Somerset Council: Funding and Governance
(10 months, 3 weeks ago)
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Mr Marcus Fysh (Yeovil) (Con)
I beg to move,
That this House has considered the funding and governance of Somerset Council.
It is a pleasure to serve under your chairmanship, Mr Pritchard.
When I became a councillor—some years ago; probably 10 or more years ago now—one of the things that I took most seriously was my duty to those in our community who are more vulnerable than others, in particular looked-after children within the authority of Somerset, as it then was. I passionately believe, as do all of my Conservative colleagues here in Parliament, in trying to ensure that we have the best possible quality services for both our young people and all those in the rest of society who are vulnerable. That really goes to the quick with me and indeed with all of us. I am therefore passionate about trying to make sure that our local services have the funding that they need, and the inspiration that they need, to be able to do the best possible job in the best possible way. I want to make that a reality for those who depend on us for their care.
When I became a councillor, I also became aware that under previous Liberal Democrat administrations—there are various arguments about the genesis of the current situation, but the fact of the matter is that a large debt had been run up by the council to some of the public sector financing organisations and others, which needed to be serviced. The debt was of some £350 million or more. What we needed to spend on the interest on that debt was really detracting from what we needed to spend on for our constituents. The need to get that debt under control, to begin to repay it, was a big deal for the council in Somerset at that time.
Of course, at that time—under the coalition and after a massive debt had been run up nationally—there was a big need for councils across the country to make savings. The coalition made the decision—indeed, my predecessor as the Member for Yeovil, David Laws, was the Chief Secretary to the Treasury who decided, at that time, that he would champion the idea of being “the axeman in chief”, according to his autobiography, in trying to get spending by the Government generally under control. One of his decisions was to make savings in local authority budgets.
At that time, that was a necessity. What we also saw under the coalition, as things evolved, was that in order to try to protect some of the county spending budgets—the local authority budgets—money was provided to councils, so that they were able to restrict the increases in council tax that would otherwise have been required to pay for some services. The national Government made more money available, which meant we could limit council tax rises to 3%, 4% or 5% a year, rather than what otherwise might be required.
That is the context for the financing of Somerset Council and for the wider council environment. However, it also has to be said that part of managing the budgets for local authorities is that there needs to be creative thinking about how to get more growth, more investment and more housing into an area, with more council tax being delivered through that development, to be able to finance some council services.
In recent years, I have been quite disappointed that the new administration in Somerset, which is Liberal Democrat, has not taken some of those opportunities to think more holistically about how we might grow such economies to help pay for services. At the end of the day, it is only by getting the top line—the revenue—growing that we can get the tax revenue coming through to support the good-quality services that we all want to see for our residents.
For example, getting the town centre in Yeovil going again has been really important. As an MP, I got the Government to commit to very substantial town centre regeneration funding of £9.75 million through the towns fund to make that happen. The idea was to have a transformative change in Yeovil’s value proposition. It involved regeneration to enable the town centre and surrounding areas to be seen as places on the up, and to engender a virtuous circle that could increase property prices and get people excited about investing in their property, making sacrifices and a life for themselves and being able to make money from that. That kind of vision is essential for making places in the UK inspiring, where people think there is a future for them and an opportunity to make something of themselves for their families and their retirement.
Such things are really important, so it has been disappointing to see the local Lib Dem administration—thus far, at least—not capitalise on that investment. The projects have stalled. I have been working constructively with the local authority to make sure that the opportunities come forward properly in the time available, to transform those areas rather than just spending, or wasting, money on projects that do not quite work out or on public realm improvements that are not well thought through or well contracted. It is essential to focus on those basic issues of competence in the administration of how the funds are spent.
Another reason why Somerset is in a troublesome situation more generally is that the business case at the heart of the plan to move to a unitary authority, which was based on a very good decision by the previous Conservative administration to save money by amalgamating all the councils, has not been pursued by the new Liberal Democrat administration. Those savings have therefore not come through, some of the personnel and management rearrangements have not occurred, and many tens of millions of pounds that would otherwise have been saved have not been saved since the savings were to have started, a year or two ago. That means that the council is in a difficult position and needs more funding.
I am supportive, as my parliamentary colleagues in Somerset are, of the Government helping with more funding for social care and for thinking more carefully about how we manage some of the inflationary aspects that, in part, have put the council in the position that it is in. However, we cannot get away from the fact that the current Liberal Democrat administration has not taken the decisions and done things according to the business plan that was set out to save the money required to make the changes necessary to keep the council’s finances on an even keel.
