Local Government Finance

Angela Watkinson Excerpts

Tuesday 10th February 2015 Commons Chamber

[Kris Hopkins]

I hope my right hon. Friend will forgive me; I cannot give him the percentage change, but I can give him some clear figures. For example, business rate retention by local authorities alone is some £11 billion, and as the Prime Minister said this morning, should a Conservative Administration be returned at the forthcoming general election, we would hope to increase that to two thirds.

Through consecutive settlements, we have ensured that these unavoidable changes to local authority funding have been applied in a fair and sustainable way, and through our reforms to local government finance we have established a basis for more self-reliant government—a sector less dependent on grant and increasingly confident about using the tools and incentives we are providing to grow their local economies.

[Dame Angela Watkinson (Hornchurch and Upminster) (Con)]

The low level of private rents in the London borough of Havering has given rise to a surge in demand, particularly for children’s services. The local population is already top heavy with older people and all the demands that come with that. How might the funding formula respond more to individual boroughs with particular difficulties?

[Kris Hopkins]

The key thing about the choices that we have placed before local government is just that—local authorities can determine where money is spent. We appreciate that there is less money to spend as a consequence of the previous Administration’s activities, but it is right that people can make choices, set their priorities and—in this case—choose to look after very vulnerable individuals.

As well as growing their economies, the best authorities are transforming how they do business and demonstrating innovation, including in how they work with local partners. We are supporting them as they do that, helping them to achieve savings and, perhaps most importantly, improving outcomes for people who use local services. As I announced in December, we are developing proposals for a project to identify and disseminate good practice in transforming services, especially in rural areas. This work will involve rural authorities and the Rural Services Network, and is a clear commitment to our rural areas.

--- Later in debate ---

[Hilary Benn]

Indeed. If one looks back at the record of the previous Labour Government, one can see that that is precisely what we did. In fact, we increased investment in those two things as that reflects public priorities. Of course, Government life is about the choices one has to make and one of the choices the Government have not made is to publish the figures that the NAO has asked them to publish. I suspect that Ministers know what the figures are and know that they will damage their argument that this is a settlement that is fair to all, north and south, and therefore do not want to reveal what is happening. We also know that the NAO has criticised the Department and Ministers for not paying close enough attention to what is going on. Again, those are not my words but those of the National Audit Office, which said:

“The Department has a limited understanding of the financial sustainability of local authorities and the extent to which they may be at risk of financial failure.”

That is why the Public Accounts Committee said:

“The Department does not understand the impact over time of reductions in funding to local authorities, and the potential risks of individual authorities becoming financially unsustainable if reductions continue.”

On current trends, the revenue support grant will disappear entirely by 2019-20. When the Minister replies, will he confirm that that is the case? What assessment have the Government made of the impact of that on the viability of local authority services, particularly in the areas most reliant on Government support? Indeed, I ask Members to pause for a moment and contemplate their local authority’s budget without any revenue support grant whatsoever. The Chair of the Public Accounts Committee was very clear when she said recently:

“Further cuts could not just undermine the entire viability of most optional services, but might threaten some statutory services in these areas.”

[Dame Angela Watkinson]

I am sure that the shadow Secretary of State is aware that the 12 inner London boroughs hold more in reserves collectively than the 20 outer London boroughs. Does he think that that indicates that funding is going where the greatest need is or does he agree with me that the balance of funding between inner and outer London needs to be reviewed?

[Hilary Benn]

The size of the reserves held by authorities across the country—they have been criticised by Ministers for doing that—shows the scale of the challenge they face. Councils are doing exactly what families do if they have any money to put by when times are hard, as they do not know what is around the corner or what difficulties they will face. That is my first point. Secondly, a lot of those reserves are earmarked for capital investment, including invest-to-save projects to help deliver savings further down the line. Thirdly, if councils decided today just to spend all of their reserves, that would pay for local government services for about a month and then they would all be gone. Then what should they do? It is no good criticising local councils for having reserves when they are trying to manage their money prudently.

I want to come to the point raised by my hon. Friend the Member for Coventry South (Mr Cunningham) about social care, which is under particular strain because of the growing number of older people. Will the Minister, in replying, tell us what percentage of the better care fund, about which we have heard today, is flowing into local authorities to support social care as opposed to going to the health service? He will be well aware of the pressures faced by local authorities and, as we have just heard and as all hon. Members know, part of the reason for the rising pressure in A and E departments, and for the growing number of elderly people in hospital beds when there is no medical need for them still to be there, is the reductions, in some cases, that have had to be made by local authorities, despite their best endeavours, in entitlement to social care. The Local Government Association estimates that adult social care faces a funding gap of £1.6 billion in 2015-16 and that that is expected to rise to £4.3 billion in 2019-20. Is that a figure that Ministers accept? If so, what do they intend to do about it?

Will the Minister confirm that the new homes bonus takes money away from the most disadvantaged communities and gives it to areas where, in all probability, the new homes would have been built anyway? What does he have to say about the NAO’s conclusion that there is little evidence that the new homes bonus has yet made significant changes to local authorities’ behaviour towards increasing housing supply? Even two of the Ministers on the Front Bench are not wildly keen on it. The Under-Secretary of State for Communities and Local Government, the hon. Member for Bristol West (Stephen Williams), has admitted that he is “not a fan”, and the Under-Secretary of State for Communities and Local Government, the hon. Member for Keighley (Kris Hopkins), was even more frank because he told the House back in November 2013:

“I am afraid the new homes bonus is not about encouraging people to build homes.”—[Official Report, 25 November 2013; Vol. 571, c. 11.]

Given that, why are Ministers so opposed to funding being allocated on a fairer basis, based on need, as we are proposing?

We are lectured frequently about the need to take tough decisions in tough times. If one accepts the argument—those on the Government Benches do not—that the way in which the cuts have been applied is fundamentally unfair to some authorities, one of the things one can do is to redistribute, and the new homes bonus provides an opportunity to do that.