Local Government Funding

Edward Leigh Excerpts

Wednesday 3rd February 2016 Westminster Hall

[Sir Edward Leigh (Gainsborough) (Con)]

It is always a pleasure to see you, with your acerbic wit, in the Chair, Mr Davies.

I thank the hon. Member for Leicester West (Liz Kendall). We all know that there is not enough money in the pot. I accept that cuts have to be made, but I want to make the case for fairer funding. I know how wasteful government can be, although generally, local government has delivered broadly the same service over the last five years despite having to face considerable cuts. I want to make the case for fairness between urban and rural government.

For my local district council, West Lindsey, Government -funded spending power—the overall funding available for local authority services—was £76 per head for 2015-16. The Government propose to cut that to just £52 for 2019-20. Many hon. Members here represent urban councils. Let us take Wolverhampton as an example. For 2015-16, Wolverhampton’s funding was £559 per head. It is being cut to £455 per head over the same period. That means that the people of Wolverhampton face a reduction of just 18.6%, while my constituents in West Lindsey will have to bear cuts of 31%.

The facts are just as bad at county level. The average amount awarded in Government grant per head across urban England is £486, while the grant per head in rural Lincolnshire is just £385. Metropolitan non-fire authorities face cuts of 19% over this five-year period, while shire counties, non-fire, are being saddled with an average of 34% cuts, and predominantly rural unitaries, non-fire, face cuts of 30%.

We have to face the fact that the sparsity allowance is totally inadequate. It does not even meet the higher operating costs of running essential services in rural areas. Urban residents are receiving a grant settlement from a Conservative Government that is about 50% higher than that received by rural residents. It is a double blow, as we in rural areas face higher council tax burdens, which have to be extracted from people who, on average, earn less than those in cities.

[Steve Double]

Does my hon. Friend share my concern that, despite the Government’s intention to narrow the gap between local government funding in rural and urban areas, the new formula seems to widen the gap and make the matter even worse?

[Sir Edward Leigh]

Yes, it widens the gap. We are asking the Minister not for more money but for fairer funding between rural and urban areas, which is precisely the point that my hon. Friend makes.

I have worked alongside Lincolnshire County Council and West Lindsey District Council for decades, and they are not spendthrifts. They count every penny, but they are being penalised for having saved so much in the past. They know the needs of our people far more than anyone in Whitehall does. We have already given up much of our invaluable network of local libraries, and got rid of our magistrates courts and our police stations. Are we going to get rid of our fire stations now? How much more does Whitehall really expect that rural England can take?

Closing the gap between the Government grant to the urban dweller and to the rural inhabitant by just 5% over five years would make a huge difference to service provision in rural areas. In Lincolnshire, it would mean an extra £13,130,000 per annum at the end of a five-year period. Right now, good, hard-working people in rural areas are subsidising much better provision of services to people in urban areas, and that has to change.

[Barbara Keeley]

Does the hon. Gentleman think it is a good idea to keep robbing Peter to pay Paul, as my hon. Friend the Member for Leicester West (Liz Kendall) said in her speech? As she laid out so well, adult social care has been cut by 31% across the urban councils that the hon. Gentleman is talking about. It is really necessary to cut funding for those councils more to bring fairness to the councils he is talking about?

--- Later in debate ---

[Sir Edward Leigh]

Obviously that is the argument that those representing urban areas will make. I do not deny that the Minister has a delicate balancing act to make, but let right be done. Let there be justice. How can we have such an extraordinary discrepancy? People think of rural areas as fundamentally prosperous. I represent Gainsborough, a small industrial town, and the south-west ward of Gainsborough is one of the most deprived wards in the entire country under any measure.

[Imran Hussain (Bradford East) (Lab)]

Will the hon. Gentleman give way?

[Sir Edward Leigh]

No, I must finish now. Rural areas nowadays are not like some Gainsborough or Constable painting. There are real areas of deprivation, and we ask for justice. We know that it is not practical to have absolute parity per head across the country, but it is totally unacceptable that, in a time of tightening, we are not bearing the burden equally. Are we not one nation? The settlement is totally unfair to the rural taxpayer and our rural authorities. It must be revisited.

