Local Government Finance

Jim Cunningham Excerpts

Wednesday 22nd February 2017 Commons Chamber

[Mr Thomas]

I commend the hon. Lady, who has been a brave voice on the Government side in raising this issue.

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

My hon. Friend was right when he said that even if local authorities are allowed to raise this money, in the longer term, by 2021, it will not cover the costs, because there will be a deficit nationally of more than £2 billion. If we take Coventry and Warwickshire, by 2021, there will be deficit of £33 million. That shows the scope and scale of the problem.

[Mr Thomas]

My hon. Friend has taken a number of opportunities of late to champion his local authority in the difficulties that it faces—not only for now, but in the long term. The situation he describes in Coventry is mirrored up and down the country. It is time that Ministers grasped the seriousness of the situation.

The LGA has made clear that the continued underfunding of social care is making it impossible for many local authorities to fulfil their legal duties under the Care Act 2014, leaving open the prospect of a whole series of costly court challenges. It is true that some money, £240 million, has been switched from the new homes bonus to fund social care, but when serious analysts suggest that £1.3 billion is needed urgently now to stabilise the social care system and that the funding gap for social care is expected to reach £2.6 billion by 2020, it is difficult to find anyone, even in the Government’s own party, who thinks Ministers are on track to sort the social care challenges that our country faces.

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[Mr Thomas]

Let me gently suggest to the right hon. Gentleman that he might like to think about the adequacy of the funding for services that are needed in that area. I suggest that, in that spirit, he might recognise the accuracy of the figures that I have just given.

[Mr Jim Cunningham]

Between 2010 and 2020, Coventry’s Government grants will have been cut by 50%. The Government are shifting responsibility for grants on to local authorities. Let me put it another way: Coventry will have lost £655 million, and in that respect it will be typical of local authorities throughout the country.

[Mr Thomas]

My hon. Friend has made a good point. That is all the more reason for continuing to hold the Government to account for their decision to axe revenue support grant in full under the Local Government Finance Bill.

What this settlement also does not address are the huge pressures that councils face as a result of rising homelessness and temporary accommodation costs, as well as rapidly increasing children’s social care costs. Rough-sleeping rates fell to historical lows under Labour; they have more than doubled since 2010. The number of social homes being built is at the lowest level on record. With more than 1 million people on social housing waiting lists, councils’ spending on housing families in temporary accommodation has gone up by 46%. Instead, Ministers are taking money away from councils through the new homes bonus. Ministers sing the praises of the new multi-year settlement as a way to give local government certainty, and then in their very first year make a late switch, leaving many councils with an unplanned gap in their budgets.

No area of England has been spared from cuts to services. The doors have shut on libraries, day centres and care homes. Bus services, leisure centres and youth centres have all closed or had their hours and range of services restricted. Women’s refuges have been axed, funding and contracts for local charities taken away. Advice services have gone. Investment in parks and street cleaning has been sharply reduced. All these services and others, treasured by local communities, or vital lifelines for vulnerable residents, have been cut.

This funding settlement will mean that the people of England are left with worse public services. It will deepen the divide between those parts of the country that are well-off and those that rank highest for deprivation. It is a settlement that will not remotely begin to tackle the social care crisis, and it will hit the pockets of those struggling to balance their budgets particularly hard. And it does not tackle the long-term problems facing councils from an increasing dependence on business rates. England deserves better, and that is why we will be voting against this report.

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[Anna Soubry]

I could not agree more. My hon. Friend makes a compelling point.

Broxtowe Borough Council has done a terrific job, and I pay credit to the previous authority, run by Labour and the Lib Dems, which started the sharing of back-office functions. Obviously I take the firm view that the new Conservative-run council is even better—[Hon. Members: “Hear, hear!”] I genuinely believe that it is, notwithstanding the unfortunate position that it now finds itself in. I shall address that point in a moment; my speech will not be all roses, as you can imagine, Mr Deputy Speaker. We are here to represent all our constituents, and we are also here to represent our hard-working councillors.

Broxtowe Borough Council—now Conservative run—has continued much of the good work on sharing back- office functions, but as my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) says, there is only so much that such councils can do. Broxtowe continues to carry out such functions, but we are now going across borders and sharing functions with Erewash and, increasingly, with Rushcliffe. I have already told the leader of our borough council, Councillor Richard Jackson, that I am slightly worried about that. He shares my view that we should move to a unitary arrangement. That is brave of him, as the leader of a borough council—he is also on the county council—but Conservatives are increasingly being brave and considering whether going unitary would be better. If they are to make that advance, however, they will have to work even more with other authorities in the county rather than crossing the border into Derbyshire. So Broxtowe Borough Council is sharing back office duties, but as my hon. Friend said, there is only so much that it can do. Let us look at planning. No disrespect to all my great planning officers, but in reality we need one unitary authority to deal with important planning matters.

I shall turn now to the difficulties that Broxtowe undoubtedly faces. Because of the settlement, Broxtowe Borough Council will lose around £380,000 in 2017-18, and a total of £1.18 million over the next three years. That equates to an increase in council tax of about 5%. We must bear in mind that one of the reasons why the Conservatives came into power in 2015 was our promise not to increase council tax. Broxtowe does not want to put up council tax but it faces a big drop in its income in the coming years. The council, and Councillor Richard Jackson, are agitated even more by the short notice that has been given of the settlement. He told me that the administration had

“hardly any time to plan for the reductions that will be needed”.