Dr Dan Poulter (Central Suffolk and North Ipswich) (Con)
My hon. Friend is absolutely right to highlight the challenges for local authority budgets, particularly for upper-tier local authorities, from rising social care costs, with the potential for productivity and other savings from a move to unitary. However, I am sure he will be aware that the Office for Local Government has published a report, with a dashboard to help councils identify how efficiently they are running their services and the general state of their finances. The conclusion of the Office for Local Government is that this was not just about money, but that where there have been failures in council finances—as, indeed, is the case in Somerset—it is down to a poor civil service and poor political leadership. It is incumbent on politicians and, indeed, council civil servants to take responsibility for that.
Mr Fysh
I agree with my hon. Friend. He is absolutely right that it is important that responsibility is taken and that some of these decisions—or lack of decisions, should I say—are held up for scrutiny. It is not acceptable for residents, because of the lack of money, to face the potential loss of services that are really important to them, such as the Yeovil recreation centre and the tourist information centres in Cartgate and Taunton. Such services are essential for our communities, and it is not right that those non-statutory services should now be threatened.
It is also right that we protect non-statutory services generally by making sure that the council does not go into special measures, or is subject to a section 114 notice, which is the council version of a bankruptcy. The Minister will know well how that works. These are potentially very threatening to things that are not core or statutory council operations, and we do not want to see bus services being cancelled because a council goes bust. Residents may not know or necessarily care who is in charge and what is happening, but this is a serious situation. The reality is that the current administration has caused this issue and has not taken the decisions necessary to avoid it. Nevertheless, none of us wants to see that happen and to see these services go, because they are really important.
Mr Ian Liddell-Grainger (Bridgwater and West Somerset) (Con)
My hon. Friend is making very powerful points. I have been trying to work out how long it is, but I have worked with Bill Revans, the leader of the council, for over 25 years, and I have a great deal of respect for him. My hon. Friend is quite right that none of us wants the council to go into special measures. The Minister has been very kind to all of us, and he has given us an enormous amount of time on this. I am also grateful to him for the money he has given so far—I thank him very much.
Would my hon. Friend agree that the big trick with this will be our working together, regardless of our personal views or our political views, to make sure that this does not happen? Once, many years ago, I had the commissioners in to West Somerset Council, and it was a complete disaster. We lost our cohesion, and that council disappeared soon after. This is not something we should take lightly, and I ask my hon. Friend to dwell a little bit more on how we can help the Minister and Somerset Council to get what they want, which is to maintain services—schooling, education and children’s services—so that we do not have a complete disaster on our hands.
Mr Fysh
I thank my hon. Friend, and he is absolutely right. We need to work together, including across the aisle. I am very fond of my Liberal Democrat ex-opponents on the council. I know them well, and in many cases they are very good people who want the best for their communities, as we all do. We need to work together, whatever we think about the decisions that should or should not have been made. I am willing to do that, as is my hon. Friend the Member for Bridgwater and West Somerset (Mr Liddell-Grainger). I know that my other colleagues in the parliamentary party and the Ministers are willing to work on that, too.
I want to make it clear that this is not some story of Government underfunding; that is absolutely not the case. My hon. Friend is right to point out that the Government have listened and have given substantial new money, which Somerset Conservative MPs lobbied for. Their voices were heard loud and clear and we were given that money. None the less, we still face challenges and there are things that will be required, but we need to make sure that we keep these essential services that people rely on—the recycling centre in Crewkerne, the libraries and the various services that are not protected within statutory limits, which would be protected should there be a bankruptcy. My constituents rely on their bus services; they cannot see them cut. That would be a fundamentally difficult thing for them to deal with. We cannot allow that to happen. [Interruption.]
Mr Fysh
Yeovil is one of those places that is dripping with potential. It has an incredible defence manufacturing industry, people, skills and development organisations. In my opinion, as someone who has been around the world looking at development and business opportunities for many years, I have never seen an environment that is so conducive to partnership working between business and local institutions to make things happen as there is at Yeovil College. Yeovil and the wider area need that vision from the council to back that up, to be the glue to make permissions happen more easily or to put in infrastructure, whatever is needed.
We need that vision from our local council, and that is what we are not getting right now. It is incredibly frustrating, for someone who wants to do the best to make that difference, with opportunities for people in our town, to find that at all stages it has been underwhelming, shall we say, for everybody dealing with the local council. I urge Ministers to think structurally about change, so that local councils have more accountable responsibility for bringing those things forward.
