Funding for Local Authorities

Julian Huppert Excerpts

Thursday 10th October 2013 Commons Chamber

[Dr Julian Huppert (Cambridge) (LD)]

It is a pleasure to contribute to the debate, and to follow the hon. Member for Worcester (Mr Walker). As a former county councillor and, now, a vice-president of the Local Government Association, I care deeply about local government, which provides essential services that many people use every day. I always find it strange that the Home Office and the Foreign Office are seen as the best and most important Departments although most people—hopefully—have very little interaction with them and their work, whereas people interact almost daily with the Departments for Communities and Local Government and for Transport.

There are clearly financial problems throughout the country, and there are places where local government spending is inefficient. The same is true of central Government spending, and of spending everywhere else. Improvements could certainly be made. In general, however, local government provides an excellent service, cheaply, affordably and very well.

Is there fat that could be trimmed from local government? Sure—but there is only a certain amount of fat, and many councils have run out of it. That is largely because councils are funded at different levels. Councils such as Cambridge city council in my constituency, which has received low funding for many years—the hon. Member for Beverley and Holderness (Mr Stuart) will be well aware of that, having been a member of the council himself—have trimmed off fat again and again. What is left is muscle and bone, and we are already cutting into that. Cambridge city council faces a cash-terms cut of almost 15% in 2015-16. That figure is much higher than the national average, and it obviously hits residents’ expectations: 15% is a huge amount of muscle and bone to cut off.

Cambridgeshire county council, on which I used to serve, is also very hard hit. Its 2013-14 settlement funding assessment has been reduced by 20.9%, which is the third highest county council figure in the country. That has put the council in a very difficult position, which I accept is slightly worsened by the £33 million that it is to be paid in settlement of a dispute about the guided busway. The busway scheme was rammed through by Conservative and Labour councillors—but that is another story.

We have a particular problem in Cambridge, because the Department for Communities and Local Government is using figures from the Office for National Statistics to work out how many people there are in Cambridge. That would normally appear to be a good thing, because we normally trust the ONS. However, the ONS has previously got the figure for the population of Cambridge completely and utterly wrong. For the last census, in 2011, it estimated that the population had shrunk by 5,000 in the last 10 years. We said that it had grown by 15,000, and the census proved that the council was correct: Cambridge had, in fact, grown. Anyone who has been there lately will have seen all the new houses and flats being built. It is absurd to suggest that Cambridge is shrinking.

We won that argument, and the census figures have been used. However, the ONS is still forecasting that Cambridge will “continue to shrink” over the next 10 years, by about 5,000 people. The fact is that we have accelerating growth: we have many, many more houses, and we expect to see even more than 15,000.

This is a huge problem, because every year the ONS figures, which the Department is using—and I can understand why—put a 2% gap between the number of people for which the Department is funding us and the number of people who are actually there. That does not take account of the fact that new growth costs much more money, and the money never arrives ahead of time. Moreover, it comes on top of the existing financial constraint caused by the Department’s settlement. The Communities Secretary is apparently over-eager to cut his own expenditure, which is very generous to other Departments but comes at great cost to local government.

There are also constraints governing what local government can raise separately. Council tax is an awfully designed tax. It is deeply regressive: the highest payers pay only three times more than the lowest payers, and the tax shot up massively under the last Government. I do not like council tax. It was encouraging to hear comments in favour of our proposal to move towards a fairer local income-based tax and a mansion tax, but while council tax remains it has to be set at a level that is fit for purpose. That has to be supported by central Government.

The rhetoric of a council tax freeze is great. The first year the Government did that, the equivalent money was provided from central Government to cover the difference that year and for the future. So far so good—but for every other year that extra funding has not been made available for councils, so many of them could not take the hit to their long-term budget of a council tax freeze.

Of course, controlling council tax increases by percentages misses the fact that different councils charge different amounts: 1% of a low-tax district council is far less than 1% of a well-funded top-tier council. The Minister described councils as democracy-dodging and trying to undercut democracy if they increase their council tax by just under the 2% limit. That is complete rubbish. How can it be undemocratic for elected officials to operate within the powers made available to them? What is undemocratic is to cut local government funding from the centre and simultaneously constrain what can be raised locally so that elected councils are forced increasingly into a place where all they can do is the statutory responsibilities—they are not free to do more.

