Local Government Finance (England)

Clive Betts Excerpts

Wednesday 9th February 2022 Commons Chamber

[Michael Gove]

Again, the hon. Gentleman—my apologies, the right hon. Gentleman, and quite right too —makes three important points. On looked-after children, the whole position that we have had to take over the past 10 years on children in social care has been driven by a variety of factors that mean that we deal with the challenges of looked-after children and children at risk of abuse and neglect in a more intense fashion. That is why Josh MacAlister’s review of children in social care is so important and I hope that when it is published the right hon. Gentleman will welcome it.

On adult social care, the right hon. Gentleman is absolutely right that there is a greater degree of pressure, not just because we have an ageing population, although I note his important point about life expectancy in County Durham, but because we have more people moving into adulthood who, thanks to advances in medical care, also require social care. That is why in this settlement local authorities can make use of more than £1 billion of additional resource specifically for social care. On top of that funding, as was outlined in the presentation of the White Paper earlier today by my hon. Friend the Minister for Health, £162 million in adult social care reform funding is also being allocated to help local authorities.

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

I could recognise the valuable approach the coalition Government took under the then Secretary of State in removing ringfences, but we can contrast that with the number of pots that are being created that local authorities have to bid into, which seems like ringfencing by another name. The Secretary of State mentioned Councillor Jamieson, the chair of the LGA, who said at the Select Committee that we cannot sort out local government finance until we sort out social care funding. The LGA is looking for a big solution and it is disappointed that the levy highlighted as solving the problem actually gives no mainstream money to local councils to deliver important social care services.

[Michael Gove]

The Chair of the Levelling Up, Housing and Communities Committee makes two very important points. First, there is the tension, which always exists, between ensuring that we devolve as much funding as possible and simplify the funding landscape. There is also the need from time to time to respond to specific challenges. The one relates to the other, because local government, as he made rightly clear in his second point, wants additional funding for adult social care made available to it, and worries, for well-rehearsed reasons, that much of the additional funding will be devoted to the NHS’s immediate needs rather than long-term reform. I believe that the White Paper introduced earlier today on the integration of adult social care between the NHS and local government to an even greater degree will help address those issues. However, I recognise that they are serious ones and that the House will want to examine both the White Paper and any legislation that we introduce in due course.

I am conscious that many Members across the House will want to use the debate both to praise those in local government and to make specific cases for future funding reform. However, the settlement that we have secured marks a real recognition of the importance of local government and the Government’s determination to ensure that we strengthen its hand in dealing with the social ills that our country faces. That is why I commend the increase in the local government finance settlement to the House.

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

The Secretary of State is right: the settlement this year is better than in some previous years. The core spending power is up by 7.4%, though I think his definition of inflation is somewhat different from mine. The scrutiny unit of the House of Commons told me that the Bank of England’s inflation rate is 5.4%, so that does not give quite such a big increase in the real-terms rise in core spending as the Secretary of State indicated. But it has to be set against the background that since 2010, local government has had the biggest cuts of any part of the public sector.

The Secretary of State was explaining how the coalition Government had to respond to a financial crisis; but there were choices in the way that response was made. One of the choices was to single out local government for those spending cuts. Perhaps the suspicion was that it was easier to pass the responsibility on to others to decide which bits of the public sector were to be cut—libraries, parks or bus services, or whatever else local authorities had to resort to in order to reduce their expenditure.

It is also, I think, uncontested that the poorest parts of our country had the biggest cuts. That is a reality with the Government grant. The Secretary of State made the point—he produced the figures—that the poorest areas have done slightly better this year. I accept that: I think the figures show it, but it is slightly better on top of substantially worse situations for the previous 10 years, and they are having to recover from that. I will return to the issue of levelling up later.

For my own city of Sheffield, the grant cut has meant that £3 billion-worth of grant in real terms has been lost since 2010. That is an awful lot of money when thinking about what could have been done with that in terms of levelling up. Yes, the situation has been better since 2015. Government figures show that spending power has gone up by 2.1% in real terms. Actually, per head, though, it has fallen by 2.2%. So even since 2015, real spending power per head has fallen across the country.

