I beg to move,
That the Local Government Finance Report (England) 2019–20 (HC 1916), which was laid before this House on 29 January, be approved.
With this it will be convenient to discuss the following motions:
That the Report on Referendums Relating to Council Tax Increases (Alternative Notional Amounts) (England) 2019-20 (HC 1917), which was laid before this House on 29 January, be approved.
That the Report on Referendums Relating to Council Tax Increases (Principles) (England) 2019–20 (HC 1918), which was laid before this House on 29 January, be approved.
Strong, vibrant, resilient communities are, more than ever, key to unlocking a brighter future for our country. We must therefore celebrate them and help them to succeed, and, in turn, support councils and the many people who serve them every day in delivering essential services and changing lives. I hold those dedicated public servants in the highest regard and have faith in them to rise to the challenges that lie ahead, seeing their people and places flourish with no one left behind. To achieve that, they must have the necessary tools and resources to do their job and I am determined to ensure that they get them. That was why I published the provisional settlement on funding for local authorities in England late last year and invited contributions as part of our formal consultation on that.
We received around 170 responses and I am grateful to those who engaged so constructively with me and my Ministers. My particular thanks throughout the process go to the Under-Secretary of State for Housing, Communities and Local Government, my hon. Friend the Member for Richmond (Yorks) (Rishi Sunak), for all his work and immense efforts.
That important work has helped to shape the final settlement, which recognises the pressures that councils face and acknowledges their impressive efforts to drive efficiencies and strengthen our public finances. That paves the way for more confident, self-sufficient and reinvigorated local government.
I am pleased to confirm on behalf of the Government that, importantly, core spending power is forecast to increase from £45.1 billion in 2018-19 to £46.4 billion in 2019-20. That amounts to a cash increase of 2.8% and a real-terms increase in resources available to local authorities, which is good news for the many communities that will benefit.
Does the Secretary of State recognise that children’s services are now at crisis point and that there will be a £2 billion—£2 billion! —shortfall by 2020?
We are spending around £1 billion more than at the start of this Parliament. Some £84 million is added into the settlement to ensure that we drive quality and support in the knowledge that, yes, there are pressures. I hope that the hon. Gentleman will recognise the additional £410 million that has been committed to children’s and adult social care in response to the good work that is going on and some of the pressures.
I welcome the £2.7 million extra for the Isle of Wight. More than that, I am delighted that, for the first time ever, the fair funding review mentions English islands and refers to the Isle of Wight by name as somewhere that requires extra study to analyse additional costs. Will my right hon. Friend ensure that that results in concrete extra support for English islands and the Isle of Wight in recognition of the needs of islands?
My hon. Friend is a fine champion of the interests of the Isle of Wight and I commend him for his work. He has made representations to the Local Government Minister and seen a recognition that different communities are affected in different ways as we look at the review of relative needs and resources. Obviously, we will listen carefully to representations we receive from hon. Members of all parties as we move forward with the review.
The Secretary of State talks about the additional cash for local authorities. I spoke to a colleague who was at East Sussex County Council’s budget meeting today, and I can tell the right hon. Gentleman that the situation is a catastrophe. The situation with core funding means that meals on wheels are being cut. Unless additional money comes next year, services for vulnerable children will be savaged. Will the Secretary of State today commit to giving East Sussex County Council fairer funding? Even though this is a Tory-led county, the council is on its knees. It needs the money urgently.
I hope that the hon. Gentleman will recognise that East Sussex is part of the business rates pilots and gets the benefits that attach to those involved in that process through the additional resources that are garnered from it. Councils across the south-east will get an extra £226 million in their core spend in the settlement if the House approves it today, which will mean around £7.1 billion of funding.
Will my right hon. Friend join me in congratulating Ian Hudspeth and Oxfordshire County Council on the excellent way in which they have managed their resources? Does he agree that capital funding is equally important? I hope that he will look kindly on our housing infrastructure funding bid, because that funding would provide vital infrastructure for Didcot in my constituency, which is one of the economic engines of the United Kingdom.