--- Later in debate ---

[Mr Jones]

I have got very little time, but I have made my views on that point very clear to the House in recent months.

Hon. Members will have the chance to get involved in the process of business rate retention in the coming months. The Government do not underestimate the challenges. Local government representatives consistently tell me, as they told my predecessors over many years, that greater certainty about their income over the medium term would enable them to organise more efficiently and strategically, and put their safety-net reserves to more productive use. This settlement will for the first time ever offer a guaranteed budget to every council that desires one and can demonstrate efficiency savings for the next year and every year of the Parliament. Four-year settlements will give local government more certainty and confidence. Councils will also be able to spend 100% of capital receipts from asset sales to implement cost-saving reforms.

As we move to a world of full localisation of income, it does not make sense to talk simply about Government grants, as a number of Opposition Members did. As colleagues know, the revenue support grant will be phased out by 2020, but local government will still spend significant sums of money. Therefore, it makes more sense to talk about the wider measure of council spending power, which we improved after listening to the Public Accounts Committee and the Communities and Local Government Committee. We no longer include the NHS-scored better care fund or the ring-fenced public health grant in the calculation, since councils cannot spend those funds as they wish.

Overall, our proposals are fair. Councils’ core spending power will remain virtually unchanged over the Parliament—it will go from £44.5 billion in 2015-16 to £44.3 billion in 2019-20.

[Sir Edward Leigh]

Will the Minister give way on the issue of rural areas?

[Mr Jones]

I am sorry, but I have not got time to give way again. There are a number of things I need to talk about, but I will come to the issue of rural areas in a moment to address my hon. Friend’s earlier point.

Real-terms savings of 6.7% are required over this spending review period, compared with the 14% savings announced in the 2010 spending review. Even the Institute for Fiscal Studies recognises that that is substantially lower than the spending reductions that councils had to deliver between 2009-10 and 2015-16.

On adult social care, we responded to the clear call from all tiers of government and many colleagues in the House to recognise the importance of the growing cost of caring for our elderly population. The Local Government Association and the Association of Directors of Adult Social Services asked for £2.9 billion by 2020 as a contribution to the cost of social care. In the settlement, we make up to £3.5 billion available by that year. It will be distributed fairly to local authorities with social care responsibilities. There will also be a package of support for councils working with the local NHS to address pressures on care, a dedicated social care precept of 2% per year, and a fund of £1.5 billion by 2019-20 to complement the new precept. We recognise that councils providing services in rural areas face additional costs, so we have proposed that the rural services delivery grant should be quadrupled from £15.5 million this year to £65 million by 2019-20 to address those issues.

Let me cover one or two of the points that the hon. Member for Leicester West made. She and a number of other Opposition Members spent a lot of time talking about the effect that the reduction in central Government spending will have on local government. They have very quickly forgotten that their election manifesto clearly set out a path for reducing local government spending. They may wish to take that into account. The core spending power measure is the most accurate way of measuring councils’ expenditure. Leicester has a core spending power of £2,003 per household this year, compared with the English average of £1,829, so I hope that reassures the hon. Lady that Leicester is not getting a bad deal.

On the point made by the hon. Member for Croydon North (Mr Reed) about council tax, the Conservative party will not listen to any lectures from the Labour party. Council tax is 11% lower in real terms than it was five years ago. I remind the hon. Gentleman that council tax doubled under the Labour Government between 1997 and 2010, so the Labour party clearly says one thing in opposition and does something else in government.

We recognise the challenges that have been raised today and those that lie ahead. This is a time of big opportunity and expectation for local government reform. We are moving to a world long desired by local government, in which councils are financed by local sources. Whitehall’s apron strings will be cut. Central and local government are decisively addressing social care pressures, and we are beginning to design long-term integrated care and lasting local solutions.

I know that these changes require a lot of hard work from councils, but changes always do. However, I am confident that, after we have carefully considered the consultation responses before announcing the final settlement, and after we have undertaken a further period of meaningfully engaging and working with local government to design a 100% business rates retention scheme, hon. Members will agree that a better future of proper local control is becoming a reality at last.