secretary of State said nothing about it in his speech to the Local Government Association conference. Where is the introduction of 100% business rate retention, or the bit which allowed tax relief on new ultra-fast broadband lines? I understand that the telecoms infrastructure Bill will deliver the tax relief instead, backdated to April—the Minister is nodding. Which legislation will deal with business rates retention? I ask only because the Secretary of State said how important that legislation was in February. He said that the reforms offered,

“a bold and innovative response to the twin challenges of promoting economic growth and securing more self-sufficient and sustainable local government. They will help determine the role, purpose and means of delivery for local government in the years ahead”.—[Official Report, Commons, 20/2/17; col. 27WS.]

That is all pretty important, yet the Secretary of State can make a speech to the LGA conference without mentioning it. Usually the saying is: “It’s like the play without Hamlet”; in this case, it was Hamlet without the play. What information can the Minister give to the House on this subject?

I live near Camberwell Green, one of the busiest crossroads in London. On the edge of the green is a purpose-built residential home, which also facilitated nursing care. I know the building because my mother stayed there before she died, more than 10 years ago. The building was bought and sold a couple of times and now lies empty with a “To Let” sign outside. I cannot begin to describe the desperate need of some families in south London for residential and nursing care for their loved ones, or even for a halfway house or respite care unit. This building is a shocking monument to our failure as a country to deal with social care. If we had well-resourced local government, this is the kind of service that it could and should provide.

Southwark’s children will lose the equivalent of £1,000 per pupil in the education cuts. We have a serious problem with air pollution: the level of nitrogen dioxide is more than one and a half times the accepted limit on the Peckham Road, which is where I wait for my bus every morning to come here.

Southwark Council has been magnificent in checking all the high-rise blocks in its area and assisting Kensington and Chelsea Council after the Grenfell Tower tragedy. Its experience with the Lakanal House tragedy, already referred to by the noble Lord, Lord Shipley, made it well aware of some of the dangers. We still remember that it was Sir Eric Pickles, then DCLG Secretary of State, who refused a public inquiry into that very serious issue eight years ago. How many lessons might have been learned had that been taken more seriously?

We have one of the highest incidences of knife crime in the UK in my area, and never has the need for community police work and council resources been greater. Local government finance is about the fabric of our society, as has already been said. If central funding to local councils is cut by 77% by 2020, as the Government intend, people will suffer—not the haves, but the have-nots: those with the worst housing, the greatest personal debt, the most insecure jobs and the most need. Doling money out from the centre, such as with the infrastructure fund for building new homes, is no substitute for vibrant local government. The Secretary of State should not blame councils for faults in central government, as he did at the LGA conference. He should reflect the pride that people from all parties feel when they serve the local community. Having spent several hours this week and last helping to select our three candidates for our local ward, I am staggered by their energy and commitment. It is a reflection of the pride in municipal government which all parties support but which I feel this Government do not.

Council tax has increased by 15.8% in the past 10 years, compared with increases of 58.7% for gas, 50.5% for electricity and 34.2% for water, all of them privately owned. While the increase in utility bills is shocking, I suspect that local councils would have been grateful for even half of those increased sums.

We all know about the desperate shortage of affordable homes, with young people today being half as likely to be on the housing ladder as they were 20 years ago. The Local Government Association has reminded the Government that in the 1970s local government built 40% of the 250,000 new homes then constructed. The LGA has put forward sensible proposals, including,

“allowing the Housing Revenue Account borrowing cap to be lifted”—

that has already been mentioned by my noble friend Lord Kennedy and the noble Lord, Lord Shipley—and,

“building a new wave of different affordable housing options linked to a new definition of affordable housing as being of a cost that is 30 per cent of household income or less”.

These are all things which noble Lords on this side of the House have called for.

However, it is in the area of homelessness and its prevention where councils have a vital role. The level of homelessness has increased by 44% in the past six years. According to the LGA:

“Councils are currently housing 75,740 families including 118,960 children in temporary accommodation, at a net cost that has tripled in the last three years”.


If the Government were to adopt even half the LGA’s proposals to tackle homelessness, it would make a real difference.

Finally, if the Minister is unable to say what plans the Government have to legislate in the area of financing local government, can he at least tell us how the Government intend to alleviate the parlous financial condition of local authorities, which are doing their best to serve their communities?

15:37

[Lord Greaves (LD)]

My Lords, I congratulate the noble Lord, Lord Kennedy, on initiating this debate, which is very timely. I declare an interest as a member and deputy leader of Pendle Borough Council and various other local government interests. Talking of Pendle, I am reminded of a time, a very long time ago, when the Minister, the noble Lord, Lord Young of Cookham, visited Pendle—in fact, it was two occasions—when he was a junior Housing Minister in a Conservative Government. He gained a reputation in Pendle which one or two people still remember him for. He came and we told him why we wanted more housing money and all the rest of the things that we do when Ministers come—we showed him lots of good things and tried to hide all the bad things. Fairly soon afterwards—a few days, I think—he was sacked as a Housing Minister and we thought, “That was all a waste of time”. Time passed on and he became a junior Housing Minister again, and yet again came to visit Pendle—at the behest of the man who is now my noble friend Lord Lee of Trafford. We went through the whole rigmarole again. I do not think that he was sacked that time, but he was certainly moved on from being a Housing Minister. The word went out in Pendle: “If we get a government Minister coming, make sure it’s never that man Young”. I have to say to the noble Lord, Lord Young, that he will be very welcome indeed to come to visit Pendle again and I hope we will not have the same effect on him.

