Rural Councils: Funding

Derek Thomas Excerpts

Wednesday 29th November 2023 Westminster Hall

[Derek Thomas (St Ives) (Con)]

I thank my hon. Friend the Member for West Dorset (Chris Loder) for giving a great opportunity to speak in support of our local rural areas and councils, and for raising this timely issue.

As we have heard, it does not take an economist to recognise that the pressure on Government Departments to find savings in public spending will mean that local authorities do not get what they need to deliver the services that they want to deliver. In that context, it is more rather than less important to distribute the available resource fairly between different areas. I am here to press the Minister and his Department to ensure that the 2024-25 local government finance settlement is fairer for local authorities. I say that as an MP who represents a remote island community with its own unitary authority, the Council of the Isles of Scilly, which has had discussions with Government Ministers and me for every year I have been an MP to try and resolve their funding challenges.

I also speak as an MP who represents a sparsely populated rural area served by the large unitary authority of Cornwall Council. It is a great delight to be joined by my hon. Friend the Member for Truro and Falmouth (Cherilyn Mackrory) to campaign for this together. I also speak as the chair of the all-party parliamentary group on rural services.

I remind the House that urban councils receive 38% more per head in Government-funded spending power than rural councils. As we have heard, rural residents will get 13% less per head in social care support. Rural councils have to increase council tax to balance their budgets, and that means that rural residents now pay on average 20% more in council tax per head. That additional tax on rural residents is a result of Government underfunding over many years. The cost of living in rural areas is higher than in urban areas, and that rural earnings are lower. The cost of service delivery is also higher in rural areas.

The Government have sought to address the disparity. Following a campaign by the Rural Fair Share Campaign and the Rural Services Network, the Government accepted that “such a correction”—so that there is a proper recognition of the additional cost of delivering services in rural areas—“is warranted”. Changes were approved and the formula was changed. The new formula is still, by and large, the one in operation today. The problem is that that uplift to rural council funding has not been realised, because on average 75% of the exemplified gains were lost to authorities as a result of damping and other changes. Damping aims to protect councils from volatile changes, which is understandable, but the Government froze the formula so that it was not changed further. As we have heard, there are London local authorities that receive millions of pounds a year more in grant than the formula says they should.

We were not deterred. With the support of the Rural Services Network, many parliamentarians, including me, convinced the Government that a fair funding review was needed. That was in 2016, soon after I became an MP. The Government then announced a relative needs and resources review, which was intended to ensure a fairer formula for the allocation of Government funding, with a new funding formula in place for the 2020-21 financial year. If that had been delivered as intended and as we expected, we would not be having this discussion today, and the councils we represent would not be facing such difficult decisions about how to spend money not where they want to, but where they need to. The review has been delayed over and over again. It has now been seven years since the review was announced, but the formula has not been changed.

It is time to act. The Minister must deliver fairer funding by applying in full, without damping, the effects of the changes made but not fully implemented to the needs assessment component of the formula that was agreed back in 2013. The Minister must ensure that funding for social care reform proposals uses a formula that recognises a whole range of costs faced by rural councils and care providers. The Minister must also address fairer funding through the completion of the needs and resources review for local government funding in the first 12 months of the next spending review period, and fully implement the changes promised in 2021 for implementation in 2026-27. The Minister must also fight for, defend and maintain the rural service delivery grant.

I recognise that that will not be easy. However, we do not go into government for an easy life, but to correct unfairness and inequality. Our Government believe in levelling up, and I am not aware of a better way to level up than to fairly fund the day-to-day public services that our councils deliver, that our constituents depend on and that they have a right to expect.

[Several hon. Members rose—]