Local Government Finance Bill
Debate between Kevin Hollinrake and Simon HoareMonday 23rd January 2017
(7 years, 10 months ago)
Commons ChamberRead Full debate Local Government Finance Bill 2016-17 View all Local Government Finance Bill 2016-17 Debates Read Hansard Text
Kevin Hollinrake (Thirsk and Malton) (Con)
It is a pleasure to follow my hon. Friend the Member for Torbay (Kevin Foster), who speaks with much knowledge on this subject. The business rates retention provisions in the Bill clearly have huge potential for our local authorities, which will be able to focus on economic growth in their area, and to grow their rates base and therefore their income. However, this is an incentive around growth rather than the whole redistribution of the current local authority funding system. Most of the revenue going into local authorities will be baked in and redistributed according to a formula whose details we do not yet know, but I am heartened to hear from the Minister that the fair funding review is being taken forward. A technical working group from the Local Government Association has now been charged with that responsibility.
The principle has to be that there is a fair funding formula wherever we live. There cannot be a postcode lottery. The previous and current Secretaries of State have been clear that that is a key part of the proposals. The Communities and Local Government Committee looked into the business rates retention policy, and our report considers the concerns and the opportunities. Overall, we were supportive of the principle of the Bill, but we recommended that an independent body should look at the funding review. I am sure that the LGA has some good people, but it is important that we have a fresh look at this, so it would be good to have someone truly independent who can sit back from where local government is today.
In addition to the Committee’s initial witness sessions, we had about an hour and a half in the House of Commons Library with some experts from the Scrutiny Unit during which they tried to explain the current system to us, but we left none the wiser. I understand that 159 measures are currently in use, so the current system and the way in which the measures combine is very complex. With so many measures, one would think that the current system would be fair, but it is absolutely not.
I am grateful to Leicestershire County Council for its detailed work—it is available on its website—on authorities’ core spending power. As many will know, core spending power involves all an authority’s revenue, taking into account the revenue support grant, council tax, business rates, the new homes bonus—everything. Opposition Members might say that this is a political argument involving the shires against metropolitan areas, but the council’s evidence did not suggest that at all. Many mets are not getting a fair deal, but many shire counties, such as the one that I represent, are not getting a fair deal either. The fairest deals seem be those of many London authorities. Nine out of 10 authorities with the highest spending power are in London, yet nine out of 10 authorities with the lowest council tax are also in London. Over the past five years, a typical council tax bill outside London has increased by £100 whereas the average bill in London has decreased. Something about how overall funding is being allocated under the current system is not quite right.
To put those figures in context, the spending per head of the local authority with the highest spending power—obviously a London authority—is £1,170. That figure falls to £770 in North Yorkshire and to £615 in York. There are many other examples, such as Kirklees, Leeds, Wigan, Bury and Wakefield, of authorities getting a raw deal. One might put that down to certain other factors, such as a correlation with deprivation, income or another demographic, but that is not the case. Areas with high income deprivation, such as Leeds or Kirklees, or with a high proportion of elderly people, such as the East Riding of Yorkshire or Dorset, often have a low amount to spend per head. The system just is not working. The 1988 centralisation of the system, under which money was to be redistributed around local authorities, was supposed to make the system fair by ensuring the equal funding of services on the basis of need, but that clearly has not worked and we have been left with a postcode lottery.
I am not picking on London, because some London local authority areas, including that of the Minister for Housing and Planning, whose birthday it is today, are not particularly well funded, but the pattern persists. To put the situation into context again, Hammersmith and Fulham is not increasing its council tax this year. It is not applying the adult social care precept, but it is providing free home care to residents and has cut the price of meals on wheels. Hardly any of those facilities are now available in my area. It is simply not fair that people in different parts of the country with the same needs are getting different levels of service.
Of course there is an impact on the provision of other services in my local area of North Yorkshire. Libraries are closing or are being moved over to community libraries. Bus services will no longer be subsidised, so some services will no longer operate. Obviously there is an effect on children’s services and, crucially, on adult social care—we have a more elderly population in North Yorkshire.
This is not an easy situation to resolve. Moving from one system to another is a zero-sum game. If the system is to be made fair today, somebody will lose out. We have to move away from a system that is clearly unfair. I understand that the system is as it is because of something called regression. Past inaccuracies and unfairness have been built one on top of one another, and it is difficult to reverse those changes.
Of course more money is coming into the system—£12.5 billion, according to the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Nuneaton (Mr Jones). Some extra services will clearly be required for that money, but there is an opportunity to make the system fair. Yes, there will be more services and greater responsibilities, but some areas are getting a better deal today.
Simon Hoare (North Dorset) (Con)
Does my hon. Friend agree that, in order to ensure that the problems that he highlights are not replicated in the new system, we need to find an agreed and sensible way of measuring rural deprivation? That is often incredibly hard to measure compared with deprivation in urban areas because of the scarcity and sparsity of the population.
Kevin Hollinrake
My hon. Friend makes a strong point about simplifying the system, which I was about to address. There cannot be 159 different indicators. We know that that does not work. Leicestershire has suggested nine simple indicators, including children’s services, adult social care, highways, fire, area costs, sparsity and density. That is a simple formula that people can understand and penetrate, and it would make sure that the allocations cater for the extra responsibilities we are getting through the system. We should use those nine simple cost drivers instead of this regression, which is a model based on something that clearly does not work. We need a progressive move away from that regression towards a simple, standard, penetrable formula based not on where we live, but on a fair system with fair resources and a fair assessment of the cost drivers wherever we live.