Local Government Finance (Herefordshire)

Jesse Norman Excerpts

Tuesday 26th February 2013 Commons Chamber

[Bill Wiggin (North Herefordshire) (Con)]

As the House will know, the Government are set to provide approximately £72 billion of grants to local authorities in England for 2013-14. Despite the enormity of that figure, there is no disputing that overall spending must be reduced. However, even though the cake is smaller—indeed, precisely because the cake is smaller—we must ensure that rural areas such as Herefordshire receive their fair share of funding. For far too long, the historical balance has been tipped against them.

Herefordshire is the fourth most sparsely populated county in England. It is made up of five market towns, villages, remote farms and hamlets, as well as Hereford city in the centre. At 42,500, the number of elderly residents in Herefordshire as a proportion of the population is well above the national average. Just over a fifth of Herefordshire’s population, 22%, is aged 65 and over, compared with just 17% in England and Wales as a whole. Rural sparsity is an expensive challenge for a small county. Costs for transport, social care, schools, ambulances and health services are all pushed up. Yet Herefordshire is not and has not been a well resourced council. The 2012-13 budget figures show that formula grant funding per capita is £311, which is 13% below the national average of £358.

What can we do? The council has just voted to raise council tax by 1.9%, because it feels that with only 1% being given by the Government, if it freezes the council tax it will fall further and further behind over time. I support a freeze in council tax, and I do not agree with increasing it, as that will have a real impact on already stretched household budgets, especially for the retired and those living on pensions. Councillors have made efficiency savings of £21 million since 2011, and a further £9.1 million of savings are due to be delivered this year, and once the fat has been trimmed the pickings are lean. Factor in a below-average level of council tax, alongside a relatively low base, and it is clear that Herefordshire is running out of options. That is a state of affairs with which many of my colleagues representing rural areas will be depressingly familiar.

We know from research that urban authorities receive far greater levels of financial assistance under the current system. Recently, the Government have taken some positive steps towards redressing the balance. Technical adjustments mean that the formula will do a better job of reflecting the additional cost of providing services in rural areas.

[Jesse Norman (Hereford and South Herefordshire) (Con)]

I congratulate my hon. Friend on securing the debate. As the other MP for the glorious county of Herefordshire, may I add my voice to his on the issue of underfunding and draw his attention and that of the House to a study that I commissioned in March 2010? It showed that the cumulative underfunding for Herefordshire in the period from 2005 to 2010, compared with comparable authorities, was £174 million over five years, or roughly £35 million a year, including a shortfall of £85 million in support for Herefordshire council. I commend my hon. Friend for drawing wider attention to the issue of gross underfunding and the important challenge that faces the country and the Government.

[Bill Wiggin]

My hon. Friend and neighbour—it says in the Bible, “Love thy neighbour”, and he is an easy man to love and I know his constituents love him deeply—is absolutely right to be concerned. There is some good news, because on 4 February my hon. Friend the Minister announced that 95 authorities would receive a transitional efficiency support for services in sparse areas grant, of which £531,374 would go to Herefordshire. That and the technical adjustments that I mentioned are excellent news and speak of the coalition’s determination to bring about real change, and let us never forget Labour’s pledge to deliver £52 billion of local government cuts.

There is still work to be done. First, the efficiency support for services in sparse areas funding has been provided for 2013-14 only. A one-off grant cannot be budgeted for in rising to the challenges that rural authorities face when delivering services in geographically sprawling areas. Those are permanent challenges that can, and will, never be completely overcome. It is time to give serious thought to our long-term future.

Secondly, the counterintuitive damping mechanism is undoing much of the Government’s good work to date. There is undoubtedly common sense in promoting stability and protecting councils from violent change. However, there is no logic in freezing the system completely for six years, which benefits only a select few London commuter belt authorities with high house prices. The Government should look again at that time scale.

Under the summer consultation figures, Herefordshire should have benefited from an extra £6 million per annum. No less than 74% of that, or £4.4 million, was subsequently lost through damping. Across the country as a whole, that figure rises to at least £60 million. That is a huge amount. Quite simply, the mechanism is preventing money from being allocated where it is needed. Expectations were raised and sadly dashed. Herefordshire council specifically requested that the Government’s adjustments for sparsity be reflected in cash terms and excluded from the damping or smoothing effect, yet that has not happened. We now face a situation where the rural penalty has been reduced at best by one or two points from 50%, when it really needs to be down to 40%.

It is true that the changes to business rates from 1 April will mean that local authorities can keep 50% of business rate growth. That is designed to increase local employment and income by attracting new businesses to an area. However, while useful, it may be an incentive that urban authorities, with their existing infrastructure, may be better placed to benefit from than rural areas such as mine. I ask Ministers to look again at Herefordshire council’s suggestion. Alternatively, damping could be unwound or the special grant continued until the sums truly add up.

Rural communities have been chronically underfunded for more than a decade. My constituents have faced further blows from rising fuel costs, energy bills and, as has been recently in the news, turbulence for beef farmers. Approximately a fifth of households in Herefordshire live in poverty. The gap between the most and least deprived areas is widening, and there are many deprived areas in the constituency of my hon. Friend the Member for Hereford and South Herefordshire (Jesse Norman) as well. The Government have recognised this need and have risen to the challenge only to be dampened down. I ask my hon. Friend the Minister to look at this again. If he cannot un-dampen or de-dampen in the immediate short term, then can he try looking at the longer term so that councils can budget wisely rather than raise council tax?

In short, I criticise the council for seeking to tax constituents further, but I congratulate it on the savings it has made so far. Our Government have made a mistake by allowing damping to undo their good intentions, and with the long periods of time that these budgets cover, I congratulate and thank my hon. Friend for what he has done to try to help—£531,374 is most welcome. We all know that budgets must shrink and I am not calling for more spending, only a fairer allocation.