Some significant themes have continued this year that we ought to reflect on for the longer term. The Secretary of State has been talking about the longer term; I think it is right that we should view these settlements in a longer-term context for the future. First, council tax in my own city of Sheffield was 41% of council spending in 2010; it is now 59%. That is a really significant switch of where the money comes from. Spending on social care is now two thirds, as opposed to about half. Again, that is a switch in what the money is spent on. My real concern is that although councils have properly responded—not just in Sheffield, but all over the country —to the pressures in social care and given it a priority, for very obvious reasons, it means that all the other day-to-day essential services that councils provide have been cut even more. Many libraries across the country are shut; the services in parks have been reduced; cuts have been made to bus services right across the country—we have heard Conservative Members complaining about those; money has been cut from road safety schemes; and cuts have been made in terms of the availability of public health inspectors to go into food shops. One issue I know the Secretary of State is really concerned about is planning departments, where a significant cut has been made to resources. There is a real democratic issue here: most people do not receive services from social care, but the public do, as a whole, look at their street cleaning, parks, libraries, buses and other important services, and they are paying more council tax—I have just described the extra money that comes from council tax—and getting less for it. There is a real challenge to our whole democratic system if we allow that to continue. I think the Secretary of State probably recognises that and we need to address it.

In the face of that, councils have done remarkably well. They have probably produced more efficiency savings than the rest of Government put together; if the rest of Government worked as well as councils have done, we would all be in a much better place. Most councils, like Sheffield’s, have used reserves very prudently; they are only able to get through the social services crisis we are in because of the reserves we have. Great credit must go to council officers and councils across the country, particularly to those in my city of Sheffield. Councils have also done a remarkable job during covid, be it on food parcels for the elderly and people who are shielding, on working with the health service jointly to deliver effective services, or through directors of public health doing test and trace far more efficiently and effectively than that the national system, at far less cost. We can be proud of what local government has done in those circumstances.

There were one or two disappointments about the settlements, but to put it slightly more positively I will call them “challenges for the future”. First, this is a single-year settlement. Local councils want multi-year settlements; we can all agree on the reasons why, and that is important. Secondly, on fair funding, it cannot be right that we have a settlement here based on 2014 data, with some of it going back to 2000. I accept the challenge; one person’s fair funding is another person’s unfair funding. That is going to be an interesting challenge for the Secretary of State, but I would say that levelling up has to be part of a fair funding review. It cannot be about individual bits of money; levelling up has to be about mainstream core funding and getting the distribution of that right to reflect the need for levelling up.

We have to get a new source of funding for social care. We have to get money from a levy or whatever source to come in. I welcome the attempt to integrate health and social care. I do not think it should be brought into one giant service; getting local councils and the health service to work together is right. They have done brilliantly well in Sheffield during the pandemic, with the clinical commissioning group, the director of public health and the director of social care working together. One of my worries is that in the reforms to the health system we do away with that place-based approach that a CCG gives. I welcome the letter that the Secretary of State has just sent and the offer to meet officials. It is really important that that place-based delivery of services—councils and the health service working together at a local level—is maintained. I hope that that is absolutely seen through.

The other two issues are still waiting to be done: business rates reform; and protection for the high street as part of that, with some sort of digital sales tax. When are we going to get it? Everyone seems to think that we ought to have one, but we have not actually got one. I mentioned the level of council tax now—the amount out of the totality of council spending. Council tax is regressive. If we look at the amount people pay compared with the value of their houses as they go up, we see that it is completely disproportionate. So we need a council tax review reform as well as a business rates reform if we are going to deal with this for the future.

Finally, I come to one regret. I look at the public health grant, where there is a 2.8% increase—if inflation is 5.4%, that means a reduction in real terms. The public health service has done a brilliant job, and I give credit to Greg Fell and his team for what they have done in Sheffield, but covid has shown us the health inequalities in our communities that need addressing. Is that cut not therefore a complete mistake at a time when we need more prevention and more attempts to reduce those inequalities?

