Local Government Finance

James Brokenshire Excerpts

Tuesday 5th February 2019 Commons Chamber

[The Secretary of State for Housing, Communities and Local Government (James Brokenshire)]

I beg to move,

That the Local Government Finance Report (England) 2019–20 (HC 1916), which was laid before this House on 29 January, be approved.

[Madam Deputy Speaker]

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

That the Report on Referendums Relating to Council Tax Increases (Alternative Notional Amounts) (England) 2019-20 (HC 1917), which was laid before this House on 29 January, be approved.

That the Report on Referendums Relating to Council Tax Increases (Principles) (England) 2019–20 (HC 1918), which was laid before this House on 29 January, be approved.

[James Brokenshire]

Strong, vibrant, resilient communities are, more than ever, key to unlocking a brighter future for our country. We must therefore celebrate them and help them to succeed, and, in turn, support councils and the many people who serve them every day in delivering essential services and changing lives. I hold those dedicated public servants in the highest regard and have faith in them to rise to the challenges that lie ahead, seeing their people and places flourish with no one left behind. To achieve that, they must have the necessary tools and resources to do their job and I am determined to ensure that they get them. That was why I published the provisional settlement on funding for local authorities in England late last year and invited contributions as part of our formal consultation on that.

We received around 170 responses and I am grateful to those who engaged so constructively with me and my Ministers. My particular thanks throughout the process go to the Under-Secretary of State for Housing, Communities and Local Government, my hon. Friend the Member for Richmond (Yorks) (Rishi Sunak), for all his work and immense efforts.

That important work has helped to shape the final settlement, which recognises the pressures that councils face and acknowledges their impressive efforts to drive efficiencies and strengthen our public finances. That paves the way for more confident, self-sufficient and reinvigorated local government.

I am pleased to confirm on behalf of the Government that, importantly, core spending power is forecast to increase from £45.1 billion in 2018-19 to £46.4 billion in 2019-20. That amounts to a cash increase of 2.8% and a real-terms increase in resources available to local authorities, which is good news for the many communities that will benefit.

[Mike Amesbury (Weaver Vale) (Lab)]

Does the Secretary of State recognise that children’s services are now at crisis point and that there will be a £2 billion—£2 billion! —shortfall by 2020?

--- Later in debate ---

[James Brokenshire]

We are spending around £1 billion more than at the start of this Parliament. Some £84 million is added into the settlement to ensure that we drive quality and support in the knowledge that, yes, there are pressures. I hope that the hon. Gentleman will recognise the additional £410 million that has been committed to children’s and adult social care in response to the good work that is going on and some of the pressures.

[Mr Bob Seely (Isle of Wight) (Con)]

I welcome the £2.7 million extra for the Isle of Wight. More than that, I am delighted that, for the first time ever, the fair funding review mentions English islands and refers to the Isle of Wight by name as somewhere that requires extra study to analyse additional costs. Will my right hon. Friend ensure that that results in concrete extra support for English islands and the Isle of Wight in recognition of the needs of islands?

[James Brokenshire]

My hon. Friend is a fine champion of the interests of the Isle of Wight and I commend him for his work. He has made representations to the Local Government Minister and seen a recognition that different communities are affected in different ways as we look at the review of relative needs and resources. Obviously, we will listen carefully to representations we receive from hon. Members of all parties as we move forward with the review.

[Stephen Lloyd (Eastbourne) (Ind)]

The Secretary of State talks about the additional cash for local authorities. I spoke to a colleague who was at East Sussex County Council’s budget meeting today, and I can tell the right hon. Gentleman that the situation is a catastrophe. The situation with core funding means that meals on wheels are being cut. Unless additional money comes next year, services for vulnerable children will be savaged. Will the Secretary of State today commit to giving East Sussex County Council fairer funding? Even though this is a Tory-led county, the council is on its knees. It needs the money urgently.

[James Brokenshire]

I hope that the hon. Gentleman will recognise that East Sussex is part of the business rates pilots and gets the benefits that attach to those involved in that process through the additional resources that are garnered from it. Councils across the south-east will get an extra £226 million in their core spend in the settlement if the House approves it today, which will mean around £7.1 billion of funding.

[Mr Edward Vaizey (Wantage) (Con)]

Will my right hon. Friend join me in congratulating Ian Hudspeth and Oxfordshire County Council on the excellent way in which they have managed their resources? Does he agree that capital funding is equally important? I hope that he will look kindly on our housing infrastructure funding bid, because that funding would provide vital infrastructure for Didcot in my constituency, which is one of the economic engines of the United Kingdom.

[James Brokenshire]

I pay tribute to Oxfordshire and to all councils that have been working hard to provide services for their local communities. I am sure that my right hon. Friend will recognise the increase of about £16.9 million that will come through the settlement for Oxfordshire. I am looking carefully at the housing infrastructure bids in respect of Didcot and elsewhere, and I note his lobbying in that regard.