It is extraordinary, when looking around the world, to see how welcoming some other places are to investment, new thinking and different ways of doing things. When I proposed the idea about six or seven years ago of a new town development on the A303, to capitalise on the advantages of investing so much money in the A303 dualling, which we in Somerset fought so hard to get from the Government, we were met with a brick wall when talking to the council about executing those opportunities, and thinking about whether such things should be in the local plan, to excite local entrepreneurs. It has been such a frustrating process. We need to make sure we have well-equipped, local economic development operations of one kind or another, and to make sure we have good access to local and national incentives that attracts business to set up in different places.
Mr Liddell-Grainger
My hon. Friend is making a very powerful point. I think what he is getting around to is levelling up. Somerset has not done very well out of levelling up, and my hon. Friend and I have talked about this. I would say to the Minister that levelling up would help immeasurably. What we need to look at is the learning of skills, rural deprivation, helping young people get on to the job ladder in rural areas—that covers the whole of Somerset—and we certainly need to look at the way people are leaving school. Although we have Bridgwater, Taunton and Yeovil, there is not much in between, and therefore young people have not got those opportunities. I therefore make a plea through my hon. Friend to the Minister that we start talking about getting a levelling up bid for Somerset, where we could work with the council to get money to help the most vulnerable.
Mr Fysh
My hon. Friend makes a brilliant point. This is all about thinking of a plan for how we join up those urban and rural development opportunities and our skills development opportunities to make the most of what is an incredible area.
Somerset is a rural area, but I have never seen anything like it in my travels of the whole world—there is so much energy and sophistication in what is a rural environment. Yeovilton is in the north of my constituency —it is the home of the Fleet Air Arm, and the site of one of its core operations. We have the manufacturing cluster around Yeovil, and indeed we have north Dorset, which is second to none in the world in its defence manufacturing abilities. We need to support that—it means people come from all over the world to work and raise their families there; it is not an average rural area by any stretch of the imagination. We need to build on that; it is a massive opportunity for the country in exports, high-value engineering jobs, and all the things that we as a nation are supposed to be trying to encourage.
We need to support our local authorities and ensure they are doing the right thing. We need to ensure they are making the right decisions, at the right time, to be able to save money where it is required, and that they are also thinking about ways of making money where it is required. That should not just be through some fly-by-night plan to invest in commercial real estate; local authorities have no ability to judge if such plans are a good idea, and that is something we need be careful they do not do. However, those core activities of working with private industry to make sure the incentives and skills are there for business is the way forward—that is the way to finance any local authority.
There can be endless arguments about who gave what money to who and so on, but unless that core business of getting growth going in an area is there, with proper support and incentives from local and national government, it will be very hard to compete with some other parts of the world that are doing a brilliant job of it. They are rolling out the red carpet to welcome people to those areas, and they are giving massive incentives: 40% or 50% capital incentives are being paid up front to people who want to start businesses and invest in renewable energy generation—or whatever it is.
There are very serious things going on out there, and we need to think about how we match that. This idea that we can just put our fingers in our ears and pretend it is not happening is for the birds. These are real-time decisions being made now that people are having to think about, and we need to make sure that we are on the same page and we are competitive. Somerset is an amazing place with amazing opportunities, and we need to focus on how we can capitalise on those. They could be an absolute driver of economic performance, and the realisation of the aspirations of people in all income brackets across our country. I hope the House will urgently consider this topic.
Sarah Dyke (Somerton and Frome) (LD)
It is an honour to serve under your chairship, Sir Mark. I thank the hon. Member for Yeovil (Mr Fysh) for securing this really important debate. I agree with him on many of his observations about our wonderful county that is Somerset and, indeed, the opportunities that it offers.
Local authorities exist to provide crucial frontline services to their residents. Some 63% of Somerset Council’s budget is spent on children and adults who need council care, but the stark reality is that the funding model is broken. As a proudly active Somerset councillor, I have seen the situation at first hand. The Government have decimated council finances and local communities are paying the price. This is a national problem that requires a national solution; it is not specific to Somerset.
Somerset Council has declared a financial emergency. It did so late last year because of the significant pressures on its finances due to sky-high inflation, spiralling costs of providing services, especially in social care, and a broken system for the funding of local government.
The council has been completely transparent about the measures that it has taken to address the £100 million funding gap for next year and will do what is necessary to continue to provide those essential services to its residents. I know that most of Somerset’s MPs have met Councillor Bill Revans and the Somerset Council team to learn more about the financial emergency, but sadly the hon. Member for Yeovil has not yet been able to find time to do so. However, speaking to the council’s leader this morning, I found that the offer of a meeting still stands, and I would be happy to join him if he wishes to meet Councillor Revans.
