Local Government Finance

James Heappey Excerpts

Wednesday 22nd February 2017 Commons Chamber

[Sajid Javid]

The hon. Gentleman may not be aware that although the better care fund picks up over time, it has already kicked in. I think it represents £105 million this year, and it rises next year and in the following years. However, he makes an important point; I listen carefully to what he says, especially given that he is Chair of the Select Committee that oversees my Department. I hope he will agree that as the better care fund comes in and builds up, it will start to make a bigger difference.

[James Heappey (Wells) (Con)]

Will the Secretary of State confirm that all additional funds that have been and will be committed for the purposes of adult social care will be allocated according to the needs-based formula, not the existing local government formula, so that things such as sparsity of population and a deteriorating demographic will truly be taken into account?

[Sajid Javid]

I can confirm that the way in which the funding has been allocated overall is based on relative needs. I have mentioned, for example, the new £240 million fund that the settlement sets up for adult social care. That is all based on need as well.

My hon. Friend has been a passionate advocate of ensuring that we think of all parts of our country, including the more rural parts, that face particular challenges. I have had many constructive discussions with him and will continue to do so. He has often highlighted that we must make sure that those needs-based formulae, whether for adult social care or for funding for local authorities more generally, are updated and modern. That is something that I am attempting to do.

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[Sajid Javid]

I can confirm that that is exactly the kind of thing that we need to look at more closely. If my hon. Friend allows me to, I will give a bit more detail about the kinds of things that I am keen to ensure are covered by the review.

I have been privileged to hear the views of colleagues from across the House, many of whom have direct experience of service in local government. Various themes have emerged. Foremost among them is the need to ensure that the formula works for all local authorities, wherever they are. Rural councils in particular have unique needs that must be met, and councils have been clear that they want to see action sooner, rather than later. I am happy to confirm what we have previously said on the issue. We will make the changes to the fastest possible parliamentary timetable, and we aim to implement new baselines for every authority in 2019-20, following Royal Assent of the Local Government Finance Bill, the necessary secondary legislation and the completion of the fair funding review. I will update the House as soon as I have further details to share.

[James Heappey]

I acknowledge that my right hon. Friend said that this will happen in the fastest time that the parliamentary process will allow. May I invite him to be a little clearer on when he anticipates that means the review will have been completed and committed to?

[Sajid Javid]

Again, I thank my hon. Friend for the role he has played in making sure that this issue is looked at properly. As he will know, the commitment we have made on business rates retention, which we want to start in the financial year 2019-20, means that there will be a requirement to have the proper baseline set for all local authorities before that system can be properly brought in. I hope that that gives him some comfort on the timing that is necessary given that the two things—the fair funding review and the business rates retention plan—are very much interlinked. There will be various staging posts on the way. As always, I am more than happy to sit down with him to take him through those and discuss this further.

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[Mr Thomas]

I encourage the right hon. Lady, for whom I normally have a lot of respect, not to make such partisan and, I suspect, inaccurate points, but to look at a booklet published by the LGA Labour group that gives 100 examples of the way in which Labour councils have innovated during the past few years. She may want to encourage some Conservative councillors whom she knows to follow such examples.

The Secretary of State sent a letter to all his Conservative colleagues claiming that the concerns raised about business rates by businesses and hospitals were based, apparently, on a

“relentless campaign of distortions and half-truths”.

Leaving aside the question of whether it was right to release the figures just to Members of his own party, the irony is that, as was quickly exposed, the actual bills businesses will receive are likely to be 7% higher than the figures he produced. I gently suggest that the Secretary of State is in danger of getting a reputation for being sloppy in his use of figures.

Ministers have known about the business rates revaluation for a long time. Indeed, when announcing the delay, the right hon. Member for Brentwood and Ongar (Sir Eric Pickles) explained that it was to prevent “unexpected hikes” in business rates. Why did the current group of Ministers not think to analyse its consequences a little earlier? How can it possibly be fair that the overall business rates bill for Amazon, which has avoided paying much in corporation tax despite making huge profits, has gone down while family-run businesses that have existed on local high streets for decades face huge rises in their business rates bills? To accuse, as the Secretary of State effectively did, the Federation of Small Businesses, the CBI and the British Retail Consortium of “distortions and half-truths” in their campaigning is a disgrace. He should apologise to them.