I pay tribute to Oxfordshire and to all councils that have been working hard to provide services for their local communities. I am sure that my right hon. Friend will recognise the increase of about £16.9 million that will come through the settlement for Oxfordshire. I am looking carefully at the housing infrastructure bids in respect of Didcot and elsewhere, and I note his lobbying in that regard.
I will take one more intervention and then I will seek to make some progress.
Harrow Council is not unique in having had most of its revenue support grant axed over the past seven years. What conversations is the Secretary of State having with the Chancellor of the Exchequer so that we can, as we hope, see a significant increase in that revenue support grant in the comprehensive spending review?
I am looking carefully at sustainability and issues relating to local government finance more broadly. I hope that the hon. Gentleman will recognise the change that is happening in the structure of local government finance and the move away from revenue support to the retention of business rates. In London, we have a 75% business rate retention pilot. We want to move away from the merry-go-round of money being collected so that it comes into central Government and then going back by way of a grant. We want to simplify the process.
I will take one final intervention, but then I will make some progress, because I know that a lot of Members want to speak and I am conscious that interventions will eat into their time.
Does my right hon. Friend agree that the measures he is outlining will help Leicestershire County Council, which is involved in the business rate retention pilot scheme, as well as Harborough District Council and Blaby District Council? Those three local authorities are led by excellent Conservative administrations.
I commend the Conservative authorities in my hon. Friend’s area for their work, and I commend him for his recognition of the benefit that accrues from the business rate retention pilots and of how funding from the growth in business rates can be invested into local services. That is why we want to move to this new system throughout the next financial year.
These proposals will amount to a real-terms increase, but I know that we face a number of challenges. Among the most serious is the responsibility that councils—and, indeed, all of us—have towards the most vulnerable in our society. It is therefore right that out of the more than £1 billion of extra funding committed at last year’s Budget, £650 million will go towards adult and children’s social care in 2019-20. This will help to meet the pressures resulting from an ageing population. Some £240 million of that amount has been allocated to ease pressures on the NHS, and that is on top of the £240 million announced in October to address current winter pressures. The remaining £410 million can be spent on either adult or children’s social care and, where necessary, to take pressure off the NHS. I know that local authorities will value that flexibility greatly.
We are investing a further £84 million over the next five years to expand three of our most successful children’s social care innovation programme projects in up to 20 local authorities to keep more children at home safely. We are supporting local authorities to make the best use of available resources and to increase efficiency, as well as to innovate and improve the way in which they deliver services. Better integration of the health and care systems with other local services is essential, particularly in regard to social care. The long-term NHS plan, with its welcome shift from acute to community healthcare services, together with the upcoming social care Green Paper, will make a big difference.
I welcome the extra funding that is going into social care, notwithstanding reductions over the past several years. Will my right hon. Friend do all that he can to ensure that that money is not just pumped into the acute sector? Integration far too often seems to mean bailing out hospitals that are struggling because of increased demand from an ageing population and people with multiple co-morbidities, so will he ensure that more of that money is directed into preventive care in the community? This would take pressure off the NHS and keep people well and properly supported in their own homes.
My hon. Friend will recognise the work of the better care fund and some of the positive outcomes that it has driven for acute hospitals and social care, such as preventing people from having to go to hospital, as he highlights. Ensuring that the social care system works effectively to deal with some of the pressures is a core component of the NHS long-term plan.
I will give way to the hon. Member for Slough (Mr Dhesi) and then take a couple more interventions.
I thank the Secretary of State for giving way. A new study by the Centre for Cities shows that Slough has been the hardest-hit town in the south-east. In fact, it has been the 10th worst hit nationally by this Government’s austerity measures. Slough’s local government spending has been cut by 23% since 2009-10, while the UK average figure is 14%. Does the Secretary of State agree that it is unfair to mete out the deepest cuts in those areas that are most affected by issues such as childhood obesity, childhood poverty and homelessness?
The hon. Gentleman will recognise the need for us to look carefully at relative needs and resources. I encourage him to engage constructively and positively with our review so that we get the right formula to ensure that need is recognised. He makes an important point, but we are putting more funding into the system, and I hope that he will recognise the benefit.
