Local Government Finance Settlement

Lord Beecham Excerpts

Tuesday 19th December 2017 Lords Chamber

[Lord Bourne of Aberystwyth]

My Lords—

[Lord Beecham (Lab)]

My Lords—

[Noble Lords]

Order!

--- Later in debate ---

[Lord Porter of Spalding (Con)]

My Lords, first, I remind noble Lords of my interests listed in the register— namely, that I am the chairman of the Local Government Association. I am also the leader of South Holland District Council, which is in Lincolnshire, so I thank the Government very much for letting us be one of the pilots. We much appreciate that.

As my noble friend might expect, I need to be critical of the fact that again adult social care was not mentioned. I cannot see the new funding in a positive light, as the £2 billion will not actually be £2 billion; it will be about £900 million this year, which will be insufficient to deal with the pressures. However, I have every faith that my noble friend and the Secretary of State will be able to persuade the Treasury that it will be in this Treasury’s best interests to find additional money. We all know that the people most affected by adult social care crises are those who vote. Also, as has been said, there has been a massive rise in the number of looked-after children. That will need to be reflected in direct funding to local councils, which will have to pick up that burden. However, I am confident that there is still time for my noble friend and the rest of the DCLG team to persuade the Treasury that that needs to be met.

I do not want to carry on being critical, so I will make some really happy noises. The fact that the changes to the new homes bonus flagged in the last few months will not be implemented will be well received by local government. Clearly, that would have been a counterproductive move and we are pleased that it is not happening. On a South Holland-specific basis, if the Government are looking for somewhere safe to trial the setting of planning fees, somebody whom I know will probably be writing a letter in support of that and offering their council as a pilot. They would not use it to stop development, which, I know, is one of the risks that the Government are concerned about. They are worried that some people might use it as a way of stopping planning permissions being granted in the first place by pushing up the fees to a prohibitive level.

All in all, I think that the Statement was a game of two halves. There was quite a lot to be glad about. The 1% council tax increase was a massive move forward—by 50%—although it is still not massive in terms of cash. In the case of South Holland, I think that it will increase my council tax by about 15p a year over and above what was already in the budget, so it will not make a fantastic difference. Given that 50% of my council tax goes to a drainage board and not to direct services offered by the council, a bit more flexibility around that would be appreciated. However, from the sector’s point of view, it is a welcome move. A move to relinquish the Treasury’s control of what we can charge locally is much appreciated but it would be a much better idea to remove the Treasury from the equation altogether. It is a local tax taken from local people for local services, and that should not require HMT to go anywhere near it.

[Lord Beecham]

My Lords—

[Lord Bourne of Aberystwyth]

I am still looking forward to hearing from the noble Lord, Lord Beecham. I am sure there will be time.

I thank my noble friend very much for the welcome he has given to the pilot in Lincolnshire, and we certainly look forward to seeing how that pans out. I also thank him for the qualified welcome for the local government settlement from the Local Government Association. I have read its response and it welcomes some of what it is in the settlement. I can well understand its position. It would be most extraordinary if in any year the Local Government Association said, “That’s everything we want”, and my noble friend did not disappoint on that front.

I thank him for the welcome that he gave regarding the new homes bonus. I agree that there is a challenge in relation to adult social care—as I said, we have the summer review coming up—and I also agree that there is a challenge in relation to children’s social care. We have recognised that with additional funding but I note what he says.

I also note what he says in relation to South Holland in general, although perhaps not his request to trial full cost recovery of planning fees. We have not yet agreed to that. It is something that we are looking at, and obviously we would make sure that it went through a proper process if we did agree to it. However, I thank my noble friend for his response.

[Lord Beecham]

My Lords, first, I refer to my interests as a Newcastle city councillor, in which capacity this is the 51st local government settlement that I have had to engage with.

I notice that the Statement bears the heading “Check Against Delivery”. I assure the noble Lord that local government will certainly check against the delivery of the Government’s intentions as expressed in the Statement, and it will certainly hold the Government to account for the consequences of this settlement.

Perhaps I may refer in the first instance to the question of business rates. The Statement says:

“The aim is for local authorities to retain 75% of business rates from 2020-21 … From 2020-21 business rates will be redistributed according to the outcome of the new needs assessment”.


