Local Government Finance (England)

Baroness Laing of Elderslie Excerpts

Wednesday 10th February 2021 Commons Chamber

[The Secretary of State for Housing, Communities and Local Government (Robert Jenrick)]

I beg to move,

That the Local Government Finance Report (England) 2021-22 (HC 1200), which was laid before this House on 4 February, be approved.

[Madam Deputy Speaker (Dame Eleanor Laing)]

With this it will be convenient to consider the following motions:

That the Referendums relating to Council Tax Increases (Alternative Notional Amounts) (England) Report 2021-22 (HC 1201), which was laid before this House on 4 February, be approved.

That the Referendums relating to Council Tax Increases (Principles) (England) Report 2021-22 (HC 1202), which was laid before this House on 4 February, be approved.

[Robert Jenrick]

Among the many acts of heroism that we have seen over the past year, the quiet dedication, hard work and compassion shown by all who serve their communities in local government has truly shone through. I am sincerely thankful for their efforts. I am grateful to them for protecting the most vulnerable, including those who are shielding from the pandemic, and providing unprecedented levels of support through Everyone In to reduce rough sleeping, bringing it to the lowest levels that we have seen for many years. I am grateful to councils for their support for local businesses, enterprises and entrepreneurs; for keeping essential public services going against the odds; and for the part that they are now playing in the success of our national vaccine programme, ensuring that it reaches all communities and paving the way for our recovery as a nation later this year.

From the outset of the pandemic, we promised to do everything within our power to support local authorities during this most unusual and difficult time. Our local government financial settlement shows that we have kept that promise, with a real-terms increase in core spending power and a guarantee that no council anywhere in the land will receive less funding than it did last year. That stands alongside an unprecedented package of covid-19 support this year and next year, totalling more than £11 billion directly to councils and £30 billion in additional help for local councils and their businesses and communities.

The settlement strengthens social care, with councils able to access an additional £1 billion, comprising £300 million from the social care grant and a 3% adult social care council tax precept. It also supports children’s social care, helping councils to provide better services for the most vulnerable children in society, children in care and children with disabilities. Those vital services have experienced severe disruption over the last few months and will no doubt experience further demand as we ease lockdown and move forward as a country.

Balancing the contributions of national and local taxpayers, this settlement gives councils increased flexibility, with a 2% council tax referendum limit for most authorities and an extra 3% for social care authorities, which councils may choose to defer until 2022-23. I can inform the House that many councils, particularly Conservative ones, are indeed doing so. The council tax referendum principles are not a cap, nor do they force councils to set taxes at the threshold level. Councils should and must consider the financial concerns of local residents at this most challenging time, alongside the public’s support for action on keeping our streets safe and providing essential services.

Recognising the vital door-to-door services that councils deliver day in, day out to the most isolated, our settlement provides an extra £4 million to authorities in remote rural areas through the rural services delivery grant, taking the total to £85 million—the highest contribution to the delivery of public services in our rural areas to date. Lower- tier local councils will also receive a new £111 million lower-tier services grant, with main funding allocations for the full range of council services rising in line with inflation.

Finally, we know that the new homes bonus accounts for a considerable part of funding for many councils. We are therefore implementing a further round of the bonus allocations, with the same 0.4% funding baseline as last year and no new legacy payments on the new round. We will reform it over the course of next year to ensure that this significant amount of money is focused on the councils that are keenest to build, build, build and get the homes this country needs under way.

While these measures are providing confidence and stability, we know that councils will continue to face very unusual challenges as a result of covid-19 for quite some time, despite all the success of the vaccine roll-out, so today I am setting out further details of nearly £3 billion in additional covid-19 support for councils next year. We were able to provide certainty to local councils in December on allocations for £1.55 billion of unring-fenced funding, and I am now very pleased to confirm, on top of the funding already provided in the settlement, the final allocations for £670 million of grant funding for local council tax support. This helps local authorities to continue reducing council tax bills for those who are finding it hardest to pay.

We have also provided our published final position on the extension of the sales, fees and charges scheme from April to June 2021, a vital safety net for councils facing lost income as a result of covid-19, ensuring that everything—from the local car parks to our theatres, heritage attractions and all the things that local councils provide and which demand income to keep going—will have that guarantee of certainty and confidence to move forward until at least the mid-point of this calendar year. They will soon receive grant funding reflecting 75% of irrecoverable losses in their council tax and business rates income from 2020-21, with an up-front payment early in the financial year to aid cash flow. In both respects, we have listened to the sector, acted and provided them with the certainty and the resources they need. We made promises and we have kept them, and we are making sure that local councils can continue to deliver for their citizens.

We know that a handful of councils face serious financial challenges—some, it has to be said, due to very poor management, but others due to the exceptional events of the past year. There is quite a broad range, and today we are publishing details of the targeted support that we are providing to four councils unable to balance their budgets without some additional recourse to Government. This aid is provided on an exceptional basis, with these councils being subject to rigorous reviews of their financial positions, their governance and their ability to meet some or all of their budget gaps for the next year without Government funding. Taxpayer support of this kind is never provided lightly, and in return for the increased flexibility afforded to councils next year, we expect sound financial management, with residents shielded from unaffordable increases.

