Local Government Finance

Gareth Snell Excerpts

Wednesday 5th February 2025 Commons Chamber

[Kevin Hollinrake]

I can only reiterate what the hon. Gentleman has said and what I said earlier: they do fine work and most do not do it for money but because they have the interests of their local communities at heart. That should always be the case, and those are the kind of councillors that we want. Where people have expenses to do their jobs, that needs to be properly compensated for.

Will the Minister accept that the majority of the extra money provided through the settlement is raised through council tax increases, which are effectively taxes on local taxpayers—that is, working people? As he is sensible and considered, does he regret the fact that the Prime Minister stood on a stage in Swindon on 30 March 2023 with the Deputy Prime Minister, who is also the Secretary of State for Housing, Communities and Local Government, stating that he would freeze council tax for the first year they were in Government? That has not been the case. The Prime Minister quite clearly promised

“a tax cut for the 99 per cent of working people who are facing a rise in their council tax”.

His words were also that there would be

“not one penny on your council tax”.

We said then that those promises were not worth the paper they were written on. How right we were.

Under Labour, typical council tax bills are to rise by 5% in April 2025, in another increased tax on working people. That means that the average household faces an above-inflation increase of around £100 in their council tax bills in that year. All that will do in many cases is fill the black hole in council finances that Labour is creating due to an increase in national insurance contributions. Furthermore, it is quite clear that Labour is deliberately funding largely Labour-led urban areas at the expense of rural areas.

[Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)]

I thank the hon. Gentleman for giving way. He is one of the more reasonable of his party’s Front Benchers—not that he needs my praise.

Between 2010 and 2024, Stoke-on-Trent city council had a cumulative loss of £411 million. In cash terms, if the budget had been frozen and there had been no increases, we would have had that much more in spend. Does the shadow Minister accept that the damage that his party did in local government cannot simply be fixed in one settlement after seven months of a Labour Government?

[Kevin Hollinrake]

I have spoken before about the financial pressures all councils are under. That is principally due to rising demand on services; that is the reality. Eighty per cent of discretionary spend is on the three areas I referred to earlier. There is no doubt that there are challenging circumstances. Nevertheless, the vast majority of money raised through the settlement is through council tax, and much of the money raised for core spending power will go on national insurance rises. There are direct costs, but there are also indirect costs that are not covered. Many councils will be worse off as a result.

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[Kevin Hollinrake]

I think my right hon. Friend the Member for Richmond and Northallerton (Rishi Sunak) was talking about fairness, which we all believe in. The hon. Member for Middlesbrough and Thornaby East (Andy McDonald) will have a different perspective on fairness from other people. The reality is that there is a political division here. One thing that we must agree on is that the statutory duties on councils should be properly funded. My concern is that that will not be the case, and lots of those pressures fall differently on rural councils compared with urban councils.

[Gareth Snell]

Under the formula that has been proposed and on which we will vote this evening, Stoke-on-Trent city council will receive a recovery grant of £8.2 million. I hope that the shadow Minister is not saying that, were the Conservative party still in Government, we would not receive that additional cash, and would therefore be £8.2 million worse off.

[Kevin Hollinrake]

It is interesting, because the loss of the rural service delivery grant cost my local authority £14 million, so it depends where we draw the line and what the priorities are. The change in the rural services delivery grant is robbing Peter to pay Paul. That is the reality.

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[Mr Forster]

I thank the Minister for admitting that the 0.3% rise in DCN funding is happening. I do not think he can say that the Liberal Democrats and I are looking both ways on unitarisation, based on the statement earlier and the questions that took this debate later than Members might have wanted. We have concerns about unitarisation, particularly about the way that the Government are doing it. Fundamentally, we welcome reform of local government, but it cannot be imposed on councils and local areas, and we are concerned that that is happening. My county council, Surrey county council, has 14 days of reserves left—that is how bad of a state its finances are in. The Minister has talked about the past 14 years; I am more worried about the 14 days until my local authority, which is protecting vulnerable elderly people and children, will run out of money.

Social care is another area where the previous Government failed miserably, and I worry that Labour is set to repeat the same mistakes. Councils that provide social care are supposed to be better off under this settlement, but the reality is that demand for care is rising, costs are soaring, and local authorities are still struggling to meet their legal needs—I am sure all Members know that from their casework, and we see it time and again in tribunals. The Government’s allocation of funding for social care is simply not enough, and their refusal to commit to long-term reform, and particularly to have a long-term inquiry, will make the problem worse, not better.

On top of that, local authorities are saddled with extra costs from the Government’s policies. The increases in national insurance contributions will push up payroll costs for councils across the country, yet the Government’s package of support is lacking. Councils will be short of hundreds of millions of pounds just from NI contributions, and once again they will be pushed to increase council tax or cut services.