I have two questions about that. First, how far have the Government got in developing a system for equalising—or, at any rate, balancing—the distribution of business rates? Secondly, are they now looking at the position of firms such as Amazon with large out-of-town premises, paying next to nothing in business rates and, for that matter, probably diminishing the return of business rates in local authorities with this new economy that is forming? Will the Government look at the implications of that for financing local government, as well as perhaps in other respects?

There is also a distinct question about the funding of children’s social care, which is said to amount to some,

“£200 million on innovation and improvement in children’s social care”.

The present situation is that the funding is £600 million short of what is required to support the existing services. Even if this £200 million were devoted to closing part of that gap, it would still leave those services substantially underfunded. It seems to me that the Government have not taken the right step in adequately funding what is a crucial service and one which, as my noble friend pointed out, is growing and will be an ever-greater call on local government finances.

I also have a question about the slightly odd wording, if I might put it that way, on page 6 of the Statement, in which the Government announce their intention to give,

“local authorities the continued freedom to use capital receipts from the sale of their own assets. This will help fund the costs of transformation and release savings”.

But if these are capital receipts, they cannot be used for revenue purposes—can they?—which the Statement appears to imply. They can be used for capital purposes which might have marginal impact on the revenue side, but they cannot be used to contribute significantly to the revenue situation.

My noble friend referred to the shortfall in education expenditure, but there is clearly also a significant shortfall in social care, to which the Statement made no reference at all, as he pointed out. That is a serious burden on local authorities. Ultimately, and this is the other side of the problem, that will probably increase the costs for the National Health Service. If local government cannot provide social care, the call on the health service, and in particular hospitals, will grow disproportionately. The Statement makes no effort to deal with that situation.

So far, the check against delivery is not encouraging, but it remains to be seen whether, over time, the Government can improve on what has been a pretty downbeat result for local authorities and, more importantly, their citizens.

[Lord Bourne of Aberystwyth]

My Lords, the noble Lord referred to his 51 years in local government. We know from his contribution today that he has not lost any of his enthusiasm—like a young colt, he was anxious to intervene and make his point, and I congratulate him on that. However, it was the usual dismal litany of matters that he set out, and unlike his noble friend on the Labour side, he did not welcome some of the points in the Statement. Let me try to deal with some of the perfectly fair points that he made, some of which I will respond to, if I may, subsequent to the Statement.

On how far the fair funding review has gone, as I indicated we are opening the consultation today for response by 12 March, with the intention of bringing it in in 2021. Obviously, there is thinking on the broad general principle, but we want to see how we look at issues of deprivation and provide a fair funding formula.

The noble Lord referred to the broader question, which has been raised before, perfectly validly, of online shopping and the fact that there are some very large players such as, but not limited to, Amazon. He suggested that it is perhaps a question of rebalancing some of the ways that we raise money. I will cover that in a letter, if I may, but from memory I think that there is an international aspect to this issue that kicks in in the spring—there is reference to this issue and we are participating in that. I appreciate that that is a rather woolly reference, but I will clarify it in correspondence.

The noble Lord referred to the significant challenge, which certainly exists, in children’s social care and adult social care. We have provided already a precept of 3% from the last Statement a year ago, and we have increased flexibility this year in relation to the referendum, which helps. However, I accept that there is a significant challenge. I accept also that the noble Lord is right to say that we will be checked against delivery.

The noble Lord made a point about capital purposes, and we are both mere lawyers in this regard. However, I think that there is probably some accounting process whereby transformational investment from capital funding, which would help with the revenue side of things, is classified as capital. I suspect that that is the case, but again I will take up that somewhat technical point in correspondence.

The noble Lord is right to refer to a broader consideration of the complex—or perhaps not so complex—interrelationship between the health service and social care and the need to get that right. This has challenged Governments of all colours in the past, but I accept that there is a broader question that we need to look at.

The noble Lord will be pleased to know that, in relation to Newcastle, there is a £2.3 million increase in funding from this settlement, quite apart from the referendum uplift, and a maximum additional funding of £6 million as a result of the council tax flexibility previously announced. I am sure that that is of some comfort.