Local Government Funding: Isle of Wight

Bob Seely Excerpts

Tuesday 16th January 2018 Westminster Hall

[Mr Bob Seely (Isle of Wight) (Con)]

I beg to move,

That this House has considered local government funding on the Isle of Wight.

It is a pleasure to serve under your chairmanship, Ms Dorries. I am most grateful to the Minister for attending, and I extend to him an invitation to visit my wonderful constituency. I want to raise the issue of the Isle of Wight’s local government funding, to explain why that system is prejudiced against the Island—why it is not fair—and why recognising that disadvantage and rectifying it would in no way set a precedent. Indeed, I hope that the Minister will see it as the right thing to do.

In this debate, I will focus on local government finance for the Island and I hope to call debates in future to examine the Island factor for health, housing and other policies. Overall, I want to work towards an Island deal that includes a settlement over local government funding but, more broadly, a partnership with central Government across Departments that recognises the unique and valuable role that the Isle of Wight plays in our national life. It is not only about money—although that comes in slightly—but about helping us to make the Island even more of a success.

We are an island. I know that is a statement of the obvious, but I say that because I feel that sometimes Whitehall assumes that we are not really an island in the true sense of the word—surrounded by water. We are an island; we are surrounded by water and we are dependent on the ferries to get us to and from the mainland, which is the bit that the Minister lives on, otherwise known as north island. We have a unique place in the nation’s artistic, cultural, scientific and political heritage. Our geology is unique, too: we have some 70 miles of coastline, parts of which contain the richest dinosaur finds in Europe. Half the Isle of Wight is an area of outstanding natural beauty and, arguably, we should be England’s next national park. We are the largest constituency in Britain, with some 140,000 souls. Ours is a little island, but one that has inspired great things and achievements. I would not wish to be anywhere else.

From a Government perspective, we aim to be national leaders in recycling, in the integrated public services model and in combining health and social care, to name but three areas. However, there is a problem with local government funding. Put simply, the Island’s status as an island is not taken into account. In the 1990s, the John Major Government promised the Isle of Wight a study of the extra cost of being an island. Nothing ever came of that proposal, yet the costs remain. Will the Minister consider honouring that pledge? In the meantime, or instead, I am presenting another option to the Minister.

In a 2015 study by the University of Portsmouth, the extra cost of providing local government services on the Isle of Wight—the island factor—was estimated at £6.4 million per annum based on 2015-16 data, which is an additional 3% on the public service provision. That information is on page 2 of phase 2 of the report, “Impact on Physical Separation from the UK Mainland on Isle of Wight Public Service Delivery”. I have circulated copies to the Minister and to his excellent team of civil servants, whom I also thank for being here. That report has been peer reviewed and is undergoing further review.

The University of Portsmouth broke down those extra costs into three. The first is forced self-sufficiency—the lack of spillover of public goods provision to and from neighbouring authorities. We have an obligation to provide a service on the Island, but sometimes we cannot share costs with the mainland. The fire service is an example of that. The second extra cost is the island premium, which refers to the additional cost of conducting business on and with the Isle of Wight. For the provision of public services, that may refer to the relatively higher prices that may be charged by contractors or reflected in the price of goods and services. We try to be as competitive as possible but, clearly, within a confined space there are limits. The third extra cost is what the university has described as “dislocation”—the costs associated with physical and perceived separation from the mainland. Sometimes referred to as “isolation”, it is a common characteristic of all islands, and it is seen in terms of small area, small population and small market.

Other reports have said much the same. They include the report by Coopers & Lybrand in 1996, the Joint Strategic Needs Assessment in 2000, the report by PricewaterhouseCoopers in 2004, the report entitled “The effects of being an island” by the Isle of Wight Council in 2005, the report by the European Spatial Planning Observation Network in 2013 and the University of Portsmouth report in 2015.

Does the Minister agree that we are potentially dealing with decades of historical underfunding? Does he agree that the review by the University of Portsmouth is academically rigid and backed by a wealth of primary and secondary material?

Moving back a little further, I believe that the Island is a victim of the funding system. I will outline briefly the reasons why. First, we are victims of prejudice in public project funding. The Green Book assessments—the way the Government rate public sector investment—does not work for the Island because we are physically separate. That separation results in a lower cost-benefit ratio. We do not have spillover: I cannot prove that a project that would do great things for Sandown, Newport or Freshwater has an effect in Fareham, Southampton or Portsmouth, because we are an island. We cannot make the same arguments as everywhere else in Britain that is connected physically to the mainland or is part of the mainland. We simply do not have that connection. What does the Minister suggest that we and the Government can do about that?

Secondly, we are isolated, but because we are isolated by water we fail to qualify for the rural services delivery grant, because that grant’s funding basis does not recognise the isolation of being an island and does not take into account physical separation in its definition of isolation. Can the Minister suggest a reason why that may be the case, and what does he think Government could do about that?

Thirdly, the ferries were privatised with no public service obligation. That is a significant and pretty unique error. There appears to be no desire to rectify that situation, yet elsewhere, public money tends to get thrown at locations with isolation issues. On the Isle of Wight, we spend more than £100 million a year on the ferries. What does the Minister think of this situation? Does he think that it is acceptable?

Fourthly, health model funding calculations for over 80-year-olds arguably are seen as inadequate, because of the complex health and adult social care needs of people when they hit 80 and get into their ninth and 10th decades. The Island has more 80-plus residents than the national average, and that has a significant impact on our adult social care costs.

