Council Tax and Revenue Support Grant

Chris Loder Excerpts

Tuesday 31st January 2023 Westminster Hall

[Chris Loder (West Dorset) (Con)]

I beg to move,

That this House has considered council tax and the distribution of the revenue support grant.

It is a pleasure to serve under your chairmanship today, Sir Mark. I thank other Members, and indeed the Minister and my hon. Friend the Member for Loughborough (Jane Hunt), for attending.

People who live in Dorset currently pay over two and a half times more council tax on an average band D property than people who live in London. People of school age living in Dorset, or their parents, will need to pay for their ravel to school or college; meanwhile, in London and other urban areas, that travel is paid for. A third of our community in Dorset is over 65, compared with around 10% of the community in London. In Dorset, 85% of services are provided diligently by the council, and will be funded through council tax, compared with a national average of 50%. Why, then, given the rurality of West Dorset, the demographics of its residents and the challenges we face, do we receive a fraction of the Government support that urban boroughs receive?

The Government have a powerful lever of influence on local government finance and its impact on the tax burden of local residents, and that lever is the revenue support grant, which allows the Government to choose and target which areas of the country to help most. Year after year, the residents of rural West Dorset are continually frustrated that preference is given to urban areas, such as those in the capital, over places such as my constituency. The formula for the revenue support grant is in need of a great deal of scrutiny and reform as part of a wide-scale review of local authority funding.

In West Dorset, we are custodians of picturesque rolling green hills, with livestock grazing and productive arable land, and magnificent landmarks and heritage sites, such as the Cerne Abbas giant and the Jurassic coastline. Yet the people of West Dorset and the wider county face one of the highest rates of council tax in the country. My constituents and those living in neighbouring rural Dorset constituencies pay £2,225 for an average band D property, compared with just £866 in the London Borough of Wandsworth—an enormous difference of £1,359. In short, that means that West Dorset’s council tax is 150% more than Wandsworth’s.

Through diligent financial management, Dorset Council has continued to cut its costs, but many still face high council tax bills. A key reason for that is that the local government funding formula requires urgent reform. In 2019-20, local authorities on average received 50% of their revenue through council tax, alongside 23% from Government grants and 27% from retained business rates. Dorset Council is forced to derive 84% of its revenue from council tax, which itself has increased 12% since 2010-11 and, in 2022-23, totals almost £300 million. In contrast, Wandsworth Borough Council needs only to raise around £70 million in council tax. In previous years, we in Dorset have received zero revenue support grant, compared with a £24 million revenue support grant last year for Wandsworth. We have to ask: is that really fair? [Interruption.]

--- Later in debate ---

[Sir Mark Hendrick (in the Chair)]

Order. The debate now resumes and can continue until five minutes to 6. Mr Loder, would you like to continue?

[Chris Loder]

I would like to remind Members present that, just before the Division, I was talking about the fairness of the specifics of the Dorset Council revenue support grant. For the past three years, Dorset has received exactly zero revenue support grant. This is the first year since my election that we have received any form of revenue support grant. At a slim £654,000, that equates to roughly 0.2% of total council income. Although welcomed, that has come only after others and I spent a long time banging the drum for the situation to change. I am afraid that it is still overshadowed by the £24 million that, for example, Wandsworth Borough Council and other boroughs receive.

[Jim Shannon (Strangford) (DUP)]

I thank the hon. Gentleman for being such an assiduous MP for his constituency, which he clearly is. He is outlining the pressure caused by the rising cost of living. Councils are finding it increasingly difficult to balance their books, and I believe that Government must consider increasing the grants to ensure that the basic service-level provision is in place—that basic services are maintained, and that the parity of grant that the hon. Gentleman has referred to applies across the whole of the United Kingdom. There is deep privation in the hon. Gentleman’s area: the same is true in other parts of the country.

[Chris Loder]

I agree that deprivation affects all parts of the United Kingdom—not just urban areas, but rural areas as well, and indeed all four nations of the UK.

Despite Dorset benefiting from £654,000 from the revenue support grant, local councillors have made me aware that while we have finally received a positive revenue support grant contribution, other Government grants have been reduced by a broadly similar amount, meaning that the council is little better off in real terms. It is therefore clear that the way in which local government finances and the revenue support grant are calculated and delivered is in need of urgent review. Unlike others, I am not looking for favour or preference for Dorset, or indeed West Dorset, but I am looking for fairness.