I support the LGA’s calls for greater local autonomy to allow local authorities to help secure the financial stability and sustainability of local government. I hope we can explore this further given the Government’s commitment to localism, so we have local decision-making to make communities the masters of their own economic destinies, as the Deputy Prime Minister rightly said.

I welcome the city deal championed by the Deputy Prime Minister. The greater Cambridge city deal is well under development, and assuming the Government do the right thing and agree it, it will be a very good thing for the area. We have three very different councils coming together collaboratively to secure the future of one of Europe’s greatest hi-tech clusters, with 1,600 companies and 56,000 direct jobs in hi-tech and revenues of £13 billion. That will enable us to provide the sustainable infrastructure and the affordable housing we so desperately need to avoid stifling our own success. It will be a huge step forward. It will make it easier for the three councils to work together—although, frankly, I think a single council for the area would probably be a better way forward, but that is not on the cards right now.

The city deal is great, but there is a slight risk to it if the Government go ahead with proposals to top-slice the new homes bonus by £400 million from the councils that were expecting it and had budgeted for it. They were not expecting it to be transferred to local economic partnerships, who were not anticipating it. In our case, the LEP has written to the Communities Secretary to ask for the new homes bonus to be given to the councils, as expected. I hope the Government will agree that if the LEP says the money should be given to the councils, that is clearly right.

We also have issues with housing. In Cambridge we are building a lot more affordable housing at a great rate and some of the first new council homes for a very long time since the rules were relaxed. It is not so easy to build those houses, however. It is great that we can spend right-to-buy money on replacement housing. That should always have been the case. Right to buy was fine, but we have to build replacement homes and Governments did not do that.

The money that there is now is tied up with red tape, however. It can be used to cover only a third of the cost of the replacement, so two-thirds match funding has to be found from somewhere. That two-thirds cannot include any other grant money, however, such as from the Homes and Communities Agency. The money also has to be spent within three years or it goes back to the Government, and the Treasury’s refusal to lift the borrowing cap makes it very hard for councils to spend the money to build the houses. That must be addressed.

There is a further problem with the change in the target rent system. Cambridge took on a debt from the Treasury of many millions of pounds on the basis that it would be able to repay it from the rent. Cambridge had been debt-free and was having to pay a huge amount of, in effect, tax from council tenants in Cambridge to support council housing in the rest of the country. We made a deal with the Government based on the idea that we would move average rents towards the target rents. The Government are now threatening to freeze that process. When a house is empty we have been raising the rent to the target level, as it should be assuming the energy standards are all right. If that is frozen, different rents will be charged for identical neighbouring council houses when new people move into them. That simply does not make sense on a practical level and it would also cost the council and the housing account £22 million over the period of the business plan. More importantly, it breaks the faith that existed. This debt was taken on with an understanding of what the rules would be. If the Government are going to change those rules, it is very hard for us to keep our side of the understanding.

Education is a key local authority responsibility. Cambridgeshire county council and the city council are low-funded, low-council-tax authorities, partly because of all the years of controls on council tax, but Cambridgeshire is right at the bottom of the funding tables for schools. We get £600 per pupil per year less than the English average—that is £250,000 out of the budget of the typical two-form-entry primary school. That is not acceptable and it lets down our pupils. I do not know what pupils in Cambridgeshire have done to deserve it. That underfunding has gone on for three decades; it has been a long-term problem. State schools in Cambridgeshire have a much tougher job than those anywhere else. They do a great job given that background, but the lack of spare resources makes it far harder and we are now seeing greater problems, with people from more disadvantaged backgrounds struggling to keep up. The pupil premium helps and free school meals will help, but against a background of such a huge lack of funding it is hard.

The Government have committed to changing this formula, and I very much welcome that. A number of hon. Members have contributed to that debate, and Cambridgeshire has been particularly concerned. That change has to mean extra money coming into Cambridgeshire’s schools to end this unfair treatment of our young people. But I want to see that money in our schools by the end of this Parliament, as that is how we will know that the Government are serious about it and that they do intend to be fair to our pupils.