[James Heappey]

While the hon. Gentleman is discussing the revaluation of business rates, will he welcome the Government’s measures in recent years to provide small business rates relief, and its indefinite extension, which has been so advantageous to many of the small businesses he claims the Government will have harmed?

[Mr Thomas]

I certainly welcome small business rates relief. We will have to wait and see whether Ministers will raid the pot that some businesses were hoping to benefit from, in terms of that rates relief, to fund support to other businesses that will see even bigger increases than they were expecting in their business rates bills.

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[Mr Thomas]

My hon. Friend makes a very good point. The default position for Conservative Members, whenever an issue is raised about the funding gap for social care and a number of other services, is to blame local authorities. The evidence of Simon Stevens and others rightly rebuts that point.

[James Heappey]

Conservative Members actually blame Labour Front Benchers for so shamelessly rigging the system in favour of Labour-controlled cities during their time in government. I am sure that the shadow Minister will therefore welcome the review announced today to make sure that the future funding formula for local government is much fairer to both urban and rural areas.

[Mr Thomas]

I admire the hon. Gentleman’s chutzpah, if nothing else. On the subject of mates’ rates, I shall deal with Surrey County Council in a moment.

Just last month, the Secretary of State once again told the House:

“In the last spending review, the Government allocated an additional £3.5 billion a year by 2020 to adult social care.”—[Official Report, 16 January 2017; Vol. 619, c. 664.]

That was based on £1.5 billion from the back-loaded better care fund and £2 billion from the social care precept, but when we look at those figures closely, we see that the £2 billion was simply rounded up from the Department’s estimate that £1.8 billion would be raised from the precept. The Government had casually added an extra £200 million. That assumption was based on every council’s raising the precept by the full amount, but we already know that not all councils will do so.

When we look even more closely at the detail, we see that it also builds in the assumption that an additional 1.45 million households will be paying council tax. Ministers seem to have disowned the ambition of the previous Housing Minister—the current Minister for Policing and the Fire Service—to build a million new homes by 2020, so I have no idea where the Government plucked that 1.45 million figure from. Perhaps the right hon. Member for Welwyn Hatfield (Grant Shapps) would be tempted to call this another case of “spinning the numbers”. The truth is that the additional funding that the Government claim to be putting into social care is far from guaranteed, and, in any event, unless they find genuinely new money, there will still be a very significant funding gap by 2020.

Now let us come to Surrey County Council and the sorry saga of the abandoned 15% council tax referendum. Shortly after the announcement, David Hodge, the council’s leader, revealed that he had already made cuts worth £450 million and explained that he would have to take an axe to services if the extra £60 million that the 15% council tax hike would have raised was not agreed.

One reason why Surrey’s announcement was so striking is that it has been able to increase spending on adult social care by over 34% since 2010-11, whereas some councils have had to decrease it by up to 32% in the same period. In fact, only two of the 152 social care-providing local authorities have been able to increase their spending on social care more than Surrey. If Surrey says that it cannot cope with demand for social care, which council can?

In the most deprived areas of the country, social care spending fell by £65 per person as councils were hit particularly hard by Government funding cuts, but rose by £28 per person in the least deprived areas. The social care precept will only further entrench that inequality. Blackpool, the most deprived unitary authority area in the country, faces a 31% reduction in spending power between 2011 and 2019, whereas Wokingham, the least deprived area, faces only a 4% fall in the same period.

Perhaps Ministers will finally take the opportunity today to enlighten us on what discussions took place between their Department and Surrey County Council, but from the outside it looks like policy making on the hoof: Ministers, embarrassed by one of their own, exposing the fallacy of their argument. They seem to have settled on opening up the business rates retention pilot scheme, but why was Surrey given special access, whereas other local authorities have not been told how they can apply until now?

