Local Government Finance

Jim McMahon Excerpts

Wednesday 7th February 2018 Commons Chamber

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

Thank you, Madam Deputy Speaker. Well, what on earth was all that about? We have been waiting since December to get this detail. We were told that discussions were taking place and that there were journeys over to No. 11 to make sure that we secured money for housing and public services such as adult social care. To see just crumbs off the table being provided is depressing.

On my way here, I often walk past the Department for Business, Energy and Industrial Strategy. I imagine the Secretary of State, when he was in that Department, being fulfilled, happy, contented and enthusiastic about his brief. What a contrast with now! He clearly does not have the energy for this brief and does not understand the detail, to the extent that incorrect information was presented to the House during the December debate.

Probably more telling is how little attention the Secretary of State got from the Chancellor. The social care crisis ought to have been addressed in the autumn statement, but because it was not, he now has to work within the departmental budget.

[Mr Dunne]

The hon. Gentleman seems to have completely ignored the £2 billion given to adult social care in the March 2017 Budget. What is his response to that?

[Jim McMahon]

I am pleased the hon. Gentleman asks that question. At that time, there was already an in-built deficit in the Budget because of the increase in the national living wage and employers’ national insurance contributions, so even within the £2 billion allocated there was a £1.3 billion in-year deficit, because of the need to make sure that the provider market could be sustained. That is my response. It is just not enough money. Everybody in the House and our communities knows that. It is just a shame that the Secretary of State does not carry the weight in the Treasury to get the money into the Department and out to councils and into our communities.

[Mr Betts]

The Local Government Association has calculated that there will be a £2.3 billion gap in social care funding by 2020, having taken account of the 2017 Budget increases, and there are similar figures from the King’s Fund. The National Audit Office did a report for the Communities and Local Government Committee looking at these figures and basically confirmed their accuracy. There is a real problem here that cannot be disguised and that will not go away without extra funding being delivered.

[Jim McMahon]

Those figures are absolutely right. The analysis from Age UK shows that 1.2 million people who would have been entitled to social care in 2010 are no longer receiving social care because of cuts to the eligibility criteria by councils.

[Mr Jim Cunningham]

Coventry City Council has probably lost about £90 million over the past few years. The Government are playing a very clever game: they are shifting the cost of local government on to the local taxpayer, so that they can boast of keeping taxes low. It is really just a double-edged sword.

[Jim McMahon]

I agree with that. We are here debating work carried out by people outside this place—local councillors and local government workers—and it is right in this place to thank them for their hard work, their dedication and their grit and determination to make sure that services are provided in the face of severe austerity.

[Several hon. Members rose—]

[Jim McMahon]

I want to make some progress, because I am conscious of the number of people down to speak.

We need to ask a number of questions when faced with the settlement. First, does it step up to meet the scale of the challenges facing local public services in England today? Does it meet the challenge of 1.2 million older people who would have been entitled to social care in 2010 who no longer get the care they need? Does it meet the challenge of huge increases in the number of child protection and looked-after children cases reported by the LGA? After nearly a decade of Tory-dominated Government, does it begin to rebuild the essential community infrastructure that was taken away after the financial crash?

My view is that it fails on every one of those counts. The funding settlement today is little more than an insult. I want to put this into context—after all, we can have a party political debate about it and attribute blame, but that makes no difference to the day-to-day experiences of local councils.

[Simon Hoare (North Dorset) (Con)]

Will the hon. Gentleman give way?

[Jim McMahon]

I want to lay out the case, and then there will be a long time for debate—but only if I rush through this to allow time for people to speak.

Central Government funding of local services has reduced by 40%—less money when demand is increasing—and we all know that it has not been distributed evenly. The overall reduction has hit local authorities with lower tax bases hardest because they are more dependent on central Government grant. The UK Government’s total spending on local government, as a share of the economy, has fallen sharply. In 2010, it accounted for 8.4% of the economy; by 2022, the figure will be down to 5.7%, which constitutes a 60-year low. Yet councils in England still have 1,200 statutory obligations. They have less money, but the same is required of them. That has had an impact on people, in that 811 fewer people now work in local government. The local government workforce today is the lowest since comparable records began, when the central Government workforce is the highest that it has been since comparable records began. Moreover, the figures are not fairly distributed across government, let alone geographically.

