Local Government Finance

Clive Betts Excerpts

Wednesday 7th February 2018 Commons Chamber

[Sajid Javid]

My hon. Friend makes a very good point. Such certainty is of course very important for many local authorities, including his own, and I hope I can now make the situation clearer. It is our intention to deal with the problem of the negative RSG, but we have yet to determine exactly the best way of doing so and providing support to the local authorities affected, and that is why it is right to consult on it. I absolutely commit to him that we will do so, and when we do—our plan is to do it in the spring—I hope that he and others will make an input to make sure that we get it right and really deal with this problem for his authority and many others.

[Mr Clive Betts (Sheffield South East) (Lab)]

Will the Secretary of State reflect on the issue of the transitional grant? It may be important to some authorities, but will he confirm the figures Sheffield City Council has given me showing that the authorities that have had the biggest cuts to their core spending—cuts of over 30%—have between them benefited in this financial year to the tune of £10,000? That is the total figure for the authorities that have had the biggest cuts in grant over the past few years.

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[Jim McMahon]

I am pleased the hon. Gentleman asks that question. At that time, there was already an in-built deficit in the Budget because of the increase in the national living wage and employers’ national insurance contributions, so even within the £2 billion allocated there was a £1.3 billion in-year deficit, because of the need to make sure that the provider market could be sustained. That is my response. It is just not enough money. Everybody in the House and our communities knows that. It is just a shame that the Secretary of State does not carry the weight in the Treasury to get the money into the Department and out to councils and into our communities.

[Mr Betts]

The Local Government Association has calculated that there will be a £2.3 billion gap in social care funding by 2020, having taken account of the 2017 Budget increases, and there are similar figures from the King’s Fund. The National Audit Office did a report for the Communities and Local Government Committee looking at these figures and basically confirmed their accuracy. There is a real problem here that cannot be disguised and that will not go away without extra funding being delivered.

[Jim McMahon]

Those figures are absolutely right. The analysis from Age UK shows that 1.2 million people who would have been entitled to social care in 2010 are no longer receiving social care because of cuts to the eligibility criteria by councils.

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[Mr Clive Betts (Sheffield South East) (Lab)]

This debate has to be seen against the background of a 79% cut in direct funding to local authorities between 2010 and 2020—those figures are from the Institute for Fiscal Studies. Local government has faced bigger cuts than virtually any other part of the public sector, and how well local government has dealt with that is to the great credit of councils across the country of all political persuasions. There have been real cuts to services, and if central Government were as good at managing their resources as local government, we would probably see much better services being delivered by central Government Departments. The reality, however, is that the councils with the biggest needs, such as Sheffield City Council, have faced the biggest cuts. There have been more than £300 million of cuts in grants to my local authority, and we have seen the problems in Northamptonshire only too starkly in the past few days.

On Monday, as we looked at business rates and local government finance, the Communities and Local Government Committee heard from witnesses including Councillor David Simmonds from the Local Government Association and Councillor Paul Carter from the County Councils Network, both of whom are respected Conservative leaders. When we asked them whether other councils were likely to follow Northamptonshire, they said, “Not this year, but unless attention is paid to the growing pressures of adult social care and children’s services, which are becoming an even bigger problem in some authorities, there is a cliff edge that other authorities are going to fall over at some point.” Those Conservative leaders are not going off half-cocked or at a tangent; they are facing up to the real problems that local authorities are having to address daily.

The £150 million extra for social care is of course welcome. We are now somewhat used to having sticking plasters every year to address the social care problem, but it is just that the sticking plaster has got a bit small this year—it is £150 million rather than the billions we had perhaps come to expect. The LGA has said in its assessment that by 2020, the gap for social care will be £2.3 billion. That figure has been confirmed by the King’s Fund and by the National Audit Office in a report for the Select Committee. It is there for everyone to read, so this problem is coming at us—it is here and now, and it is growing. Conservative leaders of local authorities are saying this just as strongly as Labour leaders, and we are talking about a total funding gap of nearly £6 billion. That is the reality, and I have not heard Ministers challenge it in any way. These are the problems that local authorities are facing up to, and without extra resources, they will not be able to deliver the services that our constituents need.

I wish to pay particular attention to two issues, the first of which is business rates retention. Council leaders told us on Monday that there is a great deal of uncertainty. The four-year funding settlement that we are now in the middle of was welcomed by local councils, as they saw a degree of certainty, but they are now uncertain about what will happen in 2020. The Government’s intention is to have 75% business rate retention, which will give an extra £5 billion to the financing of local councils, but the Government intend to offset that by making the money pay for public health grants, rural delivery grants and other grants, so there will not actually be any net new money for local councils as a result. The leaders told us that when the move is made to 100% business rates retention, it will deliver another £5 billion, but local councils need that money to deal with the pressures on them now, and they will grow by 2020. The policy cannot be used to provide a reason for giving even more powers to local government in order to absorb that £5 billion, which is the Treasury’s intention. Ministers really have to think about that. There is a way to solve the funding problems in 2020: use this extra £5 billion from 100% business rate retention to fund dealing with the pressures that local government can identify.

Finally, I wish to talk about the fair funding review, which is a wonderful form of words to keep Conservative Back Benchers happy, is it not? Everyone smiles and says, “Fair funding means we are going to get more,” but one person’s fair funding is, of course, another person’s unfair funding, as we have seen over the years. Local government cannot agree among itself how fair funding should be sorted out. Of course it is right to review needs assessments every so often, and the Select Committee has put forward some evidence, following research we had commissioned on that review. But in the end, this is a zero-sum game, because when one council gains from the review, another will lose. What came out clearly from our evidence session on Monday—I believe that this was said by the Conservative leaders—is that if the cake is not large enough, the fair funding review will probably end up being seen by no one as fair at all. That is the real problem. If additional funding is not identified, the growing crisis in social care will mean that there will be an even worse failure to deliver for some of the most needy in our communities, with the risk that some local authorities will be so financially strapped that they will follow Northamptonshire. That is a warning of which we should all be aware, and we have to bear it clearly in mind in the next few months.