Provisional Local Government Finance Settlement
(Limited Text - Ministerial Extracts only)
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Baroness Pinnock (LD) [V]
I draw the attention of the House to my interests as a member of Kirklees Council and as a vice-president of the Local Government Association.
This annual announcement of the funding package for vital local government services is never given the attention it merits. In the last year, it has become ever more apparent how dependent our communities are on the services provided by local councils. In March, it was local councils that ensured that nearly all rough sleepers were placed in accommodation. Contact tracing by local council officers has been over 90% successful, as compared with the approximately 60% success rate for the private sector, which has had vast resources to do the task. It is local councils that have encouraged and enabled hundreds of thousands of local volunteers to support their communities by befriending the lonely, and that have provided food and meals for families on the breadline and have continued to provide essential services, carried out by unsung heroes—the key workers in waste collection, social care and children’s services, to name just three.
The Public Services Committee of your Lordships’ House has reported that, in the nation’s efforts to combat the pandemic, it was locally delivered services, provided by local councils and the voluntary sector, that were able to rise effectively to the challenge and respond to new demands in very different circumstances. On behalf of Liberal Democrats in this House, I express thanks for the amazing effort and leadership of councillors and council staff across the country.
That is the context of this funding settlement. It is, then, disappointing to read that those sterling efforts are not to be rewarded by the provision of funding that will enable councils to provide the additional services that their communities will need in the months and years ahead. For example, all predictions are that there will be a considerable rise in unemployment and business closures.
The funding settlement has a top-line figure of an increase in spending of 4.5% in what is described as “core spending power”. However, this is predicated on councils increasing council tax by the maximum amount permitted by the Government before triggering a local referendum. Unpacking this top-line increase reveals that 85% of the increase in funding comes from council tax payers—hard-pressed council tax payers. There will be a 2% council tax increase and, on top of that, a 3% increase in the social care precept, resulting in an expectation by the Government that council tax payers must pay an additional 5% this coming year.
Since the social care precept was first introduced by this Government, it has resulted in council tax payers being required to pay 15% more, over and above the 2% maximum allowed. For an average band D council tax payer, the extra imposed by this could mean a further £260 each year. Do the Government intend to pile the pressure on council tax payers every year via this social care precept? Can the Minister let the House know when proposals for social care funding reform will be published?
It is welcome that the Government have recognised the cost pressures on councils as a result of Covid. Those cost pressures come in the form of lost income for, for example, leisure services teams, but there are additional costs in tackling the pandemic. Unfortunately, the Government appear to be willing to fund only 75% of the losses, which simply puts even greater pressure on service delivery at a time when this is needed as never before. The consequences are, as the noble Lord, Lord Kennedy, has just said, inevitable job losses in local government and a reduction in vital services at a time when they are needed as never before.
If the Government’s levelling-up agenda is to be meaningful, it has to include enabling local government to extend its services—for instance, in the regeneration of local economies and improving skills to open up better-paid opportunities for local people. Can the Minister give any assurances to the House that the Government’s thinking on the levelling-up agenda includes a substantial and properly funded role for local government?
Of course, fundamental reform of local government funding and business rates is the basis of a secure future for local government when the role of public services, locally determined and delivered, has been never clearer. Therefore, can the Minister tell the House when the fair funding reform for local government is to be published and determined, and when business rates reform is to be tackled? I look forward to his answers to those questions.
The Minister of State, Home Office and Ministry of Housing, Communities and Local Government (Lord Greenhalgh) (Con)
My Lords, unfortunately I do not have the ability to declare an interest in local government as a vice-president of the Local Government Association, despite 16 years as a local councillor, six years as council leader in the London Borough of Hammersmith and Fulham, and four years in City Hall as Deputy Mayor for Policing and Crime, but that gives me the ability to talk with some confidence about why I think this settlement by the Government is particularly generous at this time.
Even when you unpack the numbers, as has been done by the noble Lord, Lord Kennedy, and the noble Baroness, Lady Pinnock, the reality is that there is a headline increase in core spending power of 4.5% but we see not a single reduction in grant income. Indeed, in some areas the grant income has increased considerably. Of course, if local town halls want to maximise their core spending power, they have a choice in how much they increase council tax. This coming financial year is not disproportionately different from the previous one in assuming increases of 2% in council tax and 3% for adult social care, as compared with 2% in the previous financial year, but, as a balancing item, that is a choice for council leaders and their Cabinets up and down the country to take, with, in some cases, elections looming. They have a choice in how much they increase council tax for their residents.