If austerity had not kicked in and affected our local council base, councils today would have £14 billion more than they have. That would be sufficient to deal with the crisis in social care and the crisis in children’s services.

[Charlie Elphicke (Dover) (Ind)]

I have listened carefully to what the hon. Gentleman has been saying, and it seems to me that his answer to every question is, “Send more money.” My question to him is: where is the money going to come from?

--- Later in debate ---

[Jim McMahon]

I will come to that a little later. [Interruption.] There is absolutely no such thing as “no cost effect” when it comes to not providing vital services for people. We know that because older people are not being looked after the way that they need to be looked after. We know because social care is not being provided in the home. More than 3 million delayed-discharge days have been attributed to a lack of social care. More than 120,000 hospital beds have been blocked, so there is a cost involved.

Most people who understand public services would say that it is far better to have joined-up public services that are unified at local level, so that money is spent to best effect and spending is tailored to the circumstances of the individuals who are using the services, than for people to have to navigate the ridiculous silos in which money is held. However, we must also accept that people are living longer, which has health and social care consequences that carry a cost.

As a society, we must make up our minds about the type of country in which we want to live. Are we the country that ignores older people who need care because we can ignore them? They are not visible in the same way as ambulances queuing up at A&E. The truth is that 1.2 million people who are in their homes are being ignored by central Government, and by the Treasury in particular. I think that they deserve better.

[Mr Peter Bone (Wellingborough) (Con)]

The hon. Gentleman is making a serious point about adult social care. Would the Labour party work with other parties to bring about a bipartisan approach? Everyone knows that there is a problem, but we should all work together to find a solution.

[Jim McMahon]

The problem with health and social care is that so many reports have been commissioned, but by the time a commission has met, considered the evidence put before it and reached a conclusion that can be accepted across partisan divides, the world has moved on and the challenges have changed. Some of this is not difficult, but any idea that it does not come down to pounds and pence is nonsense. Of course we can be more efficient with the money that we have, and we ought to ensure that that happens. We can work better across Departments, and we should do that as well. Ultimately, however, there has to be enough money in the system to meet the demand.

[Rachel Maclean (Redditch) (Con)]

Will the hon. Gentleman give way?

[Jim McMahon]

I will give way once more, but then I must move on.

[Rachel Maclean]

The hon. Gentleman is talking about a very important challenge that we face as a nation. Will he confirm that the Labour party would double council tax to deal with this crisis, as other members of it have suggested? Our voters would need to know that.

[Jim McMahon]

Council tax has an important role to play, as have business rates, but it also has significant limitations. I shall explain why a little later.

Any idea that the social care and safeguarding crisis—we should talk about safeguarding as much as we talk about social care and the NHS, because it is all-important—that can be addressed through council tax, through a property-based system that is now 27 years out of date, completely misses the scale of the challenge that faces public services.

[Wera Hobhouse (Bath) (LD)]

rose—

[Jim McMahon]

I need to make progress.

I want to touch on what the 1% additional council tax means. When we seek to raise money through council tax—through a property-based tax—that takes account of the property values in an area, but it bears no relation at all to local needs or the cost of delivering services in that area. Therefore, the more pressure that gets added to councils to provide that from council tax, the more inequality we are going to see through council tax.

In Richmond, 1% for social care would raise £36 per person over the age of 65, but in Rochdale it raises just £18, because the tax base just is not there to support an equal increase in cash being taken. So if all we do every year is come back and say that we are going to allow another 1% and another 1%—and perhaps, if things get even worse, allow another 2%—that will just take even more from people who can afford it even less, because although council tax is important, it is regressive; it takes far more from lower income families than any other form of direct taxation in this country. So as much as it is important, we ought to always have an eye on the impact on those who actually pay the bill. After all, as we often hear from Government Members, there is no such thing as Government money; it is all the public’s money. That is right, but we are quicker to take the money from some people than from others it seems. We should focus on that, too.