I associate myself completely with the comprehensive speech made by my noble friend Lord Shipley, who covered quite a lot of very interesting matters, some of them fundamental. If local government is going to be sorted out, many of those matters are going to have to be tackled.

I want to comment briefly on the goings-on at the moment in two local authorities in my part of the world, in Lancashire and Liverpool, where very strange things are happening. I do not know what the latest information is—it seems to change every hour—and in mentioning it briefly I shall be very careful because it involves criminal investigations. I shall not get involved in those, but some time ago four people were investigated by the police in relation, as I understand it, to goings-on in connection with partnerships between those two councils and BT, Liverpool Direct and One Connect. It may well be that that will be discussed in the future. However, one of those being investigated, a man called Geoff Driver, was released from the investigation. He was leader of Lancashire County Council at the time that is being investigated and is leader again now after an interregnum of four years. On 22 May—these are just facts—all four of these people were arrested, according to the police, “on suspicion of conspiracy to pervert the course of justice and witness intimidation”. They were bailed on 19 June and rebailed on 23 August. I do not wish to comment on those investigations in any way. I want to comment on the effect that they are having on these two councils.

In Liverpool, the chief executive, Ged Fitzgerald, one of these four, was suspended and, the press reports, is on paid leave of absence from his £200,000 a year job. However, the significant thing is that the elected mayor, Joe Anderson, the Mayor of Liverpool, has taken over the functions of the chief executive, according to the press, which seems an extraordinary thing to happen. Despite that, according to reports in the newspapers, specifically in the Liverpool Echo of 23 June:

“Liverpool’s arrested chief executive Ged Fitzgerald will continue to ‘guide and advise’ Mayor Joe Anderson while he remains on paid leave as police investigations into his conduct continue”.


What is happening in Liverpool seems unusual, to put it very mildly indeed.

As for Lancashire, Geoff Driver, perfectly properly, was elected as leader of the county council, but he has issued what I can only describe as a quite extraordinary injunction to four senior officials of Lancashire County Council: they are not to attend any briefings at which he is present. In other words, the elected leader of the county council, Geoff Driver, has banned four senior officials—including the chief executive, Jo Turton; Mr Sutton, director of development and corporate services; Ms Lowry, head of internal audit; and Ms Kitto, director of corporate services—from giving the leader any advice, except in writing. They can email and no doubt they can send old-fashioned written communications. This is causing a great deal of concern. The leader of the Labour opposition on Lancashire County Council, Councillor Azhar Ali, has written to the Communities Secretary to ask for a government investigation into what is going on in Lancashire, and I have to say that none of it does Lancashire, or Liverpool, or local government any good whatever, regardless of the ongoing investigations by the police.

It is inevitable in a discussion such as this that current budgets are top of the list; although they are current budgets, they are a symptom, a serious symptom, of the crisis which is hitting local government. I have the exciting task of being what people call the “portfolio holder for finance” on my council and it is not a particularly pleasant job at the moment. This is particularly true, if I may say so, for district councils in two-tier areas, as opposed to county councils, which are lumbered with having to deal with what in the old days, when finance for local authorities was given in blocks, were simply called “other services”. The recent general election and a great deal of speculation now about “the end of austerity” suggests that funding for health, social care, education and transport—high-level public services—might be released. I do not hear anyone saying that the same thing is going to happen for the ordinary local services on which the health and future of communities depend and which people expect to keep going: street sweeping, dustbin collection, recycling, libraries and all that kind of thing. I see no sign at all.

The Local Government Association, of which I am not a vice-president, issued a statement saying:

“Even if councils stopped filling in potholes, maintaining parks and open spaces, closed all children’s centres, libraries, museums, leisure centres, turned off every street light and shut all discretionary bus routes they will not have saved enough money to plug this gap”.


The point is that these are exactly the kinds of services which are discretionary and do not have to be done except at a very low level—and I do not know how long it is going to be before somebody takes a district council to court for not sweeping the streets properly. They are that kind of service. They are in the front line of cuts and, frankly, in a lot of places, they are in the front line to be reduced to a level where they are of no use whatever.

Councils are finding all sorts of wheezes to try to get round these things, and some of them may be desirable in themselves. Apart from everything else, I hold the exciting title of chair of Pendle Borough Council’s transfer of services and facilities to town and parish councils committee. If that sounds like a low-level job, let me tell the House that negotiating with 18 or 19 parish and town councils that are full of people who want to get involved in the detail of everything—because they are very local and that is what they do, and quite rightly too—is such that I could quite easily spend much more of my time and energy on that work than on work in the House of Lords, and perhaps I do. And we are doing it: we, an ordinary district council of 90,000 people, are currently working on transferring, for example, our 11 parks to our town and parish councils. Perhaps that is the right level for those parks to be run at—and I agree with that. The problem is that the town councils will be able to do it only if they put their council tax up. One of the reasons why the councils are doing things like this is that town and parish councils can put their council tax up but the district council cannot. I hope the Government will never stop us doing that, because it is a matter for local decision, but still it does not avoid the need to raise the money. The alternative is to sell off some of the parks, for housing land, perhaps, and use that money to keep the parks going for another 10 years. That is an answer. Another is to close two or three of the parks, to stop cutting the grass very substantially, to stop planting flowers in the park or to stop painting the railings—or whatever it is. Surely local government is not down to that kind of level.