The Government have honoured their commitment to support local government through the pandemic. I too pay tribute to the amazing work of people in our town halls, providing services on the front line at a particularly difficult time. I commend them, and I agree with both previous speakers that they have played a phenomenal role in this pandemic. Long may that continue. As we have heard, the Government join both the noble Lord and the noble Baroness in supporting the work of people throughout the country delivering local services to their local communities.
So far the Government have provided—I am sorry to hesitate, but I am not seeing too well at the moment—£6.2 billion in support specifically to meet the pressures of the pandemic. Sorry, I got that figure wrong; it is £7.2 billion. I can add an extra billion for you: there has been £7.2 billion in support through the pandemic. As mentioned in the other place, the estimate of what local councils have spent is £4.4 billion. My maths is not terribly good, but that is less than the £7.2 billion given to councils. Frankly, that is putting our arms round town halls and supporting them through those inevitable pressures during a pandemic.
It is estimated, rightly, by local government itself, that that expenditure will increase and hit £6.2 billion. But again, within this settlement is £1.55 billion for Covid-related pressures. That shows a tremendous commitment from the Government, and tremendous work by my right honourable friend Robert Jenrick in negotiating with the Treasury for a great settlement for local government, and one that honours the support needed for our town halls.
It is fair to say that we face tough times. The economy has contracted, and people may be unable to pay their council tax. I can declare an interest as a council tax payer, and as a director of a business that pays business rates. Yes, businesses are struggling, and people are struggling to pay their bills. But covering 75p in the pound, without knowing the downside, is a pretty good deal from the Treasury, rather than the way in which the noble Baroness, Lady Pinnock, described it.
There is the same commitment to ending rough sleeping, and a 60% increase in funding. There is also the same commitment to people with no recourse to public funds. The derogation for London has been widened to the rest of the country, which is commendable. We have also told local town hall leaders that they have the discretion to support people without recourse to public funds who are not EEA nationals, as they see fit. That is the leadership we need to see in our town halls.
I agree with the noble Lord, Lord Kennedy, and the noble Baroness, Lady Pinnock, that we need to think about council tax, and about balancing council tax and grants. I will say more about that later, because I want to save some of my ammunition for speakers to come.
The Deputy Speaker (Baroness Morris of Bolton) (Con)
My Lords, we now come to the 20 minutes allocated for Back-Bench questions, and I call the noble Lord, Lord Lancaster of Kimbolton.
Lord Lancaster of Kimbolton (Con)
The Oxford-Cambridge arc is an economic powerhouse, but we desperately need more new homes for skilled workers if we are to help drive the economic recovery post-Covid. The challenge for local authorities is the up-front funding of vital infrastructure such as roads and schools, given that council tax receipts will not come until after the homes are built. The new homes bonus is most welcome, and although I will not join the chorus for more money, may I simply ask my noble friend whether he thinks it could be better targeted at the areas that need it most?
Lord Greenhalgh (Con)
My Lords, I thank my noble friend for mentioning the Oxford-Cambridge arc. Unlike the Prime Minister, I err more towards the Cambridge end of it. My noble friend is absolutely right to draw our attention to the importance of getting the infrastructure right to unlock growth and the prosperity of this country. That is why, as part of planning for the future—we discussed this at length in connection with the Planning for the Future White Paper—we are looking at an infrastructure levy, which would be much more transparent and streamlined, as a way of raising the funds that local areas need to ensure that they have the infrastructure to unlock their potential.
Lord Liddle (Lab) [V]
My Lords, I declare an interest as a member of Cumbria County Council, and I seek the Minister’s advice, because we have a meeting on Monday morning about whether to proceed with the 3% supplement on council tax to fund social care. Does he agree that, in total, a 5% increase in council tax is a very considerable real-terms increase at a time of great economic stress? Secondly, does he agree that council tax is an unfair tax, because it does not make the broadest backs bear the heaviest burden, which should be a fundamental principle of taxation? Thirdly, does he agree that, given the desperate position of social care, made worse by the Covid crisis, local authorities have little real choice in whether to implement the 3%? Finally, will he make a commitment that this will be the last year when this grossly unfair mechanism for funding social care will be applied, and that in 2021 the Government will produce their long-promised plan for putting the funding of social care on a long-term sustainable basis?
