Local Government Funding: North-East

Debate between Alex Cunningham and Iain Wright

Tuesday 1st March 2016 Westminster Hall

[Mr Wright]

My hon. Friend is absolutely right about services having been stripped to the bone: there is nothing left to cut. Local authorities can really only consider what they can manage to do and the minimum amount required of them in respect of statutory services.

Along with other local authorities, Hartlepool had a tough deal in the last Parliament, but it is going to get tougher in this one. Hartlepool Borough Council was established when unitary authority status was granted 20 years ago. The coming financial year is set to be the most difficult that the borough has ever faced, with a budget that is £8.274 million less than last year, representing a year-on-year reduction of 19.6%. That reflects the combined impact of a further £4.474 million cut in Government revenue support grant, which is a year-on-year reduction of 19.7%, and the permanent reduction in the rateable value of the nuclear power station—the Minister has heard me discuss this before—which reduces business rates income by £3.8 million year on year, in perpetuity, equating to a reduction of 19.4%. Over the lifetime of this Parliament, to the year 2019-20, Hartlepool faces a combined settlement funding assessment cut of 27%. Every single local authority in the north-east will experience cuts, from 35% in Northumberland to 25% in Sunderland. By the end of this Parliament, Hartlepool, and local authorities in the north-east in general, will have experienced nine consecutive years of funding cuts. That is unprecedented.

My hon. Friend the Member for Darlington mentioned further pressures on health and education, where we have challenges in our region. Will the Minister comment on public health funding budgets, to which further cuts will be made over the next four years? Additional cuts will be phased in at 2% in 2016-17, 2.5% in 2017-18, and 2.6% in 2018-19 and 2019-20. On top of that, from 2017-18 the Government will cut £600 million from the national education services grant, which equates to a cut of 74% over the lifetime of this Parliament. That will have enormous effects on how local authorities can help education provision in the north-east.

From 2017-18, the national schools funding formula will also affect the council’s revenue budget—perhaps not directly, but it will have a negative impact on Hartlepool’s schools and reduce the public funding available in my borough. That will mean that the local authority will have to step up to the plate and try to provide further help, which it cannot provide because it does not have the available resources.

[Alex Cunningham]

When I head towards my flat in the evening, I see all this tremendous building in London. One of these blocks of flats is 50 storeys high and is probably generating millions of pounds in additional council tax—certainly hundreds of thousands. We would have to build on almost every single square foot of land in Stockton to generate that sort of income, which is a further illustration of how the south has it good in being able to generate cash but we do not.

[Mr Wright]

My hon. Friend and constituency neighbour makes an important point about something that I was going to come to. The 100% retention of business rates does not help the north-east and will not help the finances of local authorities in the region. Whereas Westminster City Council, for example, could pave its streets with gold, we in the north-east will suffer enormously as a result of the 100% retention of business rates.

The switching off of the nuclear power station in my constituency for reasons of health and safety, which was quite right, means that my local authority is incredibly vulnerable to the loss of business rates. Given the make-up and structure of the north-east economy, large manufacturing businesses could end up putting local authority finance under further pressure as a result of the lack of help. Nowhere has that been exemplified more than in the closure of the SSI steelworks in Redcar.

Further Education Colleges (North-east)

Debate between Alex Cunningham and Iain Wright

Tuesday 26th January 2016 Westminster Hall

[Mr Iain Wright (Hartlepool) (Lab)]

It is a pleasure to serve under your chairmanship, Sir Edward. I thank my hon. Friend the Member for Bishop Auckland (Helen Goodman) for securing the debate.

Further education colleges in the north-east are important engines of economic growth and prosperity in our local communities, as well as significant drivers of social mobility. By 2022 the Tees valley will require 127,000 jobs in key sectors, but only 278,300 people out of a working-age population of 417,000 are in employment. The skills mismatch is incredibly important, and FE colleges can fill the gap.

Hartlepool, for a relatively small town, has a remarkably diverse range of post-16 provision. We have a sixth-form college, Cleveland College of Art and Design, and two schools with a sixth form. Hartlepool College of Further Education is the biggest provider of apprenticeships in the Tees valley and the second biggest provider in the north-east for 16-to-18 apprenticeships. It has a fully functioning aircraft hangar, with two jets and a helicopter, and we have real skills, expertise and quality in STEM. The college’s apprenticeship success rate was 86.4%, when the national rate was 70.3%.