The country as a whole has to have a fundamental rethink about what local government is for and how it is organised. I wish we would stop using the word “government”. What I am interested in is local democracy. At a local democracy level it is not the regions and city regions and the arbitrary amalgamations of local authorities to make combined authorities. People are not interested in that. They do not understand it and they are not particularly bothered about electing mayors or anybody else for towns on the other side of the big city. What people want is the ability to have an influence and to get involved in making sure that basic local services in their local community are there. As far as democracy is concerned, that means coming back to the fundamental building blocks of democracy which, in my view, are towns—big towns, little towns, middling towns, small towns. Towns provide the civic focus—the name gives it away—for people to get involved in running and helping to run them, as well as the accountability that local representatives should have. I believe that towns are the key to the future, and by “towns” I include big cities such as Manchester and a little town such as Earby in Pendle which has 3,000 electors. They are the places that things have to be built on. We have to rebuild our local democracy from the bottom upwards and stop trying to run everything from London, Manchester or Leeds in a top-down way.

15:51

[Lord Smith of Leigh (Lab)]

My Lords, in thanking my noble friend for securing this debate I must apologise to him for missing his first sentence. I was coming down on a train today and unfortunately it, like the Government, had a loss of power. Fortunately for Virgin Trains, the loss of power was only in Milton Keynes, not over the whole country.

I need to declare my interests in local government. I am leader of Wigan Council, a member of the Greater Manchester Combined Authority, a vice-president of the LGA and vice-chair of an organisation called SIGOMA.

In looking at the Government’s loss of power, one of the factors that affected the election in June was the impact of austerity. As the campaign went on and as issues such as school funding, police funding, the loss of police numbers when the Prime Minister was Home Secretary and social care, which was a total disaster, came out, it made people understand that if you cut back public services you cut back on the way they affect people’s lives—and people had had enough. I shall say a bit more on this later.

In Wigan, one of the things we do now which we did not do before is that we go around to the different communities to explain to them what we are doing and answer questions from the local community. We were in a former mining village the other Wednesday. It was one of those rare evenings in Wigan when the heat was blasting down and I would rather have been in the garden with a long, cool drink than in the venue—but enough people turned up and they listened to my explanations, and then we got to question time. Again, austerity was the dominant issue.

The first question people asked was about the increase in anti-social behaviour by young people and the lack of police response. In the last few years, Greater Manchester Police has lost 2,000 officers and does not now come out. If somebody now rings the police and says: “We have an anti-social”, the police reply, “It’s category 3 and we only come out to category 1 and 2. You’ve had it. We don’t turn up at all”.

In the same area, people criticise the council for not having enough youth workers on the scene. As the noble Lord, Lord Greaves, was implying, this was a discretionary spend. Where we are looking to make the kind of savings we have to make, we do it, but not as much as we did before.

One gentleman raised the issue of transport. People cannot get in and out of the place early in the morning or in the evening because there is no public transport; the buses stop running. Why is that? Because Transport for Greater Manchester lost funding and can no longer subsidise non-profitable routes, so they go. He made the point that if you want to get a job on a shift pattern, you could not do it. We have also reduced street cleaning. To be precise, I think about £3 billion has been taken out of the neighbourhood services budget nationally.

I think the Government were sleep-walking when they went into the election, not understanding the way austerity was hitting people. In some ways, there is an excuse. The former Prime Minister—as I was stuck on the train, I have not heard on the news today whether the current Prime Minister is still with us, but I assume she is—David Cameron said, “We are all in this together”. That was a totally untrue statement. The unfairness in the way that austerity is applied has come through quite dramatically. In cash terms, local government lost 20% of its budget from 2010 to 2016. There will be a slight increase between 2016 and 2020—which is distorted, as the noble Lord, Lord Greaves, pointed out. Huge amounts are not going into local government services, except for the better care fund for dealing with some of the problems. My authority, Wigan, lost far more in that period. In real terms, we have lost over 40% of our budget, as has the noble Lord, Lord Storey, in Newcastle. All the northern authorities lost out.

If we turn to a place such as the Royal Borough of Windsor and Maidenhead—not perhaps unknown to the Prime Minister—the losses are much less. It has not taken the hit; there has actually been an increase in funding in some of those areas. The cuts taken in more affluent areas have not been the same.

I also want to talk about the continuing unfairness of one of the ways in which the Government tried to fund the social care increase: namely, through the increase in council taxes, the so-called social care precept. The level of cash that can be raised by authorities depends on the level of council tax banding in those areas. In a place such as Wigan, there are not many £1 million properties, I have to confess. Most of the properties are in band A or band B. So if we put a 2% or 3% increase on council tax, it does not raise as much money as more affluent areas raise. SIGOMA gave me some figures that show that in SIGOMA authorities, for every dwelling that raises £713, the figure for the rest of the authorities that run social care is £857—quite a significant 17% difference between the amounts that can be raised in that way. Clearly, those in urban areas and the most deprived areas are having to put more money in to solve the problems of social care.

The one area of local government activity that was in the Queen’s Speech with a promise was the fact that the Government are looking for a solution to social care funding. I think that all sides of the House would welcome a proper approach to that funding, but it cannot be done by the Government. It has to be done working with local government and across parties, because we need a solution that will be satisfying and sustainable in the long term. If we do not do that, a number of local authorities and health services will be overwhelmed by the increase in pressure of the ageing population. I believe this is an urgent problem. It is not an immediate problem but it is certainly urgent, because the longer we do not solve it, the greater the pressures are going to be.

