Local Government Funding: North-East

Lord Beamish Excerpts

Tuesday 1st March 2016 Westminster Hall

[Mr Kevan Jones (North Durham) (Lab)]

It is a pleasure to serve under your chairmanship, Sir David. I congratulate my hon. Friend the Member for Darlington (Jenny Chapman) on obtaining the debate.

There was a time when the Conservative party believed in local government, and it had a long tradition of supporting it. My hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson) highlighted the effect that the Thatcher Administration had on our region, but one thing that Margaret Thatcher did not do was devastate local government as the present Government are doing. Many people in my constituency say “They are as bad as Thatcher”. No, they are worse than Thatcher. They do not believe in the state as we do. They take the view that local government should just deliver statutory services. As my hon. Friend the Member for Darlington eloquently outlined, that is what the people of Darlington will end up with—an authority with the ability to deliver just statutory services. Everything else that we have for generations taken for granted that councils should deliver will go by the bye.

What makes it worse is that the Government are in the most blatant way allocating funding to pacify voices within their own party. I am not sure that it will pacify them for long, because I do not know how they will protect the areas in question in the long term, given the reductions that the Government still have in line—a cut of some 56% for the Department for Communities and Local Government. However, at the moment that is clearly what they are doing.

Where, in the core spending and transitional arrangements, are the lowest reductions being made? What are those very deprived areas? They are Surrey, Hampshire, North Yorkshire and Devon. We have a ludicrous situation of North Yorkshire getting a 2.5% increase and Surrey a 1.5% increase in core spending. A 2.5% increase in our core spending in Durham would mean an additional £10 million of funding. On the figures for core spending powers and cuts in 2016-17, Durham will have minus 4.1%, Newcastle minus 4.4% and Sunderland minus 4.3%. Surrey will have a 1% reduction and my favourite place, Wokingham, a 0.4% reduction.

I think it has been the understanding of all Governments, irrespective of political make-up, since the second world war, that need has to be taken into account. The idea that it is possible to equate the health problems and social deprivation of the north-east and, I must say, inner-city areas in parts of some London boroughs and the north-west with pressures in Surrey and Wokingham, is nonsense. In the figures for the final settlement for 2016-17, the core spending per dwelling figure for Durham county council is £1,608; for Surrey it is £1,661. It may be thought that that is not much higher, but no account is taken of the demands of an ageing population in Durham, and its higher unemployment and social care needs. If the district councils in Surrey are taken into account, the core spending per dwelling figure goes up to more than £2,000. I am sorry, but it cannot be right that one of the wealthiest parts of the country is getting more expenditure than some of the most deprived communities.

The rural indicator was a measure that the Government brought in to try to compensate for rurality. There could not be a more rural county than County Durham; but what did it get out of it? Not one penny. I do not object to Northumberland, which includes the constituency of my hon. Friend the Member for Blyth Valley (Mr Campbell), getting some extra funding, but why did that county get it? It is because it has two Conservative Members of Parliament. We are now in a situation where funding is allocated on the basis of what the local electors decided. The Government are punishing electors in the north-east for voting Labour. We would expect that in a totalitarian dictatorship, not in a democracy such as ours.

[Mr Campbell]

Could we press the Communities and Local Government Committee to have an inquiry, covering the whole gamut of this issue?

[Mr Jones]

I would welcome that, but I remind my hon. Friend that this lot do not care. What they did in the previous Parliament shows that. They are small state Conservatives who frankly do not give a damn about the north-east, because it means nothing to them electorally.

One of the biggest needs of, and pressures on, most of our councils is social care. The Government have announced that councils can charge 2% extra on council tax. That will raise a lower amount in Durham than in Surrey, because about 55% of properties in County Durham are in band A. The idea that that is a panacea that will answer the social care issue is not true. My hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) demonstrated the problems that Newcastle City Council faces, and the situation will be duplicated in all north-east and inner-city councils, which have huge pressures on them.

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[Sir David Amess (in the Chair)]

Order. Before the hon. Gentleman responds, I remind the House that three hon. Ladies still want to speak, as well as the Opposition spokesperson and the Minister who will respond. The debate finishes at 4 o’clock, so I hope that colleagues will bear that in mind.