The hon. Member will be aware that some of the issues facing the current administration are the legacy of the previous Conservative council. Vesting day for Somerset Council, the new unitary council, was on 1 April 2023. The previous administration’s One Somerset business case stated now that the seemingly meagre £18.4 million-worth of savings would be realised after three years, not within nine months of forming a new council. The previous administration was guilty of irresponsible fiscal decisions. Six years of council tax freezes from 2010 reduced income from council tax, a move that saw a minimum shortfall of £24 million per year and delivered a total cut to services of £150 million.
During this period, central Government reduced the council’s revenue support grant, leaving councils more dependent on council tax and business rates. In 2018, the council was close to bankruptcy, which is why Somerset turned to the Liberal Democrats to sort out the mess.
It is important to note that Somerset has historically low council tax rates, compared with its contiguous councils, such as Dorset and Wiltshire. Somerset lost many of the higher-banded homes in Bristol and Bath areas to Avon in the 1974 reorganisation, and council tax then was set low in 1993 against the national average, all while the council tax itself is still based on the 1991 house values. This funding model is clearly unfit for purpose, and I do not believe that anyone would design a system like that now. Let me just add that there are now 18,000 homes with planning permission in Somerset caught in a moratorium due to the phosphates issue, which obviously has an impact on income that we would possibly then be able to draw down in council tax.
Where council tax income is lower, the need in the population is generally higher. Somerset is a rural county with an ageing population. The 75-plus age group is expected to double over the next 25 years. The cost of care in Somerset rose by 47% between 2022 and 2023, and the number of people needing more care is rising. That equates to a £70 million increase in council costs. There is an elephant in the room almost identical in size to the cost of living crisis that people face right now: fair funding from the Government to allow councils to get the basics right and give local people a fair deal.
It costs more to deliver services in rural areas, and the Government recognised that by altering the funding formula in 2013-14. However, due to damping, only 25% of the new benefit has been received by rural councils. Support from the Government does not match the increased cost, and the cost of years of underinvestment is now being felt by councils across the country.
Every single council bar the Greater London Authority is expected to experience a real-terms cut of at least 6.4% in 2024-25. That means that there will be a real-terms shortfall of £5.75 billion in council finances compared with 2016-17. The Government failed to get a grip on the situation early and now they are scrambling at the last minute to try to avoid a situation in which more local authorities go bankrupt.
Hon. Members from across the political spectrum have demanded action from the Government. Recently, I was pleased to join colleagues from across the aisle, including the hon. Member for Bridgwater and West Somerset (Mr Liddell-Grainger), in signing a letter that called for urgent additional funding for local government.
The previous Conservative leader of Somerset County Council, as it was, also previously called out this Government for leaving needs in social care unmet, and advocated for immediate investment. I was glad to see that the Government had listened to those pleas, but the extra funding announced last week is simply inadequate to quell the oncoming costs. It is like a rugby team converting a penalty in the 81st minute when they needed to score a try to prevent a crushing defeat.
We are all seeing councils that are close to the cliff edge; unfortunately, some have tipped over that edge. The situation is hurting residents and communities. I urge the Government to provide more funding to support councils as a matter of urgency, while allowing them increased powers to deliver for their communities and to reform business rates to boost local economies. The Liberal Democrats would provide additional funding by reversing tax cuts for the big banks, which could raise £18 billion over five years. We would also look at implementing a proper windfall tax on the oil and gas giants, and we would collect more of the £36 billion of tax that goes uncollected every year.
I have experienced—indeed, I continue to experience—the privilege of working in local government. I have seen the impact that local government can have on our communities and I am determined to defend it, but we need a Government to listen and to help turn the tide against this crushing wave.
Mr Ian Liddell-Grainger (Bridgwater and West Somerset) (Con)
I always find—my hon. Friend the Member for Yeovil (Mr Fysh), the Minister and you, Mr Pritchard, all know this—that the best speeches in this place are the ones that you write yourself, and not the ones you deliver in parrot fashion after they have been written by someone else.
As my hon. Friend said, in the last few months we have worked together to try to solve this problem. Let us look back at the history of the situation. I will gently say that it was going on under the coalition Government. We made representations then and I do not remember being completely supported by David Laws, David Heath, Tessa Munt or—I have forgotten now, but I think that is about it. That is a problem.