Lord Greenhalgh (Con)
My Lords, I have never heard so many questions poured in with such economy, but I refuse to give advice to any council, or any councillor, on how they should tax their local communities. I could point to my own record as the leader of Hammersmith and Fulham Council. For six years we cut council tax by 3%, and for one year we froze it. That was because I believed that our council tax level was too high. I did not understand why neighbouring boroughs such as Wandsworth and the Royal Borough of Kensington and Chelsea had substantially lower council tax than Hammersmith and Fulham. I chose the route of being able to tax less and provide better services, through more efficiency and driving greater productivity. So I would say that it is down to local leaders to decide how they set their council tax. My advice would be: what do you think is in the interests of your people? I agree that council tax is a regressive tax—but it is particularly ridiculous to see how some councils have to raise their funds largely through council tax increases, because they receive so little grant as a proportion of their combined budget. I shall give more examples of that later.
Lord Young of Cookham (Con)
My Lords, in the Statement we are discussing, the Secretary of State said:
“I want local government to emerge stronger, more sustainable and better able to meet the needs of those it serves.”
Does my noble friend, with his local government experience, recognise that the current tax base for local government is unsustainable, with domestic rates 30 years out of date—and, as he has just admitted, regressive—and commercial rates killing the high street? Will the White Paper on devolution and local recovery, promised for last autumn, set out a firmer and broader basis for local government, so that it can be empowered as the Secretary of State wishes?
Lord Greenhalgh (Con)
My Lords, I have saved my data, which I carefully put together—although I will not be able to read it very well—for my noble friend’s question, of which he kindly gave me notice. I shall tell a tale of two boroughs—the London Borough of Richmond upon Thames, a Liberal Democrat authority, and the London Borough of Hammersmith and Fulham, now, sadly, a Labour borough. It was taken over after I was leader of the council—but that is democracy for you. Things can change back again, I hasten to add, for the benefit of the noble Lord, Lord Kennedy. Things can swing both ways. For those two boroughs, exactly the same budget base was estimated, through both council tax and grant. Richmond upon Thames had £173 million and Hammersmith and Fulham £174 million—pretty much the same amount. Yet 83% of the money in Richmond upon Thames is raised through council tax, whereas only 31% of the money in Hammersmith and Fulham is raised through council tax. That is patently absurd. Of course we need to think about a more sensible system of local government finance. It is very hard to estimate via complex formulae, and I am sure the devolution White Paper will look into some of the vagaries of local government financing, whereby a river can separate, and thus create such great differences between, two neighbouring authorities.
Lord Scriven (LD) [V]
My Lords, I draw the House’s attention to my interest in the register as a vice-president of the Local Government Association. The public health grant for 2020-21 was 22% lower per head in real terms compared to 2015-16. Restoring spending per head to this level would require an additional £1 billion. At a time of a public health crisis, to deal with the local ongoing and long-term effects of Covid-19, and to restart public health services that have had to be paused during this pandemic, does the Minister think the £1 billion should now be reinstated?
Lord Greenhalgh (Con)
I will have to write to the noble Lord about that. I did not quite catch his question, but I will make sure that we get a full and proper answer to him and put a copy in the Library.
Baroness Bennett of Manor Castle (GP) [V]
My Lords, I declare my position as a vice-president of the Local Government Association. On the subject of local government finance, I am going back to two answers from the Government on 15 December to questions that I and the noble Lord, Lord Young of Cookham, had asked, referring to the £500 self-isolation payment to people who were ordered to self-isolate due to Covid-19 exposure or infection. At that point it was clear that there was a postcode lottery, and some local authorities had run out so people were unable to get payment. On 15 December the Government gave two answers, one of which said there was a fixed envelope of money and implied that no more money would be given, while the other, from the noble Lord, Lord Bethell, said that this was under review. Has it been reviewed, and has the postcode lottery over the money being paid out by local government been fixed?
Lord Greenhalgh (Con)
My Lords, I am sure that my noble friend Lord Bethell is absolutely right and the matter is under review.
Lord Greaves (LD) [V]
My Lords, I declare my interest as a member of Pendle Council. Pendle is a small district in east Lancashire. I speak again from the sunlit uplands of east Lancashire but they are not sunlit from the point of view of local government finance. The Minister talks about a 4.5% increase in core spending power but in my authority, if we did not increase council tax by the 2% that is allowed, we would have a reduction in core spending power, which is grossly unfair. About two-thirds of our council tax payers are in band A, which puts that band up to unsustainable levels. It is getting out of hand. People simply cannot afford the council tax that they are now being asked to pay. What is the Minister doing about that? Will he give an absolute commitment that not only is there the £1.5 billion in the settlement for Covid-related extra costs but there is still a commitment from the Government that all extra costs to local authorities from Covid during the next financial year will be met by government grant?
