Local Government Funding

Drew Hendry Excerpts

Wednesday 28th March 2018 Commons Chamber

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

I join the shadow Secretary of State and the Secretary of State in paying tribute to councillors across the nations of the UK for the work that they do. It is an undervalued job. Those who do it correctly often spend long hours serving their constituents diligently, and often at odd hours of the day and night. It is important for us all to reflect on that. As a former councillor and council leader, I am well aware of the pressures on individual councillors and on budgets.

The shadow Secretary of State quite rightly pointed the finger of blame for the problems of local government at the austerity that has been imposed on local government by this Tory Government. I absolutely agree with him. I was encouraged that he focused on that aspect when replying to the hon. Member for Coatbridge, Chryston and Bellshill (Hugh Gaffney), because I also want to talk about the situation in Scotland.

The UK Government Budget did not present a good deal for Scotland, as a consequence of real-term cuts to Scotland’s revenue block grant for day-to-day spending of over £200 million next year. Despite a commitment of over £300 million of resource funding for the NHS in England this year, Scotland will receive only £8 million in consequentials in 2018-19 due to UK Government cuts elsewhere. Of the additional money that the UK Government announced as being added to Scotland’s budget, over half—£1.1 billion—comes from financial transactions that the Scottish Government cannot spend on frontline public services and that have to be repaid to the Treasury.

Austerity has not ended. Over the eight years of this UK Government—between 2010-11 and 2017-18—and onwards to 2019-20, we will see Scotland’s discretionary budget fall in real terms by £2.6 billion. That is 8.1%. Scotland continues to be hit by UK austerity and the decision to leave the EU. The Scottish Government have actually protected local government budgets and vital public services in the face of this austerity onslaught. Compare what the Scottish Government have done with the 49% real-terms cuts to English local authority budgets.

In Scotland, total resource funding for local government has increased by a total of £170 million in this year’s budget, providing local authorities with an above inflation increase, before taking into account the ability to increase the council tax. Some £35 million will be transferred to local authorities this year using agreed distribution mechanisms. The remaining £135 million will be in the Local Government Finance (Scotland) Order 2018. This figure includes a specific resource grant of £10.5 million agreed with Orkney, which will receive £5.5 million, and Shetland, which will receive £5 million, to address funding for inter-island ferries.

While the Tories in Scotland propose cutting over £556 million from public services to pay for their tax cuts for the wealthiest, the SNP Government deliver for councils and protect the vital local services in the areas that we all hold dear, especially in my own constituency in the highlands. The SNP’s progressive reforms on income tax—with 70% of people paying less than they did last year and 55% paying less than they would if they lived south of the border—are vital for allowing this funding increase, despite the continued austerity that is being imposed.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

My hon. Friend is making a very powerful point about taxation. Council tax on an average band A property in Scotland costs £1,208 per year, whereas a band A property in England costs £463 more, at £1,671. Is it not clear that England is the highest-taxed place in the UK?

[Drew Hendry]

My hon. Friend makes a good point. Indeed, the average cost of a band A property is some £400 more in England than in Scotland—5.1% up on last year.

The Scottish Government’s progressive budget also provides extra funding for our NHS, our education and—even though it is a reserved matter for this Parliament and Ministers here—the push to make sure that we have done more on broadband coverage in Scotland. There is more money for our economy, for research and for our environment, too, as well as for protecting important things like free university tuition, free personal care for the elderly, free school meals and free prescriptions—among many other items.

[Mr Sweeney]

rose—

[Drew Hendry]

I am happy to give way—I have been waiting for the hon. Gentleman’s intervention.

[Mr Sweeney]

The hon. Gentleman describes the SNP’s recent budget as “progressive”. The Convention of Scottish Local Authorities says that councils need £545 million just to stand still, yet the budget settlement imposed by the SNP was just £159 million. That yawning gap has not been filled. How can that possibly be progressive?

[Drew Hendry]

I am delighted that the hon. Gentleman has intervened, because I was expecting him to do so. I was a former group leader at COSLA, so I have been watching for a number of years the Scottish Government manage to put money into local authorities in a way that could not be done down here. In fact, in the last debate on local government that I took part in in this Chamber, Tory MPs were talking about their councils having to hand back the keys to Treasury Ministers such were the cuts. Actually, one of the biggest challenges in Scotland is dealing with the private finance initiative legacy left by Labour in terms of the additional interest costs on all these different items that continue to drain local authority resources.