I also want to echo what my noble friends have said about business rates. We need to know what is happening with this promise to return business rates to local authorities, in two ways. The questions that my noble friends asked are absolutely right, but I also want to know what is going to happen to the pilot schemes which are in progress but which we are told will run only until the end of this year. The pilots are meant to teach us things, but how can we learn if we do not know when that will happen? We need to see what we can get from those.

The other issue around business rates is of course the mess the Government got into of their own making on valuations. I remember arguing with the Government—it always seemed to be at 11 pm—along with my noble friend Lord McKenzie of Luton and the noble Earl, Lord Lytton, about their plans to defer the regular revaluation of business rates. We tried to point out to them that if you defer it and then try to come back to the scheme, you will actually get into more of a mess—and of course it proved to be that way. The figures for revaluation were so high in many cases that, as soon as the Government saw what they were like and got such bad publicity, they had to bury it. The third issue around business rates is equalisation because, clearly, the ability of different areas to raise funds through business rates is quite variable. I fully support the principle of return, but the Government still need to find a mechanism by which they can make sure that places that are not able to raise such a big amount of money can do it.

Then of course the other main source of income now for local authorities is council tax, and I welcome the comments of my noble friend Lord Desai on this matter—again, I am banging on. It is over a quarter of a century now since we last revalued houses for council tax. The council tax was brought in as a desperate measure to replace the poll tax: “What can we do? We need to replace the poll tax?”. So allegedly the noble Lord, Lord Heseltine, as he is now, sent round teams of estate agents to run up and down streets with fairly arbitrary rules saying, “Band A, band B, band C”. These bands have stuck for all that period and have not been revalued since. But of course there have been huge changes in the values of properties over that period, and changes in quality. A house built in 2017 will have broadband and different facilities that were not available in 1991. How do you say, “Ah, but if this house had been built in 1991, what would it be valued at?”. It is a rare art to be able to look at a house being built in the current year and think what it might have been valued at all that time ago. As my noble friend said, if we do not have the change in valuations, we have no buoyancy in the tax. Unlike with income tax, VAT and other taxes, the only way to raise more money through council tax is to raise the rate of the tax—and that is not the best way to do it, so we need to do this.

It is easy to have a glass-half-full or even a glass-quarter-full mentality, but I like to see opportunities from what has happened. Many local authorities, including my own, have responded to the cuts in as positive a way as we can by looking to see what we can do for public service reform. Again, I have spoken before about this in the House, but the Government have not really taken much of a lead on this. In a programme that we call “The Deal”, we are looking to see how much more we can help people. We take what is called the asset-based approach on individuals, looking to see what their needs are and what their benefits are. When you do that and look at people, what you find is that the individuals we are dealing with as a local authority are often undergoing health treatments for various things—often mental health problems—or may have housing issues, and probably the police know them. So if we can get a holistic approach to families, we can begin to start turning them around. Rather than waiting until a child has problems and we have to put them into care, we try to support the family so that they can remain in the heart of the family.

We have to do much more on integration, working with all the different agencies to ensure that we can look at the family and help to address those issues. One of the problems we have is getting people back to work. We do not ask people just to rewrite their CVs, as they were often asked to do under the previous job creation scheme; we get them to understand what their issues are. If you do not have a home, you are likely not to be able to get work, so we need to address that.

The final area is working better with the community. I think we are one of the few authorities that puts more money now into the community than we did in 2010. We call it investment because it is an investment. We have attracted visits from various parts of the UK and Europe and we are holding a conference in September 2017, so if any noble Lord wants to come, they should get in touch.

I agree in part with the noble Lord, Lord Greaves, on how we deliver services. We have to go back to units that people understand in terms of delivery. However, we need a strategic role in local government, which is where the larger authorities can work together. I am a great supporter; it has been a challenge and a privilege to be a leader of local government, it continues to be so, and I continue to be positive.

16:06

[Baroness Pinnock (LD)]

My Lords, I draw attention to my interests: I am indeed a vice-president of the Local Government Association, but more importantly, I am an elected councillor in Kirklees in West Yorkshire.

The clear message from all speakers is that funding for local government is at crisis level. The Government’s response, as we know, was—or maybe is—to set it free from reliance on central government funding of its core services by the introduction of the 100% retention of business rates. In theory, people across local government can support that aim, although with some caveats. The first is that local government has, following this divvying-up of business rates, sufficient sources of funding to deliver essential local services. The second is that central government stops delegating additional responsibilities to local government without at the same time fully funding the resources needed to do so. The third principle is “He who pays the piper calls the tune”, so that if government does not fund local government, local government is set free to fulfil the needs of the people and businesses it serves and is enabled to raise the funding it requires to do so.

We have heard a number of ideas from across the Chamber as to how that could happen, and I will throw in a couple more. First, why is local government not able to have a proportion of the VAT that is raised locally, by spending in local businesses and shops, to spend on local services? That would be relatively easy to do and could transform local government’s relationship with businesses. Secondly, why is local government not able to take a proportion of taxes raised from vehicle taxation in order to repair roads? Those are a couple of ideas for the Minister to ponder, and I hope that he will be able to respond in a positive way.