Lastly, let me touch on health care, because Cambridgeshire is also grossly underfunded in that area. Most clinical commissioning groups get more than £1,000 per head to spend on health care, but Cambridgeshire and Peterborough is one of the few areas that gets less than £1,000 per head. Is that a fair allocation? Has it just been worked out that we do not have people who need health care? Helpfully, the Government did publish the outcome of their fair shares formula for health allocation, which takes into account factors such as population, age, deprivation and much more. They published the figures, which showed that the amount that Cambridgeshire and Peterborough should be getting will be £46.5 million more than the current figure. We do not want to be right at the top—we would not even be at the average—but give us that £46.5 million and we could start to improve health care in an area where the health economy is really struggling. Today is world mental health day. If we are given that £46.5 million, we can make sure that mental health care in Cambridgeshire gets to the standard that people want and deserve.

Local government faces a number of problems and challenges, and Government after Government have failed to allow local government to be free to deliver what it can do for its citizens in an open and varied way: that must change.

[Andy Sawford (Corby) (Lab/Co-op)]

It is a great pleasure to speak for the first time as the Opposition local government spokesman on a subject of such importance. It is very close to my heart, as I represent a rural and urban area and a local authority that is a member of SPARSE—the Sparsity Partnership for Authorities delivering Rural Services—and has supported the call for today’s debate and for action.

I congratulate the hon. Member for Tiverton and Honiton (Neil Parish) on securing this important debate and on the way in which he spoke strongly for not just his own area but rural areas across the country. He spoke for some of my constituents and those of many hon. Members, and I was pleased that he said he is not seeking to steal money from urban authorities. On that basis, I can say that, like all hon. Members, I am very sympathetic to the case he has made for a fair deal for his area.

The same case was made also by: the hon. and learned Member for Sleaford and North Hykeham (Stephen Phillips), who spoke knowledgeably about the way in which his local authority is making savings; the hon. Member for Worcester (Mr Walker), who championed localism and devolution in a way that I have sought to do in roles before I came to this place; the hon. Member for Penrith and The Border (Rory Stewart), who painted a powerful and evocative picture of our rural areas and the way they are changing; the hon. Member for Beverley and Holderness (Mr Stuart), who gave us a masterclass in how to win friends and influence people, with his complimentary appeal to the Minister’s good graces; and the hon. Member for Newton Abbot (Anne Marie Morris), who spoke for not only her constituency, but her region, giving a perspective from an area of the country that must be heard and was heard today in this House. I also welcome the way in which my hon. Friends the Members for Gateshead (Ian Mearns) and for Coventry South (Mr Cunningham) made strong interventions to argue that the unfairness is felt keenly in many areas of the country, both rural and urban, because of a range of factors. As the hon. Member for Mid Dorset and North Poole (Annette Brooke) highlighted when she talked about the range of issues that impact on local authorities, there is also an impact on town and parish councils at the first tier of local government. I was pleased to hear her put that on the record today.

My hon. Friend the Member for Penistone and Stocksbridge (Angela Smith) spoke about the rural-urban mix in her constituency. She correctly diagnosed the funding problems as being about the level of cuts overall, rather than what could otherwise be a divisive debate about rural-urban. Had she been in her place, I would have associated myself with the congratulations she offered to Sir Steve Houghton. I had the pleasure of working with Sir Steve in my former life, when I was chief executive of the Local Government Information Unit, and he is a champion for local government.

Like the constituencies of many Members in the Chamber today, my constituency is very varied. Corby is mainly urban whereas east Northamptonshire, in contrast, is a rural area. I remember that just after I was elected I had a conversation with Mr Deputy Speaker, in which we spoke about engaging with our rural areas and farming communities. I know that that is very dear to his heart.

Let me highlight a particular issue faced by my area, which was also mentioned by the hon. Member for Cambridge (Dr Huppert). He spoke about the impact on areas with fast-growing populations of the failure to take proper account of that in the funding formula. Corby is the fastest-growing place in the country and has the highest birth rate. I know that the hon. Gentleman’s constituency is growing too and we hope that the Minister will assure us that by moving away from a formula fixed to the 2012 baseline we can take better account of population growth.