[Several hon. Members rose—]

[James Brokenshire]

I will take one more intervention and then I will seek to make some progress.

[Gareth Thomas (Harrow West) (Lab/Co-op)]

Harrow Council is not unique in having had most of its revenue support grant axed over the past seven years. What conversations is the Secretary of State having with the Chancellor of the Exchequer so that we can, as we hope, see a significant increase in that revenue support grant in the comprehensive spending review?

[James Brokenshire]

I am looking carefully at sustainability and issues relating to local government finance more broadly. I hope that the hon. Gentleman will recognise the change that is happening in the structure of local government finance and the move away from revenue support to the retention of business rates. In London, we have a 75% business rate retention pilot. We want to move away from the merry-go-round of money being collected so that it comes into central Government and then going back by way of a grant. We want to simplify the process.

[Several hon. Members rose—]

[James Brokenshire]

I will take one final intervention, but then I will make some progress, because I know that a lot of Members want to speak and I am conscious that interventions will eat into their time.

[Alberto Costa (South Leicestershire) (Con)]

Does my right hon. Friend agree that the measures he is outlining will help Leicestershire County Council, which is involved in the business rate retention pilot scheme, as well as Harborough District Council and Blaby District Council? Those three local authorities are led by excellent Conservative administrations.

[James Brokenshire]

I commend the Conservative authorities in my hon. Friend’s area for their work, and I commend him for his recognition of the benefit that accrues from the business rate retention pilots and of how funding from the growth in business rates can be invested into local services. That is why we want to move to this new system throughout the next financial year.

These proposals will amount to a real-terms increase, but I know that we face a number of challenges. Among the most serious is the responsibility that councils—and, indeed, all of us—have towards the most vulnerable in our society. It is therefore right that out of the more than £1 billion of extra funding committed at last year’s Budget, £650 million will go towards adult and children’s social care in 2019-20. This will help to meet the pressures resulting from an ageing population. Some £240 million of that amount has been allocated to ease pressures on the NHS, and that is on top of the £240 million announced in October to address current winter pressures. The remaining £410 million can be spent on either adult or children’s social care and, where necessary, to take pressure off the NHS. I know that local authorities will value that flexibility greatly.

We are investing a further £84 million over the next five years to expand three of our most successful children’s social care innovation programme projects in up to 20 local authorities to keep more children at home safely. We are supporting local authorities to make the best use of available resources and to increase efficiency, as well as to innovate and improve the way in which they deliver services. Better integration of the health and care systems with other local services is essential, particularly in regard to social care. The long-term NHS plan, with its welcome shift from acute to community healthcare services, together with the upcoming social care Green Paper, will make a big difference.

[Dr Dan Poulter (Central Suffolk and North Ipswich) (Con)]

I welcome the extra funding that is going into social care, notwithstanding reductions over the past several years. Will my right hon. Friend do all that he can to ensure that that money is not just pumped into the acute sector? Integration far too often seems to mean bailing out hospitals that are struggling because of increased demand from an ageing population and people with multiple co-morbidities, so will he ensure that more of that money is directed into preventive care in the community? This would take pressure off the NHS and keep people well and properly supported in their own homes.

[James Brokenshire]

My hon. Friend will recognise the work of the better care fund and some of the positive outcomes that it has driven for acute hospitals and social care, such as preventing people from having to go to hospital, as he highlights. Ensuring that the social care system works effectively to deal with some of the pressures is a core component of the NHS long-term plan.

[Several hon. Members rose—]

[James Brokenshire]

I will give way to the hon. Member for Slough (Mr Dhesi) and then take a couple more interventions.

[Mr Tanmanjeet Singh Dhesi (Slough) (Lab)]

I thank the Secretary of State for giving way. A new study by the Centre for Cities shows that Slough has been the hardest-hit town in the south-east. In fact, it has been the 10th worst hit nationally by this Government’s austerity measures. Slough’s local government spending has been cut by 23% since 2009-10, while the UK average figure is 14%. Does the Secretary of State agree that it is unfair to mete out the deepest cuts in those areas that are most affected by issues such as childhood obesity, childhood poverty and homelessness?

[James Brokenshire]

The hon. Gentleman will recognise the need for us to look carefully at relative needs and resources. I encourage him to engage constructively and positively with our review so that we get the right formula to ensure that need is recognised. He makes an important point, but we are putting more funding into the system, and I hope that he will recognise the benefit.

[Anna Soubry (Broxtowe) (Con)]

Nottinghamshire County Council, which is run by an exceptional Conservative group, has had its funding cut by 52% since 2013—from £238 million to £118 million for 2019-20. Despite its excellent budget management and real-terms cuts to services, the council’s deficit is projected to be £34.1 million. I say to my right hon. Friend, who is a very good Secretary of State, that the cuts have been going on for too long, and county councils such as Nottinghamshire will now have to cut through the muscle and into the bone. They simply need more money. On that basis, I will be abstaining this evening.

