Local Government Funding

Justin Madders Excerpts

Wednesday 3rd February 2016 Westminster Hall

[Justin Madders (Ellesmere Port and Neston) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Davies. I first commend my hon. Friend the Member for Leicester West (Liz Kendall) for the clear way in which she set out the issues, in particular the impossibility of councils’ social care obligations being met. For all the talk of devolution, the reality is that the Government have shown contempt for local democracy. They are devolving not only power, but cuts, risk and blame. Worst of all, they do so in the most cynical and Machiavellian way, using sleight of hand at every opportunity. Indeed, they have got so good at spinning on these issues that they have even managed to fool the Prime Minister, as my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) pointed out earlier.

One consistent concern that I have heard from local government is about how the Government keep moving the goalposts. The most recent autumn statement contained a total of 10 changes that have left my council, Cheshire West and Chester, £8.4 million worse off. That is on top of a funding formula error that means the council will receive £2.3 million less than previously indicated. Overall, the council will lose £90 million of central Government grant over 10 years, and in-year cuts such as those to public health not only make planning difficult, but will cost us all more in the long term.

There is widespread agreement that devolution is a good thing, but I do not believe the Government are so good at putting it into practice. True devolution means central Government trusting local government. An example of where they have not done that is the proposal to deny councils the new homes bonus where planning permission has been granted on appeal. That is a blatant attack on local democracy. It seems we have a transfer of responsibility, but not a genuine transfer of power.

The council tax reduction scheme is a classic example of the Government passing on a cut locally, but dressing it up as a new power to be enjoyed by local government. It is an invidious choice for councils: do they cut local services or take money off some of the poorest people in their communities? Another example is the Housing and Planning Bill, which proposes an annual raid on council housing revenue accounts. The retention of business rates is in principle a welcome measure, but in its current form it passes on risk and uncertainty while failing to pass on the power and flexibility to allow councils to grow their local economies.

There has to be greater consistency in the powers given, so that it does not look like local government is just getting the difficult decisions that central Government want to swerve. The Communities and Local Government Committee has just published a report on devolution, and I want to draw attention to one comment in it:

“We also believe that the Government’s approach to devolution in practice has lacked rigour as to process: there are no clear, measurable objectives for devolution, the timetable is rushed and efforts are not being made to inject openness or transparency into the deal negotiations.”

I hope the Government will take heed of those comments, as they not only apply to devolution, but rather neatly sum up many of my criticisms of how the council funding regime operates. Local government is full of great innovators, and they should be given respect, true freedom and fair funding.

--- Later in debate ---

[Mr Steve Reed (Croydon North) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Davies. I congratulate my hon. Friend the Member for Leicester West (Liz Kendall) on securing this important debate and thank the many Members who have turned up to take part.

I really hope that the Minister is in listening mode today, because my goodness, he has had a powerful lesson in the impact of his decisions on communities right across the country. I predict that when he responds he will claim that he and the Government have protected local government funding, but they have not. In fact, they have cut £1 in every £3 available to councils as the settlement funding assessment falls by 34%. They have cut some NHS budgets, handed them over to local government to take the blame and included that figure in the core spending power so that it does not look like spending has fallen by so much overall.

To partly fill the gap, the Government’s funding assumptions expect councils to increase council tax by 1.7% a year, every year, and on top of that impose a 2% social care precept. That still leaves a giant £1 billion social care funding gap, which will hit the poorest communities in the country the hardest. All that adds up to a 20% council tax rise over four years—a council tax rise that was designed in Downing Street. The scale of the Government cuts that are being imposed means that council tax payers will be forced to pay more while getting less.

[Justin Madders]

Would my hon. Friend be surprised to learn that the Conservative party’s manifesto for last year’s general election promised to keep council tax rises to a very low minimum?

[Mr Reed]

Given the rest of what the Government are up to, I am not surprised at all, but I share my hon. Friend’s disappointment.

As we have heard this afternoon, local government funding under this Government is deeply unfair. That is illustrated by the fact that the 10 most deprived councils in England have been hit by cuts that are 18 times higher than those for the 10 least deprived councils. Research by the Joseph Rowntree Foundation found that during the last Parliament, social care spending fell by £65 per person in the most deprived areas. We have more frail and older people in need of care, but less and less money to pay for the services they need.

Even the Tory-led Local Government Association has warned that after the local government settlement, social care will still face a giant £l billion funding black hole by 2020. That can mean one of only two things: either more older and disabled people will be denied the vital services that they need, or other vital public services will be cut back even harder to make up the difference. That means services such as keeping street lights on at night, filling in potholes, repairing broken pavements, sweeping the streets, removing dumped rubbish, emptying the bins, maintaining parks, providing youth services and children’s centres and keeping libraries and museums open. All those things that affect the quality of life of every community are under threat because of the Government’s decisions on funding local services. I urge the Minister to explain whether it is his Government’s policy to close the funding gap and ensure that older people get the care that they deserve—or will he stand back and watch as services are decimated?

The Government have come up with a cunning plan to cut the NHS while pretending to have kept their promise not to. Services have been taken out of the NHS and then cut before being handed over to councils in the clear expectation that the councils will take the blame for the chaos that will follow. Particularly affected will be treatments for drug and alcohol abuse and work to tackle the country’s obesity crisis and to prevent sexually transmitted infections. Not only is that a bad idea in health terms, but it makes absolutely no sense in financial terms. We will all be made to pay the cost of dealing with health crises as they get worse because of short-sighted, short-term funding cuts. In the words of the LGA, which, let us remember, is led by the Conservative party, these

“drastic cuts will have a major impact on the many prevention and early intervention services carried out by councils.”

Labour welcomes the Government’s proposal to allow the full retention of business rates, although we are disappointed that that will not happen before 2020. Nevertheless, without an effective equalisation measure, the Government’s plans for business rates devolution will make the system even more unequal. Without certainty about what further services will have to be paid for, there is no knowing whether it is simply cover for yet more Government cuts. Westminster City Council accounts for 8% of England’s entire business rates intake—that is more than Birmingham, Manchester, Sheffield, Liverpool and Bristol combined. The Minister promised me in the main Chamber that the Chancellor would make the equalisation mechanism clear during the autumn statement, but the statement came and went with no announcement. Worryingly, the Municipal Journal quotes a senior official saying that the Department for Communities and Local Government has done “no thinking” about how the system will work. Will the Minister explain why not? Does the fact that the Department has done no thinking explain why the Chancellor did not make the announcement that the Minister told me he would?

The entire financial crisis stemmed from the irresponsible behaviour of the banks, but instead of being open about their response to dealing with it, the Government are cutting councils harder and harder while coming up with ever more ingenious ways to try to cover up what they are trying to do. By the end of this Parliament they will have cut council funding by more than two thirds, with Britain’s poorest communities suffering the biggest cuts. Unfair funding, council tax hikes and an assault on the quality of life of every community in the country—that is the Tory record on local government funding. It is simply unacceptable.