Lord Greenhalgh (Con)
My Lords, I remind everyone that we have seen a seismic contraction of the economy and that many people have lost their jobs and will need to retrain. This has been a dreadful pandemic and it continues to be extremely tough as we enter another lockdown, but with the glimmer of hope that we have with the vaccine being available. We are providing grant funding that is absolutely flat in cash terms. Baseline funding remains £12.48 billion, the revenue support grant has increased a tad from £2.32 billion to 2.33 billion. Other grants have increased from £4.98 billion to £5.26 billion. That is quite a sizeable increase. There is no reduction at all in cash year on year, with inflation at relatively low levels and, as I mentioned, huge amounts of support for Covid-related pressures. I think that is an excellent financial settlement for local authorities. It really is up to the people in town halls to show some civic leadership and decide what they tax the local residents. If they choose to tax them heavily then they may have to pay the price at the ballot box, but that is democracy for you.
Baroness Uddin (Non-Afl)
My Lords, I humbly succumb to the Minister’s statistical genius, so I am not going to go into that arena. I welcome all the resources and measures introduced by the Government so far, especially regarding homelessness and commitments towards easing the “no recourse to public funds” rule for families. The Minister will be aware that, in Newham and Tower Hamlets in particular, homelessness issues and overcrowding have contributed in part to the incredibly high numbers of infections and admissions. Yesterday in this Chamber we debated the commitment from the Government, and indeed all of us, regarding housing for families fleeing domestic violence. What consideration is being given to ensuring that that commitment and the Statement encompass and embrace all these very pressing needs and demands? How will we continue to ensure that the Government adhere to their own principles and desires to level up and be fair and equal and just?
Lord Greenhalgh (Con)
I thank the noble Baroness, Lady Uddin, for raising the issue of homelessness. I know from having visited the London Borough of Tower Hamlets on many occasions and the London Borough of Newham on a number of occasions that homelessness is a real issue. I would point out that this settlement is pretty good news: it is reasonable to put forward £100 million to start planning for move-on accommodation from temporary accommodation, which is not a place where you want families to be. That was provided in the summer. There is a commitment in the financial settlement of £750 million towards supporting people whom we have a statutory duty to house—the homeless—and £430 million of that is for move-on accommodation. I hope that assures the noble Baroness that we take issues of how to tackle homelessness very seriously.
Baroness Neville-Rolfe (Con) [V]
My Lords, largely because of the needs of Covid, the national finances are now in a dire state. Many retailers are experiencing serious financial problems for the same reason. The temporary suspension of business rates, a national policy, is relevant. Is the Minister satisfied that the Government’s policy on business rates is optimal and value for money and that it best deals with the serious problems both within the retail sector and, more generally, the problems of the high street?
Lord Greenhalgh (Con)
I thank my noble friend for raising the issue of the high street. There is support through the high streets fund to ensure that our high streets thrive, but they are places where we need to see significant change. As my noble friend points out, a lot of businesses on the high street are struggling to pay their business rates. I think that, in the longer term, the tax base needs to shift. This is not policy, but self-evidently we are seeing online business take a greater share, and those housed in bricks and mortar are struggling to make a go of their businesses.
We need to see a policy shift over time. The Government cannot do that by waving a magic wand, so we need to make sure that there are policy tweaks to support the high street in the interim. There are a lot of measures to do that in those that my right honourable friend Robert Jenrick has announced. More will be coming to support our high streets, which are the very bedrock of local economies.
Lord Shipley (LD) [V]
My Lords, I too should remind the House that I am a vice-president of the Local Government Association. The Minister said earlier that the settlement is particularly generous, but the reality is that the Statement means that council tax could rise for council tax payers by up to 5% in April. At the general election just over a year ago, the Conservative Party manifesto promised not to increase income tax, national insurance or VAT in this Parliament. The consequence is an increased burden on council tax payers for the sixth year in a row, largely to fund adult social care. Why do the Government force up council tax in this way, well above the rate of inflation?
Lord Greenhalgh (Con)
My Lords, all of us who have run local authorities recognise the spending pressures intrinsic to local government, particularly for adult social care but also for social care for children. They form a significant part of any local authority budget, so it is quite right and proper to think about giving the option, as a balancing item, to have the latitude to increase council tax to pay for some of our most needy. The other 2% is very much guidance; it is a balancing item. It is for administrations up and down the country to decide whether they want to increase council tax to achieve the maximum core spending power. That is the situation that we find ourselves in. There is no reduction in grant and significant extra funding to see local councils through the Covid-related pressures. That is a good deal, particularly given the state of our national economy and the rise in national debt.
The Deputy Speaker (Baroness Morris of Bolton) (Con)
My Lords, the noble Lord, Lord Wei, has withdrawn so all Back-Bench questions have now been asked.