Funding for Local Authorities

Brandon Lewis Excerpts

Thursday 10th October 2013 Commons Chamber

[The Parliamentary Under-Secretary of State for Communities and Local Government (Brandon Lewis)]

First, I join the Chairman of the Select Committee in congratulating the hon. Member for Corby (Andy Sawford) on his new role. I look forward to working with him and debating with him across the Chamber. I welcome the hon. Member for West Ham (Lyn Brown) to her new role as well.

I was somewhat surprised and a little disappointed that in the speech that the hon. Member for Corby has just made in his new role, he did not get round to outlining where the £52 billion of cuts that his party would make were likely to fall. If I understood him correctly, he said that the funding formula was unfair. I wonder whether he will at some stage explain to the House why, in 13 years, his party did nothing about that and, indeed, made it worse. In his comments about how councils are currently funded and how the spending patterns worked, he did not note the fact that his own council, Corby, despite having the highest spending power per head in Northamptonshire, had an increase of about 4.4% this year, so proving that the formula is fair wherever one is.

I shall try to restrict my comments—

[Grahame M. Morris]

rose—

[Brandon Lewis]

Let me make a start before I take interventions, depending on time. I shall try to restrict my comments to the topic on which the majority of Members have spoken today, which is rural funding, although I note and will comment to some extent on comments from Members across the Floor on local government funding generally. We also moved into NHS funding and Department for Education funding, but I will not take up Members’ time by going too far into that.

I congratulate my hon. Friend the Member for Tiverton and Honiton (Neil Parish) and thank him for bringing this important debate to the House, giving everybody a chance to comment and giving me the opportunity to listen. I have met him and the team from the rural sparsity group on a number of occasions and will be happy to do so again. No doubt we will meet again over the next few months as we get towards the funding settlement. I note that he would like an extra £30 million. I also note the realism in his comment about the chances of the Government finding another £30 million when we are still trying to clear up the debt, the deficit and the mess left by the previous Government.

[Grahame M. Morris]

rose—

[Brandon Lewis]

I will take an intervention in a little while, if I have time.

We heard a number of interventions during the speech by my hon. Friend the Member for Tiverton and Honiton. My hon. Friend the Member for High Peak (Andrew Bingham) mentioned what small councils could do. It is worth stressing—I am happy to put this on the record again—that there are small district councils across the country, and not just in rural areas, running budgets of roughly £10 million or even less. They must look at their situations very closely and consider whether their current format, with their own chief executives, management and silo services, is sustainable. They should consider partnering with other authorities, as around 40 authorities do already, and having shared chief executives and management.

The partnerships between High Peak borough council and Staffordshire Moorlands district council is a fantastic example. My hon. Friend the Member for Bury St Edmunds (Mr Ruffley) talked about Mid-Suffolk district council, and I must say that Suffolk, as a county generally, offers a really good exemplar of the work that can be done. Suffolk Coastal and Waveney district councils are coming together with a shared chief executive. Babergh and Mid-Suffolk district councils and St Edmundsbury borough council and Forest Heath district council are all showing how to come together to make real savings.

The chief executive of a council deal such as Staffordshire Moorlands and High Peak would explain that those kinds of savings can amount to 18% or 20%. When they are running a budget of around £10 million, that is a substantial saving. I argue that small local authorities should be doing that not only because of financial pressure, but because the money could be spent on front-line services, rather than on administration and management.

Several Members mentioned school bus services. I agree that councils should be working very hard to protect front-line services that are important to rural and urban communities. In my constituency of Great Yarmouth, the Labour-led county council has looked at cutting rural bus services, which would mean children having to walk up to 3 miles to get to school, and on major roads with no pathways. That is absolutely unacceptable. It should be looking at the plans that were in place under the previous Conservative administration in order to find the savings it needs and bring in the revenue it needs without slashing those important services. Councils should look at that carefully.

The hon. Member for Penistone and Stocksbridge (Angela Smith) carefully outlined the situation with regard to funding, but we must remember that in the past year councils increased their reserves to £19 billion, the highest level on record. It is important that we also look at options. This Government are not just talking about that; with community budgets we are delivering a transformation in the way services are provided across the public sector, which independent reports show could save this country around £20 billion. Across the country there are community budget pilots, of all political colours, doing some phenomenal work, and that has now been rolled out to a further nine areas.