The Liberal Democrats are concerned that rural councils will suffer as a result of the Government’s decision to remove the rural services delivery grant in favour of the new recovery grant. The new grant will be allocated through a need and demand basis, and we are concerned that that will exclude rural councils from critical funding because it does not consider the specific reasons that the delivery of services is more expensive in rural areas.

[Gareth Snell]

Stoke-on-Trent will get £8 million from the recovery grant, and we are the fifth poorest city in the country. The hon. Member and I want to see services in our communities funded, so I urge him not to fall into the false trap that the Conservatives are setting by trying to pit our councils against one another. I want services, and he wants services; we need to agree to fund them properly and not be put into some sort of “Hunger Games” competition.

[Mr Forster]

I thank the hon. Gentleman for his helpful contribution. We should not have councils competing against each other, but although we have to recognise deprivation, and local government funding should be linked to that, we also have to recognise the cost of delivering services. Our fear is that removing the rural services delivery grant will not do that.

Last year the rural services delivery grant provided £110 million to rural councils to compensate for the vast rural areas that they serve, but this means that they will now face higher costs. We are concerned about, and it will leave rural communities and residents struggling, with fewer services and higher taxes. The Liberal Democrats urge the Government to provide rural councils with the funding settlement they need.

The Liberal Democrats believe in properly funding local government so that we can care for the people we need to care for, house the people we need to house, and protect vulnerable residents. I thank the Minister and his officials for putting the funding settlement together. It is a step in the right direction and an improvement on what we have seen, but as I think the Minister will concede, it couldn’t not be—it was always going to be better. This is a step in the right direction, but the challenges we face as a society and a country are huge, and the Liberal Democrats and I need to hold the Government to account to make sure that this is the last one-year single financial settlement. We need to make sure that social care is properly funded. That does not mean kicking the can down the road in three years’ time. It means that the homelessness strategy that we are promised in July genuinely solves the problem, genuinely tackles prevention, and is fully funded.

We also need to tackle special educational needs on a long-term, cross-party basis, not kick the can down the road, which is the fear for those issues. I was pleased that the Minister agreed—almost conceded—to have a cross-party review into the council tax system. The hon. Member for Hartlepool (Mr Brash) highlighted that his constituents in a band H property are charged £3,000 more than for a band H property in London, which is unacceptable. It is well known that Buckingham Palace pays the same level of council tax as an average three-bedroom semi-detached in Blackpool. That is not reasonable. We must fundamentally tackle those issues.

The Liberal Democrats and I are immensely grateful for the councillors and council staff who give up their time and their lives to shape their communities. We cannot let them down in this House, and they need to be fully funded going forward.

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[Sir Geoffrey Clifton-Brown (North Cotswolds) (Con)]

I am pleased to follow my very hard-working, excellent deputy on the Public Accounts Committee, the hon. Member for Sheffield South East (Mr Betts), who has huge knowledge on local government matters. In fact, whenever we come to local government matters in the Committee, we always defer to him.

I echo the opening remarks by my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) about our hard-working councillors up and down the country, whatever their political persuasion. Often, they work many hours and do not get much pay for it. They do it because they want to improve the lot of their local communities, so I warmly welcome that. I even echo his opening remarks to the Local Government Minister, who I always think is a fair and reasonable man. He has dealt with this matter in a knowledgeable and professional way, and I pay tribute to him.

I want to pick up on a couple of things from the excellent speech by the Chair of the Levelling Up, Housing and Communities Committee, the hon. Member for Vauxhall and Camberwell Green (Florence Eshalomi). She is very knowledgeable on this whole matter. First, the local health grant, which has been picked up by others, is peanuts in comparison with the total health budget, but if we can keep the population more healthy through the things that she said and other preventive measures, it would be far better for them and far cheaper for the country in the longer run. I do not know why Governments of all colours have not paid more attention to that.

Secondly, I want to pick up on local housing allowances, which the hon. Member for Sheffield South East also mentioned. As he said, the impact on homelessness has not really been calculated, which our PAC report made perfectly clear. The Minister needs to look at that relationship and how we can get a closer, more targeted local housing allowance or another allowance to alleviate the problem of some of the poorest in our society who cannot afford the houses that they live in, and who have to be subsidised to a considerable extent by the local authority, putting even more pressure on it.

Often, local government is not understood by our constituents, but they certainly know when they are not getting the services they pay for from their council. Council tax bills are increasing up and down the country. I was shocked to read that some people’s council tax is going up by as much as 10%, as the Secretary of State has given permission to override the legislation in place for a referendum to be called if council tax is raised by more than 5%. I remind the House, as my hon. Friend the Member for Thirsk and Malton did, that the Prime Minister stated in Bristol that he would freeze council tax bills for all. Clearly, that is not the case. I would love it if he was able to, but clearly when he said it, it was not realistic.

