Spring Statement

Baroness Thornhill Excerpts

Wednesday 20th March 2019 Lords Chamber

[Baroness Thornhill (LD)]

My Lords, I declare my interest as a vice-president of the Local Government Association. My humble contribution will focus on the impact of the Spring Statement on local government finances and the serious concerns over the short-term crisis and future sustainability.

The Chancellor certainly attempted to morph himself from Eeyore to Tigger and inject some optimism into his Statement. But there was little to lift the gloom in local government circles. For us, it was slim pickings. However, it is churlish not to recognise that in the 2018 Budget, the Government responded to local government’s call for investment to ease some of the pressures facing local services this year. But it was just that—another one-off payment to avert a crisis, stick a finger in the dam or create a headline.

What was noticeably missing was any comment on the dire position that local government finds itself in. There was nothing on the long-overdue Green Paper on social care, which takes up some 40% of councils’ spending; nothing for children’s services, which are already expected to be the next crisis area after adult social care; and nothing to provide much-needed social housing. Your Lordships will note that I say “social housing”, given that the Government seem wedded to the so-called affordable homes that are simply not affordable to many of those on our housing list.

Will the Minister accept the views of the LGA, the IFS and local government finance officers that the current model for funding local government is broken and unsustainable? Can we be assured that there will be some urgency injected into new processes as we approach 2020? The Government will be well aware of the substantial funding black hole facing local government. A conservative estimate from the LGA places the funding gap at £8 billion by 2025 if more money is not provided for those services that in particular are experiencing a marked growth in demand. The real-world impacts are being felt by adults and children in care, homeless families and children on the streets, and millions of users of damaged local roads. These are specific services stretched to breaking point; but one cannot keep papering over the cracks that a significant reduction of funding, year after year, has caused to local services across the board.

We have an unprecedented situation where representatives of the police, head teachers, local government and hospital workers are all saying that, at the very least, they are stretched to a level that is impacting on services; at worst, they are at crisis point. Between 2010 and 2020 councils will have lost 60 pence out of every pound that the Government provide for public services. Compounding that funding gap is the now critical lack of clarity about where council funding will actually come from after this year. Many people in local government and beyond are rightly calling it a post-2020 cliff edge, and we are moving dangerously ever closer.

The proposed spending review will be setting overall departmental budgets for the coming years. That is good, but it has not even begun yet, so councils simply do not know broadly what their funding levels will be after 2020. How are they able to plan for the continued delivery of vital services? Added to that uncertainty, long-awaited reform of business rates retention and fair funding are still ongoing. Those are due to be implemented from April next year, which will leave councils with a matter of months to adapt. Some councils will inevitably be worse off, but they do not know which they are yet. Others will be eager to retain more of the business rates they collect so as to spend it locally, but are currently in the dark about whether they will be allowed to. Clarity is urgently needed. At the very least, the Government should commit to taking levels of deprivation into account when deciding what councils’ relative financial spending needs are.

In response to my recent Question on this matter, the noble lord, Lord Bourne, told me that I was wrong. If so, could he please make a statement to reassure councils that deprivation levels will be taken into account in the baseline funding when the new so-called fair funding formula is revealed? That would alleviate current concerns being felt in the sector, as this is certainly not the perceived position.

The Chancellor also mentioned a £10 billion reduction in business rates and plans for revaluation from 2021. There is also a massive backlog in appeals for revaluation on current business rate levels. Given that a significant part of a council’s resources will in the future depend on business rate levels and growth, those are both factors that inject further instability into the process. With the plans for an increase to 80% business rate retention and the implementation of the fair funding formula both progressing at a snail’s pace, it is little wonder that there is widespread concern.

It goes without saying that this continued financial uncertainty is not good for our communities. This is not about process; it is about people. Councils must be trusted to get on with the job of delivering valued services locally, creating the best solutions for their areas, which they know best. They want to help the Government meet national targets for things such as new homes, job creation and preventing ill health, but they are currently unable to do as much as they could do. Put simply, they are being handicapped by an acute lack of financial certainty, which must be urgently addressed. This in turn is hurting those who depend on the services provided by local councils, many of whom will be among the most vulnerable people in our society.

Finally, I agree with the comments made by the noble Lord, Lord Macpherson, about council tax. What is the difference between Brexit and raising council tax? With Brexit, you get only one referendum, so you cannot change your mind. But if you want to raise council tax, you can have a referendum year after year after year—so you can change your mind, depending on the circumstances. That is why council tax has not risen enough to cover needs over the last years. Local government has long asked for that to be revoked. It has not happened yet.