As my hon. Friends have indicated, there are concerns that the Government’s reforms are pushing FE colleges to adopt significant changes in their business models, which will put their viability at risk.

[Alex Cunningham (Stockton North) (Lab)]

I am grateful to my hon. Friend and neighbour for giving way. Yesterday in Education questions the Minister dismissed my concerns about the cost of area reviews, which I am led to believe could result in millions of pounds of extra banking fees being incurred as loan agreements are ended and new ones created. Does my hon. Friend agree that any real financial benefit to colleges might be lost unless the Government step in and decide what will happen with those additional costs?

[Mr Wright]

My hon. Friend makes a fair point, but I would go further, because I worry about the area-based review in the Tees valley. May I ask the Minister why the review includes FE and sixth-form colleges, but not school sixth forms, 16-to-19 free schools or university technical colleges? If a comprehensive review of post-16 provision in an area is being undertaken, why include only certain providers? The 10 FE colleges in the Tees valley subject to the review account for only about 60% of provision, so how can a proper evaluation take place? The process seems opaque, and no one has been able to demonstrate to me clear and transparent criteria for how the area-based review is being conducted. Will he use this opportunity to do so this afternoon?

Furthermore, given that colleges are autonomous organisations, it is difficult to see how any conclusions of the review can be implemented unless the Government starve colleges of funding until they agree to the conclusions. Will the Minister respond to that point and confirm that colleges in the north-east that refuse to accept the findings will not experience disproportionately harsh cuts to their funding?

The Government’s key objective in skills policy is the target of 3 million apprenticeships by 2020. The apprenticeship levy has been proposed as a means to ensure that firms pay for training. I appreciate that core funding for 16 to 19-year-olds and adult skills will be maintained in cash, if not real, terms as a result of the spending review. However, the Minister knows that there remains acute pressure on college budgets. The Skills Funding Agency has suggested that about 70 colleges throughout the country could be deemed financially inadequate by the end of 2015-16.

A devastating impact on FE colleges in the north-east is possible. Will the Minister reassure the House, without referring to specific institutions—doing so might undermine confidence—that colleges in the region will have suitable resources? Will he explain how he anticipates that the combination of his main priority, apprenticeship expansion, with other FE college activities will complement one another, rather than the former being seen as a substitute or alternative for the latter?

I mentioned that FE colleges in the north-east are drivers of social mobility. For people in the north-east in their 20, 30s or 40s who have been made redundant—sorrowfully, we have had far too much of that in the north-east recently—or who may not have worked hard at school but now want to put their lives back on track, and yet are not in a position to take on an apprenticeship place, how does the Minister anticipate that FE colleges will be able to provide them with the necessary basic skills to make something of their lives?

I turn to the apprenticeship levy and, in particular, something that the Minister said when giving evidence to the Sub-Committee on Education, Skills and the Economy yesterday. About 2% of firms in England will be liable for the levy, and the Tees valley figure is broadly comparable to the national proportion—2.2% of our employers are large firms. In Committee I asked the Minister whether the Government position was that the levy will be a ring-fenced fund to be drawn on only by levy payers to fund apprentice training. The Minister said that large firms would have “first dibs” on the money raised from the levy.

That response prompts a number of questions. If that is the case, how will the 98% of smaller firms receive funding for apprenticeship training through the levy if they are waiting for scraps from the table? Will firms be able to carry the levy forward to subsequent financial years, so that if a large firm does not want to draw on it in year one, it will have that possibility in year two? Again, how will that help smaller firms? How will the system help FE colleges provide suitable financial planning? Will the “first dibs” approach be allocated on a national, regional or sub-regional basis—will it be large firms only in the Tees valley, or only in Hartlepool? How will the levy work?

As the Minister understands, the considerable uncertainty is undermining the ability of colleges in the north-east to plan and to provide their existing excellent further education provision. I hope that further detail will be provided this afternoon, so that colleges can get on with the job of ensuring that we can transform our regional economy and that people’s lives in the north-east are made better.