It is easy to cast aspersions, but let us look at the reality. I am very grateful to the Minister; I must give credit where credit is due. He has worked very hard to make sure that he gives the time that is needed to all these councils to get this situation sorted. The point was made that £5 million is very little. Yes, of course it is, but it is a start.
I do not think it is any secret that tomorrow the Minister is meeting the leader of Somerset Council, Bill Revans, and his team to talk about the next phase. My conversations with the Minister—I do not know how many there have been, but there have been an awful lot—have always been constructive and helpful. We are in a crisis—we must be absolutely frank about that.
I absolutely abhor having in commissioners. Having suffered that, as I said in my intervention on my hon. Friend the Member for Yeovil, who was very noble about it, I know it is an absolute disaster. If they come in to Somerset, I can tell hon. Members exactly what will happen. They will shut the recycling centres, stop the buses and pull back on the funding for roads, for the most vulnerable and for many others, and the money we give to colleges such as Yeovil, Bridgwater & Taunton, and Strode just will not happen. No matter what we do—parliamentarians, councillors or anyone else; parishes, towns or whatever—it will make no difference at all.
The problem we have is that councils such as Taunton, I think Yeovil, Minehead and others are raising council taxes way out of proportion with what they need to do. I am worried that they will raise them so high to take on services that the county has been running up to now, and they will not be able to cope. In all my 23 years in this place, I have seen when councils have taken on assets, and after a while they just cannot cope. That is partly down to the people they have, partly down to the rises in costs that we all have, and partly down to the fact that these things are damned complicated, and that goes not just go for the loos, but for much more.
We really must talk with the Minister about how we make sure that when assets are given to other councils—mainly town councils, because it is more difficult to do for parishes—they are able to deal with those assets in the future. Taunton is to have a 200% increase in council tax, and that is huge, but it wants to take on a lot of things, and Taunton covers the whole of Taunton—not a bit of it, but the whole thing. I am not going to cast aspersions about whether this is right or wrong; I am just making the point that the assets that go over to such councils still have to be managed.
The other issue I have is about the superb colleges we have, and my hon. Friend the Member for Yeovil and I have talked about Yeovil College, and Bridgwater & Taunton College. We have come an enormous way in Bridgwater, and these colleges are superb. When I first came in all those years ago—and let us be honest—they were not as good as they are now. There has been a huge amount of work by the teams in both those colleges, and we have created proper colleges for Somerset. The debate goes on, and the conversations between Bridgwater & Taunton, Strode and Yeovil are brilliant. They are really looking at how we move on in the future.
Another point, and the Minister must be aware of this, is that not only are we building the biggest infrastructure project in Europe, which is Hinkley Point, but we are about to start building the Gravity site. Again, my hon. Friend the Member for Yeovil has been very helpful, with his wonderful workforce at Westland and so on. This is a 423 acre, 11 million square foot battery factory for Jaguar Land Rover under the Tata Group. It is a phenomenal investment in the west country, with 9,500 jobs, and it is crucial to the future of our beautiful county.
In the time I have left as an MP—God willing, and the electorate willing, I will still be an MP, but not for Bridgwater—I will be absolutely dedicated to getting this to the stage where we have the infrastructure, but we need a functioning council. We have to have that. It is going to be difficult for the council, because it has to put in some money, and we will have massive infrastructure costs. I do not want to have to come back to the Government in however long it is—in the next six months —and say, “Look, we haven’t got the money to put in the roads, the railway and the college campuses for Bridgwater & Taunton and for Yeovil.” We must get this sorted.
In the short time I have left, I say to the Minister that this is going to be a partnership. As I have said, I have worked with Bill Revans for a very long time, and I have enormous respect for him. He is trooping on, and not perhaps in the best circumstances, as we all know. He is still there fighting his corner, as he has long done—he stood against Tom King in 1992. He is a long-term, committed politician for whom I have a great deal of respect; as hon. Members know, that is not always the case.
We have to work together to get the funding we need to stabilise the situation, and this cannot wait until after the election. I have no idea about the policy of the Labour party—I genuinely do not know—but I know the hon. Member for Oldham West and Royton (Jim McMahon) will be sympathetic because I was in opposition when I came in and I will probably be in opposition when I go out. However, when I had issues when Tony Blair was Prime Minister, they were listened to, and I can only say that I am very grateful for everything, but we need to do this now, Prime Minister—
The Parliamentary Under-Secretary of State for Levelling Up, Housing and Communities (Simon Hoare)
I am not the Prime Minister.