In Sheffield, if I get on a bus in the west end of the city and go to the east end, life expectancy changes by 10 years. That simply cannot be right. Our public health director and his staff in that service, working with the health service, are key to addressing those problems. It is disappointing that their reward for all the work they did during the pandemic is to see a real-terms cut in their spending.

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[Mr Kevan Jones (North Durham) (Lab)]

We have just heard it in a debate on the police grant, and we have heard it in this debate with the Secretary of State: the Government are treating 2019 like year zero. Anything that happened before then was nothing to do with them. He is increasingly trying to push the narrative that decisions around funding, local government, policing, fire or anything have somehow happened by accident. They have not: they have happened because of deliberate political decisions that, in some cases, the Secretary of State—who I think has been in the Government since 2010—has taken.

My hon. Friend the Member for Sheffield South East (Mr Betts) said that the most savage cuts have been made to local government, with a 56.3% cut in the past decade. The Cameron-Osborne approach was to cut the central Government funding to councils from central taxation and push it on to local council tax payers, thereby deflecting the blame when local councillors and council officials had to take some very tough decisions. We have had the galling situation over the past 10 years in County Durham of Conservative councillors standing up and blaming the Labour council for raising the council tax, when they know the real reason is that the formula being used has shifted the way local government is funded in this country from central to local taxation.

In County Durham’s case, that means that the county council’s budget has been cut by £232 million a year—40% of the council’s budget. The hon. Member for Bromley and Chislehurst (Sir Robert Neill) referred to Lord Pickles, and in the early days, we were told, “Don’t worry about this; it can all be sorted out if councils get more efficient”—that if they had fewer pot plants in council offices, as I think was said at one stage, or stopped serving tea and coffee at meetings, or sacked all their chief officers, somehow that would fill the gap. Well, that is absolute nonsense.

Another issue that affects counties like County Durham is that we now have an inbuilt mechanism that deliberately moves money from the poor areas with the highest need, to more affluent areas. That is no accident, but the result of a political choice. I take as an example County Durham, where 58% of our properties are in council tax band A, so if we raised the council tax by 1% we would raise £3.8 million. There are a couple of higher-band properties in my constituency—there is at least one castle, which may well be in the higher tax bracket—but there are very few higher band properties across County Durham. That should be compared that with Wokingham in Surrey, where only 2.8% of properties are in band A, so if it raises council tax by 1% it generates £8.9 million. Add to that the fact that we are not just moving that money to areas of lower need, but are ensuring that the poorest people in County Durham, or Knowsley or any other deprived community, pay the most, because we all know that council tax is a very aggressive form of taxation.

That is continuing. We again have a one-year settlement, and councils are now having to work out what they will do in coming years. The Policing Minister told us earlier that when it came to the fairer funding review on police funding, the train had left the station. He gave no indication of when it would arrive. Unless we tackle this issue, councils such as County Durham will always be at a disadvantage

As my hon. Friend the Member for Sheffield South East said, there is a lot of press and PR. The Government work on the basis of slogans, gimmicks and spin, and the latest one is levelling up. I might be one of the few people who have actually read the entire levelling-up White Paper, including the annex.

[Mr Betts]

Sad.

[Mr Jones]

Yes, I am, and the hon. Member for Redcar (Jacob Young) called me an anorak, so possibly I am both.

The White Paper’s analysis is not bad in that it raises the issue that we should be tackling, but it offers no solution to enable us to do that. I really enjoyed the undergraduate thesis on the Venetian city state and how Babylon was built, but again it did not reach any conclusions. Nevertheless, we have a Government who talk in terms of levelling up. My hon. Friend the Member for Sheffield South East is right: you cannot have levelling up if you exclude the way in which local government is financed.