Nottinghamshire County Council, which is run by an exceptional Conservative group, has had its funding cut by 52% since 2013—from £238 million to £118 million for 2019-20. Despite its excellent budget management and real-terms cuts to services, the council’s deficit is projected to be £34.1 million. I say to my right hon. Friend, who is a very good Secretary of State, that the cuts have been going on for too long, and county councils such as Nottinghamshire will now have to cut through the muscle and into the bone. They simply need more money. On that basis, I will be abstaining this evening.
I pay tribute to the work that councils such as Nottinghamshire have done over the past few years in making hard calls and difficult decisions as a consequence of the financial position that the Government have had to deal with. I encourage my right hon. Friend to look at core spending power, which combines all sources of local government income, because she will see that Nottinghamshire will have an additional £16.3 million between 2018-19 and 2019-20, which is an increase of 3.2%.
I am terribly grateful to my right hon. Friend for giving way. West Sussex is thankful for the additional money and for the business rates retention pilots, but the truth is that we have had to make savings of £200 million over the past eight years and face a gross gap of £145 million over the next four years. We have one of the oldest populations in the country, with the consequent social care requirements, and we are in the bottom decile for schools funding. In addition to all that, we have “Think Family”—one of the best troubled families programmes—and it would be a catastrophe if its funding were not renewed next year, because it offers really good preventive early intervention work, the effects of which are great and save money later on.
I am a strong supporter in the troubled families programme, and I have been a strong believer in preventive work for young people, including through family units, for many years. My hon. Friend makes an important point based on his experience about the value of such services and interventions. I assure him that I will continue to focus on that as we look to the months ahead and the spending review.
I need to make some progress due to the time available for this debate.
To do more, it is crucial that we listen and respond to what local authorities are telling us, not just on the NHS and social care, but on all issues. It is in that spirit that we are increasing the rural services delivery grant by £16 million in 2019-20 to maintain it at last year’s level. In addition, after consulting widely, we have decided directly to eliminate negative revenue support grant—where changes in revenue support grant have led to a downward adjustment of some local authorities’ business rates top-up or tariff—in 2019-20. I recognise the strength of feeling about that, and I believe this is the most straight- forward and cost-effective approach for the next year.
We also want to continue rewarding councils for delivering the homes we need. I therefore confirm that the new homes bonus baseline threshold will be maintained, at a cost of £18 million. The message about councils wanting certainty to help them plan also came across loud and clear in the consultation. To that end I can confirm that, in 2019-20, local authorities, with the exception of police and crime commissioners, will retain the same package of council tax referendum limits as in 2018-19. This will protect local taxpayers from excessive increases, in line with our manifesto commitment.
Every council has the freedom to set higher council taxes if it wishes, provided it gains the consent of local people in a referendum. I am also providing an additional 2% council tax flexibility to Northamptonshire County Council to assist with improvements to council governance and services after its serious issues.
With the end of the current multi-year deal in sight, it is clear that we need to take a longer view on how we fund councils as we move to a stronger, sustainable, smarter system of local government. Preparations this year for increased business rates retention, a new approach to distributing funding between local authorities and the upcoming spending review will be pivotal to this, as will the important work under way with local authorities and the wider sector to better understand service costs and pressures. Again, we are listening and responding.
For years, councils have asked for more control of the money they raise, and we are giving it to them through our plans to increase business rates retention to 75% from 2020, in the process providing local authorities with powerful incentives to grow their economies. Local authorities estimate they will retain around £2.4 billion in business rates growth in 2018-19 under the current system, a significant revenue stream, on top of the core settlement funding I am outlining today.
The pilots testing increased business rates retention have, unsurprisingly, proved very popular, and I am delighted there will be 15 new pilots for 2019-20 covering 122 local authorities. We will also be piloting 75% business rate retention in London and continuing our existing pilots in devolution deal areas.