[Mr Kevan Jones]

My hon. Friend the Member for Gateshead (Ian Mearns) makes a pertinent point. We will end up with councils that deliver core statutory services, and even then they will be under pressure.

When the right hon. Member for Brentwood and Ongar (Sir Eric Pickles) was Secretary of State, he argued that somehow we could make the savings by having fewer pot plants in council departments, or by cutting staff numbers. I must tell the Minister that every council in the north-east has made back-office efficiencies. That will not enable them to meet the figures. For example, from 2011 to 2020 Durham will have lost £288 million from its budget. It is ludicrous to think we can make that up. I am sorry that the Secretary of State is not here; previously he has accused councils of hoarding large balances, but that is a way of diverting attention. I will explain the situation in Durham. It has £220 million in reserves. However, only £30 million of that is actual reserves, in the sense of the 5% that, when I was in local government, local councils needed. The rest is allocated for other things, such as redundancies and things that will take place against a budget of more than £865 million. Let us knock on the head the nonsense that northern councils are awash with large reserves. As my hon. Friend the Member for Darlington demonstrated, they are down to the bone. The other thing is that reserves can be used only once. The Government’s idea about a way of somehow mixing revenue and capital is economically illiterate.

I want to finish on devolution, because we will no doubt get a load of guff from the Minister about it. The devolution being put forward for the north-east is a devolution of responsibilities without the cash to go with it; £30 million is on offer for the north-east so-called mayoral model. If the cuts to public health funding go forward as predicted, Durham alone will lose £20 million a year.

I noticed last week that a Conservative, Mr Jeremy Middleton, announced his candidacy for mayor of the north-east. Strangely, he said:

“I won’t be asking people to vote for me because I’m a Conservative. I’ll be asking them to vote for me because I’m the right man for the job.”

I had a look at his website this morning, and he has also said that through negotiation with Whitehall he will deliver

“a fair financial settlement with similar public funding per head as Scotland”.

I challenge him to state why he has sat quietly for the past six years without saying a single thing about local government finance being butchered in the north-east. He is a friend of the Chancellor, a former Conservative candidate—he thankfully failed in the by-election against my hon. Friend the Member for Hartlepool (Mr Wright)—and has been an apologist for this Government. I ask the people of the north-east to remember that when and if we actually get this ludicrous situation with a mayor.

I am fully supportive of the idea of devolution, but devolution of responsibility without the funding, which is what this is, is not the way forward. Councils in the north-east are facing a crisis and there is only one explanation. It lies with the Government who are protecting their own areas in a party political way while not giving a damn about Labour-voting areas in the north-east of England.

[Sir David Amess (in the Chair)]

Order. I am having to impose a time limit of three minutes, which is unsatisfactory. I ask colleagues to resist making interventions.

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[The Parliamentary Under-Secretary of State for Communities and Local Government (Mr Marcus Jones)]

As always, it is a pleasure to serve under your chairmanship, Sir David. I congratulate the hon. Member for Darlington (Jenny Chapman) on securing the debate. It is my pleasure to be able to respond and I thank hon. Members for their valuable contributions.

I recognise that councils throughout the country have been fully dedicated to improving local services in a very challenging environment. It was absolutely right that we listened to local authorities and to Members of this House during the local government finance settlement consultation. We have done our utmost to ensure that the settlement is right and fair for all. The distribution of funding has recently been discussed at length in this House, alongside the overall level of resources available to local government. The hon. Lady called today’s debate to discuss local government funding for the north-east, but it is important to place that in the national context of what the Government are working to achieve.

Local authorities account for a quarter of all public spending, so it has always been clear that they would have to play their part in reducing what was the largest deficit in post-war history. Last autumn, the Government’s spending review set out clearly how savings must be made over this Parliament to ensure that we finish the job of eliminating the remaining deficit and what that will mean in terms of overall council funding. In real terms, councils will be required to save 6.7% over the spending review period. At the 2010 spending review, a reduction of 14% was announced, so the pace of spending reductions has slowed significantly for this Parliament, as the Institute for Fiscal Studies has acknowledged.