I want to turn to Highland Council, because it is on my own patch and I speak from experience. Highland Council’s resource budget for our services such as schools, roads and housing rose to almost £450 million for the coming year—an increase of over 2% compared with last year. While the Scottish Government protect local authority budgets, the UK Government leave them paying the price for the austerity agenda.

Highland Council is a good example of the impact of universal credit on local authority budgets. As many Members will know, the constituency of Inverness was a pilot area. We went through the live service and then full service roll-out in June 2016. Local agencies, the council and I have been voicing concern about these issues since 2013, and the measures introduced do not even scratch the surface of the process failings of universal credit. Our local authorities are paying the price now, and right hon. and hon. Members in this Chamber who go through full service roll-out will see the effect on their own local authorities.

Let me reflect on the cost to Highland Council of the impact of rent arrears. Average rent arrears for somebody on universal credit are now £840. Average rent arrears for somebody not on universal credit are £250. The effect of that is that in July 2016 rent arrears were £1.6 million. In March 2017, that figure rose to £2.2 million, and then in December 2017, it rose to £2.7 million, racking up the costs for local authorities, which are having to implement and deal with the effects of universal credit. This will have an effect on services as it starts to drain their budgets.

The extra resources needed for administering the change to universal credit are running into hundreds of thousands of pounds—money that is coming out of the council budget. The welfare support team do amazing work, but they are flat out with demand. Housing officers are also flat out with demand, as more people face housing crises. Some 29% of landlords already say that they have evicted because of universal credit rent arrears. People are becoming homeless, so the local authority has a duty to house them. It is a vicious cycle of costs for the local authority. The increased demand then affects other agencies such as Citizens Advice.

The impact on poverty is also very harsh. One in four children in Scotland is growing up in poverty as a result of this Government’s austerity regime. As household incomes are pushed, people find themselves relying more and more on local authority services. Highland Council, especially its welfare support team, has done incredible work in the face of the most trying difficulties.

The SNP Government are committed to mitigating Tory austerity wherever they can. Since 2013, the Scottish Government have spent more than £100 million a year to protect people from the worst aspects of Tory welfare cuts. We are fully mitigating the bedroom tax in Scotland, and we have pledged to abolish the tax completely when we have the powers to do so.

[Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

My hon. Friend is making the SNP’s fundamental point, which is that it would be far better for us as an independent country to be making the right decisions in the first place than having to spend £100 million to correct the Tories’ errors.

[Drew Hendry]

I am grateful to my hon. Friend for his intervention. As ever, he makes a telling point: choices would be different in Scotland. We would choose not to have to mitigate something as horrendous as the bedroom tax, which was so ill thought out that the Tories did not take into account the fact that there are virtually no houses in the highlands and islands that do not have more than one bedroom.

Since its establishment, the Scottish welfare fund has helped more than 275,700 households. The fund provides crisis grants when someone experiences a disaster or emergency and community care grants to enable independent living. We have also extended the Scottish welfare fund on an interim basis to mitigate the UK Government’s decision to remove housing benefit for 18 to 21-year-olds. In 2016-17, more than 17,500 applications for crisis grants were made because of delayed payment of benefits—that is around 10% of all applications. Between July and September 2017, that increased to 14%, clearly showing the impact of the Government’s harsh welfare cuts.

We have restored the council tax support cut in Westminster through the creation of council tax reductions, protecting the incomes of more than half a million people on low incomes. We have extended the child allowance in the council tax reduction scheme by 25%, benefiting 77,000 households by an average of £173 a year, or £15 a month. That boost for low-income families will help nearly 140,000 children across Scotland.

Following the UK Government’s decision to scrap the UK-wide scheme, we have safeguarded support for 2,600 disabled people through the Scottish independent living fund. We have now created an extra £5 million fund to support young disabled people to make the transition into adulthood.

To conclude, I urge the Minister to listen to hon. Members and to stop shifting the responsibility for his Government’s austerity agenda on to local authorities across the nations of the UK.

--- Later in debate ---

[Mr Paul Sweeney (Glasgow North East) (Lab/Co-op)]

I am grateful for the opportunity to contribute to this debate on a critical issue for the future of the UK and, indeed, the integrity of many of our communities that have faced hardship in recent years.