Mr Liddell-Grainger
Yes, I know. I do apologise. Minister, we need to sort this now, and that conversation is crucial. We need to keep this going as much as we can. We need to take it forward in the constructive way in which it has been dealt with so far. I am one of the worst offenders in this place for taking it to the lowest common denominator and attacking everybody, but this is a time when we cannot do that. There are too many vulnerable people whose futures and wellbeing are at stake, so I say to the Minister: please, just keep talking to us.
Minister, you have been brilliant. I cannot fault you or the Secretary of State. I cannot fault the way in which you have dealt with Bill and his team, Duncan Sharkey and everybody in Somerset. At every meeting I have had, we have talked about how we have work to do, and we will do it. We have discussed what needs to be done. I am conveying that to Bill, the Minister will convey that tomorrow, and we will work on it. In the next few months we have to come up with a formula that safeguards those vulnerable people. My constituency covers Exmoor. The problems we face with things like social mobility and access in one of the most rural parts of England will be devastating if we cannot come to an agreement.
Minister, we are here to do the best for our constituents; we always have been. That is why you do it, why I do it, why my hon. Friend the Member for Yeovil does it, and why everyone else does it. If you can come halfway, we can come the other half. That will be most important. You could use Somerset as a guinea pig in order to come up with a formula that will get this working, so that we can work with you and land what we need to do. I am meeting the Chancellor tomorrow. I am going to put the plea to him and ask him to be generous—
Mark Pritchard (in the Chair)
No, I am not curtailing the hon. Gentleman’s speech, if he has anything more to contribute. I just gently remind him that he should address his remarks through the Chair rather than speaking directly to the Minister. I have let it go a bit, but he should speak through the Chair.
Mr Liddell-Grainger
I am so sorry, Mr Pritchard. After all these years, I should know better. I do apologise.
That partnership will be crucial. It matters more than anything. I look forward to working with the Minister on this.
Jim McMahon (Oldham West and Royton) (Lab/Co-op)
It is a pleasure to serve under your chairmanship, Mr Pritchard, and to respond to the debate secured by the hon. Member for Yeovil (Mr Fysh). Despite the clear localised political differences that have played out, we have heard quite a lot of commonalities in terms of the structure of local government finance and the issues that are driving demand pressures. That is important: we need at least a shared analysis of the issue before we try to find common ground on the potential solution. I welcome the exchanges today and congratulate the hon. Member on securing the debate. We perhaps need to talk about issues like this more than we do.
I hope very much that the offer of a meeting with the local council leader is taken up, because this matters to all our constituents. That is why we bring such debates to the House, but in the end, the solution lies in local partnerships and in Members of Parliament working in partnership with their local authorities, regardless of political affiliation, for the best outcome for their constituents. That is the only way to work, in the end, so I hope that is taken up and that the council enters into the spirit of partnership in return.
Let me be clear: we are here to talk about funding and governance in Somerset Council, and we have heard many of the arguments, but this issue affects councils of all political colours. I have met many council leaders up and down the country. The one thing they have in common, and the one thing they continually raise, is that they often feel that they are standing alone in dealing with the pressures of rocketing demand while trying their hardest to prioritise services for their local communities. We have heard about some of those issues today: the number of children who need child protection; older people living longer but needing care in older age; the homelessness crisis and people staying in temporary accommodation—all those things have a significant impact on council budgets at a time when central Government funding has been reduced in real terms. Those were political choices made over 13 years of a Conservative Government. They have fundamentally changed the structure of council funding, and Somerset will feel that too.
We should not forget that in 2010 the coalition Government announced the closure of the Audit Commission. It is not just that money has been taken away; the infrastructure required to raise a red flag when there are concerns was taken away as well. What does that mean, 14 years later? The audit market is still dominated, by and large, by six firms, with very few new market entrants. The market size has not grown in comparison. As a result, there is real tension in the system. As one could predict, the closure of the Audit Commission and the limitations placed on the National Audit Office mean that there is a gap in local as well as national reporting. Councils are often left alone to inspect their own financial risk, rather than looking for value for money, or to use a broken audit market.
How does that manifest itself here today in 2024? There has been a sharp increase in the number of local authorities that have not had their accounts audited by the statutory deadline. In 2022-24, just five of the 467 councils delivered their audits on time. That means just 1% of English councils published their audited accounts by the deadline. When a council is in financial difficulty, the warning system which should escalate the matter is just not there. The Minister needs to consider how that might be improved.