We know that social care and children’s services are in crisis, and we know the complexities of social care will mean there is greater demand on the public purse. The difficulty is that the Government’s approach has been completely underwhelming and has completely missed the opportunity to set the record straight. Aside from the massive increase in looked-after children and children in receipt of reviews, we also know the way that has been funded is completely unsustainable.

The transition grant and the rural service delivery grant were introduced on the basis of two concepts. First, those who were hit hardest by the reduction in revenue support grant would get greater support to help them in a temporary period of two years to adjust their baseline budgets and organise efficiencies to eventually deliver a balanced budget. Secondly, there was a recognition through the second grant that it costs more to deliver services in rural areas than in urban areas because of sparsity. I am afraid the evidence base for both of those does not hold water and has not even passed the test the Government have set. So the transition grant that was meant to be there for two years has now been extended, and the rural service delivery grant has been completely undermined by a report the Government themselves commissioned by LG Futures in 2014 to assess the additional costs of delivering services in rural as opposed to urban areas.

The report said there were differences in the cost of delivering some services in rural as opposed to urban areas but the net cost in terms of the impact on councils’ overall budgets was felt harder by urban areas as the costs in those areas were far higher. [Interruption.] That is not my report; it is a Government report published on their website that supports the revenue support grant. Given that the evidence base has been decried by the Government’s research, I am staggered that they are putting even more money into a system where the evidence base is completely contrary to the position the Government seem to be taking.

The report found that 11 service areas were affected in rural areas and that accounted for about 15% of the council spend in those areas, but when it looked at the 15 service areas that were not affected, it found that they accounted for 31% of urban local authority budgets, so there was a 15% additional cost because of sparsity in rural areas versus 31% of additional cost in urban areas for service delivery. Therefore, if there was going to be a grant designed to help councils deal with the additional cost of delivering public services, on an evidence base the Government have commissioned, accepted and published on their website, that ought to be directed to urban authorities where the costs have been demonstrated to be much higher. Yet we continue with this farce.

I find it interesting that the Secretary of State does not have the Chancellor’s ear. When he knocks on the door of No. 11 and asks for more money, the Chancellor is not particularly interested in banking that support for the future as much as the Secretary of State is determined to bank the support of Conservative Back Benchers for whatever reason. Perhaps it is to face off a rebellion today or to buy off Conservative shires—a purpose that has not yet been declared. He should be honest about why the money has been allocated.

I do not resent the argument being made by areas with service delivery costs relating to sparsity that that ought to be reflected in their settlement. I do not disagree with that at all, and I commend the MPs who have made that case and have managed to secure progress from the Secretary of State, who on most measures does not seem to understand his brief. However, he certainly understands the need to appeal to Back Benchers and to bank their support for the future.

I resent the view, however, that some councils in some areas can be funded in a fairer way—although still not fair—while others have to sink or swim depending on their council tax base 27 years ago. That is not a fair or sustainable way to fund council services. I have no confidence that the fair funding review will deliver what most reasonable people would consider to be a reasonable and fair funding formula, which would be one based on need that would take into account urban deprivation, rural sparsity, demographics and demographic change, and the difference in unit costs for delivering public services. A fair formula would take all that into account and arrive at a number, but that is not what is on the table today.

The Conservatives who will go through the Lobby later to support the motions should bear this in mind: there is no new money. Money has been moved around from departmental budgets that were set before Christmas. The money in the transition fund and the rural service delivery grant is a one-off that has been taken from the business rate safety net—the Government will not say how that will be funded in future—and from other departmental reserves. How will councils be funded between now and 2022? Do Conservative Back Benchers really want this charade at this point in the calendar every year? We know that there is not enough money to fund public services, but they hold their nose because they have been bought off with a couple of pounds. They absolutely understand, in the way that all Opposition Members do, that the cuts have gone too far and that our communities deserve better.

[Several hon. Members rose—]

--- Later in debate ---

[Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)]

I commend the hon. Member for Wellingborough (Mr Bone) for his speech. The simple answer in his case is that the Conservative councillors on Northamptonshire County Council could find the fortitude simply to no-confidence the existing leader, rather than trying to get the Lords Commissioners to do the dirty work for them, but it seems that they would rather abdicate responsibility in that sense as well.