The average age in rural Dorset is much higher than almost anywhere else in the UK, with one third of the community aged over 65, compared with an average of 19% in England and just 10% in some London boroughs. That, alongside rising special educational needs and disabilities among young children, means that 69% of Dorset Council’s revenue is spent on social care. Since 2010-11, there has been a 25% rise in the number of those aged between 65 and 84 in Dorset, and a 20% increase in those aged over 85—with, of course, the associated social care needs. Those changing demographics have caused the council’s spending to change dramatically, with net spending on adult social care in Dorset increasing by 15% to £139 million, and children’s social care spending increasing by almost 25% between 2010-11 and 2019-20, reaching over £60 million. However, the fundamental funding structure has still not changed.

Care of adults and children is an obvious council priority, and with internal migration having increased the average age in Dorset, that service has taken up more and more of the council’s budget in recent years. That has resulted in cuts elsewhere: planning, development, culture, environment and regulatory services, and highways and transport have all seen reductions in net spending over the same period to facilitate the priority of adult and child social care. Highways and transport spending has been reduced by more than half over the past 10 years —a fact that is only too evident, as Dorset is also home to the worst frequency rail line in the country, between Yeovil, the county town of Dorchester and Weymouth. At best, there is a train every three hours, if you are lucky.

Buses have also been impacted, with Dorset Council having to spend its already tightening pool of transport resources on taking over vital community service routes from commercial operators that have pulled out. While concessionary bus passes appear good, they result in operators receiving 92p from a £6.50 single fare. That makes many routes commercially unviable and, paradoxically, reduces bus services in rural Dorset, which cuts off elderly communities from essential health and community services—the very groups of people who are meant to benefit from those concessionary passes. The young in West Dorset are also impacted by the inequalities in funding for transport. While I recognise that transport provision is often the responsibility of the Department for Transport, I am bringing up this issue today because of the situation we are in with the allocation of local government funding. Children throughout London enjoy the perks of free bus and tram travel to go to school or see their friends, but the parents of children in West Dorset are faced with financial obstacles. Some school bus passes cost over £600—and that is just for their child’s daily travel to and from their place of learning at sixth form or college.

A 17-year-old living in Dorset will have to find a way to pay to get to their sixth form college or apprenticeship. A 17-year-old living in a London borough will not, thanks to the 16-18 bus pass, which is included in the funding for London. It is also worth noting that per passenger journey in London, TfL receives 10 times the amount of public funding than we do in Dorset. This refusal to give Dorset its fair share, according to its population and characteristics, is pushing the elderly into increasing isolation. That is an increasing concern for me as their MP.

It also places obstacles in the way of our bright, young minds, all while residents and small businesses continue to buckle under the ever-high rates of council tax. It is time that Dorset received its fair share of Government investment and funding and that my hon. Friend the Minister and his colleagues show that the south-west is just as important to the levelling-up agenda as the north-east or indeed other parts of the United Kingdom. The need for funding is especially pronounced following the impacts of the covid-19 pandemic, during which, I am afraid to say, we lost some 20% of our businesses.

A very topical subject being debated around the country is funding for emergency services. Here, too, we see the detrimental impact that the Government’s failure to treat Dorset fairly is still having. My constituency and those surrounding it continue to face the difficult blight of county lines drugs gangs. Dorset Police’s resources are pushed to breaking point during the summer months, especially when the county’s population trebles with holidaymakers and day trippers. Dorset is the sixth-most popular region in the country for visitor trips during the summer, but these can sometimes stretch police resources. I understand that the Minister cannot answer for the Home Office, but I would like him to note this difficulty that we face.

I recognise that these policing matters sit with the Home Office, but I wonder whether my hon. Friend would consider the points I raised at the beginning of the debate. I will refresh everyone’s memory on what those are. Why is levelling up not focused on rural areas in the same way as urban areas? Why does rural hardship not seem to matter in the same way that urban poverty does? Why does Dorset Council have to raise 85% of its funds through council tax, when the national average is 50% and even less in some urban locations? Why is it deemed acceptable to put financial obstacles in the way of access to rural education but to remove them for urban education?