I thank the Secretary of State for including West Sussex in the business rates retention scheme and for the 4.2% increase the county council is getting. Crawley Borough Council has reserves of over £21 million. What more can be done to make sure that councils use such large reserves more efficiently?
I congratulate my hon. Friend on the way in which he has championed his local area. As a former local government leader, he has shown what can be delivered through local authorities, and I commend him for that.
My hon. Friend highlights the increased spend that West Sussex will gain as a consequence of the settlement before the House, but obviously it is for local authorities to work smartly and thoughtfully in relation to their retained reserves. There is a clear need for reserves, which he will understand, but he rightly underlines the need to use those funds sustainably, appropriately and effectively.
The Secretary of State rapidly skipped over the funding review. Will he confirm that the consultation proposed in December to take deprivation out of the foundation element of the funding review? That would transfer money from deprived areas to non-deprived areas. Is that fair?
Obviously we will look at all the representations that continue to be made during the review of relative needs and resources, but our analysis in the review demonstrates that, overall, population is by far the most important cost driver for both the upper-tier and lower-tier foundation formulae. Although in aggregate terms deprivation is not shown to be a major cost driver for the services included in the foundation formulae, I am of the view that relative levels of deprivation remain an important cost driver for some specific service areas such as social care. I welcome views as part of the current consultation, and I am sure the Select Committee will continue to focus on this important work.
Can it be right that prior to the new fairer funding formula central Government grants for inner London were £437 per person per year, whereas the grants for county areas were £153 per person per year? Do we not simply need a fairer funding formula?
My hon. Friend makes the case clearly for undertaking this review and looking at this properly. We need to look at the starting point and take the approach he highlights to ensure that fair distribution can be made.
I will give way one last time but then I really must conclude.
While mindful of the intervention from the Chairman of the Select Committee—of course it is right that we take into account deprivation—let me say that a range of other factors are involved. Rurality and sparsity in a county such as Lincolnshire make it hard to deliver public services, as the Secretary of State will know. He has mentioned rurality, so when he looks at the funding formula, while being mindful of that earlier intervention, will he look at that matter once again?
My right hon. Friend makes an important point about rurality, the impact it can have and the cost drivers it can generate. I assure him that we will be analysing it closely as the work continues.
I must make some progress.
I know that local authorities were also pleased to hear that we plan to distribute £180 million of surplus in the business rates retention levy account in 2018-19, which was generated by strong growth in business rates income, to every authority in England, based on need. But as well as more control, councils want and need to see a clearer link between the allocation of resources and local circumstances.
On a point of order, Madam Deputy Speaker. I have tried two or three times to draw the Secretary of State’s attention to serious cuts in Coventry, and the people of Coventry want to know what the benefits are in relation to the £1 billion that he just announced—
Order. The Secretary of State has the right to take as many or as few interventions as he wishes. He is aware that there is pressure on time. I am not sure whether the hon. Gentleman has put in to speak, but he really does have to wait until the Secretary of State wants to give way. I do not like points of order getting in the way of speeches, because I do not think it is fair on others who are waiting to speak.
Thank you, Madam Deputy Speaker. I know that a number of Members wish to speak this afternoon. I hope I have been generous in taking interventions, but I am conscious of allowing sufficient time for right hon. and hon. Members to make their points for their individual communities. I did not mean any disrespect to the hon. Member for Coventry South (Mr Cunningham), as I know he takes these issues extremely seriously. It was on that basis that I sought to be generous but I need to make progress now.
As well as more control, councils want and need to see a clearer link between the allocation of resources and local circumstances. That is why we are working with them to overhaul a funding formula that is currently far too complicated and badly out of date. We need to look at this afresh and do away with anomalies such as double weighting for urban roads compared with rural roads, which the Labour party was far too comfortable imposing. Let us not forget that local people paid the price for Labour: under the last Labour Government the average band D council tax bill went up by a staggering 109% between 1997 and 2010, costing families, on average, an extra £751 a year. Given that track record, one would think that the Opposition might have learned a lesson or two about excessive tax rises, but no. Labour’s manifesto set out plans for a new land tax on family homes, which would punish those with gardens. Labour’s garden tax would send tax bills soaring and house prices plummeting, and would pressure families to build over their back gardens. By contrast, our approach has been informed by a strong consensus on the need for fairness, for local authorities and for local taxpayers. It is now critical that everyone takes a pragmatic approach, recognising the trade-offs that are necessary to ensure we get this right and deliver a new and fair formula on time, as agreed.