The Government’s proposal was 100% retention of business rates by local government, but the balancing act was the 100% removal of revenue support grant. The position local government now finds itself in is that the continued reduction of revenue support grant will continue for the next three years, but there will not be a replacement revenue stream of business rates—unless, of course, the Minister is able to tell us otherwise. So uncertainty reigns and, where there is uncertainty, there is inability to plan. Local service providers need certainty in order to plan. Without a local government finance Bill to deliver the business rates retention model, local government continues to be starved of the funding it needs.

However, that is not to say that the business rates model is without significant problems. The National Audit Office report of March this year drew attention to some of the stark facts. It said:

“Designing and implementing the 100% scheme will require a ‘radical overhaul’ of the local government finance system. The Department”—


of Communities and Local Government—

“faces complex design issues, which need to be addressed in the context of often competing views within the sector. At the same time, the Department is undertaking a fair funding review of the sector. This will identify relative levels of needs and resources across the sector and set the baseline distribution for funding under the 100% scheme. The Department is undertaking this work having faced some reduction in staff resource”;

a reduction of nearly 40%. It goes on to say:

“There are risks in designing and implementing the 100% scheme. These include short-term risks whereby failing to deliver the scheme on time or to provide the sector with enough information in advance could undermine local financial planning. There are also more significant long-term risks whereby poor planning and design could deliver a scheme that puts local authorities’ financial sustainability at risk or fails to create a mechanism that delivers local economic growth”.


It also says that failure to address the lack of correlation between areas of need and areas of business growth will lead to some council areas having even larger cuts in services than they have now.

That is the National Audit Office’s fairly impartial view of what the Government are—or were or may be—planning for local government funding reform. The conclusion I draw is that the business rates model for self-sufficiency as a stand-alone solution to local funding is totally inadequate. That is without even considering the increasing demands, as we have heard from all speakers today, for housing and social care or the funding of the base delivery of core services.

Local government has seen what can be described only as massive cuts in funding over the past six years. Taken as a whole, local government funding has had nearly a 40% real-terms cut. Again, as we have heard, the reduction is not shared equally across councils. Those that serve more deprived areas and relied more heavily on central support have had to shoulder the lion’s share of the cuts—how fair is that? These have been so deep that another National Audit Office report in 2014—even then, three years ago—reported district auditors as saying that some metropolitan and unitary councils may not be able to provide statutory services when the last of the grant cuts are felt in 2019. I would like to hear the Minister’s response to that statement from the district auditors.

I will use some of the figures for my own council of Kirklees as an example of what is going on. The estimated budget shortfall is £54 million this year, increasing to £104 million in 2020-21. This comes on the back of significant reductions, the revenue support grant having reduced by over 40% in the 2010 to 2016 period. That is for a council whose net revenue spend was nearly £400 million in 2009 and will be less than £300 million—around £270 million—by 2020. That gives the scale of the cuts that a big met authority such as Kirklees is facing.

The current level of revenue support grant for Kirklees is £32.7 million—that is after all these cuts that we have heard about. The assumption is that that will disappear by 2020-21. That currently funds 11% of the council’s net revenue budget, so it is significant in absolute and proportional terms. Obviously, the council continues to experience significant service pressures, in particular on support for children, providing adult social care and on environmental issues such as street cleaning and waste collection.

Obviously, the council tax will not bridge the gap and neither will the business rate, so cuts in services will continue. For instance, it is currently consulting on decommissioning half of the play areas across the borough. This is for a population of 420,000 in a big urban area. How poor is that, when we are trying to encourage children to exercise more?

The Government have a responsibility to find a solution to this situation and need to explain to council tax payers, who will find—in my borough and, I guess, many others—that two-thirds of the council’s spending will be to fund vulnerable adults, whether they be elderly or people with learning difficulties or disabilities, and vulnerable children and families. That is two-thirds of the budget on, perhaps, 2% of the population. That is what council tax and business rates will be funding. It seems to me that we have that totally out of kilter. If local government is to do what many noble Lords have said, which is to provide basic community services that local people want and need, such as street lighting, street cleaning, parks, libraries and somewhere to work and play, people, especially at the poorer end of the spectrum, will suffer, and indeed are suffering.

I thank the noble Lord, Lord Kennedy, for initiating this debate and trust that the Government, through the Minister, will find another couple of billion pounds at the back of the very large sofa, where they have already found £1 billion, so that we can have even just a small reduction in the large gap of funding for local government and its services.

16:18

[Lord Young of Cookham (Con)]

My Lords, I welcome this opportunity to debate this important issue, and I am grateful to all noble Lords who have taken part. We have had a thoughtful and, on the whole, consensual, debate about the future of local government. As the noble Lord, Lord Kennedy, said, right at the beginning, many of the key services on which our society depends—education, social services, housing and public transport—are not delivered by central government but by local government. Local government works hard to deliver quality services when it has had fewer resources to do so, as the noble Lord, Lord Smith, said. It works hard to deliver those services. Local councils have much to be proud of and I pay tribute to the way that they have made economies and efficiencies and yet still maintained a high level of public satisfaction.

I cannot claim the same intensity of local government service as many noble Lords who have spoken. I served three years on Lambeth Borough Council in 1968, when there were 50 Conservative and three Labour councillors, but I must have visited Pendle in 1971, because I then lost my seat.

