Local Government Funding: North-East

Alex Cunningham Excerpts

Tuesday 1st March 2016 Westminster Hall

[Jenny Chapman]

At least there is some consistency in approach between the Government and their local representatives. This was a straightforward bribe to Tory MPs threatening to vote against the Government’s financial settlement for local authorities and it worked. Members have spoken openly about being persuaded to support the Government’s plans following the receipt of transitional funds. This is the worst kind of pork-barrel politics I have ever seen.

[Alex Cunningham (Stockton North) (Lab)]

The Minister might start to talk about the wonderful devolution deals that we are about to get in the north-east of England. In the Tees valley, we get £15 million a year for 30 years, whereas Aberdeen gets twice that over half that period. That will not save us, will it?

[Jenny Chapman]

No, it will not. I really wish the combined authority well, and I will work hard to support it, because we need to make these things work. However, I am not overly optimistic about the impact of that initiative on the outcomes for the people I represent. I do not know how to put this politely, in the phrase that I am looking for, but it is too little, it is peripheral and it is not widely supported in the community. We are having a mayor for a place that, to most people who live in my constituency or my hon. Friends’ constituencies, does not really exist, so we are not putting all our hope in that particular initiative.

The Government have taken support away from areas that need it most and that are least able to make up the shortfall through business rates or council tax increases—areas, most shockingly of all, whose only crime is to be guilty of voting Labour.

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[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.

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[Mrs Hodgson]

I hope the Minister will explain. Perhaps the special circumstances are that, unlike Durham, Northumberland has two Conservative MPs. The unfairness speaks for itself.

[Alex Cunningham]

I do not know whether my hon. Friend is correct in assuming that it is something to do with Tory MPs. We have a Tory MP in Stockton—the Under-Secretary of State for Communities and Local Government, the hon. Member for Stockton South (James Wharton)—and we got nothing.

[Mrs Hodgson]

That says more about that Minister. His lobbying was obviously not as successful as that of his colleagues in Northumberland.

The Prime Minister is on the record saying, in an interview with Jeremy Paxman before the 2010 election, that the north-east and Northern Ireland are the two areas where his planned public sector cuts would have the greatest impact. True to his word, when he walked into Downing Street in 2010, propped up by the Liberal Democrats, he began implementing some of the deepest and most devastating cuts our region has ever seen. I would hazard that they are even worse than the cuts under Margaret Thatcher, which I never would have thought possible.

Here we are again: councils in some of the poorest parts of the country are having to cut services back to the bare bones. The fat went long ago. In most of our region, especially the coalfield communities, some of which I represent, there was for many years trepidation about what the Conservatives would do if they were ever in power again. It is with no surprise or pleasure that we gather here to point out that the Government have truly lived up to those dire expectations. After six years of belt-tightening, Opposition Members listened with disbelief as the Secretary of State for Communities and Local Government stood at the Dispatch Box last month and announced a local government settlement of £300 million of transitional funding, 85% of which will benefit Tory councils that have not faced anywhere near the funding cuts meted out to Labour councils. Labour councils are expected to tighten further and add a few notches to an already worn-out belt. If that were not already impossible, it certainly is now.

Not a penny of the funding that was announced is directed at the majority of councils in the north-east, where unemployment is the highest in the country at 8.1% and poverty remains a persistent issue. Some of the poorest communities in the country are paying for 36% of the Government’s austerity measures. Social care is a burgeoning issue for many of them, especially given that the people who use social care will bear 13% of the cuts.

Tomorrow, my local council, Sunderland, will pass its budget for the 2016-17 financial year. It must find £46 million of savings this year and a total of £110 million by the end of this Parliament, on top of the £207 million that it had to find during the last Parliament. That means that the council has a total of £290 million to spend by 2020, compared with the £607 million it had in 2010, before the Conservatives came to power in 2010. That is less than 50% of its pre-2010 budget. That is not trimming, belt-tightening or streamlining; it is an attack—a full-scale assault. So much for the rhetoric of a northern powerhouse. Northern poorhouse, more like.

Of the £290 million of spending power that Sunderland has left, £182 million is reserved for statutory adult social care and children’s services. The remaining £108 million will have to pay for all other services, including waste collection and disposal, libraries, museums, housing, business investment, and sport and leisure. Those wide-ranging services need proper investment to be suitable for public access, but with such a small budget for those services, it is obvious that the council will struggle to maintain the high standard that our local communities deserve and expect.

Significant cuts will also have to be found within the needs-based funding elements, including children’s services. An 8% per annum cut is expected in the early intervention budget on top of the 50% cut to early intervention services since 2010. Children’s services and early intervention are such important areas. If funded correctly, they can mitigate greater costs further down the line by preventing children from becoming adults with multiple issues. The Government’s policy is so short-sighted.

No doubt the Minister will talk about devolving the collection of local business rates. Labour supports that policy in principle, but in practice it will further ingrain unfairness into an already unfair system. He may also talk about the 2% increase in council tax to fund social care as a means for councils to bring in additional funding. For low-tax councils such as Sunderland, such measures will not bring in the funding they require to continue to provide the local services that we rely on. It is estimated that the 2% for social care will bring in only £1.5 million for Sunderland, but our local social care demands are approximately £3 million. Where does the Minister think the additional funding should be found? This is one of the greatest public policy crises that we face in this country. For Sunderland, the prognosis remains bleak for the near future. There is no respite or support on the horizon from the Government.