I wish I could say that here, in our nation’s great capital, the Greater London Authority is blazing a trail that others might wish to follow, but, sadly, the opposite is true. I have reluctantly placed before the House today a principle to allow for the Mayor of London’s request to increase council tax by £15 on band D properties without holding a referendum in order to fund transport concessions above the level available elsewhere. This brings the total increase in precept he is seeking from Londoners to nearly 10%. While the final decision on the increases rests with the Mayor, and with the Mayor alone, I would urge him to abandon this ill-judged pursuit of tax hikes and to behave responsibly at a time of great difficulty for Londoners.

We want to unite and level up our councils, as we do the whole of the country, and to build back better from this pandemic and stronger than before. That starts with holding local polls in May this year. We said that further delaying elections would require a high bar, and the huge success of our vaccine programme gives us confidence that we can and should now move forwards. More than ever, people deserve their say on issues ranging from safer streets to the level of council tax, and we are providing £15 million to ensure that our polls are made covid- secure. My Department and the Cabinet Office will do all we can to support local council officers and the brilliant staff and volunteers of polling stations the length and breadth of England with the hard work and challenges that lie ahead. We want to ensure that the process is as smooth as possible and, in particular, that as many schools as possible can remain open.

We know that there are challenges posed by the pandemic, of course there are, and we also know that the scars are likely to take time to heal, but we are not cowed by them. We want to work together to learn from our experiences and to solve long-term problems in local government, because councils will be the thread running through our response to each and every one of these issues. We will empower them to reboot and restart vital public services on which communities depend, from health to justice: making sure that vulnerable children get the care that they need; helping schools to see children returned safely and address lost learning, particularly in our most deprived communities; and increasing funding for social care to help tackle the backlog in assessments while laying the foundations for future reforms and a sustainable future for the sector for decades to come.

As we tackle those issues, we will help councils to grapple with the sharp drops in footfall that we have seen on our high streets, and the knock-on effects for local businesses. Our £3.6 billion towns fund and the urban centre recovery taskforce will ensure that our towns and city centres are renewed and become once again the vibrant places that we love and that we want to see people living, working and shopping in again, and attracting tourists from home and abroad.

Our £900 million getting building fund is integral to this work, kickstarting local recoveries and delivering the next generation of roads, bridges, 5G networks and full-fibre broadband, with more than 50% of the shovel-ready projects already started, creating thousands of jobs all over the country. Our £4 billion new levelling up fund will invest in high-value local projects, regenerating eyesores, upgrading town centres, breathing new life into local arts and culture and, above all, creating and sustaining jobs. We will be setting out more details on that shortly through my right hon Friend the Chancellor.

In each and every one of these endeavours, we see a very strong role for local councils, knowing their communities best and being at the heart of their future economic recovery. We do this while helping councils to seize new opportunities, particularly in technology. We do not intend to return to the way that things were done before by default. As we leave the pandemic, we want to ensure that councils build back better, build better public services and embrace some of the good things that have come out of this unusual period. Councils have rightly embraced meeting and working remotely, and we will build on reforms to digitise our planning system, utilise our local digital fund and ensure that local authorities fully embrace moving more meetings, services and processes online, transforming how they deliver for residents, for their staff and for the country.

We will work with councils to build back better from the pandemic, becoming a more prosperous, greener, safer and more neighbourly country. Local councillors will be a golden thread woven through the fabric of that better country. The settlement that we are debating today provides local councils with the resources that they need to plan for the future. It recognises the role that councils have played every day at the forefront of our response to covid-19, and we thank and salute them for the hard work that they have done on our behalf. This settlement places them at the heart of our national recovery. I commend this motion to the House.

[Madam Deputy Speaker (Dame Eleanor Laing)]

I should inform the House that the Order Paper notes that these instruments have not yet been considered by the Select Committee on Statutory Instruments. I have now just been informed that the Committee has in fact considered the instruments and has not drawn them to the attention of the House. The Committee’s report will be published on Friday.

[Steve Reed (Croydon North) (Lab/Co-op)]

I start by echoing the Secretary of State’s praise for frontline council workers and others involved in delivering frontline public services, including volunteers. They really have done a tremendous, heroic job in supporting communities through the unprecedented circumstances of the past year.

Last November, the Chancellor of the Exchequer told councils that he would

“increase their core spending power by 4.5%.”—[Official Report, 25 November 2020; Vol. 684, c. 829.]

The Communities Secretary followed suit, telling us that English councils would see a

“4.5% real-terms cash increase in core spending power”—[Official Report, 17 December 2020; Vol. 686, c. 431.]

What they did not make quite so clear was that those funding increases were based on the assumption that council tax would go up by 5%. To be clear, in the Treasury spreadsheets, that is an assumption, not an option.

