Local Authority Financial Sustainability: NAO Report

Emma Hardy Excerpts

Tuesday 20th March 2018 Westminster Hall

[Emma Hardy (Kingston upon Hull West and Hessle) (Lab)]

I thank my hon. Friend the Member for Weaver Vale (Mike Amesbury) for securing the debate. My constituency covers both the Conservative-controlled East Riding of Yorkshire Council and the Labour-controlled Hull City Council, and the messages coming out of both councils are very similar. This is not fake news. Instead, it is the hard truth and reality of the cuts faced by both councils.

Hull City Council’s social care spend equates to 60% of its entire budget, and it is rising as a proportion of its total spend by 4% to 5% every year. It told me that it spends 37% of its total budget just on adult social care. It spends 23% of its total budget on children’s services. Yet since 2010 the council’s budget has been reduced by a staggering £126 million. This year it received £5.3 million less than it did the year before. Is it any wonder that it does not have the money to repair the potholes in the roads, or to invest in many other needed services?

Recently we had a situation in which Hull City Council was desperately trying to move money around to fund the rising demand and cost of adult social care and children’s services. One of the things it was looking at having to cut was its peer-to-peer support for breastfeeding mothers. In the end, it was able to find some money, but that means money coming from elsewhere. When I talked to the council about that, it was not because it wanted to take support away from breastfeeding mothers, but because every choice is an impossible choice. Either it takes money away from supporting breastfeeding mothers, or it cannot give it to support homeless projects in the constituency, to repair the play equipment in the parks or to deal with the increasing pothole problem. Every choice the council makes is an impossible choice.

Hull West and Hessle is a wonderful place to live, with great people. I am particularly delighted to see two of my constituents sitting in the Gallery and delighted that they can be here today. We are very proud of where we live, but we would be lying if we said that it did not have some significant problems. It is the third most deprived local authority in the whole country. A report by End Child Poverty has revealed that more than 20,000 children in Hull are living below the poverty line. That is one third of all the children in Hull living in poverty. In East Yorkshire, over 20% of children live in poverty.

As austerity continues to bite, the demand for social care continues to grow and Hull City Council simply does not have the council tax base from which to fund it. Some 68% of properties in Hull are in band A. We would be hard pushed, looking around our surroundings here in Westminster, to find a single property that is anything below band C. The number of people over 65 in Hull is forecast to increase by 6% by 2020, which of course will increase demand, but only 7% of people needing adult social care can self-fund it; everybody else is reliant on the council. Two thirds more residents in Hull require social care compared with the national average.

The picture I am trying to paint for hon. Members is of a city that simply does not have the ability to raise its own money to fund a problem that is greater, and growing more quickly, than in many other parts of the country. Hull City Council will get the lowest amount per head from the social care precept of any Yorkshire and Humber council. It has a very low tax base. If people want to raise the precept by 1%, fine, but in Hull that will raise £2.90 per head, compared with £7.08 per head in the City of London. They simply cannot be compared. Hull City Council is 81% reliant on the revenue grant from Government. It does not have the ability to self-fund, but still, even with all these problems so clearly laid out, it will have to cut another £16 million from its social care budget, or find cuts in all the other budgets.

It angers me that there are Liberal Democrat councillors in Hull criticising the council for making those cuts and for the consequences. I wonder how long their memories are. I wonder whether they remember that they were part of the coalition Government who in 2010 voted through all those cuts. When they stand there and criticise Hull City Council for not being able to repair the parks or the potholes, I wonder whether they could cast their minds back to being the people who took away that money in the first place.

Conservative-controlled East Riding of Yorkshire Council has said that the additional £2 billion for adult social care announced in the 2017 spring Budget was welcome, but said,

“if it is the Government’s wish to continue to safeguard some of the most vulnerable people, this scheme needs more investment and the human cost of failure in such an essential service is huge.”

That is a quote from the Conservative-controlled East Riding of Yorkshire Council. Even that council says that it does not have the funds needed. I know it has already spent all the reserves it has. Where is it going to find the money from in the future? It wants the Government to look at extending the additional £2 billion beyond 2019-20.

Cities such as Hull, with high needs, significant deprivation and a very low tax base, have limited ability to generate income. It is therefore essential that the Government’s future financial settlement calculations recognise and make allowances for those differences, challenges and variations. It is positive that the National Audit Office recommendations seem to be informed by a realistic understanding of the national position facing local authorities. If the recommendations were implemented in full, there would hopefully be some potential improvement.

While councils and their partners are making and continue to make strenuous local efforts to protect statutory services and to cope with the great pressures affecting children’s services and adult services in particular, it is simply the Government who must ensure that the national system is fit for purpose. People in Hull West and Hessle are tired of “make do and mend.” They are tired of tough and impossible choices. As East Riding of Yorkshire Council put it, “Salami slicing from other grant streams is not sustainable.”

