Local Government Finance

Debate between Jim McMahon and Clive Betts

Wednesday 7th February 2024 Commons Chamber

[Jim McMahon]

I thank the hon. Member for inviting me to celebrate the success of Labour in Plymouth, and the work that our councillors are doing, after taking back control, to show leadership to the city. Plymouth is a proud place, and the Labour party there is making a huge difference. He may want to consult those on his party’s Front Bench when it comes to the submission of audited accounts, because there is an issue to reconcile here. Only 1% of councils have submitted accounts; how do we break through that bottleneck, given that the market is not responding? The Government will have to respond to that sooner rather than later. I politely advise him, if I may, to withhold his criticism, and to wait to see what his Government’s approach will be. I suspect he may be slightly embarrassed.

[Mr Clive Betts (Sheffield South East) (Lab)]

The Select Committee has written a report recently on local authority audit, which is a complete mess, with only 1% of accounts done on time. This is not a party political matter, as councils right across the country are struggling with this issue. One factor is low audit fees. Another is the complication of pension fund valuations, which is holding many accounts up. The likelihood is that the only way to get through that will be to agree accounts that are qualified because it has not been possible to confirm pension fund valuations. I hope that party political points are not made about councils and the qualification of accounts.

[Jim McMahon]

First, I thank the Select Committee for the work that it has done in this area. Last week, we received the report “Financial distress in local authorities”, and a great deal of work has been done to understand the detail and the contributing factors. There is no doubt that the accountancy regime for pension funds is a contributory factor to the delay in some cases. We need to know that councils are financially resilient, and that the financial settlement is robust. Where there are issues, an early warning system should allow them to be picked up earlier, so that if an intervention is required, it is made at the right time and in the right way, whereas now, section 114 notices are being issued at a rate not seen for the past three decades. That cannot stand, and it is not sustainable. We look forward to the Government’s response on that.

On the wider point about cross-party agreement, I think all of us and the Local Government Association, which is cross-party, would welcome with open arms the day when party politics was taken out of local government finance, and when there was consensus on how to fund local public services. I sincerely hope that after the next election, when those on the Government Front Bench are in opposition, they join us in that call, but let us wait and see.

The Government will know, as we do, that because of the financial fragility of local councils and the lack of an early warning system, it now takes only a small shock to send town halls into financial meltdown; the resilience just is not there. The Local Government Association has done a fantastic job in leading from the front and ensuring that adequate support is supplied when needed, but it cannot be expected to lead the charge on its own, nor should it be expected to. Councils need certainty and stability. They need to have the fear and anxiety of financial bankruptcy removed, so that they can continue to deliver for local communities. Councils need to be given adequate time to plan ahead for the fiscal year. Labour would support local councils where the Government have failed.

Single-year settlements do not provide the certainty or stability needed for planning ahead. We recognise that councils need something more than that to end this disjointed approach. Labour will embed transparency in the relationship between local and national Government, and move towards multi-year funding settlements for councils that allow them to plan well ahead. We will give towns and cities the tools that they need to foster local growth and deliver better public services. Should we be privileged enough to form the Government after the next election, Labour will empower councils to get on with the job that they have been elected to do.

Finally, we will see a radical transfer of power away from Westminster and into the hands of the British people through the landmark take back control Act, but we will not wait; where we can accelerate improvement, we will. We want a new relationship between central and local government as genuine partners in power. We want to see the right powers in the right places. Our communities are resilient, and so are our councils, but we need to do far more to work, hand in hand, as true partners going forward.

Financial Distress in Local Authorities

Debate between Jim McMahon and Clive Betts

Thursday 1st February 2024 Commons Chamber

[Mr Betts]

I thank my hon. Friend for his question. The report says that not every section 144 notice can be blamed on the Government. There will be circumstances in which councils get themselves into difficulty, but what we have said is that there are general problems coming down for councils, which have been created by a shortage of funding. We did make reference to Bradford. Bradford’s problem is the young age of its population—the number of children. Children services are run by trustees appointed by the Secretary of State for Education. That body has demanded from the council an amount equivalent to about 50% of its council budget. We could get the ridiculous situation in which the Secretary of State for Levelling Up, Housing and Communities sends in commissioners to run services to try to find the money to pay the trustees who are appointed by the Secretary of State for Education. That does not seem a great way for local government to operate.

