Local Government Finance Bill
Debate between Jeff Smith and Steve DoubleMonday 23rd January 2017
(7 years, 10 months ago)
Commons ChamberRead Full debate Local Government Finance Bill 2016-17 View all Local Government Finance Bill 2016-17 Debates Read Hansard Text
Jeff Smith (Manchester, Withington) (Lab)
It is a pleasure to follow the hon. Member for Northampton South (David Mackintosh) who, like me, brings experience of local government to the debate.
I do not intend to speak for long, but I want to echo concerns that have been raised about the Bill. Like others, I welcome it in principle. I welcome more flexibility for councils to make spending decisions closer to home. We have certainly argued for that in Manchester for a long time. My fear, however, is that the Bill will do nothing to solve the crisis in local government funding. As such, it is a missed opportunity to support local government properly.
No other part of the public sector has been hit harder by austerity than local government. I was executive member for finance on Manchester City Council during the middle years of the coalition Government, so I experienced at first hand the consequences of unfair cuts to local government spending. They are the result of the Government effectively outsourcing the most difficult decisions to local authorities, thereby putting the blame on local councils rather than taking it themselves. I therefore have a natural suspicion of this Government’s intentions when it comes to local government funding. I will not forget the role of the Liberal Democrats, either. They are not represented in the Chamber at the moment, but without their collaboration with the Tories, local government would not be in such a parlous state.
Every year Manchester faces impossible decisions about which services to close as a result of the huge funding cuts imposed on us. Since 2010, the council has had to take out more than £300 million from Manchester’s budget year on year. Between 2011-12 and 2019-20, there will have been a £600 per household cut in funding. The city council has had to reduce its staff numbers from 10,400 to 6,400. How are councils supposed to continue to deliver services properly with that level of reduction?
I warned when I was making some of these difficult decisions that their full effect would not be seen for some time. I said that it would take time for cuts to feed through the system, and I think that we are seeing that now. For example, in Manchester since 2010, there has been a reduction of £77 million in spending on adult social care, on top of an £11 million reduction in the public health grant. Is it any wonder that we now have a social care and NHS crisis when councils around the country are having to make cuts of that size? I echo the point made by my hon. Friend the Chair of the Communities and Local Government Committee that we need to look at a new way of funding social care with a root-and-branch consideration of how that might be done in future.
The most important thing to remember is that the Bill does not represent any additional funding for councils in the short term. As the Minister said, it is fiscally neutral. While I welcome some of its measures, and although I support in principle the ability of local authorities to retain business rates, there have to be safeguards for those authorities that are less able to raise such revenue. In that regard, the Bill gives rise to more questions than answers. In fact, it raises more questions than answers about local government funding in general.
There is no clarity at all about the most important issue raised by the Bill: how will the Government handle the need for a redistribution mechanism? How will a fairer funding formula operate? What is the basis for any replacement tariff and top-ups? How do we stop the poorest councils losing out? The Government say that councils will not lose out—they are conducting a fair funding review and a needs assessment—but I hope that the House will forgive my scepticism about the Tories’ commitment to fair funding in local government as the poorer cities have consistently lost out over the past six years, particularly compared with the southern shires.
Steve Double (St Austell and Newquay) (Con)
I am listening with great interest to the hon. Gentleman. Will he acknowledge that rural counties and councils have been underfunded by central Government for many years and that all we are doing is addressing the imbalance that has been in place for a very long time?
Jeff Smith
There is an issue with rural funding that needs to be looked at. We calculate that if Manchester had had a fair and equal share of funding cuts across England—not protection from cuts, but the average cut—we would be £1.5 million a week better off, which would go a long way in local government spending.
I agree with my hon. Friend the Member for Sheffield South East (Mr Betts) that the Government need to approach the abolition of the revenue support grant with caution. Councils have different dependencies on RSG. For example, Westminster would need to retain only 8% of its business rates to replace the grant that it currently receives, whereas Wirral would require 187% of its business rates to retain the same amount as its current grant, and the figure for south Tyneside is 259%. That illustrates the London problem: how do we address the much stronger ability of the capital, particularly the City of London, to raise business rates revenue? In all likelihood, that issue will be exacerbated by the proposed house price indexing, which as I understand it means that London will be able to raise £700 million more while everywhere else might raise less. Unless the Government make clear how they are going to redistribute funds, we will run the risk of poorer areas being left behind, especially those where business and industry have been in long-term decline and finding solutions is genuinely difficult. Manchester has a very well run Labour council and we are doing pretty well, but plenty of other areas around the country are struggling and will genuinely struggle to drive growth in the future.
Forgive me for wanting to see the detail before I am convinced by the Bill. We will need to see much more detail as it passes through the House as too much is unclear. For example, there is no clarity about the role of specialist grant funding. In my experience of the extremely complex world of local government finance, it is very easy for Government to make cuts under the radar via reductions in specialist grants. I have seen that happen in Manchester. It is not unusual for the Government to use such a mechanism to force difficult decisions on local councils.
I will end with some positive points. Giving local authorities the ability to reduce the national business rates multiplier has potential, but there are obvious concerns about a race to the bottom as a consequence. I am pleased that tax powers are being given to the mayoral combined authorities to fund new infrastructure projects and to stimulate growth—that has to be good news. I also welcome the multi-year settlements, which are a much more sensible way of allowing councils to plan for the future. While we welcome some of the Bill’s measures in principle, I cannot support it without being given a lot more detail and some sense that the Government know how they are going to address inequality between areas and how they are going to make sure that areas such as Manchester will not lose out in the long term.