This debate, which I am grateful to the noble Lord, Lord Kennedy, for initiating, gives us an opportunity to stand back a bit from the day-to-day challenge of service delivery and look at some of the medium-term strategic issues that we have talked about—if not the fundamental rethink that the noble Lord, Lord Greaves, called for, at least a serious look at the challenges faced by local government and possible solutions. These strategic issues include finance—the main subject of the debate—but we have also touched on the relationship between central and local government and the redistribution of powers, and within that, the relationship between the NHS and adult social care, which has been one of the major themes. I also want to touch on the emerging and changing structures of local government, and new ways of working together, mentioned by the noble Lord, Lord Shipley, and indeed, working with the private sector to deliver those services.

First, a cautionary note: when I was no longer Housing Minister after my second visit to Pendle, I became a Minister at the Treasury. We need to set this discussion in the context of the challenging fiscal position in the UK. As we heard at the end of the previous debate, at nearly 90% of GDP, our public debt is the highest it has been in nearly 50 years. Our deficit is still above the post war average and above sustainable levels. We have the fourth highest deficit and the sixth highest level of debt out of 24 advanced economies.

We are having this debate against the background of trying to return to balance by the middle of the next decade, which is the right medium-term fiscal objective, enabling debt to fall back to safer levels. We cannot exempt, and we have not exempted, local authorities from this process. As I said, we have recognised their successes in making efficiencies over recent years. Looking ahead, local authorities will see a modest 1.2% increase in cash terms between 2015 and 2020, but looking only at central grants—RSG—does not reflect the totality of resources available to local authorities to deliver local services, including business rates and council tax, as well as dedicated grants, such as the improved better care fund.

Local government finance is a key element in enabling local councils to play their role. To facilitate their work, we have given councils important financial freedoms and flexibilities to help them manage their own budgets. For example, we have given councils new flexibility to use up to 100% of the receipts from the sale of land and buildings, to help make the up-front investment in the transformation of local services and therefore ensure further savings.

The noble Lord, Lord Kennedy, asked in his opening speech for more certainty and stability—I think those were the two words he used. In 2015 we provided more certainty and stability through the offer of a four-year financial settlement, and 97% of eligible local authorities have accepted that offer. We have also introduced flexibility to use the receipts from the sale of land and building, as I have just mentioned, not just to help pay the up-front investment in the transformation of local services, but to put more money into adult social care. We have also introduced the social care precept. As a result of those, against a challenging background, councils can now plan for the future with greater certainty over their funding than ever before, helping them to take more control and plan service delivery and transformation, and to achieve more effective collaboration with local partners.

For example, the transformation challenge award is a challenge fund to support local authorities to re-engineer their business practices and redesign service delivery. It helps local authorities to go further and faster with their transformation plans. Among many others, Lancashire County Council used it to develop and implement an integrated well-being and resilience offer, the London Borough of Brent used it to help local residents overcome barriers to employment, and Blaby District Council is using it to make housing support services easier to access. Much of this debate has been about business rates retention. The noble Lord, Lord Kennedy, and the noble Baroness, Lady Donaghy, touched on that.

As noble Lords have noted, there was no government finance Bill in the Queen’s speech, so there have been questions about our plans for the future of business rates. Looking ahead, I can assure the noble Lord, Lord Kennedy, and others, that local government finance is still very much on our agenda. We are committed to delivering the manifesto pledge we made to continue to give local government greater control over the money it raises, and we will work closely with local government to agree the best way of achieving that. We have no plans yet on timing for a broad local government finance Bill; we will, of course, be looking at what can be achieved without primary legislation, which was something the noble Lord, Lord Shipley, touched on, although, of course, there will be some constraints on what we can do through that route.

We are planning to take this opportunity to open up a conversation with business and local government stakeholders, and ask what their priorities are for the future direction of local government finance reform. We are committed to making the right reforms and ensuring the long-term sustainability of the local government system, delivered on an appropriate timescale. That does not mean we have abandoned the idea of early action. We recognise the impact of increasing service pressures, and are already responding positively to help councils meet immediate issues. For example, as noble Lords have said, in addition to the money announced by the Government in 2015, at the spring Budget this year the Government announced an additional £2 billion to put social care on a more stable footing and alleviate short-term pressures across the health and care system. We have also allowed relevant authorities the flexibility to raise more income through the adult social care precept.

I note the point raised by the noble Lord, Lord Smith—that the money raised from the precept is not quite as much in areas with low-valued housing. But the money raised from the precept is only part of the additional funding made available for adult social care. The majority of the funding announced in the spring Budget will be allocated using the improved better care fund formula, which takes account of the ability to raise money through the council tax precept for social care. Therefore, the total reflects relative need as closely as possible, in recognition of the additional challenges that social care places on certain councils.

In the medium term I reiterate our commitment to the fair funding review, which addresses local authority concerns about the fairness of current funding distributions and the lack of transparency and simplicity in how that funding is allocated. It has been almost 10 years since the current formula was reviewed, and it needs revision to reflect the rapidly shifting factors, such as changing population and demographic pressures, which determine local authority costs in providing services. The fair funding review will set new baseline funding allocations for local authorities by delivering an up-to-date assessment of their relative needs and resources, using the best evidence available. It will be a thorough, evidence-based review of what the relative needs formula should be and will consider a wide range of options for developing an updated funding formula by looking again at the factors that drive costs for local authorities. We cannot and will not do that in isolation; the review is using an open process of close consultation and engagement, and the team is working actively with the LGA and with representatives from all parts of local government through a technical working group to try to get this right. I recognise that local authorities are keen to make progress on this, as indeed are the Government, but they also tell us that it is important to get this review right. We shall continue to seek views on the approach and the target date for implementation.