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

I thank the Chair of the Select Committee for what I think is a very important report. I also thank the Committee members who have spent a significant amount of time getting under the skin of the issue. First, does he agree that, ahead of the scheduled finance settlement next Wednesday, the Government need to finally take responsibility for the financial crisis in local government? Secondly, does he share my concern that the breakdown in local government audit is contributing to the removal of the early warning system?

[Mr Betts]

I thank my hon. Friend for that question. Yes, it certainly is doing so. I have just produced a report about local government audit. There is a real problem there. If accounts have not been audited for three years, as in most cases, but probably longer in other cases, how on earth do we know what is happening in local council finances? Certainly, getting local audit on an even keel by the end of this year is very important, but where accounts are qualified, as they will be, councils should not be blamed for that; it is the problem of the local audit system, and we really must sort that out.

Local Government Finance (England)

Debate between Jim McMahon and Clive Betts

Monday 24th February 2020 Commons Chamber

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

First, may I congratulate the hon. Member for Cities of London and Westminster (Nickie Aiken) on what I thought was a really thoughtful maiden speech? It is quite telling when councillors come into this place. The experience and insight they bring, regardless of party affiliation, means that we are actually at one when it comes to the need for reform of local government. I very much welcome her contribution on that point.

I thank my hon. Friend the Member for Sheffield South East (Mr Betts), who is the Chair of the Select Committee, for the contribution he made and the insight he brings to this debate. He made it very clear, from information from the IFS, that we have now seen a 20% reduction in spending power since 2010. He asked the question that we all ask: if austerity is over, what does that mean in practice? Does it mean just that the funding cuts stop today, or does it mean that we will begin to rebuild what has been taken from many of our local communities since 2010?

My hon. Friend also laid out a statistic that was new to me—I was surprised by this, but perhaps I should not be so surprised—which is that 2.4 million cases have been linked to food contamination. No doubt a reduction in the number of our public health officials has played a part in that, but in England we are behind. In Wales, a takeaway has to display its food hygiene ratings on the door of the premises, as it does on online ordering platforms, in a way that a takeaway in England does not have to do. In addition to the need to rebuild our public health functions, we need to move forward and make sure we have mandatory food hygiene ratings so that people can make an informed choice about where they buy food.

As always, my hon. Friend the Member for Kingston upon Hull West and Hessle (Emma Hardy) gave a real insight into the impact of cuts and austerity on her community. There are a staggering 848 looked-after children—almost doubling since 2010—with council services left at crisis point. There is a real tension: the Government have of course reduced the central grant and council tax is going up all the time, but the very councillors who are working to protect their community and their council often face the most criticism from local people for the very difficult decisions they have to make. That is a very difficult task for many.

My hon. Friend the Member for Harrow West (Gareth Thomas), as always, gave a London insight, painting a picture that we are not always used to hearing about in this place. We very much hear the story that London is thriving and the rest of England is really struggling, but we see real pockets of deprivation in this great capital that should shame us all. We are seeing every local authority really struggling to make ends meet and demand for services really going through the roof.

My hon. Friend also made the case, and I absolutely support this, for saying that we cannot believe that devolution in London has finished. The problem with devolution in England is that we look to London, and we discount it for the rest of England, believing that the job here is done, and it absolutely is not. If we look at devolution in our major cities around the world—New York, Tokyo and other places—we see real fiscal devolution and real law-making powers devolved to a local level, in a way that leaves London in the shadows. When we talk about levelling up, there is a need not just to talk about redistributing finance and capital investment, but about the powers needed across all our major towns and cities in this country to make sure that every community has the right to determine their own future.

My right hon. Friend the Member for North Durham (Mr Jones) was absolutely blunt in his assessment. It was interesting to hear the exchange across the Chamber on parts of that, but we can understand why tempers are so frayed on this fraught issue. How can it be right that 40% of a council’s budget—£232 million—has been taken away from local public services. In the midst of all that, when my right hon. Friend raises those issues and the impact on his community and reflects on the local authority’s difficulty in trying to balance the books, we have people who for reasons of cynical political game playing decide to make the local council the target, instead of laying the blame where it thoroughly deserves to be, which is of course with the Government who are pushing through those cuts.