We want our roads fixed, we want our parks to have new equipment and I know how much Friends of Pickering Park want their aviary back, but none of that can happen with the year-on-year cuts at the same time as the rising demand. My constituents deserve so much more. There is no justification for the continued underfunding, and the previous Liberal-Tory coalition’s mantra, “We’re all in this together,” just rings empty. It is time to end austerity, implement the National Audit Office’s recommendations and fund our local councils properly.

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[Jo Platt (Leigh) (Lab/Co-op)]

I thank my hon. Friend the Member for Weaver Vale (Mike Amesbury) for securing this vital debate. Local authorities across the country are at a tipping point. Eight years of Tory austerity have decimated our local councils, with my local authority of Wigan facing an additional 30% cut to its budget, which will mean £160 million taken out of its budget by 2020.

Prior to coming to the House, I was a local councillor. I saw at first hand the impact of the cuts inflicted to services, particularly on the most vulnerable. It is really important to note that cuts to local authorities are not just cuts to their services—the cuts to support services are just as barbaric. For example, in my area there has been a 20% rise in domestic violence, which is little wonder when local registered charities also lose their funding due to the financial pressures on local authorities via commissioning streams. The same can be said for homelessness, in which we have seen a huge surge nationally. Local cuts to early intervention and prevention grants have only exacerbated the problem. I urge the Minister to take that into consideration when she next thinks about the causes of homelessness.

Councils should have the resources to provide emergency accommodation and council housing to those most in need and to offer the support to transform people’s lives. However, the Government have time and again shifted the responsibility on to local authorities while dramatically cutting their budgets. Quite simply, our local councils are unable to cope any further with the increased responsibility placed on them by central Government without the means to deliver.

Without the resources to deliver, where do councils turn? As my hon. Friend the Member for Kingston upon Hull West and Hessle (Emma Hardy) mentioned, they turn to their reserves. However, reserves are not pots of money that councils sit on for fun, as they are often characterised by the Government. Local authorities rely on these reserves to transform their services, as has been the case in my local authority. They are also called on in emergencies to ensure that councils remain operational.

[Emma Hardy]

My hon. Friend is absolutely right about reserves. In 2007, Hull was hit by terrible flooding, which caused a lot of damage. One thing reserves are used for is for emergencies like that—to deal with unforeseen disasters. What will happen if we have a similar flood situation again and the council has spent all its reserves?

[Jo Platt]

I completely agree. We could all mention many instances where the reserves have come into play.

The scale of cuts faced by councils has meant that many have been forced to eat into the reserves to provide the everyday essential services that we all rely on. That is not only unsustainable, but reckless—we cannot play Catch-22 with the fate of our vital local councils. Doing so has led to the frankly astonishing reality of the National Audit Office warning that 10% of councils will exhaust their reserves within three years.

For me, there is another elephant in the room: Brexit. As the Brexit process continues, local authorities are still unaware of the impact that leaving the EU will have on their finances—business rates retention, for example. They also have to deal with the loss of EU structural funding: both areas on which the Government have not given sufficient assurances.

Our councils face the greatest crisis in living memory: an assault on their funding while also adopting ever more responsibility. Put simply, they have been passed the buck without the bucks. The Government’s unsustainable position must come to an end. If they are serious about delivering on housing, about social mobility and about giving powers to local communities, they need to provide the funding that our councils deserve.

[Andrew Gwynne (Denton and Reddish) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Evans. I congratulate my hon. Friend the Member for Weaver Vale (Mike Amesbury) on securing this absolutely crucial debate today. I thank the many Labour Members who have contributed, particularly those who made speeches: my hon. Friends the Members for Peterborough (Fiona Onasanya), for Kingston upon Hull West and Hessle (Emma Hardy), for Liverpool, Walton (Dan Carden), for North West Durham (Laura Pidcock) and for Leigh (Jo Platt). They speak up on behalf of their communities, who are really struggling in the face of eight years of Tory austerity.

I find it bitterly surprising that there is not a single member of the parliamentary Conservative party here, save for the Minister and her Parliamentary Private Secretary. I cannot believe that after eight years of cuts and the destruction and decimation of our public services, there is not a single member of the Conservative party willing to stand up for their communities and to say to the Minister and the Government, “Enough is enough!”

[Emma Hardy]

I have already spoken about the cuts facing the East Riding of Yorkshire Council. My constituency represents a very small part of that council, but the Conservative Members of Parliament that represent the council, such as the hon. Member for Beverley and Holderness (Graham Stuart), are not here. Why is it left to Labour MPs to give the Government the message about what is happening in their own Conservative-controlled councils?

[Andrew Gwynne]

I agree wholeheartedly with my hon. Friend. As I said, I find it bitterly surprising. When we talk to Conservative Members in private, they are as concerned about what is going on in their own communities as Labour Members are. When we look at what is happening across local government, it is not just the Opposition raising concerns.