The other sad thing is that the Government’s approach has mainly been around capital projects. I think it is because the Prime Minister has a fixation—he has a fixation on quite a few things—on projects where you can see that something is being built. No doubt a Minister or local Conservative Member of Parliament can unveil a plaque and say, “This is what we have achieved.” As my right hon. Friend the Member for Knowsley (Sir George Howarth) said, if it was a fair process, fine.

I used to have a saying, when I was in local government, that any idiot can spend capital, which they can. The more difficult thing is to get the revenue streams into the future. Like my right hon. Friend, distantly I used to understand local government finance, but no doubt my knowledge is a bit out of date. What I do recognise is that we can spend as much capital on projects as we like, but what is needed is the revenue funding to go alongside it for the day-to-day needs of our local communities.

My right hon. Friend the Member for Knowsley covered the bidding process very well, but the point is that, if it were a fair process, then fine, but it is not. Quite clearly, it is a pork barrel approach to the doling out of money to certain Conservative seats. Let me give an example in County Durham. Which constituency has either got new towns funding or levelling-up funding? The answer is Bishop Auckland.

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[Neil O'Brien]

I assure my hon. Friend that we will expedite that.

Let me turn to the thoughtful comments made by the Chair of the Levelling Up, Housing and Communities Committee, the hon. Member for Sheffield South East (Mr Betts)—the spending power of Sheffield will go up by 7.6% under this settlement. He noted, to use his phrase, that the settlement was better than in some years, which may be faint praise, but we will take it. He raised the very important long-term issue about the relevance of upward pressure on social care caused by an ageing society, and one in which we do a better job of caring for the sick and disabled. As a party, we have taken difficult decisions to adequately fund that and the NHS, and difficult decisions on tax. We are also taking steps, as we set out in the House earlier, to promote the integration of health and social care, because we all know that is one of the crucial things we can do to make that sustainable in the longer term.

[Mr Betts]

I mentioned the letter from the Secretary of State offering a meeting with officials. Perhaps it could be a meeting with Ministers, and perhaps I could be allowed to bring someone from the CCG and someone from the city council, who are doing great work together, to explain what they really want to see to marry up this place-based approach to health with local government.

[Neil O’Brien]

Absolutely, and the hon. Gentleman anticipates the point I was about to make.

Of course, deepening devolution is one way of driving the integration agenda to save money and produce better services. The hon. Gentleman referred to the important health and life expectancy gaps, and the White Paper sets out the steps that the Department of Health and Social Care will take through its health inequalities strategy and its new tobacco strategy.

My hon. Friend the Member for South Dorset (Richard Drax) noted the importance of keeping taxes down, and I strongly agree. That is why the settlement keeps the increase to 2%, with 1% for social care—far lower than the double-digit increases we saw in many years under the Labour party.

I will reply at length to the right hon. Member for Knowsley (Sir George Howarth). This morning I relayed all the points raised in the important debate on funding in Merseyside to my right hon. Friend the Secretary of State, and we talked it through. I completely agree about the need for a multi-year settlement. We had to have one-year settlements because of the turbulence around covid, but we aim to have a multi-year settlement. Yes, it will take account of the need for levelling up and of inflation.

I am pleased the right hon. Gentleman mentioned Shakespeare North, as I was previously involved in its central Government funding. It is a brilliant project, and he rightly paid tribute to some of the individuals who are helping to make it happen.

The right hon. Gentleman also made some important points about the levelling-up fund. Seventy-five per cent. of the money has so far gone to top-priority areas, and only 6% has gone to bottom-priority areas. It is highly skewed towards the poorest areas and, in the first round, £20 million went to Liverpool, next door to Knowsley, and £37 million went to the Liverpool city region as a whole. It is not correct that there is a political process. There is competition, and there are arguments for having non-competitive funding, which is why there will also be an allocation through the UK shared prosperity fund. There are arguments for competition to get good bids, but we must not traduce civil servants who score the bids and allocate the money.

My hon. Friend the Member for Bromley and Chislehurst (Sir Robert Neill) will see spending power in his constituency go up by 6.2%.