Local Government Funding: Rural Areas

Debate between Lord Garnier and Dan Poulter

Monday 11th January 2016 Commons Chamber

[Sir Edward Garnier]

I agree on that, and my hon. Friend illustrates the sparsity factor. I am getting into the jargon now—you might almost think I am beginning to enjoy myself, Madam Deputy Speaker, but I do not want you to get that impression. On the sparsity factor, getting schoolchildren from parts of rural Lincolnshire or rural Leicestershire to the town centres where the schools are is an expensive activity and the county councils are finding it increasingly difficult to subsidise it, to the concern of the parents of those children.

I do not wish to think of this as being as complicated or difficult as the Schleswig-Holstein question, but I sometimes think that either I am either dead or mad, or I have forgotten the answer. Lord Palmerston, one of our greatest Prime Ministers, said that only three people knew the answer to the Schleswig-Holstein problem—one was dead, one was mad and one had forgotten the answer. That is a diversion, I hope.

I am relying heavily here on a note provided by the excellent Conservative leader of Leicestershire County Council. The council recognises that the Government wish to use “spending power” as the only means of discussing the funding available to local authorities and that there are financial constraints—there is a limit on the amount of public money available. In government jargon, “spending power” means Government-funded spending power—I know this gets very exciting, Madam Deputy Speaker—which means core spending power minus council tax. It consists of the settlement funding assessment, the new homes bonus and the rural services delivery grant, and from 2017-18 it will also include the improved better care fund—would that Lord Palmerston were with us now!

The Government’s proposed changes to the revenue support grant, designed to limit reductions in funding for the local authorities most dependent on RSG, such as inner-London boroughs and cities, will have a significant impact on Leicestershire and other similar counties. They will mean a £6 million additional loss of RSG, making a total reduction for the county council of £19 million in RSG for 2016-17. The additional loss to all counties amounts to £160 million. The Government’s proposals also will mean that £2 million of retained business rates will be lost to Leicestershire in 2019-20 as those are redistributed—guess where, oh Conservative Government—to cities and inner-London boroughs. I am not making this up. These changes can fairly be seen as the latest in a series of “compromises”—I say that politely—made by successive Governments.

Let me quickly illustrate how the system is not working now. The RSG does not take account of the needs of the local population. RSG per head in 2016-17 in Leicestershire, which includes the seven or eight district councils or borough councils outside the city of Leicestershire, is £67, whereas the figure for Islington is £246 and the figure for the city of Westminster is £251. Council tax per head at band D in 2015-16 for Leicestershire, including the districts, was £490, whereas the figure for Islington was £416, with the city of Westminster figure at £352. One sees straightaway from those examples the imbalance that the campaign led by my hon. Friend the Member for Beverley and Holderness has been so successfully highlighting.

Spending power—I referred to that complicated compendium a moment ago—is apparently how the Government define income to a local authority. The Government headlines around the provisional settlement and the so-called “good news” are directed towards the position right at the end of this Parliament, in 2019-20, and not to the current year. My colleagues in the county council welcome the principle of a four-year settlement, but not if its certainty increases the savings required and compels further service reductions in the short term, and does not take account of spending pressures at the end of the four years, when a projected 3.5% increase in spending power for Leicestershire will be totally inadequate. That sort of increase would simply not meet the needs of the over-65s, an increasing school-age population and the cost of the living wage. For example, the cash increase in spending power for Leicestershire County Council by 2019-20 equates to £12 million, but that is the context of living wage costs to the council by 2019-20 of £20 million. The 2% adult social care precept equates to £22 million, which compares with the increase in adult social care costs, including the living wage, of £50 million over the same period.

[Dr Daniel Poulter (Central Suffolk and North Ipswich) (Con)]

My right hon. and learned Friend is making some very good points, particularly on adult social care. We are finding that, increasingly, people choose to retire to rural areas, where life expectancy is higher. Adult social care is the part of the upper tier local authority budget that is increasingly suffering from great strain. Does he agree that, when we are looking at local authority budgets and at the demographic needs of rural areas, the increasing pressure on adult social care budgets and the increasing number of people requiring adult social care in rural areas because of that demographic shift to an older population is something that needs to be put into those budgets today? We also need to future-proof those budgets and the projected increases in Government spending in the years ahead.

[Sir Edward Garnier]

I am sure that that illustration applies both to my county of Leicestershire and to my hon. Friend’s county of Suffolk. As a doctor, he will have seen how that matter touches on his constituents directly. Certainly in Leicestershire, 50% of the £350 million revenue budget is spent on adult social care. If my hon. Friend is right, that percentage can only go up as we move through this Parliament and beyond it, so the points that he makes have even greater purchase than perhaps he might have initially thought. It seems, too, that the scope for savings is necessarily restricted. As a result of the provisional settlement, Leicestershire needs to save £28 million in 2016-17, increasing to a total of £83 million by 2019-20 just to ensure that it is living within its means. That is on top of savings that the county has already achieved of £130 million.

I do not pretend to have an instant solution to any of this; I do not suppose that any one of us does, but I urge the Government to think a little more intelligently about how it deals with local government finance and how it distributes what is accepted to be a limited pot of money across the country. Without wishing to be rude to the hon. Member for Inverness, Nairn, Badenoch and Strathspey, I urge Members to forget about Scotland for the moment—it is a difficult thing to do, but we will do it just for this evening—and to call on the Government to work out what is fair. A poor person in Harborough is no better off than a poor person in inner-city Leicester. A poor elderly person in Harborough needs as much financial support as a poor elderly person in the city of Leicester. I appreciate that there will be rough edges and that there is no perfect solution to the problem, but I am reasonably sure that there is a better solution than the provisional settlement that we are looking at now.

Leicestershire is a well-behaved Conservative council—I do not mean that in a pompous way, although I have been accused of many things and pomposity may be one of them. It believes in using taxpayers’ money well and in getting good value for every public penny spent. We are not about to initiate some sort of riot or revolution in Leicestershire County Council. We are just asking for a bit of fairness—not a difficult thing to ask for. Although I do appreciate that that is hard to deliver, I none the less think that the Government should try just a little bit harder.