My hon. Friend the Member for Newton Abbot (Anne Marie Morris) touched on some of the issues relating to education, transport and buses, which I have already outlined. The Chair of the Communities and Local Government Select Committee, the hon. Member for Sheffield South East (Mr Betts), raised some issues about funding and mentioned the 56 councils. I have touched on some of the things that they could be looking at. I am not entirely surprised, although I am still disappointed, that he seems to be making the case for more taxes on people who I think want the cost of living to go down. That is why it is important that we freeze council tax and do not encourage more taxes locally.

[Mr Betts]

The Minister just mentioned reserves. Does he not understand that it is not an issue of rural or urban, or Conservative or Labour? It is about councils looking at the black hole that is coming, as the forecasts show, and which the Chancellor has identified in the spending review, and making prudent decisions on how to spread the money available over a number of years in order to try to do their best to protect services. If Ministers just keep rubbishing that as councils holding on to reserves for their own sake, they do a disservice to hard-pressed local authorities.

[Brandon Lewis]

I am afraid that I entirely disagree. Having led a local council that, before my time, had seen council tax increases of 18% and 16%—they were regularly in the double figures—and in a country where council tax doubled under the Labour Government, I believe that hard-working people think that council tax should be kept low and that councils should be looking at how they spend their money, not just building up reserves and then pleading poverty. If they believe that they are short of money, they should use the reserves they have to invest for income in the future and make savings, as many good authorities are doing.

The hon. Member for Mid Dorset and North Poole (Annette Brooke), in a very strong speech, touched on the new homes bonus, as did a number of Members. It is an issue that we are looking at. There is a consultation at the moment and the Government will of course respond to it. The hon. Member for Easington (Grahame M. Morris) referred to fire authorities, but he should bear in mind that the response to the Knight review is coming. Fire authorities were protected in order to make some of the efficiencies that they should have been making but in too many cases were not.

My hon. Friend the Member for Penrith and The Border (Rory Stewart) outlined in his strong contribution—other Members also commented on this—how he thought the funding gap should be reduced. I say to my hon. Friend that the gap between rural and urban with regard to spending per head has reduced by 4%.

That leads me to an important point raised by my hon. Friend the Member for Beverley and Holderness (Mr Stuart) in his passionate speech. I thought I was doing well with his flattery and compliments, for which I am grateful. He was clearly being sincere until he mentioned the word “svelte”; I knew then that my ego was not being brushed in the way I hoped. My hon. Friend made a clear point about the analysis. While he was away after suffering an unfortunate injury, I met SPARSE and I would be happy to go through this again. We managed to clarify the difference between how it and the Government have calculated the figures. A rural area is different for the Government, because an area such as my county of Norfolk, which would usually be classed as rural, has within it urban areas such as Norwich, Great Yarmouth and King’s Lynn, and that gives us a slightly different calculation. I would be happy to go through the figures with my hon. Friend when we get to them in a few months’ time.

[Rory Stewart]

Will the Minister please consider the broader context? The county of Cumbria is losing £63 million from its health budget and another £1 million from its fire budget. These things cannot be seen in silos. They have to be put together.

[Brandon Lewis]

My hon. Friend makes a reasonable point. I will touch on how these things come together and the work we are doing to deal with that.

The hon. Member for North Devon (Sir Nick Harvey) made a passionate and strong speech about sparsity and disparity and how they need to be dealt with. My hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski) made a powerful point about the chief executive of the Local Government Association, who is clearly disposed towards higher council tax charges for residents, which I think all of us—those of us on the Conservative Benches, at least—want to move away from while we keep frozen and low council tax. In some areas, good Conservative councils are even cutting council tax for their hard-working residents. I noted my hon. Friend’s comment about asset sales. I will look at that, and if he will bear with me I will get back to him on that specific issue.

My hon. Friend was absolutely right to mention incentives to pool and work together. We have put incentives in place and I will touch on them in a moment. Councils such as High Peak, Staffordshire Moorlands, Breckland and South Holland have just this week benefitted from those incentives and the money we announced.