We have talked a lot about the grant funding and, as such and in the interests of time, I will not go over old ground. However, it is a matter of fact that Somerset Council has £100 million less than it needs to provide services in its area, when compared with demand. Labour understands that councils like Somerset are funding the impossible balance between demand rocketing and budgets not keeping pace. When the austerity programme started, cuts were targeted at local government far more than at any other part of Government. We know that local government was always the prevention arm of Government. When we take away the prevention arm, all we have left is the reactive. We see that in the NHS and right across the board, but in the end it always comes right back to local government to pick up the pieces. That is what we have seen in social care, children’s services and homelessness. It is important that councils are given the tools to take the long-term decisions that are needed. Labour would commit to single pot, multi-year settlements to give the financial certainty that is needed, as well as funding that follows the need where it exists.
We often hear debates in this place about the difference between the north and the south, between our towns and our cities, and between counties and villages, but in the end, for a funding formula to be fair, surely it must follow need, wherever it is? It is not right that an older person in any part of England is denied the care they need, or a young person is placed at risk because they do not receive the care they need, or someone is not given the home they need. For a funding formula to be truly fair, it has to follow the need where it exists. That also requires a resetting of the partnership to be a partnership of equals. That is why Labour would introduce a take back control Act to reset the balance of power between central Government and local government.
The Parliamentary Under-Secretary of State for Levelling Up, Housing and Communities (Simon Hoare)
It is a pleasure to serve under your chairmanship this evening, Mr Pritchard, and to reply to the debate initiated by my hon. Friend the Member for Yeovil (Mr Fysh). We have covered a lot of ground. The danger of covering a lot of ground is that it leaves the Minister with precious little time to respond to that ground, so I shall canter through as quickly as I can, with some barely connected bullet points.
I am grateful for the comments made by those who participated in this afternoon’s debate. My hon. Friend the Member for Yeovil said that we all want to see top-quality services for our communities. My take, and I say this as a party politician, is that the public out there do not really care what type of council is delivering the service. When push comes to shove, they are not that motivated by which party, if any, is doing it either. They just want to know that the services are there when they need them and that the council can deliver those services with resilience and robustness.
In response to the point made by my friend the shadow Minister, the hon. Member for Oldham West and Royton (Jim McMahon), I would gently remind him that in broad terms the funding of local government formula today is that which we inherited, authored and written by his party when in government. I think we all recognise that the formula needs change. Certainly, as late as last week, the Government committed to a fundamental review in the next Parliament. I am tempted to say that it would have been done had it not been for covid, which took up significant bandwidth within local government, but it is a job that needs to be done.
My hon. Friends the Members for Bridgwater and West Somerset (Mr Liddell-Grainger) and for Yeovil, and the hon. Member for Somerton and Frome (Sarah Dyke), are right to point out that there is a clear role for local government, not just in delivering statutory service, but in making place and effecting beneficial change. My hon. Friends were right to point to the excellent Yeovil College. About 40% of the students of Yeovil College come from my constituency and that of my hon. Friend the Member for West Dorset (Chris Loder). The principal, Mark Bolton, provides exemplary leadership. My hon. Friends spoke of Bridgwater & Taunton College, about which I am afraid I do not know, but if it is half as good as Yeovil College, it is excellent.
My hon. Friend the Member for Yeovil talked about the role of trying to attract business and he is absolutely right, because business rates help to grow the services. If he thinks of Leonardo and Yeovil College in his own constituency, the giga-factory investment not far from Bridgwater that my hon. Friend the Member for Bridgwater and West Somerset spoke about, and the massive investment in Hinkley Point C, I would suggest that Somerset as a rural county is very much punching above its weight in economic activity. That is to be applauded, and the role of Somerset Council in helping to foster that environment is to be noted and the council congratulated.
What is the basic problem that Somerset faces? The hon. Member for Somerton and Frome talked about money. She said that the Government were not listening. I take issue with her; I do not like taking issue in normal circumstances with the hon. Lady, but I am going to in this case. She said that we need a Government who will listen. I can give the hon. Lady half a billion pounds of listening, which we announced last week. The rural services delivery grant will now stand at its highest-ever level. We are raising the funding floor from 3% to 4%—an ask of the district councils. We have listened.
Part of the underpinning of Somerset going unitary was to deliver efficiencies and savings. For reasons that my officials and I continue to explore and doubtless will touch on in conversations tomorrow, those savings have not manifested themselves. The steam has fallen out of the engine of change. I appreciate any new party coming into an administration will want at least to cast a casual eye over a plan, but to have delayed and prevaricated for as long as it has is, in my judgment, inexcusable because the basic premise of going unitary will have been submitted. The programme of savings and efficiencies will have been looked at by officials in my Department and have been a key part in determining whether Somerset was to go unitary. A very clear and compelling case was put forward.