Why does Transport for London get £1.7 billion of Government money when needed, yet Dorset Council gets hardly anything? Why, despite known patterns of domestic migration, is the cost burden of rural social care placed on the local community, whereas other communities can get help? Why does Dorset receive such low levels of the revenue support grant, whereas in inner London there are boroughs that charge very low rates of council tax comparatively and are furnished with tens of millions of pounds in Government grants?

In short, it is my intention with this debate for the House to consider two central points. The first is that rural Britain, and specifically rural Dorset and my constituency of West Dorset, should finally receive its fair share of Government local authority support. For too long, Dorset has been overlooked in the allocation of RSG payments, and for too long council tax has had to cover the deficit. It is time that services in Dorset had adequate funding, so that they can continue to support rural and coastal communities in the way they need to. Finally, as I continue to champion relentlessly the needs of West Dorset and advocate for fairness across the board, I believe that the Government need to examine the whole system of revenue support grants, and that there is a need for reform so that local authorities such as Dorset Council receive their fair share of Government funding and support to enable us to thrive.

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[Lee Rowley]

I will do that, Sir Mark. The RSG has been in place since the late 1980s. It has been a feature of the financial and settlement landscapes for a number of years. But, as my hon. Friend the Member for West Dorset has indicated, the utility of the RSG and the way in which it is applied to individual areas, such as Dorset and elsewhere, has changed over recent years. That is to be expected as the local government funding landscape changes over a 20 or 30-year period.

That plays out within the context of a broader settlement, and in order to have these kinds of conversations we have to acknowledge what is within that broader settlement—not just the RSG but all the other grants, and the overall envelope within which it is offered. While I absolutely accept that there are a significant set of challenges at the moment, I hope the sector has recognised—in my experience from speaking with the sector, from unitary councils and districts to county and metropolitan boroughs, it has done—that a significant amount of money has gone into it. While there is still a challenge with inflation, it looks like £60 billion-worth of taxpayer subsidy, in one shape or form, in England will be allocated in the provisional local government finance settlement that was announced for consultation before Christmas. We will make decisions and finalise that for the sector shortly.

That figure represents a significant increase across all councils. We have also provided additional clarity about what is likely to come in the financial year 2024-25, which has been a long-standing request of the sector, irrespective of the way in which it funds its individual services. That has been welcomed by the sector, and I hope we can build on it in future years, once we are through the current spending review period.

Although it has tended to be more relevant for non-unitary councils than unitary councils, we have also given a one-off funding guarantee that meant the provisional settlement contained a floor that ensured that individual councils were able to obtain some uplift prior to deciding what they wished to do or not do about council tax. The hon. Member for Strangford (Jim Shannon) is no longer in his place, but he raised an important point about his concerns regarding local government finance. I hope that with the provisional settlement and the clarity that we will provide shortly with the financial settlement, we have demonstrated our willingness to respond where we are able.

That is all within an extremely challenging global financial context, which we all know about, even if those on either side of the House disagree in part on the reasons for it. That is all down to challenges that were discussed at the Budget and that have been visible for a number of years—both within the immediate post-covid era and stretching back longer—across many western democracies as debt has risen, as the recovery from the global financial crisis has been attempted and as we seek to accommodate spending decisions that were made a number of years or decades ago, which still have overhang even now. We have to contextualise decisions about the financial settlement as a whole, which will hopefully be finalised soon, and how it is distributed within the very challenging financial context.

My hon. Friend the Member for West Dorset talked powerfully about the particular pressures on children’s services and adult social care, and he is absolutely right to highlight that there have been significantly increasing challenges around both those areas in the last decade or so. That is not unique to Dorset, but is absolutely the case in all other councils, as the hon. Member for Luton North (Sarah Owen) highlighted from the Opposition Front Bench when she spoke of her own experiences of adult social care.

That has been recognised in the last number of years of the financial settlement with the creation of, and then increased funding for, grants earmarked for adult social care and children’s care, including the social care grant. Over recent weeks, we have seen an additional amount made available for adult social care through the discharge fund, of which at least a portion will go through local authorities to support additional social care provision within individual localities, to help the NHS get through the winter challenges. My hon. Friend will probably also be aware of the market sustainability and improvement fund, which is due to come in in the next financial year. So there has been a response to the increasing pressures, and one that reflects greater linearity between grants that are provided by the centre and the challenges and pressures that individual authorities are facing. I hope that that further additional context is helpful.