My hon. Friend the Member for Enfield North (Feryal Clark), a councillor for 14 years, is also adding real quality to this place. We need more councillors coming here—maybe it should be a prerequisite of coming to this place, as perhaps then we would have a better quality of debate. The figure of £800 per person cut from that local authority is absolutely eye-watering. Although we bat around the numbers, as they are important, what this really means is that those essential services that make a place a decent place to live have been affected: the community centre is not open any longer; the library is now closed; the Sure Start centre that gave young kids the real start in life that they need is no longer there. A startling report today says that life expectancy is going backwards for women and is stalling for men. How can that be right? We are seeing a decrease that this country has not seen for 120 years. Why? It is because of the lost decade of Tory austerity. That cannot be right.

May I just place on record, as my boss my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) did, a tribute to the right hon. Member for Rossendale and Darwen (Jake Berry) for the work he did as the Northern Powerhouse Minister? One thing that I enjoyed about the right hon. Gentleman was that he knew how to take a good rebuttal, and the exchanges that we had were fun and in good spirit and were a good challenge. He worked hard behind the scenes to try to make progress on devolution, and I hope that continues.

My final point is that we cannot afford to continue this pressure on council tax. We all know that council tax is out of date, and maybe next April, when council tax revaluations turn 30, we can have a big party and crack open the sausage rolls, the prawn cocktails could come out and maybe a bit of fizzy orange, or perhaps we should look back and recognise that there has been a collective failure on council tax revaluation and the need to modernise. Governments duck this because it is not popular, but we now have a system that is very unfair.

How can it be right that over the last five years we have seen council tax increase by a third in England? That is not right. What would happen if income tax was increased by a third in the same period? What would happen if national insurance was increased by a third in the same period? What would happen if VAT was increased by a third in the same period? What would happen if fuel duty was increased by a third in the same period? And, God forbid, what would happen if beer duty was increased by a third in the same period? There would be a riot in the Strangers’ Bar as we speak. But of course there is not a riot over the council tax increase. Why? Because we can defer blame down to local councils, but it is just not good enough. Today we see that low-income families have 8% of their household income taken for council tax while that figure is only 1% for higher earners. That cannot be right. It is hugely regressive and it is getting worse with every year that passes.

If the Government really want to address this, it requires maturity. It requires a forward view and it requires a clear strategy that has to be more progressive and up to date, and must reflect geographical variations. It must also recognise that council tax has its limitations. Of course property tax is very important, but it cannot take the burden of adult social care and children’s services, and it cannot be right that our ability to receive adult social care in older age is determined by a house value 29 years ago, any more than whether a child gets the care that they need to protect them from harm is determined by the same measure.

We need to grow up on this; we need to tackle it, and we need a solution that puts councils in the right place for the long term.

[Mr Betts]

I agree with my hon. Friend. We need a separate funding stream for adult social care, as the two Select Committees recommended in the last Parliament. Also, my Select Committee recommended a review of council tax very much along the lines that the hon. Member for Cities of London and Westminster (Nickie Aiken) recommended, but the Government just dismissed it in their response and said they were not minded to do a review of any kind. Does my hon. Friend agree that that is disappointing?

[Jim McMahon]

It is disappointing, but is inevitable in a way, because there would be winners and losers—and, let’s be honest, the winners would be the poorest who have less agency to mount a campaign and the losers would be the wealthiest, the people with agency who can mount a campaign in objection to it, and the major right-wing newspapers will also mount a campaign against it. It will be called the garden tax, the conservatory tax, the porch tax, or the driveway tax, but it will never be a tax that is actually deemed to be fair. But that is what this country needs; it cannot be right in England that we carry on with such an unfair tax system.

If the Government want to be mature—if they want to look long-term, if they genuinely want to take the politics out of this, which is probably what is needed—I am sure our side would be looking to contribute to that, but if they want to wilfully ignore the impact on low-income families and on many local authorities now not able to fund decent local services, I am afraid they can expect strong opposition on this side.