Adult social care was mentioned by the noble Lord, Lord Smith, the noble Baroness, Lady Donaghy, and others. As my noble friend Lord O’Shaughnessy said in exchange at Question Time earlier this week:

“This Government’s ambition is to make the UK a good place for everyone to grow old, and we have put in place a programme of reforms across health, care, housing and other services to support older people to live independent and fulfilling lives”.—[Official Report, 11/7/17; col. 1158.]


For example, following the rollout of full devolution in April 2016, 10 local authorities and clinical commissioning groups for Greater Manchester have devolved responsibility for the health and social care budget to a new Greater Manchester partnership, which will oversee an annual £6 billion budget with which to commission both health and social care services. That has to be the way forward—breaking down the iron curtain between health and social care.

The ageing population still presents one of our nation’s most profound challenges—one of the themes of this debate—and it raises critical questions as to how as a society we enable all adults to live well into later life and how we deliver sustainable public services that support them. We have, as I said already, invested an additional £2 billion to put social care on a more stable footing and alleviate short-term pressures across the health and care system. However, further reform is required to ensure that the system is prepared to meet the challenges of the increasing numbers of over-75s.

To address these questions, the Government will work with partners at all levels, including those who use services and who work to provide care, to bring forward proposals for public consultation. The Government will consult on options to encourage a wider debate. The consultation will set out options to improve the social care system so as to put it on a more secure financial footing, supporting people, families and communities to prepare for old age, and to address issues related to the quality of care and variation in practice.

On emerging structures of local government and new ways of working, local government has changed since I was a first elected as a councillor nearly 50 years ago. The aldermen and town clerks that I recall working with have been replaced by chief executives, leaders and cabinets. Across government, we are making huge strides towards rebalancing the economy and empowering local government. Devolution deals have been mentioned in this debate, and we have supported such deals, strengthening local leadership and institutions through the establishment of mayoral combined authorities. We have devolved powers and funding away from Whitehall, so that those powers are exercised at the right level. We are also strengthening local leadership and institutions through the establishment of mayoral combined authorities. Directly elected mayors provide a single point of accountability for residents and are an ambassador for their area, boosting the area’s profile and helping to attract inward investment. On 4 May, six combined authority mayors were elected, representing 9.8 million people in England—33% of England, including London, now has a directly elected mayor with new powers to create jobs, improve skills, build homes and make it easier to travel.

We want to see these new city region mayors continue to develop innovative policy solutions. I will, for example, be interested to see development of the West Midlands Mayor’s mentorship scheme, which he hopes will attract mentors to help guide young people into worthwhile careers and out of unemployment. Councils are also innovating in how they work with each other—a point raised by the noble Lord, Lord Shipley—and with outside bodies. This has produced new delivery models such as Achieving for Children, a social enterprise company created by the Royal Borough of Kingston upon Thames and the London Borough of Richmond upon Thames to provide their children’s services.

Touching on some of the issues raised in the debate, the noble Lord, Lord Desai, mentioned the poll tax. I confess that I was one of the Tory rebels who voted against the poll tax at every conceivable point as it went through the House of Commons—I was subsequently surprised to be appointed Chief Whip against that background. The noble Lord said, I think, that he could quadruple the revenue from council tax in a way that was almost painless. I think that we would like to see that scheme worked up in a little more detail before we finally commit ourselves to it.

On revaluation, I gently point out that the Labour Government, between 1997 and 2010, did not revalue in England, despite the powerful arguments for revaluation that we have heard from the noble Lord, Lord Desai. The Government capture the rising values of property in other ways, for example, through inheritance tax and, of course, stamp duty. It is not the case that the public purse does not benefit from rising values. We have no plans to introduce new bands; adding new bands would be complex, involve the valuation of many homes and raise fairness issues about the ability of those liable to pay the tax. Many people living in high-value homes may be on fixed incomes and may have lived in them for a long time. It would risk penalising those people on low incomes, such as pensioners, who have seen their homes appreciate in value. They might face a substantial increase in taxes without having the income to pay it.

[Lord Desai]

The noble Lord will remember, during the poll tax debates, that we had the whole population studied. It was said there were houses where a working man lived with four adult boys working and others where there was a lonely old lady, and there was an injustice because their rates were the same. That is a myth. Let us face it: we need revaluation. People with a fixed income living in a highly valued property will be a very tiny minority.

[Lord Young of Cookham]

Well, I hope that the noble Lord’s words of wisdom have fallen on his Front Bench as well as my own. I just make the point that they did revalue in Wales, in 2005; 33% of homes were placed in a higher band and only 8% of homes were placed in a lower band. Two-thirds of the net rises were among homes originally in bands A to C, meaning that in that case revaluation hit the less well-off households the hardest. Therefore, I note the case that was made, but I have to disappoint the noble Lord and say that that is not on the agenda.

I was encouraged to hear the noble Baroness, Lady Donaghy, say that she has three energetic candidates waiting to fight in her ward. I will make it my mission to ensure that they are opposed by three equally energetic, dynamic and motivated candidates from my party so that we have a proper contest in whatever part of Southwark she may live in.

