The Parliamentary Under-Secretary of State, Department for Communities and Local Government and Northern Ireland Office (Lord Bourne of Aberystwyth) (Con)
My Lords, I thank the noble Lord, Lord Greaves, for moving this debate and outlining the importance of district councils, the range of services that they cover, the area coverage and the trusted, familial and responsive nature of district councils, as well as for the energetic way in which he always represents the best interests of Pendle, which came across again today.
In trying to set the scene for this debate, I have to say that even I noted perhaps a slight tension, a frisson, between the opposition parties—a hint of disagreement from the noble Lord, Lord Beecham, for example, which was uncharacteristic. Let us reflect on where we are with this. I do not think there is any question that we would all wish to spend more in local government but we all have a responsibility, which came across earlier this week, on intergenerational fairness. At the moment, we are still running a considerable deficit. There has been a lot of talk of cuts and so on, but noble Lords should cast their minds back. As the noble Lord, Lord Shipley, referred to, when the coalition Government came in in 2010 there was a dreadful financial position. That has been ameliorated, but we are not out of the woods yet. Those parties and individuals who understandably want to spend more money have a duty to tell us where that money would come from. Would it come from increased borrowing, taxation or a combination of the two?
Lord Bourne of Aberystwyth
I think I heard a murmur that it could come from cancelling Brexit. If people are suggesting that, they had better tell us how they are going to go about doing it. There are some serious fundamental issues lying behind any increase in spending.
That said, we have councils up and down England providing essential services to millions of people. I know district councils in particular are at the front line of our democracy; they play a vital role in our society. As I say, they are familial, trusted and, obviously by their very nature, local. They are responsible for providing housing, collecting local taxes, protecting our environment and shaping our community. District councils provide these services, and they are services that people value and depend on on a daily basis.
I am grateful to some noble Lords for indicating that there are ways in which local government can save money, and indeed has done, by the merger, sometimes voluntary, into unitary councils. The noble Lord, Lord Shipley, referred to this. Sharing back-office functions sometimes makes sense. The noble Baroness, Lady Pinnock, mentioned, perhaps critically, rationalisation of waste collection. This is often a sensible way to save money, not something that is necessarily bad news. We have to look at what is proposed.
We also need to put it in context. In the 2015 spending review, the Government delivered £200 billion for local government—a significant amount—and in 2016 we provided an unprecedented four-year financial settlement offer, which 97% of all local authorities accepted. We did this because local government was asking for certainty, and we recognise the need for that; that is absolutely right and fair. The settlement will see a modest increase in funding in cash terms—in cash terms, I acknowledge—over the period covered and, as I said, we still face a challenging national debt which is at nearly 90% of our GDP. Nevertheless, the settlement is designed to ensure that councils have the right level of funding for the most important services that they offer. The noble Lord, Lord Shipley, referred to the challenge of rurality. The settlement includes a dedicated grant worth more than £260 million for rurality.
We are in the second year of that multi-year offer, and we recently published a consultation on our approach to the third year. This includes—something that was touched on—a commitment to continuing the reforms to the new homes bonus, as laid out last year, and the social care challenge. The noble Lord, Lord Kennedy, rightly recognised the size of that challenge. He said that it might lead to increasing costs; I do not think there is any doubt about that, as it certainly will. He is absolutely right that we should welcome the fact that people are living longer, but it means additional costs to the health service and social budgets. That represents a challenge, which the Government are looking at, and we will bring forward proposals on how to face it. I think that there is recognition around the House that this problem is faced by the country, and we need to square up to that challenge as a country. I am sure that we will be able to work together on it.
The new homes bonus—to return to it—has been successful so far. It has allocated more than £6 billion, reflecting more than 1.2 million new homes. People have referred to the importance of new housing, and I will deal with some of the specific issues raised later. The council of the noble Lord, Lord Greaves, Pendle, is set to receive more than £4.5 million over the course of the Parliament, around 13% of its total core spending, but we need to explore every possible option to support the creation of even more homes for our communities. The Government continue to be committed to incentivising local authorities to support housing growth in their areas; it is something we value. This is why we are currently consulting on a methodology for reducing payments for new homes where planning permission is later granted on appeal. That seems to us to be the right thing to do. Decisions on any changes will be made in light of this consultation, and, as I said, we will be bringing forward our proposals.
When it comes to increasing our country’s housing supply, we stand behind local government. The new homes bonus is one way in which we do this, but there are others, and we know that we need councils to continue to deliver. We have introduced our new £2.3 billion housing infrastructure fund for all councils to bid into, and we have already committed more than £1.7 billion of the home building fund, which will deliver more than 100,000 homes and create thousands of new jobs.
We are also engaging in bespoke deals, which are progressing in, for example, Leeds, Manchester and the West Midlands. I think a specific question was asked about the £2 billion additional money that has been announced. I said earlier this week, I think, but I am happy to restate it, that we will be bringing forward our specific proposals as to how that money is to be spent and, of course, a great deal of it will be on social housing. We will publish those proposals.
District councils play a particularly vital role as local planning authorities, and reference was made to planning departments. The noble Baroness, Lady Maddock, the noble Lords, Lord Beecham and Lord Kennedy, and others spoke of the importance of ensuring that we deliver on the 20% increase, which was referenced in the housing White Paper. I apologise for again restating a policy that has already been announced, which is something I was criticised for, but I have been asked what we are doing on it and I can say that we will be delivering on that 20% additional fee by the end of the year. That has been broadly welcomed, and I am glad that we are able to deliver on it. All planning authorities have accepted and confirmed that they will ring-fence the additional income for investment and planning. We are also, as noble Lords will be aware, consulting on options to go further and to allow an increase of another 20% for those authorities delivering on their housing need, thus coupling additional money for planning departments with increased housing supply, which I know is something noble Lords understandably are keen on.
