Local Government Funding

George Howarth Excerpts

Wednesday 3rd February 2016 Westminster Hall

[Mr George Howarth (Knowsley) (Lab)]

I, too, congratulate my hon. Friend the Member for Leicester West (Liz Kendall) on the clarity with which she presented her case and the characteristic forcefulness of her argument.

I mainly want to say a few words about Knowsley Council and how it is affected by the settlement, but before I do that, it is worth looking at the context of the past 10 years. My hon. Friend the Member for Liverpool, West Derby (Stephen Twigg) referred to our city region. Over the past 10 years, the support to local authorities in the Liverpool city region has been cut by a staggering £800 million. In Knowsley, that has meant a cut of £90 million, which I calculate to be £1,500 a household. He rightly mentioned devolution, which the local authorities and he and I welcome, but any pretence that it will resolve the problems we are confronting with funding for local government is fraudulent, because all it brings with it is £30 million a year in extra funding for infrastructure problems, and it will not resolve any of the issues that concern us in some of the most deprived parts of the country.

The hon. Member for Gainsborough (Sir Edward Leigh) talked about the difficulties that his local authority is experiencing. I have every sympathy with him, but his area has not been subject to the reductions in grants and support over the past 10 years that areas such as Knowsley, Liverpool, Manchester and Birmingham have. He sets up a slightly false dichotomy between rural and urban areas. The dichotomy is between the areas with the greatest need and those with less need.

I want to say a few words about some of the issues that the Minister might mention when he comes to reply. We welcome the additional 2% flexibility on social care, but in Knowsley’s case that produces only £550,000 a year, when we face pressures of £3 million a year. There will be a massive reduction in the resources available. With the new homes bonus mechanism, for every pound that is withheld, we only get 38p back, so that is not much of a help. Finally, we do not even know what the figures on public health are at the moment, but it is likely that there will be a reduction there, too, and that is disgraceful.

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[The Parliamentary Under-Secretary of State for Communities and Local Government (Mr Marcus Jones)]

I congratulate the hon. Member for Leicester West (Liz Kendall) on securing the debate, and it is a pleasure to respond to it. Before I proceed, I want to acknowledge the hard work and dedication of councils across the country over the past five years and the contribution they have made to improving local services in challenging times. However, we need to make more savings as we finish the job of eliminating the largest deficit in post-war history.

We listened carefully to councils when preparing the provisional settlement that was recently consulted on. I thank everyone who took the time to respond to the consultation and made considered comments about our proposals. I and my fellow Ministers spoke to local government leaders from across the country and many colleagues in the House. Although the hon. Lady did not make representations to that consultation, I am pleased to be able to discuss these issues with her today. I thank all Members who took the time to respond to the consultation, and I thank councils for their detailed and considered comments on our proposals. We are reflecting carefully on them at the moment.

We have previously had one of the most centralised states in the world—almost 80% of council spending was financed through central Government grants at the start of the previous Parliament—but councils will be entirely financed by their own resources by 2020. Local government will retain 100% of the business rates, fees and charges raised by councils, leaving them fully accountable to the electorate rather than Whitehall. Those huge changes will not be made without careful consideration and consultation in the coming months. Hon. Members will have the chance to have input into the design of the new business rates retention process, which is the other side of the Government’s devolution agenda.

[Mr George Howarth]

The Minister might recall that that was almost exactly the argument that was used to justify the poll tax—[Interruption.] Oh yes, it was. Does he accept that local authorities with lower tax bases will not benefit from the changes unless there is a proper recognition of need? If anything, the situation will get worse.

[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.