My hon. Friend talked powerfully and at length about the specific aspects of rural funding. He made a strong point, and I will absolutely consider it more. As he will be aware, councils that have a significant proportion of rurality have already received additional funds through the rural services grant over the last few years. As part of the provisional settlement, we confirmed that that will continue in the coming years. I know that there is a debate about the quantum of that grant, but we have sought to do that. Within the funding formulas for other grants, there is a recognition of need, irrespective of rurality. As my hon. Friend rightly indicated, need is not necessarily related only to urban areas, but is also present in rural areas. I hope that, at least in part, the overall funding settlement is able to reflect that.

I want to talk about three points that my hon. Friend raised—I am not sure he will fully agree with me, but I want to touch on each of them. He made a number of points about the difference, both perceived and actual, between how different parts of the country and different authorities allocate their resources, and about the different funding that comes to different parts of the country, both in terms of what is provided centrally and what is raised. He highlighted a differential between London and other parts of the country, and that is returned to regularly. As somebody who was a councillor in London for eight years and who is now happily back home in Derbyshire as a Member of Parliament, I have seen both sides of the equation. As I say, nothing in life is perfect—no methodology is perfect, and no funding formulas are perfect. However, if there were an equivalent number of Members of Parliament here from urban areas—I know this because I used to be part of this conversation—they too would make a strong case that there are challenges, issues and problems in their areas that need attention. That is not to take anything away from my hon. Friend’s point about comparison, but it offers some context.

There are different pressures in urban and rural areas, in different geographical areas and in areas with different demographics. Ultimately, different choices are made. I have served in councils where there are significant choices around how social care is approached and where different choices are made around how leisure services and library services are approached. If we accept the principle of devolution—I know that my hon. Friend was not making this point per se—we also have to accept that there will be differences in the choices that are made, while recognising that some of those choices are down to the ability to determine things locally and some are more influenced by the overall process and decisions made elsewhere.

[Chris Loder]

I appreciate that, between the Minister’s constituency and mine, there is an £800 difference in council tax at a band D level, so the issues that my constituents face are very much as he is kindly outlining. However, even if we take away the urban areas, which I used as a comparator, there is a level of disparity—his constituency and mine are not totally dissimilar, but there is a clear disparity. We welcome many people to retire in West Dorset, and indeed across the whole county and the whole south-west. That means that local councils often have to bear much greater financial responsibility for social care, but that is not reflected in the financial machinery we have today. From what the Minister said, and from my understanding of the process, there is not really a way to take that into account. Are the Government doing anything to give us some hope that we will have a better machinery in due course to take it into account?

[Lee Rowley]

I am grateful to my hon. Friend for his question. I accept that the existing settlement is a complex landscape with multiple different grants, interventions and interactions. At the core of those grants, there is a set of need assessments, need calculations and funding formulas. Some of those funding formulas are a number of years old, some are more than a number of years old, some are more recent and some approach things in different ways from others, so I accept that there is a complex landscape. Local government finance has always been a complicated and challenging landscape, but there is, at the core, a set of needs assessments. There is always a question about whether they could be updated and changed and whether they could better reflect how things are working and what is happening in individual localities, but needs assessment is at the heart of local government finance. As I indicated, there has also been a move over the last few years to a greater set of earmarked grants, specifically around adult social care, and they are intended to reflect need to the extent that is possible.

To respond to the second of the points from my hon. Friend’s speech, there is then a set of different circumstances in each individual area, in terms of both spend—lots of demand on adult social care in one place, but slightly less in others, and lots of demand on children’s services in some places, but less in others, depending on the geography—and the funding available. That is because of a complicated web of where councils started from; decisions that have often been made over many decades; the corporate approach that successive councils and their leadership have made; and reflections of need—however perfect or imperfect they may be. Can I say that that process is perfect? Absolutely not. Can I say that there will not be anomalies or challenges in it? No, because there absolutely will be.

My hon. Friend mentioned his concerns about areas with older demographics and the pressures that that puts on them. He makes a cogent case that rural areas, parts of which are more affluent, although they still contain areas of deprivation, are highly dependent on council tax. However, if there were urban MPs here—he compared his area to at least one such location—they would argue that their areas receive significant revenue from business rates, and Government are removing an element of that and distributing it elsewhere, including to places that are not urban. It is a very difficult, complex set of interactions. I absolutely accept that it is not perfect and that we need to continually look at it, but it seeks to reflect need, notwithstanding the complicated process by which it has got there.