The Public Accounts Committee, which I have the great honour to chair on behalf of this House to try to expose how the taxpayer’s pound is spent—well or not, as the case may be—has taken a strong interest in local government. We will shine a light on the areas needed, as will the Chair of the Levelling Up, Housing and Communities Committee. Together, hopefully we can make a real positive difference in the way that services are delivered for people up and down this country.

It is clear that local government finances have increasingly become more dependent on council tax rather than central Government grants. I listened to the speech by the Liberal Democrat spokesman, the hon. Member for Woking (Mr Forster) about his local council, but it cannot be denied that some councils have managed their budgets better than others.

I welcome the multi-year settlements that this Government have introduced. We often criticise the Government, but I think these settlements will be warmly welcomed by councils, and would, I think, be welcomed in other areas of Government spending, too. Like a business, local authorities will be able to plan, investing taxpayers’ money into longer-term projects with more certainty, and therefore hopefully using money more efficiently.

I urge the Government in their review of the funding formula to keep in mind the rural-urban divide, which we have had quite a lot of discussion about this evening. In what I am going to say, I do not to wish pit one council against another in any way—that is not the object of what I am saying. I simply say that if we put the emphasis more on one facet and less on the other, we will benefit some councils and disadvantage others. The problem with rural councils is that in many cases it costs more for them to deliver services, which is not properly reflected in the grant. Even the House of Commons Library says that scrapping the rural service grant and replacing it with a recovery grant already demonstrates a divide. According to the Library, which is supposed to be independent, the change in methodology for allocating money has meant that rural areas are losing out to urban areas and city centres.

Now, I do not want to get into deep water, but a need is a need. Adult and children’s social services, which have been mentioned today, are both high-consuming, voluntary parts of the budget, and are increasing. If the Government take away the needs basis and put it into deprivation basis, they will benefit some councils and disadvantage others. I repeat: a need is a need. That includes adult social services and children’s social services; it also includes SEND—our Committee produced a report on SEND, which said the system is broken—which is a hugely consuming part of the budget, and is consuming a greater and greater percentage.

[Gareth Snell]

Will the hon. Gentleman give way?

[Sir Geoffrey Clifton-Brown]

Just a second. Another part of the budget that is consuming more and more is temporary housing accommodation; this, again, needs a fix in some way or another. Structurally, we cannot let these areas of spending go on unreformed, so that they continue to put huge pressure on the finances of all councils.

I give way to a former member of the Public Accounts Committee.

[Gareth Snell]

I thank the hon. Gentleman for giving way—I did enjoy my time on the Public Accounts Committee.

For two years, I led a small shire district council. We were often told that there would be money for county councils, because that is where the greatest need was in terms of adult and children’s social care, and various other demand-led services. I do not even think the divide is urban-rural; it can sometimes be between county and district, in the same locality. Is this the hon. Gentleman’s quiet way of telling us that when the Government bring forward the orders for reorganisation, his party will be supporting that, to take out that one element of potential divide in our funding systems?

[Sir Geoffrey Clifton-Brown]

I am really pleased that the hon. Gentleman has raised the whole business of devolution, because I am going to come on to that at the end of my speech. What I think we should do is build it from the bottom up, as we did, and let local people have a real say in what they want for the future of the delivery of their local services. I am going to say a little bit more about that and ask the Local Government Minister some quiet questions about it at the end.

I turn to a matter that is bread and butter for the Public Accounts Committee, which the hon. Member for Vauxhall and Camberwell Green, the Chair of the Housing, Communities and Local Government Committee, also raised, which is the whole business of local auditing. Without proper auditing, there is no guarantee that all the money—I say “all the money”, but I just mean “the money”—that councils get from both council tax and local government grants, in one form or another, is being spent wisely and providing value for money. The shocking position that we find ourselves in with local auditing at the moment is not, I think, helping the whole system.

The Public Accounts Committee recently held an evidence session on the whole of Government accounts, as the hon. Lady referred to, where we found that 44% of councils did not submit any data at all to those whole of Government accounts, and that 46% of accounts had not been audited for nearly five years, in some councils’ cases. The Local Government Minister has laid before the House measures to ameliorate the timing of producing local audits. Hopefully, we can get to a situation where we can start those local audits and get a set of figures we can begin to rely on. The next year, once we have started with an established set of figures, we hopefully ought to be able to get a properly audited set of accounts.

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[Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)]

How on earth does one follow that? I just wish that the hon. Gentleman had spoken up so we could all hear him. He made points about councils raising council tax, selling assets and cutting services. Does he believe that has happened to Bradford in isolation? Does he believe that his is the only council that has looked at its services and budget and said, “This is tough”? What he actually described is eight years of Conservative rule in Stoke-on-Trent, where council tax went up in eight years out of eight, town halls were closed and put up in fire sales, children’s services were on the brink, and a record number of children were in care. What he has described is a fate that every council faced, and the predominant reason is that his party in government took the scissors to the Budget, slashed the services we all had and decided that they knew better. He may make a fiery speech in this place for social media clips, but perhaps he needs to—

[Robbie Moore]

Will the hon. Member give way?

