Local Authority Financial Sustainability: NAO Report

Fiona Onasanya Excerpts

Tuesday 20th March 2018 Westminster Hall

[Fiona Onasanya (Peterborough) (Lab)]

I thank my hon. Friend the Member for Weaver Vale (Mike Amesbury) for securing this important debate. In February I asked the Chief Secretary to the Treasury how my authority is expected to meet the rising demands of adult social care and children’s services, despite devastating funding cuts. She argued that councils have been given the ability to increase council tax levels to pay for those services. However, that new flexibility—namely, to increase council tax to pay for social care, as my council has had to do—and indeed the introduction of the improved better care fund, have associated conditions that might limit the flexibility of some local authorities to spend on social care funding as well as local priorities, thus disproportionately harming low-income families. Austerity is expensive. It has not tackled the deficit; rather, it has passed it on to public services.

In March 2018 the National Audit Office reported that many local authorities rely on their savings to fund local services and increasingly find themselves in an unsustainable financial position. We cannot keep cutting their funding and expect them to do more with less. In my constituency there has been a real-terms cut of 10.6% in adult social care, almost double the national average, and the Government have committed no further funding for social care in the Budget. The money offered to councils in the local government finance settlement is nowhere near enough to calm the crisis.

My constituents have repeatedly described social services as a nightmare. In Peterborough, 17,638 people are over the age of 65 and, of them, 2,171 are unpaid carers and 6,802 live alone. Cambridgeshire and Peterborough clinical commissioning group would have received an extra £30.3 million if it was funded in line with the national average. The CCG was ranked 204th out of 207 for the level of funding received from NHS England.

Services are overstretched, and the recent trends in the level of funding are unsustainable and unacceptable. Peterborough’s needs have been attended to on the cheap for far too long. As a consequence, cracks are beginning to appear in our services. Our needs have not been properly or adequately addressed, and the current settlement is blatantly below par.

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[Andrew Gwynne]

I am grateful to the hon. Lady. I will be kind to her because she was my son’s German teacher at Audenshaw School. She is right to acknowledge the role that the Liberal Democrats played in this matter. I know she was not a Member of this House when the cuts were made, but some of the most damaging and deepest cuts made to local government happened under the coalition Government. Not a single Liberal Democrat Member of Parliament stood up, spoke out and voted against those cuts, so I am afraid the Liberal Democrats do have a responsibility for the state that local government is in today.

However, the hon. Lady is absolutely right to say that enough is enough. Local government is in crisis—and it is not the Labour party saying that, but the National Audit Office and the Tory-controlled Local Government Association.

[Fiona Onasanya]

In my constituency, Peterborough is run by a Conservative council, which has come to me and said, “Will you join us and lobby Government and say enough is enough? Stand up for Peterborough. We do not have enough funds. We cannot continue to do more with less.” Does my hon. Friend agree that the Government need to listen to their own voices from within and stop the cuts?

[Andrew Gwynne]

I absolutely agree. The Tory-controlled Local Government Association and Tory-controlled County Councils Network speak with one voice in the local government family, which is that local government is on its knees, our public services are struggling and local government cannot carry on if the cuts continue over the coming years. We know what is happening because it is happening today. Tory-controlled Surrey County Council, in one of the richest parts of the country, is complaining that it does not have enough money. If Surrey County Council has not got enough money, what hope have the Liverpools, the Tamesides and the Hulls of this world?

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[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.

[Fiona Onasanya]

Does my hon. Friend agree that the situation is a clear case of knowing the price of everything and the value of nothing?

[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.

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[Mrs Wheeler]

I am always delighted to hear the dexterity of mathematicians in this building. It is £44 billion up to £45 billion, which I see as an increase. [Interruption.] I will move on. Local government and the NHS have worked in collaboration this year to deliver significant improvements in care. That is highlighted by the 26% reduction in delayed transfers of care, when comparing February this year with February last year. That is not all, however, because a further £150 million is being made available in 2018-19 for adult social care support grants. That, alongside the freedom to raise more money more quickly through the use of the adult social care precept, and the improved better care programme, means that councils have access to £9.4 billion in dedicated adult social care funding over the three years from 2017-18 to 2019-20.

[Fiona Onasanya]

Listening to the figures being presented, I understand the proposition that there has been an increase in funding. However, as Labour Members have said in their contributions, in real terms this is not an increase because supply is not keeping up with demand. I feel that this is like the emperor’s new clothes—the emperor seeks to describe the elegant, flamboyant gown that he is wearing, but actually he is completely naked. The amounts that the Minister is talking about do not keep up with the demand. These are demand-led services, and that is the point we are seeking to make.

[Mrs Wheeler]

The hon. Lady makes her point very elegantly, but I prefer the dress she is wearing today to ones I might imagine.

Alongside the £150 million for adult social care support grants, there is the freedom to access £9.4 billion up to 2019-20. I make it absolutely clear that real improvements are being made in adult social care services. That is in relation to the delayed transfers that have happened and the change whereby the NHS is working so much better by working hand in hand with local government. There has been such an improvement.

Like the NAO, we recognise the importance of investment in prevention and in high-quality children’s services. That is why the Government have invested almost £250 million since 2014 to help the children’s social care sector to innovate and redesign service delivery to achieve higher quality and better value for money. We have also invested £920 million in the troubled families programme, reducing the number of children in need.

I would like to say something about our work to deliver a fairer funding settlement for local government—I do appreciate the comments from the hon. Member for Denton and Reddish (Andrew Gwynne) on this matter. We all know that we live in a changing world. Over the years, the current formula for budget allocations has served councils well, but what is right today might not be right tomorrow. The conditions that councils face, including demographic shifts in some parts of the country and new risks, mean that the system of financing local government also needs to change. We need an updated and more responsive way of distributing funding that gives councils the ability to meet the challenges of the future. That is why we are currently working with councils to undertake a review of local authorities’ needs and resources. There have been widespread calls for a thorough review, and we will deliver that.

We are committed to using the most up-to-date data available and, as far as possible, taking an evidence-based approach to both current and future demand. What we are looking to do is very important. We want to devise a new funding system that more fairly reflects modern needs. The Government aim to implement a new system, based on their findings, in 2020-21. Alongside the new methodology, in 2020-21 the Government are committed to giving local authorities greater control over the money they raise.