On my hon. Friend’s point about whether there are opportunities to review the situation, there is always a need to look at these kinds of landscapes, particularly given the complexity and the fact that some elements of them have been around for a number of years. He will be aware—we have spoken about this previously—of some of the things that were started in recent years, such as the fair funding review.

On the financial settlement this year—I am not taking anything away from my hon. Friend’s point about the need to review these areas—having come through three years of significant difficulty in everybody’s lives, but particularly in the local government sector, we had to choose whether to make significant changes or offer stability. Through the provisional settlement, we have tried to offer a platform for stability, with significant additional funding, so that local authorities in the coming financial year—2023-34—have some breathing space after the tremendous work they have done post covid and during the inflationary period, which we hope has now peaked or will shortly peak. That will give them the opportunity to plan, think and look at how they can reform and do things differently to get ready for the years ahead.

We will always look at opportunities for review and change. Before Christmas, the Secretary of State indicated to the Levelling Up, Housing and Communities Committee that he wanted to do that, and I am doing it as a new Minister. We are looking at what can and cannot be done in individual areas. I welcome the comments and thoughts of my hon. Friend and the hon. Member for Luton North about those kinds of changes, and we will look that in the coming months and years.

I want to make a small plea to my hon. Friend to see things in the round. Although I accept that it is important to zero in on areas of contention and problematic areas, councils should have a significant absolute-terms increase in revenue in the coming financial settlement, and there have also been significant grants, particularly on the capital side. I do not want to tell my hon. Friend things he already knows, but I want to read this into the record: there has been significant funding on both the revenue and the capital sides to Dorset in recent months through the community renewal fund and the UK shared prosperity fund, and I believe that an area near his constituency was successful in a levelling-up bid just a few weeks ago. None of that takes away from his points, but it is important to see the context in which this discussion is taking place.

I absolutely accept that these are challenging times, that no methodology is perfect and that there is a legitimate debate to be had about how local government finance supports all parts of our country, all demographics and all facets and characteristics, including rurality and other things that my hon. Friend outlined. I hope that, in acknowledging all that, we can also collectively recognise that there has been a significant increase in funding this year, which is likely to go to all areas, as outlined in the provisional settlement. I hope my hon. Friend accepts that the prioritisation of stability in this coming year is important, given the challenges we have gone through in recent years. I look forward to working with all Members, including my hon. Friend, to see what changes and improvements are possible in the coming months and years.

[Chris Loder]

I thank my hon. Friend the Minister, the hon. Member for Luton North (Sarah Owen) and the hon. Member for Strangford (Jim Shannon), who is no longer in his place, for contributing. I appreciate the extent to which the Minister was able to answer some of my questions.

There is clearly still a lot of work to do to address fair funding throughout the country, particularly for rural areas. I appreciate all the work that the Government have done. The Government intervention, funding and support that we have seen in the last three years is unparalleled by pretty much anything we have ever seen, certainly in my lifetime and, although I hate to hazard a guess at the Minister’s age, probably in his as well—he might be younger than me, so I do not know.

The point is that we in West Dorset are below where we started. I mentioned the situation with our businesses; we lost 20% of them over covid. Our economy has already shrunk. As I said, our children who want to go to sixth form are having to pay £600 or £700 to get a bus to the nearest school, which can be 10 or 15 miles away, in order to study. We should not be in a situation where one part of the country is having to do that and another is not.

I appreciate the Minister’s points on stability. I know how important that is, especially when we are going through a turbulent period with inflation and other things. I know that the Minister—and I hope that his colleagues in the Department—will take away from this debate the fact that, although stability is important, we have a lot to address in our mechanisms for local government and local funding. The fact that there are immense differences between how much the constituents of the four of us in this room contribute towards council tax indicates the extent of the variation. I am advocating that we review those processes and work for fairness. I hope the Minister will take that back to the Department, and I look forward to seeing a much better case for Dorset in the next settlement.

Question put and agreed to.

Resolved,

That this House has considered council tax and the distribution of the revenue support grant.