This important work—on the funding formula and on increased business rates retention—reboots our system of local government, creating the space for communities to re-imagine what they can do and can be in the 21st century, and helps to renew the bonds with communities. This is of the utmost importance as we strive to ensure every part of our society and country benefits from a modern, outward-looking Britain after Brexit. No one is better placed to deliver on that than local authorities. That is why last week I released £56.5 million, to be used across this year and next, to help councils to prepare for EU exit, and it is why we are backing them to deliver every day through this settlement and the extra funding announced in the Budget. In doing so, we are delivering on what they have asked for: a real-terms increase in spending in 2019-20; support for the vulnerable; a boost for housing, with the removal of the Government cap on how much councils can borrow to build, for quality public services and local economic growth; and help for our high streets. The Labour party may turn its face against this, but it is no less than our councils and communities deserve. I commend the settlement to the House.
It is a pleasure to close the debate. I start by joining my predecessor, my hon. Friend the Member for Nuneaton (Mr Jones), in paying tribute to all the committed people who work in local government and deliver for their communities every single day. We are all grateful to them for their hard work and dedication. I thank all hon. Members for their passionate speeches today, particularly those who brought their personal experience of local government to the Chamber—our debates are the richer for that. Although I may not agree with the content of Labour Members’ speeches, I respect the passion with which they represent their local communities.
As a northern MP, I feel that the north is lucky to have, in my hon. Friend the Member for Carlisle (John Stevenson), a champion for the northern powerhouse. He is committed to pushing the Government on rebalancing the economy and working constructively with them. That sentiment was echoed by my hon. Friend the Member for Stoke-on-Trent South (Jack Brereton), who spoke well about the importance of economic regeneration in his constituency and what the Government are doing to support his residents as they look to a brighter future.
My hon. Friends the Members for Northampton South (Andrew Lewer) and for Lewes (Maria Caulfield) made excellent speeches about the need for all Members and all local authorities to think about how we can serve our constituents better and at cheaper cost every single day. We should always strive for ways to achieve that, given that the taxes that fund our public services are paid through their hard work and efforts. My hon. Friends the Members for Rugby (Mark Pawsey) and for Waveney (Peter Aldous) do a great job in this Chamber of representing their district council and county council respectively, and I thank them for all their engagement with me and the Department over the few months in which I have had this job. I can tell my hon. Friend the Member for Rugby that the Secretary of State is well aware of the excessive activity of a few councils with respect to borrowing for commercialisation, and this is something that the Department is actively looking at as we speak to the Treasury.
Many Conservative Members, including my hon. Friends the Members for Bromley and Chislehurst (Robert Neill), for Gloucester (Richard Graham), for Lewes, for Thirsk and Malton (Kevin Hollinrake), for Waveney, for Redditch (Rachel Maclean) and for Bexhill and Battle (Huw Merriman), made powerful and compelling cases for a root-and-branch review of how we distribute money in local government today. We heard about the specific issues that councils face on the ground that our current funding formula simply does not capture. I pay tribute to their work in bringing this to my attention and that of officials. They mentioned issues such as the rapidly changing demographics that are driving up demand for adult social care. These are the kinds of things that a new formula fit for the 21st century should absolutely cover, and I look forward to working with all of them as we develop a funding formula that is right for every part of this country.
My hon. Friends the Members for Northampton South, for Thirsk and Malton and for Bexhill and Battle spoke of the absolute importance of getting adult social care right. I know that my colleagues in the Department of Health and Social Care are committed to doing exactly that, and I agree that the solutions should be radical, not statist. I hope that they will include consideration of the excellent work of the Select Committee.