While I am on my feet, I wish to draw attention to the comments made earlier by the new Secretary of State for Housing, Communities, Local Government and other subjects—the list seems to be growing every day.

[Jim McMahon]

Don’t forget bins.

[Gareth Snell]

Yes, obviously he is the Minister for Bins.

The Secretary of State said that Stoke-on-Trent City Council would see an increase in its funding abilities. I have just double-checked the figures published by the Conservative portfolio holder for finance on Stoke-on-Trent City Council, and they say that £32 million needs to be cut over the next two years. Either the Conservative Minister in this place was misinformed or the Conservative deputy leader of Stoke-on-Trent City Council is providing misinformation to the public. Those two statements cannot be reconciled without someone saying they are wrong. That is the nub of today’s debate. Conservative Members are quite happy to throw around terminology and certain figures simply to prove a point that they are not cutting local government, but anybody in this place who has been involved in local government knows that they are.

I apologise, Mr Speaker. I should have drawn attention at the beginning of my speech to my declaration in the Register of Members’ Financial Interests: I am a serving district councillor in a shire county, so I understand the points made by the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski) about the deprivation that exists in shire counties. However, I represent Stoke-on-Trent, and what he fails to understand is that this is not necessarily about the absolute level of deprivation, but the number of people for whom those services are needed—the number of children in care and the number of older people requiring complex social care. That simply cannot be compared in a city and a county as though it is apples and apples, because it is not; it is apples and pears at best.

As my hon. Friend the Member for Nottingham North (Alex Norris) made clear, the cuts being inflicted on local government are causing councils to make very short-term decisions year on year to balance budgets, because they cannot make illegal budgets—they are not able to deliver any budget that is not balanced. In the case of Stoke-on-Trent, £1 million will be taken out of the homelessness budget. That will not end homelessness, but drive more people towards A&E services and peripheral services funded by the clinical commissioning group, the police and crime commissioner or other funders that will then be asked by their departments to make their own savings. We have a circular system of cuts that do not help the individuals on which they are focused. Again, Stoke-on-Trent City Council is looking to cut £751,000 from its drug and alcohol support service by 2019-20. If, as the Secretary of State says, there is more money coming into Stoke-on-Trent, I do not understand why such political choices are being made.

It is not only Labour councillors and Labour Members who are saying this; Lord Porter, the chair of the Local Government Association, has said:

“Years of unprecedented central government funding cuts have left many councils beyond the point where council tax income can be expected to plug the…gaps”

alone. If Conservative Members will not listen to Labour Members, perhaps they will listen to their own peers who are experts in this field. Quite frankly, if Lord Porter is saying that there is a problem with local government funding, we should all sit up and listen because he knows what he is talking about.

I want to touch briefly not on the funding arrangements in Stoke-on-Trent, but, although the Secretary of State is no longer in his place, on the issues in Bromsgrove. It is one thing for the Secretary of State to tell me that my council has no problems, but another for his own council in Bromsgrove to predict a £1 million shortfall over the next three years and to have to put up council tax by 3% and for the county council to predict a £32 million deficit over the next year and to have to put up council tax by 4.94%. The leader of the county council said in a cabinet report:

“The current…financial year has faced significant financial challenges”.

This is not scaremongering by Labour councils or Labour Members. Tory councils with Tory MPs are making it quite clear that Tory Government cuts are affecting the provision of local government in their own communities.

I am not entirely convinced that the report, for all its fancy words and funny fudging of figures, will actually deliver anything to give the necessary help and support to councils that need it. I will now finish to leave some time for others, but my hon. Friend the Member for Nottingham North said that he is from Robin Hood country. The motion does not give us the redistributive polities of Robin Hood; it is more about robbing the cities and robbing the poor.

The report is about taking money out of areas of deprivation to make sure that rebellious Back Benchers do not decide to sit on their hands and cause the Government a problem this evening. I welcome the fact that the hon. Member for Shrewsbury and Atcham, who is not in his place, has been able to succeed in getting additional funding for his council on a one-off basis, but that is not a long-term solution for the problems faced by local government. As more and more services are pushed by this Government towards local government, it is incumbent on us all to make sure that local government is funded properly and fairly.