I thank my hon. Friend the Member for Sheffield South East (Mr Betts) for his kind words about my new role and also, in particular, for the opportunity to serve under his excellent chairmanship of the Select Committee on Communities and Local Government, where I learned a great deal from him, as we all did today when he highlighted the scale of cuts faced by local government. With his experience of the sector in this House and as a former councillor and council leader, he warned us and the Government that we are facing a very serious situation indeed.

My hon. Friend the Member for Easington (Grahame M. Morris) illustrated the severity of the cuts when he talked about the 40% cuts his council faces. My hon. Friend the Member for North Tyneside (Mrs Glindon) spoke strongly for her constituency and the impact on her local council as well as on the north-east region. I have been pleased to receive the briefings from ANEC and to hear from many Members from that region today.

The hon. Member for North Devon (Sir Nick Harvey), in a powerful speech, predicted that complete areas of public services would cease. I was pleased to hear him praise the days when councils were properly funded under the previous Labour Government.

It is not just that funding is being cut. We all recognise that this is a time of rising pressures. In particular, Members have spoken about the costs of looked-after children and social care, which are rising. The demands on local authorities are going up while income is coming down significantly—so much so that, as my hon. Friend the Member for Sheffield South East said, the LGA’s Conservative leader, the highly respected Sir Merrick Cockell, has called the cuts “unsustainable”. The Tory leader of Kent county council states that his county cannot cope with further reductions and is “running on empty”. As the hon. Member for Cambridge said, we are now cutting to the bone in many councils.

Ministers know that local government is the most efficient part of the public sector—the Prime Minister has said so—but they decided to reward councils for that efficiency by cutting more from them than from any other part of the public sector. The Institute for Fiscal Studies is clear that the total cuts to local government spending will outpace those in the public sector as a whole. The situation will get worse rather than better. The LGA’s excellent report, “Future funding outlook for councils”, incorporates the additional 10% cut in this year’s spending review, which came on top of the 33% cut that councils face over this Parliament.

No doubt the Minister will tell us that the cut amounts to 2.6%, but councils do not recognise that figure. It does not stand up to scrutiny. The LGA estimates that there will be a £15 billion black hole in finances by 2020, but the Secretary of State has called the cuts to councils “modest”. No wonder the Conservative council leaders of Essex, Buckinghamshire, Wiltshire, Lincolnshire, Leicestershire, Kent, East Sussex and West Sussex wrote to the Prime Minister to complain about the language that is being used by Communities and Local Government Ministers, because the cuts that councils face are not modest; they are massive.

The National Audit Office warned that cuts are having a direct impact on front-line services. It warns that 12% of councils are at risk of being unable to balance their books in the future, with potentially disastrous consequences. The recent Public Accounts Committee report on the financial sustainability of local authorities found that there had not been a proper analysis of the impact of the cuts. The Committee highlighted the unfairness of the cuts to different areas of the country, and it raised serious concerns about some councils simply not being viable, such as Tory-led West Somerset.

What actions will the Government take in the event of multiple financial failures of local authorities? If the Minister will not reply to me today, I am sure that in due course he will reply to the Chair of the Public Accounts Committee, who has rightly put that question to the Government. Do the Government have a plan for what is about to happen?

The impact falls on both statutory and non-statutory services. Too often, it is assumed that statutory services will be safe because they are a legal requirement, but the truth is that councils already, throughout the country and increasingly, are restricting eligibility criteria, so older people in my constituency and those of my hon. Friends who have spoken today are losing their care. Children are losing their transport to school. The brunt of the cuts will fall on the non-statutory services that Members have mentioned, such as road maintenance, cultural and leisure services, street lighting and libraries.

We must be honest that were a Labour Government now in office, of course there would be cuts to local government. But they would not go as far as the cuts that this Government are making, and they would certainly not be allocated to local authorities in such a fundamentally unfair way. It is not just organisations such as ANEC and the Special Interest Group of Metropolitan Authorities that point that out to us; so too has the Audit Commission, which said:

“Councils in the most deprived areas have seen substantially greater reductions in government funding as a share of revenue expenditure than councils in less deprived areas.”

Perhaps it is that kind of speaking truth to power that has caused the Secretary of State to abolish the Audit Commission, which I regret.

