District Council Finances

David Drew Excerpts

Wednesday 1st May 2019 Westminster Hall

[Dr David Drew (Stroud) (Lab/Co-op)]

I am delighted to serve under your chairmanship, Mr Gapes. I congratulate my friend, the hon. Member for Rugby (Mark Pawsey), on such an excellent exposé of the funding of district councils. I am delighted to be part of the group and to have played a small part in an excellent report. I look forward to engaging with the Minister again, and with my hon. Friend the Member for Oldham West and Royton (Jim McMahon), so that we can at least bring attention to bear on this important topic.

In advance of the debate, I asked my district council in Stroud what main aspects it would like the Minister to look at. I pay due regard to the council leader, Doina Cornell, and the head of finance, Andrew Cummings; both contributed to an outline of what they saw as the main funding formula issues. It would be pointless to go over the same ground as the hon. Member for Rugby, but I will reinforce what he said, which was borne out by the Local Government Association and the District Councils’ Network, both of which made excellent reports to allow us to make our contributions today.

Stroud would like the Minister to dwell on four main points. I have a couple of subsidiary ones, which I will talk about at the end. First—overwhelmingly so—is the issue of uncertainty in the sector. Local government in general faces uncertainty about the future funding regime; the forthcoming spending review will obviously have an impact on the finances of the sector from 2020-21, but we are also not sure about the new fair funding review, the changes to the new homes bonus and the resetting of the business rates baselines—they will all come together. They could be good news, but they could put local government under even more pressure.

My district was in a sense saved by the Government’s decision not to pursue the negative revenue support grant. We are one of the areas of the country in the business rates retention pilot scheme, but that is coming to an end and I am interested to know the Government’s future thinking. That all adds to the mood of uncertainty, however, and such a background makes it difficult for local authorities to set budgets. My hon. Friend the Member for Oldham West and Royton will have things to say about that.

On resetting the business rates baselines, the Government have made it clear that that is the direction of travel in which they wish to go, but they have not quite said how they intend to get there. So much depends on how the moneys already there are redistributed, and that will have an impact on district councils because we tend to be at the end of the train, rather than driving it—some of us might hope for a much greater say in how things are going.

That level of uncertainty is multiplied by the potential changes to the new homes bonus system. In Stroud district, that contributes £1.8 million, which is a not inconsiderable sum, and one that is important in allowing us to balance our budget. Again, will the Government say what they intend to do? We are talking about what the changes will imply after this year. If some of the suggestions are implemented, sadly many authorities including mine stand to lose out very badly.

Another big bugbear is the limited ability of small district councils to raise money through council tax. District councils are limited to a 3% ceiling, whereas upper-tier authorities have been granted some dispensation with the social care precept. The police have also been allowed to raise a much greater sum. I am a great fan of parish and town councils, and one of the reasons I am a fan is that they set their own budgets; they take the responsibility and are not capped.

The result—I do not know whether this is the case in Rugby as it is in Stroud—has been some offloading of responsibilities on to parish and town councils. That might be laudable, because the idea of subsidiarity and running things as locally as possible has merit, but the problem is that parish and town councils might be running things because they have to, because the district councils simply do not have the resources—although that gets us to pay attention to the difficult scenario of the threat of closure of such services. The District Councils’ Network is therefore clearly lobbying for what is called a prevention precept—the hon. Member for Rugby intimated that—and it will be interesting to know the Government’s attitude to that.

On housing, quickly—I am mainly looking at the funding per se of the councils—there are problems. Stroud District Council owns its own stock; it bought it for some £97 million. We are proud that we have built something in the order of 230 new council houses, which is a considerable increase for a small district authority. We could have the argument about the right to buy, which some of us feel is a real disincentive, but the problem is that although notionally the Government have said that the cap on borrowing has been removed, real hurdles remain in the way of driving forward that programme. At the moment, therefore, we are at a standstill, which is really disappointing, because it would be the way to deal with at least some of our problems of homelessness and of other means by which people get into the housing sector. I hope that the Government will look at what is happening, and why there is not the drive towards what some of us want to see, which is council housing at least being part of the solution, rather than being seen as a marginal element.

I have a couple of final points to make. Planning is always a real bugbear, because we are forever expected to provide more housing, which is right, and more jobs, which is right. The problem is that there are not necessarily the means to do that. The Government’s formula means that Stroud is being asked to provide something like an extra 48% on top of its normal provision, and the question of how that will be done is causing real heartache in communities. There are very few ways in which the provision of services can be guaranteed if the housing is provided, so the Government need to look at their planning proposals. That is all bound up, because it affects the new homes bonus, which is the incentive, but if the funding is not carried through, there is very little benefit for local authorities and the people they represent.

Waste is a difficult issue. Stroud District Council has a proud record of collection. It is one of the greenest authorities in the country and has a good record for collecting food waste. I will not go into the politics of this, but we have a new incinerator about to go live and the county is starting to remove tax credits for recycling. That is totally bizarre, because we talk about the need to drive up recycling and to avoid waste. I could go on at great length about that; I have said many things in the past about it and no doubt will in future. Would the Minister look at some of the ways in which the smaller district local authorities are penalised by what I see as a mad dash towards incineration?

I share the desire of the hon. Member for Rugby to get this topic heard. It is a pity that a few more people are not in the debate. We are a bit of an endangered species because so many authorities are going unitary. I was talking to the hon. Member for South West Bedfordshire (Andrew Selous) about that, because in Bedfordshire they are in the process of doing that. I support unitary—the Minister responded to my debate on unitary—but until Gloucestershire grasps the nettle, we have to do the best we can for our district. Many people look to that authority for the bulk of their services.

I hope the Minister listens to the need for certainty and proper funding, and that he recognises that those authorities are doing valuable work on waste and new housing, and more particularly on the services that are so important to everyday life.