Fifthly, recent NHS reports have simply ignored the island factor, as if the Solent somehow did not exist. Those are just some factors that I bring to the Minister’s attention. Please, do not get me wrong, Ms Dorries: we love being an island, having that wonderful identity and a different festival every weekend, and being a fantastic place that people come to, with our wonderful quality of life. This is not some special pleading, but when Government write the rules they do not seem to take the Island into account.

I am presuming that Government funding formulas are based on the idea of broad fairness. If the Minister says that, actually, they are based on the idea of broad unfairness, I will go away, but I assume he will say that the Government try to be fair. If that is the case, can he please not be permanently prejudiced against my Island, and will he recognise that the Island has issues in public service provision by dint of being an island? As we know, Scottish islands receive extra money from the Scottish islands needs allowance based on a number of factors. Welsh islands seem to have bridges galore. We have none of that. We have only the world’s most expensive unregulated ferries. I asked one of the ferry owners whether there was a more expensive ferry anywhere in the world. He said, “Try the chain link between Cowes and East Cowes.” I thought, “That’s not a great answer.” The Government recognise that islands play a special role in Britain. We would like the same recognition for the Isle of Wight—England’s island.

The fair funding formula is due to be implemented in 2021. A previous Secretary of State said that

“the costs associated with being an Island separated from the mainland will be given due consideration…as part of the fair funding review.”

The word “island” appears in the fair funding review technical consultation, along with the question, “Should island status be taken into account?” When I read that, I thought, “Hallelujah.” Clearly, we believe that the answer should be a resounding yes. Will the Minister indicate whether he thinks there is a case for island status being taken into account in the fair funding formula?

We generally have been given two answers at this point: first, “Devolution is the answer to all your problems,” and secondly, “You’re setting a precedent, so we’re not interested.” Devolution is not the answer, for the following reasons. First, there was extraordinarily little information on the Solent devolution package. Secondly, it was clear that that was simply a device to force more housing on the Island. Housing is a problem on the Island. The Government’s housing targets are completely unacceptable, and the current system on the Island serves no one. By building on greenfield sites, we provide housing neither for our youngsters nor for the people on the housing list who need it, and we damage our economy, which is in part dependent on tourism. That is not a conversation for now, but I would like to return to it in due course. Thirdly, the Solent devolution deal that was offered was a Treasury construct. The Treasury is full of wise and sensible people who have difficult jobs—I respect that—but what looks good in London may not work on the Island. Fourthly, to put it bluntly, there was nothing in the deal for the Isle of Wight.

The key power we want to be devolved is the power to impose a public service obligation on the ferries. The ferries would pay for that—its cost would be covered by their inflated profits—and there would be no reduction in services elsewhere. For the Minister’s information, because he may not be aware of their history, those are the ferries that were privatised badly in the 1980s without a public service obligation and are among the most expensive in the world. Their profits are multiples of the public infrastructure industry standard, and hundreds of millions of pounds of debt have been racked up, which Islanders pay for. Will he support giving us such PSO powers, which may mean having to cap the ferries’ profits and debts? I am genuinely interested in his opinion.

The second answer is that the Government cannot possibly give us an island factor because it would set a precedent. I do not understand that. Are the Government implying that Cornwall is going to dig a ditch a mile wide, fill it with water and declare itself an island? Is Northamptonshire somehow going to up sticks and move? Is Lindisfarne going to go on some three-dimensional steroid programme? I think not. Recognition that there is an island factor for the Isle of Wight would not set a precedent, unless that precedent was the Government accepting that we are a little bit different—a little bit special and unique—and working with us so that the Island became the jewel of southern England, as it was and we hope it will be. Listening to us and working with us on a new deal—an island deal—would set a wonderful precedent.

I thank the Minister for being here. I remind him that the amount of money we seek—£6.4 million—is small. It is a tiny part of Government expenditure. It is a margin of error in the Government accounting system. Whitehall probably spends more on paperclips every month. I also remind him that a previous Government made promises about Isle of Wight funding that were not kept, so will he support a study to honour those promises? In the meantime, does he agree that there are additional costs to being an island, which the University of Portsmouth has quantified and which I have quoted, and that those costs are unique to islands? Will he respect, accept and act on, this year and in the future, the costs outlined in the University of Portsmouth report?

Does the Minister also agree that devolution is not in itself an answer, and that no conceivable precedent would be set by honouring a fair funding formula that recognised the Island as just that—an island? Will he assure us that our submission for extra funding will be looked at seriously this year? If there is any doubt about that, may we have the promised meeting, which has not yet materialised, before the settlement for this year is finalised? Will he commit to including an island factor in the fair funding review, and to accepting and implementing that funding formula in full?

I thank the Minister once again for his time, and again extend an invitation from the people of the Isle of Wight to come and visit us. Like our 2 million annual visitors, he will have a wonderful time.

--- Later in debate ---

[Mr Seely]

I thank my hon. Friend for his words. Just a point of fact: Jack was a great-great uncle and was elected as a Conservative despite the fact that he was a Liberal. It is a long story.

I thank my hon. Friend for recognising our distinct nature, for his words on the Scottish islands needs allowance and for his comments on the fair funding formula, which is so important to us. We will submit much evidence. Finally, although public services debates can sometimes seem arcane, it is important to remember their purpose—to build a fair and just society—for which we all aim.

Question put and agreed to.