Local Government Funding

Jim McMahon Excerpts

Wednesday 27th March 2019 Westminster Hall

[Jim McMahon (Oldham West and Royton) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Mrs Main. I declare an interest as a vice-president of the Local Government Association. I thank my hon. Friend the Member for Colne Valley (Thelma Walker) for securing an interesting debate. I would say that the debate had been inspiring, but it has not; it has been quite depressing to hear about the human consequences and the community cost of austerity.

We were told that austerity was over, and that there would be a reset—a bright new tomorrow. That has proven to be a lie. When the Chancellor was called to open his cheque book, no money came to local government. That is because there has been a determined attempt not just to take the money away, but to completely reshape how local public services are funded. For someone who lives in a wealthy area where property prices are high and the business rate base is strong, that is great, because it will be possible to fund reasonable public services. I am afraid, however, that people who live in areas with historically low house prices and business rate bases will be denied basic public services—the civic infrastructure that makes a country a decent place to live.

Those may be the 1.2 million older people who would have had care in 2010 but no longer receive it today. They may be the children who are denied a good start in life because of cuts to Sure Start centres or the youth service in their area. They may just be people who live in areas where crime has gone through the roof, not simply because our police service has been cut, although it has, but because support has been completely taken away. Crime reduction budgets in England have been cut by 61%, safety services by 76% and CCTV by 35%. Hundreds of youth centres have been closed, and the Government scratch their head and wonder why knife crime has gone through the roof. They wonder why probation is falling over, even though money has been taken away and the failed privatisation model let so many people down.

It is about more than just funding, although that is important; it is about a Government who want to wash their hands of local public services and local communities. That is shameful for a number of reasons, not least because of the cries for a new settlement during the EU referendum. Not many people were talking about the European Union as a political entity. People were saying, “I am fed up with this being my lot. I am fed up with looking at my community and seeing all the times that things are taken away. I am fed up with having to look backwards to yesterday, when there were decent jobs. For my children and grandchildren, even more than for me, I am more fearful for the future than ever before.”

When the Government had the opportunity to reinvest into local public services, they did the opposite—they turned their back on the very communities that needed that investment and support. It is criminal to allow that responsibility to fall by the wayside. We cannot continue to have an £8 billion public service deficit for local councils. It will be on this Minister’s watch that an older person dies because they did not get the care that they needed in their own home. It will be on this Minister’s watch that a child is neglected because there is no funding for children’s services to support them. It will be on this Minister’s watch that someone dies in a doorway because money is not going to support homelessness in our communities. No Minister wants that to be their record. Who comes into this place to make the country worse, rather than better?

There is an opportunity, because we know that the Treasury is sitting on many billions of pounds of tax surplus. Something like £14 billion was collected at the end of January, over and above what was spent on public services. There is money in the system, but it is being stubbornly held back rather than being released to fund public good.

I will finish on this point: if the Government want to build a better Britain, they have to base it on a strong local public service foundation. If we do not do so, when we look to our communities and councils to start to rebuild, they will simply say, “We haven’t got the resources or the capacity to do that.” We will miss an opportunity for another generation. No more excuses, no more rehearsing the financial crash and no more pulling out the old top lines from Tory HQ. Today is the day for answers.

--- Later in debate ---

[Rishi Sunak]

I acknowledged right at the beginning of my speech the difficult financial climate that local government has suffered over the last few years. I am not trying to pretend it has not—I acknowledge that. The point is that the Government are absolutely listening and responding. A billion pounds more is almost a 3% rise in funding. That is more than the economy is growing by, and it is more than inflation.

[Sir Christopher Chope in the Chair]

[Jim McMahon]

The Minister is correct that councils have £1 billion more to spend on public services today than they did this time last year, but that is because of the pressure that has been applied to council tax payers. People are paying more and more council tax for less and less in the way of public services. By the way, the data shows that, in England, there have been cuts of £4.5 billion to neighbourhood services and £3.5 billion in real terms to transport services. That is the cost in the community—the £1 billion goes nowhere near covering that. Surely he knows that.

[Rishi Sunak]

It is nice that we are now talking about whether the increase in funding is enough. I am glad we have moved the debate on. It is also good to hear Labour Members talking about the importance of council tax. We believe in keeping people’s council tax bills down. They will be 6% lower in real terms this year than they were when this Government came into office, and they have risen slower than under the last Labour Government, when they increased at an annual rate of almost 6%. This Government are committed to keeping council tax bills low, and it is important that we are mindful of that.

Many points were made, and I want to try to address as many as I can in the time available. I would like to do so through the framework with which I look at local government, given the sheer range of things it does. Local councils do three important things: support the most vulnerable in our society, drive economic growth in their areas and build strong communities. I believe very much that this Government are backing them in doing all three of those vital tasks.

First, as we heard, local government helps the most vulnerable in our society. Local authorities are the first to reach out those who fall on hard times, and I am delighted that our recent settlement provides them with increased funding to do exactly that. Councils have told this Government that the most acute pressure they face is in adult and children’s social care, so in the recent settlement and Budget, the Government responded with an additional £650 million for adult and children’s social care this year. That includes £240 million to ease winter pressures and the flexibility to split the remainder between adult and children’s services as local preferences dictate.