[James Brokenshire]

I pay tribute to the work that councils such as Nottinghamshire have done over the past few years in making hard calls and difficult decisions as a consequence of the financial position that the Government have had to deal with. I encourage my right hon. Friend to look at core spending power, which combines all sources of local government income, because she will see that Nottinghamshire will have an additional £16.3 million between 2018-19 and 2019-20, which is an increase of 3.2%.

[Tim Loughton (East Worthing and Shoreham) (Con)]

I am terribly grateful to my right hon. Friend for giving way. West Sussex is thankful for the additional money and for the business rates retention pilots, but the truth is that we have had to make savings of £200 million over the past eight years and face a gross gap of £145 million over the next four years. We have one of the oldest populations in the country, with the consequent social care requirements, and we are in the bottom decile for schools funding. In addition to all that, we have “Think Family”—one of the best troubled families programmes—and it would be a catastrophe if its funding were not renewed next year, because it offers really good preventive early intervention work, the effects of which are great and save money later on.

[James Brokenshire]

I am a strong supporter in the troubled families programme, and I have been a strong believer in preventive work for young people, including through family units, for many years. My hon. Friend makes an important point based on his experience about the value of such services and interventions. I assure him that I will continue to focus on that as we look to the months ahead and the spending review.

[Several hon. Members rose—]

[James Brokenshire]

I need to make some progress due to the time available for this debate.

To do more, it is crucial that we listen and respond to what local authorities are telling us, not just on the NHS and social care, but on all issues. It is in that spirit that we are increasing the rural services delivery grant by £16 million in 2019-20 to maintain it at last year’s level. In addition, after consulting widely, we have decided directly to eliminate negative revenue support grant—where changes in revenue support grant have led to a downward adjustment of some local authorities’ business rates top-up or tariff—in 2019-20. I recognise the strength of feeling about that, and I believe this is the most straight- forward and cost-effective approach for the next year.

We also want to continue rewarding councils for delivering the homes we need. I therefore confirm that the new homes bonus baseline threshold will be maintained, at a cost of £18 million. The message about councils wanting certainty to help them plan also came across loud and clear in the consultation. To that end I can confirm that, in 2019-20, local authorities, with the exception of police and crime commissioners, will retain the same package of council tax referendum limits as in 2018-19. This will protect local taxpayers from excessive increases, in line with our manifesto commitment.

Every council has the freedom to set higher council taxes if it wishes, provided it gains the consent of local people in a referendum. I am also providing an additional 2% council tax flexibility to Northamptonshire County Council to assist with improvements to council governance and services after its serious issues.

With the end of the current multi-year deal in sight, it is clear that we need to take a longer view on how we fund councils as we move to a stronger, sustainable, smarter system of local government. Preparations this year for increased business rates retention, a new approach to distributing funding between local authorities and the upcoming spending review will be pivotal to this, as will the important work under way with local authorities and the wider sector to better understand service costs and pressures. Again, we are listening and responding.

For years, councils have asked for more control of the money they raise, and we are giving it to them through our plans to increase business rates retention to 75% from 2020, in the process providing local authorities with powerful incentives to grow their economies. Local authorities estimate they will retain around £2.4 billion in business rates growth in 2018-19 under the current system, a significant revenue stream, on top of the core settlement funding I am outlining today.

The pilots testing increased business rates retention have, unsurprisingly, proved very popular, and I am delighted there will be 15 new pilots for 2019-20 covering 122 local authorities. We will also be piloting 75% business rate retention in London and continuing our existing pilots in devolution deal areas.

[Henry Smith (Crawley) (Con)]

I thank the Secretary of State for including West Sussex in the business rates retention scheme and for the 4.2% increase the county council is getting. Crawley Borough Council has reserves of over £21 million. What more can be done to make sure that councils use such large reserves more efficiently?

[James Brokenshire]

I congratulate my hon. Friend on the way in which he has championed his local area. As a former local government leader, he has shown what can be delivered through local authorities, and I commend him for that.

My hon. Friend highlights the increased spend that West Sussex will gain as a consequence of the settlement before the House, but obviously it is for local authorities to work smartly and thoughtfully in relation to their retained reserves. There is a clear need for reserves, which he will understand, but he rightly underlines the need to use those funds sustainably, appropriately and effectively.

[Mr Clive Betts (Sheffield South East) (Lab)]

The Secretary of State rapidly skipped over the funding review. Will he confirm that the consultation proposed in December to take deprivation out of the foundation element of the funding review? That would transfer money from deprived areas to non-deprived areas. Is that fair?