Reference was made to energy efficiency by the noble Baroness, Lady Maddock, and I know she does great work on this—we engaged together on this area when I was in a previous role on climate change—and the noble Lord, Lord Shipley, also talked about energy efficiency standards. I will ensure that a copy of this debate is passed to BEIS, which leads on energy efficiency, but much is happening through product regulations and through the action of the market on things, such as cars and so on, in reductions of carbon. We published last week The Clean Growth Strategy, setting out proposals for decarbonising all sectors of the economy, so that is happening, too.
Looking to the future, we have ambitious plans for the local government funding system. Questions were asked about this. We are committed to our manifesto pledge to give councils even greater control of the money they raise locally. We will press on with these reforms to increase business rates retention. I think it was the noble Lord, Lord Beecham, who asked about smoothing mechanisms to make sure there was a fairness element. Of course, that will be inherent in it.
I know from the current retention scheme that Pendle benefits, as does Lancashire generally, from the Lancashire business rate pool. Pendle is forecast to increase its business rate income above its baseline level by more than 10%. This year, Lancashire’s business rate pool members will have an estimated extra income of £9.8 million. We want to increase further that reward for growth.
In September, we published a prospectus for a new tranche of pilots for 100% business rates retention. I urge members to participate in that—applications for the pilots close on Friday 27 October, which is a week tomorrow, and there are five spaces. We launched the prospectus, as I said, in September, and that would be for 100% business rates retention, so it may well be of interest to district councils. From next year, successful applicants will run alongside the current five pilots. These authorities will be able to keep even more of the growth in their business rates income, with no impact on the rest of their funding. They can use that growth to invest or spend on services. Our pilots will be invaluable in testing our reforms to ensure an outcome which delivers for the whole of England. So those pilots are extremely important.
We have recently relaunched our steering group, looking at how we progress business rates retention beyond the current level independently of those pilots. My department co-chairs the steering group with the LGA to look at ways to move forward without primary legislation. We can certainly achieve much by secondary legislation, and we will come forward with suggestions and publish them. We are analysing more than 200 responses to a further consultation on business rates retention, and I want to thank those who participated.
I shall touch on two related matters, if I may, which are not directed specifically laser-like at local government finance but which certainly have an impact on it. One of those is coming up next week—the Committee stage of the Telecommunications Infrastructure (Relief from Non-Domestic Rates) Bill, which is related to relief for fibre. It has broad support throughout the House. There are some issues that we will need to work through, but it is something that will help. Just to take Pendle as an example, it currently has only 0.05% full-fibre coverage, so that is something that Pendle and many other areas would expect to benefit from.
Many of the contributions were in the context of the north, so I should also mention the opportunities that are provided by the northern powerhouse, which is particularly the case in Lancashire. We have created a network of growth hubs—for example, Lancashire’s hub has over 3,000 local SMEs and has created more than 1,300 new jobs in its first three years. It has run in tandem with growth investment into the Lancashire local enterprise partnership. So to get the full picture, it is right that we look at those things as well, and at specific local projects. The Burnley-Pendle growth corridor, for example, has funding of £8 million for a transport and highways improvement scheme. We want to unlock growth in all sorts of ways—some through local government and some elsewhere.
I shall turn briefly to the fair funding review, which I think was not touched on. I should like to set out where we are on that review and in that cycle. It is going to redesign the way in which we determine local government’s relative needs, and set new baseline allocations. It is over a decade since the current formula was looked at thoroughly; indeed, some parts of it date back to 1991. Since then, the demographic make-up of many areas, such as those we have talked about, including Northumberland and Pendle, has altered radically. An ageing population, as the noble Lord, Lord Kennedy, said, means demand for different services has shifted within areas. We are entering a world in which local government spending is funded by local resources, as I have indicated, with business rates retention, not through central government necessarily.
The fair funding review will consider how to introduce a more up-to-date and more transparent needs assessment formula. We need to make sure that it works for all local authorities, wherever they are. Rural councils, for example, or areas which struggle with higher levels of deprivation, will have unique needs that have to be met. That has to be recognised. To get this right, we are working collaboratively with local government at every step of the way. We have a strong relationship with the LGA, with which we chair a working group, which is progressing matters. Last year we conducted a call for evidence, which drew over 200 responses. We plan to consult again soon, and we will make sure that it is a thorough, evidence-based review. It should be fully effective by 2021.
There were some specific questions from the noble Lord, Lord Beecham, to which I shall respond in writing—and I shall copy other noble Lords in. As is my customary practice, I shall ensure that a circular letter is sent around to noble Lords to pick up any points that I miss, with copies also placed in the Library.
We recognise the vital and ongoing importance of district councils. We wish to work with district councils; they are our partners, and we have shared ambitions with them. We recognise the challenges, and I fully recognise and wish to place on record the debt that the Government have to our partners in working with us to ensure that we continue to bear down on some of the costs involved while providing excellent services. There are challenges but, as I have indicated, there are mechanisms that we are looking at in terms of business rate retention and some of the specific funds and matters to which I have referred. As I say, the fair funding review will help to equalise within different councils some of the distortions that currently apply.
With that, and with the assurance that, if there are any other points that I have missed I shall certainly pick them up on the write-around, I again thank the noble Lord, Lord Greaves, for bringing this important topic to the House and airing it as effectively as he has done.