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[James Heappey (Wells) (Con)]

In Somerset, local government looks pretty small. In the 600 or so square miles of my constituency, there are six, gusting seven bus routes, one of which is under threat at the moment. There is one train station, and library opening hours and bin collections have been reduced. There is a limited number of small road improvement schemes and absolutely no major road improvement schemes. There have been cuts to drug advisory services and youth clubs and there is less funding to support the elderly in their homes and communities.

In return, there is a higher precept for flood protection and adult social care, and higher council taxes. I make no criticism of Somerset County Council, which froze council tax for six years when household incomes were tightest, helping families across the county. Furthermore, it was saddled with the reckless debts of the Lib Dem administration. None of that party’s Members can be bothered to turn up for a debate today on local government finance—presumably because they are too busy in the other place turning their backs on democracy instead of standing up here for the communities that they still pretend to represent. That administration racked up debts of £350 million when it was running Somerset County Council. That means that millions of pounds every year from the council’s budget is spent on the interest of those Lib Dem debts.

All that is happening while petrol prices are rising in rural areas—they are rising everywhere, but in rural areas the impact on the cost of living is felt more quickly. For my many constituents who live off the gas grid, heating oil prices have gone up. My constituents pay the same as those who live in cities for their mobile phone and broadband contracts, yet get a fraction of the functionality and connectivity. Their house prices and rents are well above the national average yet their wages are well below it. It seems so unfair that the solution the Government have come up with for reducing local government funding, widening the gap between urban and rural, is to increase the council tax burden on those living in rural areas when their cost of living is already, in so many cases, so much higher than elsewhere.

Last year, the already unfair gap in funding between urban and rural areas would have widened had it not been for the last-minute intervention of the then Secretary of State, who put in place an interim grant so that rural and urban funding, although being cut, would be cut by the same across the board. But that interim grant did nothing to correct the trajectories of those cuts, so that this year the gap between urban and rural widens by just as much as it was always intended to do. That brings with it no reflection of the cost of rurality or of an ageing demographic, and no reflection of our limited ability to grow our economy, given the lack of connectivity and the size of the working-age population as a proportion of the population as a whole.

Somerset County Council and the district councils in our area have now set their budgets for this year. Those painful decisions have been taken, so it is really all too late for this year. However, as my hon. Friend the Member for North Dorset (Simon Hoare), who is no longer in his place, said in this debate at this time last year, we have to accept that public services in rural areas have not just been cut to the bone; all the marrow has been sucked out as well.

The disadvantage for rural areas cannot continue, so I warmly welcome the announcement that the Secretary of State has made at the Dispatch Box today. The review to which he has committed is ambitious in scale and scope. This is not about claiming that rural areas should be at an advantage over urban ones; it is simply about making things fair, which requires a full understanding of the cost of delivering public services in rural areas and a formula that allocates funds accordingly. That review is urgent. I note that the Secretary of State said that it will be completed ahead of the introduction of the full retention of business rates for 2019-20, but we cannot leave it until this debate in two years’ time to be clear about the result of the review. Councils need to know the outcome of the review by this debate next year—in January 2018—so that they can know that the jam tomorrow that we have been promising throughout these difficult four years means that their retention of business rates will be baselined at x, and they can start to plan accordingly. Certainty is all they have left to ask for now that it is clear that there ain’t gonna be any more money in the near future.

So, too, must the Government set a mechanism for the ongoing review of the baselining of business rates when the business rates retention has been introduced. I am sure that the Secretary of State and his team will agree that the potential for economic development will vary from region to region, and from area to area. Considering that the economic development team—if, indeed, one is left—in many of the smaller and more hard-pressed county councils is one person, the opportunities to grow the economy are somewhat more limited. We must have an eye to the idea that once we have baselined in 2019-20, some areas, through their entrepreneurial guile, may be able to grow their economies and their rates bases more quickly than others. Therefore, there will be a requirement to reset from time to time so that the deal remains equitable. Or—I am equally happy with either solution—the Secretary of State could direct that the growth deals allocated better reflect the areas where skills, connectivity or workforce availability are most difficult.

