Local Government Finance

John Redwood Excerpts

Wednesday 22nd February 2017 Commons Chamber

[Sajid Javid]

The hon. Lady will know that all councils have been asked to make a contribution to deal with the large deficit that the country had in 2010. That does not mean it has not been challenging—it has been for Liverpool and other councils—but many other councils have demonstrated that there are ways to deal with that and have been able to handle the challenges well. It might reassure the hon. Lady to remind her that the Liverpool city region is part of the business rates retention pilot, which I shall address in a moment and which may help to deal with some of the challenges.

[John Redwood (Wokingham) (Con)]

Does my right hon. Friend agree that the gap between the lowest-funded authorities, such as West Berkshire and Wokingham in my area, and the highest-funded, had become too extreme and that more needs to be done to create some fairness?

[Sajid Javid]

I very much agree with my right hon. Friend. I shall in a moment discuss the fair funding review, which is an attempt to do just that.

The measures can broadly be grouped into three areas, which I shall go through during the debate. Later, I would like to update the House on another important source of Government funding for local authorities: business rates.

The first request we have had from local authorities is for increased certainty about funding. For years, councils have called for the tools to improve services and deliver efficiencies over a longer horizon. That is why the 2015 spending review delivered a £200 billion flat cash settlement for local government and why we have delivered four-year funding allocations that provide the financial certainty required for councils to be bold and ambitious. They have used that funding certainty to publish long-term efficiency plans, showing their taxpayers that they can deliver great services and still live within their means.

The story does not end there, though. Last month, we introduced the Local Government Finance Bill, which will devolve 100% of business rates to local government and enshrine in law our commitment to providing funding certainty by establishing a legal framework for multi-year settlements. The revenue support grant will be abolished, so councils will become financially self-sufficient. With services financed locally, councils will be even more accountable to their electorates, rather than to Ministers in Whitehall.

--- Later in debate ---

[Mr Thomas]

I certainly welcome small business rates relief. We will have to wait and see whether Ministers will raid the pot that some businesses were hoping to benefit from, in terms of that rates relief, to fund support to other businesses that will see even bigger increases than they were expecting in their business rates bills.

[John Redwood]

The hon. Gentleman is making a case for more funding for social care and more rates relief. How much money does he have in mind and how should that be paid for?

[Mr Thomas]

I am sorry that the right hon. Gentleman was not successful in his efforts to get on to the Local Government Finance Bill Committee, but if he will bear with me, I will to come on to Wokingham and social care.

--- Later in debate ---

[Mr Thomas]

I admire the hon. Gentleman’s chutzpah, if nothing else. On the subject of mates’ rates, I shall deal with Surrey County Council in a moment.

Just last month, the Secretary of State once again told the House:

“In the last spending review, the Government allocated an additional £3.5 billion a year by 2020 to adult social care.”—[Official Report, 16 January 2017; Vol. 619, c. 664.]

That was based on £1.5 billion from the back-loaded better care fund and £2 billion from the social care precept, but when we look at those figures closely, we see that the £2 billion was simply rounded up from the Department’s estimate that £1.8 billion would be raised from the precept. The Government had casually added an extra £200 million. That assumption was based on every council’s raising the precept by the full amount, but we already know that not all councils will do so.

When we look even more closely at the detail, we see that it also builds in the assumption that an additional 1.45 million households will be paying council tax. Ministers seem to have disowned the ambition of the previous Housing Minister—the current Minister for Policing and the Fire Service—to build a million new homes by 2020, so I have no idea where the Government plucked that 1.45 million figure from. Perhaps the right hon. Member for Welwyn Hatfield (Grant Shapps) would be tempted to call this another case of “spinning the numbers”. The truth is that the additional funding that the Government claim to be putting into social care is far from guaranteed, and, in any event, unless they find genuinely new money, there will still be a very significant funding gap by 2020.

Now let us come to Surrey County Council and the sorry saga of the abandoned 15% council tax referendum. Shortly after the announcement, David Hodge, the council’s leader, revealed that he had already made cuts worth £450 million and explained that he would have to take an axe to services if the extra £60 million that the 15% council tax hike would have raised was not agreed.

One reason why Surrey’s announcement was so striking is that it has been able to increase spending on adult social care by over 34% since 2010-11, whereas some councils have had to decrease it by up to 32% in the same period. In fact, only two of the 152 social care-providing local authorities have been able to increase their spending on social care more than Surrey. If Surrey says that it cannot cope with demand for social care, which council can?

In the most deprived areas of the country, social care spending fell by £65 per person as councils were hit particularly hard by Government funding cuts, but rose by £28 per person in the least deprived areas. The social care precept will only further entrench that inequality. Blackpool, the most deprived unitary authority area in the country, faces a 31% reduction in spending power between 2011 and 2019, whereas Wokingham, the least deprived area, faces only a 4% fall in the same period.

Perhaps Ministers will finally take the opportunity today to enlighten us on what discussions took place between their Department and Surrey County Council, but from the outside it looks like policy making on the hoof: Ministers, embarrassed by one of their own, exposing the fallacy of their argument. They seem to have settled on opening up the business rates retention pilot scheme, but why was Surrey given special access, whereas other local authorities have not been told how they can apply until now?

[John Redwood]

It should be made clear that Wokingham starts £400 a head worse off than the very best-rewarded councils, which is why there has to be a differential rate.

[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.