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[Andrew Gwynne]

I will let the Minister speak for herself. We know that local authorities have to provide social care and that it is not the social care services that necessarily get squeezed, but all the other services that many of our residents access on a day-to-day basis. Most of our constituents do not access adult social care unless they have an elderly relative who needs it and they do not access children’s social care unless they have a child in the system, but they expect their parks to be well maintained, their streets to be adequately surfaced, street lighting to be fixed, and litter to be picked up. They expect basic decent services, and it is those services that are being cut.

[Emma Hardy]

Exactly. There are cuts to the local library service, for example. Local libraries have had to reduce their opening times, and yet the move towards universal credit means that everybody is expected to apply online. They were told, “Go to your library and use the computers there,” but there are not enough computers in the local library and it is not open as much as it used to be. That is another consequence of the cuts and it shows a lack of joined-up thinking, a lack of forward planning and a lack of consideration and regard for the people in the poorer parts of this country.

[Andrew Gwynne]

Absolutely. Those are the pressures facing our communities. We talk about local services as though they are isolated from one another, but they are the life blood of many towns, villages and communities. Library services, welfare support and advice, and housing services are crucial elements of what makes communities tick and brings them together.

I speak not only in my role as shadow Secretary of State for Housing, Communities and Local Government but as someone with a fundamental belief in local government’s power to make a difference. I spent 12 mainly happy years, and my wife is nearing her 18th year, as a Tameside councillor. I want to add to the thanks that my hon. Friend the Member for Weaver Vale expressed in his speech. We do not thank nearly often enough those, of all political parties and none, who serve as councillors and elected Mayors, or the staff and officers who implement councillors’ decisions. I offer thanks and appreciation to all those who work in our communities as elected members and local authority staff and officers. They are on the frontline of defending public services. Not only that, but they are the last line of defence when it comes to making the tough decisions that the Government have forced on them. I recognise the way many of them value and take pride in their position as councillors.

The National Audit Office’s assessment of the Ministry of Housing, Communities and Local Government makes for rather uncomfortable reading. Fundamental to the argument presented by the NAO is the failure of the Ministry to present a long-term strategy for the sector. As a result, even the four-year settlement that we were told was intended to offer some financial stability just kicked the can down the road. Authorities face major funding uncertainties beyond 2019-20.

Even within those four years of supposed certainty, local government has had to deal with rapidly shifting priorities from central Government—often announced at relatively short notice. It is reported by the NAO that the majority of case study authorities with social care responsibilities that it spoke to said that central Government funding outside the settlement had changed a number of times. An example was the new homes bonus being repurposed to fund adult social care.

We are told that

“The Department’s view is that these changes reflect considered responses to new pressures and risks”.

Anyone who has been following the issue would know that those pressures and risks have been growing since the beginning of the decade. As will ring true for many of my hon. Friends who have spoken today, over the decade from 2010 to 2020 Tameside will have lost close to £200 million in funding. Stockport will have lost well over £100 million. We can, as I have said, never fill those gaps with council tax alone. Although Stockport has a slightly better and more advantageous council tax base than the Tameside part of my constituency, this year it will have to find a further £18 million of savings—or cuts, as I like to call them—which is leading to consultation of residents about some drastic changes to the delivery of social care.

Tameside has said that demand for its services is at unprecedented levels. That is because of the wider impact of austerity on the public purse. If we operate in silos, there should be no surprise when cost-shunting presents itself as a problem on the town hall doorstep. Whether it is the closure of Sure Start centres or early intervention and family support, or the reduction in the number of domestic violence officers who used to be employed by the police, resulting in children being presented as safeguarding cases to the local authority, everything moves one way—from one part of the public sector to another. It may be councils pushing on to the NHS or police pushing on to councils, but it is a merry-go-round of self-defeating prophecy. We must stop that, and fund services properly.

Elsewhere in the report, we were told that the Government are working towards implementing the fair funding review. However, the implications of that are not yet clear. I must be honest with the Minister: anything that comes from a Minister’s mouth and that includes the words “fair”, “funding” and “local government settlement” sends shivers down my spine. We sure know what that means: that the Tamesides, Stockports, Liverpools, Durhams, Leighs, Wigans and Hulls—I could rattle through all the areas—will almost certainly end up with less money. As sure as night follows day, that is what happens when the Tory Government instigate funding changes to local government. Yet we have real social need, and are not able to raise money directly. What we see is the culmination of a crisis facing local government across England. What certainty can the Minister give our councils that they will get a fair funding settlement reflecting the areas’ needs and their inability to make up funding gaps through other sources? So far that has been badly lacking.