In 2014-15, the 10 most deprived local authorities in England will lose six times more than the 10 least deprived local authorities compared with 2010-11. The councils that will suffer the biggest cuts in spending power per head, even on the Government’s own measure, which is designed to mask the real effect, are Liverpool, Hackney, Newham, Manchester, Knowsley, Blackpool, Tower Hamlets, Middlesbrough, Birmingham and Kingston upon Hull. My hon. Friend the Member for West Ham (Lyn Brown), who has also joined the Communities and Local Government team, in Newham, knows the impact of that on her constituents, as I do on mine in Corby and east Northamptonshire.

In contrast, the Prime Minister’s own local authority, West Oxfordshire, one of the least deprived in the country, ranking 316th out of 325 in the indices of multiple deprivation, is getting an increase in spending power of 3.1%. That is all we need to know about the Government’s priorities. And we know that it is not an unfortunate accident; it is a deliberate strategy. The former Local Government Minister, the hon. Member for Bromley and Chislehurst (Robert Neill), put it like this:

“Those in greatest need ultimately bear the burden of paying off the debt”.—[Official Report, 10 June 2010; Vol. 511, c. 448.]

He told us that quite clearly and frankly, and we know that in our communities.

Is that not exactly what this Government are about? They are not interested in the people in the communities that are being hit hardest. They are so brazen about it that when, earlier this year, the additional funding for rural areas was announced, they inexplicably removed Durham—one of the poorest rural areas—from that list.

Do the Government also acknowledge that it is not just councils that are affected? Costs are increasingly being passed on to our hospitals, our prisons, our police service and our welfare system. In my area, for example, the local hospital has found that it has had to pay for care home beds out of the budget for acute hospital services, making a nonsense of the Government’s claim that they have protected NHS spending.

If my party comes to power, as I hope it will, times will still be very tough and we will need to look at what we can do to help councils. First, we will need to make a reality of Total Place—of community budgets—on which this Government have sadly been dragging their heels. People may call it what they like, but the principle is absolutely sound. We must get local services properly joined up, we should put councils in the driving seat to do that, and we need truly to break down the barriers to it, not least in Whitehall.

That is why Labour will look at powers in areas such as training, skills, infrastructure, transport and investment in order to help our local authorities to get their local economies going. That is why we will return the control of back-to-work schemes to councils. That is why we will launch, with our local authorities, the biggest house building programme in a generation and celebrate council house building again across the country. That is why we will give councils the right to grow, with the incentives they need to acquire land and put in the infrastructure, and that is why we will truly integrate health and social care to realise the vision of Nye Bevan, the founding father of the national health service.

That is why we will back those things that councils are doing well, even though money is tight. We want to celebrate good things in local government, but I was very surprised to hear the hon. Members for Shrewsbury and Atcham (Daniel Kawczynski) and for Bury St Edmunds (Mr Ruffley) crowing about the BBC ICM report. I have the full survey here. In not one of the 15 service areas do the majority of people think their services are getting better. In some areas, such as road maintenance—my constituents who experience the potholes every day know about this—66% were clear that they were getting a worse service. I am sure hon. Members will have an opportunity to correct the record of the remarks that they made earlier. One thing that people are clear about in the survey is how frightened they are about the impact of the cuts that this Government are imposing.

Labour councils are working hard to mitigate the impact of the damage being done by this out-of-touch Government. That is why I am delighted that many more Labour councillors were elected earlier this year and many councils turned to Labour control. Whether we are implementing the living wage, schemes to bring household energy bills down, promoting apprenticeships, building social housing or attracting new investment into our local high streets, I am very proud of what Labour councils are doing. It helps us to plan for our return to office in 2015. That is why the work of our local government innovation taskforce is helping to shape the policies of the next Labour Government.

Finally—

[Dr Huppert]

Will the hon. Gentleman give way?

[Andy Sawford]

I have no more time.

Finally, on funding, we will review the formula. We will make the formula fairer, but for today let us accept that the Government’s approach to local government funding needs to be seen for what it really is—it is unfair and it is unjust. It is unfair to local residents who rely on local services, and it is unjust in the way it hits the poorest areas and the poorest people hardest.