It has had only a few weeks in which to balance next year’s budget.

It is tough to say this, but the reality is that all our local authorities are increasingly finding themselves in financial difficulty. They have a desire to deliver excellent services, but the amount of money available to them—notwithstanding the good work that so many of them have done to reduce their costs—is putting a strain on their ability to deliver the first-class services that they are determined to deliver. I make this plea on behalf of Broxtowe Borough Council. It has accepted this cut, which will be difficult—the Secretary of State was good enough to arrange a meeting with representatives of the council, and we are grateful for that—but enough is enough. Really, these must be the last such cuts to good local authorities such as Broxtowe.

I want to turn now to business rates. Having had the pleasure of working with the Secretary of State for 12 months and more, I have absolutely no doubt that he understands the needs, the pressures and indeed the joys of running a small business. He gets that—of course he does—and I am proud that we did so much in our time together to improve the lot of small businesses. However, I have big concerns about business rates. Now is not the time to go into all that, but in my view, it is a bad system. It is inherently unfair. No matter how much money a business makes—or, indeed, loses—it still has to pay its rates, and that is absolutely wrong. A business could occupy a certain space and have only a couple of people working in it, but it could be making millions of pounds in profits because it provides an online service. However, that very same space could be a shop on one of our great high streets, which are frankly struggling. We all want our high streets to thrive. The shop might employ three or four people and have a much smaller turnover, but its rates will be exactly the same as those of the multimillion-pound business in the same space. I am sorry, but that is not fair. As I said, now is not the time to discuss this, but I think the Government get the issue. The trick is to find an alternative that still raises the same amount of money, which I accept is difficult.

[Mr Jim Cunningham]

I agree with a lot of what the right hon. Lady is saying. On average, small businesses with fewer than 10 employees could face an increase in rates of around £17,000 a year. Now, that is a lot of money and it could put many small businesses, shops in particular, out of business.

[Anna Soubry]

I thank the hon. Gentleman for his intervention. We must realise that small businesses are defined in different ways. There is a profound difference between the Government’s definition of a small business, which is any business that employs fewer than 250 people, and the many microbusinesses that so many of us have in our constituencies. We should not underestimate the benefit that many of them have had from the raising of the threshold to £12,000 a year, which has been a real boost. Of course, the difficulty is that many microbusinesses, which may employ five people or fewer, still face the burden of rates. Anything that the Government can do to improve their situation will be hugely welcome.

We do not know all the details of the revaluation yet because it will not be officially announced until March, but we know that the multiplier will be reduced and my office has been asking small businesses about the effect. While some businesses will undoubtedly benefit, my concern about the situation in Broxtowe is that some pubs may face a quite unbearable rates rise. We do not have all the details of the situation yet, but I know that the Secretary of State will want to know them and I will not hesitate to give them to him. We know the value of pubs. They are important to our communities, but they are also important to our economy. They are great small businesses.

There are also concerns that rates will be reduced for some supermarkets while other businesses that employ maybe five to 10 people will find that their rates increase. In Broxtowe, the change will be neutral across the board—not the 0.7% change in the letter from the Secretary of State and the Chief Secretary to the Treasury—but with inequities in who will have to pay more and who will have to pay less. For example, we think that some businesses in Broxtowe’s three retail parks may pay less. There is often a battle between the retail park and the high street, and we think that some high street businesses may pay more than businesses in retail parks. Retail parks have big businesses—Ikea, Boots and Mamas & Papas, for example. I am not saying that they can necessarily afford an increase in rates, but they can probably soak it up in a way that a small independent business cannot. I will provide the Secretary of State with any details as they come out, and I know that he will take them on board.

I have no doubt that the Government absolutely understand the real strains in our social care system. I welcome all that has been done, but much more needs to be done. I reject the use of the word “crisis”, which is horribly overused. Our services are strained, but they are not in a crisis. In Nottinghamshire, the Conservatives have made it clear that if we are successful in May and again gain control of the county council, we will use the good provisions that the Secretary of State has put in place to allow us to raise the additional 3% through the precept. We will do that to ensure that we can raise as much money for social care as possible. However, I gravely fear that the reality is that the Government need to put more taxpayer money into the system.

I spoke to the chief executive of Nottinghamshire County Council on Friday, and such is the strain, for all sorts of reasons—I do not have time to go into those reasons, and this is not the place in any event—that Nottinghamshire is unable to offer homes to unaccompanied child refugees because of the extraordinary cost required to ensure that they are kept safe. It is important that such children get the right services and placements, and so on. At the moment, Nottinghamshire does not have the resources needed to do the right thing by those unaccompanied children. As I said at the beginning, we have to bear in mind the real strains being put on our local authorities and our outstanding councillors.

Finally, I have spoken about unitary authorities, and I urge the Secretary of State to consider being even braver, to take the bull by the horns and say to councils, “Now is the time. You must become unitary.” That is the way forward for many councils in order to save money and, most importantly, improve services.