My hon. Friend the Member for Beverley and Holderness continues to make a strong case on this issue. He has pushed it with other Members and comes to see me regularly. I have no doubt that our conversations will continue as we approach the financial settlement period over the next few months.

My hon. Friend the Member for Worcester (Mr Walker) and my hon. and learned Friend the Member for Sleaford and North Hykeham (Stephen Phillips) highlighted the cost for rural areas, particularly with regard to transport. Members representing urban areas often mention issues to do with density and poverty and how they balance out. That issue has yet to be proven with regard to cost differences and we will continue to look at it.

I gently say to the hon. Member for Cambridge (Dr Huppert) that, if Cambridgeshire is so short of funding, he might want to ask how it could afford a huge pay-off and the rather interesting system it has used to reappoint the chief fire office of its fire authority. That happened in the past few weeks and it has raised a number of questions.

[Mr Graham Stuart]

Will the Minister touch specifically on the magic dust of 2012—the damping—and the fact that, instead of a being a transition mechanism, it turns out to be a deep freeze of an inequity?

[Brandon Lewis]

I am about to turn to some more general points and I will touch on the damping issue.

I want to be clear that behind all our thinking is that it is vital for councils to continue to play their part in tackling the budget deficit we inherited from the previous Government, making sensible savings and delivering value for money for the taxpayer, as many good councils are doing. We are providing direct financial incentives for councils to promote growth and jobs in their area. This year’s local government finance settlement set out how authorities can now directly retain £11 billion-worth of business rates and keep the growth from them instead of returning them to the Treasury.

More importantly, and perhaps more relevantly to this debate and the points made by hon. Members from all parties, in the current settlement we accepted, based on the available evidence, that rural areas are comparatively underfunded. We have therefore ensured that there is proper recognition of the additional costs of delivering services in rural areas. We adjusted the relative needs formula to reflect those costs. That was one of only three formula changes in the settlement.

Members have noted the changes, but I will reiterate them. We have increased the weight of super-sparse areas in the formula; doubled the sparsity weight for older people’s social care and district-level environmental protection and cultural services; reinstated the sparsity adjustment for the county level; and introduced a sparsity adjustment for fire and rescue. As a result, funding per head has been reduced by less in predominantly rural authorities than in predominantly urban authorities within all classes. There was a 4% reduction in the gap between 2012-13 and 2013-14. I know that some Members have an issue with how that is classified and I am happy to meet them to go through that when the figures for next year are confirmed.

We listened to the representations of rural authorities on the provisional settlement in the debate earlier this year. That is why we provided a further £8.5 million grant to help rural authorities with sparse populations.

[Stephen Phillips]

North Kesteven district council received £38,000, whereas if the sparsity factors had been properly taken into account and not been damped, it would have received several hundred thousand pounds. I say to the Minister that £38,000 does not butter many parsnips.

[Brandon Lewis]

I do not know where my hon. and learned Friend buys his butter and parsnips, but I understand his point. The Government obviously have to ensure that there is not too much volatility in the system, but the comments on damping have been noted and I will return to them in a moment.

Hon. Members have spoken about incentives. Yesterday, I announced the successful bids to the transformation challenge award. Eighteen local authorities will share £7 million to look at ways of bringing their services and management together and working in innovative ways. We are showing clearly that councils will get what they make, rather than having to take from a begging bowl. We will reward councils that deliver. The new homes bonus and the business rates incentive scheme are part of that. Through the new homes bonus, about 40 councils saw an increase in their spending power this year. I note that one of those councils was Corby borough council, in the shadow Minister’s constituency. There are councils that need to be more efficient still. Some small councils need to do more to share their management and services. We are doing what we can to incentivise and support that.

We issued the “50 ways to save” document. I encourage councils to look at that to find more ways to save and to ensure that they are being efficient in the back office and in their services, and that they are using transparency to cut waste. The best councils are protecting the front line, including weekly bin collections, library services and meals on wheels, while getting rid of waste and inefficiency.

We are aware of the pressures that are coming. We therefore have a £3.8 billion pool of funding for integrated health and social care, a new transforming services fund, a programme that will review the pressures on children’s services, and new flexibility to use capital receipts from asset sales to fund one-off revenue costs for reforming services.

I have heard the clear and passionate comments that have been made today. We will consider them over the next few months as we approach the spending review.