I wish to pay particular attention to the issues that affect my constituency, which come under the Scottish Government’s purview. It was interesting to hear the Scottish National party Front-Bench spokesperson, the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry), grandstanding and railing against the cuts that are coming to Scotland, and talking about how the SNP has been stretching every sinew to mitigate Tory cuts. Indeed, he referred to the block grant cut, yet why did SNP Members abstain on Third Reading of the Tory Finance Bill just a few weeks ago? They could have prevented that cut. It is clear that in reality they are not doing much to mitigate the cuts.

Local government in Scotland is now the most centralised system of government of any country in Europe. We have seen a continued strangulation of local government finances. The SNP has slashed £1.5 billion from local councils since 2011, merely acting as a conveyor belt for Tory austerity.

[Drew Hendry]

Does the hon. Gentleman agree with not only the Scottish Government but the Fraser of Allander Institute that Scotland’s discretionary budget has been cut by more than 5% over the past few years?

[Mr Sweeney]

The reality facing local government in Scotland is that the SNP has taken Tory austerity and more than doubled it, passing it on to local government. From 2013-14 to 2016-17, the local government revenue budget decreased at a much faster rate—minus 4.6%—than the Scottish Government’s revenue budget, which declined by only 1.5%. If we look at the local government finance order figures for 2016-17 to 2017-18, we see that the revenue budget for local government continues to fall, by 2.2%, while the Scottish Government revenue budget falls by only 0.6%. That is a conveyor belt and amplification of Tory cuts; it is certainly not mitigating Tory cuts in Scotland. That is very much clear from the SNP’s attitude.

The SNP budget was passed on 21 February, with the support of the Scottish Green party. The budget deal struck by the SNP and Greens does not stop Tory austerity, tackle poverty or redistribute wealth and power. For the second year running, Green Members of the Scottish Parliament have backed a nationalist budget, which will leave councils’ lifeline services further squeezed. It is a backroom stitch-up deal that fails to fund a proper pay rise for council staff or to deal with the child poverty that our councils face. As I have mentioned before, the Convention of Scottish Local Authorities said that it needed £545 million just to stand still, but the latest budget deal delivers only £159 million. I do not see much mitigation of local government cuts in that settlement.

Faced with a different path from that of the Tories’ austerity, the SNP has ignored it and rejected the progressive, radical package brought forward by the Labour party in Scotland. Audit Scotland has confirmed that in November last year accounts revealed that there is increasing strain on local government finances throughout Scotland. In 2016-17, a total of 19 out of the 32 councils in Scotland used cash from their revenue reserves—up from just eight that did it in 2015-16. This dipping into reserves is really going through the fat and into the bone. It is totally unacceptable. Indeed, over the course of the year, the overall amount held in council rainy day funds, or reserves, fell by £32 million. The Accounts Commission said:

“Councils are showing signs of increasing financial stress. They are finding it increasingly difficult to identify and deliver savings and more have drawn on reserves than in previous years to fund change programmes and routine service delivery.”

That is extremely worrying.

Labour’s alternative plan for the Scottish budget would deliver a nearly £l billion stimulus for the Scottish economy, by saving lifeline local services; increasing child benefit by £5 a week to put money back into the pockets of working-class families; and delivering an extra £100 million for our NHS. We also have a more radical tax policy than the one the SNP has proposed, despite the Scottish Government’s having unprecedented tax powers. The top 1% in Scotland own more wealth than the bottom 50% put together, but the SNP’s proposals on income tax just tinker around the edges, putting a penny on the top rate. Labour’s radical alternative would match the SNP’s starter rate, but would drop the threshold for the 45p rate to those earning more than £60,000 and introduce a new 50p rate for those earning more than £100,000.

Prospects would improve massively under Labour’s proposals. The SNP says that it cannot mitigate, but we have seen no effort to remove the public sector pay cap for local government. Public sector workers have faced years of cuts to their wages thanks to the pay cap. The current SNP proposals do not fully fund a pay rise and do not include all public sector workers—including those in local government. Labour’s proposals would. It is a radical package of proposals from the Labour party in Scotland. In addition to our tax plans, the further investment could be used to deliver more radical decisions on income tax and new economic powers to local authorities, including the ability to levy a tourist tax and a land value tax on vacant and economically inactive land. The latter is critical to my constituents, where 10% of land is vacant and derelict. Those are radical proposals from a radical Scottish Labour Government-in-waiting.