[James Brokenshire]

Obviously we will look at all the representations that continue to be made during the review of relative needs and resources, but our analysis in the review demonstrates that, overall, population is by far the most important cost driver for both the upper-tier and lower-tier foundation formulae. Although in aggregate terms deprivation is not shown to be a major cost driver for the services included in the foundation formulae, I am of the view that relative levels of deprivation remain an important cost driver for some specific service areas such as social care. I welcome views as part of the current consultation, and I am sure the Select Committee will continue to focus on this important work.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

Can it be right that prior to the new fairer funding formula central Government grants for inner London were £437 per person per year, whereas the grants for county areas were £153 per person per year? Do we not simply need a fairer funding formula?

[James Brokenshire]

My hon. Friend makes the case clearly for undertaking this review and looking at this properly. We need to look at the starting point and take the approach he highlights to ensure that fair distribution can be made.

[Several hon. Members rose—]

[James Brokenshire]

I will give way one last time but then I really must conclude.

[Sir John Hayes (South Holland and The Deepings) (Con)]

While mindful of the intervention from the Chairman of the Select Committee—of course it is right that we take into account deprivation—let me say that a range of other factors are involved. Rurality and sparsity in a county such as Lincolnshire make it hard to deliver public services, as the Secretary of State will know. He has mentioned rurality, so when he looks at the funding formula, while being mindful of that earlier intervention, will he look at that matter once again?

[James Brokenshire]

My right hon. Friend makes an important point about rurality, the impact it can have and the cost drivers it can generate. I assure him that we will be analysing it closely as the work continues.

[Several hon. Members rose—]

[James Brokenshire]

I must make some progress.

I know that local authorities were also pleased to hear that we plan to distribute £180 million of surplus in the business rates retention levy account in 2018-19, which was generated by strong growth in business rates income, to every authority in England, based on need. But as well as more control, councils want and need to see a clearer link between the allocation of resources and local circumstances.

[Mr Jim Cunningham (Coventry South) (Lab)]

On a point of order, Madam Deputy Speaker. I have tried two or three times to draw the Secretary of State’s attention to serious cuts in Coventry, and the people of Coventry want to know what the benefits are in relation to the £1 billion that he just announced—

[Madam Deputy Speaker (Dame Rosie Winterton)]

Order. The Secretary of State has the right to take as many or as few interventions as he wishes. He is aware that there is pressure on time. I am not sure whether the hon. Gentleman has put in to speak, but he really does have to wait until the Secretary of State wants to give way. I do not like points of order getting in the way of speeches, because I do not think it is fair on others who are waiting to speak.

[James Brokenshire]

Thank you, Madam Deputy Speaker. I know that a number of Members wish to speak this afternoon. I hope I have been generous in taking interventions, but I am conscious of allowing sufficient time for right hon. and hon. Members to make their points for their individual communities. I did not mean any disrespect to the hon. Member for Coventry South (Mr Cunningham), as I know he takes these issues extremely seriously. It was on that basis that I sought to be generous but I need to make progress now.

As well as more control, councils want and need to see a clearer link between the allocation of resources and local circumstances. That is why we are working with them to overhaul a funding formula that is currently far too complicated and badly out of date. We need to look at this afresh and do away with anomalies such as double weighting for urban roads compared with rural roads, which the Labour party was far too comfortable imposing. Let us not forget that local people paid the price for Labour: under the last Labour Government the average band D council tax bill went up by a staggering 109% between 1997 and 2010, costing families, on average, an extra £751 a year. Given that track record, one would think that the Opposition might have learned a lesson or two about excessive tax rises, but no. Labour’s manifesto set out plans for a new land tax on family homes, which would punish those with gardens. Labour’s garden tax would send tax bills soaring and house prices plummeting, and would pressure families to build over their back gardens. By contrast, our approach has been informed by a strong consensus on the need for fairness, for local authorities and for local taxpayers. It is now critical that everyone takes a pragmatic approach, recognising the trade-offs that are necessary to ensure we get this right and deliver a new and fair formula on time, as agreed.

This important work—on the funding formula and on increased business rates retention—reboots our system of local government, creating the space for communities to re-imagine what they can do and can be in the 21st century, and helps to renew the bonds with communities. This is of the utmost importance as we strive to ensure every part of our society and country benefits from a modern, outward-looking Britain after Brexit. No one is better placed to deliver on that than local authorities. That is why last week I released £56.5 million, to be used across this year and next, to help councils to prepare for EU exit, and it is why we are backing them to deliver every day through this settlement and the extra funding announced in the Budget. In doing so, we are delivering on what they have asked for: a real-terms increase in spending in 2019-20; support for the vulnerable; a boost for housing, with the removal of the Government cap on how much councils can borrow to build, for quality public services and local economic growth; and help for our high streets. The Labour party may turn its face against this, but it is no less than our councils and communities deserve. I commend the settlement to the House.