Funding for Local Authorities

Debate between Brandon Lewis and Stephen Phillips

Thursday 10th October 2013 Commons Chamber

[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.