Three themes have run through the speeches that I have heard in the debate, and they are the three things that everyone agrees that our local councils do: first, they support the most vulnerable in our society; secondly, they drive economic growth in their areas; and, thirdly, they build strong communities. I am proud to say that this Government are backing them to do all three. It is local authorities whose hands are the first to reach out to those who fall on hard times, and I am delighted that this settlement provides them with a real-terms increase in financial resources to support that vital work.
Councils told us that the most acute pressure that they faced was in adult and children’s social care, so this Government responded with £650 million in incremental funding in the Budget. Councils told us that they wanted to do more to support people with disabilities, so this Government responded with an extra £55 million to make vital home adaptations. Rural councils highlighted their particular challenges, so this Government responded by maintaining the rural services grant at record levels. But Conservative Members measure success not by how much money we spend, but by how many lives we are changing, so we are supporting local authorities to innovate and improve to ensure that we are careful with taxpayers’ hard-earned money and that people are getting the best possible services.
In children’s care, where there is a huge variation in performance, we are investing £84 million to spread best practice from Leeds, Hertfordshire and North Yorkshire across the country so that children everywhere will benefit from best-in-class practice. In technology, we recently launched an innovation fund to support councils in embracing the digital revolution. Working with the Local Government Association, we are developing a tool to help councils to benchmark, analyse and drive performance. Across local government, whenever there are opportunities to improve lives, save money and transform services, this Government will be relentless in pursuing them.
The Government understand that the only sustainable way to pay for our public services is to create the economic growth that will fund them. Let us not forget the vital role that councils play in creating prosperity for their communities. Rather than being reliant on central Government handouts, local authorities should be empowered and rewarded for their entrepreneurship. I am pleased to say that our business rates retention scheme does exactly that, and local authorities are expected to retain almost £2.5 billion of business rates growth this year. Across the nation, from Yorkshire to Southampton, our 15 new business rates retention pilots demonstrate this Government’s commitment to backing councils’ ambitions for their local economies. We all know that the enemy of that growth is the higher taxes that the Labour party would inflict on our residents.
Local authorities are key to strengthening our communities. Every single day, they ensure that people are proud of the places in which they live. Those communities must start with the houses that people call home, so this Government are backing local authorities to fulfil those people’s aspirations. The new homes bonus part of the settlement has awarded councils almost £8 billion since it started for 1.5 million additional homes that they have brought forward, each one providing incentive and rewards for those councils that are trying to ensure that every one of their residents can fulfil the dream of homeownership.
However, local authorities told us that they want more. They want greater flexibility to build more of their own homes, so this Government listened and lifted the housing revenue account borrowing cap. Strong communities also need vibrant high streets, so this Government are trusting local councils with a £675 million fund to transform and revitalise our town centres. Finally, when it comes to our communities, the only holes that I want to be pouring money down are the ones on our local roads, so this Government were pleased to ensure that councils have £420 million to fill potholes for our motorists. From homes to roads to high streets, this Government are backing local authorities to create communities where everyone can thrive.
We have heard a lot about deprivation today, and there was an accusation that this Government are somehow trying to massage the numbers. When we put together the new funding formula, we listened to the Housing, Communities and Local Government Committee report that was published at the end of 2017, which made a compelling case for reducing the number of indicators to fund local government without sacrificing accuracy. That is exactly what our funding formula does. Deprivation accounts for less than 4% of the variation in spend for universal services—[Interruption.]
Order. I need to hear what the Minister has to say. I am sure that he is nearly at the end.
We heard a lot about Liverpool and a lot about Surrey. Members of this House should know that households in Liverpool have £400 more to spend on local services than households in Surrey. Only a third of spending in Liverpool is financed by council tax versus almost 85% in Surrey. This funding formula is accurate and based on the facts.
In conclusion, I will continue to listen to local councils to learn from their expertise and to champion their cause across Whitehall. I tell them that their voice is heard loud and clear and that they will be supported by this Government. I commend the settlement to the House.
Question put.
The House proceeded to Division.
I remind the House that the motion is subject to double-majority voting: of the whole House and of Members representing constituencies in England