The south-west lags behind the rest of the country on infrastructure spending, and we are well behind on connectivity and on our skills base, yet when the growth deals were announced recently, the deal for the Somerset and Devon local enterprise partnership was particularly poor. It would be great to see the growth deals reflecting the areas where the economic development challenge is greatest so that when it comes to this entrepreneurial idea of the full retention of business rates, which I wholly support, we will start with equality of opportunity because we will have the connectivity, skills and infrastructure in place.

[Kevin Hollinrake]

I am sure that my hon. Friend is aware that the industrial strategy White Paper refers to having regard to per capita spending throughout the country, rather than spending being concentrated in London and other regions that are getting the lion’s share at the moment.

[James Heappey]

I absolutely agree. There is something very empowering and very Conservative about giving councils the opportunity to be masters of their own financial destiny, and giving them the means by saying, “If you go out and attract business into your area, the rewards are yours to keep and spend on improved public services for your communities.” We just have to be aware that when we get that going, we need to have stacked the growth deals in favour of areas where the challenge is greatest so authorities really can take things into their own hands and grow their economies as keenly as the areas that already benefit from better connectivity, infrastructure and skills.

It is sad that the Chief Secretary to the Treasury and the Chancellor have already left their seats because I was going to make one other plea in order to alleviate Somerset’s problems in the short term. The Government have encouraged local authorities to do as they wish through mechanisms such as the new homes bonus and the community infrastructure levy. Not too long ago, there was an aggregates levy designed so that the minerals and aggregates that were extracted in certain areas would be taxed. Some 10% of that was supposed to stay locally in order to fund local betterment and mitigation, but it has drifted off into the centre and is no longer benefiting communities that suffer from hosting those industries. Why does that matter to us in Somerset? Well, in Somerset the Chancellor raises £24.7 million a year from the aggregates levy, and the 10% that we have lost is worth £2.47 million. That is an awful lot of bus routes, youth centres, community support for the elderly, library hours, recycling centres, bin collections, and everything else. As the Government offer the community infrastructure levy to communities that might find fracking appealing, and offer the new homes bonus as an incentive for communities who might want to host more housing, will the Chancellor let us have back the 10% of the aggregates levy that was supposed to have been the incentive for hosting quarrying?

In my constituency, we are doing an awful lot to facilitate national infrastructure projects. In Cheddar valley, the lorries going towards Hinkley Point now number more than 300 a day as it has gone on to 24-hours-a-day building. The pylons that National Grid will soon need to build to connect Hinkley into the national grid will roll through my constituency very shortly. All that building work means that all those quarry lorries are having an impact on our roads, causing potholes and congestion. Yet we are getting zero in mitigation while also getting a very poor deal on local government finance.

Public services in Somerset are being squeezed right down, but the adult social care requirements will continue to grow and grow. We should not see libraries, bus services, support groups and day centres as things that can simply be cut in order to divert money towards adult social care. That is a false economy. Those bus routes, day centres, community support groups and libraries allow people to lead independent lives, staying in their own homes independent of the adult social care system. It is only when we make them so isolated and so lonely that we end up needing to spend more and more on adult social care.

Let us move as quickly as we can to carry out the review that the Secretary of State has promised. It is very welcome announcement for which I and, I am sure, many colleagues are extremely grateful. I have every confidence that that review will make a huge difference to rural areas, perhaps in terms of the money that we get, but much more importantly, in terms of our constituents’ perception that the system is not stacked against them—that they get a fair cut of the Government’s cash. I know that the Secretary of State wants to be bold in the scope and scale of the review that he embarks on, but I also urge him get it done this year so that when we have this debate next year we can offer our councils much more certainty on what full business rate retention looks like and what the advantage to them will be.

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[James Heappey]

My hon. Friend is wrapping up, but may I say that he speaks with great passion and knowledge on behalf of Cornwall, as do all his Conservative colleagues? Does he share my suspicion that the appearance of a Liberal Democrat in the Chamber reflects the significant anger in Cornwall that no Lib Dem could find the time to be for the first hour and a half of the debate?

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I do not think we will go down that path.