Local Government Finances

Baroness Scott of Needham Market Excerpts

Thursday 21st March 2024 Lords Chamber

[Baroness Scott of Needham Market (LD)]

My Lords, I thank the noble Lord, Lord Shipley, for securing today’s debate, and for the characteristically incisive way he introduced it. My noble friend Lady Hamwee need not be diffident about painting with a broad brush, because her broad brush, in the hands of someone with many years of experience, painted a picture of the threat to local democracy that our current system is posing. In many ways, that is probably the most important point that can come out of today’s debate.

I share my noble friend’s commitment to local communities. That is why, when the National Association of Local Councils asked if I would become its president, I was very happy to take on that role, because that town and parish council sector, which covers 91% of the country, is the first layer of local government and the one that faces these challenges on a very personal and day-to-day basis.

I want to make sure that that sector is not lost in today’s debate. It is interesting that, in the otherwise excellent House of Lords Library briefing, this sector does not get a mention. There are around 100,000 councillors who are volunteering their time in this sector, putting in, we estimate, 14.5 million hours a year—I sometimes felt that I worked that myself. They are working so hard to change and improve their local area. Unlike other tiers of local government, they do not have many statutory duties but they do have an array of discretionary powers, which they are using to deliver services in their area. Sometimes it is interesting to see these quite archaic powers, designed in a different age, being used to address very modern problems, such as loneliness, the climate emergency and the cost of living crisis. They are doing that on top of the more conventional activities, such as dealing with allotments, bus shelters, Christmas lights, open spaces and public toilets.

In that sector, the parish precept is usually the main and only dedicated source of income. In 2023, the total parish precept came to £708 million, which is 1.8 % of the total council tax requirement for England, with an average band D rate of £78. Unlike principal councils, local councils do not receive revenue support grant or a share of business rates, and they do not generally have access to central government funding. It remains a very strong feeling in the sector that parish and town councils should be able to apply for central government funding schemes on the same basis as principal authorities.

During the passage of the Levelling-up and Regeneration Bill, I put forward an amendment to address the situation where government said it did not have the powers, but disappointingly the Government did not agree. On a positive note, and I thank the Minister for this, the Government have extended the community ownership fund to allow applications from parish councils. In the short period of time since then, around £4.5 million has been allocated for community assets, such as a market, community centres, a library, parks, a skate park and a nature reserve.

I move on to trends in spending power and the impact of reductions. It is striking how investment by town and parish councils in their local area has changed over the past few years. In 2010-11, the total precept was 1.4% of the total council tax requirement for England, and, as I have said, this year it is 1.8%. In some cases, that is because the sector is doing more, getting involved in more things and being more active, and that should be welcomed and applauded. However, it is also because many parish and town councils have stepped up to take over services from principal councils, particularly those discretionary areas where principal councils feel they have no choice but to withdraw. It is alarming to hear warnings from bodies such as the LGA that government funding will lead to a £4 billion gap over the next two years. When coupled with the number of principal authorities issuing Section 114 notices, this will place even more pressure on parish and town councils, especially town councils, because otherwise they will completely lose those important discretionary services such as libraries and leisure centres, and support for community organisations, culture and the arts.

You can argue that it does not matter which bit of local government is paying for something. I would argue that it does matter, because facilities such as libraries, for example, are often used by a significant rural hinterland, and there is a danger that the local town council will end up footing most of the bill, whereas, at the moment, it is spread more widely, right across the local authority precept. It is simply not going to be sustainable for parish and town councils to keep on increasing their precept to provide much-needed investment in their area just to stand still and take up the slack that has been left by principal tiers of local government which have no choice. I think the sector would argue that we should have access to dedicated funding for some of those services, such as improving high streets, parks and leisure centres—the quality-of-life services that matter so much.

Despite increasing pressures on their budgets, town and parish councils have taken all available steps to demonstrate financial prudence when setting the precept. I think that has been recognised by the Government, who continue to defer setting referendum principles for that tier, which is welcome. However, I argue that no local authorities should be forced to hold referenda. We should not be having levels of intervention by the Government at this point. I very much agree with the noble Lord, Lord Shipley, and the noble Baroness, Lady Eaton, that finance settlements should cover multiple years. Local government has always been told that it should behave more like business; no business would operate on a one-year basis.

I conclude with two specific asks for the Government. The first is technical but important, and is for one specific reform to the audit regime. The limited assurance regime for smaller councils works very well, but there is a £25,000 threshold at which they enter the rather more costly and onerous category 1, and there is currently a backlog for that. If the Government would consider raising that level and introducing a matching transparency regime, it would relieve some councils of a huge burden. The second is more fundamental: that parish and town council should have the diverse range of funding opportunities they need to fund growing services, take local action on national priorities and help pick up where principal authorities are having to leave. This includes direct access to government funding, multiyear freedom to set their precept, no referenda, a share of business rates and the exemption of cultural assets.