I want to end by discussing today’s crisis. Tory Northamptonshire is the first council effectively to declare bankruptcy, but it will almost certainly not be the last. The NAO reckons that in the next few years, unless the funding settlement improves considerably, one in 10 councils with social care responsibilities will have exhausted their reserves and, almost certainly, be in a similar predicament.

How did Northamptonshire, which by any standard is a wealthy part of the country, with a good council tax base, end up with an overspend at this year end of about £21 million, and reserves depleted to about £17 million? I will tell the House how it happened: it took the advice of the former Secretary of State, Sir Eric Pickles, who said that rather than complaining about cuts councils should spend their reserves. Once reserves are spent the money is gone; once the assets are sold, the asset base is gone. Once the money is gone, councils have to make cuts and take difficult decisions.

[Andrew Gwynne]

It absolutely is, but if it was compounded by Tory mismanagement at local level in Northamptonshire, the root cause of the problem undoubtedly came from the Tory Government. They have, as we heard from my hon. Friend the Member for Weaver Vale and the National Audit Office, presided over cuts of almost 50% in central Government funding to councils. That is unsustainable. If we want councils and councillors to facilitate services of such a quality as to provide dignity to the elderly and the best start for the young, and to provide the general population with quality public services, that must be funded.

[Emma Hardy]

We have talked a lot about percentages and money, but I want to mention something a little more individual: the incredible increase in the number of looked-after children in my constituency, which has gone up by 140. We have one of the highest numbers in the country, and that is a consequence of the cuts. That is what happens when cuts take place.

Councils do not have the money for early intervention or the other services that used to provide that extra family support. Such support does not exist anymore, because all that is left is the statutory service. Sure Start used to be available for wider family participation; groups that anybody could take their child to are now open only to a small number of people who have a particular identified need. That all contributes to the increasing number of looked-after children. We cannot just sit here and ignore it: 140 children’s lives have been changed forever.

[Andrew Gwynne]

My hon. Friend is absolutely right. Indeed, it is worse than that because we need to rebuild these services, yet over the past eight years we have lost thousands of dedicated council workers and staff. We have lost the corporate knowledge and history that was embedded in our local authorities. This is not just a question of money; it is difficult to rebuild overnight that capacity in our local councils.

The reality of Government cuts is laid bare in the National Audit Office report. Planning and development has been cut by 52.8%. If we are to meet the Government’s targets for new homes, who will be the strategic planners of the future to identify the land? Who will be the planning officers who implement planning applications? Who will be the planning enforcement officers and ensure that homes and buildings are built in accordance with the plans? Transport funding has been cut by 37.1%. These are our bus routes and the vital links between communities; these are our roads, pavements and cycleways. These cuts are unsustainable.

[Emma Hardy]

The Government talk the good talk on social mobility and say how important that is, but at the moment there are young apprentices who live in rural areas and cannot afford to do an apprenticeship or attend college, or they cannot get there because there are no local transport services for them to use.

[Andrew Gwynne]

Absolutely. This is about our museums, heritage, and cultural services—the glue that makes our communities tick. It is about who we are and that sense of place, yet funding has been cut by 34.9%. Housing services are not just about ensuring that people have roofs over their head. They are about support for the homeless and ensuring that our housing market works correctly. They are about tackling the scourge of rough sleeping, yet funding has been cut by 45.6%.

When a Government have created a £5.8 billion gap in local government funding, when everyone is saying that social care is on its knees, and when children’s services need an additional £2 billion, this Secretary of State, this Minister and this Tory Government stick their heads in the sand. They fail to give our services the money they need, and they ignore the crisis that is happening on their watch to our services and communities. We need a Government who are committed to our local councils and to rebuilding our communities. We need a Labour Government for the many, not the few.

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[Thelma Walker]

rose—

[Emma Hardy]

Will the Minister give way?

[Mrs Wheeler]

No, I am going to carry on. As I said, alongside the new methodology, the Government are committed to giving local authorities greater control over the money they raise, which we are doing through our plans for increasing business rates retention. Local authorities are the engines of local growth. They know best the levers to pull to boost their business rates, which is why business rates retention is an important move. Our aim is for local authorities to retain 75% of business rates from 2020-21, with the other 25% going to councils that do not have a large business rates take.

[Emma Hardy]

On that point, if I am not able to make the point that I was going to make previously, I want to ask this: will the system make allowances for councils such as Hull? Currently, 81% of its income comes from the Government revenue grant and only 19% can be raised locally.

[Mrs Wheeler]

Yes, indeed. Forgive me for repeating myself, Mr Evans: 25% will go to the councils that do not have large business rates retention.

[Emma Hardy]

The Minister says 25%. Hull City Council currently relies on the Government revenue grant for 81% of its income, not 75%.

[Mrs Wheeler]

The business rates for the City of London are many, many millions of pounds. The money that is split out goes to the rest of the country.