I know from my experience of when I did it with our colleagues in Dorset, including my right hon. Friend, the former Member for West Dorset, Sir Oliver Letwin, the numbers that we put in were gone over with a fine-tooth comb because there is no point delivering change if there is no tangible and obvious benefit. I urge Somerset Council to build up that head of steam, to put some wind in the sails—I am mixing my metaphors; not unusual for me—and to drive forward the efficiency, innovation and modernisation that underpins the unitary process.
I am not going to comment—I know colleagues have invited me to do so—on the minutiae of the conversations that officials and I are having with Somerset Council. I know that the House would not expect me to do so, but the points I am making in this debate are ones that I have and will continue to make. Somerset’s budget is up 6%—£565.3 million in ’24-’25. There are no cuts anywhere in local government budgets for this coming financial year. We are a Government who have listened. We asked, we heard.
A section 114 notice is often referred to as bankruptcy. It is not bankruptcy in the commercial sense of the term. That is the key message from me. This is not bankruptcy. No Government would ever allow any council to fall over, not because of politics or politicking, but because the vulnerable who need services need to have the comfort and security that those services will be provided. I do not want to scare the most vulnerable in our society and have them suddenly think that at the stroke of a pen and the issuing of a section 114 notice, everything they rely on for their quality of life will suddenly be removed. That would not be the case.
Mention has been made of the levelling-up agenda, which falls within the portfolio of my hon. Friend the Member for Redcar (Jacob Young). My hon. Friends the Members for Yeovil and for Bridgwater and West Somerset are right to make the point that the levelling-up agenda is not reserved solely to our northern and industrial towns, as important as they are to the levelling-up agenda. There is an element of coastal levelling up. There is an element of rural levelling up.
The hon. Member for Somerton and Frome made a point that I have made in every speech in this place since my hon. Friend the Member for Yeovil and I were first elected way back in 2015—with all we have gone through, it feels a lot longer, I am sure he will agree. The hon. Member for Somerton and Frome was right: the cost of delivery of services in a rural area, which is wider in geography and sparser in population, is by definition going to be higher than in denser urban populations. We do not then move forward and rob Peter to pay Paul and say that the deprivation in a rural area is more important than the deprivation in an urban area, or that need is greater in an urban area compared with a rural area.
Need is need. Deprivation is deprivation. We must meet the two where they manifest themselves in order to make the lives of our fellow citizens better and more comfortable. I am not a Minister who believes in robbing the rurals to pay the urbans or vice versa. I believe in trying to get equity in the system and having a more sophisticated way of recognising and addressing need. I have every confidence that in a review of the formula that would be an absolute kernel of all that we do.
The hon. Member for Oldham West and Royton referenced the audit issue, and he was right to do so. It is a serious issue. There are some announcements on that in the not-too-distant future, which I will, of course, share with him in due course through the usual channels. In conclusion, let me say this to the three representatives of the great county of Somerset—not as great as Dorset, I hasten to add. From the Blackmore hills, nothing gives me greater pleasure than to look down on Somerset, but it is a great county. It is full of innovation and good people working hard and paying their taxes. I do not believe that they should be overburdened with taxation to mask deficiencies in the public sector. I think that is something that resonates across this Chamber—indeed, I see the hon. Member for Somerton and Frome nodding in agreement.
A number of Members spoke about the importance of partnership. The central theme since I was appointed in November has been the pivotal, positive partnership between central and local government to achieve for our people, wherever they are and whatever their needs. My door stands open to work with colleagues across the House representing Somerset to ensure that their residents secure the services that they need at a good value-for-money rate. I expect Somerset Council to rise to that challenge, and I look forward to furthering my discussions with it in due course.
Mr Fysh
The Minister has set out exactly his case, and he is right to say that we need to work together on this. Councils are integral, and they have been for hundreds of years, to our local people and their experience of life. They are vital. We in this House support the Minister in trying to make sure that the process works well and efficiently, that savings are made and that the vision we can try to set out as Members of Parliament and councillors can be translated into real change for people on the ground. I am extremely grateful for his attention on this issue, and I look forward to working with him over the months and years ahead.
Question put and agreed to.
Resolved,
That this House has considered the funding and governance of Somerset Council.