In cash terms, when we look at the overall core resources available to local government in the finance settlement, core spending power is virtually unchanged over the spending review period. Councils will receive £44.5 billion in 2015-16 and £44.3 billion in 2019-20. Furthermore, we have tried to be as fair in regard to distribution as possible, making reasonable assumptions that understate the maximum resources available to councils. For example, in line with the Office for Budget Responsibility, we assume that council tax will increase with inflation, not by the referendum threshold of 2%. If we had assumed the maximum figure, more than a quarter of a billion pounds extra in resources would have been available. We have been clear: yes, further savings are required, and councils have recognised that, but we have taken important steps to help councils make those savings.

[Mr Kevan Jones]

I do not know what colour the sky is in the Minister’s world. What is fair about north-east councils—Durham, Newcastle and others in the figures I read out—having 4% cuts in their budgets this year when Surrey has less than a 1% cut and Wokingham’s cut is even less than that? How can that be fair, given the demands on services faced by Durham compared with places such as Surrey? Is it just a coincidence that 85% of the councils who gain from his transitional arrangements happen to have Tory MPs?

[Mr Marcus Jones]

The average spending power per dwelling for the 10% most deprived authorities is about 23% more than for the 10% least deprived authorities in this coming year. Opposition Members have mentioned several times an assertion about the transitional grant. The grant was based firmly on the local government finance settlement, the consultation we undertook and the responses from the consultation. There were a significant number of responses and a call for some sort of transitional grant to support those areas that had lost the most central Government grant compared with the amount expected based on the old redistribution formula.

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[Mr Marcus Jones]

That is why generally, as I said, the areas that have been referred to in the debate that are receiving transitional grant had a higher reduction in revenue support grant than areas such as that represented by the hon. Gentleman. He and a number of his colleagues have taken a dim view of the north-east in relation to its ability to move forward as an economy and create business rate revenue and additional council tax.

To take the constituency of the hon. Member for Hartlepool (Mr Wright), for example, thanks to the business rate retention scheme during 2014-15 there was a 14.6% increase in revenue. To pick up on a point he made, we will move to full business rate retention in 2020, but before that there will be a consultation on how we deal with redistribution. We understand and accept that in some places significantly more business rates are collected than in others.

The approach we have taken in this historic settlement is aimed at supporting those areas with the greatest pressures and providing councils with the certainty they need as we move towards a system of greater devolution. The settlement allocates funding on the basis of the core resources available to local authorities, taking into account councils’ business rates and council tax as well as their revenue support grant. It ensures that councils that deliver the same set of services will receive the same changes in core funding for those services.

[Mr Kevan Jones]

Will the Minister give way?

[Mr Marcus Jones]

I will in a moment. That is fair and that fact was recognised by Middlesbrough Council in its response to the consultation on the settlement.

We have also provided councils with unprecedented levels of certainty. Our historic offer of a four-year settlement answers calls from councils to allow them to plan over the long term, giving them the certainty required to create greater efficiencies. That has been welcomed by councils across the country, including those in the north-east such as Durham County Council and Newcastle City Council.

[Mr Kevan Jones]

Will the Minister give way?

[Mr Marcus Jones]

I have already given way; I am going to make some progress.

Councils now have the opportunity to smooth their path over four years, using reserves where necessary and if they so wish. Even so, we have not made any assumptions that councils will use reserves in any published figures. Despite giving this opportunity, we have made no assumptions that councils will use their reserves in any published figures.

The settlement also responds to the clear call from all tiers of local Government and from many of my colleagues in the House to recognise the priority and increasing cost of caring for our elderly population. As such, we have made up to £3.5 billion available by 2019-20 for adult social care through a dedicated social care precept of up to 2% a year and the improved better care fund. That is significantly more than the amount asked for by the Local Government Association and the Association of Directors of Adult Social Services. We have proposed that the additional better care fund money should be distributed to complement the new council tax flexibility, so more will go councils that can raise the least from that flexibility. We will, however, consult colleagues in local government on that in due course.

We have also prioritised housing. The new homes bonus was due to come to an end, but it has been a useful contributor to the increase in planning permissions being granted. Payments since its introduction in 2011 total just under £3.4 billion, reflecting more than 700,000 new homes and conversions and more than 100,000 empty properties brought back into use.