[Gareth Snell]

No, I will not give way. We have heard plenty from the hon. Gentleman over the last several minutes. He needs to think less about detaching his constituency from Bradford and more about reattaching himself to the reality of the situation that he put us all in.

I welcome the fact that Stoke-on-Trent city council has received £8 million through the recovery grant, and I have listened with great interest particularly to the hon. Members for Glastonbury and Somerton (Sarah Dyke) and for Woking (Mr Forster) about the impact on the rural services delivery grant. I go back to the point I have raised before: we have to move ourselves away from this confected game of Top Trumps that the Conservatives wanted us to have—that deprivation in Stoke-on-Trent is somehow in competition with the needs of rural communities. The Government’s trajectory—with the fair funding review, and a look at how and why we end up with the funding settlements we have—will take us towards that place. I know that it will not be immediate, and I fully accept that there are always winners and losers in everything, but my city is one of the five poorest cities in the country.

Ninety per cent of homes in my city are band A. Every time we raise council tax by 4.99%, it raises less proportionally than when my neighbouring district council authorities and the county council raise it by 4.99%. Not only are we not getting the benefit of having band B through to band E; we are also seeing the difference of what is paid in neighbouring authorities grow every year. That is simply unfair—a system that nobody would design in that particular way.

I was first elected to a council in 2010. In fact, the Minister was the peer mentor appointed to my council by the LGA. I suppose that is why I am here and not running a council. We were shown the “jaws of doom” graph demonstrating just how challenging financing was going to be over the next decade, and the predictions that my party made then have turned out to be true. Had the last Government frozen in cash terms alone—no uprates, no decreases—the amount of money we were receiving in 2010 and kept it at that rate until 2024, we would have had £411 million to spend on various projects. Instead, we lost that money. We then had this perverse idea that suddenly we had to start bidding to get some of it back through a levelling-up fund.

If we had had £411 million over those 10 years, the economic regeneration of my towns and city centres would have happened. We would not have had to come cap in hand to a Government to ask for capital funding to build a car park or a new hotel. We simply would have done the things that we needed to do over time in a way that fitted with the other projects we were seeking to deliver. We did not have that; instead, we got levelling up, which in my city was basically a car park, which now costs the council more money than it raises because of where it is and how many people use it.

We should learn from those lessons. I welcome every penny given to my city by every Department. The disabled facilities grant money announced by the Department of Health and Social Care is helpful, but the council administers that to keep people safe in their homes so they do not end up in A&E. We could look at how we join up public spending, in Total Place based way, in order to drive those efficiencies and productivity gains that will make the system of public sector provision much better.

When we look at the funding for local government, I urge the Minister as part of the next phase to think about how we stop the shuffling of wooden dollars. As my hon. Friend the Member for Telford (Shaun Davies) said, it is local authorities that provide the youth clubs that stop young people going into crime and antisocial behaviour, which then costs much more through the criminal justice system later on. It is local authorities that do the checks on houses to make sure that they are safe and decent, so that people do not end up in A&E because they have lived in cold, damp houses. It is local authorities that make sure that the restaurants we go to meet the food hygiene standards that we want, and that the products we buy are being checked by trading standards. Those services keep us safe and well, and prevent much greater public sector costs further on, so how we fund the public sector, with a Total Place approach, has to be part of the Government’s thinking.

Let me end my short contribution to the debate with this. We in Staffordshire today received the letter that the Minister sent about reorganisation and devolution. Reorganisation in Staffordshire could be a long, drawn-out process because basically no one can agree on anything, and we all pretend we like each other but the secret is that we do not. The comments from council leaders and other Staffordshire MPs about Stoke-on-Trent have been appalling. We are a lovely place and want to work with everybody. We will undoubtedly end up in some form of North Staffordshire combined authority that makes sense logically, economically, geographically and socially—it is where people live, work, and enjoy themselves.

When the Minister invites new proposals from local authorities and there is an appetite for them but one or two councils are holding out—perhaps because some people are more interested in protecting their jobs as leaders than in protecting the jobs of the people we represent—I urge him to move at pace and make it quite clear that we will not wait for them. My constituents deserve the same level of investment that goes into the west midlands, east midlands, Manchester and Liverpool combined authority regions. Without it, we will get further left behind. My constituency is, as I said, the fifth poorest in England. I do not want to be standing here after the next election saying that my constituency is still the fifth poorest in England. I hope that, with this Government, we can make sure that it is not.