It is hard to believe, but this Conservative Government have chosen to clobber hard-working families with a council tax hike after the Government’s incompetence left the country facing the worst crisis of any major economy. Household budgets are under pressure like never before. Millions of people are fearful for their job security. Millions have seen their incomes plunge. Millions more families are using food banks or going into debt just to survive, and now, thanks to the Government, families are being forced to pay the price for Conservative failure with a council tax hike made in Downing Street.

We know that Government Members have been coached to say that councils have a choice in this, but with social care by far the biggest factor driving up councils’ costs, there is no real choice at all. Councils that refused to implement the Tory council tax hike would have to cut social care for older people in the middle of an unprecedented health crisis that is primarily affecting the same older people.

Let us not forget that because a council tax increase raises less money in poorer areas, the Government are deepening the postcode lottery for social care, instead of ensuring that every older and disabled person gets the care they need, wherever they live. The Government are not levelling the country up, in the way the Secretary of State just described. Instead, they are pulling it apart.

We know the Government recognise that there is a social care crisis, because the Prime Minister admitted it on the day he entered No. 10 Downing Street. He boasted that he had a plan to fix it, but no one has seen a dot or a comma of it ever since. All we have seen are sticking plasters while the crisis rages on and more and more older people are denied the care they need and deserve. The Government’s failure is simply increasing the pressure on our NHS when we should be doing all we can to protect it.

Last March, the Chancellor told councils that he would fund them to do “whatever it takes” to get communities through the pandemic. On the back of that promise, councils set to work correcting the Government’s failures on personal protective equipment distribution, contact tracing, shielding and much more, but the Government did not repay those costs. Instead, they left councils facing a £2.5 billion funding black hole. That is not my figure; it comes from the Conservative-led Local Government Association. If the Government had not broken their promises, there would be no need to plug the gap now with a council tax increase.

Perhaps the Government could not find £2 billion to prevent a council tax rise because they had already stuffed the money into their friends’ pockets. Despite stark warnings from the National Audit Office last November, the Government have handed out £2 billion in crony contracts to companies with close personal links to senior Conservative party politicians. More than 500 companies were fast-tracked for covid-related contracts simply because they had relationships with Conservative MPs. That made them 10 times more likely to secure contracts than other businesses that could well have done the job better.

The chairman of Clipper Logistics donated £725,000 to the Conservative party. He was rewarded with a £1.3 million contract to set up an Amazon-style PPE distribution network. Instead of the next-day delivery service that care workers were promised, they had to wait so long to receive any PPE at all that town halls had to pay to go out and find their own. Then there is Randox, which pays the Conservative right hon. Member for North Shropshire (Mr Paterson) handsomely to act as an adviser. The Government gave Randox a contract worth half a billion pounds last year to provide covid tests, but they were so defective that 750,000 had to be recalled.

Serco, of course, is responsible for the Prime Minister’s “world-beating” test and trace system, which is so world-beating that the Government’s Scientific Advisory Group for Emergencies described it last year as having only a “marginal impact” on reducing the spread of the virus. It never worked properly, but it cost £22 billion. Serco’s chief executive is the brother of a former Conservative MP and his wife has donated thousands of pounds to the Conservative party. The company counts among its former senior executives the current Minister for Health. The Government handed Serco a £108 million contract for a failing system that could have been run better by directors of public health for a fraction of the cost, and then Ministers rewarded that catastrophic failure with another £57 million contract for “management services support” at testing sites. This is not the behaviour we would expect in an advanced democracy such as our great country; it is the wilful incompetence and endemic cronyism that we would expect in a tinpot dictatorship.

The Government are simply wrong to force councils to hike up council tax after their own mistakes led this country into the deepest recession of any major economy. Not only is it unfair on the families forced to pay the price of Tory failure, but it is economically illiterate, because hitting people with tax rises in the middle of a pandemic makes them tighten their belts and stop spending, when we should be rebuilding confidence to promote economic recovery.

The Conservatives’ priorities are wrong, which is why Labour will not vote for their Tory tax hikes today. They should be helping families manage hard-pressed household budgets, not stuffing billions of pounds into the pockets of Tory party donors. They should be fixing the social care crisis, not forcing hard-working people to pay more but get less as social care is cut back even harder. They should be promoting economic recovery on our high streets, not choking off spending with tax hikes at a time when families are struggling simply to make ends meet. But it is still not too late. I urge the Government to think again, scrap Rishi Sunak’s council tax bombshell—

[Madam Deputy Speaker (Dame Eleanor Laing)]

Order. The hon. Gentleman must refer to the Chancellor of the Exchequer as the Chancellor of the Exchequer or as the right hon. Gentleman, and not refer to him by using his name.

[Steve Reed]

I absolutely agree. I urge the Government to think again, scrap the Chancellor’s council tax bomb- shell, stop stuffing billions of pounds into Conservative party donors’ pockets and stand by their commitment to support councils and communities to get through this crisis.

[Madam Deputy Speaker]

I am sorry to have stopped the hon. Gentleman in his peroration, but it is really important in these times, when things are not normal in this Chamber, that we stick to the highest standards, and I thank him for immediately putting right his phraseology. It was not a great mistake, and I am grateful for his support.