The noble Lord, Lord Shipley, raised the point about local authorities investing in property. Like him, I saw the article and made some inquiries following the leader in the Times on Tuesday about local authority property investments betting with taxpayers’ money. There are strong checks and balances in place to protect taxpayers’ money, and local authorities are required to ensure that they have the right skills and commercial expertise to make investment decisions. However, we are actively monitoring the nature and scale of local authority commercial activity, working closely with the sector to ensure that the governance framework continues to be appropriate.

Yes, we have to do more on housing; I recognise that. I have some briefing here on housing, explaining how we are building more council houses than the Labour Party. I will not read this out because I am short of time, but I agree with one of the thrusts of this debate that we need to raise our game on housing.

I say to the noble Lord, Lord Greaves, that it says here that you should not comment on an ongoing police investigation, so I will not.

[Lord Greaves]

I was very careful not to comment on the ongoing police investigation. I commented on what is happening in Liverpool council and Lancashire council, which is alarming.

[Lord Young of Cookham]

I will be even more careful by moving quickly on.

The noble Baroness, Lady Pinnock, made the interesting proposal that we should somehow topslice DVLA proceeds and VAT and give it to the local authorities. However, they would not then have the certainty that they have at the moment, because they would not know how much they would raise. Local government would be out of pocket because it would have kept the money and we might simply reduce the RSG to that local authority by the amount that it was going to get from the VAT, so actually you would be back where you started. I note that in the many reviews of local government finance that proposal has not found favour.

In conclusion, local government has met some major challenges recently. It has faced immediate demands from emergencies: terrorist attacks in London and Manchester and the fire at Grenfell Tower. It is dealing with these emergencies against a background of rising demand for services in key areas such as adult social care. It has shown willingness and ability to work together across boundaries of all kinds, not just geographic boundaries but social and political ones as well, to best support the communities it represents.

Despite such challenging conditions, councils continue to deliver, and council tax is expected to be lower in real terms in 2019-20 than it was in 2010-11. Councils have embraced innovation and transformed the way they work to deliver services for their local areas. We must create the conditions for strong local public services to serve our communities. This will support the important work that our public sector workers do in ensuring that all our citizens are provided with high-quality public services at local and national level at every stage of their lives.

16:38

[Lord Kennedy of Southwark]

My Lords, I thank all noble Lords who have spoken in the debate. Listening to it, I was struck by the amount of agreement on all sides.

The noble Lord, Lord Shipley, made an important point about collaborative work and the need for clarity in the patchwork that has been created. We have discussed many times the issue of council tax. The noble Lord, Lord Marlesford, who is not in his place this afternoon, has talked about that issue many times and presented a Private Member’s Bill in the previous Parliament looking at council tax bands.

My noble friend Lord Desai talked about the problems we have caused ourselves by not having a revaluation. As we have heard, council tax was introduced as a fix to get the Government out of the poll tax disaster, and many noble Lords referred to it. I did not realise that the Minister had opposed the introduction of the poll tax. I congratulate him on doing so—well done.

My noble friend Lady Donaghy made a powerful point about the crisis in social care. I know the area to which my noble friend referred, as I went to school in Peckham and Camberwell and lived in Walworth. I was a Southwark councillor for many years. The noble Lord, Lord Young of Cookham, mentioned aldermen. I was appointed an honorary alderman by Southwark council many years ago after I left the authority. When I was a councillor there, we had a category of housing called “hard to let”, which included the Pullens Estate in my ward. No such category now exists because there are no more homes that are hard to let—every home is snapped up the moment it becomes available.

The noble Lord, Lord Greaves, commented on austerity and how to move forward. His points in respect of parks were also well made.

The noble Lord, Lord Young of Cookham, has an open invitation to visit Lewisham any time he wants. I would be delighted to show him what a great place it is, particularly if he comes to Crofton Park, which I represent. In issuing that invitation, I hope that I will cause him none of the problems that he had when he went to Pendle, because there have been a few issues there in the past.

My noble friend Lord Smith of Leigh has vast experience of local government as the leader of Wigan Council and as a member of the Greater Manchester Combined Authority. The spending cuts have had a real effect on people’s lives, and my noble friend highlighted many other issues, such as council tax. He made an important point about the effect of the cuts in different authorities, and that, for me, highlights how important the fair funding review will be.

The noble Baroness, Lady Pinnock, raised a number of interesting points, including on VAT, road tax and other taxes. I did not mention it in my opening contribution, but the London Finance Commission has reported under both the previous mayor, Boris Johnson, and the present mayor, Sadiq Khan, and has looked at those very issues. I think I am right in saying that both mayors have been supportive of the commission’s reports, but perhaps further work needs to be done. This may be an issue that needs to be looked at in the future.

I thank everyone who has spoken in this debate. Again, I make the point that on most of the issues raised today local government speaks with one voice, and that is one of the more positive things to have happened in local government in recent years. Things were very different when I was a Southwark councillor in the 1980s. However, things have moved on, which pleases us all. Any disagreements today tend to be much more between central and local government; as I said, local government often speaks with one voice.

The response from the noble Lord, Lord Young of Cookham, particularly in respect of local government finance, was interesting. Discussions need to take place urgently on how local government is to be funded in future years, particularly beyond 2019-20. It does not appear that the previous proposals, if implemented, will be achieved in the same timescale—these things always seem to slip.

In conclusion, I thank the noble Lord, Lord Young of Cookham, for his detailed response to the debate, which he delivered with his usual courtesy. I appreciate it very much, and I thank all those who have spoken.

Motion agreed.