We also champion authorities that put innovation at the heart of service delivery. We heard a lot about money, but the outcomes that that money delivers are just as important. We should be focused not just on what goes in but on what comes out. The Government will focus relentlessly on ensuring that taxpayers’ hard-earned money is well spent.

On children’s care, about which we heard a lot, a recent National Audit Office report noted the enormous variation in performance and cost among local authorities. That is nothing to do with the political colour of those authorities; it is just down to differences in leadership and management practice. That is why it is important that the Government are backing practices in Leeds, Hertfordshire and North Yorkshire with an £84 million fund, and taking their models, which deliver higher-quality outcomes at lower cost, across the country.

The hon. Members for Colne Valley and for Stockton North (Alex Cunningham)—and indeed the hon. Member for Croydon North (Mr Reed), who is no longer in his place—rightly mentioned the importance of early intervention, in which I strongly believe. I have been a relentless champion of the troubled families programme since I have had this job. He is not here anymore, but the hon. Member for Croydon North will have seen the Secretary of State make a very significant speech last week about the progress of that programme and how it is transforming children’s lives on the ground, getting people into work and keeping people out of the criminal justice system.

Knife crime is also important. That is why a £10 million extension was recently made to the troubled families programme, specifically to support families against youth crime. That funding is now benefiting 21 areas that bid into the programme to tackle that vital issue. The hon. Gentleman talked about funding running out. That is because we are at the end of a spending review period. Of course, in the spending review, I and the Government will be batting very hard for a successor programme to the troubled families programme. The Secretary of State committed to that last week, and I wholeheartedly support it.

I am also passionate about technology, which has the potential to be transformative. I recently launched an innovation fund to help councils embrace the digital revolution. Technology helps deliver services better on the ground and find ways to save money. Together with the LGA, we are developing a tool to help councils to benchmark, analyse and drive their performance. I believe there are considerable opportunities across local government to improve lives, save money and transform services, and we will pursue them all relentlessly.

The second thing local authorities do is drive economic growth, ensuring that every part of our country can prosper. Ultimately, that is the only sustainable way to fund the public services that we have heard so much about and we all care passionately about, and it is the only way to improve living standards in our communities. There may well be fundamentally different points of view on that. The Government believe that, rather than being funded by central Government handouts, local authorities should be empowered and rewarded for their entrepreneurship. Indeed, even Labour Members expressed different points of view about the degree of autonomy local government should have to raise its own money and about over-reliance on things such as business rates—the single largest way for local areas around the world to raise income. It is all very well saying we want more local autonomy, but we must understand what that means in practice.

Our business rates retention scheme does exactly that, putting power in the hands of local authorities to reap the benefits of their hard work. This year, on top of the £46 billion I mentioned, local authorities will retain an additional £2.4 billion of business rates growth. The 15 new business rates retention pilots across the nation, from Northumberland to Southampton, demonstrate this Government’s commitment to backing councils’ ambitions for their local economies.

--- Later in debate ---

[Rishi Sunak]

No, I will finish my point. Where the Government do have a role to play is in ensuring that the tax system is in line with modern practice. When it comes to business rates retail relief, which gives retailers a third off their business rates bill for the next two years, is the latest in a long line of measures that mean there will be £13 billion of business rates reductions by the end of this Parliament. That means a third of all businesses will pay no business rates.

[Jim McMahon]

That is a fair point, but the Minister will recognise that that is nowhere near enough. Because of the threshold that is in place, a local Marks and Spencer would not benefit from the type of relief that is being offered. He must accept that, unless we deal with international taxation and business taxation in the round rather than just having business rates coupled to local government spending, it will never be fair, and we will still be in a situation in which a cleaner or a server in Starbucks pays more tax than Starbucks itself. How can that be sustainable?

[Rishi Sunak]

The idea that this Government are not doing that is an old chestnut. This Government have brought forward more ways to clamp down on international tax than any previous Government and £14 billion extra has been collected. This Government put in place the first diverted profits tax and at the last Budget announced a digital services tax, which we will put in place in line with international peers.

[Jim McMahon]

Will the hon. Member give way?

[Rishi Sunak]

I am conscious of time, so I will make progress. If those peers do not act, then we will act unilaterally. The Government are addressing the point.

I agree with the hon. Member for York Central that high streets are important. That was also mentioned by the hon. Member for Stockton North, who talked about his high street, which I know as it is near my constituency. This Government understand the importance of high streets in creating living, breathing communities. That is why a £675 million high streets transformation fund was announced at the last Budget for all local authorities. I encourage Members to talk to their local authorities and bid for the fund. It is there to fund transformational projects that revitalise high streets and comes on top of the Treasury business rate reductions. The Government are agreeing with and backing local authorities to ensure that high streets remain the beating, vibrant hearts of communities. We are in agreement and there is financial support, through tax reductions and this fund, to support high streets. However, shopping habits are changing and retailers, high streets and planning authorities have to adapt. Business rates are only one part of the answer.

The last thing to touch on is building strong communities. We have talked about high streets and other points. Ultimately, local authorities are making people more proud of the places where they live, partly by building houses that people want to call home, whether through the new home bonus or through the lifting of the housing revenue account borrowing cap. Again, the Government are responding to what local government has asked for and delivering it for them.